On March 30, 2022, the SEC announced proposed rules regarding SPACs and the use of projections. The proposed rules would require expanded disclosures regarding SPAC sponsors, conflicts of interest and dilution and require additional disclosures in de-SPAC transactions, including with respect to the fairness of the transaction to the SPAC’s investors. The target company in the de-SPAC transaction would also be required to be a co-registrant when the SPAC files its registration statement. The proposed rules would also deem the SPAC IPO’s underwriters to be underwriters in connection with the subsequent de-SPAC transaction when certain conditions are met.
The proposed rules would amend the definition of “blank check company” to make the liability safe harbor in the Private Securities Litigation Reform Act of 1995 for forward-looking statements, such as projections, unavailable in filings by SPACs. The proposed amendments would expand and update the SEC’s guidance on the presentation of projections of future economic performance in registration statements. The SEC will consider proposing additional disclosure requirements when projections are used in SPAC business combination transactions.
The proposed rules clarify that a SPAC does not need to register as an investment company under the Investment Company Act if it (1) maintains assets comprising only cash items, government securities and certain money market funds; (2) seeks to complete a de-SPAC transaction after which the surviving entity will be primarily engaged in the business of the target company; and (3) enters into an agreement with a target company to engage in a de-SPAC transaction within 18 months after its IPO and completes its de-SPAC transaction within 24 months of such offering.