The proposed rule would hold SPACs and the companies they acquire to similar standards as traditional IPOs, SEC officials said. Under the proposal the SEC is considering, blank-check companies would have to disclose information about their sponsors’ compensation as well as the dilution that shareholders might suffer if an acquisition is completed. Current rules often allow SPAC insiders to multiply their initial investment even if the companies they take over—and other shareholders—struggle.
“Functionally, the SPAC target IPO is being used as an alternative means to conduct an IPO,” SEC Chairman Gary Gensler said Wednesday. “Thus, investors deserve the protections they receive from traditional IPOs, with respect to information asymmetries, fraud, and conflicts, and when it comes to disclosure, marketing practices, gatekeepers, and issuers.”