Blank check companies (also known as special acquisition companies), don't actually have any business operations. Instead, they are created with the sole purpose to acquire and/or effect a merger with other businesses. Furthermore, at the time of the IPO, these companies typically have not yet determined which businesses they will seek to acquire. So, in a sense, they can be thought of as an alternative for investors who wish to be involved in private equity investments.
However, due to their speculative nature, they are often overlooked by most investors. That said, they might not be as risky as many investors assume. That is because if the blank check company has not signed a letter of intent for a merger or acquisition within 12-24 months of the IPO, it must dissolve and return the capital back to the stockholders.
But, until the company actually enters into a transaction, the stock typically does not fluctuate a whole lot. Therefore, an investor's capital may be tied up in an unappreciating asset for some time.
As for CFFAU, it says that it will not limit its prospective target businesses to any particular field or geographic region, but, it does intend to focus on companies in the financial services or real estate services industries where its management team has significant experience.
CFFAU, its sponsor, and CF & Co, are all affiliates of Cantor , a diversified financial services company for institutional customers operating in the global financial and commercial real estate markets. Cantor's businesses include CF & Co, an independent middle market investment bank and primary dealer, and BGC Partners, a financial technology and brokerage business servicing the financial services markets. It also owns Newmark, which operates a commercial real estate services business.
CFFAU will be led by Howard Lutnick, who has served as Cantor's President and CEO since 1992. Mr. Lutnick has led Cantor’s successful exit from many of its acquisitions and investments. As an example, in 1996, Cantor launched eSpeed, its fully electronic treasuries trading platform. Cantor developed and launched eSpeed into which BGC Partners was merged in 2008. Then, in June 2013, BGC Partners sold the eSpeed business to Nasdaq, Inc. for $750 mln in cash and up to $484 mln earn-out shares of Nasdaq, Inc.
The company will seek to capitalize on the significant resources and the global infrastructure of Cantor and it believes these relationships will provide it with exposure to a broad selection of potential acquisition targets. However, there is no formal agreement between it and Cantor with respect to the provision of any services to it by Cantor and its employees.
As for its investment criteria, it will seek to acquire one or more businesses with an aggregate enterprise value of approximately $750 mln to $2 bln. In general, CFFAU will seek to acquire a readily understood business with sustainable competitive advantages, predictable cash flows and a solid management team at an attractive valuation. Its universe of potential acquisition targets will include -- but will not be limited to -- asset management firms, financial brokerage firms, financial information technology companies, insurers, investment consultants, and residential and commercial mortgage banking firms.
As of the publication of its IPO prospectus, it had not selected any specific business combination target and it has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.