There is a new form of companies that is gaining popularity, called SPACs. SPACs are defined as “A special purpose acquisition company, sometimes called blank-check company, is a shell company that has no operations but plans to go public with the intention of acquiring or merging with a company with the proceeds of the SPAC’s initial public offering.”
The idea of those companies is to essentially raise money and then merge/acquire with another to fully fund that other companies operation and they essentially become one company under one ticker.
I’m currently looking at “SHLL” but it is flagged as “questionable” on Zoya app, so I’m not sure what to do. It already has published a SEC FORM 10-Q, and in the form, it says “On June 18, 2020, the Company, Merger Sub and Hyliion entered into the Business Combination Agreement, pursuant to which Merger Sub agreed to merge with and into Hyliion (the “Merger,” together with the other transactions related thereto, the “Proposed Transactions”), with Hyliion surviving the Merger as a wholly owned subsidiary of the Company (the “Surviving Corporation”). Hyliion designs, develops and sells electrified powertrain solutions that can be installed on Class 8 trucks from most major commercial vehicle original equipment manufacturers. Hyliion’s headquarters are located in Cedar Park, Texas.”
Is it halal to invest in a SPAC that has already identified the company in which it plans to acquire?
Just to add, the nature of investing in a SPAC is that the stock is currently at a specific rate, but once the merger is complete, the stock is likely to increase significantly in value within a span of 2 weeks, but also has the probability of staying as is (Allah knows best).
The issue with SPACs is that the investments the SPACs makes must be shariah compliant. Therefore, there is a medium-to-high Shariah non compliance risk if there is no Shariah board overseeing SPACs and their investments.
Jazak Allah Khairan. Correct me if I’m wrong, but what I understood from what you just said is that SPAC companies invest their existing dollars in other companies/trust funds (some of which may not be shariah compliant to raise further funds) before they acquire their intended company, and as such we don’t know what we are investing in, ergo, should avoid it.
Precisely. It all depends on which types of companies they target and the Shariah compliance of those acquired equities. If there is no Shariah framework or governance in place, there is every chance that the investments can be non-compliant. Hence, the existence of a Shariah board or a Shariah governance framework is vital in such types of investments.
I have recently invested in a SPAC that is due to merge with an electric vehicle company in December. based on your answer above, sounds like my investment is not sharia compliant. Could you please advise what I should do, as I invested in it without knowing the fact that the SPACs are nonsharia compliant? I looked at the company’s core business and their finance which looked ok to me, i.e. business is halal and debt is well below the 30% threshold.
Assalamu alaikum, I have this same question. I invested in a spac that was merging with an electric vehicle company. If the company being merged with is shariah compliant, would that not make my investment in the spac shariah compliant?
Assalamu alaikum, I have the same question, I’ve invested in a company (THCB) that I later found out may have been involved with marijuana, except it’s a blank check company right now that may be merging with an EV battery company. I’m feeling terrible right now and want to sell but I am currently losing about $1000 on the shares and would like to know if this is a halal investment, if it isnt then i will take the loss and learn my lesson.
Hello sir,
are you talking about THCB? I’m wondering how did you see that their business is halal as I’ve recently discovered that they are involved in dealing with cannabis, although im not sure since it’s a blank check company so far so it shouldnt have a business yet until it merges/acquires another company
Walikumassalam Moham, I was talking about SBE due to merge with Charge Point (EV charging company).
I have a second question that is somewhat related, once the SPAC is merged with the new company, as long as the newly formed companies core business is in line with Sharia will it be halal?
Assalaamu alaykum brothers & sisters
I have invested in 2 SPAC’s…
After reading all of these posts i did my research & found out they both put the money in an intrest-bearing trust account
I sold them both on the same day… i’m going to give away my profits…
I assume only my profits are haraam… my initial investment is still halal because i didn’t know this i assume?
Please correct me if i’m wrong on this. & if i need to give away more than only the profits i need to know this. Also what exactly should i do with the profits? Can i just give it to a homeless person?
To be honest i was still not 100% convinced this was haraam due to the fact that i only bought it to be an early investor in the companies… not to benefit from their trust account. But better be safe than sorry…
the core business of both SPAC targets are halal, their products & services have nothing to do with riba or other sinful products
I’m waiting for the article to come out. I have to be honest if this article says it’s halal i will buy back into them but i doubt it.
Another criterion of a halal investment is that it must have some non liquid assets. SPACs don’t. Eagerly awaiting the article
“the shares of a company can be purchased only if the company owns some non-liquid assets. If all the assets of a company are in liquid form, i.e. in the form of money, then that cannot be purchased or sold, except on par value, because in this case the share represents money only and the money cannot be traded in except at par value.”
Above can be heard in the below video in step 5 (6:46)
I too am also invested in the SPACs space - has the article been issued elsewhere you can signpost me and the other questioners too - or if not issued yet - can you advise when you think it will - there does seem to be limited information by experts so it’s much needed. JazakAllah khair for working on this.
How you able to advise some brief screening points for SPACs in particular to in the meantime:
Before a SPAC merges but say it has identified it’s target (e.g from reports from reputable sources - bloomberg etc) are we allowed to invest at this point pre merger as the most likely the SPAC at this stage only has assets in liquid form/possible being held in interest accounts).
The reason being this is where the potential gain is to be had - pre merger investment.
