The Comprehensive Guide to Launching a SPAC on NASDAQ: From Formation to De-SPAC

Launching a Special Purpose Acquisition Company (SPAC) on the Nasdaq Stock Market is a multi-stage process that offers a faster route to public markets compared to a traditional Initial Public Offering (IPO). A SPAC is essentially a “blank check” shell company created solely to raise capital through an IPO for the purpose of acquiring or merging with an existing private company, a process known as the “de-SPAC.”

This guide outlines the critical steps, from the initial formation and IPO to the final business combination on Nasdaq.

Phase 1: Formation and Structuring (The Blueprint Stage)

This initial stage sets the foundation for the entire SPAC lifecycle. The quality and reputation of the sponsors are paramount, as the SPAC has no operating history or assets other than the initial capital.

1. Assemble the Sponsor Team and Thesis

The sponsors are the experienced investors or industry experts who form the SPAC’s management team and provide the initial capital.

• Sponsor Profile: The team should have a demonstrable track record in investments, M&A (Mergers & Acquisitions), and public markets. Investors are primarily betting on the sponsors’ ability to find and execute a successful acquisition.
• The Investment Thesis: Define the SPAC’s focus. This includes the target industry (e.g., technology, clean energy, healthcare) and geographic area. This thesis must be detailed in the public filings to attract the right investors.
• Founder Shares (The “Promote”): Sponsors typically receive 20% of the SPAC’s common stock for a nominal price, known as the “Promote.” This incentivizes the sponsors to maximize value.

2. Legal Formation and Capital Commitment

• Incorporation: The SPAC is incorporated, typically as a Delaware corporation or an offshore entity.
• Initial Funding: Sponsors contribute the capital needed to cover formation costs and the IPO roadshow (estimated to be around $800,000 to $1 million). This capital is often referred to as “at-risk” capital and is used to purchase warrants in a private placement concurrent with the IPO.
• Underwriters and Counsel: Engage top-tier investment banks (underwriters) to manage the IPO and experienced legal and accounting teams (SEC counsel and PCAOB-registered auditors) to navigate the complex regulatory environment.

3. Nasdaq Initial Listing Requirements (The IPO Stage)

SPACs must satisfy NASDAQ’s listing requirements at the time of the IPO. These are less stringent than the requirements for the post-merger operating company, but essential for trading.

Phase 2: The Initial Public Offering (IPO)

This phase focuses on regulatory approval and raising the required capital from public investors.

4. SEC Registration and Review (Form S-1)

• Filing the S-1: The SPAC files an initial registration statement (Form S-1) with the Securities and Exchange Commission (SEC). This prospectus details the SPAC’s management team, its acquisition strategy, the IPO unit structure (stock plus warrants), and the terms of the trust account.
• SEC Review: The SEC staff provides comments on the draft S-1. The SPAC’s counsel addresses these comments through multiple amendments. The time to effectiveness is typically shorter for a SPAC (8 to 12 weeks) compared to a traditional operating company IPO.

5. Pricing and Roadshow

• Unit Structure: SPAC shares are typically sold as “units,” often consisting of one share of common stock and a fraction of a warrant. The unit price is historically $10.00.
• The Roadshow: The SPAC’s management team and underwriters market the offering to institutional investors. This marketing pitch focuses entirely on the sponsor team’s reputation, track record, and industry-specific expertise.
• Pricing and Closing: Once sufficient investor interest is secured, the IPO is priced and closed. The gross proceeds are transferred directly to the trust account.

6. Listing and Trading on NASDAQ

• Listing: The SPAC is officially listed on Nasdaq under a reserved ticker symbol.
• Separate Trading: Shortly after the IPO (typically 30–52 days), the units separate into individually trading common stock and warrants.

Phase 3: The Target Search and De-SPAC (The Acquisition Stage)

With the cash secured in the trust, the SPAC now has a limited timeframe—typically 18 to 24 months—to identify, negotiate, and complete a merger with a private operating company.

7. Target Identification and Due Diligence

• Screening and Outreach: The sponsor team leverages its network to find a high-growth private company that is ready for the public markets (i.e., “public company ready”).
• Letter of Intent (LOI) & Negotiations: Once a target is identified, the SPAC negotiates a non-binding LOI, followed by extensive financial, legal, and operational due diligence (DD).
• Public Company Readiness: The target company must quickly prepare its infrastructure for public reporting, including PCAOB-audited financials, Sarbanes-Oxley (SOX) compliance, and public company internal controls.

8. The Merger Agreement and PIPE Financing

• Definitive Agreement: The SPAC and the target company sign a definitive merger agreement, establishing the valuation and deal structure.
• PIPE (Private Investment in Public Equity): To compensate for potential redemptions by public SPAC shareholders and to raise additional growth capital, a simultaneous PIPE transaction is often executed. Institutional investors commit capital to purchase shares in the merged company at the IPO price. Securing a strong PIPE is crucial as it reduces the uncertainty of the cash available at closing.

9. SEC Disclosure and Shareholder Vote

• S-4/Proxy Filing: The SPAC files a proxy statement (or an S-4 registration statement if new securities are being issued) with the SEC. This document, known as the “De-SPAC Filing,” is lengthy and contains detailed disclosures about the target company, including its historical financials, projections, management discussion, and the terms of the merger.
• The Redemption Option: SPAC shareholders receive the proxy and have two choices:
  1. Vote for the merger and retain their shares in the newly merged public company.
  2. Redeem their shares for their pro-rata portion of the trust account proceeds (typically $10.00 per share plus accrued interest).
• Shareholder Meeting: A meeting is held to approve the transaction. The merger must be approved by a majority of the outstanding shares.

10. Completing the Business Combination (De-SPAC)

• Closing: If the merger is approved and all closing conditions are met, the de-SPAC transaction closes. The private target company is legally merged into the public SPAC shell.
• Ticker Change: The combined entity changes its name and begins trading on Nasdaq under a new ticker symbol, marking its debut as a fully operating public company.
• Super 8-K Filing: Within four business days of closing, the new public company must file a Form 8-K (“Super 8-K”) with the SEC, containing all the information that would be required in a Form 10 registration statement for a new public listing.

Phase 4: Post-Merger Compliance and Governance

The newly public company must now adhere to the ongoing obligations of a Nasdaq-listed entity.

11. Ongoing Nasdaq Compliance

• Continued Listing: The combined company must satisfy Nasdaq’s initial listing requirements at the time of the de-SPAC. This includes meeting higher standards for market value of publicly held shares, stockholders’ equity, and financial performance metrics.
• Corporate Governance: The company must maintain Nasdaq’s corporate governance standards, including having a majority independent board of directors and fully independent committees (Audit, Compensation, Nominations).
• Public Reporting: The company is subject to all SEC reporting obligations (10-K, 10-Q, 8-K filings) and must maintain effective disclosure controls and procedures.

12. Key Risks and Considerations

• Redemption Risk: High shareholder redemptions can significantly reduce the cash available to the merged company, forcing it to rely heavily on the PIPE or requiring the sponsor to secure additional financing.
• Valuation Scrutiny: The SEC and public investors place significant focus on the target company’s valuation and the financial projections disclosed in the proxy statement. Projections must be well-grounded and defensible.
• Sponsor Dilution and Lock-ups: Sponsors typically face a one-year lock-up period for their founder shares. The high proportion of sponsor equity (the Promote) also leads to significant dilution for other shareholders.
• The Time Clock: If the SPAC fails to consummate a business combination within the specified timeline (usually 18–24 months), it must dissolve and return the funds in the trust account (plus interest) to the public shareholders. The sponsors forfeit their promote and at-risk capital.

Summary Timeline

The IPO phase of a SPAC is relatively quick, while the M&A process that follows can be complex and challenging.

This guide provides a structural overview of the complexities involved in bringing a SPAC to the Nasdaq. Launching a SPAC requires meticulous planning, a strong sponsor reputation, and significant legal and financial resources to navigate the regulatory and market hurdles.

Partnering with Mergerscorp SPAC TEAM

Navigating the complexities of a SPAC IPO and the subsequent de-SPAC transaction requires more than capital; it demands flawless execution, regulatory expertise, and a network of trusted advisors.

Whether you are an institutional sponsor seeking to maximize the Promote, or a high-growth private company considering the public market via acquisition, the time to build your strategy is now.

Connect with the Mergerscorp SPAC TEAM today to:

• Refine Your Thesis: Develop a targeted acquisition strategy that resonates with institutional investors.
• Mitigate Risk: Strategically address redemption risk, valuation scrutiny, and ongoing compliance challenges.
• Accelerate the De-SPAC: Leverage our M&A experience to ensure a seamless transition to a fully operating public company.

Schedule Your Strategic Consultation Contact the Mergerscorp SPAC TEAM

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Editorial Team

Editorial Team at MergersCorp M&A International

MergersCorp™ M&A International is a leading Lower-Middle Market M&A advisory brand, offering professional M&A services to clients across the world.

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