US Securities and Exchange Commission, the Washington DC-based Government agency which was brought into being to prevent market manipulation following a 1929 Wall Street crash, has been brewing off new measures alongside legislations to protect investors from a worrisome uptick in SPACs (Special Purpose Acquisition Company) or blank-check companies’ joyful ride to raise capitals, the US SEC’s new chair Gary Gensler has been set to tell the US lawmakers, a draft document seen by a press agency reporter had unveiled later last week.
In point of fact, latest remarks from US SEC Chair comes over the heels of a waning investors’ euphoria about SPAC-based listing, as analysts fretted that the SPACs had taken many companies public which had been mostly loss-making or even without revenues.
Besides, as an SPAC rally subsides, data from Refinitiv had revealed that less than 30 companies had filed for SPAC mergers since the onset of April, compared to a reading of 69 SPAC-based mergers between February-March period.
Fuelling up the worries further, data from Dealogic had unfurled that US SPACs had raised more than a record $100 billion thus far this year, while the combined valuation of SPAC mergers and acquisitions had spiked to a record $263 billion, as many smaller companies sought to capitalize on a high-flying US money markets earlier this year.
Nonetheless, SPACs are shell entities that could be capitalized to take a company public following a merger or acquisition, while SPACs are allowed to raise funds through IPOs or private fundraising campaigns in order to finance their slated mergers or acquisitions without telling their investors about the companies they are pursuing.
US SEC to take action against an SPAC boom
Meanwhile, Gary Gensler said in a prepared testimony to the financial services and general Government subcommittee of the US House Appropriation panel later last week that overseeing SPACs were putting pressures of watchdog resources and the Division of Enforcement had fewer staffs than it had back in the 2016s.
Besides, raising questions over investors’ safety amid an SPAC boom, Gensler was quoted saying in his second appearance before Congress last month, “Are SPAC investors being appropriately protected? Are retail investors getting the appropriate and accurate information they need at each stage. ”