How Blank Check Company Investments Work

Lower fees, fewer regulations, and a faster increase in capital can make a blank check company investment more appealing than an IPO (initial public offering) that uses standard practices. The information that follows will outline the purpose behind SPACs (special purpose acquisition companies) and how an investment in one could prove to be lucrative.

A Blank Check Company

A blank check company may also be referred to as a SPAC—one example of this is ALSP Orchid Acquisition Corporation 1. This type of company does not have a formal business plan. The owner/owners of a blank check company may have a specific business type in mind that they would like to purchase or merge with. They may have no intentions of starting a business from the ground up and be focused solely on acquiring a business through funding that they have raised through financial contributors.

For instance, if business owners are looking to get into the medical field, they may not have the experience needed to formulate a brick-and-mortar healthcare business. They may, however, have the educational tools needed to run an existing business. A blank check company will outline its goals to the public. Existing investors or new investors who would like to build a portfolio will be able to easily research the company's objectives and purchase stock in the company.

A Potential Investor's Perspective

A potential investor should assess a blank check company's agenda. This will be a written outline that describes what type of purchases or merges the company is considering. Investing in a company that has plans to buy or merge with an existing healthcare business that has a solid reputation may provide the security that an investor is seeking.

If an individual has already invested in healthcare facilities or similar businesses, they can use their past financial records to help them determine if a new investment in a similar field will be risky. A financial advisor can research information blank check companies and guide a potential investor. A blank check company usually provides transparency and offers low investment costs. These variables often make a blank check company appealing to a seasoned investor or new investor.

Just like an IPO investment, SPAC investments always come with risks. A financial advisor will outline the risks involved in purchasing shares. If someone is new to investing and has some budget constraints, purchasing a few shares will allow them to get started in investing, without taking a large monetary risk.