In recent years, SPACs (Special Purpose Acquisition Companies) have frequently appeared in capital market headlines. Whether it’s star companies, well-known investors, or new tech startups, SPACs have seemingly become a “faster and more flexible” shortcut to going public. But what exactly is a SPAC? How is it different from a traditional IPO? And what potential opportunities and risks does it present?

1. What is a SPAC?

A SPAC is essentially a "blank check" company that follows the model of "raising funds first, finding a target later." Initially, it has no actual business, and its only purpose is to raise capital through an IPO. The company then promises to find a potential private company within a specified timeframe (usually 18 to 24 months) and bring it public through a "merger." In simple terms, investors first give their money to the SPAC team, which will then use those funds to acquire a suitable company, and once the deal is completed, the target company becomes publicly listed through a reverse merger.

2. SPAC Listing Process: From “Shell” to “Real Company”

The operation of a SPAC can be broken down into three main stages:

3. Differences Between SPAC and Traditional IPO

In short, SPACs allow companies to bypass the lengthy IPO process and enter the capital market faster, but they are also controversial due to the lack of a full market pricing process.

4. The SPAC Boom and Cooldown

From 2020 to 2021, SPACs created a wave in the U.S. stock market. According to Refinitiv data, in 2021, global SPAC fundraising exceeded $160 billion, accounting for half of the total IPO market. However, with tighter regulation and concerns over market bubbles, SPAC activity cooled significantly after 2022. Key reasons for this downturn included stricter regulations, valuation corrections, and declining investor confidence. The SEC has required SPACs to provide more transparent financial disclosures and risk explanations. Some companies that went public through SPACs performed below expectations, with significant valuation corrections. Increased redemption rates also weakened capital utilization, making it difficult for many SPAC projects to successfully complete mergers.

Recently, however, SPAC activity in Asia has been accelerating, and the Hong Kong Stock Exchange’s De-SPAC mechanism is maturing. On November 12, the HKEX announced that mainland lidar leader, Tuodatong, successfully passed its listing hearing. The company plans to merge with SPAC company TechStar at a valuation of HK$11.7 billion, which will mark the third De-SPAC listing in the Hong Kong market. Tuodatong is expected to begin trading on the main board of the HKEX on December 10.

This means that after Hesai Technology and Suteng Juchuang, Tuodatong’s inclusion will bring the "big three" lidar companies to the Hong Kong stock market, highlighting the recovery of SPAC models in financing emerging tech industries.

5. The Significance of SPACs for Investors and Companies

For companies, SPACs offer a faster path to going public, negotiable valuation space, and flexible financing mechanisms. However, they still need to face post-merger integration and compliance challenges. If the target company is poorly chosen, the stock price volatility risk is also relatively higher.

For investors, SPACs provide an opportunity to participate in the growth of emerging companies early and come with some redemption guarantees. However, the lack of transparency in these models and potential conflicts in sponsor incentives could lead to misalignment of interests. For regular investors, understanding the structure and risks is crucial.

6. Conclusion: SPAC is Not a Shortcut, But a Choice

SPAC mergers provide companies with a “second channel” to enter the capital market, especially suitable for growth-stage or unprofitable tech companies. Compared to traditional IPOs, SPACs offer a faster process, larger negotiation space, and flexible capital operation, creating a new bridge between startups and investors. However, this path is not a guaranteed shortcut to success.

The success of the SPAC model ultimately depends on the balance of three factors: the sponsor team’s expertise, the real value of the target company, and the rational judgment of investors. If the sponsor team lacks a long-term vision and focuses only on mergers; if the target company’s performance cannot sustain growth momentum; or if investors blindly chase concepts while ignoring risks, SPACs could become short-term capital games.

In the future, as regulations tighten and the market returns to rationality, SPACs may return to their original purpose: to be a compliant, transparent, and long-term investment tool. For companies, it is a financing method; for investors, it is a choice full of both risks and opportunities.

As Wall Street often says: “You can borrow the shell, but you must tell the story yourself.” In the capital market, what truly wins investors’ trust is never the packaging, but the ability to consistently deliver on growth promises.