SPACs, also known as “blank check companies,” have been around in their current form since the 1990s and have been viewed as the fraudulent backwater of the financial world for years, but they caught fire during the pandemic. And the SPAC mania is only growing: SPACs raised $ 42.7 billion in the first six weeks of 2021, more than half the amount they raised last year, according to the Financial Times.

Why do celebrities jump on the train? To get richer, of course.

Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management and a Wall Street scholar, explained the piece. “I imagine a manager somewhere saying to you, ‘Hey, listen, there’s this hot new financial offer. Let’s put your name and fame on it, ”said Mr Ritholtz. “‘They’re going to put some fairy dust in a SPAC and the potential upside is tens, if not hundreds, of millions of dollars.'”

The celebrities are not so much the financial decision-makers, but the sponsors who have been brought in to attract investors (“strategic advisors” in the prospectus). Like soft drink marketers or sneakers, SPAC executives use the power of celebrity to sell a product – in this case a financial instrument that the New York Times likened to an “empty shell.”

Let’s say a SPAC hypothetically costs $ 10 per share and brings in $ 500 million in the public markets. When a prominent consultant negotiates 1 percent of this deal, they’re rewarded with a $ 5 million stake in the company. Now let’s say the same SPAC also finds a successful merger candidate, attracts other investors, and closes a $ 10 billion deal. The 1 percent stake in the celebrity got them (on paper) a payday of $ 100 million.

Basically, celebrities risk their reputations for a few million dollars initially, “but if it works it’s $ 100 million,” said Ritholtz. “People love asymmetrical risk-reward situations.”

He added, “I can’t believe we haven’t seen a Kim Kardashian SPAC.”

Similar to a stock market boom during a global pandemic, the term SPAC has a silly, absurd quality and is suitable for the play on words: SPAC-spectacular! SPAC delicious! It was a missed branding opportunity that Mr. O’Neal’s investment vehicle was called Forest Road Acquisition Corp rather than Shaq SPAC.