SEC SPAC Attack Intensifies

SEC Rules are expected this Spring to affect SPAC offerings; last week the SEC’s Investor Advisory Committee provided the Commission with a list of recommendations for consideration.

These recommendations focus primarily on enhanced disclosures: use of financial projections (generally omitted in regular IPOs); disclosure of profits for promoters regardless of share performance by SPAC founders; receipt of sizable equity in the target by founders regardless of how the target performs; plain English explanations of founder comp; disclosure of risks in finding a good targets; how the SPAC determines public readiness of a target, including accounting factors.

Commentary in the lawyer publishing service Law360 quotes one SEC Advisory Committee member as follows: “many target companies seem to prefer the more certain pricing and timing that comes with a blank-check [SPAC] merger compared with a traditional IPO;” and no doubt the robust compensation of promoters (and the generation of related professional service fees) support the prevalence of SPACs and the hundreds which today are funded and in the marketplace seeking acquisition targets, so it is not at all likely that SPACs will be mortally wounded by new regulation; and query if enhanced disclosure will matter much to the retail investor if the market generally remains “hot.”

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