SEC: Staff Statement On Accounting And Reporting Considerations For Warrants Issued By Special Purpose Acquisition Companies (âSPACsâ) John Coates, Acting Director, Division Of Corporation Finance, Paul Munter, Acting Chief Accountant, April 12, 2021 Date
In a recent statement, Acting Chief Accountant Paul Munter highlighted a number of important financial reporting considerations for SPACs.[2] Among other things, that statement highlighted challenges associated with the accounting for complex financial instruments that may be common in SPACs. Additionally, CF staff also issued a recent statement[3] highlighting key filing considerations for SPACs.
We recently evaluated fact patterns relating to the accounting for warrants issued in connection with a SPAC’s formation and initial registered offering. While the specific terms of such warrants can vary, we understand that certain features of warrants issued in SPAC transactions may be common across many entities.
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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).
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On March 31, 2021, the Securities and Exchange Commission (SEC)
provided public statements from Acting Chief Accountant Paul Munter and from
the Division of Corporation Finance addressing
Special Purpose Acquisition Companies (SPACs). Although each of the
statements were distinct and addressed different issues, the
primary focus of both was to raise awareness of critical
accounting, financial reporting and governance considerations that
a private operating company should carefully consider and address
prior to consummating a business combination with a SPAC.
SPACs are shell companies that raise capital through an initial
SPAC Attack: Placing The Risky Chicken Before The Regulatory Egg forbes.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from forbes.com Daily Mail and Mail on Sunday newspapers.
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SPACs have gotten a lot of attention from investors. Now, regulators are watching, too.
The Securities and Exchange Commission is stepping up scrutiny of special-purpose acquisition companies, which exploded in popularity during the pandemic as a way for early-stage companies to go public without the regulatory scrutiny of a traditional IPO. But increased attention from the SEC may throw a wrench in the market.
In the latest of a string of warnings issued by the SEC in recent weeks, the regulator said late Monday that some of the blank-check firms, called SPACs, may have failed to properly account for warrants sold or given to investors.