SPACs 101: What Is a SPAC and How Does It Work?

Why the buzz around special purpose acquisition companies (SPACs)? Here's everything you need to know about these "blank-check" firms.

the acronym SPAC written on wooden blocks stacked on top of each other
(Image credit: Getty Images)

Special purpose acquisition companies (SPACs), or "blank-check" companies, exploded in popularity in 2020. The excitement around SPACs has faded in recent years, but they're once again in the spotlight following the late-March merger of Digital World Acquisition and Trump Media & Technology Group (DJT), the media firm founded by former President Donald Trump that owns Truth Social. 

This likely has many folks wondering what is a SPAC exactly, and how does it differ from other investments?

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Andrew Packer
Contributing Writer,

A prolific financial writer, Andrew Packer has helmed newsletters on small-cap value investing, early-stage investments, special situations, short-selling, covered call writing, commodity investing, and insider trading, among others. He’s most proud of his 100% win rate on all trades in 2016.