A special purpose acquisition company (“SPAC”) is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. SPACs, which qualify as emerging growth companies and smaller reporting companies under Securities and Exchange Commission (SEC) rules, have become increasingly popular in the energy space over the past three years. Currently, there are ten SPACs with a focus on the energy space which have consummated initial public offerings (IPOs) raising over $3 billion in proceeds and are each still searching for an initial business combination (IBC). Six of these SPACs are listed on the Nasdaq Capital Market and four of them are listed on the New York Stock Exchange (NYSE).

In a typical SPAC IPO the company will sell units comprised of one share of common stock and a fractional or whole warrant to purchase a share of common stock, at a price of $10.00 per unit. The units, shares and whole warrants trade separately.

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A SPAC has a fixed deadline to consummate an IBC, which is typically either the 18 or 24 month anniversary of its IPO closing date. If the deadline is not met, and the SPAC has not obtained stockholder approval for a deadline extension, the SPAC must liquidate and return the per share trust value to its public stockholders. Each of Pure Acquisition Corp., Trident Acquisitions Corp., HL Acquisitions Corp. and AMCI Acquisition Corp. have an 18 month term to consummate an IBC, while the other six SPACs each have a 24 month term with the upcoming deadlines.

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Of these ten SPACs, seven have anchor investor arrangements in place to provide for additional private placement investments by their sponsors, affiliates or third parties, in connection with an IBC.

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