SEC Speaks Out On SPACs

When a significant volume of capital is raised from investors through nontraditional capital markets transactions, the U.S. Securities and Exchange Commission (SEC) is sure to follow with increased scrutiny. The SEC made that readily clear in recent weeks with several important statements conveying the risks of Special Purpose Acquisition Companies (SPACs). While many financial sponsors, operating companies, and investors have been drawn to SPACs on the premise that they represent a streamlined method for private targets to become public companies, the SEC is cautioning sponsors and target companies that the SEC views its role in reviewing disclosure regarding the de-SPAC transaction (the transaction in which a private operating company combines with the SPAC) much the same as for a conventional initial public offering (IPO), and will be eyeing disclosures by sponsors and targets carefully for any misleading statements or omissions, including projections and