SPAC Structure and the De-SPAC Process

Underneath the acronym, a SPAC's structure is simple and almost entirely mechanical: it IPOs selling units, each usually made up of one common share plus a fraction of a warrant, and nearly all the cash raised goes straight into a trust account that just holds short-term Treasuries until a merger target is found. The company itself does no operating business — its only job before a deal is announced is to sit on that trust and search.

The two components shareholders actually hold

A SPAC unit typically splits apart shortly after the IPO into its common share and its warrant, which then trade separately. The common share carries a right most ordinary IPO shares don't: if shareholders vote against the proposed merger, or simply don't like the deal, they can redeem their shares for a pro-rata slice of the trust account instead of taking stock in the new merged company. The warrant is a longer-dated call option on the eventual merged company, usually struck well above the trust's per-share value, and it keeps trading regardless of whether a shareholder redeems their shares.

This redemption right is what makes SPAC shares behave less like ordinary equity and more like a cash-like instrument with an attached option — a shareholder's downside is largely floored near the trust value per share (assuming they redeem), while the warrant provides separate, uncapped upside exposure to a deal actually happening.

The de-SPAC process

Once the SPAC's sponsors find a private company to merge with, the process (called the de-SPAC) runs through a public announcement, a proxy filing describing the target's business and deal terms, a shareholder vote, and finally the closing, at which point the private company becomes listed simply by combining with the already-public shell. A concrete timeline: a SPAC with two years to find a deal announces a merger with a private logistics company in year one; over the following months it files a detailed proxy statement, shareholders vote to approve, some shareholders redeem their shares for cash from the trust rather than continue holding, and the combined company begins trading under a new ticker once the deal closes.

If no deal is found within the SPAC's deadline (commonly two years), the trust is liquidated and cash is returned to shareholders — the SPAC simply dissolves.

What this means in practice

Heavy redemptions at the shareholder vote can leave a de-SPAC merger with far less committed cash than the deal originally assumed, which is why many deals also raise a separate PIPE (private investment in public equity) alongside the SPAC merger, specifically to backstop against redemptions. Anyone analyzing a SPAC needs to track the trust value per share, the redemption deadline, and warrant terms separately — they behave like different instruments with different risks, even though they started life bundled in the same unit.