Behind some of SPACs are big name investors, like activist investor Nelson Peltz and billionaire Ronald Perelman, who is best known for owning cosmetics giant Revlon. Major investment banks such as Citigroup, Credit Suisse and Lehman Brothers are underwriting the deals.

That's raising the profile of SPACs in the marketplace. It also helps that they work like private-equity funds for the masses, giving small investors access to dealmaking that they don't generally have. SPACs also have been largely spared from the credit crisis because don't initially need to access debt to finance their acquisitions.

To get into a SPAC, investors purchase the stock at the IPO or after. Their investments are then earmarked to be used for one big acquisition that typically must be completed in about 18 to 24 months after the IPO.

Once management picks a target, shareholder approval is required. If investors vote it down, or if management can't find a suitable acquisition target, the company is dissolved and investors largely get their money back.

"Investors are taking a significant risk because they are investing in a company without any idea of what will be acquired," said Wayne State University assistant professor of law Steven Davidoff.

Thanks to scandals involving SPACs two decades ago -- when executives defrauded investors, which essentially led to SPACs disappearing from the marketplace in the early 1990s -- there are better protections in place for shareholders. Most importantly, shareholders' money is put in escrow until an acquisition is made or the company dissolved.

But that doesn't mean investors are entitled to get back every last cent. Companies often deduct the costs for seeking an acquisition from the pool of investor money.

SPACs also don't have to be transparent. Marathon Acquisition Corp. last month said that it had picked a target, but declined to disclose what it was. It also said it could take up to Aug. 30 to close the deal.

Once a deal is done, another question arises: Can management run the company it bought? Some might not have incentive since they've already made their big money already: SPAC managers typically get shares at discounted prices.

Despite the risks, stock exchanges want a piece of this fast-growing, lucrative pie. The 66 companies that listed last year raised some $12 billion, according to SPAC Analytics, and the American Stock Exchange is where most of the action happened. Now Nasdaq Stock Market and the New York Stock Exchange are seeking permission from the Securities and Exchange Commission for the ability to list.

Nasdaq's senior vice president Bob McCooey calls past problems regarding SPACs "ancient history" and notes that the Nasdaq is trying diminish risk by tightening its listing standards, including requiring a majority of independent directors to sign off on acquisitions, too.

It's too soon to tell if most SPACs live up to the current hype. A few big-name deals have claimed much of the attention in recent years, but 74 of the 156 that have come to market are still searching for an acquisition, according to SPAC Analytics. Thirteen have been liquidated, and the remaining have announced an acquisition target or have completed an acquisition.

Some investors may be willing to wait things out since SPAC shares are holding up better than the overall stock market. In the last six months, they've lost 1.47 percent versus about an 11 percent decline in the Standard & Poor's 500 index, according to Dealogic.

The trouble with that gamble is there aren't any clues about how it will pay off.

------

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org