WASHINGTON (dpa-AFX) - On Wednesday, the Securities and Exchange Commission (SEC) adopted new rules and amendments to improve disclosures and provide additional investor protection in initial public offerings (IPOs) by special purpose acquisition companies (SPACs) and in subsequent business combination transactions between SPACs and target companies (de-SPAC transactions).
SPAC IPOs and de-SPAC transactions provide a way for private companies to go public. The Commission's focus is on improving investor protection through better disclosure. The rules also address broader investor protection concerns related to shell companies and blank check companies, including SPACs.
While 2020 and 2021 saw a surge in SPAC IPO filings, there were only 86 in 2022, a significant decrease. In 2023, the SPAC trend collapsed, with 21 firms that had gone public via SPACs going bankrupt, the largest being WeWork.
Legal Director Stephen Hall emphasized the need for greater disclosures regarding SPACs and their merger transactions to better protect retail investors. The rule aims to reduce information asymmetries between investors in SPACs and traditional IPOs by providing enhanced disclosures at both stages of the SPAC process. It also aims to enhance accountability and crack down on abuses in forward-looking statements and projections.
Following the SEC's proposal of the rule changes, underwriters including Goldman Sachs Group Inc. and Bank of America Corp. scaled back their services for the market within a few months. As part of the final rule, the SEC will issue guidance on when it will consider firms to be underwriters.
Additionally, SPAC sponsors, often hedge funds, private equity firms, and venture capital investors, would need to disclose more information about their identities, conflicts of interest, dilution, and compensation.
The SEC stated that if a majority of the agency's five commissioners vote to approve the rules, they will go into effect more than four months from now.
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