SPAC IPOs

SEC Proposes New Rules For SPACs – Part 6

On March 30, 2022, the SEC proposed rules related to SPAC and de-SPAC transactions including significantly enhanced disclosure obligations including related to financial projections, making a target company a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination, and aligning de-SPAC transactions with initial public offering rules. In addition, the SEC has also proposed rules that would deem any business combination transaction involving a reporting shell company, including but not limited to a SPAC, to involve a sale of securities to the reporting shell company’s shareholders. The new rules would amend a number of financial statement requirements applicable to transactions involving shell companies.

In addition, the SEC has proposed a new safe harbor under the Investment Company Act of 1940 (‘40 Act’) that would provide that a SPAC that satisfies the conditions of the proposed rule would not be an investment company and therefore would not be subject to regulation under the

May 17, 2022

SEC Proposes New Rules For SPACs – Part 5

On March 30, 2022, the SEC proposed rules related to SPAC and de-SPAC transactions including significantly enhanced disclosure obligations, expanding the scope of deemed public offerings in these transactions, making a target company a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination, and aligning de-SPAC transactions with initial public offering rules. In addition, the SEC has also proposed rules that would deem any business combination transaction involving a reporting shell company, including but not limited to a SPAC, to involve a sale of securities to the reporting shell company’s shareholders. The new rules would amend a number of financial statement requirements applicable to transactions involving shell companies.

In addition to proposing new rules for SPAC and de-SPAC transactions, the SEC is proposing new Securities Act Rule 145a that would deem all business combinations with an Exchange Act reporting shell to involve the sale of securities to the reporting shell company’s

May 10, 2022

SEC Proposes New Rules for SPACs- Part 4

On March 30, 2022, the SEC proposed rules enhancing disclosure requirements associated with SPAC initial public offerings (IPOs) and de-SPAC merger transactions; requiring that a private operating company be a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination; requiring a re-determination of smaller reporting company status within four days following the consummation of a de-SPAC transaction; amending the definition of a “blank check company” to make the liability safe harbor in the Private Securities Litigation Reform Act of 1995 for forward-looking statement such as projections, unavailable in filings by SPACs and other blank check companies; and deeming underwriters in a SPAC IPO to be underwriters in a de-SPAC transaction when certain conditions are met.

The proposed rules would require specialized disclosure with respect to compensation paid to sponsors, conflicts of interest, dilution and the fairness of business combination transactions. Further disclosures will also be required in connection with the use of projections.

May 2, 2022

SEC Proposes New Rules for SPACs- Part 3

April 26, 2022

SEC Proposes New SPAC Rules – Part 2

April 19, 2022

SEC Proposes New SPAC Rules – Part 1

As I wrote about last week, the SEC has had a very busy rule-making few weeks. In addition to issuing six new compliance and disclosure interpretations (C&DI) for merger and acquisition transactions, most of which directly impact SPAC business organization transactions, it also proposed new rules on SPACs and all shell companies in a 372-page release. The new C&DI were the topic of last week’s blog (HERE) and in a multi-part blog series, I am delving into the proposed new SPAC rules.

April 12, 2022

SEC Issues New Mergers And Acquisitions Related C&DI

Last week was a very busy regulatory week for the SEC, including issuing six new compliance and disclosure interpretations (C&DI) for merger and acquisition transactions, most of which directly impact SPAC business organization transactions; proposed rules on SPACs’ shell companies and the use of financial projections; proposed rules to modify the definition of “dealer” for purposes of broker-dealer registration requirements; and a new accounting bulletin impacting the accounting treatment of cryptocurrencies by exchanges. This blog will discuss the new C&DI.

Background

The rules related to disclosure obligations, including in Forms 8-K, S-4 registration statements and proxy materials, and the filing of exhibits associated with a material contract, including merger agreements, have evolved over the past few years (see here related to confidential treatment of material contracts – HERE). In March 2021, the SEC issued a statement discussing certain legal specifics associated with a SPAC, including expressing concerns regarding disclosures associated with a de-SPAC transaction (i.e., a business

April 5, 2022

SPAC Shareholder Litigation – First Fire

On January 3, 2022, the Delaware Court of Chancery denied a motion to dismiss a shareholder lawsuit against a SPAC’s sponsor, its directors, and financial advisor claiming among items, breach of fiduciary duty. The facts supporting the claim mirror common factual scenarios in SPAC and de-SPAC (acquisition transaction) transactions where the post SPAC public company has a decline in stock value. As such, the case is being closely watched by SPAC sponsors and boards of directors.

Background on SPACs

A special purpose acquisition company (SPAC) is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, or other business combination transaction with an unidentified target. Generally, SPACs are formed by sponsors who believe that their experience and reputation will facilitate a successful business combination and public company. SPACs are often sponsored by investment banks together with a leader in a particular industry (manufacturing, healthcare, consumer goods, etc.) with the specific intended purpose of effecting

February 8, 2022

Public Market Listing Standards

One of the bankers that I work with often once asked me if I had written a blog with a side-by-side comparison of listing on Nasdaq vs. the OTC Markets and I realized I had not, so it went on the list and with the implementation of the new 15c2-11 rules, now seems a very good time to tackle the project. I’ve added NYSE American to the list as well.

Quantitative and Liquidity Listing Standards

Nasdaq Capital Markets

To list its securities on Nasdaq Capital Markets, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements. The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity prior to listing. NASDAQ also requires listed companies to meet stringent corporate governance standards.

Requirements

Equity Standard

Market Value of

Listed Securities

Standard

Net

November 9, 2021

OTCQX And OTCQB Rule Changes

In September 2021, the OTCQB and OTCQX tiers of OTC Markets instituted amendments to their rules, to, among other things, align with the market changes resulting from amended Rule 15c2-11.

The OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink Open Market. The OTC Pink Open Market, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information. Companies trading on the OTCQX, OTCQB and OTC Pink tiers of OTC Markets have the option of reporting directly to OTC Markets under its Alternative Reporting Standards. The Alternative Reporting Standards are more robust for the OTCQB and OTCQX in that they require audited financial statements prepared in accordance with U.S. GAAP and audited by a PCAOB qualified auditor in the same format as would be included in SEC registration statements and reports.

Companies that report to the SEC under Regulation A and foreign companies that

October 19, 2021

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SEC Proposes New Rules For SPACs – Part 6

SEC Proposes New Rules For SPACs – Part 5

SEC Proposes New Rules for SPACs- Part 4

SEC Proposes New Rules for SPACs- Part 3

SEC Proposes New SPAC Rules – Part 2

SEC Proposes New SPAC Rules – Part 1

SPAC Shareholder Litigation – First Fire

Public Market Listing Standards

OTCQX And OTCQB Rule Changes

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