While the SEC’s latest rule proposal has the greatest relevance to SPACs & shell companies, there’s one aspect of it that applies to all public companies – proposed tweaks to the agency’s guidance on the inclusion of projections in SEC filings (see p. 130 of the release). That guidance is laid out in Item 10(b) of Reg S-K and the proposal would inject some familiar concepts from Reg G into that guidance. Specifically, the SEC proposes to amend Item 10(b) to state that:
– Any projected measures that are not based on historical financial results or operational history should be clearly distinguished from projected measures that are based on historical financial results or operational history;
– It generally would be misleading to present projections that are based on historical financial results or operational history without presenting such historical measure or operational history with equal or greater prominence; and
– The presentation of projections that include a non-GAAP financial measure should include a clear definition or explanation of the measure, a description of the GAAP financial measure to which it is most closely related, and an explanation why the non-GAAP financial measure was used instead of a GAAP measure.
The SEC would also amend the guidance to clarify that it applies to the projections of any entity included in the filing, such as the target in a business combination transaction.
– John Jenkins