Yesterday, the Securities and Exchange Commission charged Cantor Fitzgerald, LP, and two Special Purpose Acquisition companies (SPACs) it controlled with “making misleading statements to investors ahead of their initial public offerings (IPOs).”
SPACs are companies that go public with the intent to acquire a private firm. Typically, there is a timeline for the process, and the sponsor highlights the type of firm it may consider acquiring.
Cantor settled the charges without admitting or denying guilt while agreeing to pay a $6.75 million civil penalty to settle the charges.
SPACs or blank check firms boomed in recent years, only to slow as the SEC scrutinized the process of taking a firm public via a SPAC that allowed a different level of disclosure for the acquired firm.
Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, said Cantor misled investors by stating it had not identified a target acquisition while actually holding talks with several different firms.
SEC Commissioner Mark Uyeda disented from the Commission’s decision to penalize Cantor issuing a statement because the” alleged misstatements and omissions are not material, and I do not view the facts in the Order as demonstrating investor harm.”
Uyeda explained:
“In bringing these charges, the Orders appear to treat the disclosure of potential merger discussions and history of merger negotiations by the SPAC respondents in the same context as if the disclosure had been made by an operating company. However, SPACs are fundamentally different from operating companies. The purpose and day-to-day operations of a SPAC are reflected in its name – a vehicle formed for the special purpose of acquiring an operating company. In contrast, an operating company’s purpose is to sell a product or service, and any merger activity, especially those requiring shareholder approval, is rare and an extraordinary corporate event.”
Uyeda states that he does not support three different proceedings, including the Cantor settlement and several other cited SPAC deals involving Digital World Acquisition Corp (Trump Media) and Northern Star Investment Corp. II (Apex Clearing Holdings).
Uyeda chastised the Commission, stating the agency should be “mindful of the unique nature of SPACs and how they differ from operating companies.”