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Companies like to raise money first and decide what to do with it later. For investors, however, that can be tricky .Everybody wants a blank check. So-called blank check initial public offerings are in the midst of a renaissance, though they might not provide much of a thrill.

They work like this: A lone management team files to go public, planning to use the proceeds to buy a company. Investors in these IPOs are in effect wagering that management will be able to squeeze profits out of whatever company it chooses to acquire. At a time when profitable companies are stumbling out of the IPO gate, the idea of betting on a few dealmakers seems a bit counterintuitive. Nonetheless, the deals are thriving

According to Fortune, blank check IPOs are popular again. Also known as special purpose acquisition companies (SPACs), these are IPOs that are done to raise money to possibly buy another company. That is, you are investing in a company with no business model, no sales... nothing. You're just hoping that the management can find some brilliant acquisition that will create value.

Given the tendency of acquisitions to do anything but create value, you have to wonder why anyone would invest in a SPAC. But that doesn't mean people won't do it anyway. From Fortune: "SPACs have soared in popularity in recent years. So far this year, some 40 blank check companies have raised $5.3 billion through public offerings, compared to 13 companies that raised $484 million in all of 2004, according to Dealogic."

The idea of investing in a company where you have no idea what the business will be is hardly new. During England's 18th Century South Sea Bubble, a promoter raised money through a stock offering for "a company for carrying on an undertaking of great advantage, but nobody is to know what it is."

It's an appealing proposition for a company to raise money first and figure out what to do later. In addition, Guy Lander, a securities lawyer with Carter, Ledyard & Milburn says it's a way for management to acquire a large stake in what they hope will become a profitable outfit. Plus, going public as a shell company is an easier route to market than actually building a company.

BUM DEAL? Humphrey Polanen, the CEO of SPAC Sand Hill IT Security, which has agreed to buy St. Bernard Software, says going the blank check route"provides access to capital which may not be available to people without a private equity track record."

Companies that have recently filed to raise money include East India Company Acquisition (See BusinessWeek.com, 6/26/06, "East India's Iffy IPO"), Millennium India Acquisition Company, and ChinaGrowth. While these outfits are clearly eager to link themselves to Asia's booming megamarkets, there are plenty of reasons for investors to shy away.

In the year's biggest blank check offering, Apple Computer (AAPL) founder Steve Wozniak's Acquicor Technology (AQR.U) raised $172 million in March. On June 29, it traded around $6.30, up from its offering price of $6.

DOWNPLAYING THE RISK. At least during the pre-acquisition stage, blank check deals don't look like a strong addition to a portfolio, or bring in returns that IPO investors like to see. Lander says that sophisticated investors have some advantages. Underwriters, he says often minimize the risk involved, and might contribute some of their commission to the IPO infusion. Several firms that underwrite blank check deals, such as Morgan Joseph and Early Bird Capital, declined to comment for this story.

On the other hand, these stocks might work for some sophisticated traders. Polanen says that about 15% of each share price for Sand Hill IT constituted warrants that investors traded independently while the company searched for an acquisition. So, some investors could recoup their investment solely by trading warrants. In such cases, these traders "frankly wouldn't care what the management team came up with as a deal," Polanen says. Of course, if the company succeeds, they still have their piece.

PARTNERS WANTED. When blank check companies succeed in finding a partner --that is, a source of revenue -- it can mean a big payday for shareholders. In one of 2005's more hyped deals, Fort Lauderdale Services Acquisition (SVI.U) raised about $127 million. In March, the company announced plans to acquire private smoothie chain Jamba Juice. The stock is currently trading at $13.90, up from its offering price of $8.

Still, a bet on a blank check company can turn sour for investors if the right partner is not found. And now, with even more deals in the pipeline, there's less money to go around. "Given the large supply of these deals," Lander says, "the window may be

A blank check IPO exists to raise money, and then seeks to use that money to acquire another company.Blank check companies, also known as special purpose acquisition vehicles, are formed for the sole purpose of acquiring other businesses.

They generally tap investors in the public markets prior to making acquisitions, and generally have an agreement to return funds to investors within a specified period if they fail to close deals.

For instance, Endeavor Acquisition went public as a blank-check IPO and then acquired American Apparel. Now the company trades as American Apparel (AMEX: APP), and Kevin Kelly wrote about why he thinks that company is a buy here.

Sometimes companies that go public through this process can be good investments, but there's something investors need to keep in mind: A company that has been acquired by a SPAC has just been put up for sale and is therefore unlikely to be undervalued. If the sellers could have gotten more for it, they would have sold it to someone else.

Blank check companies, which have only come into vogue in recent years, have courted controversy because they have no revenue or operating history -- just a management team promising acquisitions if the right opportunity presents itself.

After a slow start, these specialized offerings are now beginning to take off with almost $6 billion having been raised by blank-check IPOs so far this year, up from $3.4 billion last year, or about 15 percent of what mainstream IPOs raised in the first nine months of the year.

Investors who buy into blank checks are in effect betting on the resumes of the managers and their ability to find suitable businesses to acquire