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.