The SEC’s new rules governing blank-check firms appear intended to harmonize the requirements (and potential liability for SPAC acquisition targets) of de-SPAC transactions with those of a traditional initial public offering, to the extent such requirements did not already apply, writes DarrowEverett attorney David Pentlow in a blog post.
In the past few years, it has been common for SPACs and acquisition targets to include financial projections in proxy statements or registration statements on Form S-4, which has not been typical in conventional IPOs due to the unavailability of the safe harbor provided by the Private Securities Litigation Reform Act (“PSLRA”) for initial public offerings or offerings by blank check companies. The new rules explicitly provide that this safe harbor is also not available for projections in de-SPAC filings, Pentlow notes.
The new rules also explicitly provide that the target company is considered a co-registrant under the Securities Act. This means, among other things, that the principal officers (including the CEO and CFO) and a majority of the board of directors of the target must sign the registration statement relating to the de-SPAC transaction, and that these individuals will be subject to strict liability under Section 11 of the Securities Act. Read more.
