Document Type
Article
Publication Date
10-2022
Journal Title
University of Pennsylvania Journal of Business Law
ISSN
1097-4938
Abstract
Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange in a transaction that resembles a public offering. Also known as “blank-check” or “reverse merger” companies, this process avoids many of the pitfalls of a traditional initial public offering.
During late 2020 and 2021 an unprecedented surge in the popularity and issuance of Special Purpose Acquisition Companies (SPACSs) took place. John Coates, the SEC’s Acting Director of the Division of Corporation Finance, observed, “Concerns include risks from fees, conflicts, and sponsor compensation, from celebrity sponsorship and the potential for retail participation drawn by baseless hype, and the sheer amount of capital pouring into the SPACS, each of which is designed to hunt for a private target to take public.”
We discuss this popular approach to capital formation within the context of the securities issuance process and examine the robust market for SPAC issuance during 2020 and 2021. Financial reporting and auditing considerations are examined, along with regulatory concerns. Several examples of these offerings are provided. We believe this paper adds to the discussion and understanding of this widely employed financing mechanism.
First Page
639
Last Page
699
Num Pages
61
Volume Number
24
Issue Number
3
Publisher
University of Pennsylvania Law School
Recommended Citation
Neal Newman & Lawrence J. Trautman,
Special Purpose Acquisition Companies (SPACS) and the SEC,
24
U. Pa. J. Bus. L.
639
(2022).
Available at:
https://scholarship.law.tamu.edu/facscholar/1659
File Type
Included in
Antitrust and Trade Regulation Commons, Banking and Finance Law Commons, Business Organizations Law Commons, Secured Transactions Commons, Securities Law Commons