I wrote an article discussing what is a SPAC. In that article, I briefly discussed what a blank check company. I understand that most people may not be familiar with that term. So, I want to further explain what this means for a lot of our casual investors. It’s not a complicated concept to get your head around, but still worth explaining non the less. I want to make this quick and easy to read. I’m just going to talk about how they work and then give you an example.
This is a pretty basic concept but it will be helpful to know when you read IPO articles. Because it’s the worst when you are reading an article and have no idea what they are talking about. Trust me I’ve been there.
How do Blank Check Companies Work?
How they work is very simple. One entity is used to raise money, the black check company. While the other entity is the one that is looking to go public and not waste time going through the regulatory process. The black check entity will raise the capital and create hype around the idea. This entity will then utilize the capital it has raise to acquire the company that is looking to go public. Check out the example below to see a real life example of this.
An Example of a Blank Check Company
A good example for this currently would be Black Rifle Coffee Company. They recently just announced that they were going to file for an IPO. But they mentioned that they “will be going public in combination with an entity called SBEA (SilverBox-Engagement Corps).”
In this example, Black Rifle Coffee Company is the entity that is looking to go public. SilverBox is the company that we are calling the “black check.” Because SilverBox will raise the money in the sole interest to acquire/merge with Black Rifle Coffee Company to make them the public company after the acquistion/merger. If you are interested in reading more about this check out the story here.
Hopefully, this article helps clear up any questions regarding what a blank check company actually is. After reading this article you should now have a good understanding on the next IPO article you decide to read. These are small terms that may not mean much, but in the big scheme of things they do. As you can tell with the example with Black Rifle Coffee Company.