Will SPAC History Repeat Itself? SEC Takes Aim At SPACS

SEC requirements on SPACs are ramping up. The last time they did so, blank-check companies languished. How will greater scrutiny this time round impact the momentum of SPACs in play and in the planning stages?

The surge in today's market darling special-purpose acquisition companies (SPACs) has the SEC taking notice. On April 8, the SEC issued a public statement outlining a myriad of concerns including risks from fees, conflicts, and sponsor compensation. "With the unprecedented surge has come unprecedented scrutiny, and new issues with both standard and innovative SPAC structures keep surfacing," the statement reads.

SPACs are shell companies that facilitate an initial public offering registered with the SEC in order to use cash to buy a separate business. In the last two years, the use of SPACs in the marketplace has exploded. SPACs accounted for almost 40% of all IPOs in 2020, double the rate of 2019. SPACs raised more than $10 billion in IPOs in 2020 alone,