Glossary

The vocabulary a SPAC filing assumes you already know.

Trust account

Where IPO proceeds are held until a deal closes or the SPAC liquidates. Invested in short-dated government securities and released only on closing, redemption, or wind-up.

Redemption

A shareholder’s right to exchange shares for their pro-rata share of the trust, usually exercisable at a deal vote or an extension vote. Exercising it is a cash decision, not a bearish signal.

Redemption rate

The percentage of public shares redeemed at a given vote. Rates above 90% have been common in weak markets, and they determine how much cash actually reaches the target.

PIPE

Private investment in public equity — capital committed by outside investors at closing, alongside whatever survives redemption. A deal with no committed PIPE depends entirely on the trust surviving.

Founder shares

Shares issued to the sponsor for nominal consideration, typically about 20% of the post-IPO count. They convert on closing and are worthless on liquidation.

Warrant coverage

The fraction of a warrant included in each unit — one half, one third, and so on. Higher coverage is more generous to IPO buyers and more dilutive to the eventual company.

Extension

A shareholder-approved amendment pushing the deadline back, usually in exchange for a sponsor contribution to the trust and always accompanied by a redemption window.

Deferred underwriting fee

Underwriting commission payable only on closing, typically 3.5% of the IPO. Banks sometimes waive it on troubled deals, which is itself worth noticing.

Going concern

Language in the auditor’s opinion stating substantial doubt about the entity continuing for twelve months. For a SPAC it usually reflects an approaching deadline rather than an operating failure — but it is a fact, and it is disclosed.

De-SPAC

The merger transaction itself, and the process of turning the target into a listed operating company.