Online marketplace Mercado Libre and venture capital fund Kaszek are teaming up to launch a special-purpose acquisition company, or SPAC, aiming to invest in a Latin American firm. Initially, MELI Kaszek Pioneer Corp — as the company will be known — aims to fundraise USD 250 million from the market, with Meli and Kaszek willing to invest another USD 50 million. But the total amount may be as high as USD 370 million, depending on incentives and the participation of other investors.
Known as blank-check companies, SPACs raise funds to acquire a company with high-growth prospects. The model has become widely popular in the U.S., where it is seen as a cheaper way for companies to go public. However, it also has risks, such as the lower level of scrutiny on the companies compared to traditional initial public offerings (IPOs), meaning investors could be left more exposed.
The MELI Kaszek Pioneer Corp is the fourth tech-focused SPAC in Latin America, and is gambling on its sponsor’s reputation to see it take off. One of the most famous venture capital funds in Latin America, Kaszek has already invested in unicorns such as fintechs Nubank and Creditas, and real estate startup Quinto Andar.
Mercado Libre, meanwhile, is one of the first and most prominent success stories in the Latin American tech environment. More recently, it has expanded into financial services.