Forward Purchase Agreement

A forward purchase agreement (FPA) is a contractual commitment — usually entered into at or around the time of the SPAC's IPO — for a specified buyer to purchase additional shares (and sometimes warrants) of the SPAC at a predetermined price when the business combination closes. The buyer is typically an affiliate of the sponsor, a dedicated SPAC fund, or a strategic investor.

FPAs differ from PIPEs in timing and structure. While PIPEs are negotiated and committed at the time of the deal announcement, FPAs are arranged much earlier — often at the IPO stage — and provide a standing commitment that doesn't depend on identifying a specific target. This makes FPAs attractive to sponsors who want to pre-commit additional capital to demonstrate deal-closing ability.

The economic terms vary: some FPAs are structured at $10.00 per share (matching the IPO price), others include a discount or premium. Some are for a fixed number of shares; others scale based on redemption levels ("backstop" FPAs that absorb redeemed shares to maintain minimum cash for the target).

In recent SPAC vintages (2023–2025), a new wave of "recycling" FPAs has emerged, where hedge funds enter FPAs to purchase shares from redeeming holders at a discount to trust, effectively becoming the deal's marginal capital provider. These structures have replaced traditional PIPEs in many smaller deals.

SpacDesk tracks FPAs under the broader financing instruments dataset, with links to the S-1 or 8-K disclosing the agreement.