Other than the risks normally associated with IPOs, SPACs’ public shareholders' risks may include:
- limited liquidity of their securities
- low visibility on future acquisition(s) at the time of the SPAC public offering
- dilution due to management and sponsor shares (20%)
- public shareholder approval contingency may make SPAC unattractive to sellers
- potential for uncertainty associated with the SEC merger/acquisition proxy process
There is also potential for delay and expense attributable to the public shareholders' special rights and the costs of functioning as a registered public company.
Research coverage of SPACs has been limited. This is due to conflicts that discourage underwriters from covering the companies they are most familiar with. In addition, traditional sell side coverage is hesitant to allocate time and effort to research a company when certainty of deal completion is not known.