SpacDeskLetter of Intent
A non-binding preliminary agreement between a SPAC and a potential target company outlining the key terms of a proposed business combination, typically signed before detailed due diligence and definitive documentation.
A letter of intent (LOI) marks the first formal milestone in the SPAC deal process. It is a document — usually non-binding except for confidentiality and exclusivity provisions — in which the SPAC and the target company agree on the broad strokes of a potential merger: indicative valuation, deal structure (stock, cash, or mixed consideration), governance arrangements, and a timeline for completing diligence and signing a definitive agreement.
LOIs are not publicly disclosed at the time of signing. The SPAC has no obligation to report an LOI in a current report (8-K), and most sponsors prefer to negotiate quietly until a definitive agreement is reached. However, if the LOI represents a material event — for example, if news leaks and affects the stock price — the SPAC may file a voluntary 8-K to address market speculation.
The period between LOI and definitive agreement is when the heaviest work occurs: the SPAC's advisors conduct financial, legal, and operational due diligence on the target; the target's auditors prepare financial statements to SEC standards; valuation consultants may issue fairness opinions; and PIPE investors are approached to gauge interest. This phase typically takes 4–12 weeks.
Not all LOIs lead to definitive agreements. Diligence may uncover problems, valuation gaps may prove unbridgeable, or PIPE commitments may fall short. When an LOI falls through, the SPAC resumes its search with no public disclosure — one reason SPAC investors often have limited visibility into the deal pipeline until a formal announcement.
Data sourced from SEC EDGAR filings. Example SPACs are drawn from the SpacDesk universe and selected to illustrate this concept. Definitions reflect standard SPAC structures; individual deals may vary.