Many firms that have gone public by merging with special purpose acquisition companies are quickly running low on cash, Bloomberg writes in this opinion piece. To stave off disaster, newly listed startups are turning to an equity line of credit, or ELOC, which grants them the right — but not the obligation — to sell additional shares to a financial investor in return for hard cash.
It’s an efficient and low-cost method of raising money which, if used judiciously, can help plug a liquidity shortfall. But there are risks for the retail investors on whom the shares might ultimately land. Read more.
