In the first three months of 2021, there have been approximately 300 initial public offerings (IPOs) of special purpose acquisition companies (SPACs) that have raised $100 billion, which are significant increases over the record number of transactions and amounts raised in all of 2020. Inevitably, the growth in SPAC deal activity has attracted scrutiny from market regulators, including the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), as well as private plaintiffs. We expect this will continue and perhaps increase, particularly if retail investors get involved in SPAC IPOs. SPAC market participants—including sponsors, target companies, directors and officers on both sides of the transactions, and investment banks—should be aware of the enforcement and litigation risks involved. This advisory surveys the lay of the land regarding these risks and identifies practical suggestions about ways to anticipate and mitigate them.
