EXPLAINER: What's a SPAC, the latest craze on Wall Street?

CHARLOTTE, N.C. (AP) — WeWork will finally go public this year, allowing investors to buy and sell its shares. But not through a traditional IPO.

In the two years since the office-sharing company’s failed IPO, a new way to launch a stock on Wall Street has become fashionable: SPACs.

Special purpose acquisition companies have been embraced by big institutions and small-pocketed investors alike. Celebrities and famous athletes have endorsed them.

SPACs have raised more than $96.5 billion in less than three months so far this year. That tops the $83.3 billion raised in all of last year, which itself was six times bigger than the prior year, according to SPACInsider. Well-known companies such as Draftkings and Virgin Galactic used a SPAC to go public last year.

“I didn’t take them seriously until I saw the momentum,” said Susan Winter, head of global loan syndications at Silicon Valley Bank.

Lately, however, banks, regulators and some investors are taking a more cautious look at these red-hot investments. Critics point to risks inherent in how SPACs are constructed, while others see the maniacal fervor for them as one sign of a bubble in the stock market.

WHAT'S A SPAC?

SPACs are publicly traded but have no real business. A SPAC is essentially just a pile of investors’ cash. The goal is to use those millions of dollars to take a private company public without using the traditional initial public offering process that’s been around for decades.

Billionaire hedge fund investor Bill Ackman raised $4 billion last year for his own SPAC, known as Tontine Capital. Chamath Palihapitiya, an early Facebook employee and chairman of Social Capital, has multiple SPACs and is using one to take SoFi, the online financial services startup, public later this year.

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