A blank-check company is a development-stage company that either does not have an established business plan or its business plan is based around a merger or acquisition with another company or companies.

Blank-check companies generally are speculative and often fall under what the Securities and Exchange Commission (SEC) defines as "penny stocks", or speculative securities that trade for fewer than $5 per share.

A popular type of blank-check company is a special purpose acquisition corporation (SPAC). The founder of a SPAC pools money from investors and he or she may contribute to the SPAC to form a blank-check company with the sole purpose of acquiring another company or companies.

Investors do not have knowledge of how their money will be spent, so they issue blank checks to the SPAC. In turn, the SPAC must receive shareholder approval for all acquisitions and 80% of investor funds must be used in any single deal. If the SPAC fails to find a shareholder-approved deal within two years of creation, it is liquidated and the SPAC's founder loses the investment. Blank-check companies present investors with an alternative similar to private equity.

For more on this topic, read SPACs Raise Corporate Capital, Mergers and Acquisitions: Introduction and The Lowdown on Penny Stocks.

This question was answered by Richard C. Wilson.

  1. What's the difference between a merger and an acquisition?

    Learn about the difference between mergers and acquisitions. Discover what factors may encourage a company to merge or acquire ... Read Answer >>
  2. What is the difference between a merger and an acquisition?

    Read about the legal and practical differences between a corporate merger and corporate acquisition, two terms often used ... Read Answer >>
  3. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    Learn about mergers and acquisitions and how these two corporate actions differ based on the size and participation of the ... Read Answer >>
  4. Are acquisitions only for large companies?

    Learn how mergers and acquisitions, despite what the media portrays, actually take place more often among small companies ... Read Answer >>
  5. Why do some mergers and acqusitions fall through?

    Most merger and acquisition (M&A) activities are carried out successfully, but from time to time, you will hear that a deal ... Read Answer >>
  6. In M&A how does an all-stock or all-cash deal affect the equity of the buying company? ...

    Mergers and acquisitions (M&A) are forms of corporate restructuring that are becoming increasingly popular in the modern ... Read Answer >>
Related Articles
  1. Insurance

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  2. Investing

    The Second Return of Twinkies May Not Be So Sweet

    Twinkies are making their second comeback, this time to the public markets. Almost four years after the snack cake line's owner, Hostess Brands, declared bankruptcy following an acrimonious ...
  3. Investing

    How The Big Boys Buy

    Learn what those in-the-know look for when acquiring a company.
  4. Financial Advisor

    Acquire A Career In Mergers

    This exciting sector demands a lot from its advisors. Are you up for it?
  5. Investing

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  6. Investing

    Why Do Penny Stocks Fail?

    Penny stocks are speculative and highly risky investments. Lack of government and stock exchange oversight and general information leaves penny stock investors open to sudden losses.
  7. Small Business

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  8. Investing

    Understanding Penny Stocks' Risks and Rewards

    Penny stocks can soar in a short period, but dabbling in them is a dangerous game. Here is a breakdown on the risks and rewards of penny stocks.
  9. Small Business

    What's an Acquisition?

    In corporate terms, an acquisition is the purchase of a company or the division of a company. Some acquisitions are paid in cash, while others are paid with a combination of cash and the acquiring ...
  10. Investing

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller. We tell you what to look for.
  1. Special Purpose Acquisition Company - SPAC

    A publicly-traded buyout company that raises money in order to ...
  2. Blank-Check Company

    A company in a developmental stage that either doesn't have an ...
  3. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  4. Penny Stock

    A stock that trades at a relatively low price and market capitalization, ...
  5. Acquisition Premium

    The difference between the estimated real value of a company ...
  6. Acquisition

    A corporate action in which a company buys most, if not all, ...
Hot Definitions
  1. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  2. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  3. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  4. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  5. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  6. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
Trading Center