The Securities and Exchange Commission’s proposed new rules on special purpose acquisition companies could force almost half of the SPACs that are still searching for a merger partner into liquidation, according to a new report from SPAC Insider.
Those SPACs account for $80.6 billion in capital that is now held in trust, but which would be returned to investors.
Under the SEC’s proposal, a SPAC would need to announce a deal within 18 months from the date of its IPO and close within 24 months in order to avoid falling under the Investment Company Act of 1940.
“As investment companies, their activities would be severely restricted and subject to very burdensome compliance requirements,” wrote Kristi Marvin, the founder of SPAC Insider and author of the report. “Those requirements can get quite expensive, and most SPACs do not have the funds available to pay for it.” As a result, she said, “liquidating would be the most palatable and likely solution in that situation.”
‘Enforcement 40’ for 2020
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