SEC Commissioners Consider Implications Of Different Paths For Going Public

At a meeting of the SEC Small Business Capital Formation Advisory Committee, SEC Commissioners considered the implications for retail investors of shifting trends in companies' pathways to going public, (i.e., by direct listings and special purpose acquisition companies ("SPACs") rather than traditional initial public offerings ("IPOs")).

In his remarks, SEC Chair Gary Gensler stated that improved disclosures and regulations can enhance competition in the SPAC market. Mr. Gensler noted that, after choosing a target company, SPACs typically raise additional capital through private investments in public equity ("PIPEs"), which give large institutions an opportunity to purchase shares at a discount. Mr. Gensler asserted that PIPE investments are an example of a structural component of SPACs that comes at the expense of retail investors' investments. Further, Mr. Gensler stated that issues arising from the structure of SPACs, including the structure of sponsor,