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Considerations Before Investing in SPACs

The SPAC model poses risks to investors, especially those who hold SPAC shares through the de-SPAC merger.  Investors can mitigate their downside exposure by selling or redeeming their shares prior to the business combination or by negotiating a favorable subscription agreement through a PIPE investment, which allows for rigorous, confidential evaluation of the operating company. Over time, SPACs could become more attractive to investors who hold shares through the business combination, as disclosure and terms evolve to become more shareholder-friendly.