Aon  |  Financial Services Group

The special purpose acquisition company (SPAC) boom shows no signs of slowing down. In fact, 613 SPAC initial public offerings occurred in 2021 – compared to 248 and 59 in 2020 and 2019, respectively.¹

The SPAC boom, according to U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler’s remarks before the Healthy Markets Associate Conference, led to 181 de-SPAC transactions in 2021 – compared to just 26 de-SPACs in 2019. Given this surge in SPAC activity, Mr. Gensler asks, “which principles and tools do we use to ensure that like activities are treated alike?”²

The chair’s comments suggest a heightened scrutiny to come for SPAC deals. “I believe the investing public may not be getting like protections between traditional IPOs and SPACs,” Mr. Gensler announced.

For example, Mr. Gensler voiced concern that, whether at the time of the initial SPAC blank-check IPO or the de-SPAC merger, information asymmetries, fraud, and conflicts are not adequately mitigated and that SPAC investors are not receiving “the protections they would get in traditional IPOs, with respect to disclosure, marketing practices, and gatekeepers.” As illustrations of the information imbalance, Mr. Gensler pointed, in part, to the possibility of: (1) private investment in public equity (PIPE) investors obtaining access to information that the public has not; (2) retail investors not receiving adequate information about how their shares can be diluted throughout various stages of the SPAC; and, (3) incomplete information based on marketing practices.

As a result, Mr. Gensler remarked that he is currently obtaining input from SEC staff for proposals to close the information gap in SPAC deals by focusing on requirements around disclosure, marketing practices, and liability for sponsors and other gatekeepers to SPAC deals. Comparing SPACs to IPO’s, he concluded “the SPAC target IPO is akin to a traditional IPO” and “like should be treated alike.”