FAQ: Shell companies (SPACs)
Historical Origins of a Shell Company (SPACs)
Historically, the term "shell company" (SPAC) was used to describe stock corporations whose operating business was discontinued. The last assets of these companies were then regularly the stock exchange listing, existing loss carryforwards, an existing free float and the existing company history.
However, the preparation of former operating shell companies requires a high restructuring effort, which is only worthwhile for shell companies listed on the Regulated Market these days. In addition, restructuring should only be carried out by absolute capital market experts, such as the stock market professionals at INSTANT IPO, so that these companies are "risk-free" when they are transferred. In this context, "risk-free" means that the shell company has been freed from accounting, tax, personnel or procedural risks as a result of its former operating activities.
However, the preparation of former operating shell companies requires a high restructuring effort, which is only worthwhile for shell companies listed on the Regulated Market these days. In addition, restructuring should only be carried out by absolute capital market experts, such as the stock market professionals at INSTANT IPO, so that these companies are "risk-free" when they are transferred. In this context, "risk-free" means that the shell company has been freed from accounting, tax, personnel or procedural risks as a result of its former operating activities.
Nowadays, synthetic shell companies (SPACs) are often used in both the OTC segment and the Regulated Market. These are companies that were founded specifically for this business purpose and listed on the stock exchange. These companies are therefore per se without economic risk, as they have never been operationally active. The "Regulated Market" segment for synthetic OTC shells is usually achieved following the purchase and subsequent recapitalisation via a segment upgrade.
However, the preparation of former operating shell companies requires a high restructuring effort, which is only worthwhile for shell companies listed on the Regulated Market these days. In addition, restructuring should only be carried out by absolute capital market experts, such as the stock market professionals at INSTANT IPO, so that these companies are "risk-free" when they are transferred. In this context, "risk-free" means that the shell company has been freed from accounting, tax, personnel or procedural risks as a result of its former operating activities.
However, the preparation of former operating shell companies requires a high restructuring effort, which is only worthwhile for shell companies listed on the Regulated Market these days. In addition, restructuring should only be carried out by absolute capital market experts, such as the stock market professionals at INSTANT IPO, so that these companies are "risk-free" when they are transferred. In this context, "risk-free" means that the shell company has been freed from accounting, tax, personnel or procedural risks as a result of its former operating activities.
Nowadays, synthetic shell companies (SPACs) are often used in both the OTC segment and the Regulated Market. These are companies that were founded specifically for this business purpose and listed on the stock exchange. These companies are therefore per se without economic risk, as they have never been operationally active. The "Regulated Market" segment for synthetic OTC shells is usually achieved following the purchase and subsequent recapitalisation via a segment upgrade.
Advantages of Shell Companies (SPACs)
Growth financing via a stock exchange listing and subsequent capital measures has also become much more popular in Germany in recent years. This is mainly due to the sharp rise in interest rates for debt capital.
Listings (pure trade admissions) and shell company (SPAC) transactions have now matured into genuine IPO alternatives.
By acquiring a shell company (SPAC), the acquirer can not only organise the sale and redistribution of shares more easily, it also gains access to equity via shareholders and investors. Direct access to the capital market is possible via capital increases and private placements. In addition, a stock market listing can significantly increase the value of the company. This is due to the fact that unlisted partnerships or limited liability companies are only valued using multiples. The stock market price, on the other hand, often includes additional growth and profit forecasts in the valuation as additional goodwill, which is reflected in higher multiples. This higher valuation can already represent a significant increase in value if the multiplier is increased by 1 or 2 points.
Listings (pure trade admissions) and shell company (SPAC) transactions have now matured into genuine IPO alternatives.
By acquiring a shell company (SPAC), the acquirer can not only organise the sale and redistribution of shares more easily, it also gains access to equity via shareholders and investors. Direct access to the capital market is possible via capital increases and private placements. In addition, a stock market listing can significantly increase the value of the company. This is due to the fact that unlisted partnerships or limited liability companies are only valued using multiples. The stock market price, on the other hand, often includes additional growth and profit forecasts in the valuation as additional goodwill, which is reflected in higher multiples. This higher valuation can already represent a significant increase in value if the multiplier is increased by 1 or 2 points.
Use of Shell Companies (SPACs)
The stock exchange listing of the shell company (SPACs) represents the decisive value. If the SPAC is acquired, the buyer can flexibly adapt the company name and business purpose and incorporate its existing business.
SPACs enable an immediate listing without the lengthy and complicated procedure of the traditional IPO process. As a result, SPAC transactions are much more independent, time and cost efficient.
A stock exchange listing also gives companies a high degree of independence from lending banks, as it enables them to raise non-interest-bearing equity capital.
Through their future position in the capital market, shell companies (SPACs) also enable a significant increase in the level of awareness of the company.
SPACs enable an immediate listing without the lengthy and complicated procedure of the traditional IPO process. As a result, SPAC transactions are much more independent, time and cost efficient.
A stock exchange listing also gives companies a high degree of independence from lending banks, as it enables them to raise non-interest-bearing equity capital.
Through their future position in the capital market, shell companies (SPACs) also enable a significant increase in the level of awareness of the company.
Difference: Shell Company/ SPAC
Both shell companies and SPACs are exchange-traded companies that do not (or no longer) pursue their own operating business. The term "shell company" or "shell company" can be seen as a generic term, whereby the term SPAC is a special form of this. The term SPAC stands for "Special Purpose Acquisition Company" and refers to a special form of special purpose company that is founded by the initiators with the aim of acquiring a certain amount of investment capital in order to use the capital to acquire a suitable target company for a takeover within a defined period of two years.
A SPAC usually has two types of investors: the sponsors (initiators) and the public investors. The number of sponsors of a SPAC can range from one to several individuals or organisations, depending on how much capital they invest and how they divide the stakes. The number of public investors in a SPAC can range from a few hundred to several thousand, depending on how many shares they buy and how much interest there is in the SPAC. The classic shell company, on the other hand, describes a company that is not operationally active, usually without major investment capital.
The difference between a shell company and a SPAC is therefore that in the case of a shell company there is already a specific business model that is to be floated on the stock exchange and in the case of a SPAC a suitable business model is still being sought. However, both terms are often used/understood synonymously. The stock market professionals at INSTANT IPO will be happy to show you which is the most favourable way for your company to go public.
A SPAC usually has two types of investors: the sponsors (initiators) and the public investors. The number of sponsors of a SPAC can range from one to several individuals or organisations, depending on how much capital they invest and how they divide the stakes. The number of public investors in a SPAC can range from a few hundred to several thousand, depending on how many shares they buy and how much interest there is in the SPAC. The classic shell company, on the other hand, describes a company that is not operationally active, usually without major investment capital.
The difference between a shell company and a SPAC is therefore that in the case of a shell company there is already a specific business model that is to be floated on the stock exchange and in the case of a SPAC a suitable business model is still being sought. However, both terms are often used/understood synonymously. The stock market professionals at INSTANT IPO will be happy to show you which is the most favourable way for your company to go public.
How much does a Shell Company cost?
The prices for shell companies (SPACs) vary and depend on the stock exchange segment, the size of the holding and the balance sheet structure of the company. There is therefore no "price list". The costs for a shell company (SPAC) are individual and must be determined on a case-by-case basis. What is certain in any case is that the costs for a shell company/SPAC purchase are significantly lower than those of a bank-sponsored IPO.
In the case of an IPO, the costs are at least in the seven-figure range, depending on the issue volume, placement success and other legal and advisory costs, as advisors and banks are liable for the issue prospectus and a large number of other institutions are also involved in the process.
In contrast, shell companies (SPACs) are significantly less time-consuming and cost-intensive.
In the case of an IPO, the costs are at least in the seven-figure range, depending on the issue volume, placement success and other legal and advisory costs, as advisors and banks are liable for the issue prospectus and a large number of other institutions are also involved in the process.
In contrast, shell companies (SPACs) are significantly less time-consuming and cost-intensive.
Stock Exchanges
The stock exchanges in Germany differ in terms of their focus and their segments in terms of admission requirements and follow-up obligations. Stock exchanges in Germany are
Frankfurt am Main,
Berlin,
Düsseldorf,
Hamburg,
Hanover,
Munich,
Stuttgart and
Tradegate .
Frankfurt am Main,
Berlin,
Düsseldorf,
Hamburg,
Hanover,
Munich,
Stuttgart and
Tradegate .
Market Segments
In Germany, a distinction is made between two market segments, the Regulated Market and the Open Market. There are different transparency standards within these segments, which entail different requirements.
Segment Differences
The Regulated Market is a market organised in accordance with EU law and the German Securities Trading Act. The Regulated Unofficial Market (Open Market) is an exchange-regulated segment and is intended to provide companies with cost-effective access to investors and growth capital.
Transparency Standards
The various transparency standards differ in terms of admission and follow-up requirements. Depending on the market segment, different transparency and publicity requirements must be met.
Selling a Shell Company?
INSTANT IPO is also interested in buying/trading potential shell companies/SPACs. If you own a potential shell company (SPAC) and would like to sell it, please contact us.