A merger with a publicly traded shell, or “blank check” company, might offer some unique advantages to a private firm looking to go public, but the transaction could raise many accounting and reporting concerns, International Banker reports. That was the impetus behind the SEC actions last spring, and new Chairman Gary Gensler recently hinted that more aggressive SPAC regulations could be on the horizon.
Indeed, some SPACs have already faced regulator ire. The SEC announced its first enforcement action on July 13, 2021, against all parties involved in one proposed SPAC transaction: the SPAC and its sponsors and CEO, as well as the proposed merger target and its founder and CEO. The action addressed misleading claims about the target’s technology and national security risks associated with the target’s founder and CEO, highlighting the SEC’s focus on investor protection.
Regulators in the EU and Asia have already issued rules and guidelines to allow the issuance of SPACs in those jurisdictions, and it’s unlikely that deal activity will come to a complete halt in the United States. As such, compliance teams must understand the risks that these entities can pose to their firms. Read more.
