Editor's note: We've talked a lot about initial public offerings ("IPOs") in the Digest over the years...

An IPO is the route that many private companies take to "go public" by selling shares of the business in the stock market. And the IPO day is the first time that everyday investors can buy shares through their brokers.

But an IPO isn't the only way for a company to go public... In recent years, another method has gained popularity – and as an investor, you often need as little as $10 to get involved.

In this weekend's Masters Series, we're sharing a pair of essays from our good friend and Empire Financial Research editor Enrique Abeyta to explain this different way of going public. As you'll see today, it has come a long way from its seedy beginnings in the 1980s...

This Red-Hot Corner of the Market Is Just Getting Started

By Enrique Abeyta, editor, Empire Financial Research

I began my full-time career on Wall Street at Lehman Brothers in August 1995.

Two years earlier, I spent the summer working for Lehman on the powerful fixed-income syndicate desk.

When I started, Lehman was known as a fixed-income powerhouse. It was the only place I wanted to work. I imagined it being like the coolest fraternity on campus.

As part of our training at the firm, though, new hires were required to do a "rotation program" where we would sit on a number of other trading desks. The idea was that the team running those trading desks would get to meet us, and then both groups could decide whether it would be a good fit (similar to rushing a fraternity).

For my rotations, I chose corporate fixed-income, syndicate fixed-income, internal proprietary trading (basically the company's internal hedge fund), and private-equity placement.

The last one intrigued me the most...

A smart, aggressive investment banker named Peter Ax ran the desk. My time working rotation on this desk opened my eyes to the big opportunity in venture investing and investing in private companies.

This was back in the earliest days of the Internet. Household names like Google's parent Alphabet (GOOGL) and Facebook (FB) didn't even exist yet... But Lehman's private-equity placement desk already had an impressive two-decade track record of generating massive returns by investing in nascent companies with incredible growth potential.

These businesses weren't publicly traded, which meant this market wasn't transparent. I had to work hard to find these opportunities... and they weren't available to most retail investors.

Each of the deals took a ton of work. There were no public filings, analyst reports, or any of the usual paperwork you would have with a publicly traded stock.

But that's exactly why they had such incredible upside potential... and also why I was so interested.

Despite my initial plans to join the prestigious fixed-income desk, I ended up joining the private-equity desk, where I stayed for a couple of years. Peter eventually moved on to start a chain of laundromats – of all things... and with my mentor gone, I decided to move into the hedge-fund side of the business.

Still, my interest in private equity never went away... And over the years, I continued to look for these kinds of opportunities. My last hedge fund, Falcon Edge Capital, was particularly active in this market and eventually invested more than $500 million into them.

In fact, the area interested me so much that I eventually went on to start my own heavy metal and tattoo digital media and e-commerce company, Project M.

Investing in these private companies can present a huge moneymaking opportunity. However, it's basically impossible for average investors, most of whom don't have the access, the time, or the skillsets to go out and do the deep research on hundreds of ideas to identify the best private investments.

Remember, with no publicly available information on any of these companies, the process is extremely tricky and time-consuming.

But what if I told you that you can partner with some of the best investors in the world to get in on the ground floor of these kinds of opportunities?

They'll go out and find these opportunities... They invest their own money alongside you... And best of all, when you invest, you have the option to decide whether you like the deal they're making – or get your money back.

I know that sounds too good to be true, but this type of investment exists... and this little-known corner of the market is getting bigger every day.

I'm talking about special purpose acquisition companies ("SPACs"). SPACs have been around for decades. Their earliest predecessors were called "blank-check companies."

These were pools of money that were raised for the purpose of eventually acquiring another company. In short, it was a way for these companies to collect money from investors with no idea how exactly they would spend the funds.

They began to proliferate in the 1980s, but did so in the shady "penny stock" area of the capital markets. It became a big business in the go-go '80s – the decade of the cutthroat Gordon Gekko from the iconic film Wall Street. In fact, from 1988 through the third quarter of 1989, an incredible 70% of penny stocks went public through blank-check companies.

Often, these businesses were merely fronts for unscrupulous brokers to go out and defraud investors. They would often invest in non-viable (or even fake) private businesses and then use their high-pressure tactics to push the price higher and dump them on unwitting investors. (Think of films like Boiler Room or The Wolf of Wall Street and you'll get the picture.)

In 1990, the U.S. Securities and Exchange Commission ("SEC") began to respond, beginning with the Penny Stock Reform Act ("PSRA"), which clamped down on these blank-check offerings.

And in 1992, the SEC really put its foot down when it stipulated that money raised in this structure would have to be put in escrow until the company identified its investment. It also ruled that the majority of the money raised had to be used for the acquisition. Most important, investors would have the option to vote on whether to participate. These were put out in SEC Rule 419 and legitimized the once-seedy world of SPACs.

One of the first big investors to take advantage of these new regulations was GKN Securities Chairman David Nussbaum. He saw an opportunity to use this structure to do "reverse mergers" with private companies that might not otherwise have access to the capital required for a traditional IPO process.

Technically, Nussbaum created companies that weren't subject to Rule 419... but he abided by the rules and created the first real institutionally investable SPAC vehicles.

The tech bubble put a damper on the creation of more SPACs, as virtually any company that wanted to go public did so via an IPO. But the collapse that followed created another opportunity.

The SEC added additional regulations in 2003, which paved the way for large banks like Citibank, Deutsche Bank, and Credit Suisse to get involved.

And now, the tremendous growth in the issuance of SPAC stocks over the past decade represents a great opportunity for investors...

Over the past few years alone, we've started to see legendary investors like Bill Ackman, Mario Gabelli, Peter Thiel, and Howard Marks launch their own SPACs. They and other highly regarded management teams have acquired and taken well-known private companies public... like space-tourism company Virgin Galactic (SPCE) and sports-betting website DraftKings (DKNG).

The increased regulations, coupled with some of the world's largest investment banks, legitimized the entire SPAC market for individual investors.

Now, more than any other time in history, SPACs have investors' best interests in mind. This has led to private-equity funds and even university endowments to invest huge sums of money into SPACs.

The SPAC market has never been bigger, better, or safer. As more investors learn about them – and more money flows into them – I expect we'll see some life-changing returns over the next couple of years... Don't miss it.

Regards,

Enrique Abeyta

Editor's note: On Thursday, October 8, Enrique will join Empire Financial Research founder Whitney Tilson for the SPAC Investment Summit.

During this FREE event, you'll learn everything you need to know to make money in the sector... how to avoid falling into traps... and why Enrique and Whitney have never been more bullish on SPACs than right now.

You'll also hear from investing legend Bill Ackman, whose latest venture recently launched the largest SPAC ever. The action starts promptly at 8 p.m. Eastern time. Save your seat right here.