SEC Unveils New SPAC Rules Targeting 'Unreasonable' Financial Projections And Requiring More Disclosures


The Securities and Exchange Commission proposed a set of measures to bolster disclosure requirements for special-purpose acquisition, or blank-check, companies on Wednesday amid a wave of scrutiny targeting the popular go-public vehicles whose usage skyrocketed during the pandemic.

Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), speaks during a Senate … [+] Committee hearing.

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Key Facts

In a Wednesday afternoon release, the SEC said the proposed new rules would require enhanced disclosures regarding conflicts of interest, dilution and SPAC sponsors, or investors who support a SPAC before its initial public offering and typically receive about 20% of its common equity, according to Jefferies.

The proposal also includes a provision to make financial projections more closely aligned with those for traditional IPOs by requiring management agree it has a reasonable basis for its assessments, citing concerns that projections for SPAC-target private companies “have appeared to be unreasonable, unfounded or potentially misleading.”

The rules would also require underwriters involved in a SPAC IPO to ultimately underwrite the resulting acquisition, a move the SEC says should “better motivate underwriters to ensure the care necessary to ensure the accuracy of disclosures.”

The Defiance Next Gen SPAC ETF, which tracks the prices of IPO companies derived from SPACs, has plunged 33% over the past year, while the S&P 500 has climbed 17%.

The SEC will vote to approve the rules after a 60-day period for public comment on the proposal. (Forbes Media announced plans to go public via SPAC in August).

Surprising Fact

According to the SEC, some companies vying to go public via SPAC “presented projections of significant increases in revenue or market share even though they did not have any operations at the time such projections were prepared.”

Key Background

SPACs exploded in popularity early in the pandemic as a relatively speedy and streamlined alternative to traditional IPOs. Headlined by buzzy startups including fintech firm SoFi and insurer Clover Health, 238 SPACs completed an acquisition in 2021—by far the largest year ever, according to Goldman Sachs. Furthermore, 550 SPAC IPOs raised $150 billion in proceeds in 2021, though nearly two-thirds of the capital was raised in the first quarter—before enhanced SEC scrutiny curbed the pace of issuance.

Crucial Quote

“Nearly 90 years ago, Congress addressed certain policy issues around companies raising money from the public with respect to information asymmetries, misleading information, and conflicts of interest,” SEC Chair Gary Gensler said Wednesday. “Today’s proposal would help ensure that these tools are applied to SPACs… investors deserve the protections they receive from traditional IPOs.”


More than 500 active SPACs with $144 billion in equity capital are still searching for a target, according to Goldman. Nearly 90 active SPACs are set to expire this year and 318 are set to expire in the first half of 2023, presenting the possibility of a logjam of deal closures. However, even if targets are identified, a growing number of SPAC transactions have fallen through before companies go public largely due to growing market uncertainty and regulatory scrutiny.

Further Reading

Take Back The SPAC: More And More Companies Are Canceling High-Profile Deals To Go Public (Forbes)

US SEC set to unveil tighter rules on blank-check companies (Reuters)

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