What am I missing? Other than the sponsors, what are people getting out of it? Going "public" and selling shares on the public market without having to disclose anything first? This feels so bubble.
If you're a company owner: If you take your company public in an IPO, you have no idea what people will pay. With a SPAC you can discuss and negotiate and fix a price. That might be 100% shares or 100% cash. But you know you will end up with X percent of the shares and Y dollars once the deal is done so you can manage your risk.
If you're the SPAC, you are taking more risk. But you think you're getting the company cheaper than the market will value it. So you'll profit from the first day of trading.
Public companies (in theory) are better run and have easier access to capital. So the act of going public should increase company value and that adds motivation to both sides.
Using a sponsorship deal and charging investors for it is just advertising really. If the SPAC wastes money on it, that's the investors problem.
It doesn't seem much worse than buying on the first day of an IPO, when the well-connected investors have already bought their shares at the IPO price and enjoyed a "pop" to the price they're selling to you at.
In the typical structure of a blank-check SPAC, if you don't like the company they pick to acquire, you're supposed to be able to get your money back before the deal closes. I'd guess that the option isn't exercised all that often in practice, though.
In some cases, the advantage of a SPAC is that it has a senior management team that will take over the acquired company (not unlike a PE deal). For some investors, this makes the target company more attractive than it would have been going public on its own without a management team.
