Last week’s IAC meeting must have been pretty busy, because in addition to the 10b5-1 reform recommendations, it also received a subcommittee’s draft recommendations on enhancing SPAC disclosure. This excerpt from a recent CFO Dive article summarizes the key recommendations:
Based on the draft document, the advisory committee would recommend SPACs be required to:
– describe the role of its sponsor (including “insiders or affiliates such as celebrity sponsors/advisors”), their “expertise and capital contributions,” and any potential conflicts of interest, according to the advisory committee’s draft document;
– enable investors to gauge risks by providing “plain English” disclosure about stages in the SPAC process, including the “promote” to be paid to sponsors and the impact on dilution of shares and;
– detail “the mechanics and timeline of the SPAC process,” including a description of the asset to be purchased, events required during the next two years for the asset to appreciate and the shareholder approval process at the time of de-SPAC.
The draft also includes a recommendation that the SEC publish an analysis of the players in the various SPAC stages, their compensation, and their incentives. Following the publication of that analysis, the IAC may follow-up with additional actions or recommendations regarding SPACs.
If you take the time to read the draft, I think you’ll come away with the sense that the IAC subcommittee is very uncomfortable with how little is known about the post-2019 SPAC market. In particular, with so many SPACs still looking to complete their merger transactions, the draft says that “the greatest risk of SPACs to investors may remain ahead with the merger being a point of significant inflection for investors – and their related risk and returns.”
Speaking of SPACs & SPAC mergers, be sure to tune in to our September 22nd joint webcast with DealLawyers.com on “Navigating De-SPACs in Heavy Seas” to hear our panel of experts discuss the De-SPAC process and the challenges presented by the current regulatory environment.
– John Jenkins