(Reuters) -USA Securities and Exchange Commission has stepped up its attack on the SPAC sector and has urged top auditors for acquisition companies with blank checks to more strictly report public shares in these shells, according to several industry firms and lawyers familiar with the change .
SEC staff have privately told top auditors of specialty companies or SPACs that "redeemable" shares issued by these shells must be treated as temporary – known as "mezzanine" equity, during a break from many years of industry practice to deal with them as permanent equity, the people said.
The change will cause most SPACs to fall below the minimum capital requirement for Nasdaq's capital market level, which drives SPACs that want to list on Nasdaq to its Global Market Level, which has no equity requirement, the people said.
This is the second time this year that the SEC has tightened its SPAC accounting guidelines and the latest salvo in the agency's broader crackdown on the SPAC business market, a thriving Wall Street business in the past 18 months.
While the long-term consequences of changing the listing status of SPACs in the pipeline were unclear, some industry lawyers and auditors said it was another worrying sign that the SEC was looking for ways to maintain a long-standing practice in the SPAC market. .
"It's a change in accounting and a change in the way the SEC views the issue," said Jeffrey Weiner, CEO of Marcum LLP, which handles over 40% of SPAC's audit work, according to data from SPACInsider.
SPACs are listed shell companies used to take private companies public, which deviates from the more traditional and lengthy initial bidding process. In an era of free-flowing money, more than $ 100 billion in SPAC agreements have been signed so far this year.