July 6, 2022

Volume XII, Number 187

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July 05, 2022

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SEC Proposed New Rules Relating to SPACs

On March 30, 2022, the SEC published proposed new rules that would, among other things, impose additional disclosure requirements on initial public offerings (IPOs) by special purpose acquisition companies (SPACs) and in business combination transactions between SPACs and private operating companies (de-SPAC transactions).

Key highlights from the SEC’s proposal include:

  • Enhanced disclosure requirements concerning SPAC sponsors, potential conflicts of interest and dilution of shareholder interests. Additionally, de-SPAC transactions and any related financing transactions would require disclosure about the fairness of these transactions, including disclosure regarding any outside report, opinion or appraisal received by the SPAC or its sponsor.

  • Application of underwriter liability such that underwriters in a SPAC IPO would be deemed underwriters in a subsequent de-SPAC transaction when certain conditions are met.

  • Expanded definition of “blank check company” to include SPACs, effectively eliminating the availability of the Private Securities Litigation Reform Act’s safe harbor for a SPAC’s forward looking statements. This proposed change would serve to align de-SPAC transactions with traditional IPOs for purposes of nonfinancial statement disclosures and liability protections.

  • Creation of a safe harbor for SPACs from “investment company” status, provided that the SPAC’s assets consist solely of cash, government securities and government money market funds prior to completion of a de-SPAC transaction. Additional conditions for the safe harbor require: (1) the SPAC to seek to complete a single de-SPAC transaction through which the SPAC will be primarily engaged in the business of a target company or companies; (2) at least one class of the surviving company’s shares be listed on a national securities exchange following the de-SPAC transaction; and (3) a de-SPAC transaction to be announced no later than 18 months after the effective date of the SPAC’s registration statement, with such transaction closing within 24 months after such effective date.

The SEC’s proposing release is available here. The public comment period will remain open until the later of 30 days after publication in the Federal Register or May 31, 2022.

© 2022 Vedder PriceNational Law Review, Volume XII, Number 126
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About this Author

John M. Sanders Investment Lawyer Vedder Price
Associate

John M. Sanders is an Associate at Vedder Price and a member of the firm's Investment Services group.

Mr. Sanders focuses on advising clients on mutual funds, private placements, sale transactions and regulatory issues.

While in law school, Mr. Sanders was a judicial extern for the Honorable David J. Novak, U.S. District Court for the Eastern District of Virginia and a law clerk with the Baltimore City State’s Attorney’s Office. He also served as Lead Articles Editor for the William & Mary Law Review.

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(202) 312 3332
Nathaniel Segal Investment Attorney Vedder Price Law Firm
Counsel

Nathaniel Segal is counsel at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due diligence...

(312) 609 7747
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