While bulge-bracket banks pull back from SPACs, second-tier banks, sponsors and law firms are adjusting to the prospect of new SEC rules, The Deal reports. It’s been two months since SEC Chair Gary Gensler announced proposed changes to regulations in the SPAC sector, and reverberations continue to rattle the market.
Gensler’s proposal, which passed on a 3-1 margin, would require more disclosures from special purpose acquisition company sponsors tied to conflicts of interest. Additional disclosure would also be required regarding de-SPACs including those examining the fairness of transactions. Projections of future performance by companies going public would come under a brighter light. The regulator also wants financial statements from private companies in SPAC deals to look more like initial public offering financials. Private companies would hold greater responsibility for transaction information, while underwriters would be handed additional responsibilities and liabilities tied to both SPAC IPOs as well as business combinations on which they advise.
Doug Ellenoff, who heads up the SPAC practice at Ellenoff Grossman & Schole LLP, said the SEC’s proposals will bring the SPAC market into practices that are no different from those of traditional IPOs and direct listings. “The SEC’s proposed rules have accelerated that trend line,” Ellenoff said. Read more.
