PSPCs remain on everyone’s mind, especially the country’s chief regulator. On May 26, 2021, SEC Chairman Gary Gensler testified before the United States House Subcommittee on Financial Services and General Government on “major capital market trends” that will impact the SEC’s resources in the years to come. And the very first topic he raised – initial public offerings and special purpose acquisition companies – did not surprise most market watchers.

While Gensler noted that the market is on track to offer “more traditional IPOs than there was during the dot-com peak of 2000,” he also noted that the capital markets “Are witnessing an unprecedented increase in non-traditional IPOs by specialist acquisition firms. . “The SEC has already received 700 S-1 filings in 2021, up from 13 of those filings in 2016.

Gensler has also made the news by stating that it refers to de-PSPC transactions – when a PSPC merges with a target company – as “target IPOs” because they “allow the target companies to access the markets. audiences for the first time “. This reasoning echoes the language used in the April 8, 2021 press release from Acting Director of the Division of Corporate Finance John Coates on “SAVS, IPOs and liability risk under securities laws. “

In addition, the SEC noted an increase in direct primary listings, “where companies can sell shares directly on exchanges without a traditional go-ahead public offering.” Gensler noted that this may be a new trend that calls for even more SEC resources.

Beyond the need for significant SEC resources, the recent increase in PSPCs prompted Gensler to highlight two key questions the SEC will need to answer. First, “Are SAVS investors properly protected? Are retail investors getting the right, accurate information they need every step of the way – the first stage of the IPO with blank verification and the second stage of the target IPO? “

Second, “How does SPAC fit into our mission to maintain fair, orderly and efficient markets?” Gensler, supported by a recent study, noted that “PSPCs may be less effective than traditional IPOs”. On receiving a twenty percent promotion, this study found that “PSPC sponsors generate significant dilution and costs.” Coupled with the common occurrence that investors in private equity investments (PIPE) “buy at a lower price than a post-target IPO price.[,] [i]The retail public may bear a large part of these costs.

Gensler concluded his thoughts on PSPCs by noting that he had asked SEC staff to “consider what recommendations they would make to the Commission for possible rules or guidance in this area.”

© 2021 Proskauer Rose srl. Revue nationale de droit, volume XI, number 160


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