Legal Law

SEC increases interest in SPAC boom from “passing on” to “almost asking”

Last year was the year of the SPAC – two and a half months. Whatever happens from here, 2021 will be the new year of the SPAC as they have already raised $ 87.9 billion this young year, up $ 4.5 billion from last year and $ 6.5 billion times as much as any other year before.

Indeed, things are happening like new SPACs popping up in new places and the hundreds of existing SPACs that seemingly doing business on a daily basis. But there are also things that are not generally associated with years, which are referred to as the year of something, by which we mean bad things. Things like people saying, “huh, do you think there might be too many of these things already?”

Earlier this year, trade pops or stock price increases were the order of the day for SPACs. The gains surged to over 30% but declined in March due to a wider sell-off in many companies that agreed to go public through a SPAC merger.

All but one of the 15 SPACs that started trading this week closed below their IPO price of $ 10 per share on the first day of trading.

Certainly bad enough, and probably not improved by the fact that the Securities and Exchange Commission has increased its concern with blank check companies from confused, head-shaking questions to threatening letters that even predict the future, to more threatening letters.

The SEC asked banks to provide the information voluntarily and, as such, failed to reach the level of a formal investigation request, two of the sources said.

However, one of these two people said letters were sent by the SEC’s enforcement department, suggesting that they may be a precursor to a formal investigation.

That person said the SEC wanted information about SPAC deal fees, volumes, and what controls banks have put in place to internally monitor deals. The second source mentioned above said the SEC had raised questions about compliance, reporting and internal controls.

The SEC may be concerned about the depth of due diligence SPACs perform prior to acquiring assets and whether huge payouts will be fully disclosed to investors, a third source said.

Another potential issue is the increased risk of insider trading between a SPAC going public and the announcement of its acquisition target, the second source added.

“Wall Street’s Biggest Banks Are Asked: What’s Up?” said the person.

And while you’re at it, you and everyone else would like to know what’s going on with a particular SPAC sponsor.

“After the Nasdaq rigged, posted front-page news and the SEC claimed it had never heard of it, the SEC is now revealing that SoftBank is currently under investigation by the federal government,” PlainSite tweeted Wednesday. Aggressive trading was a concern for Elliott Management, which the Wall Street Journal ranks as the second largest investor in SoftBank. It was reported that the hedge fund had bought put options on an index of technology stocks to protect itself against trading with SoftBank.

The US regulator opens an investigation into the IPO madness sources on Wall Street [Reuters]SEC confirms probe from SoftBank [II]SPAC Trading Pops empty when “exuberance and greed” disappear [Reuters]The first SPAC in Scandinavia has institutional resources [Bloomberg]The space infrastructure conglomerate Redwire is going public via a SPAC [CNBC]UK electric vehicle company Arrival is sinking on SPAC debut [CNBC]

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