✒ SPACs have become an increasingly popular means for going public in recent years, with a record 617 SPAC going public globally in 2021 worth a combined $172.2 billion, according to data from Dealogic. Meanwhile, SPAC IPOs rose to account for more than 60% of all IPOs in 2021, while SPAC mergers accounted for more than 30% of all going-public deals last year.
The SEC took notice, and warned that the purported advantages of the SPAC process, like reduced legal liability, could prove illusory if tested in the court, as the SEC proposes new rules that would clarify that there is no legal safe harbour protecting companies from liability for making misleading projections of financial performance when taking company public via SPAC.
The proposed rules, if adopted, would also require enhanced disclosure about potential conflicts of interest between SPAC sponsors and target companies, as well as information about how an investor’s interest in a SPAC can be diluted as it takes a company public.
SEC Chairman Gary Gensler told reporters that: “What we are trying to do is bring traditional IPOs and SPAC-target IPOs to similar level of investor protection.