Tough day for SPACs

“SPAC Accountability Act of 2022” would expand the legal liability of parties involved in SPAC transactions, close loopholes that SPACs have “long exploited to make overblown projections,” and lock in longer the investors sponsoring a deal.

SEC is concluding a 60-day public comment period on the proposed guidelines for SPACs, specifically around disclosures, marketing practices and third-party oversight.

In brief the following two practices are suggested to stop:

• banks associated with SPACs are not liable for misstatements related to the merger,

• no scrutiny of/ almost no info on a company’s finances, liabilities and operations of the real business behind the SPAC.

Given the current difficult IPO environment the US move will even more limit the window of opportunities. However, increased liability may help post-IPO performance which is crucial to late stage investors.