Yesterday, the SEC voted, three to one, to propose new rules and amendments regarding SPACs, shell companies, the use of projections in SEC filings and a rule addressing the status of SPACs under the Investment Company Act of 1940. The proposal arrives in the context of calls from various corners, including from SEC Chair Gary Gensler and former Acting Corp Fin Director John Coates, to treat SPACs as an alternative method of conducting an IPO under the SEC’s policy framework. (See this PubCo post, this PubCo post and this PubCo post.) And let’s not forget the extensive recommendations from the SEC’s Investor Advisory Committee addressing SPAC regulatory and investor protection issues that have been under scrutiny. (See this PubCo post.) These investor protection concerns were exacerbated as a result of the proliferation of SPACs in 2020 and 2021—raising $83 billion in 2020 and $160 billion in 2021 and, in those same two years, constituting more than half of all IPOs, according to the proposing release. (Note, however, that this volume has not been sustained this year; according to Bloomberg, only $8.9 billion has been raised in 2022, “a fraction of the 279 deals raking in $93 billion during the same period last year.”) These concerns made SPACs an alluring target for SEC rulemaking, and the SEC has approached it with another enormous effort—literally—issuing a proposal of almost 400 pages. It must be a record—a second proposal in just over a week that would add an entirely new subpart to Reg S-K!
To learn more about this proposal, please see the recent post on Cooley PubCo.