SEC Indicates SPACs Should Provide Robust, Clear Disclosure Regarding Conflicts Between Insiders And Public Shareholders

Special Purpose Acquisition Companies (SPACs) are blank check companies with no operations that undergo an Initial Public Offering (IPO) to raise capital with the intent of acquiring an operating company. SPACs raise capital based on the public's confidence in a SPAC's management team (sponsor) to identify an operating target company and complete a business combination transaction (de-SPACing transaction), typically within a 24 month timeframe, resulting in a public operating company. Almost all IPO proceeds are held in a trust account for use primarily in a de-SPACing transaction. Prior to a de-SPACing transaction, public shareholders may exchange their shares for an amount approximately equal to the cost of the shares at the IPO.