The SEC proposed new rules to “enhance disclosure and investor protection” in SPAC IPOs and de-SPAC transactions, writes Jones Day for JD Supra.
The proposed rules, if adopted, would, among other things: (i) require SPAC participants to make additional public disclosures, including regarding potential conflicts of interest, dilution, and the fairness of any proposed business combination; (ii) potentially expose certain SPAC participants to an increased risk of liability under the federal securities laws; (iii) remove the safe harbor for forward-looking statements that many SPACs have relied upon to include financial projections in their de-SPAC disclosures; and (iv) create a safe harbor that would exempt SPACs from registering as investment companies if certain criteria are satisfied.
The SEC’s proposed rules are designed to treat de-SPAC transactions more like traditional IPOs from a regulatory perspective, and to provide investors in SPACs with many of the same protections available to investors in companies that go public through more traditional means. By increasing the risk of liability for SPAC participants, the new rules could chill SPAC activity, and in that way reduce the ability (or willingness) of some private companies to access the public capital markets in this way. Read more.
