(Reuters) – An official of the US Securities and Exchange Commission on Wednesday warned traders in the shady blank check market to comply with the statutory requirements of special purpose companies, or SPAC, amid concerns over problems with the capital raising program.
Paul Munter, Acting Auditor at the SEC, urged market participants to be wise in how they choose and disclose details of their dealings with SPAC.
SPAC mergers, including careful consideration of whether the target company has a clear and comprehensive plan to be prepared to be a public company, he says in a statement.
SPAC are listed shell companies that raise money to acquire a private company for the purpose of making it public, so that such goals can circumvent a traditional IPO.
SPAC has increased globally to a record $ 1
The boom has been driven in part by simple monetary conditions as central banks have pumped money into pandemic economies, while the SPAC structure provides start-ups with an easier way to go public with less regulatory scrutiny than the traditional IPO.
But the madness has aroused the skepticism of some investors and has also captured the regulators.
Wednesday's SEC statement comes after the agency sent letters to Wall Street banks for information. about their SPAC deals, Reuters reported last week.
Investors have sued eight companies combined with SPAC during the first quarter of 2021, according to data compiled by Stanford University. Some of the lawsuits claim that the SPACs and their sponsors, who reap big pay days when a SPAC is combined with its target, hid weaknesses before the transactions.
The SEC may be concerned about the amount of due diligence performed by SPAC before acquiring assets. and about information to investors, analysts said.