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As the wave of SPAC IPOs and de-SPAC transactions continues to build, so too has the scrutiny of these transactions from the SEC and the shareholder plaintiff’s bar. On April 8, 2021, the SEC gave its clearest warning yet among a series of recent signals that it plans to intensify its review of de-SPAC transactions. Most recently, the SEC raised the possibility that statements in a de-SPAC transaction proxy statement fall within the IPO exclusion to the Private Securities Litigation Reform Act (“PSLRA”) safe harbor for forward-looking statements. Meanwhile, a SPAC shareholder recently filed suit in the Delaware Court of Chancery alleging that the SPAC’s board and sponsors breached their fiduciary duties in approving a de-SPAC transaction, and argued that the claims should be reviewed under Delaware’s demanding entire-fairness standard due to conflicts posed by the board’s and sponsors’ receipt of founder shar
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SPACs short for special purpose acquisition companies recently have drawn significant interest by companies and executives as a more seamless method to conduct an initial public offering. Often referred to as blank check companies, SPACs provide a vehicle by which companies may raise funds from public markets through initial public offerings (IPOs) that take a company from private to publicly listed. Unlike traditional IPOs, which often involve private companies that have developed over time, SPACs are shell companies when they become public and have no underlying operating business and no assets apart from cash and other limited investments. SPACs also have, in the SEC s words, distinct risks associated with investing in them. [1] These risks include conflicts of interests that SPAC sponsors may have, meaning that the sponsors economic interests may diverge from shareholders. [2] In addition, SPACs are not all
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One of the hottest going-public trends in 2020 and 2021 has been the rise of SPACs – Special Purpose Acquisition Companies – as a vehicle for private companies to go public. SPACs are shell companies that are formed, funded and taken public for the purpose of later acquiring an operating company. By merging with a SPAC, the private company effects a reverse takeover, inheriting the SPAC’s existing cash and taking over its management. SPAC mergers have quickly increased from being occasional to outpacing the number of traditional IPOs.
A SPAC merger involves different players that can have different motivations than a traditional IPO. In a traditional IPO, a private company may slowly prepare to become a public company, augmenting staffing and systems over a period of years, before engaging with underwriters that will conduct an initial public offering of securities for the company. By comparison, in a SPAC merger, t
Monday, April 5, 2021
Not far behind the dramatic increase in the use of special purpose acquisition companies (SPACs) is a corresponding increase in the number of shareholder lawsuits and increased activity at the US Securities and Exchange Commission (SEC). In recent days, Reuters reported that the SEC opened an inquiry seeking information on how underwriters are managing the risks involved in SPACs,
[i] and the SEC’s Division of Corporation Finance (Corp Fin) and acting chief accountant have issued two separate public statements on certain accounting, financial reporting and governance issues that should be considered in connection with SPAC-related mergers.
[ii] This increase in activity by SEC staff comes on the heels of nearly two dozen federal securities class action filings, several SEC investor alerts and earlier guidance from Corp Fin.
right now. lou dobbs on why you need to pay attention. plus democrats setting up a certain to fail vote on capitol hill this week on the payroll tax holiday. is this too smart by half or might they have set a very good trap for the gop? and barney frank is about to retire after 30-plus years in the house of representatives. why? and why now? find out, top of the hour when he explains live. jon: you re used to hearing about companies merging, but how about towns? it s happening now in new jersey where a historic vote has two towns on a path to becoming one. laura ingle is live in princeton, new jersey with more. reporter: you know the effort to merge municipalities has been going on for decades here. after several years of failed attempts. the marriage of princeton and