Tagged: SPAC

Corporate / SEC Rulemaking

Canadian CPCs, SPACs, and Shells Should Be Careful to Avoid U.S. Investment Company Status

On January 24, 2024, the SEC issued new guidance on when a special purpose acquisition company (SPAC) may run afoul of the U.S. Investment Company Act (the Act).  While this guidance was directed at SPACs that register or file reports with the SEC, it is also instructive for other types of shell companies, including Canadian capital pool companies, SPACs, and similar shell companies that do not file reports with the SEC. Why Care About the U.S. Investment Company Act? If a Canadian issuer is deemed to be an investment company that has failed to register under the Act, it is prohibited from engaging in any business in the U.S. or offering or selling...

Capital Markets / SEC Rulemaking / Securities

The SEC Amends Policy on Economic Projections, and Issues Final Rules and Additional Guidance for SPACs and Shell Companies

As discussed in our eUpdate published today, the SEC on January 24, 2024 adopted final rules amending the disclosure and registration requirements applicable to special purpose acquisition companies (SPACs) and shell companies that register or file reports with the SEC. These amendments impose significant new requirements on SPAC IPOs, as well as de-SPAC and similar transactions for SEC reporting shell companies. The new SEC rules do not apply to Canadian capital pool companies, SPACs, or shell companies unless they register or file reports with the SEC. As part of the final rule package, the SEC also amended its guidance for all SEC reporting companies on how to make economic projections in SEC filings,...

Capital Markets / M&A / Tax

Cross-Border de-SPAC Structures

More special purpose acquisition vehicles (common known as “SPACs”) completed their initial public offering (“IPO”) in 2021 than in any prior year. In 2021, approximately 613 SPACs completed their IPO within the United States alone. An increasing number of Canadian companies are being approached by U.S. and tax haven SPACs with significant US shareholders. A SPAC is organized with no business operations and minimal direct assets (cash raised from private investors in the IPO is held in a trust account) for the purpose of acquiring a private company, effectively resulting in that company being taken public. Such acquisition is generally referred to as a “qualifying transaction” (or “de-SPAC” transaction). Private companies generally find...

Capital Markets / M&A

SPAC Talk: Important Considerations for Private Companies Evaluating a SPAC Going-Public Transaction

One of the hottest going-public trends in 2020 and 2021 has been the rise of SPACs – Special Purpose Acquisition Companies – as a vehicle for private companies to go public. SPACs are shell companies that are formed, funded and taken public for the purpose of later acquiring an operating company. By merging with a SPAC, the private company effects a reverse takeover, inheriting the SPAC’s existing cash and taking over its management. SPAC mergers have quickly increased from being occasional to outpacing the number of traditional IPOs. A SPAC merger involves different players that can have different motivations than a traditional IPO. In a traditional IPO, a private company may slowly prepare...