The U.S. House Committee on Financial Services in May held a hearing regarding SPACs, direct listings, public offerings, and investor protection associated with these offerings, write attorneys with Schiffer Hicks Johnson for JD Supra. Prior to the hearing, the committee released draft legislation amending the safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995 (PSLRA). If passed, companies looking to go public through a SPAC (commonly referred to as a “de-SPAC” or “business combination”) will face increased potential liability in forward-looking statements like the proxy provided to SPAC shareholders for purposes of voting on the de-SPAC or business combination.
This potential liability will not only influence the disclosures and communication made by the SPAC, their target, and their respective directors and officers to minimize risk while building support among shareholders for the de-SPAC transaction, but also impact the directors and officers liability insurance purchased to protect the directors, officers, and companies if a shareholder should sue them, alleging the disclosures were wrong or misleading. Read more.
