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SEC Warns PSPCs Not A Way To Avoid Securities Laws

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The United States Securities and Exchange Commission has a new warning for the booming PSPC market: Blank check companies are no way to avoid disclosing key information to investors.

In a statement released Thursday, a senior SEC official said that despite their unique structure, special purpose acquisition companies are covered by federal securities rules. Claims that developers face less legal liability than a traditional public offering are “uncertain at best,” said John Coates, acting director of the agency’s corporate finance division.

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PSPCs go public to raise funds to buy other companies. For months, the SEC has reported that investors are not fully informed of the potential risks. Coates pointed out that companies have obligations as they seek to identify an acquisition target and ultimately make it public through another transaction known as de-SPAC.

“A de-PSPC transaction does not give anyone a free pass for material inaccuracies or omissions,” he said. “Everyone involved in promoting, advising, processing, and investing in PSPCs should understand the limits of any alleged differences in liability between PSPCs and conventional IPOs.”

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About 300 SPACs were launched on U.S. exchanges in the first quarter, raising nearly $ 100 billion. This total was higher than last year. The deluge overwhelmed SEC filing reviewers, sparked a spike in liability insurance rates for blank check companies, and fueled market fears that the bubble was about to collapse. to burst.

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Top photo: Commuters exit a Wall Street subway station near the New York Stock Exchange. Photographer: Michael Nagle / Bloomberg

Copyright 2021 Bloomberg.

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