Assuming trust equals cash
Median redemptions have run well above 60%. Underwrite the deal on cash after redemptions, never on headline trust.
Resources
SPAC 101 for Founders
Going public through a SPAC is the biggest decision most founders will make. Here is how the process actually runs, what determines your outcome, and where deals go wrong.
The Process, Stage by Stage
- 014–8 weeks
Evaluate & select
Screen sponsors on completion history, trust size and sector experience. Sign an NDA and run mutual diligence.
- 022–4 weeks
Letter of intent
Agree valuation, minimum-cash condition, promote structure and exclusivity. This is where leverage is highest.
- 036–12 weeks
Definitive agreement & PIPE
Negotiate the merger agreement and raise committed PIPE capital to de-risk redemptions.
- 043–6 months
SEC review
File the S-4/proxy, respond to SEC comments, deliver PCAOB-audited financials and projections support.
- 054–6 weeks
Shareholder vote & redemptions
Public holders vote and elect redemptions. Actual cash delivered is decided here.
- 06Ongoing
Close & public company life
Lock-ups, earnouts, analyst coverage, quarterly reporting and index eligibility.
SPAC vs Traditional IPO vs Direct Listing
| Dimension | SPAC merger | Traditional IPO | Direct listing |
|---|---|---|---|
| Time to public | 4–7 months from LOI | 9–18 months | 6–12 months |
| Price certainty | Negotiated up front | Set at pricing | Market-determined |
| Cash certainty | Low — redemption dependent | High once priced | None — no primary raise |
| Projections allowed | Yes, with liability | Effectively no | No |
| Cost | Promote + fees | 6–7% underwriting | Advisory only |
| Partner value | Sponsor operating help | Bank distribution | Self-directed |
Common Founder Pitfalls
Ignoring the promote
A standard 20%-of-IPO promote can be 4–6% of the post-deal company. Negotiate earnout tranches tied to price performance.
A soft minimum-cash condition
Without a firm minimum-cash closing condition you can be forced to close into a cash-starved balance sheet.
Late PIPE process
PIPE demand is set months before the vote. Starting late leaves you price-taking at a discount.
Deadline pressure
Sponsors near their liquidation deadline negotiate hard and fast. Check the deadline before you engage.
Projection exposure
Forward projections in the proxy carry real liability. Build them with counsel and keep the support file.
Ready to pressure-test a deal?
Model redemptions and dilution, then shortlist sponsors that fit your profile.