SEC targets SPACs with rules on inflated business forecasts, merger disclosures

Source: CNBC

SEC targets SPACs with rules on inflated business forecasts, merger disclosures

PUBLISHED WED, MAR 30 2022 11:30 AM EDT UPDATED 2 HOURS AGO
Thomas Franck
@TOMWFRANCK

The Securities and Exchange Commission on Wednesday debuted a host of new rules for SPACs that, if enacted, would mark one of the broadest attempts to date at cracking down on the hot market for blank-check companies.

SPACs, or special-purpose acquisition companies, have come under fire in recent years by investors who say that the firms often inflate the business outlooks of the firms they seek to acquire. Many of those companies include start-ups that have not yet become profitable.

With its new rules, the SEC also hopes to address complaints about incomplete information and insufficient protection against conflicts of interest and fraud. The issues are not as pervasive in a traditional initial public offering.

SPACs are typically shell firms that raise funds through a listing with the goal of buying a private company and taking it public. That process allows the often-young firms to circumvent the more rigorous scrutiny of a traditional initial public offering.

“Functionally, the SPAC target IPO is being used as an alternative means to conduct an IPO,” SEC Chair Gary Gensler said in a statement. ...

-snip-

Read more: https://www.cnbc.com/2022/03/30/sec-targets-spacs-with-new-rules-about-forecasts-mergers.html