SEC Introduces New Rules to Regulate Struggling SPAC Market
Dive into the latest developments as the SEC takes measures to address the challenges faced by the struggling SPAC market, impacting the future of SPACs.
The SPAC IPO market has been facing a series of challenges in recent times, as highlighted by financial and risk advisory firm Kroll. These challenges include increased scrutiny from the SEC, underwhelming performance by SPAC-acquired firms, an uncertain economic outlook, and rising interest rates. According to law firm Paul Hastings, there has been a significant decline in the number of SPAC listings, with a reduction of over 85% in 2021 and 2022. This downward trend has continued into 2023, with a further two-thirds decrease in such listings.
The report from Kroll suggests that the SPAC craze that was prevalent in late 2020 and 2021 has officially died out, with only 31 SPAC IPOs pricing during 2023 compared to 613 during 2021. Additionally, there have been instances where the rules require the target company to sign a registration statement filed by a SPAC, making the target company a "co-registrant" and assuming responsibility for disclosures in that registration statement.
The SEC first proposed its SPAC rules in March 2022, with some observers predicting that the rules would significantly increase the regulatory burden on SPAC deal participants. This move comes in the wake of ramped-up SEC enforcement activity targeting SPACs, indicating a shift in the regulatory landscape for SPACs.
The SPAC IPO market has been facing significant challenges, leading to a sharp decline in the number of SPAC listings. The increased scrutiny from the SEC, underperformance of SPAC-acquired firms, and regulatory changes have contributed to the changing dynamics of the SPAC market.
SEC Introduces New Rules to Regulate Struggling SPAC Market
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