<h2><span style="font-size: small;">Introduction<a name=" ednref1" href="https://www.sec.gov/news/statement/munter-oca-2021-12-06?utm medium=email&utm source=govdelivery# edn1">[1]</a></span></h2>
<p><span style="font-size: small;">The events of the past year bring to mind the old saying that “change is the only constant in life.” Our capital markets continue to evolve and adapt in response to changes in the economic environment, investors’ needs for new types of information, and challenges related to the ongoing effects of the pandemic. Amidst these changes, the U.S. financial reporting system remains strong, largely due to the cumulative efforts of thousands of stakeholders who have exhibited resilience and adaptability, while remaining focused on the need for high quality financial reporting for the benefit of investors.</span></p>
So far in 2021, we have seen more than 500 Special Purpose Acquisition Companies (SPACs) go public and raise more than $123 billion, and more than 160 of these “blank check firms”.
At least one securities class action focusing on the restatement of SPAC warrants has been filed. It remains to be seen whether stock price declines in response to restatements and/or disclosures of weaknesses by SPACs are of sufficient magnitude to prompt more lawsuits.
What happened
In a recent client alert, we discussed the dramatic rise
in offerings of special purpose acquisition companies (SPACs) and
some of the attendant litigation and enforcement risks. A raft of
recent public statements and actions by Securities and Exchange
Commission (SEC) staff reflect the agency s enhanced scrutiny
of these transactions and suggest that enforcement investigations
(and ultimately actions) cannot be far behind.
In late March 2021, it was reported that the SEC s Division of
Enforcement had requested information from Wall Street banks
regarding SPAC transactions. According to the reports, Enforcement
staff requested information on topics including SPAC deal fees,
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In light of the dramatic upswing in the use of special purpose acquisition companies (SPACs), the staff of the Securities and Exchange Commission (SEC) has issued several public statements highlighting concerns and issues related to SPACs and private operating companies that are going public through business combinations with SPACs. These business combinations are referred to as de-SPAC transactions.
On April 8, 2021, John Coates, Acting Director of the SEC s Division of Corporation Finance, published a statement titled
SPACs, IPOs and Liability Risk Under the Securities Laws, discussing the legal liability risks of de-SPAC transactions and traditional initial public offerings (IPOs).