April 19, 2021 Webinar
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Mayer Brown invites you to the Practising Law Institute’s The SPAC Life Cycle: Business, Legal and Accounting Considerations 2021 virtual forum.

This all-day event is made up of a number of panels that will provide a comprehensive examination of special purpose acquisition companies (SPACs) and the various business, legal, SEC reporting and accounting considerations that must be addressed in each phase of the SPAC’s fast-paced and complex lifecycle.

Mayer Brown partner, Eddie Best, will participate in the afternoon panel, “The De-SPACing Transaction,” addressing:

  • Proxy and shareholder vote considerations
  • Raising additional capital
  • SEC reporting and accounting considerations – reverse merger transactions
  • Market communications during the de-SPACing process
  • Financial statement requirements of the target company
  • Auditor requirements
  • The “Super Form 8-K”
  • Timing, details, and examples

For more information, please visit the event website.

Today, the Staff of the Securities and Exchange Commission issued two statements relating to special purpose acquisition companies (SPACs). Neither statement provided any guidance or interpretation. Both seemed directed at emphasizing existing regulations.

The first statement from the Staff of the Division of Corporation Finance (see: https://www.sec.gov/news/public-statement/division-cf-spac-2021-03-31) noted a series of considerations that private companies should take into account before entering into an initial business combination with a SPAC. The statement highlighted some of the securities law concerns that are well understood by practitioners, including the fact that the combined company would be considered an “ineligible issuer” and, as an ineligible issuer, subject to certain communications and other limitations, the limitations on the use of Form S-8, etc. The statement also reminded issuers of their obligations regarding maintaining books and records in sufficient detail to account for transactions in and dispositions of the issuer’s assets, as well as maintaining adequate internal control over financial reporting. Finally, the Staff statement noted the requirements to comply with the continued listing rules of the securities exchange on which its securities are listed or quoted.

The second statement was issued by the Office of the Chief Accountant (see: https://www.sec.gov/news/public-statement/munter-spac-20200331). This statement also is directed at private companies, their boards of directors, and their audit committees. The statement notes that, “[a] merger with a SPAC may also raise unique challenges for a private target company seeking to become a publicly-traded company. It is critical that the board of directors, audit committee (as applicable), management, and auditors of these operating companies fully understand and fulfill their respective professional responsibilities so that companies meet their obligations under the federal securities laws and investors are provided with high quality financial reporting at the time of the merger and on an ongoing basis in subsequent periods.”

PLI’s Private Placements and Hybrid Securities Offerings 2021

April 19 – 20, 2021 Webinar
Register here.

Mayer Brown invites you to the Practising Law Institute’s Private Placements and Hybrid Securities Offerings 2021 virtual conference.

Private Placements and Hybrid Securities Offerings 2021 will focus on the changes to the exempt offering rules, including the changes to the integration framework, the proposed amendments to Rule 144, and the proposed changes to Rule 701 and Form S-8, among other things.  Panelists also will discuss the documentation, principal negotiating issues, and market developments relating to late-stage or pre-IPO private placements, PIPE transactions (including SPAC PIPE transactions), 4(a)(2) and 144A offerings, and confidentially marketed public offerings.

Chaired by partner Anna Pinedo, co-author of PLI’s Exempt and Hybrid Securities Offerings, this year’s conference will feature experts from across the industry including the Chief of the Office of Small Business Policy in the US Securities and Exchange Commission’s Division of Corporation Finance, Jennifer Zepralka; Minh Q. Le, Director in FINRA’s Corporate Financing Department; and Nikolai Utochkin, counsel in Nasdaq’s Legal and Regulatory Group.

For more information, please visit the event website.

On March 24, 2021, the US Securities and Exchange Commission (SEC) adopted interim final rules to implement portions of the Holding Foreign Companies Accountable Act (the HFCA Act), which was signed into law by President Trump on December 18, 2020. As explained in an earlier Mayer Brown Legal Update, the HFCA Act aims to address restrictions China has placed on the ability of the Public Company Accounting Oversight Board (PCAOB) to inspect or investigate PCAOB-registered public accounting firms in connection with their audits of Chinese companies by mandating certain disclosures and requiring the delisting in the United States of companies whose auditors do not (or cannot) comply with the PCAOB’s inspection rules.

Read the full Legal Update.

CB Insights summarized 2020 corporate venture capital (“CVC”) financing trends in 2020 in its recent report. Globally, CVC-led deals raised over $73.1 billion in 2020 in 3,359 transactions. While global deal levels declined by 1.7%, CVC-backed funding rose by 24% year-over-year.  CVC-backed funding increased by 24% year-over-year in the United States.  The number of US CVC-backed deals declined to 1,211 in 2020 from 1,238 in 2019.  The largest CVC-backed deal in 2020 was a $1 billion private equity investment in a China-based semiconductor company.

979 CVCs were active investors in 2020 compared to 984 in 2019.  CVC investments represented 24% of all venture capital deal activity in 2020.  Approximately 33% of CVC-backed deals did not include a traditional VC co-investor in 2020, compared to 38% in 2019.  As companies delay going public, there has been an increase in CVCs investing in later stage deals.  Globally, seed-stage deals accounted for 24% of CVC investments, down 10% year-over-year.  The average CVC-backed deal size increased to $28.6 million in 2020, $7.8 million larger than the average venture capital deal (without CVC participation).  There were 182 CVC-backed mega-rounds in 2020, 109 of which were CVC-backed mega rounds for US-based companies.

Source: The 2020 Global CVC Report, CB Insights

The report highlights certain sectors in which CVC investors were particularly active globally, including artificial intelligence (“AI”), cybersecurity and digital health.  AI companies raised $11.2 billion in CVC-backed deals in 2020, 2% lower than 2019.  Thirty AI companies completed mega rounds in 2020. Cybersecurity companies raised a record high of $3.8 billion in CVC-backed funding, which included 12 mega rounds.  CVC-backed funding to digital health companies grew by 68% year-over-year to $8.8 billion across 310 transactions in 2020, of these 27 were mega rounds.  As a result of increased reliance on technology during the pandemic, tech-enabled sectors have raised large amounts of capital allowing for the development of new products and technologies helping the world adapt to remote working and interaction.

During its recent meeting, the Securities and Exchange Commission’s Investor Advisory Committee (the “Committee”) approved a recommendation to the SEC regarding minority and underserved community inclusion in investment and financial services.  The Committee previously held a panel discussion on September 24, 2020, which focused on how minority community inclusion in investment and financial services is critical to closing the wealth gap in the United States. The recommendation can be found here, in draft form.

The Committee finds that minorities lag significantly behind white Americans and other groups in the areas of acquisition of homeownership and financial assets. For example, the recommendation cites a Federal Reserve study noting that only 6.5% of Black Americans own stocks, bonds, and mutual funds, and the average retirement account of Black Americans is $24,520, compared to $75,200 for white Americans. FINRA’s “African American and Hispanic/Latino Responses to Pandemic Related Volatility in the Stock Market” report shows that respondents that identified as white more frequently owned both retirement and taxable accounts compared to respondents who identified as African American and Hispanic/Latino.

The Committee set out its recommendation in four parts.

  1. The Committee recommends the Commission support regulations, legislation, programs and other steps that increase acquisition of financial assets and services by minority communities. The report notes that specific programs, such as the US Department of the Treasury’s “myRA” (my Retirement Account) program, can encourage investor communities with traditionally lower assets and financial to establish savings and investing accounts.
  2. The Committee recommends that the Commission enable a more hospitable environment for investment by minority communities through regulatory oversight of financial services. Specifically, the Committee suggested the review of disclosure requirements and disclosure documents, such as prospectuses, to make these easier to understand and to provide useful, consistent information. The CFPB’s TRID rule, which simplified home mortgage disclosures forms, was highlighted as a good example of disclosure simplification.
  3. The Committee recommends that the Commission continue and build upon its programs that are directed toward increasing financial literacy and supporting investments by minority communities. The SEC’s Office of Investor Education and Advocacy, the recommendation highlighted, is currently engaged in a number of activities designed to improve financial literacy and engagement in investing by minority communities.
  4. Finally, the Committee recommends that the Commission help registered financial services firms expand and improve their ability to encourage investment by under-represented communities.

Acting SEC Chair Allison Herren Lee reacted positively to the detailed recommendation, acknowledging specifically the suggestion that the SEC analyze the effects of its policies on investments by minority and underserved communities.

In another step toward the integration of climate factors into the US corporate disclosure landscape, Acting Chair of the US Securities and Exchange Commission (SEC), Allison Herren Lee, issued a request for public input on climate change disclosures on March 15, 2021.

The request seeks input relating to 15 climate-related disclosure topics, including:

  • specific disclosure metrics that may be used to quantify climate information, including GHG emissions in line with the GHG Protocol and GHG reduction goals;
  • the advantages and disadvantages of existing disclosure frameworks (specifically referring to the TCFD, SASB and CDSB frameworks);
  • whether climate disclosure requirements should be incorporated into existing rules, like Regulation S-K, or new regulations; and
  • the advantages and disadvantages of a “comply or explain” framework.

The variety and scope of topics suggests that the SEC is considering a broad range of approaches to climate-related disclosure. The request also suggests that other ESG-related disclosures may follow, noting that “the staff is evaluating a range of disclosure issues under the heading of environmental, social, and governance, or ESG, matters.”

The SEC provides a webform and email box for the public to provide input on these issues, and asks for comments within 90 days. For more information on the SEC’s ESG efforts, including the recent creation of its Climate and ESG Task Force, see our earlier blog post here.

Global Capital Markets & the US Securities Laws 2021 Webinar
Hosted by PLI | April 7, 2021
Register here.

Capital markets continue to adjust to a wide range of evolving regulatory standards that affect the way in which offerings are conducted around the world. Practising Law Institute’s all-day webcast event will provide an update on domestic and international regulatory and market developments, bringing together experts for an in-depth look at how the US securities laws work in the context of a rapidly evolving global regulatory environment.

Among this group of experts, Mayer Brown partner Christina Thomas will join the 9:15am panel, Global Capital Markets Perspectives in 2020, to address the following:

  • The state of capital markets in a global environment;
  • The SEC’s international regulatory agenda;
  • Areas of focus for issuers raising capital in global markets; and
  • Current trends in foreign offerings in the United States.

For additional information, please visit the event website.