When an individual is first introduced to the world of investing, it’s almost like they are a kid in a candy store. There are so many different investments that a person can choose from, and some are traditional and some are a bit more unorthodox. What about blank check companies? Are they a good investment to consider? Here are some questions you might have regarding this unique investment:
What Are Blank Check Companies?
According to the professionals at Money Morning, a blank check company is another term for a Special Purpose Acquisition Company (SPAC) and they are formed solely for the express reason of buying a private company and taking it public. Naturally, this type of investment has surged in popularity over the last couple of years, simply because the shareholders in blank check companies know that they will get the first crack in owning the newly public company before they begin their IPO. Of course, another broad definition of a blank check business would have to be a development stage company that has no express purpose other than to engage in mergers or acquisition deals with other companies, individuals, or entities.
Are They Worth Investing In?
There is no question that SPACs have their share of appeal. Part of the reason for that is because they are not regular companies, but simply ones that have been started by venture capitalists to help investors pool most of their money together in order to possibly invest in the “next big thing.” Of course, one of the main reasons why these blank check companies are so alluring is simply because of the fact that you can buy them just like you could a stock. Of course, one drawback to this would be that you won’t know what you are getting until the company transforms and merges. For example, there are many cases where investors in a SPAC might think they are investing in real estate, but the company that the SPAC merges with turns out to be involved in the cutting-edge real estate vehicle industry instead. Thus, if you are going to make this type of investment, you will need to be open-minded at the very least. However, the good thing is that if you don’t like the company that the SPAC merges with, you can often get your money. So yes, for many people the answer to whether these investment entities are worth investing in would be an emphatic YES.
How Do You Invest in Them?
First of all, it’s important that you do your research. Unlike stocks, these blank check companies are often offered on a “per unit” basis, and usually in increments of $6 to $10. Moreover, if you decide to invest in one of these SPACs, you should realize that they have a deadline of 18-24 months to make the acquisition in their chosen company. However, not to worry; your money will be held in escrow until they invest. If the SPAC does not meet the deadline, you will be returned the initial amount that you invested. It is important to realize that the only thing that one of these blank check companies can do with your money is buy something. You are essentially trusting the people behind the SPAC to make an effective investment.
Does this sound appealing to you? If so, you should realize that you’re not the only one. One of the main reasons why SPACs are growing in popularity is because they tend to invest in industries that have the potential for tremendous growth. You could get a fabulous return on your investment if you play your cards right.