Back in December, The Wall Street Journal reported on the resurgent demand for special-purpose acquisition companies, also knows as SPACs or blank-checks. These are companies that are taken public for the sole purpose of seeking to acquire another operating company. If they can't find one with in a set period of time, they return the money to investors.

I was skeptical, writing that "Sometimes companies that go public through this process can be good investments, but there's something investors need to keep in mind: A company that has been acquired by a SPAC has just been put up for sale and is therefore unlikely to be undervalued. If the sellers could have gotten more for it, they would have sold it to someone else ... in general, I think blank checks are something for investors to avoid."

Now, less than six months later, Wall Street has turned on SPACs, and the rapid growth in blank check IPOs of late 2007 and early 2008 has subsided. According (subscription required) to the Wall Street Journal, the glut of these IPOs in recent months has left hedge funds -- their primary investors -- tired of them and, more dangerously, there are so many recently-formed SPACs on the prowl for acquisitions that they're "bumping into each other."

Of course some SPACs will be tremendously successful, but, in general, I still think investors should look elsewhere.

"Blank check" companies are created as shells with capital but no operating business. Their purpose it to shop for firms that they can buy and operate. These corporations are also known as SPAC for special acquisition companies.

According to The Wall Street Journal [subscription required], "Last year, SPACs accounted for nearly a quarter of all IPOs in the U.S., according to Dealogic, and the Amex was the go-to listing location for nearly all of them." Now Nasdaq (NASDAQ: NDAQ) wants a shot at allowing SPAC listings as well.

SPACs has been put together by several LBO and investment firms to be used to make buyouts down the road. That would allow the operating companies to be publicly traded right away. But, trading them on stock markets before they buy real businesses is a bad idea even if it gives the SPAC owners an edge on getting to the public market.

Trading in SPACs is trading in a phantom. Investors have no way to know what the SPAC will buy or even if it will ever buy a real business, forcing it to return money to investors. It is a form of gambling being encouraged by the exchanges.

Hopefully, the Feds won't let the Nasdaq get into the business. It will just create one more risky and poorly understood financial instrument

Douglas A. McIntyre is an editor at 247wallst.com.

HJ Heinz Co. (NYSE: HNZ) should have really strong sales this week leading up to Sunday's Super Bowl. With more interest this year than in any Super Bowl in recent memory, with the two storylines of the Patriots trying to run the table, and a New York team in the big game, not only should TV ratings skyrocket, but I would expect the number of Super Bowl parties to be up as well. Clearly that will benefit the condiment maker.

Heinz is trading toward the bottom of its 52-week range and sports a yield of over 3%. What makes this even more interesting is that investing guru Nelson Peltz owns a share. About two months ago, Peltz filed a prospectus for the $750 million initial public offering of a special purpose acquisition company (SPAC). Due to the ways SPACs are set up, he will need to make some kind of acquisition, and that deal may just be Heinz.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no position in any stock mentioned as of 1/27/08

As the leveraged buyout market (LBO) tightens amid the backdrop of more expensive debt, deal makers are looking to ride new investment vehicles to make their minions money.

We've seen a surge in popularity in what's called a "Special Purpose Acquisition Company," or SPAC. Bloomberg had a good article this morning on advent of the SPAC and what's happening in the industry as a whole. These companies, also called blank-check companies, are IPO'd after raising their funds. Once public, the founding management team needs to make an acquisition in a given time-frame. Shareholders decide on an individual basis whether they like the deal or not. If they like it, great. If not, they tender their shares and receive their money back.

Essentially, it's a hedged bet on management that their industry expertise will lead to a smart acquisition.

Bloomberg says that since the start of 2003, 144 blank-check companies have sold shares, raising $18.1 billion, with 13 of the deals coming before 2005, according to SPAC Analytics.

Thomas Hicks has been in the private equity business for about 35 years and is the cofounder of Hicks, Muse, Tate & Furst (he left in 2004). He also owns the Texas Rangers.

So his next big thing? Like Blackstone, he's going to the public markets and raising capital through a so-called "blank check" vehicle (known as a SPAC). Basically, this means he can buy whatever company he wants.

While this sounds dicey, investors are likely to trust the instincts of Hicks. In fact, it looks like he may raise about $400 million.

Over the years, there have been quite a few filings of blank-check offerings. And some have include high-profile people, such as Apple Inc.'s(NASDAQ: AAPL) co-founder, Steve Wozniak.

The underwriter on Hick's deal is Citigroup (NYSE: C) and the proposed ticker is "HICK-U."

You can find the IPO filing at the SEC Web site.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Giving someone a blank check is usually a bad move. But how about giving them a check for, say, $100 million?

That's currently happening on Wall Street and it involves a financial structure known as a SPAC, or special purpose acquisition corporation.

Actually, it's not a shady practice. As indicated in a recent piece in The New York Times, there are some heavy hitters taking a flyer on SPACs, such as former executives of Time Warner Inc. (NYSE: TWX), VNU and Walt Disney Co. (NYSE: DIS). What's more, major underwriters are also in the game like Merrill Lynch and Co. (NYSE: MER) and Citigroup Inc. (NYSE: C).

Basically, a SPAC is a public offering of shares. But there are restrictions. The money must be put into an escrow account until an acquisition candidate is identified. Furthermore, at least 80% of the proceeds must go into a deal -- within a couple years.

Thus, investors have some protection, as well as the right to vote "yes" or "no" on the deal. This certainly helps to raise the money.

If you read a typical prospectus for a SPAC, there's not much detail though. You are basically relying on the smarts of the management team.

To me, this is a big leap of faith.

So for retail investors, this is probably something to be quite cautious about.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Over the past several years, there has been an interesting trend on Wall Street: special purpose acquisition companies (SPACs). That is, a company raises capital through a public offering and then hunts for acquisitions (it is also known as a "blank check" offering – since the investors do not know what companies that will be purchased).

These deals are easy to setup (after all, there is very little to disclose). Also, the capital is held in escrow.

This week, there was a SPAC deal. Endeavor Acquisition Corp. (AMEX:EDA) agreed to purchase American Apparel for $244 million.

Based in Los Angeles, American Apparel has certainly been an edgy/hip retailer, with 143 stores.

So, why go this route? First of all, American Apparel will have access to more capital. Also, it did not have to go through the grueling IPO process. Finally, the company can use its stock to make acquisitions, as well as incentivize employees with stock options.

Keep in mind: a SPAC has 18 months to find a deal. If none is found, the capital goes back to investors.

And, yes, there are a myriad of SPACs coming up on the deadline. So, going into 2007, it's a good bet to see more of these transactions.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.