The SEC Adopts New Rules for SPACs

On January 24, 2024, the U.S. Securities and Exchange Commission adopted new rules governing special purpose acquisition companies (“SPACs”), as well as subsequent de-SPAC transactions. The rules, finalized in a 581-page release, were narrowly approved by a 3-2 vote of the Commissioners and will take effect 125 days after publication in the Federal Register.

The new rules aim to align disclosures and legal liabilities in de-SPAC transactions more closely with traditional IPOs. Key provisions include the mandatory disclosure of conflicts of interest, dilution impact and fairness determinations, as well as the exclusion of de-SPAC transactions from the PSLRA safe harbor, the inclusion of target companies as co-registrants, the classification of de-SPAC transactions as sales of securities, and guidance on the status of potential underwriters.

In this Client Alert, Cohen & Gresser’s Jeffrey I Lang and Bonnie J Roe explain that while these rules are expected to impact SPACs by increasing compliance costs, SPACs are expected to remain a viable option for companies entering public markets.