The Securities and Exchange Commission is preparing to force more transparency from big private companies, as regulators grow concerned about the lack of oversight of the private fundraising that has fueled their rise, reports The Wall Street Journal.
Private capital markets have become an increasingly popular way for companies to raise money in the U.S. in recent decades, allowing firms to acquire funding from institutions and wealthy individuals without the regulatory burdens of going public. The number of so-called unicorns—private companies valued at $1 billion or more—has continued to grow even amid the recent boom in initial public offerings.
SPACs Also Face Scrutiny
SEC Chairman Gary Gensler last month directed his staff to deliver recommendations on how to make sure investors in SPACs receive the same protections as investors in a regular listing.
The chairman said there was “an “inconsistent and differential disclosure” among several parties in the deals. In some cases, retail investors don’t get the right information about share dilution, for example.
Gensler said there is also an issue with SPAC sponsors “priming the market” with inadequate statements before a merger, with investors sometimes making decisions based on incomplete information or promotional hype. Read more.
