Wall Street accountants and lawyers are trying to figure out new equity agreements to lure investors back to the blank-check company market after the US regulator cracked down on the use of warrants.
They are discussing round filing warrants issued by special-purpose acquisition companies, or SPACs, in favor of rights agreements, or dramatically restructuring the warrants after the Securities and Exchange Commission said many SPAC equity warrants should be considered liabilities.
The SEC’s April announcement slowed SPAC market to a halt as accountants and lawyers worked to figure out a fix with SEC staff.
SPACs are listed shell companies that raise cash to acquire and take public a private company, allowing targets to sidestep the stricter regulatory checks of an IPO (initial public offering).
The SEC has taken issue with warrants in part because they often give some investors such as SPAC sponsors a better deal than public investors. Retail investors in particular may struggle to understand the warrants’ complex terms or be unaware when they can redeem them, the SEC said.
A record $100-B was raised by U.S. SPACs from the start of Y 2021 to March, according to data from Dealogic, when the market started to flag amid mounting regulatory scrutiny.
There were 298 SPAC IPOs in the United States in Q-1 of the yr, but just 32 in April and May, according to data from Dealogic.
Have a healthy day, Keep the Faith!