A House Financial Services subcommittee on May 24, 2021, will examine the recent proliferation of special purpose acquisition companies (SPACs) as part of a broader hearing on public offerings and investor protection. The hearing follows a cluster of statements from SEC staff seeking to bring scrutiny to SPAC accounting and disclosures.
The hearing, entitled Going Public: SPACs, Direct Listings, Public Offerings, and the Need for Investor Protections, will be held by the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, chaired by Rep. Brad Sherman, a California Democrat who has voiced criticism of the SPAC surge.
Sometimes referred to as “blank check companies,” SPACs are shell companies that raise money in initial public offerings, using that capital to acquire a private company and take it public without a traditional IPO (IPO). The process of combining into a single publicly traded entity is referred to a “de-SPAC” transaction.
In an April 8 statement, SEC Acting Division of Corporation Finance Director John Coates said SEC staff is “continuing to look carefully at filings and disclosures by SPACs and their private targets.”
“As customary, and in keeping with the Division of Corporation Finance’s ordinary practices, staff are reviewing these filings, seeking clearer disclosure, and providing guidance to registrants and the public,” Coates said. “They will continue to be vigilant about SPAC and private target disclosure so that the public can make informed investment and voting decisions about these transactions.”
Coates, in his statement, raised investor protection questions surrounding the de-SPAC process, including possibly overstated claims of greater liability protections for investors and the risks of material misstatements or omissions in a registration statement.
Days after that statement, Coates issued a joint staff statement with Acting Chief Accountant Paul Munter related to financial reporting considerations for warrants issued by SPACs. (See SEC Staff Statement Covers Accounting Considerations for Warrants in SPAC Transactions in the April 14, 2021, edition of Accounting & Compliance Alert.)
SEC staff had also issued a March 31 statement on some SPAC financial reporting considerations. (See SEC Issues Two Staff Statements on SPACs in the April 5, 2021, edition of ACA.)
This article originally appeared in the April 29, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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