It was safe to assume that SPAC would collapse after the death of promising SPAC poster children, Buzzfeed and Nikola, among others. The boom was already in its final days. The U.S Securities and Exchange Commission (SEC) has issued new regulations that seem to confirm it.
According to Bloomberg, the Securities and Exchange Commission now threatens SPAC sponsors who “embellish projections about companies they plan to make public”, according to Bloomberg report this week.
It is targeted enforcement that appears to strike at the heart and soul of the SPAC model. Specifically, it involves coming up with bullshit projections and hoping that investors and analysts buy them.
Bloomberg reported that the SEC will propose to “curb the legal protections that some Blank-Check companies have relied upon to make bullish forward-looking statements about the firms with which they plan to merge”, Bloomberg reported.
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These rules will be presented Wednesday as part of a wider set of SPAC regulations. Investors will be able to sue for inaccurate forecasts under the rules.
Bloomberg reports that SEC Chair Gary Gensler “repeatedly raised concern” about blank check companies. He has been actively investigating ways to resolve disclosure inconsistencies and increase transparency for investors regarding SPAC fees.
SPACs safe harbor from legal liability could be removed. This would allow listing via SPAC to meet the same legal standards as traditional IPOs. It would effectively remove one of the main appeals to going public via SPAC.
This year, 49 SPACs were added to the market. That compares with 279 in 2013. Bloomberg reported that the De-SPAC Index, which tracks 25 companies that went public via SPAC in the past year, has fallen by 49%.