Will the SEC regulate SPACs?

In June, the SEC announced that its regulatory agenda includes proposing SPAC rule amendments in April 2022. A SPAC, also known as a blank check IPO or a shell company, is a company with no operations or assets.

Is it safe to invest in SPAC?

SPAC investing has been less profitable for individual investors. Most SPACs underperform the stock market and eventually fall below the IPO price. Given SPAC’s poor track record, most investors should be wary of investing in them, unless they focus their investing on pre-acquisition SPACs.

What is the definition and purpose of a SPAC according to the SEC?

“SPAC” stands for special purpose acquisition company—what are also commonly referred to as blank check companies. SPACs have become a popular vehicle for various transactions, including transitioning a company from a private company to a publicly traded company.

What is SPAC transaction?

Special purpose acquisition company (SPAC) transactions may be considered as a capital-raising alternative to initial public offerings (IPO). SPAC transactions result in the private operating company (Target) involved becoming a public company.

What happens to a SPAC after merger?

What happens to SPAC stock after the merger? After a merger is completed, shares of common stock automatically convert to the new business. Other options investors have are to: Exercise their warrants.

Why would someone use a SPAC to Go Public?

In the process the SPAC turns the company it acquires into a publicly traded firm without having to go through the lengthy and expensive process of an IPO. In either case, they represent opportunities for retail investors, not just accredited or sophisticated investors, to get a stake in a relatively new company.

Why are SPACs so popular?

The SPAC model has become popular because “in some ways it is fulfilling a need” for both firms going public and investors,” Roussanov continued. Firms filing for IPOs are only allowed to report historical financial performance, but with startups “it’s all a bet on the future,” Drechsler said.

Why SPACs are the new IPO?

The main advantages of going public with a SPAC merger over an IPO are: Faster execution than an IPO: A SPAC merger usually occurs in 3–6 months on average, while an IPO usually takes 12–18 months. Access to operational expertise: SPAC sponsors often are experienced financial and industrial professionals.

What happens when a SPAC mergers?

What are risks of SPAC?

Are there risks associated with SPACs?

• Not knowing the SPAC’s investment strategy during the initial IPO.
• Having to rely on the SPAC’s management team to find a suitable target company.
• Being in the dark about the intended target company.
• Recent regulatory scrutiny by the SEC.

Is a SPAC a change of control?

1) De-SPAC Transactions and Change in Control Protections However, depending on how the merger or acquisition is structured and on how materially the pre-transaction versus post-transaction share ownership changes in the de-SPAC transaction, it may or may not constitute a change in control.

What happens after a SPAC goes public?

Following its initial public offering, or IPO, the SPAC will identify acquisition candidates and attempt to complete one or more business combination transactions after which the company will continue the operations of the acquired company or companies (“combined company”) as a public company. [1]

What is the division of Corporation Finance’s guidance on SPACs?

Summary: This guidance provides the Division of Corporation Finance’s views about certain disclosure considerations for special purpose acquisition companies, commonly referred to as SPACs, in connection with their initial public offerings and subsequent business combination transactions.

What are the key issues with a de-SPAC transaction?

Key issues for SPACs and operating companies participating in a De-SPAC transaction include obtaining the financial statements necessary for SEC filings, addressing the financing of the transaction, increasing transaction certainty, and evaluating and negotiating post-closing equity and governance structures.

What are the SEC filing requirements for a SPAC?

SEC Filing Requirements As discussed above, before consummating a transaction, a SPAC will be required to file one of the following: Proxy statement on Schedule 14A — Generally required for the SPAC to solicit votes from its shareholders to consummate the transaction.