The Securities and Exchange Commission (SEC), Small Business Capital Formation Advisory Committee (SBCFAC), is telling the Commission to help SPACs [Special Purposed Acquisition Companies] work – not shut them down by over-regulating.
Posted last month, in a letter to Chairman Gary Gensler, the SBCFAC stated:
“The Committee would like for SPACs to remain a viable path for companies to pursue as a means of getting access to public market capital. The Committee is concerned that the proposed rules, as written, might render SPACs unusable as an alternative to IPOs.”
The SBCFAC said they are generally supportive of improving disclosures while recommending the expansion or elimination of the deadlines to close on a SPAC deal as it could “incentivize SPAC sponsors to engage in riskier acquisitions to complete the merger process within the artificially short periods.”
The letter, which was posted last month, was the result of a Committee hearing in May. The discussion on SPACs reflected a rule change proposed by the SEC that some believe will shut the door on SPACs as an avenue for firms to raise capital and become a publicly traded company. Comments closed on the proposal this past June (with some trickling in past the deadline).
One commenter lamented the SEC’s proposed rule change, noting:
“The bigger issue, however, is the unintended consequences of this proposal as currently written. It is intended to improve SPACs and to protect investors and, most notably, retail investors. Except, the proposal has already had an impact on the SPAC market since it was first published on March 30th. And since that time, we have had a preview of its effects. If the goal of the proposal was to elevate the product, it has had the opposite effect. It has made it notably worse for investors.”
In a dissenting statement when the proposed rules were revealed, SEC Commissioner Hester Peirce commented:
“The proposal – rather than simply mandating sensible disclosures around SPACs and de-SPACs, something I would have supported – seems designed to stop SPACs in their tracks.”
SBCFAC is a Committee designed to provide insight and perspective to the Commission when it comes to smaller firms raising capital – a vital policy sector for the economy. Created by a law signed in 2016, the Committee is a formal vehicle for the Commission to receive advice and recommendations but has no authority or power beyond providing an opinion.