Previously posted on SSRN.


Special purpose acquisition companies (SPACs) have exploded in popularity, luring both adventurous retail investors and sophisticated institutional investors. In a SPAC, a publicly traded shell corporation acquires a private target, thereby taking it public in a manner that circumvents the rigors of a traditional initial public offering (IPO). Proponents vaunt SPACs’ ability to simplify the process of accessing the public markets and democratize capitalism, but in their current form they pose risks to retail investors and to the market as a whole. Using a hand-collected dataset, this Article fills a gap in the literature by providing new empirical data regarding a critical feature of SPACs—the redemption right. SPACs allow their shareholders to vote for an acquisition target while simultaneously pulling their money out—a species of empty voting, where a vote is decoupled from any economic substance. We document a disturbing level of empty voting in SPACs and demonstrate an inverse correlation with stock performance: SPACs with more empty voting perform worse. Backed by this empirical support, we propose a tailored reform that we believe could make SPACs a viable and valuable alternative to traditional IPOs.