SPACs: Disclosing Before Closing

Special Purpose Acquisition Companies (SPACs) continue to ride a wave of popularity as the capital raised in relation to SPAC transactions surpassed US$280 billion in the first nine months of 2021 alone. SPACs are publicly traded companies that hold nothing but cash. They exist for the purpose of acquiring a private company and facilitating what is marketed as a fast-tracked public listing process for such acquisition target.

Given the sheer volume and scale of SPAC listings on the New York Stock Exchange and Nasdaq, SPACs have caught the eye of the US Securities and Exchange Commission (SEC) as well as hungry plaintiffs. Much of the focus to date, from an enforcement and litigation perspective, has been on the adequacy (or inadequacy) of disclosure associated with the business combination transactions entered into by SPACs. However, as the critique of SPACs inevitably increases, we may see disclosure based claims focusing on other areas of the SPAC life cycle.