The SEC’s New SPAC Rules: Mandatory Disclosure and More Liability

Amid a significant slowdown in initial public offerings by special purpose acquisition companies (“SPACs”) and de-SPAC transactions in the last two years, the U.S. Securities and Exchange Commission (the “SEC”) has adopted new rules that aim to align de-SPAC transactions more closely with traditional IPOs by mandating specific disclosures and increasing the potential liability of deal participants.

With some key exceptions, the final rules are substantially similar to the SEC’s 2022 proposal. Significantly, the SEC chose not to require a fairness statement in connection with de-SPAC transactions, which as originally proposed would have meant that fairness opinions would have been required in every deal, with materially burdensome effects on timing, cost and achievability of transactions. The SEC also retreated from its more aggressive proposal on underwriter liability in the final rules, but market practice has already changed due to the 2022 proposal, and banks are unlikely to change their procedures now.