14158 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 210, 229, 230, 232, 239, 

240, and 249 

[Release Nos. 33–11265; 34–99418; IC– 

35096; File No. S7–13–22] 

RIN 3235–AM90 

Special Purpose Acquisition 

Companies, Shell Companies, and 

Projections 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rules; guidance. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

adopting rules intended to enhance 

investor protections in initial public 

offerings by special purpose acquisition 

companies (commonly known as 

SPACs) and in subsequent business 

combination transactions between 

SPACs and private operating companies 

(commonly known as de-SPAC 

transactions). Specifically, we are 

adopting disclosure requirements with 

respect to, among other things, 

compensation paid to sponsors, 

conflicts of interest, dilution, and the 

determination, if any, of the board of 

directors (or similar governing body) of 

a SPAC regarding whether a de-SPAC 

transaction is advisable and in the best 

interests of the SPAC and its security 

holders. We are adopting rules that 

require a minimum dissemination 

period for the distribution of security 

holder communication materials in 

connection with de-SPAC transactions. 

We are adopting rules that require the 

re-determination of smaller reporting 

company (‘‘SRC’’) status in connection 

with de-SPAC transactions. We are also 

adopting rules that address the scope of 

the safe harbor for forward-looking 

statements under the Private Securities 

Litigation Reform Act of 1995. Further, 

we are adopting a rule that would deem 

any business combination transaction 

involving a reporting shell company, 

including a SPAC, to be a sale of 

securities to the reporting shell 

company’s shareholders and are 

adopting amendments to a number of 

financial statement requirements 

applicable to transactions involving 

shell companies. In addition, we are 

providing guidance on the status of 

potential underwriters in de-SPAC 

transactions and adopting updates to 

our guidance regarding the use of 

projections in Commission filings as 

well as requiring additional disclosure 

regarding projections when used in 

connection with business combination 

transactions involving SPACs. Finally, 

we are providing guidance for SPACs to 

consider when analyzing their status 

under the Investment Company Act of 

1940. 

DATES: Effective date: The final rules are 

effective on July 1, 2024. 

Compliance date: The compliance 

date for the final rules, other than 17 

CFR 229.1610, is July 1, 2024. The 

compliance date for 17 CFR 229.1610 is 

June 30, 2025. 

FOR FURTHER INFORMATION CONTACT: 

Mark Saltzburg, Office of Rulemaking, 

Division of Corporation Finance, at 

(202) 551–3430; with respect to 17 CFR 

230.145a (Rule 145a under the 

Securities Act of 1933), the Office of 

Chief Counsel, Division of Corporation 

Finance, at (202) 551–3500; with respect 

to 17 CFR 210.15–01 (Rule 15–01 of 

Regulation S–X), Ryan Milne, Office of 

Chief Accountant, Division of 

Corporation Finance, at (202) 551–3400; 

with respect to amendments relating to 

projections disclosure and tender offer 

rules, Daniel Duchovny, Office of 

Mergers & Acquisitions, Division of 

Corporation Finance, at (202) 551–3440; 

and with respect to guidance under the 

Investment Company Act of 1940, 

Rochelle Kauffman Plesset, Seth Davis, 

or Taylor Evenson, Senior Counsels; or 

Lisa Reid Ragen, Branch Chief, Chief 

Counsel’s Office, Division of Investment 

Management, at (202) 551–6825; U.S. 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: The 

Commission is adopting new 17 CFR 

210.15–01, new 17 CFR 229.1601 

through 229.1610 (Item 1600 series of 

Regulation S–K), and new 17 CFR 

230.145a. We are also adopting 

amendments to: 

Commission reference CFR citation 

(17 CFR) 

Securities Act of 1933 

Rule 405 .................. § 230.405. 

Form S–1 ................. § 239.11. 

Form F–1 ................. § 239.31. 

Form S–4 ................. § 239.25. 

Form F–4 ................. § 239.34. 

Securities Exchange Act 

of 1934 

Rule 12b–2 .............. § 240.12b–2. 

Rule 14a–6 .............. § 240.14a–6. 

Rule 14c–2 .............. § 240.14c–2. 

Schedule 14A .......... § 240.14a–101. 

Schedule TO ........... § 240.14d–100. 

Form 20–F ............... § 249.220f. 

Form 8–K ................. § 249.308. 

Regulation S–K ............... §§ 229.10 through 

229.1406. 

Item 10 .................... § 229.10. 

Item 601 .................. § 229.601. 

Regulation S–T ............... §§ 232.10 through 

232.903. 

Rule 405 .................. § 232.405. 

Regulation S–X ............... §§ 210.1–01 through 

210.13–02. 

Rule 1–02 ................ § 210.1–02. 

Commission reference CFR citation 

(17 CFR) 

Rule 3–01 ................ § 210.3–01. 

Rule 3–05 ................ § 210.3–05. 

Rule 3–14 ................ § 210.3–14. 

Rule 8–02 ................ § 210.8–02. 

Rule 10–01 .............. § 210.10–01. 

Table of Contents 

I. Introduction 

II. New Subpart 1600 of Regulation 

S–K 

A. Definitions 

1. Proposed Definition: ‘‘De-SPAC 

Transaction’’ 

2. Comments: Definition of ‘‘De-SPAC 

Transaction’’ 

3. Final Definition: ‘‘De-SPAC 

Transaction’’ 

4. Proposed Definition: ‘‘Special Purpose 

Acquisition Company (SPAC)’’ 

5. Comments: Definition of ‘‘Special 

Purpose Acquisition Company (SPAC)’’ 

6. Final Definition: ‘‘Special Purpose 

Acquisition Company (SPAC)’’ 

7. Proposed Definition: ‘‘SPAC Sponsor’’ 

8. Comments: Definition of ‘‘SPAC 

Sponsor’’ 

9. Final Definition: ‘‘SPAC Sponsor’’ 

10. Proposed Definition: ‘‘Target 

Company’’ 

11. Comments: Definition of ‘‘Target 

Company’’ 

12. Final Definition: ‘‘Target Company’’ 

B. Sponsors 

1. Proposed Rules 

2. Comments 

3. Final Rules 

C. Conflicts of Interest 

1. Proposed Rules 

2. Comments 

3. Final Rules 

D. Dilution 

1. Proposed Rules 

2. Comments 

3. Final Rules 

E. Prospectus Cover Page and Prospectus 

Summary Disclosure 

1. Proposed Rules 

2. Comments 

3. Final Rules 

F. De-SPAC Transactions: Background, 

Reasons, Terms, and Effects 

1. Proposed Item 1605 

2. Comments: Item 1605 

3. Final Item 1605 

G. Board Determination About the DeSPAC Transaction; Reports, Opinions, 

Appraisals, and Negotiations 

1. Proposed Item 1606(a) 

2. Comments: Item 1606(a) 

3. Final Item 1606(a) 

4. Proposed Item 1606(b) 

5. Comments: Item 1606(b) 

6. Final Item 1606(b) 

7. Proposed Items 1606(c) Through (e) 

8. Comments: Items 1606(c) Through (e) 

9. Final Items 1606(c) Through (e) 

10. Proposed Item 1607 

11. Comments: Item 1607 

12. Final Item 1607 

H. Tender Offer Filing Obligations 

1. Proposed Item 1608 

2. Comments: Item 1608 

3. Final Item 1608 


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Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14159 

I. Structured Data Requirement 

1. Proposed Item 1610 

2. Comments 

3. Final Item 1610 and Tagging Compliance 

Date 

III. Disclosures and Liability in De-SPAC 

Transactions 

A. Non-Financial Disclosures in De-SPAC 

Disclosure Documents 

1. Proposed Rules 

2. Comments 

3. Final Rules 

B. Minimum Dissemination Period 

1. Proposed Rules 

2. Comments 

3. Final Rules 

C. Private Operating Company as CoRegistrant 

1. Proposed Rules 

2. Comments 

3. Final Rules 

D. Re-Determination of Smaller Reporting 

Company (SRC) Status 

1. Proposed Rules 

2. Comments 

3. Final Rules and Guidance 

E. PSLRA Safe Harbor 

1. Proposed Rules 

2. Comments 

3. Final Rules 

F. Underwriter Status and Liability in 

Securities Transactions 

1. Proposed Rule 

2. Comments 

3. Declining To Adopt Proposed Rule 140a; 

Commission Guidance on Underwriter 

Status in De-SPAC Transactions 

IV. Business Combinations Involving Shell 

Companies 

A. Shell Company Business Combinations 

and the Securities Act of 1933 

1. Proposed Rule 

2. Comments 

3. Final Rule 

B. Financial Statement Requirements in 

Business Combination Transactions 

Involving Shell Companies 

1. Proposed Rule 15–01(a), Rule 1–02(d), 

and Form Instructions: Audit 

Requirements 

2. Comments: Rule 15–01(a), Rule 1–02(d), 

and Form Instructions: Audit 

Requirements 

3. Final Rule 15–01(a), Rule 1–02(d), and 

Form Instructions: Audit Requirements 

4. Proposed Rule 15–01(b): Number of 

Years of Financial Statements 

5. Comments: Rule 15–01(b): Number of 

Years of Financial Statements 

6. Final Rule 15–01(b): Number of Years of 

Financial Statements 

7. Proposed Rule 15–01(c): Age of 

Financial Statements 

8. Comments: Rule 15–01(c): Age of 

Financial Statements 

9. Final Rule 15–01(c): Age of Financial 

Statements 

10. Proposed Rules: 15–01(d), 1–02(w)(1), 

3–05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition 

of a Business or Real Estate Operation by 

a Predecessor 

11. Comments: Rules 15–01(d), 1–02(w)(1), 

3–05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition 

of a Business or Real Estate Operation by 

a Predecessor 

12. Final Rules 15–01(d), 1–02(w)(1), 3– 

05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition of 

a Business or Real Estate Operation by a 

Predecessor 

13. Proposed Rule 15–01(e): Financial 

Statements of a Shell Company 

Registrant After the Combination With 

Predecessor 

14. Comments: Rule 15–01(e): Financial 

Statements of a Shell Company 

Registrant After the Combination With 

Predecessor 

15. Final Rule 15–01(e): Financial 

Statements of a Shell Company 

Registrant After the Combination With 

Predecessor 

16. Proposed Rule 11–01(d) 

17. Comments: Rule 11–01(d) 

18. Decline to Adopt Rule 11–01(d) 

19. Proposed Item 2.01(f) of Form 8–K 

20. Comments: Item 2.01(f) of Form 8–K 

21. Final Item 2.01(f) of Form 8–K 

22. Proposed Rules 3–01, 8–02, 10– 

01(a)(1): Balance Sheets of Predecessors 

23. Comments: Rules 3–01, 8–02, 10– 

01(a)(1): Balance Sheets of Predecessors 

24. Final Rules 3–01, 8–02, 10–01(a)(1): 

Balance Sheets of Predecessors 

25. Other Shell Company Matters 

V. Enhanced Projections Disclosure 

A. Proposed Items 10(b) and 1609 of 

Regulation S–K 

1. Proposed Rules 

2. Comments 

3. Final Rules 

VI. The Status of SPACs Under the 

Investment Company Act 

A. Background 

B. SPAC Activities 

1. The Nature of SPAC Assets and Income 

2. Management Activities 

3. Duration 

4. Holding Out 

5. Merging With an Investment Company 

C. Conclusion 

VII. Other Matters 

VIII. Economic Analysis 

A. Baseline and Affected Parties 

1. SPAC Initial Public Offerings 

2. De-SPAC Transactions 

3. Blank Check Companies 

4. Shell Company Business Combinations 

B. Benefits and Costs of the Adopted Rules 

1. Disclosure-Related Rules 

2. Liability-Related Rules 

3. Shell Company-Related Rules 

4. Enhanced Projections Disclosure 

(Amendments to Item 10(b) of Regulation 

S–K) 

C. Effects on Efficiency, Competition, and 

Capital Formation 

1. Efficiency 

2. Competition 

3. Capital Formation 

D. Reasonable Alternatives 

1. Disclosure-Related Rules 

2. PSLRA Safe Harbor Guidance 

3. Expanding Disclosure in Reporting Shell 

Company Business Combinations 

4. Enhanced Projections Disclosure 

IX. Paperwork Reduction Act 

A. Summary of the Collections of 

Information 

B. Estimates of the Effects of the Final 

Rules on the Collections of Information 

C. Incremental and Aggregate Burden and 

Cost Estimates 

1. Current Inventory Update To Reflect 

$600 Per Hour Rather Than $400 Per 

Hour Outside Professional Costs Rate 

2. PRA Burden and Cost Estimates 

Resulting From the Final Rules 

X. Final Regulatory Flexibility Analysis 

A. Need for, and Objectives of, the Final 

Rules 

B. Significant Issues Raised by Public 

Comments 

C. Small Entities Subject to the Final Rules 

D. Projected Reporting, Recordkeeping, and 

Other Compliance Requirements 

E. Duplicative, Overlapping or Conflicting 

Federal Rules 

F. Agency Action To Minimize Effect on 

Small Entities 

Statutory Authority 


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14160 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1The regulation at 17 CFR 230.419(a)(2) defines 

the term ‘‘blank check company’’ as a development 

stage company that has no specific business plan 

or purpose or that has indicated that its business 

plan is to engage in a merger or acquisition with 

an unidentified company or companies and that is 

issuing ‘‘penny stock,’’ as defined in 17 CFR 

240.3a51–1 (‘‘Rule 3a51–1’’ under the Securities 

Exchange Act of 1934). 

2 15 U.S.C. 77a et seq. 

3Public Law 101–429, 104 Stat. 931 (Oct. 15, 

1990). See Blank Check Offerings, Release No. 33– 

6932 (Apr. 13, 1992) [57 FR 18037 (Apr. 28, 1992)]. 

A SPAC is not a ‘‘blank check company’’ because, 

given that it raises more than $5 million in a firm 

commitment underwritten initial public offering, it 

is not selling ‘‘penny stock.’’ See Penny Stock 

Definition for Purposes of Blank Check Rule, 

Release No. 33–7024 (Oct. 25, 1993) [58 FR 58099 

(Oct. 29, 1993)]. To that end, SPACs often have 

provisions in their governing instruments that 

prohibit them from being ‘‘penny stock’’ issuers. 

4The term ‘‘shell company’’ is defined in 

Securities Act Rule 405 and Exchange Act Rule 

12b–2 as a registrant, other than an asset-backed 

issuer, that has: (1) no or nominal operations; and 

(2) either: (i) no or nominal assets; (ii) assets 

consisting solely of cash and cash equivalents; or 

(iii) assets consisting of any amount of cash and 

cash equivalents and nominal other assets. 

5The descriptions included in this release of 

common features and fees currently seen in SPACs 

and SPAC transaction structures are based, in part, 

on reviews by the Commission staff of SPAC filings 

with the Commission. Based on review by the 

Commission staff of SPAC filings, in the majority 

of transactions, SPACs typically combine with 

private operating companies. In some cases, 

however, SPACs may combine with other public 

companies. See, e.g., Bailey Lipschultz, Re-SPACs 

Gain Steam as Arrival Finds New Sponsor, 

Bloomberg News (Apr. 10, 2023), available at 

https://news.bloomberglaw.com/mergers-andacquisitions/re-spacs-gain-steam-as-arrival-sharessink-new-sponsor-steps-up. 

6We use the terms ‘‘initial public offering’’ or 

‘‘IPO’’ to refer to a securities offering registered 

under the Securities Act by an issuer that was not 

subject to the reporting requirements of section 13 

or 15(d) of the Securities Exchange Act of 1934 

immediately prior to the registration. 

7Special Purpose Acquisition Companies, Shell 

Companies, and Projections, Release No. 33–11048 

(Mar. 30, 2022) [87 FR 29458 (May 13, 2022)] 

(‘‘Proposing Release’’), at 29461, nn.22–25 and 

accompanying text. See infra section VIII.A.1.ii. 

8See infra section VIII.A.1.iii. 

9The sponsor’s compensation usually amounts to 

around 20% of the total shares of a SPAC after its 

IPO. 

10 15 U.S.C. 78a et seq. 

11The shares and warrants usually begin trading 

as a unit, with a unit frequently consisting of a 

common share and a fraction of a warrant, and are 

traded separately after a certain period. The 

warrants often become exercisable at a price that is 

higher (often $11.50) than the IPO price for 

common shares (which is often $10) upon the later 

of the passage of a certain time period following the 

SPAC’s IPO (often one year) or a certain time period 

following the completion of a de-SPAC transaction 

(often 30 days). Many warrants have limitations on 

their potential upside as a result of the right of the 

issuer to call the warrant under certain conditions, 

which commonly include a condition that the 

underlying common stock have traded at or above 

a certain price (often $18) for a specified period of 

time. The redemption price in those call situations 

can vary based on the specific warrant agreement 

provisions, so investors commonly pay close 

attention to those pricing provisions. 

12The governing documents often provide for a 

time frame of 24 months, but it can be as long as 

36 months. Exchange listing rules generally require 

a SPAC to complete a business combination within 

three years (or such shorter period specified in its 

registration statement or applicable governing 

documents). See, e.g., NYSE Listed Company 

Manual Section 102.06 and Nasdaq Listing Rule 

IM–5101–2. 

13SPAC shareholders typically also have a 

redemption right in connection with any votes to 

extend the duration of the SPAC. 

14See definition of ‘‘foreign private issuer,’’ infra 

note 442. 

15A SPAC is required to file a Form 8–K that 

provides certain disclosures regarding the business 

combination agreement if the agreement is a 

material definitive agreement not made in the 

ordinary course of business. See Item 1.01 of Form 

8–K. 

16Three examples of common de-SPAC 

transaction structures are: (i) the SPAC is the 

surviving company in a merger and the target 

company merges into the SPAC, (ii) the target 

company is the surviving company in a merger and 

the SPAC merges into the target company, and (iii) 

a new holding company is created and the SPAC 

and target company merge into that new holding 

company. The holding company structure referred 

to in (iii) above includes ‘‘double-dummy’’ 

structure transactions. 

I. Introduction 

Special purpose acquisition 

companies, or SPACs, first began to 

emerge in the 1990s as an alternative to 

blank check companies after blank 

check companies began to be regulated 

more strictly pursuant to 17 CFR 

230.419 (‘‘Rule 419’’ 1 under the 

Securities Act of 1933 (‘‘Securities 

Act’’)),2 a rule the Commission adopted 

following the enactment of the 

Securities Enforcement Remedies and 

Penny Stock Reform Act of 1990 

(‘‘Penny Stock Reform Act’’).3 SPACs 

are shell companies 4 organized and 

managed by a sponsor for the purpose 

of merging with or acquiring one or 

more unidentified private operating 

companies, commonly known as a deSPAC transaction, within a certain time 

frame.5 The de-SPAC transaction is a 

hybrid transaction that contains 

elements of both an initial public 

offering (‘‘IPO’’) and a merger and 

acquisition (‘‘M&A’’) transaction.6

While structured as an M&A 

transaction, the de-SPAC transaction 

also is the functional equivalent of the 

private target company’s IPO, because it 

results in the target company becoming 

part of a combined company that is a 

reporting company and provides the 

private target company with access to 

cash proceeds that the SPAC had 

previously raised from the public. As 

part of this process, the shareholders of 

the SPAC go from owning shares in a 

shell company to owning shares in a 

combined company that conducts the 

business of the private target. As a 

result, the de-SPAC transaction 

implicates disclosure and liability 

concerns associated with both IPOs and 

M&A transactions. Additionally, parties 

involved in the SPAC process, such as 

the SPAC sponsor, may have incentives 

to consummate a de-SPAC transaction 

that are not present in a traditional IPO 

or M&A transaction. Further, as 

discussed in the Proposing Release,7 the 

shareholders and management of a 

private operating company may believe 

there to be certain advantages of 

combining with a SPAC compared with 

conducting an underwritten IPO. 

To have the necessary context for the 

concerns unique to SPACs and de-SPAC 

transactions, it is critical to understand 

the structure and lifecycle of a SPAC. 

Once formed, a SPAC will conduct its 

IPO in the form of a firm commitment 

underwritten IPO of $5 million or more 

in units consisting of redeemable shares 

and of warrants. The underwriting fees 

for a SPAC IPO typically approximate 

5% to 5.5% of the offering proceeds, 

and a significant portion of those fees 

(around 3% of the IPO proceeds) are 

conditioned on the completion of a deSPAC transaction.8 The SPAC sponsor 

is usually compensated through a 

‘‘promote’’ or ‘‘founder’s shares’’—i.e., 

discounted SPAC shares received prior 

to the SPAC’s IPO that generally only 

have value if a de-SPAC transaction 

occurs.9

Following its IPO, a SPAC places all 

or substantially all of the IPO proceeds 

into a trust or escrow account. The 

SPAC typically registers its shares and 

warrants under section 12(b) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 10 and lists the units 

(typically consisting of a common share 

and a fraction of a warrant) for trading 

on a national securities exchange.11

Next, the SPAC seeks to identify a 

target company for a de-SPAC 

transaction within the time frame 

specified in its governing documents.12

If the SPAC does not complete a deSPAC transaction within that time 

frame, it may seek an extension (often 

requiring approval from its 

shareholders) or dissolve and 

liquidate.13 If the SPAC enters into a 

business combination agreement with a 

target company, the SPAC files a Form 

8–K (or Form 6–K if the SPAC is a 

foreign private issuer (‘‘FPI’’) that 

reports on Form 20–F) 14 announcing 

the transaction that includes certain 

information on the material terms of the 

business combination agreement.15 The 

parties structure the de-SPAC 

transaction in different forms that may 

have tax or other regulatory 

advantages.16 Prior to the closing of the 

de-SPAC transaction, the shareholders 

of the SPAC typically have the 


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Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14161 

17Until they become exercisable, warrants issued 

by the SPAC do not typically provide a right to 

require the redemption of the warrant by any party. 18 De-SPAC transactions often result in the former 

SPAC shareholders owning a minority interest in 

the combined company. According to one study of 

the 47 de-SPAC transactions that occurred between 

Jan. 2019 and June 2020, SPAC shareholders, 

including the SPAC sponsor, held a median of 35% 

of the combined company after a de-SPAC 

transaction and the sponsor alone held a median of 

12% of the combined company. Michael Klausner, 

Michael Ohlrogge & Emily Ruan, A Sober Look at 

SPACs, 39 Yale J. Reg., 228, 239–240 (2022). 

19The parties to a de-SPAC transaction often 

negotiate a minimum cash condition pursuant to 

which a SPAC must have a specified minimum 

amount of cash at the closing of the de-SPAC 

transaction, which could include funds in the trust 

or escrow account, the proceeds from PIPE 

transactions, and other sources. When a SPAC 

conducts a PIPE transaction in connection with a 

de-SPAC transaction, the post-business 

combination company generally files a Securities 

Act registration statement following the de-SPAC 

transaction to register the resale of the securities 

purchased in the PIPE transaction. 

20 17 CFR 240.14a–2; Exchange Act Rule 14c–2. 

The regulation at 17 CFR 240.3a12–3(b) provides an 

exemption from the proxy and information 

statement rules for FPIs, providing that ‘‘[s]ecurities 

registered by a foreign private issuer, as defined in 

Rule 3b–4. . ., shall be exempt from sections 14(a), 

14(b), 14(c), 14(f) and 16 of the Act.’’ 

21 In certain de-SPAC structures, a holding 

company is formed to acquire both the private 

operating company and the SPAC. 

22As noted above, SPACs currently use a variety 

of legal structures to effect de-SPAC transactions, 

and the particular transaction structure and the 

consideration used can affect (1) the Commission 

filings required for the transaction, (2) the entity 

that will have a continuing Exchange Act reporting 

obligation following the transaction, and (3) the 

disclosures provided in connection with the 

transaction. 

23The Commission has promulgated rules under 

the Exchange Act setting forth filing, disclosure, 

and dissemination requirements in connection with 

tender offers. See, e.g., 17 CFR 240.14d–1 through 

240.14d–103, 17 CFR 240.14e–1 through 240.14e– 

8 (‘‘Regulation 14E’’ under the Exchange Act), and 

17 CFR 240.13e–4 (‘‘Rule 13e–4’’ under the 

Exchange Act). When an issuer conducts a tender 

offer, the issuer may be required to file and 

disseminate a Schedule TO pursuant to Rule 13e– 

4. Because the redemption rights in a SPAC context 

generally have indicia of a tender offer, such as a 

limited period of time for the SPAC security holders 

to request redemption of their securities, SPACs 

will generally file a Schedule TO in circumstances 

where, in connection with a de-SPAC transaction, 

the parties are neither soliciting votes or consents 

nor registering the offer or sale of securities. The 

Commission staff has not objected if a SPAC does 

not comply with the tender offer rules when the 

SPAC files a required Schedule 14A or 14C in 

connection with the approval of a de-SPAC 

transaction or an extension of the timeframe to 

complete a de-SPAC transaction and conducts the 

solicitation in accordance with 17 CFR 240.14a–1 

through 240.14b–2 (‘‘Regulation 14A’’ under the 

Exchange Act) or 240.14c–1 through 240.14c–101 

(‘‘Regulation 14C’’ under the Exchange Act), as the 

Federal proxy rules mandate substantially similar 

disclosures and applicable procedural protections 

as required by the tender offer rules. However, this 

staff position does not apply to a SPAC that does 

not file a required Schedule 14A or 14C in 

connection with the de-SPAC transaction or an 

extension. In these circumstances, SPACs have 

generally filed and disseminated Schedules TO, and 

the staff has taken the position that the Schedule 

TO should include the same financial and other 

information as is required in Schedule 14A or 14C 

for a de-SPAC transaction. See infra section II.H for 

a discussion of 17 CFR 229.1608 (‘‘Item 1608’’ of 

Regulation S–K) that we are adopting in this release 

and section IV.A for a discussion of Rule 145a 

under the Securities Act that we are adopting in 

this release, which will affect when a SPAC may be 

required to file a registration statement in 

connection with a de-SPAC transaction. For 

exchange-listed SPACs, exchange rules may require 

a SPAC to file tender offer documents with the 

Commission in some circumstances. See, e.g., 

Nasdaq Listing Rule IM–5101–2; NYSE Listed 

Company Manual Section 102.06. The staff position 

discussed in this footnote and any other staff 

guidance or statements referenced in this release, 

including staff legal bulletins, staff compliance and 

disclosure interpretations, and the Division of 

Corporation Finance’s Financial Reporting Manual 

(‘‘FRM’’), represent the views of Commission staff 

and are not a rule, regulation, or statement of the 

Commission. The Commission has neither 

approved nor disapproved the views reflected in 

these staff positions or the content of these staff 

statements and, like all staff positions or statements, 

they have no legal force or effect, do not alter or 

amend applicable law, and create no new or 

additional obligations for any person. 

24Form 10 is the long-form registration statement 

to register a class of securities under section 12(b) 

or 12(g) of the Exchange Act. See Items 2.01(f), 

5.01(a)(8), and 9.01(c) of Form 8–K. If the shell 

company is an FPI then a Form 20–F should be 

filed no later than four business days after the 

consummation of the acquisition that includes all 

of the information for the target company that Form 

20–F requires for registration of securities. By the 

time the Form 8–K with Form 10 information is 

filed, the securities of the combined company have 

often already begun trading on a national securities 

exchange with a new ticker symbol because the 

securities of the SPAC generally trade on an 

exchange until the consummation of the de-SPAC 

transaction and the securities of the combined 

company generally commence trading on the 

following business day. 

25Estimates of SPAC IPO and IPO data in Table 

1 are based on SPAC Analytics, SPAC and US IPO 

Activity, available at https://

www.spacanalytics.com. Estimates of de-SPAC 

transactions in Table 1 are based on data from 

Dealogic for SPACs registered with the Commission 

and where year is based on M&A Completion Date. 

opportunity to either: (1) require the 

SPAC to redeem their shares prior to the 

de-SPAC transaction 17 and receive a 

pro rata share of the amount in the IPO 

proceeds and related assets subject to 

the trust or escrow arrangements 

(including interest thereon and 

commonly less amounts released to pay 

income and franchise taxes), or (2) 

remain a shareholder of the surviving 

company after the business 

combination.18 To offset shareholder 

redemptions or to fund larger de-SPAC 

transactions, SPACs often conduct 

additional private capital-raising 

transactions, typically in the form of 

private investment in public equity 

(PIPE) transactions.19

Regardless of its form, a de-SPAC 

transaction often is accompanied by the 

need to attain shareholder approval for 

certain items (e.g., amendments to the 

governing documents of the SPAC, or 

authorization of additional securities for 

issuance), and, in such cases, a SPAC 

provides its shareholders with a proxy 

statement on Schedule 14A or an 

information statement on Schedule 

14C.20 If the SPAC, the target company, 

or a holding company 21 must register 

the offer and sale of its securities to be 

issued in the de-SPAC transaction, the 

entity typically files a registration 

statement on Form S–4 or F–4 to do 

so.22 If no registration statement or 

proxy or information statement is 

required, the SPAC may disseminate a 

tender offer statement (i.e., a Schedule 

TO) for the redemption offer to its 

security holders with information about 

the target company.23

Finally, after the completion of the 

de-SPAC transaction, the combined 

company must file a Form 8–K within 

four business days that includes 

information about the target company 

equivalent to the information that a new 

reporting company would be required to 

provide when filing a Form 10 under 

the Exchange Act.24

In recent years, the U.S. securities 

market experienced a significant 

increase in the number of SPAC IPOs, 

as shown in Table 1 25 below. 

TABLE 1—NUMBER OF SPAC IPOS IN THE U.S. SECURITIES MARKET FROM 2012–2023 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 

Number of Offerings 

SPAC IPOs ............................................................................... 9 10 12 20 13 34 46 59 248 613 86 31 

IPOs (including SPAC IPOs) .................................................... 147 220 258 173 111 189 225 213 450 968 118 72 

Percentage from SPACs ........................................................... 6% 5% 5% 12% 12% 18% 20% 28% 55% 63% 73% 43% 

Total Proceeds (in billions of dollars) 

SPAC IPOs ............................................................................... 0.5 1.4 1.8 3.9 3.5 10.0 10.8 13.6 83.4 162.5 13.4 3.8 

IPOs (including SPAC IPOs) .................................................... 50.1 70.8 93.0 39.2 25.8 50.3 63.9 72.2 179.4 334.7 22.9 25.1 


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14162 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

26 Id. 

27 Id. 

28For example, in May 2021, the Subcommittee 

on Investor Protection, Entrepreneurship, and 

Capital Markets of the House Financial Services 

Committee held a hearing on ‘‘Going Public: SPACs, 

Direct Listings, Public Offerings, and the Need for 

Investor Protections,’’ which included testimony 

on, among other things, misaligned incentives in 

the SPAC structure, disclosure issues with respect 

to SPACs, and the use of projections in de-SPAC 

transactions. A webcast of the hearing is available 

at https://financialservices.house.gov/events/ 

eventsingle.aspx?EventID=407753. In addition, as 

discussed in the Proposing Release, the 

Commission’s Investor Advisory Committee issued 

recommendations and expressed certain concerns 

regarding SPACs. See Proposing Release, supra note 

7, at 29462, nn.36–38 and accompanying text. 

29See Testimony of Stephen Deane, CFA 

Institute, before the Investor Protection, 

Entrepreneurship, and Capital Markets 

Subcommittee of the U.S. House Committee on 

Financial Services, May 24, 2021 (‘‘Deane 

Testimony’’), https://financialservices.house.gov/ 

uploadedfiles/hhrg-117-ba16-wstate-deanes20210524.pdf; see also Amrith Ramkumar, SPAC 

Insiders Can Make Millions Even When the 

Company They Take Public Struggles, Wall St. J. 

(Apr. 25, 2021). 

30See, e.g., Klausner, Ohlrogge & Ruan, supra 

note 18; Usha Rodrigues & Michael A. Stegemoller, 

Redeeming SPACs (2021), U. of Ga. Sch. of L. Legal 

Stud. Res. Paper No. 2021–09, available at https:// 

ssrn.com/abstract=3906196 or http://dx.doi.org/ 

10.2139/ssrn.3906196 (in the Proposing Release, a 

working paper of this article was cited as Usha R. 

Rodrigues and Michael Stegemoller, SPACs: Insider 

IPOs (SSRN Working Paper, 2021), with the short 

form citation ‘‘Rodrigues and Stegemoller’’); Minmo 

Gahng, Jay R. Ritter & Donghang Zhang, SPACs, 36 

The Rev. of Financial Stu. 3463 (2023), available at 

https://doi.org/10.1093/rfs/hhad019; letter dated 

Feb. 16, 2021, from Americans for Financial Reform 

and Consumer Federation of America to the House 

Financial Services Committee (‘‘AFR Letter’’); 

Deane Testimony; Testimony of Andrew Park, 

Americans for Financial Reform, before the Investor 

Protection, Entrepreneurship, and Capital Markets 

Subcommittee of the U.S. House Committee on 

Financial Services, May 24, 2021 (‘‘Park 

Testimony’’), https://financialservices.house.gov/ 

uploadedfiles/hhrg-117-ba16-wstate-parka20210524.pdf. 

31See Mira Ganor, The Case for Non-Binary, 

Contingent, Shareholder Action, 23 U. Pa. J. Bus. L. 

390 (2021); Rodrigues & Stegemoller, supra note 30. 

We note that exchange listing rules only explicitly 

require that, when a shareholder vote on a business 

combination is held, the public shareholders voting 

against a business combination have a right to 

redeem shares. See, e.g., Nasdaq Listing Rule IM– 

5101–2 (stating, in part, that ‘‘public Shareholders 

voting against a business combination must have 

the right to convert their shares of common stock 

into a pro rata share of the aggregate amount then 

in the deposit account (net of taxes payable and 

amounts distributed to management for working 

capital purposes) if the business combination is 

approved and consummated’’). In April 2022, the 

Commission’s Investor Advocate issued a 

recommendation to the NYSE and Nasdaq that their 

respective listing standards should prohibit 

consummation of a business combination when 

public SPAC shareholders exercise their conversion 

rights for a majority of the shares. See 

Memorandum, dated April 21, 2022, from Rick A. 

Fleming, Investor Advocate, U.S. Securities and 

Exchange Commission, to Adena T. Friedman, 

President & Chief Executive Officer, and John 

Zecca, EVP & Global Chief Legal and Regulatory 

Officer, Nasdaq, Inc., available at https://

www.sec.gov/about/offices/investorad/ 

recommendation-of-the-investor-advocate-nasdaqspac-listing-standards-042122.pdf; and 

Memorandum, dated April 21, 2022, from Rick A. 

Fleming, Investor Advocate, U.S. Securities and 

Exchange Commission, to Lynn Martin, President, 

and Jaime L. Klima, Chief Regulatory Officer, The 

NYSE Group, Inc., available at https://www.sec.gov/ 

about/offices/investorad/recommendation-of-theinvestor-advocate-nyse-spac-listing-standards042122.pdf. 

32Throughout this release, when we discuss 

‘‘SPAC transactions,’’ we are referencing both SPAC 

IPOs and de-SPAC transactions. 

33See, e.g., AFR Letter; Testimony of Professor 

Usha R. Rodrigues, University of Georgia School of 

Law, before the Investor Protection, 

Entrepreneurship, and Capital Markets 

Subcommittee of the U.S. House Committee on 

Financial Services, May 24, 2021 (‘‘Rodrigues 

Testimony’’), https://financialservices.house.gov/ 

uploadedfiles/hhrg-117-ba16-wstate-rodriguesu20210524.pdf. A number of recent Commission 

actions have highlighted disclosures about the 

private operating company that are allegedly 

materially misleading, among other things. See, e.g., 

In the Matter of Momentus, Inc., Stable Road 

Acquisition Corp., SRC–NI Holdings, LLC, and 

Brian Kabot, Release No. 33–10955, 34–92391 (July 

13, 2021) (settled order); In the Matter of Nikola 

Corp., Release No. 33–11018, 34–93838 (Dec. 21, 

2021) (settled order); SEC v. Akazoo S.A., Case No. 

1:20–cv–e08101 (S.D.N.Y. filed Sept. 30, 2020); SEC 

v. Hurgin, et al., Case No. 1:19–cv–05705 (S.D.N.Y. 

filed June 18, 2019). 

34For example, a traditional IPO requires a more 

comprehensive description of the business of a 

prospective registrant than is required of a private 

target operating company in an M&A transaction. 

Compare Item 11(a) of Form S–1, with Item 17(b)(1) 

of Form S–4, and Item 14(b)(3) of Schedule 14A. 

Additionally, a description of property and material 

legal proceedings is required for a prospective 

registrant in a traditional IPO, but these disclosure 

requirements do not apply to a private target 

operating company in an M&A transaction. See Item 

11(b)–(c) of Form S–1. 

TABLE 1—NUMBER OF SPAC IPOS IN THE U.S. SECURITIES MARKET FROM 2012–2023—Continued 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 

Percentage from SPACs ........................................................... 1% 2% 2% 10% 14% 20% 17% 19% 46% 49% 59% 15% 

Number of Completed De-SPAC Transactions ........................ 6 11 5 10 9 13 23 28 64 199 101 89 

As shown above in Table 1, SPAC 

IPOs represent a significant share of the 

U.S. IPO market in recent years. While 

we recognize that, like overall IPO 

activity, the SPAC IPO market has 

declined recently, SPAC IPOs 

nonetheless constituted over half of all 

U.S. IPOs respectively in 2020, 2021, 

and 2022, and constituted 43% of all 

U.S. IPOs in 2023.26 The number of deSPAC transactions has also been 

significant relative to the number of 

non-SPAC U.S. IPOs. 

A similar trend has occurred when 

considering total proceeds for SPAC 

IPOs as a percentage of total proceeds 

raised in all U.S. IPOs over this period. 

SPAC IPO proceeds represented 46%, 

49%, and 59% of total proceeds raised 

in all U.S. IPOs respectively in 2020, 

2021, and 2022. This percentage 

declined to 15% in 2023.27

During the years of increase in SPAC 

IPOs, many market observers raised 

concerns about various aspects of the 

SPAC structure and the hybrid nature of 

the de-SPAC transaction.28 Among other 

things, commentators expressed 

concerns about SPAC sponsor 

compensation and other costs that can 

have a dilutive effect on a SPAC’s 

shareholders,29 potential conflicts of 

interest in the SPAC structure and deSPAC transactions (e.g., the SPAC 

sponsors’ compensation being 

contingent on the completion of the deSPAC transaction could lead sponsors to 

enter into de-SPAC transactions that are 

unfavorable to unaffiliated 

shareholders),30 and SPAC governing 

documents and stock exchange listing 

rules under which SPAC shareholders 

can vote in favor of a proposed de-SPAC 

transaction yet redeem their shares prior 

to the closing of the transaction.31

Some commentators have expressed 

concerns regarding the adequacy of the 

disclosures provided to investors in 

SPAC IPOs and de-SPAC transactions 32

in terms of explaining the potential risks 

and effects for investors related to these 

transactions and the potential benefits 

for the SPAC sponsor and other 

affiliates of the SPAC.33 For example, 

even though the de-SPAC transaction 

essentially serves as the IPO of the target 

company in the form of an M&A 

transaction, investors may not receive 

the same information about the target 

company as they would in a registration 

statement for a traditional IPO, because 

a filing for an M&A transaction has 

different disclosure requirements.34

There are also additional disclosure 

and liability concerns that stem from the 

hybrid nature of the de-SPAC 

transaction. For example, some 

commentators have criticized the use of 

projections in de-SPAC transactions 

that, in their view, have appeared to be 

unreasonable, unfounded, or potentially 

misleading, particularly where the target 

company is an early stage company with 

no or limited sales, products, and/or 

operations and have expressed concern 

that some SPACs have taken the 


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35Public Law 104–67, 109 Stat. 737 (1995). 36See, e.g., Michael Dambra, Omri Even-Tov & 

Kimberlyn George, Should SPAC Forecasts Be 

Sacked? (SSRN Working Paper, 2022), available at 

https://www.utah-wac.org/2022/Papers/even-tov_

UWAC.pdf; AFR Letter; Park Testimony; Rodrigues 

& Stegemoller, supra note 30; see also Heather 

Somerville & Eliot Brown, SPAC Startups Made 

Lofty Promises. They Aren’t Working Out., Wall St. 

J., Feb. 25, 2022. 

37See AFR Letter; Deane Testimony; Rodrigues 

Testimony. For a general discussion of the role of 

gatekeepers in securities markets, see also John C. 

Coffee Jr., Gatekeeper Failure and Reform: The 

Challenge of Fashioning Relevant Reforms, 84 B. U. 

L. Rev. 301 (2004); John C. Coffee, Jr., Gatekeepers: 

The Professions and Corporate Governance (2006). 38See CF Disclosure Guidance: Topic No. 11— 

Special Purpose Acquisition Companies (Division 

of Corporation Finance, Dec. 22, 2020); Staff 

Statement on Select Issues Pertaining to Special 

Purpose Acquisition Companies (Division of 

Corporation Finance, Mar. 31, 2021); Public 

Statement on Financial Reporting and Auditing 

Considerations of Companies Merging with SPACs 

(Office of Chief Accountant, Mar. 31, 2021); Public 

Statement on SPACs, IPOs and Liability Risk under 

the Securities Laws (Division of Corporation 

Finance, Apr. 8, 2021); Staff Statement on 

Accounting and Reporting Considerations for 

Warrants Issued by Special Purpose Acquisition 

Companies (‘‘SPACs’’) (Division of Corporation 

Finance and Office of Chief Accountant, Apr. 12, 

2021). 

39 In this release, unless otherwise indicated, 

comment letters cited refer to comment letters 

received in response to the Proposing Release, and 

are available at https://www.sec.gov/comments/s7- 

13-22/s71322.htm. On March 30, 2022, the 

Commission published the Proposing Release on its 

website. The comment period for the Proposing 

Release was open for 30 days from publication in 

the Federal Register and ended on June 13, 2022. 

Four commenters stated that the comment period 

was inadequate and/or recommended extending the 

comment period. See letters from Christopher 

Iacovella, Chief Executive Officer, American 

Securities Association (June 7, 2022) (‘‘American 

Securities Association’’); Jennifer Schulp, Director 

of Financial Regulation Studies, Center for 

Monetary and Financial Alternatives, Cato Institute 

(June 13, 2022) (‘‘Cato Institute’’); Bobby Franklin, 

President & CEO, National Venture Capital 

Association (June 13, 2022); Rod Miller, Chair, 

Securities Regulation Committee, New York City 

Bar Association (June 13, 2022) (‘‘NYC Bar’’). In 

Oct. 2022, the Commission reopened the comment 

period for the Proposing Release and other 

rulemakings because certain comments on the 

Proposing Release and other rulemakings were 

potentially affected by a technological error in the 

Commission’s internet comment form. See 

Resubmission of Comments and Reopening of 

Comment Periods for Several Rulemaking Releases 

Due to a Technological Error in Receiving Certain 

Comments, Release No. 33–11117 (Oct. 7, 2022) [87 

FR 63016 (Oct. 18, 2022)] (‘‘Reopening Release’’). 

The Reopening Release was published on the 

Commission’s website on Oct. 7, 2022, and in the 

Federal Register on Oct. 18, 2022, and the reopened 

comment period ended on Nov. 1, 2022. We have 

considered all comments received since Mar. 30, 

2022, and do not believe an additional extension of 

the comment period is necessary. 40The Small Business Capital Formation 

Advisory Committee recommendations on the 

Proposing Release are available at https://

www.sec.gov/spotlight/sbcfac/sbcfac-spacrecommendation-050622.pdf. The Small Business 

Capital Formation Advisory Committee made the 

following five recommendations, in summary: (1) 

SPACs should remain a viable path for companies 

to pursue as a means of getting access to public 

market capital and the committee is concerned the 

proposed rules, as written, might render SPACs 

unusable as an alternative to IPOs, (2) the 

committee is generally supportive of improving 

disclosures for SPACs, particularly in the period of 

time between the announcement of the merger and 

the closing of the de-SPAC transaction, (3) the 

Commission should clearly identify which 

participants would have underwriter liability and 

participants should be held accountable to the same 

extent they would be in traditional IPOs, (4) 

projections in de-SPAC transactions should be 

covered by the liability safe harbor provisions of the 

PSLRA, because management projections are an 

important part of the rationale for companies in 

determining whether to engage in a merger with a 

SPAC and they are necessary when financial 

intermediaries provide fairness opinions related to 

de-SPAC transactions, and (5) the Commission 

should expand or eliminate the 18-month and 24- 

month timelines provided in the Investment 

Company Act safe harbor for SPACs, because the 

requirement to engage in a de-SPAC transaction 

within 18 months after a SPAC IPO and complete 

a de-SPAC transaction within 24 months could 

incentivize SPAC sponsors to engage in riskier 

acquisitions to complete the merger process within 

artificially short periods. With respect to the Small 

Business Capital Formation Advisory Committee’s 

first recommendation—that SPACs remain a viable 

path to access public market capital—we do not 

believe the final rules will vitiate this access or 

render SPACs unusable as an alternative to IPOs. 

On the contrary, we believe the final rules will 

support the SPAC market by enhancing SPAC 

disclosures and enhancing investor protection in 

ways that help investor decision-making and 

increase investor confidence that they have the 

necessary information to invest in the SPAC market. 

With respect to the Small Business Capital 

Formation Advisory Committee’s second 

recommendation—supporting improved disclosures 

for SPACs, particularly in the period of time 

between the announcement of the merger and the 

closing of the de-SPAC transaction—we believe the 

final rules collectively will enhance such 

disclosure. We address the other specific 

recommendations of the Small Business Capital 

Formation Advisory Committee in the specific 

sections of this release related to those 

recommendations. 

position that the Private Securities 

Litigation Reform Act of 1995 

(‘‘PSLRA’’) 35 safe harbor applies to 

forward-looking statements made by 

SPACs in connection with de-SPAC 

transactions.36 The target company also 

is often not required to sign a 

registration statement filed for a deSPAC transaction (except in transaction 

structures where the target company 

survives the de-SPAC transaction) and, 

by extension, would not take on section 

11 liability even though, similar to a 

traditional IPO, reliable information 

about the business of the target 

company is critical to investors when 

deciding whether to approve the 

transaction and to invest in the 

combined company through their 

redemption decision. Finally, 

commentators have noted that, unlike a 

traditional IPO, a registered de-SPAC 

transaction lacks a named underwriter 

that would typically perform traditional 

gatekeeping functions, such as due 

diligence on the target company, and 

would be subject to liability under 

section 11 of the Securities Act for the 

registration statement.37

In response to a number of these and 

other concerns, the Commission staff 

provided guidance relating to SPACs on 

five occasions between December 2020 

and April 2021.38 Then, in March 2022, 

the Commission proposed new rules 

and rule amendments to enhance 

existing disclosure requirements and 

investor protections in SPAC IPOs and 

in de-SPAC transactions.39 On July 13, 

2022, the U.S. Securities and Exchange 

Commission Small Business Capital 

Formation Advisory Committee (‘‘Small 

Business Capital Formation Advisory 

Committee’’) issued recommendations 

related to this proposal.40

While we recognize that the number 

of SPAC IPOs has declined since 2021, 

the investor protection concerns 

regarding SPACs and the hybrid nature 

of the de-SPAC transaction identified in 

the Proposing Release do not depend on 

market fluctuations. In addition, as 

noted above, notwithstanding the recent 

decline, SPAC transactions have become 

a much larger part of the U.S. securities 

markets over the last decade and could 

continue to grow as macroeconomic and 

other factors change. Accordingly, after 

considering comments received on the 

proposal, we are adopting final rules 

that will provide for greater 

transparency and more robust investor 

protections in SPAC IPOs and de-SPAC 

transactions. The final rules will 

enhance the completeness, usefulness, 

and comparability of the disclosures 

provided by SPACs and target 

companies at the SPAC IPO and deSPAC transaction stages and will 

provide other important protections for 

investors in this market, all of which 

may promote market efficiency. Further, 

given that the de-SPAC transaction 

essentially is an IPO of the target 

company in the form of an M&A 

transaction, the final rules also will 

ensure that investors receive similar 

information about the target company 

and similar protections as in a 

traditional IPO in connection with the 

de-SPAC transaction. The final rules 

also will provide investors with 

information about, and protections with 

respect to, the M&A elements of deSPAC transactions, particularly 

regarding the transaction approval 

process and conflicts of interest. 

To these ends, we are adopting new 

subpart 229.1600 of 17 CFR part 229 

(‘‘subpart 1600’’ of Regulation S–K) that 

sets forth specialized disclosure 

requirements for SPAC IPOs and deSPAC transactions. New subpart 1600 

contains provisions that, among other 

things: 


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41Throughout this release, for readability, we use 

‘‘shell company’’ in lieu of the phrase ‘‘shell 

company, other than a business combination related 

shell company.’’ The term ‘‘business combination 

related shell company’’ is defined in Securities Act 

Rule 405 and Exchange Act Rule 12b–2. We 

similarly use ‘‘reporting shell company’’ in lieu of 

the phrase ‘‘reporting shell company, other than a 

business combination related shell company’’ 

throughout this release. 

42Some commenters indicated that some or all of 

the new rules should not apply to existing SPACs 

and/or should apply only prospectively. See, e.g., 

letters from American Securities Association; Cato 

Institute; Freshfields Bruckhaus Deringer US LLP 

(June 13, 2022) (‘‘Freshfields’’); Don Nguyen (Apr. 

20, 2022); Nicholas Wilson (June 9, 2022). 

43 15 U.S.C. 80a–1 et seq. 

44The requirements in new subpart 1600 will 

codify and standardize some of the disclosures 

already commonly provided by SPACs. 

45See the amendments to Forms S–1, F–1, S–4, 

F–4 and 8–K and Schedules 14A and TO. While the 

Commission did not propose amendments to 

Schedule 14C, the disclosure required by subpart 

1600 will be required in Schedule 14C pursuant to 

Item 1 of Schedule 14C, which states that a 

Schedule 14C must include the information called 

for by all of the items of Schedule 14A, with limited 

exceptions, to the extent each item would be 

applicable to any matter to be acted upon at a 

shareholder meeting if proxies were to be solicited 

in connection with the meeting. If the securities to 

be issued in a de-SPAC transaction are registered 

on a form other than Form S–4 or F–4, such as Form 

S–1 or F–1 the requirements of Form S–4 or F–4 

that the Commission is adopting, as applicable, in 

regard to de-SPAC transactions would apply in that 

context. Also, in both Form S–4 and Form F–4, we 

made technical changes from the proposal to clarify 

that the new Regulation S–K Item 1600 series of 

disclosures should be located in the prospectus part 

of these forms. As a result Form S–4 provides: ‘‘If 

securities to be registered on this Form will be 

issued in a de-SPAC transaction, as defined in Item 

1601(a) of Regulation S–K (17 CFR 229.1601(a)), 

then the disclosure provisions of Items 1603 

through 1607 and 1609 of Regulation S–K (17 CFR 

229.1603 through 229.1607 and 229.1609) apply in 

addition to the provisions of this Form and 

disclosure thereunder must be provided in the 

prospectus, and the structured data provisions of 

Item 1610 of Regulation S–K (17 CFR 229.1610) 

apply to those disclosures.’’ We made similar 

changes to Form F–4. For purposes of consistency 

across forms and schedules, we made similar 

changes as well to Schedule 14A and Schedule TO, 

although there is no requirement in these forms to 

locate the disclosure in the prospectus portion of 

these schedules. In both Schedule 14A and 

Schedule TO, we made technical changes from the 

proposal to clarify that Item 1604(a) does not apply 

since these disclosure documents do not include an 

outside front cover page similar to a prospectus and 

Item 1604(b) disclosure should be included in the 

front part of the disclosure document instead of the 

prospectus summary referred to in Item 1604(b). 46 General Instruction L.1. to Form S–4; General 

Instruction I.1. to Form F–4; Item 14(f)(1) to 

• Require additional disclosures 

about the SPAC sponsor, potential 

conflicts of interest, and dilution; 

• Require certain disclosures on the 

prospectus outside front cover page and 

in the prospectus summary of 

registration statements filed in 

connection with SPAC IPOs and deSPAC transactions; and 

• Require additional disclosures 

regarding de-SPAC transactions, 

including (1) if the law of the 

jurisdiction in which the SPAC is 

organized requires its board of directors 

(or similar governing body) to determine 

whether the de-SPAC transaction is 

advisable and in the best interests of the 

SPAC and its shareholders, or otherwise 

make any comparable determination, 

disclosure of that determination, and (2) 

if the SPAC or SPAC sponsor has 

received any outside report, opinion, or 

appraisal materially relating to the deSPAC transaction, certain disclosures 

concerning the report, opinion, or 

appraisal. 

In addition, we are adopting 

amendments to provide procedural 

protections and to align the disclosures 

provided to investors, as well as the 

legal obligations of companies, in deSPAC transactions more closely with 

those in traditional IPOs. Specifically, 

we are adopting final rules that: 

• Amend the registration statement 

forms and schedules filed in connection 

with de-SPAC transactions to require 

additional disclosures about the target 

company; 

• Provide that a target company in a 

registered de-SPAC transaction is a coregistrant on the registration statement 

used for the de-SPAC transaction such 

that the target company will be subject 

to liability under section 11 of the 

Securities Act; 

• Make the PSLRA safe harbor 

unavailable to SPACs (including with 

respect to projections of target 

companies seeking to access the public 

markets through a de-SPAC transaction), 

by defining ‘‘blank check company’’ to 

encompass SPACs (and other companies 

that would be blank check companies 

but for the fact that they do not sell 

penny stock); and 

• Require re-determination of SRC 

status following a de-SPAC transaction. 

We also are providing guidance 

regarding potential underwriter status 

under section 2(a)(11) of the Securities 

Act in de-SPAC transactions. 

In addition, to provide reporting shell 

company shareholders, including SPAC 

shareholders, with more consistent 

Securities Act liability protections 

regardless of transaction structure, we 

are adopting new Rule 145a that 

specifies that any business combination 

of a reporting shell company, other than 

a business combination related shell 

company, involving another entity that 

is not a shell company involves a sale 

of securities to the reporting shell 

company’s shareholders.41 We are also 

adopting new 17 CFR 210.15–01 

(‘‘Article 15’’ of Regulation S–X), as well 

as related amendments, to more closely 

align the financial statement reporting 

requirements in business combinations 

involving a shell company and a target 

company with those in traditional IPOs. 

With respect to effectiveness and 

compliance with the final rules, in 

response to commenters,42 we have set 

an extended effective date for the new 

rules (i.e., July 1, 2024, which is 125 

days after the date of publication of this 

release in the Federal Register). This 

extended period before the final rules 

are effective will provide sufficient time 

for an initial public filing to be made 

under the existing rules for any 

transactions that are currently pending 

or planned. Any filings made on or after 

the effective date must comply with the 

final rules. 

We are also issuing guidance 

regarding the status of SPACs under the 

Investment Company Act of 1940 

(‘‘Investment Company Act’’).43 We 

have decided not to adopt proposed 17 

CFR 270.3a–10 (‘‘Rule 3a–10’’ under the 

Investment Company Act) which would 

have provided a safe harbor from the 

definition of investment company under 

section 3(a)(1)(A) to SPACs that 

complied with the rule’s conditions. 

Whether a SPAC is an investment 

company as defined in the Investment 

Company Act is a question of facts and 

circumstances. Given the individualized 

nature of this analysis, and because, 

depending on the facts and 

circumstances, a SPAC could be an 

investment company at any stage of its 

operations such that a specific duration 

limitation may not be appropriate, we 

have decided not to adopt proposed 

Rule 3a–10. We are, however, providing 

guidance as to the type of activities that 

would likely raise serious questions 

about a SPAC’s status as an investment 

company under the Investment 

Company Act. 

II. New Subpart 1600 of Regulation S– 

K 

The Commission is adopting final 

rules to add new subpart 1600 to 

Regulation S–K. The new subpart sets 

forth disclosure requirements applicable 

to SPACs regarding, among other things, 

the sponsor, potential conflicts of 

interest, and dilution and requires 

certain disclosures on the prospectus 

cover page and in the prospectus 

summary.44 The Commission is also 

adopting final rules to amend a number 

of forms and schedules used by SPACs 

for IPOs and de-SPAC transactions to 

require the information set forth in 

subpart 1600.45 To the extent that the 

disclosure requirements in subpart 1600 

address the same subject matter as the 

existing disclosure requirements of the 

forms or schedules, the requirements of 

subpart 1600 are controlling.46


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Schedule 14A; General Instruction L to Schedule 

TO. 

47Proposed Item 1601(a). 

48Letter from Jay Knight, Chair of the Committee 

on Federal Regulation of Securities of the Section 

of Business Law of the American Bar Association 

(June 17, 2022) (‘‘ABA’’). 

49Letter from ABA. 

50Letter from Kirkland & Ellis LLP (June 15, 2022) 

(‘‘Kirkland & Ellis’’). 

51Proposing Release, supra note 7, at 29466 

(request for comment number 2) (‘‘Should we 

define ‘de-SPAC transaction’ as proposed? Should 

the scope of the proposed definition instead be tied 

to de-SPAC transactions that are permitted under 

exchange listing standards?’’). 

52Letter from Vinson & Elkins (June 13, 2022) 

(‘‘Vinson & Elkins’’). 

53 Item 1601(a) of Regulation S–K. 

54Letter from ABA. 

55Letters from ABA, Kirkland & Ellis. 

56Letter from ABA. 

57See also infra note 94 and accompanying text 

concerning SPAC status after a de-SPAC 

transaction. 

58Letter from Vinson & Elkins. 

59Proposing Release, supra note 7, at 29466. 

60 In adopting this definition of de-SPAC 

transaction, we do not intend to indicate that such 

transactions are or should be permitted under the 

exchanges’ SPAC listing rules or that exchange 

listing requirements should not apply to SPACs 

seeking an exchange listing. 

61Blank check companies subject to Rule 419 

must comply with a comprehensive set of 

disclosure and investor protection requirements 

under the rule and were not proposed to be subject 

to the requirements applicable to SPACs under the 

proposed rules. 

62Proposed Item 1601(b). 

63Letter from Vinson & Elkins (noting that ‘‘as 

proposed, a special purpose acquisition company 

has a business plan to complete a de-SPAC 

transaction, and a de-SPAC transaction involves a 

special purpose acquisition company.’’). 

64Letters from ABA, Vinson & Elkins. 

65Letter from Vinson & Elkins. 

A. Definitions 

1. Proposed Definition: ‘‘De-SPAC 

Transaction’’ 

The Commission proposed to define 

the term ‘‘de-SPAC transaction’’ as a 

business combination such as a merger, 

consolidation, exchange of securities, 

acquisition of assets, or similar 

transaction involving a SPAC and one or 

more target companies 

(contemporaneously, in the case of more 

than one target company).47

2. Comments: Definition of ‘‘De-SPAC 

Transaction’’ 

One commenter recommended we 

add the term ‘‘reorganization’’ to the 

non-exhaustive list of transactions set 

out in the proposed definition of deSPAC transaction.48

One commenter recommended the 

definition of de-SPAC transaction refer 

to ‘‘initial business combination’’ not 

‘‘business combination.’’ 49 Another 

commenter recommended the definition 

be named ‘‘initial business 

combination’’ instead of ‘‘de-SPAC 

transaction.’’ 50

In response to a request for 

comment,51 one commenter said there 

was no need to tie the definition of deSPAC transaction to transactions that 

are permitted under exchange listing 

standards, particularly if the definition 

of SPAC includes non-listed shell 

companies.52

3. Final Definition: ‘‘De-SPAC 

Transaction’’ 

After considering the comments 

received, we are adopting the definition 

of de-SPAC transaction as proposed 

with a modification discussed below.53

Under the final rules, the term de-SPAC 

transaction means a business 

combination, such as a merger, 

consolidation, exchange of securities, 

acquisition of assets, reorganization, or 

similar transaction, involving a special 

purpose acquisition company and one 

or more target companies 

(contemporaneously, in the case of more 

than one target company). 

We agree with one commenter’s 

recommendation 54 to add the term 

‘‘reorganization’’ to the non-exhaustive 

list of transactions set out in the 

definition of de-SPAC transaction. It is 

our understanding some transactions 

commonly considered to be de-SPAC 

transactions may be considered 

reorganizations. Hence, we have added 

the suggested term to the final 

definition. 

A few commenters suggested the 

definition of de-SPAC transaction 

should use the phrase ‘‘initial business 

combination.’’ 55 We recognize the 

phrase ‘‘initial business combination’’ 

may be used interchangeably with 

‘‘business combination’’ or ‘‘de-SPAC 

transaction’’ in the marketplace today, 

but we believe the simpler proposed 

term ‘‘business combination’’ used in 

the body of the de-SPAC transaction 

definition will be clearer to market 

participants. One of these commenters 

suggested the term ‘‘initial business 

combination’’ should be used because 

‘‘[s]ubsequent acquisitions by the former 

SPAC after Closing should not be 

considered a De-SPAC Transaction.’’ 56

We note that a company that is no 

longer a SPAC would not be subject to 

the disclosure items in subpart 1600 of 

Regulation S–K.57

We agree with the commenter who 

said there was no need to tie the 

definition of de-SPAC transaction to 

transactions that are permitted under 

exchange listing standards, particularly 

if the definition of SPAC includes nonlisted shell companies.58 A narrower 

definition may inappropriately exclude 

transactions that should be included, 

such as those involving over-thecounter-traded SPACs. We continue to 

believe, as indicated in the Proposing 

Release,59 that the definition of deSPAC transaction should include less 

common transactions that may or may 

not be permitted under exchange listing 

rules but for which the enhanced 

disclosure and procedural requirements 

in the final rules may be appropriate 

because they raise the same investor 

protection concerns.60

4. Proposed Definition: ‘‘Special 

Purpose Acquisition Company (SPAC)’’ 

The Commission proposed Item 1601 

to define the term ‘‘special purpose 

acquisition company (SPAC)’’ to mean a 

company that has indicated that its 

business plan is to (1) register a primary 

offering of securities that is not subject 

to the requirements of Rule 419; 61 (2) 

complete a de-SPAC transaction within 

a specified time frame; and (3) return all 

remaining proceeds from the registered 

offering and any concurrent offerings to 

its shareholders if the company does not 

complete a de-SPAC transaction within 

the specified time frame.62

5. Comments: Definition of ‘‘Special 

Purpose Acquisition Company (SPAC)’’ 

One commenter indicated they saw 

no need for a definition of the term 

‘‘SPAC,’’ as the commenter saw ‘‘no 

reason why the Proposed Rules should 

not apply to all shell companies, other 

than business combination shell 

companies, inclusive of blank check 

companies’’ and also indicated the 

proposed definitions of ‘‘SPAC’’ and 

‘‘de-SPAC transaction’’ were circular, 

stating, ‘‘The proposed definition of ‘deSPAC transaction’ should be revised to 

eliminate the reference to ‘a special 

purpose acquisition company’ in order 

to eliminate circularity.’’ 63

A few commenters did not support 

including the requirement that a SPAC 

‘‘return all remaining proceeds from the 

registered offering and any concurrent 

offerings to its shareholders’’ in the 

proposed SPAC definition.64 One of 

these commenters said this aspect of the 

definition is ‘‘unnecessary and should 

be eliminated or revised to only refer to 

the plan to return proceeds from the 

registered offering’’ because ‘‘SPACs 

often hold a modest amount of working 

capital outside of their trust accounts 

that they use to fund operating 

expenses.’’ 65 According to the 

commenter, ‘‘[i]f a shell company had 

such cash remaining at the point when 

the public shareholders exercise their 

redemption rights, it would be 

inappropriate to exclude such shell 

company from the [p]roposed [r]ules 


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66 Id. 

67Letter from ABA. 

68Letter from ABA. 

69Letter from Vinson & Elkins. 

70 Id. 

71 Id. 

72Proposing Release, supra note 7, at 29466 

(request for comment number 6) (‘‘For example, 

should we amend Form S–1, Form F–1, Form S– 

4, and/or Form F–4 to add to the registration 

statement cover page of these forms a check box for 

issuers to indicate whether they are special purpose 

acquisition companies?’’). 

73Letter from Vinson & Elkins. 

74 Item 1601(b) of Regulation S–K. 

75Letter from Vinson & Elkins. See supra note 63 

and accompanying text. 

76Letter from Vinson & Elkins. 

77See Rule 145a and definitions of ‘‘blank check 

company’’ in Securities Act Rule 405 and Exchange 

Act Rule 12b–2. 

78According to data provided by The Deal during 

the years when it tracked this data, the number of 

reverse mergers not involving SPACs was as follows 

by year: (a) 48 in 2017, (b) 48 in 2018, (c) 28 in 

2019, and (d) 17 in 2020. The Deal staff indicated 

to the Commission staff they stopped tracking the 

data after 2020 because of the small number of 

reverse mergers. 

79Letter from Vinson & Elkins. See supra note 63 

and accompanying text. 

80Letters from ABA, Vinson & Elkins. See supra 

notes 64, 65, and 66 and accompanying text. 

81See, e.g., letters from ABA (‘‘In addition, SPACs 

are permitted to withdraw interest to pay income 

and franchise taxes, and, upon liquidation, pay 

certain liquidation costs. . . .’’); Goodwin Procter 

LLP (June 14, 2022) (‘‘Goodwin’’) (‘‘SPACs are 

permitted to withdraw interest to pay income and 

franchise taxes and, upon liquidation, pay certain 

liquidation costs. . . .’’); White & Case LLP (June 

17, 2022) (‘‘White & Case’’) (‘‘In addition, SPACs are 

permitted to withdraw interest to pay income and 

franchise taxes, and, upon liquidation, pay certain 

liquidation costs, which would reduce overall 

returns.’’). 

82See NYSE Listed Company Manual Section 

102.06 and Nasdaq Listing Rule IM–5101–2 

(providing for the placement of concurrent offering 

proceeds in trust). 

based solely on retaining such cash.’’ 66

Another commenter recommended that 

we change this aspect of the definition 

to use the phrase ‘‘redeem the equity 

securities issued in the registered 

offering if the company does not 

complete a de-SPAC transaction within 

the specified time frame.’’ 67

One commenter recommended we 

narrow the definition of SPAC to only 

‘‘a blank check company as defined in 

§ 230.419(a)(2).’’ 68 Another commenter, 

who opposed defining ‘‘SPAC,’’ noted 

that the proposed definition ‘‘is not 

limited to companies listed on a 

national securities exchange’’ and 

‘‘would include shell companies traded 

in over-the-counter markets, which are 

not what would generally be considered 

to be ‘SPACs.’ ’’ 69 That commenter 

noted that a ‘‘logical distinction could 

be drawn based on exchange listing, 

rather than on whether the offering is by 

a blank check company and therefor 

subject to Rule 419.’’ 70 The same 

commenter recommended that, if we 

adopt a new definition, we clarify that 

a company ‘‘ceases to be a SPAC for 

purposes of the rules after 

consummation of a de-SPAC 

transaction.’’ 71

In response to requests for 

comment,72 one commenter said that ‘‘it 

is clear what entities are SPACs, 

without the need for additional boxes to 

check.’’ 73

6. Final Definition: ‘‘Special Purpose 

Acquisition Company (SPAC)’’ 

After considering the comments 

received, we are adopting the definition 

of special purpose acquisition company 

(or SPAC) as proposed, with certain 

modifications discussed below.74 Under 

the final rules, the term special purpose 

acquisition company (SPAC) means a 

company that has: (1) indicated that its 

business plan is to: (i) conduct a 

primary offering of securities that is not 

subject to the requirements of § 230.419 

(Rule 419 under the Securities Act); (ii) 

complete a business combination, such 

as a merger, consolidation, exchange of 

securities, acquisition of assets, 

reorganization, or similar transaction, 

with one or more target companies 

within a specified time frame; and (iii) 

return proceeds from the offering and 

any concurrent offering (if such offering 

or concurrent offering intends to raise 

proceeds) to its security holders if the 

company does not complete a business 

combination, such as a merger, 

consolidation, exchange of securities, 

acquisition of assets, reorganization, or 

similar transaction, with one or more 

target companies within the specified 

time frame; or (2) represented that it 

pursues or will pursue a special purpose 

acquisition company strategy. 

One commenter did not see a need for 

a new defined term ‘‘SPAC,’’ 75 because, 

in the commenter’s view, enhanced 

disclosures should apply to all shell 

companies (other than business 

combination shell companies) and not 

only to those companies defined as 

SPACs.76 Several of the rules being 

adopted in this release will enhance 

disclosures for investors in non-SPAC 

shell companies.77 However, the 

proposed individual disclosure items in 

the Item 1600 series of Regulation S–K 

were largely tailored to SPAC 

transactions. For the reasons we discuss 

in this release below in connection with 

the specific rules we are adopting, we 

believe it is appropriate at this time to 

apply enhanced disclosure in 

connection with companies meeting the 

definition of SPAC. However, we will 

continue to consider whether enhanced 

disclosure in other shell company 

transactions, such as reverse mergers 

with public shell companies, would be 

appropriate or necessary in the future.78

This commenter further observed 

there was circularity in the proposed 

definitions of ‘‘SPAC’’ and ‘‘de-SPAC 

transaction.’’ 79 We agree the final rules 

should eliminate this circularity. 

Although the commenter made the 

suggestion to revise the definition of 

‘‘de-SPAC transaction’’ rather than 

addressing the issue by revising the 

definition of ‘‘SPAC,’’ we believe it 

would be clearer to avoid circularity by 

revising the definition of ‘‘SPAC.’’ We 

have replaced the term ‘‘de-SPAC 

transaction’’ in the definition of ‘‘SPAC’’ 

with ‘‘business combination, such as a 

merger, consolidation, exchange of 

securities, acquisition of assets, 

reorganization, or similar transaction, 

with one or more target companies.’’ 

Several comments focused on the 

aspect of the proposed SPAC definition 

regarding the return of proceeds and 

suggested that special purpose 

acquisition companies may not return 

‘‘all remaining proceeds.’’ 80 We agree 

with commenters that the proposed 

term ‘‘return all remaining proceeds’’ 

could inappropriately exclude 

companies that take some portion of 

cash out of trust for anticipated 

expenses and therefore do not return 

‘‘all’’ proceeds at the time of 

redemption.81 To avoid excluding such 

companies, we have revised the 

definition to use the term ‘‘return 

proceeds’’ instead of ‘‘return all 

remaining proceeds.’’ We have also 

added a parenthetical reference ‘‘(if 

such offering or concurrent offering 

intends to raise proceeds)’’ that qualifies 

the term ‘‘offering and any concurrent 

offering’’ to account for the fact there 

may be some SPAC offerings that do not 

raise proceeds. 

We do not believe it is necessary to 

revise the definition to refer only to the 

plan to return proceeds from the 

primary offering, rather than the 

primary offering and any concurrent 

offering. We understand SPACs 

typically place proceeds of concurrent 

offerings in trust and return these 

proceeds if the SPAC does not complete 

a de-SPAC transaction within the 

specified time frame.82

We are not adopting the 

recommendation that we should replace 

the terms related to the return of 

proceeds with alternative terms related 

to the redemption of equity securities. 

We continue to believe, as the 

Commission indicated in the Proposing 

Release, that the definition should not 

include certain criteria, including the 

issuance of redeemable securities, that 


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83Proposing Release, supra note 7, at 29466. 

84Letter from ABA. 

85See supra notes 1 and 61 (discussion of 

Securities Act Rule 419). As discussed in section 

III.E infra, in the final rules, we are not amending 

the definition of ‘‘blank check company’’ in Rule 

419 as proposed but are adopting a definition of 

‘‘blank check company’’ in Securities Act Rule 405 

that is exclusively for purposes of the safe harbor 

created by the PSLRA for forward-looking 

statements. 

86Proposing Release, supra note 7, at 29465. 

87Letter from Vinson & Elkins. 

88See, e.g., Table 2 in section VIII (Economic 

Analysis) (statistics on over-the-counter SPACs for 

over a three-decade period). 

89Prior to exchange rule changes permitting 

listing, shells commonly referred to as SPACs were 

not exchange-listed. See Securities Exchange Act 

Release Nos. 58228 (July 25, 2008) [73 FR 44794 

(July 31, 2008)] (Order Granting Approval to 

Proposed Rule Change, as modified by Amendment 

No. 1, to Adopt Additional Initial Listing Standards 

to list Securities of Special Purpose Acquisition 

Companies) (NASDAQ–2008–013); 57785 (May 6, 

2008) [73 FR 27597 (May 13, 2008)] (Order 

Approving Proposed Rule Change to Adopt New 

Initial and Continued Listing Standards to List 

Securities of Special Purpose Acquisition 

Companies) (SR–NYSE–2008–17). According to 

data from SPACInsider, in the years 2020 through 

2022, there were zero SPAC IPOs in the over-thecounter market (i.e., that were not listed on an 

exchange in connection with the IPO). 

90As a result of this change, the three prongs 

contained in the proposed definition (that had 

paragraph numbers (1), (2), and (3)) will be 

renumbered as paragraphs (1)(i), (ii), and (iii) and 

the clause regarding pursuit of a SPAC strategy will 

be numbered as paragraph (2). We have also added 

a parenthetical reference to the acronym ‘‘(SPAC)’’ 

in the body of the definition in the final rule as well 

as in the name of the defined term ‘‘special purpose 

acquisition company (SPAC)’’ to add incremental 

clarity that the acronym also refers to the defined 

term. 

91Proposing Release, supra note 7, at 29466 

(request for comment number 1). 

92Proposing Release, supra note 7, at 29490 

(request for comment number 102). 

93Proposing Release, supra note 7, at 29465. 

94Letter from Vinson & Elkins. 

95See also section III.C (discussing co-registration 

on Forms S–4 and F–4 and the requirement to 

identify the target company as a registrant on the 

registration statement cover page). 

could result in an overly narrow 

definition by including transactional 

terms that have not applied to every 

SPAC offering in the past or that could 

change as the SPAC market continues to 

evolve.83

One commenter recommended we 

narrow the definition of SPAC to only 

‘‘a blank check company as defined in 

§ 230.419(a)(2).’’ 84 The Rule 419 

definition of ‘‘blank check company’’ 

includes a requirement that the 

company is issuing penny stock.85 The 

proposed definition of SPAC reflects the 

fact that special purpose acquisition 

company structures often are designed 

to avoid issuing penny stock but 

continue to pose disclosure and other 

investor protection concerns.86 Special 

purpose acquisition companies 

frequently do not issue penny stock and, 

therefore, would not meet the definition 

in § 230.419(a)(2). Thus, the inclusion of 

the suggested criterion would 

inappropriately exclude many or all 

special purpose acquisition companies 

from the SPAC definition. 

Another commenter indicated the 

SPAC definition should draw a 

distinction based on exchange listing, 

which would exclude shell companies 

traded in over-the-counter markets. In 

the commenter’s view, shell companies 

traded in over-the-counter markets are 

not generally considered to be SPACs.87

While companies commonly considered 

to be SPACs often list on a national 

securities exchange, we do not believe 

the SPAC definition should be limited 

to such listed entities. While carving out 

companies traded over-the-counter 

might leave out only a few (or zero) 

companies today, prevailing structures 

may further evolve over time just as 

they have evolved over time in the 

past,88 and we believe investors in those 

over-the-counter companies engaged in 

the same kinds of business as exchangetraded companies should have the same 

investor protections provided by the 

rules we are adopting.89

Furthermore, we are adding a new 

clause to the definition that provides 

that the term special purpose 

acquisition company also includes a 

company that has represented it pursues 

or will pursue a special purpose 

acquisition company strategy.90 In the 

Proposing Release, the Commission 

asked if the proposed definition 

provides a workable approach to 

determining which issuers would be 

subject to the requirements of proposed 

subpart 1600.91 In addition, the 

Commission asked whether there were 

any potential opportunities for 

regulatory arbitrage in shell company or 

SPAC transactions that the Commission 

should consider addressing.92 After 

further consideration of these regulatory 

arbitrage concerns, we have revised the 

final rule to include new paragraph 

(b)(2) to Item 1601 concerning pursuit of 

a special purpose acquisition company 

strategy. Variations on common SPAC 

structures could cause some companies 

to fall technically outside one of the 

three prongs of paragraph (1) of the final 

SPAC definition. When companies 

make representations they pursue or 

will pursue a special purpose 

acquisition company strategy, they may 

be indistinguishable to investors from 

companies that meet the other 

components of the definition. As a 

result, we believe investors in such 

companies should benefit from the 

enhanced disclosures applicable to 

SPACs. Therefore, even where a 

company technically does not meet one 

of the three prongs in paragraph (1) of 

the final definition of SPAC, if it 

represents, directly or indirectly, that it 

pursues or will pursue a SPAC strategy, 

then pursuant to paragraph (2) of the 

final definition of SPAC, the company 

would meet the definition of a SPAC. 

Similarly, to avoid the risk that 

certain varieties of SPACs may fall 

outside the definition because of minor 

technical distinctions from the prongs of 

the definition, we have changed the 

proposed term ‘‘register a primary 

offering’’ to ‘‘conduct a primary 

offering’’ to account for evolving SPAC 

structures that may not conduct a 

registered offering. We do not believe it 

would be appropriate for companies in 

de-SPAC transactions to avoid the 

disclosure (or any other) requirements 

of these final rules only because the 

initial SPAC transaction was not 

registered. As noted in the Proposing 

Release,93 we intend this definition to 

be sufficiently broad to take into 

account potential variations in the 

SPAC structure and the possibility that 

SPACs may continue to evolve. This 

adjustment to the definition will ensure 

that appropriate disclosures are 

provided at the de-SPAC stage 

regardless of the structure of the initial 

SPAC transaction. In the final 

definition, we have also made a 

corresponding revision to change the 

proposed term ‘‘registered offering’’ to 

‘‘offering.’’ 

One commenter recommended we 

clarify that a company ceases to be a 

SPAC upon consummation of a deSPAC transaction.94 For the avoidance 

of doubt, we are providing guidance 

that, if a company that meets the SPAC 

definition has completed a de-SPAC 

transaction or, in the case of one or 

more target companies, 

contemporaneous de-SPAC transactions, 

then the company no longer meets the 

definition of a SPAC and that such 

companies are not required to comply 

with the enhanced disclosures under 

Regulation S–K applicable to SPACs in 

registration statements they file in later 

periods after the completion of such deSPAC transactions. 

We are not requiring a check box on 

form cover pages indicating SPAC status 

as the enhanced disclosure provided by 

registrants pursuant to the Item 1600 

series of Regulation S–K will make clear 

the registrant is a SPAC.95

7. Proposed Definition: ‘‘SPAC 

Sponsor’’ 

The Commission proposed to define 

the term ‘‘SPAC sponsor’’ as the entity 

and/or person(s) primarily responsible 


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96Proposed Item 1601(c). 

97Letter from Vinson & Elkins. 

98Letter from ABA. 

99Letter from ABA. 

100 Item 1601(c) of Regulation S–K. 

101See, e.g., Item 1603 (regarding SPAC 

sponsors). 102See Proposing Release, supra note 7, at 29466, 

n.58 (‘‘In regard to natural persons, we are 

proposing to exclude from the scope of the 

definition of ‘SPAC sponsor’ the activities 

performed by natural persons in their capacities as 

directors and/or officers of the SPAC to avoid 

overlap with existing disclosure requirements 

relating to directors and officers.’’). 

103See, e.g., DGCL Section 141(a) (‘‘The business 

and affairs of every corporation organized under 

this chapter shall be managed by or under the 

direction of a board of directors, except as may be 

otherwise provided in this chapter or in its 

certificate of incorporation.’’). 

104Letter from ABA. See supra note 98 and 

accompanying text. 

105 Id. 

106Letter from ABA. See supra note 98 and 

accompanying text. 

for organizing, directing or managing 

the business and affairs of a SPAC, other 

than in their capacities as directors or 

officers of the SPAC as applicable.96

8. Comments: Definition of ‘‘SPAC 

Sponsor’’ 

One commenter said the proposal 

‘‘should be revised to eliminate the need 

for a defined term ‘SPAC sponsor’ ’’ and, 

‘‘[i]nstead, the rules should require 

disclosure regarding the SPAC’s 

directors, officers and affiliates.’’ 97 This 

commenter also said ‘‘the definition’s 

exclusion of directors and officers in 

their capacities as such would result in 

there being no ‘sponsor’ for many 

SPACs.’’ This commenter also said the 

proposal ‘‘blur[red] the lines between 

the roles and responsibilities of the 

SPAC sponsor and that of the SPAC 

board and officers.’’ 

Another commenter recommended an 

alternative definition of ‘‘SPAC 

sponsor’’: ‘‘the entity and/or person(s) 

that (1) own all or a portion of the 

privately placed common equity 

securities of the special purpose 

acquisition company and (2) are 

primarily responsible for directing and 

managing the business and affairs of a 

special purpose acquisition company 

other than in their capacities as (i) 

directors or officers of the special 

purpose acquisition company or (ii) 

third-party service providers to the 

special purpose acquisition company, as 

applicable.’’ 98 The commenter said that 

‘‘the ‘SPAC sponsor’ should be the 

entity or persons who have both 

ownership of [s]ponsor shares and 

responsibility for directing and 

managing the SPAC.’’ The commenter 

said that their suggested definition will 

‘‘identify the entity or persons that are 

currently identified as [s]ponsors in 

registration statements for the SPAC.’’ 99

9. Final Definition: ‘‘SPAC Sponsor’’ 

After considering the comments 

received, we are adopting the definition 

of SPAC sponsor as proposed with 

certain modifications discussed 

below.100 Under the final rules, the term 

SPAC sponsor means any entity and/or 

person primarily responsible for 

organizing, directing, or managing the 

business and affairs of a special purpose 

acquisition company, excluding, if an 

entity is a SPAC sponsor, officers and 

directors of the special purpose 

acquisition company who are not 

affiliates of any such entity that is a 

SPAC sponsor. 

The definition is designed to be 

sufficiently broad that appropriate 

entities or persons will be subject to the 

enhanced disclosure requirements 

applicable to SPAC sponsors.101

Although a sponsor of a SPAC may 

perform a variety of functions within 

the SPAC’s structure, we intend for the 

SPAC sponsor definition to encompass 

activities that, based on the staff’s 

experience reviewing SPAC filings and 

public commentary, are commonly 

understood to be sponsors of SPACs or 

with persons referred to as sponsors in 

current registration statements. 

We do not believe it would provide 

investors with adequate information to 

tie the SPAC sponsor definition to 

persons with particular titles, because 

the definition and corresponding 

disclosure requirements are intended to 

capture all parties who perform certain 

activities that result in such parties 

having key substantive influence over 

the SPAC. The suggestion to replace 

‘‘SPAC sponsor’’ with ‘‘directors, 

officers, and affiliates of the SPAC’’ 

would require disclosure from directors 

and officers not commonly considered 

to be sponsors today and, as indicated 

by the Commission in the Proposing 

Release, would overlap unnecessarily 

with current required disclosure 

concerning directors and officers.102

Also, ‘‘directors, officers, and affiliates 

of the SPAC’’ may not include external 

management companies and their 

principals that should be included in 

the definition on the basis of their 

activities. While State law may provide 

that directors manage the business and 

affairs of a corporation and may not 

provide that any one director has any 

more authority than any other 

director,103 the phrase ‘‘primarily 

responsible’’ in the definition of SPAC 

sponsor is not limited to solely directors 

or solely directors and officers. Other 

persons, such as third-party 

management companies and their 

affiliates, frequently are primarily 

responsible for the organization, 

direction, or management of the 

business and affairs of SPACs today and 

would be SPAC sponsors under the 

definition we are adopting. 

One commenter recommended an 

alternative definition of SPAC sponsor 

that featured, among other things, carveouts from that alternative definition for 

directors and officers of the SPAC and 

for third-party service providers.104 This 

commenter also suggested that the 

proposed definition’s exclusion of 

directors and officers in their capacities 

as such would result in a null set of 

SPAC sponsors.105 Having considered 

this comment, we have made changes to 

the final definition. We are not adopting 

the proposed term ‘‘other than in their 

capacities as directors or officers,’’ 

because it could be unclear under the 

proposed definition whether any action 

taken on behalf of the SPAC by a 

director or officer of a SPAC is ‘‘other 

than in that person’s capacity as an 

officer or director.’’ As the commenter 

noted, this could result in no such 

persons being considered SPAC 

sponsors. To address such potential 

ambiguities, in the final rule, we have 

changed the term ‘‘other than in their 

capacities as directors or officers of the 

special purpose acquisition company as 

applicable’’ to ‘‘excluding, if an entity is 

a SPAC sponsor, officers and directors 

of the special purpose acquisition 

company who are not affiliates of any 

such entity that is a SPAC sponsor.’’ 

Based on the staff’s experience, we 

understand that a SPAC sponsor entity 

is typically involved in the SPAC. 

However, if the SPAC sponsor is not an 

entity, then we want to make sure the 

appropriate persons are captured within 

the SPAC sponsor definition. An officer 

or director of the SPAC that is an 

affiliate of an entity that is a SPAC 

sponsor would also be a SPAC sponsor 

under the final definition. For example, 

in the case of a hypothetical SPAC 

where a third-party management 

company is a SPAC sponsor and a 

person is a director of both the SPAC 

and this third-party management 

company, then this person would also 

be a SPAC sponsor. 

We are not adopting the suggestion to 

exclude ‘‘third-party service providers’’ 

from the definition of SPAC sponsor.106

As discussed above, some third-party 

service providers will be ‘‘SPAC 

sponsors’’ under the definition where 

they are ‘‘primarily responsible for 

organizing, directing, or managing the 

business and affairs’’ of the SPAC. Other 


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107 Item 1601(c). 108Proposed Item 1601(d). 109Letter from Vinson & Elkins. 110Letter from Freshfields (‘‘We believe there are 

circumstances where a SPAC may acquire some 

assets (such as cash) but would not yet have 

completed its acquisition of a target company.’’). 111 Item 1601(d) of Regulation S–K. 112Letters from Freshfields, Vinson & Elkins. See 

supra notes 65 and 66 and accompanying text. 

113See infra section III.C. 

114The term ‘‘promoter’’ is defined in Securities 

Act Rule 405 and Exchange Act Rule 12b–2. 

115See (a) proposed General Instruction VIII to 

Form S–1, (b) proposed General Instruction I.1 to 

Form S–4, (c) proposed General Instruction VII to 

Form F–1, (d) proposed General Instruction I.1 to 

Form F–4. (e) proposed Item 14(f)(1) of Schedule 

14A, and (f) proposed General Instruction K to 

Schedule TO. 

116 In the Proposing Release, the Commission 

stated that this would include, for example, fees 

and reimbursements in connection with lease, 

consulting, support services, and management 

agreements with entities affiliated with the sponsor, 

as well as reimbursements for out-of-pocket 

expenses incurred in performing due diligence or 

in identifying potential business combination 

candidates. Proposing Release, supra note 7, at 

29467, n.64. 

117Letters from ABA; Stephen W. Hall, Legal 

Director and Securities Specialist, and Scott Farnin, 

Legal Counsel, Better Markets (June 13, 2022) 

(‘‘Better Markets); Michael Ryan, Chief Executive 

Officer, Bullet Point Network, LP (June 13, 2022) 

(‘‘Bullet Point Network’’); Charles Pieper (May 13, 

2022) (‘‘Charles Pieper’’); John L. Thornton, CoChair, Hal S. Scott, President, and R. Glenn 

Hubbard, Committee on Capital Markets Regulation 

(June 13, 2022) (‘‘Committee on Capital Markets 

Regulation’’); Paul Andrews, Managing Director, 

Research, Advocacy and Standards, CFA Institute 

(May 31, 2022) (‘‘CFA Institute’’); Glenn Davis, 

Deputy Director, Council of Institutional Investors 

(June 9, 2022) (‘‘CII’’); Dylan Bruce, Financial 

Services Counsel, Consumer Federation of America 

(June 13, 2022) (‘‘Consumer Federation’’); Elizabeth 

Warren, United States Senator (July 8, 2022) 

(‘‘Senator Elizabeth Warren’’); Kerrie Waring, Chief 

Executive Officer, International Corporate 

Governance Network (June 13, 2022) (‘‘ICGN’’); 

Melanie Senter Lubin, President, North American 

Securities Administrators Association, Inc. (June 

13, 2022) (‘‘NASAA’’); Paul A. Swegle, Kinsel Law 

Offices (Apr. 9, 2022) (‘‘Paul Swegle’’). 

118Letter from Committee on Capital Markets 

Regulation. 

119Letter from CII. 

120Letter from Consumer Federation. 

third-party service providers, however, 

will not fall within the definition of 

SPAC sponsor where they are not 

‘‘primarily responsible’’ for organizing, 

directing, or managing the business and 

affairs of a SPAC. For example, external 

legal counsel that only assists in the 

formation of a SPAC by drafting its 

certificate of incorporation and bylaws 

on behalf of a client would not be 

‘‘primarily responsible’’ for ‘‘organizing 

. . . the business and affairs of a 

SPAC.’’ 107 Other third-party service 

providers may perform similar 

administrative or ministerial activities 

for a SPAC or provide outside legal or 

accounting advice neither of which 

would cause them to be ‘‘primarily 

responsible’’ for organizing, directing, or 

managing the business and affairs of the 

SPAC and thus they would not be SPAC 

sponsors. 

10. Proposed Definition: ‘‘Target 

Company’’ 

The Commission proposed to define 

the term ‘‘target company’’ as an 

operating company, business, or 

assets.108

11. Comments: Definition of ‘‘Target 

Company’’ 

One commenter asserted that ‘‘the 

concept of ‘assets’ being a ‘target 

company’ yields anomalous results 

under certain proposed rules (such as 

requiring assets to sign a registration 

statement) and the concept of a 

‘business’ may be vague (as a business 

may be a product line, rather than an 

entity that could sign a registration 

statement).’’ 109 Another commenter 

suggested ‘‘deleting the term ‘assets’ 

from the definition or clarifying that a 

target company includes assets where 

the acquisition of such assets is 

intended to constitute the SPAC’s initial 

business combination.’’ 110

12. Final Definition: ‘‘Target Company’’ 

After considering the comments 

received, we are adopting the definition 

of target company as proposed.111

Under the final rules, the term target 

company means an operating company, 

business or assets. 

To address commenters’ concerns 

about the use of the terms ‘‘assets’’ and 

‘‘business’’ in the definition of target 

company,112 we have revised certain 

registration statement form instructions, 

as discussed in more detail below.113

We believe these changes address the 

commenters’ concerns. Therefore, we do 

not believe it is necessary to make 

changes to the proposed definition of 

‘‘target company.’’ In addition, although 

an asset purchase transaction may be a 

different form of transaction for the 

purposes of other legal requirements, 

including State law, we do not believe 

a SPAC combination with a target 

company taking the form of an asset 

purchase should be excluded from the 

definition of de-SPAC transaction 

merely for this reason. 

B. Sponsors 

1. Proposed Rules 

The Commission proposed Item 

1603(a) to require additional disclosure 

about the SPAC sponsor, its affiliates, 

and promoters 114 in registration 

statements and schedules filed in 

connection with SPAC registered 

offerings and de-SPAC transactions,115

including disclosure of the following: 

• The experience, material roles, and 

responsibilities of these parties, as well 

as any agreement, arrangement, or 

understanding (1) between the SPAC 

sponsor and the SPAC, its executive 

officers, directors, or affiliates, with 

respect to determining whether to 

proceed with a de-SPAC transaction and 

(2) between the SPAC sponsor and 

unaffiliated security holders of the 

SPAC regarding the redemption of 

outstanding securities; 

• The controlling persons of the 

SPAC sponsor and any persons who 

have direct and indirect material 

interests in the SPAC sponsor and the 

nature and amount of their interests, as 

well as an organizational chart that 

shows the relationship between the 

SPAC, the SPAC sponsor, and the SPAC 

sponsor’s affiliates; 

• Tabular disclosure of the material 

terms of any lock-up agreements with 

the SPAC sponsor and its affiliates; and 

• The nature and amounts of all 

compensation that has or will be 

awarded to, earned by, or paid to the 

SPAC sponsor, its affiliates, and any 

promoters for all services rendered in all 

capacities to the SPAC and its affiliates, 

as well as the nature and amounts of 

any reimbursements to be paid to the 

SPAC sponsor, its affiliates, and any 

promoters upon the completion of a deSPAC transaction.116

2. Comments 

Broadly categorized, commenters on 

proposed Item 1603(a) or generally on 

the types of SPAC sponsor issues 

covered by proposed Item 1603(a) 

focused on six areas: (1) general 

comments that expressed support for 

the proposals, (2) promoter 

requirements, (3) compensation, (4) 

transfers of SPAC ownership, (5) 

interests in the SPAC sponsor and the 

organizational chart requirement, and 

(6) agreements. 

i. General Comments 

A number of commenters generally 

supported the proposed enhanced 

disclosure requirements regarding SPAC 

sponsors.117 Commenters cited a 

number of benefits to investors as the 

reasons for their support, including the 

following five benefits: (a) placing 

investors in a better position to evaluate 

the merits of SPAC and de-SPAC 

transactions,118 (b) illuminating 

financial incentives of SPAC sponsors 

that may affect de-SPAC transaction 

outcomes,119 (c) providing 

compensation information that may 

promote more informed investment 

decisions,120 (d) providing SPAC 


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121Letter from ICGN. 

122Letters from ICGN, NASAA. 

123Letters from ABA, NASAA, Vinson & Elkins. 

124Letters from Freshfields, Vinson & Elkins. 

125Letter from Freshfields (stating that ‘‘the 

proposed rules also already require disclosure of all 

persons who have direct and indirect material 

interests in the SPAC sponsor and the amount and 

nature of their interests’’ and that ‘‘this should 

encompass the most relevant entities and persons’’). 

126Letter from Vinson & Elkins. 

127Letters from Better Markets, Charles Pieper, 

Committee on Capital Markets Regulation, CFA 

Institute, Consumer Federation, Senator Elizabeth 

Warren, ICGN, NASAA. 

128Letters from Samir Kapadia, Director, and 

Bobby Cunningham, Director, SPAC Association 

(June 13, 2022) (‘‘SPAC Association’’); Vinson & 

Elkins (expressing the view that sponsor 

compensation and reimbursement is already 

disclosed under existing disclosure requirements 

and the material terms of lock-up agreements are 

already sufficiently disclosed as a matter of 

industry practice). 

129Letter from SPAC Association. We understand 

that the term SPAC sponsor ‘‘promote’’ typically 

refers to the acquisition by the SPAC sponsor of a 

significant percentage of the shares of the SPAC, 

typically 20%. We observe the term used to connote 

a meaning of ‘‘special compensation,’’ but it does 

not involve a preferred return, such as in real estate 

private equity investment structures that also use 

this terminology. 

130Letter from Vinson & Elkins. 

131Letter from Vinson & Elkins. 

132Letter from Loeb & Loeb LLP (June 13, 2022) 

(‘‘Loeb & Loeb’’). 

133Letter from ABA. 

134Proposing Release, supra note 7, at 29467 

(request for comment number 9) (‘‘Should we 

require more or less information about the sponsor’s 

compensation and reimbursements?’’). 

135Letter from Michael Klausner, Stanford Law 

School, and Michael Ohlrogge, NYU School of Law 

(June 13, 2022) (‘‘Michael Klausner and Michael 

Ohlrogge’’), included as an attachment to a letter 

from Michael Ohlrogge, NYU School of Law (June 

13, 2022). 

136 Id. 

137Letter from Paul Swegle. 

138Letter from NASAA. 

139Letter from ABA. 

140Letter from Vinson & Elkins. 

sponsor ownership interest information 

that may affect investor ability to vote 

on de-SPAC transactions,121 and (e) 

providing information about SPAC 

sponsor experience that may help 

investors assess the SPAC sponsor’s 

ability to find a target company.122

Also, several commenters suggested 

that proposed Item 1603(a) would 

codify, to an extent, existing disclosure 

practices.123

ii. Promoters 

Some commenters said Item 1603 

should not apply to ‘‘promoters.’’ 124

One commenter asserted that 

application to the SPAC sponsor and its 

affiliates would include all significant 

participants in the SPAC and thus the 

‘‘promoter’’ provision would not 

significantly benefit investors.125

Another commenter said that 

‘‘disclosure regarding a promoter of the 

SPAC’s initial public offering that will 

have no involvement with the de-SPAC 

transaction would be immaterial to 

investors.’’ 126

iii. Compensation 

A number of commenters suggested 

that the proposed disclosure 

requirements regarding sponsor 

compensation would provide useful 

information to investors.127 A few 

commenters expressed the view that 

sponsor compensation is already 

sufficiently disclosed.128

One commenter said the SPAC 

sponsor ‘‘20 percent promote is fully 

and fairly disclosed and has been for 

decades.’’ 129 Another commenter said 

they ‘‘believe the sponsor’s 

compensation and reimbursement are 

already sufficiently disclosed in 

response to existing disclosure 

requirements and that incremental 

disclosure requirements are thus not 

merited.’’ 130

One commenter that did not support 

the additional proposed disclosure 

requirements stated that, if the 

Commission were nonetheless to 

impose new requirements, ‘‘the 

reference to ‘compensation’ should be 

revised to refer instead to all equity and 

rights to cash held by the SPAC 

directors and officers and their affiliates, 

as certain equity interests may be 

purchased for value (i.e., not be 

‘compensation’) and reimbursement of 

advances or repayment of loans would 

not be compensation.’’ 131 Another 

commenter said ‘‘sponsor compensation 

comes almost entirely in the form of 

capital gains associated with securities 

issued in the ‘promote’ resulting from 

stock price increases after the de-SPAC 

transaction, and quantifying such 

compensation may involve speculation 

or be subject to criticism as 

incomplete.’’ 132

Another commenter said that, ‘‘in 

addressing non-equity compensation 

and reimbursements, proposed Item 

1603(a)(6) should explain its 

requirement to identify other 

compensation and reimbursements that 

are material, individually or in the 

aggregate and that the required 

disclosure may be qualitative and not 

quantitative, except where amounts are 

above a specified de minimis threshold, 

similar to the approach taken in certain 

respects under the existing 

compensation disclosure framework in 

Item 402 of Regulation S–K [17 CFR 

229.402].’’ 133

iv. Transfer of SPAC Ownership 

Several commenters recommended 

we adopt requirements to disclose 

transfers of SPAC securities by the 

SPAC sponsor and others. One 

commenter recommended, in response 

to request for comment,134 adding a 

sentence at the end of Item 1603(a)(6) 

that states: ‘‘Disclose any arrangements 

under which the SPAC sponsor, its 

affiliates and any promoters have 

transferred ownership of any securities 

in the SPAC to other parties in exchange 

for compensation or other benefit to the 

sponsor, its affiliates, any promoters, or 

to the SPAC.’’ 135 The commenter said 

that ‘‘SPAC sponsors at times sell off a 

portion of their promote or other 

securities to a ‘risk-capital syndicate’ as 

a way of cashing out early on a portion 

of the compensation they receive for 

their work on the SPAC’’ and that ‘‘the 

amount of interest that a sponsor retains 

in securities of the SPAC is material for 

investors seeking to evaluate the 

incentive of the sponsor in pursuing a 

SPAC merger.’’ 136 Another commenter 

suggested expanding current Forms 3 

and 4 director and officer reporting 

requirements to cover SPAC sponsors 

and their transactions in SPAC 

securities after the de-SPAC 

transaction.137 Similarly, another 

commenter recommended disclosure of 

post-de-SPAC transaction transfers, 

noting ‘‘this reporting could be time 

limited, for example to two years’’ 

following the de-SPAC transaction.138

v. Interest in SPAC Sponsor and 

Organizational Chart 

One commenter said that the 

proposed approach departs from the 

traditional approach to beneficial 

ownership reporting and recommended 

that this item should clarify that ‘‘an 

indirect economic interest in less than 

10% of a SPAC’s founder shares or 

warrants through ownership of equity 

interests in a [SPAC] [s]ponsor should 

not, in and of itself and absent other 

factors, be considered a direct or 

indirect material interest in the [SPAC] 

[s]ponsor.’’ 139 Another commenter said 

the identity of natural persons 

controlling the sponsor is already 

disclosed in response to existing 17 CFR 

229.403 (‘‘Item 403’’ of Regulation S– 

K).140

vi. Agreements 

One commenter recommended that 

the Commission should revise proposed 

Item 1603(a)(8) to ‘‘specify that if a 

SPAC, the SPAC sponsor, or any 

affiliated party enters into an agreement 

regarding the redemption of outstanding 

securities of the SPAC after the date of 

the merger registration statement or 

proxy, that the SPAC be required to 

issue a proxy amendment or similar 


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141Letter from Michael Klausner and Michael 

Ohlrogge. 

142Letter from Vinson & Elkins. 

143Letter from Freshfields (‘‘Exceptions to 

lockups that are customary and not significant or 

material [include]: transfers to affiliates, transfers to 

family members, gifts and other charitable 

donations, transfers by will or inheritance, transfers 

upon dissolution of a marriage, and in-kind 

distributions to an entity’s members and partners’’). 

144Letter from Freshfields. 

145 Item 1603(a) will operate in addition to 

existing disclosure requirements that may be 

applicable to a SPAC’s arrangements with SPAC 

sponsors such as 17 CFR 229.701 (‘‘Item 701’’ of 

Regulation S–K), which requires disclosure about, 

among other things, the terms of any private 

securities transactions between a SPAC and SPAC 

sponsors within the past three years, and 17 CFR 

229.404 (‘‘Item 404’’ of Regulation S–K), which 

requires disclosure about certain related party 

transactions. 

146See, e.g., Chen Lin, Fangzhou Lu, Roni 

Michaely & Shihua Qin, SPAC IPOs and Sponsor 

Network Centrality (SSRN Working Paper, 2021); 

Andrea Pawliczek, A. Nicole Skinner, and Sarah 

L.C. Zechman, Signing Blank Checks: The Roles of 

Reputation and Disclosure in the Face of Limited 

Information (SSRN Working Paper, 2021). 

147Letters from ABA, NASAA, Vinson & Elkins. 

148The proposal’s disclosure requirements related 

to ‘‘promoters’’ included the following proposed 

items: (1) Item 1603(a)(3) (promoter’s experience), 

(2) Item 1603(a)(4) (promoter’s role), (3) 17 CFR 

229.1602(b)(6) (‘‘Item 1602(b)(6)’’) and Items 

1603(a)(6), and 1604(a)(3) (promoter’s 

compensation), and (4) Items 1602(a)(5), 1602(b)(7), 

1603(b)(1), 1604(a)(4), and 1604(b)(3) (promoter 

conflicts of interest). 

149Letters from Freshfields, Vinson & Elkins. See 

supra notes 124, 125, and 126 and accompanying 

text. 

150Securities Act Rule 405 provides: The term 

promoter includes: (i) Any person who, acting alone 

or in conjunction with one or more other persons, 

directly or indirectly takes initiative in founding 

and organizing the business or enterprise of an 

issuer; or (ii) Any person who, in connection with 

the founding and organizing of the business or 

enterprise of an issuer, directly or indirectly 

receives in consideration of services or property, or 

both services and property, 10 percent or more of 

any class of securities of the issuer or 10 percent 

or more of the proceeds from the sale of any class 

of such securities. However, a person who receives 

such securities or proceeds either solely as 

underwriting commissions or solely in 

consideration of property shall not be deemed a 

promoter within the meaning of this paragraph if 

such person does not otherwise take part in 

founding and organizing the enterprise. Exchange 

Act Rule 12b–2 contains similar provisions. 

151 Item 1603 also applies to disclosure in deSPAC transactions. See, e.g., instructions to Form 

S–4 and F–4. 

152See Items 1602(a)(3) (adding term ‘‘promoter’’ 

in cover page requirements to be consistent with 

Item 1602(b)(6) prospectus summary requirements) 

and (b)(6), 1603(a)(6), and 1604(a)(3), (b)(4) (adding 

the term ‘‘promoter’’ to summary prospectus 

requirements to be consistent with cover page 

requirements in Item 1604(a)(3)), and (c)(1) (adding 

the terms ‘‘its affiliates, and promoters’’ to 

prospectus body requirements to be consistent with 

cover page and summary requirements in Item 

1604(a)(3) and (b)(4)). 

filing prior to the redemption deadline 

to inform SPAC shareholders of the new 

agreement.’’ 141

Another commenter said the material 

terms of lock-up agreements are already 

disclosed as a matter of industry 

practice and that requiring additional 

disclosure would ‘‘go beyond the 

disclosure requirements applicable to 

lock-up agreements that are entered into 

in connection with a traditional 

IPO.’’ 142 Regarding proposed 

requirements to disclose any exceptions 

to relevant lock-up agreements, one 

commenter recommended excluding 

exceptions that are not material or are 

customary.143 This commenter noted 

that frequently these exceptions provide 

that the transferee agree to the lock-up 

agreement as a condition of the 

transfer.144

3. Final Rules 

After considering the comments 

received, we are adopting Item 1603(a) 

as proposed with certain modifications 

we discuss below. Additionally, for 

clarity and consistency throughout Item 

1603, we have replaced the term 

‘‘executive officers’’ with the term 

‘‘officers.’’ 

i. General Discussion 

Item 1603(a)’s disclosure 

requirements will provide a SPAC’s 

prospective investors and existing 

shareholders with detailed information 

relating to the SPAC sponsor that could 

be important in understanding and 

analyzing a SPAC, including how the 

rights and interests of the SPAC 

sponsor, its affiliates, and any promoters 

may differ from, or may conflict with, 

those of public shareholders.145 Given 

that a SPAC does not conduct an 

operating business, information about 

the background and experience of the 

SPAC sponsor is important in assessing 

a SPAC’s prospects for success and may 

be a relevant factor in the market value 

of a SPAC’s securities.146 Corresponding 

disclosure with respect to SPAC sponsor 

affiliates and promoters will also 

provide investors with important 

information, because the SPAC 

sponsor’s affiliates and any promoters of 

the SPAC may also carry out activities 

similar to those of a SPAC sponsor. 

Furthermore, the enhanced disclosure 

regarding the SPAC sponsor’s 

compensation and the SPAC sponsor’s 

agreements, arrangements, or 

understandings may be helpful to a 

SPAC’s prospective investors and 

existing shareholders in considering 

whether to acquire or redeem the 

SPAC’s securities and in evaluating the 

potential risks and merits of a proposed 

de-SPAC transaction, because it could 

highlight additional motivations for 

completing a de-SPAC transaction. 

Several commenters suggested that 

proposed Item 1603(a) would codify, to 

an extent, existing disclosure 

practices.147 We agree that the 

requirements in Item 1603 to provide 

detailed disclosure about the SPAC 

sponsor, the SPAC sponsor’s 

experience, and its rights and interests 

will codify existing disclosure practices. 

This will help ensure that issuers 

provide consistent and comprehensive 

information across transactions, so that 

investors can make more informed 

investment and voting decisions. 

i. Promoters 

We are retaining the applicability of 

Item 1603 to promoters.148 We disagree 

with the commenters who asserted that 

Item 1603 should not apply to 

‘‘promoters’’ and that the disclosure 

regarding a promoter would not 

significantly benefit investors or would 

be immaterial to investors.149 Certain 

persons are explicitly included as a 

‘‘promoter’’ under Securities Act Rule 

405 and Exchange Act Rule 12b–2.150

There may be facts and circumstances 

involving a SPAC where a person may 

be considered either a ‘‘promoter,’’ 

‘‘SPAC sponsor,’’ ‘‘officer,’’ or 

‘‘director’’ or may be more than one of 

these. As with a SPAC sponsor, the 

promoter’s background and experience, 

compensation, and conflicts of interest 

are material information for investors in 

the SPAC IPO (particularly given the 

absence of an operating business) and 

any de-SPAC transaction. Such 

information will enable investors to 

better understand promoter incentives 

and activities.151 A registrant is not 

required to repeat the same disclosure 

twice merely because a person fits in 

two categories (for example, both a 

‘‘promoter’’ and a ‘‘SPAC sponsor’’). 

Additionally, in the final rules, we 

have made technical changes to ensure 

consistent reference to ‘‘SPAC sponsor, 

its affiliates, and promoters’’ among 

disclosure requirements relating to the 

cover page, summary, and body sections 

of the prospectus.152

ii. Compensation 

We are adopting the SPAC sponsor 

compensation disclosure largely as 

proposed with certain modifications in 

response to comments. We disagree 

with the commenter who suggested 

that—because sponsor compensation 

and reimbursement are already 

disclosed under existing disclosure 

requirements and current market 

practice provides for similar disclosure 

as to the material terms of lock-up 

agreements—the proposed additional 

disclosure requirements should not be 


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153Letter from Vinson & Elkins. See also letter 

from SPAC Association (asserting that ‘‘the SPAC 

20% promote is fully and fairly disclosed and has 

been for decades’’). See supra notes 128, 129, and 

130 and accompanying text. 

154Letters from Loeb & Loeb, Vinson & Elkins. 

See supra notes 131 and 132 and accompanying 

text. 

155See Items 1602(a)(3) and (b)(6), 1603(a)(6), and 

1604(a)(3), (b)(4), and (c)(1). For the avoidance of 

doubt, in Items 1602(a)(3) and (b)(6), 1603(a)(6), and 

1604(a)(3), disclosure should be provided with 

respect to each person who is one of the types of 

named persons in those items; registrants may 

provide totals of those individual disclosures but 

the disclosure of a single lump sum covering all 

types of persons named in those items would be 

insufficient by itself. 

156See, e.g., Clifford Chance, Guide to Special 

Purpose Acquisition Companies 5 (Sept. 2021), 

available at https://www.cliffordchance.com/ 

content/dam/cliffordchance/briefings/2021/09/ 

guide-to-special-purpose-acquisition-companies.pdf 

(‘‘However, if additional public shares or equitylinked securities are issued in connection with the 

de-SPAC transaction, the exchange ratio for the 

founder shares will typically be adjusted to 

maintain the 20% promote for the sponsors.’’); 

Michael Klausner, Michael Ohlrogge & Harald 

Halbhuber, Net Cash Per Share: The Key to 

Disclosing SPAC Dilution, 40 Yale J. on Reg. 18, 28 

(2022) (stating that ‘‘[s]ome SPACs also provide 

‘anti-dilution’ protection to sponsors by giving them 

the right to an additional 20% of newly raised PIPE 

equity at the time of a merger’’ and stating that 

typically ‘‘sponsors waive their right to some or all 

these additional shares, though in some cases they 

do so in exchange for additional shares.’’). 

157Letter from Loeb & Loeb. See supra note 132 

and accompanying text. 

158Letter from Vinson & Elkins. See supra note 

131 and accompanying text. 

159Letter from ABA. See supra note 133 and 

accompanying text. 

160Letters from Michael Klausner and Michael 

Ohlrogge, NASAA, Paul Swegle. See supra notes 

135, 136, 137, and 138 and accompanying text. 

161Certain earn-out provisions entered into in 

connection with a de-SPAC transaction may involve 

cancellation of securities if certain targets are not 

met. 

162 In addition, in final Item 1603(a)(6) we 

replaced ‘‘has or will be’’ with ‘‘has been or will 

be,’’ and replaced ‘‘rendered’’ with ‘‘rendered or to 

be rendered,’’ for clarity. 

163See 17 CFR 240.16a–2 under the Exchange Act 

(Among others, any person who is the beneficial 

owner, directly or indirectly, of more than 10% of 

any class of equity securities registered pursuant to 

Exchange Act section 12 and any director or officer 

of the issuer of such securities shall be subject to 

the provisions of Exchange Act section 16); 

Exchange Act section 16(a). SPAC sponsors also 

may have beneficial ownership reporting 

obligations pursuant to sections 13(d) and 13(g) of 

the Exchange Act and rules thereunder. 

adopted.153 On the contrary, we believe 

compliance with the final rules will be 

minimally burdensome where 

disclosure of this information is already 

market practice and will create a 

uniform and transparent regime acrossthe-board, maintaining a minimum 

standard of disclosure across 

transactions, even if market practice 

were to change in the future. 

We agree with comments that returns 

based on the price appreciation from the 

‘‘promote’’ stake owned by the SPAC 

sponsor may be a significant source of 

potential remuneration to the SPAC 

sponsor that investors would want to 

know about in making their investment 

and voting decisions.154 As a result, we 

have added terms explicitly requiring 

disclosure of the amount of securities 

issued or to be issued by the SPAC to 

the SPAC sponsor, its affiliates, and 

promoters and the price paid or to be 

paid for such securities.155 For example, 

where a SPAC sponsor purchased a 20 

percent ownership interest in the SPAC, 

this interest and the purchase price 

would be required to be disclosed under 

the revised provision and would not be 

excluded on the basis of not being 

‘‘compensation.’’ 

Pursuant to these changes, any 

mechanisms, such as an anti-dilution 

provision,156 to keep the SPAC sponsor 

ownership at a certain level (or similar 

mechanisms for affiliates or promoters) 

and any potential cancellation of shares 

issued or to be issued to the SPAC 

sponsor (or its affiliates or promoters) or 

increase in shares issued to the SPAC 

sponsor (or its affiliates or promoters) 

will be required to be disclosed since 

these features would affect shares issued 

or to be issued to those parties. The 

approach taken in the final rules will 

address the concerns over speculation 

related to quantifying compensation 

expressed by one commenter,157

because these contractual terms are 

known at the time of the IPO and 

therefore do not require any speculation 

about possible stock price changes after 

the de-SPAC transaction. 

Regarding the comments concerning 

reimbursement of advances and 

repayment of loans,158 we do not 

believe it is necessary to modify the 

proposed term ‘‘reimbursement.’’ The 

term is not limited to specific types of 

reimbursements. Any funds outlaid by 

the SPAC sponsor that are later returned 

to the SPAC sponsor would constitute a 

‘‘reimbursement’’ under the rule, 

notwithstanding that the return of the 

funds to the SPAC sponsor may also 

include other amounts (such as accrued 

interest). 

We are not adopting another 

commenter’s recommendation that 

required disclosure be qualitative rather 

than quantitative unless the amounts are 

above a specified de minimis 

threshold.159 Because de minimis 

thresholds for several categories of 

compensation could be significant on an 

aggregate basis, if quantitative 

disclosure were only required above a 

certain de minimis threshold, investors 

may not receive the complete set of 

compensation information they need to 

evaluate the structure of the SPAC in 

which they may invest. We would not 

object, however, to the registrant 

disclosing de minimis reimbursements 

(such as for perquisites that are de 

minimis) by providing an aggregate total 

of those de minimis reimbursements by 

category rather than on an item-by-item 

basis. We view such disclosure as 

consistent with the requirement in Item 

1603(a)(6) to disclose the 

reimbursements’ ‘‘nature.’’ 

iii. Transfer of SPAC Ownership 

In response to several commenters’ 

recommendation to disclose transfers of 

SPAC securities by the SPAC sponsor 

and others, we are modifying Item 

1603(a)(6) to require such disclosure.160

We agree that disclosure of share 

transfers by a SPAC sponsor, its 

affiliates, and promoters would provide 

important information to investors 

seeking to evaluate the incentives of 

these parties. We believe it would also 

be important for investors to know if the 

SPAC ownership level of these parties 

has changed because of cancellation of 

the securities.161 Accordingly, in the 

final rule, we have revised proposed 

Item 1603(a)(6) to add the requirement: 

‘‘Disclose any circumstances or 

arrangements under which the SPAC 

sponsor, its affiliates, and promoters, 

directly or indirectly, have transferred 

or could transfer ownership of securities 

of the SPAC, or that have resulted or 

could result in the surrender or 

cancellation of such securities.’’ With 

respect to indirect transfers, for 

example, if there was a transfer of 

ownership interests in the SPAC 

sponsor or ownership interests in a 

holding company that owns interests in 

the SPAC sponsor, then disclosure 

would be required under this item.162

At this time, we are not making any 

changes to add requirements to disclose 

transfers after the de-SPAC transaction 

occurs, because we believe, for most 

SPACs, SPAC sponsors will already 

have Form 3 and 4 reporting 

obligations.163

iv. Interest in SPAC Sponsor and 

Organizational Chart 

We are adopting Item 1603(a)(7) as 

proposed except that we are not 

adopting the proposal to provide an 

organizational chart. 

One commenter said that ‘‘proposed 

Item 1603(a)(7) should clarify that . . . 

an indirect economic interest in less 

than 10% of a SPAC’s founder shares or 

warrants through ownership of equity 

interests in a Sponsor should not, in and 

of itself and absent other factors, be 

considered a direct or indirect material 


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164Letter from ABA. 

165See, e.g., definition of ‘‘control’’ in Rule 405 

(The term control . . . means the possession, direct 

or indirect, of the power to direct or cause the 

direction of the management and policies of a 

person, whether through the ownership of voting 

securities, by contract, or otherwise.). 

166Letter from Vinson & Elkins. 

167Letter from Michael Klausner and Michael 

Ohlrogge. 

168See 17 CFR 240.14a–9 (‘‘Rule 14a–9’’). See 

also 17 CFR 240.14a–6(h). 

169Letter from Vinson & Elkins. See supra note 

142 and accompanying text. 

170See, e.g., Connie Loizos, The Year of the 

Disappearing Lock-up, TechCrunch (Jan. 4, 2022) 

(‘‘many related deals contain language that restricts 

sponsors from selling shares for a year from the day 

the deal is completed, but there are much faster 

ways out. According to one popular provision, if a 

SPAC’s shares trade slightly above their initial 

pricing for more than 20 days in a 30-day period, 

the lockup provision vanishes.’’), available at 

https://techcrunch.com/2022/01/04/the-year-of-thedisappearing-lock-up/; Lock-Up Periods: Regular 

IPOS V/S SPACS IPOS, Legal Scale (Sept. 21, 2022), 

available at https://www.legalscale.com/lock-upperiods-regular-ipos-v-s-spacs-ipos/; Ran Ben-Tzur, 

Itka Safir, Terms of IPO Lock-Up Agreements for 

Technology Companies Shift as Direct Listings and 

SPACs Gain Traction (2020), available at https://

www.fenwick.com/insights/publications/terms-ofipo-lock-up-agreements-for-technology-companiesshift-as-direct-listings-and-spacs-gain-traction (out 

of 80 traditional IPO-companies surveyed, four (i.e., 

5%) used Price-based lock-up releases). 

interest in the Sponsor.’’ 164 We do not 

believe that the disclosures of material 

interests in the SPAC sponsor should be 

based on a bright-line absolute 

percentage of ownership, whether based 

on percentage ownership of shares of 

the SPAC or based on percentage 

ownership of shares of the SPAC 

sponsor. As a general matter, we note 

that registrants regularly apply 

materiality standards that are not tied to 

absolute percentages in connection with 

their disclosure under the Federal 

securities laws. We believe a bright-line 

standard would not be appropriate here 

because the percentage of ownership of 

a SPAC sponsor that is material could 

differ from SPAC sponsor to SPAC 

sponsor. Also, we note that percentage 

ownership is not the only way in which 

a material interest in the SPAC sponsor 

may be present.165 For example, where 

a person has a voting interest but no 

economic interest in the SPAC sponsor, 

the required disclosure would need to 

be provided with respect to such voting 

interest. 

Related to our consideration of this 

comment, however, we have determined 

not to adopt the proposed organizational 

chart requirement in Item 1603(a)(7). 

The proposed organizational chart 

requirement would have required 

graphical display of levels of ownership 

that are above the level of direct 

ownership of the SPAC sponsor (i.e., 

tracing ‘‘upstream’’ through layers of 

interest-holders to the ultimate interestholder). It also would have required 

graphical display of levels of ownership 

of companies other than the SPAC 

sponsor (but that would be under 

common control with the SPAC 

sponsor) that are below these interestholders (i.e., tracing ‘‘downstream’’ 

through layers of affiliated controlled 

persons). We believe, in this context at 

this time, particularly with respect to 

institutions with an interest in the SPAC 

sponsor that may have complex 

company organizational structures, the 

complexity of the upstream and 

downstream tiers of ownership 

discussed above may be difficult to 

prepare graphically. As a result, we are 

not adopting the organizational chart 

requirement. 

Another commenter said the identity 

of natural persons controlling the 

sponsor is already disclosed in response 

to existing Item 403 of Regulation S– 

K.166 Item 403 requires security 

ownership information concerning 

certain beneficial owners and 

management, but new Item 1603(a) will 

elicit additional information because of 

its requirements concerning 

background, experience, and roles, 

among other things. Also, while current 

Item 403(a) requires identifying any 

person who is known to be the 

beneficial owner of more than five 

percent of any class of the SPAC’s 

voting securities, new Item 1603(a)(7) 

adds a requirement to name controlling 

persons of the SPAC sponsor. 

Furthermore, to the extent portions of 

Item 1603(a) may overlap with Item 403 

as they may pertain to specific registrant 

facts and circumstances, registrants are 

not required to provide duplicative 

disclosure. Therefore, we do not expect 

that any partial overlap—depending on 

specific registrant facts and 

circumstances—in disclosure that could 

be required under the final rule with 

disclosure required under Item 403 

would impose significant additional 

burdens on registrants. 

v. Agreements 

We are adopting Item 1603(a)(8) and 

(9), concerning agreements, as proposed. 

Final Item 1603(a)(8) provides that the 

registrant must describe any agreement, 

arrangement, or understanding, 

including any payments, between the 

SPAC sponsor and unaffiliated security 

holders of the special purpose 

acquisition company regarding the 

redemption of outstanding securities of 

the special purpose acquisition 

company. One commenter 

recommended that the Commission 

should revise proposed Item 1603(a)(8) 

to ‘‘specify that if a SPAC, the SPAC 

sponsor, or any affiliated party enters 

into an agreement regarding the 

redemption of outstanding securities of 

the SPAC after the date of the merger 

registration statement or proxy, that the 

SPAC be required to issue a proxy 

amendment or similar filing prior to the 

redemption deadline to inform SPAC 

shareholders of the new agreement.’’ 167

We do not believe it is necessary to 

revise the item in the manner suggested 

to capture events that follow the filing 

of a proxy statement in connection with 

a de-SPAC transaction, as we believe 

registrant obligations to amend such 

filings under current law, including to 

ensure disclosure are not misleading, 

are sufficient.168

Final Item 1603(a)(9) provides that the 

registrant must disclose, in a tabular 

format to the extent practicable, the 

material terms of any agreement, 

arrangement, or understanding 

regarding restrictions on whether and 

when the SPAC sponsor and its 

affiliates may sell securities of the 

special purpose acquisition company, 

including: the date(s) on which the 

agreement, arrangement, or 

understanding may expire; the natural 

persons and entities subject to such an 

agreement, arrangement, or 

understanding; any exceptions under 

such an agreement, arrangement, or 

understanding; and any terms that 

would result in an earlier expiration of 

such an agreement, arrangement, or 

understanding. 

In response to the commenter who 

stated that the required additional 

disclosure would go beyond the 

disclosure requirements applicable to 

lock-up agreements entered into in 

connection with a traditional IPO,169 we 

believe that, based on Commission staff 

experience reviewing filings, registrants 

in IPOs currently provide information 

that is analogous to the Item 1603(a)(9) 

required information. To the extent Item 

1603(a)(9) may incrementally require 

more disclosure compared to IPOs, we 

believe this is appropriate because 

investors in SPACs often focus heavily 

on the nature of the SPAC sponsor’s 

interest in the SPAC and because 

agreements, arrangements, or 

understandings regarding restrictions on 

whether and when the SPAC sponsor 

and its affiliates may sell securities of 

the SPAC often can be more complex 

than lock-up agreements in IPOs. For 

example, SPAC lock-up agreements 

often include provisions that depend on 

certain levels of stock price 

appreciation.170


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14174 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

171Letter from Freshfields. See supra notes 143 

and 144 and accompanying text. 

172See 17 CFR 229.601(a) and (b)(10)(ii)(A) 

(requiring the filing of any contract to which 

directors, officers, promoters, voting trustees, 

security holders named in the registration statement 

or report are parties, with certain exceptions). See 

also requirements for registrant to furnish exhibits 

required by Item 601 of Regulation S–K in: Form 

S–1, Item 16; Form F–1, Item 8; Form S–4, Item 

21(a); Form F–4, Item 21. 

173When we use the term ‘‘narrative’’ disclosure 

here, we do not mean that solely qualitative 

information should be provided. Depending on the 

facts and circumstances, quantitative information 

may be required in connection with these lock-up 

disclosures. Depending on the facts and 

circumstances, one example of such quantitative 

disclosure could be where the exception to the lockup depends on application of a formula involving 

a financial measure. 

174See, e.g., Cooley LLP, Blog: 10 Key 

Considerations for Going Public with a SPAC (Aug. 

3, 2020), available at https://www.jdsupra.com/ 

legalnews/blog-10-key-considerations-for-going80315/ (‘‘Most SPAC sponsors will be subject to a 

1-year lock-up, which can create staggered releases 

of shares into the market after the combination and 

may at times try to push the target company holders 

to also have a 1-year lockup to align interests. 

Companies should be thoughtful, in discussions 

with their financial advisors, on how additional 

shares will come into the market and implications 

for the public company’s trading volatility.’’). 

175With respect to lock-up agreements generally, 

see Alon Brav & Paul Gompers, The Role of Lockups 

in Initial Public Offerings, 16 The Rev. of Fin. Stud. 

1 (2003), available at https://doi.org/10.1093/rfs/ 

16.1.0001 (finding lockup agreements serve as a 

commitment device to address moral hazard 

concerns). 

176Letter from Freshfields. See supra note 144 

and accompanying text. 

177See also proposed General Instruction VIII to 

Form S–1, proposed General Instruction VII to Form 

F–1. 

178See also proposed General Instruction I.1 to 

Form S–4, proposed General Instruction I.1 to Form 

F–4, proposed Item 14(f)(1) of Schedule 14A, and 

proposed General Instruction K to Schedule TO. 

179See (a) proposed General Instruction VIII to 

Form S–1, (b) proposed General Instruction I.1 to 

Form S–4, (c) proposed General Instruction VII to 

Form F–1, (d) proposed General Instruction I.1 to 

Form F–4. (e) proposed Item 14(f)(1) of Schedule 

14A, and (f) proposed General Instruction K to 

Schedule TO. 

With respect to the suggestion to 

exclude from this disclosure customary 

exceptions to lock-up agreements,171 we 

are concerned that almost all, if not all, 

exceptions found in any lock-up 

agreement could be determined to be 

customary by a registrant, which would 

mean they would not be disclosed to 

investors under the suggested approach. 

Further, even where lock-up agreements 

are filed as an exhibit,172 exceptions to 

SPAC lock-up agreements considered 

‘‘customary’’ by industry participants 

may be difficult for a reasonable 

investor to understand, and therefore 

narrative disclosure in the body of the 

filing may help investors understand 

these terms.173

In addition, we believe each such 

exception to a lock-up agreement is 

important to investors because 

exceptions to restrictions on transfer in 

lock-up agreements can result in the 

sale of a significant amount of shares 

that could affect the trading price of the 

SPAC or of the post-de-SPAC 

transaction combined company.174 In 

addition, in connection with disclosure 

in a SPAC IPO, to the extent that an 

investor may have invested in the SPAC 

based in part on the experience and 

expertise of the SPAC sponsor and its 

affiliates, we believe the disclosure 

about exceptions to lock-up agreements 

could be important to these investors in 

understanding the extent to which the 

interests of the SPAC sponsor and 

investor are aligned.175 Similarly, this 

information is important in connection 

with disclosure in a de-SPAC 

transaction. For example, this 

information remains important in 

connection with a de-SPAC transaction 

where the SPAC sponsor will have a 

continuing management role at the postde-SPAC transaction combined 

company. Also, for example, even 

where the SPAC sponsor may not have 

a continuing management role, this 

information is important where the 

SPAC sponsor may have the ability to 

express views that influence the current 

management of the post-de-SPAC 

transaction combined company— 

potentially due to the size of the SPAC 

sponsor’s ownership stake in the 

combined company or the value of the 

SPAC sponsor’s ongoing counsel based 

on the SPAC sponsor’s expertise. In 

each of these examples, we believe the 

disclosure about exceptions to lock-up 

agreements will be important because it 

will help the investor understand the 

extent to which the interests of the 

SPAC sponsor and investor are aligned. 

While one commenter suggested that 

current market practice is for transferees 

who receive shares pursuant to an 

exception from a lock-up to agree to the 

lock-up as a condition of the transfer,176

we do not believe this means 

information about exceptions to lock-up 

agreements will not be important to 

investors. If the SPAC sponsor or 

affiliates may divest their ownership of 

the SPAC, this may affect investor 

evaluation of the SPAC and the 

incentives of the SPAC sponsor, 

regardless of whether a transferee is also 

subject to transfer restrictions. Investors 

may consider the potential amounts of 

shares that could be transferred to be an 

important factor that could affect the 

market valuation of the issuer. 

Moreover, based on the Commission 

staff’s experience, some registrants 

today already discuss each exception in 

detail, while others discuss the 

exceptions in general terms. 

C. Conflicts of Interest 

1. Proposed Rules 

SPAC sponsors and others may have 

material potential or actual conflicts 

with the interests of investors that could 

have adverse effects on those investors. 

The Commission proposed conflicts of 

interest disclosure requirements in 

certain items in proposed Item 1602, 

1603, 1604, and 1605 in connection 

with SPAC registered offerings other 

than de-SPAC transactions, such as IPO 

transactions, and in connection with deSPAC transactions, described in more 

detail below. 

The Commission proposed Item 

1602(a)(5) and (b)(7), which apply to 

registered offerings other than de-SPAC 

transactions, to require that some of 

these conflicts of interest disclosure 

requirements appear on the prospectus 

front cover page and in the prospectus 

summary, respectively.177 The 

Commission also proposed prospectus 

cover page and prospectus summary 

conflict of interest disclosure 

requirements in connection with deSPAC transactions in proposed Item 

1604(a)(4) and (b)(3).178

The Commission proposed that Item 

1603 (including 1603(b) regarding 

conflicts of interest) apply to de-SPAC 

transactions, as well as other registered 

offerings, including SPAC IPOs.179

Proposed Item 1603(b) would require 

disclosure of any actual or potential 

material conflict of interest between (1) 

the SPAC sponsor or its affiliates or the 

SPAC’s officers, directors, or promoters, 

and (2) unaffiliated security holders. 

This proposed item included any 

conflict of interest with respect to 

determining whether to proceed with a 

de-SPAC transaction and any conflict of 

interest arising from the manner in 

which a SPAC compensates the SPAC 

sponsor or the SPAC’s executive officers 

and directors or the manner in which 

the SPAC sponsor compensates its own 

executive officers and directors. In 

addition, the Commission proposed 

Item 1603(c) to require disclosure 

regarding the fiduciary duties each 

officer and director of a SPAC owes to 

other companies. 

Furthermore, in connection with deSPAC transactions, the Commission 

proposed Item 1605(d) to require 

disclosure of any material interests in 

the de-SPAC transaction or any related 

financing transaction held by the SPAC 

sponsor and the SPAC’s officers and 

directors, including fiduciary or 

contractual obligations to other entities 


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180See also proposed General Instruction I.1 to 

Form S–4, proposed General Instruction I.1 to Form 

F–4, proposed Item 14(f)(1) of Schedule 14A, and 

proposed General Instruction K to Schedule TO. 

181Letters from ABA, Better Markets, Bullet Point 

Network, CFA Institute, CII, Committee on Capital 

Markets Regulation, Consumer Federation, ICGN, 

NASAA, Paul Swegle, Public Citizen (June 10, 

2022) (‘‘Public Citizen’’). 

182Letters from ABA, NASAA, Vinson & Elkins. 

183Letters from Better Markets, CFA Institute, CII, 

Committee on Capital Markets Regulation, 

Consumer Federation, ICGN, NASAA. 

184Letter from ABA. 

185Letter from ICGN. 

186Letters from ABA, CII. 

187Letter from CII. 

188Letter from ABA. 

189Letters from ABA, Vinson & Elkins. 

190Letter from ABA. 

191Letter from ABA. 

192Letter from Vinson & Elkins. 

193Letter from NASAA. 

194Letter from Jonathan Kornblatt, CMT, Fintech 

Institutional Advisory (June 12, 2022) (‘‘Jonathan 

Kornblatt’’). 195Letter from Jonathan Kornblatt. 196Letter from Michael Klausner and Michael 

Ohlrogge. 197Proposing Release, supra note 7, at 29468 

(request for comment number 17). 

198Letter from Vinson & Elkins. 

199Letter from ABA. 

200Proposing Release, supra note 7, at 29468 

(request for comment number 18). 

201Letter from Vinson & Elkins. 

as well as any interest in, or affiliation 

with, the target company.180

2. Comments 

Broadly categorized, commenters on 

the conflicts of interest proposals 

focused on five areas: (1) general 

comments, including those with general 

expressions of support for or opposition 

to the proposals, (2) SPAC and target 

company officer and director conflicts 

of interest, (3) de-SPAC conflicts of 

interest, (4) addition of disclosure of 

‘‘break-even’’ thresholds, and (5) 

additional responses to Commission 

requests for comment. 

A number of commenters generally 

supported the proposed enhanced 

disclosure requirements in regard to 

conflicts of interest and fiduciary 

duties.181

Several commenters suggested that 

the proposed disclosure requirements 

would codify, to an extent, existing 

disclosure practices.182 Some 

commenters suggested that proposed 

disclosure requirements about conflicts 

of interest and fiduciary duties would 

provide useful information to 

investors.183

One commenter said that ‘‘in 

requiring disclosure of known actual or 

potential material conflicts of interest, 

proposed Item 1603(b) should clarify 

that a knowledge-based standard is the 

appropriate standard in determining 

whether disclosure is required under 

this item.’’ 184

Another commenter recommended 

‘‘that disclosures should include the 

names of all sponsors and their financial 

arrangements with SPACs’’ and 

‘‘information on the nature of the claims 

the investors have on the SPAC if no deSPAC transaction takes place’’ during 

the applicable period or they choose to 

exit before the de-SPAC is completed.185

A few commenters discussed issues 

related to potential SPAC and target 

company officer and director conflicts 

of interest.186 One of these commenters 

recommended that ‘‘there should be 

mandatory disclosures of conflicts of 

interest among SPAC directors, SPAC 

officers, target company directors and 

target company officers.’’ 187 Another of 

these commenters recommended that 

‘‘proposed Item 1603(c) should be 

limited to those situations where the 

fiduciary duties of an officer or director 

owed to other companies might 

reasonably be expected to present a 

potential conflict with respect to a 

potential de-SPAC transaction or the 

SPAC’s ability to pursue de-SPAC 

transaction opportunities.’’ 188

Some commenters viewed proposed 

Item 1605, including proposed Item 

1605(d) concerning conflicts of interest 

in connection with de-SPAC 

transactions, as redundant with current 

rules.189 One of these commenters said 

these disclosures are ‘‘duplicative of 

those already prescribed in the existing 

regulatory schemes for proxy materials 

and registration statements filed in 

connection with de-SPAC 

transactions.’’ 190 In lieu of adopting 

proposed Item 1605, the commenter 

recommended a ‘‘uniform methodology 

to address conflicts of interest arising 

from business combinations in general 

by revising Items 1004(a)(2) and 1013(b) 

of Regulation M–A [17 CFR 

229.1004(a)(2) and 229.1013(b)] and 

Item 403 of Regulation S–K to 

incorporate the provisions of proposed 

Item 1605.’’ 191 The other commenter 

opposed the adoption of new disclosure 

requirements with ‘‘respect to material 

interests in a prospective de-SPAC 

transaction or any related financing 

transaction held by the sponsor and the 

SPAC’s officers and directors,’’ because 

this ‘‘would be redundant with the 

existing requirements of Schedule 14A 

Item 5.’’ 192

Some commenters recommended that 

certain additional disclosures should be 

required. One commenter on the 

proposal said that registrants ‘‘should 

also provide, in an easily 

understandable, tabular format. . .the 

break-even points for non-redeeming 

investors under different scenarios, the 

break-even point for the sponsor, the 

ownership distribution for nonredeeming investors, the effects of 

outstanding warrants and sponsor 

shares, and the resulting ownership of 

the target company for non-redeeming 

shareholders and alternative 

investors.’’ 193 Another commenter said 

that registrants should provide a breakeven average share price for the sponsor, 

which would inform investors and, in 

the commenter’s opinion, the target 

company.194 The commenter said ‘‘this 

will be a simple numerical 

representation of the effective cost basis 

of the sponsor and can be used to 

ascertain the extent to which a sponsor’s 

position differs from that of other 

investors.’’ 195 One commenter stated 

that ‘‘SPACs should disclose the 

minimum post-merger share value at 

which proceeding with the SPAC 

merger will yield a higher return to the 

SPAC sponsor than liquidating the 

SPAC.’’ 196

A few commenters responded to 

requests for comment in the proposal 

related to whether we should also 

require a description of any policies and 

procedures used to minimize potential 

or actual conflicts of interest.197 One 

commenter said that ‘‘a requirement for 

disclosure of policies and procedures or 

assessment and management of conflicts 

of interest would result in incremental 

boilerplate disclosures.’’ 198 Another 

commenter said it would be 

‘‘superfluous to require a description of 

any policies and procedures used or to 

be used to minimize potential or actual 

conflicts of interest in addition to what 

proposed Item 1603 has already 

prescribed.’’ 199

One commenter responded to requests 

for comment related to whether SPACs 

should be required to provide additional 

disclosure regarding material conflicts 

of interest in Exchange Act reports 

following their IPOs.200 The commenter 

said that, ‘‘regarding disclosure in 

Exchange Act reports following the 

SPAC IPO and the Form 8–K 

announcing the signing of the de-SPAC 

transaction, additional disclosure 

should be required only where the 

conflict of interest is material and has 

not been previously disclosed.’’ 201

3. Final Rules 

We are adopting Items 1602(a)(5) and 

(b)(7), 1603(b), 1604(a)(4) and (b)(3), and 

1605(d) substantially as proposed, 

except for the changes discussed below. 

Having considered comments received, 

we are adopting the final rules to 

provide information to investors about 

the material potential or actual conflicts 


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202See, e.g., Usha Rodrigues & Mike Stegemoller, 

Exit, Voice, and Reputation: The Evolution of 

SPACs, 37 Del. J. Corp. L. 849, 896 (2013) (stating 

that ‘‘sponsors were expected to put more and more 

of their own money at risk (in the form of private 

placements), setting themselves up for substantial 

losses if no acquisition occurred’’ as the SPAC form 

evolved). 

203Letter from ABA. See supra note 184 and 

accompanying text. 

204Similarly, current Item 404 regarding conflicts 

of interest does not contain such knowledge 

qualifier. 

205Letter from ICGN. See supra note 185 and 

accompanying text. 

206See, e.g., proposed Items: 1603(a)(1) (names of 

sponsors) and (a)(5) through (6) (agreements and 

compensation) and 1602(b)(3) and (4) (redemption 

rights and plans in the event no de-SPAC 

transaction is consummated). 

207Letters from ABA, CII. 

208Letter from CII. See supra note 187 and 

accompanying text. 

209We are also making related minor changes for 

clarity in Item 1604(a)(4) and (b) to change the term 

‘‘or its affiliates’’ to ‘‘, SPAC affiliates.’’ In Item 

1604(b) and in a number of other places in the final 

rules, we also eliminated the term ‘‘shall’’ (e.g., by 

replacing it with the word ‘‘must’’) consistent with 

relevant plain English guidance. 

210See infra sections III.C and IV.A. 

211 In addition, in final Item 1603(b) we replaced 

‘‘with respect to’’ with ‘‘that may arise’’ (in the 

phrase ‘‘any material conflict of interest that may 

arise in determining whether to proceed with a deSPAC transaction’’) for clarity and consistency with 

Item 1602(b)(7). In final Item 1603(b) we also 

revised the phrase ‘‘the manner in which the 

special purpose acquisition company compensates 

a SPAC sponsor, officers, or directors’’ by replacing 

the term ‘‘and’’ with ‘‘or,’’ because the requirements 

of Item 1603(b) should apply disjunctively where 

any of the named persons has a relevant material 

conflict of interest. 

212For example, if the SPAC hypothetically 

happened to share officers or directors with the 

target company, the same disclosure (that was 

relevant for both the SPAC and target company) for 

the same individual person would not need to be 

provided once for the person as a SPAC official and 

a second time for the person as a target company 

official. The SPAC and target should be mindful, 

though, that different disclosures about conflicts 

arising under each role may be required. 

that SPAC sponsors and others covered 

by the final rules may have with the 

interests of investors. These conflicts 

could influence the actions of the SPAC 

to the detriment of its unaffiliated 

security holders. The potential conflicts 

of interest of SPAC sponsors and others 

may be particularly relevant for 

investors to the extent that they arise 

when a SPAC and its management are 

deciding whether to engage in a deSPAC transaction. The SPAC sponsor’s 

compensation structure creates 

incentives to complete a de-SPAC 

transaction. These incentives may 

induce a SPAC sponsor and others to 

compel the SPAC to complete the deSPAC transaction on unfavorable terms 

to avoid liquidation of the SPAC at the 

expiry of this period. 

There are numerous situations that 

could give rise to these potential 

conflicts. For example, SPAC sponsors 

or their affiliates may have a potential 

conflict of interest stemming from the 

nature of the SPAC sponsor’s 

compensation or security ownership 

(particularly where the security owned 

is purchased at disparate prices, often 

substantially lower than the price paid 

by public security holders). This type of 

potential conflict of interest may present 

significant financial incentives to 

pursue a de-SPAC transaction even in 

the absence of attractive target company 

transaction opportunities.202

SPAC sponsors and their affiliates 

may also sponsor multiple SPACs, 

which may result in decisions regarding 

the allocation of these persons’ time and 

target company acquisition 

opportunities that may adversely affect 

SPAC security holders. Alternatively (or 

in addition), SPAC sponsors and their 

affiliates may owe employment, 

contractual, or fiduciary duties to other 

companies than the SPAC, which, 

among other things, may affect the 

ability of the SPAC to execute a deSPAC transaction or may affect the 

terms to which a SPAC agrees in any 

ultimate de-SPAC transaction. In these 

situations, the SPAC sponsor and others 

covered by the final rules may not only 

be incentivized to take actions that 

benefit other entities, but they may be 

compelled by these other duties to do 

so, potentially at the expense of the 

SPAC and its security holders. In 

addition, SPAC sponsors and their 

affiliates may seek to enter a de-SPAC 

transaction with a target company they 

are affiliated with when superior target 

company transaction opportunities may 

be available. 

The final rules will provide investors 

with a more complete understanding of 

the conflicts of interest related to an 

investment in a SPAC, including in 

situations like the examples above. 

Investors will have improved 

information concerning interests of the 

SPAC sponsor and others covered by the 

final rule that could reduce the value of 

their investment or that could result in 

opportunities potentially available to 

the SPAC not being realized. In this 

way, the final rules will allow investors 

to analyze risks associated with 

potential conflicts of interest regarding 

a SPAC more accurately. 

We are not including a knowledge 

qualifier in conflicts of interest 

disclosure, as suggested by one 

commenter,203 because we expect the 

SPAC and its officers and directors will 

be in a position to know their own 

conflicts and that the SPAC may obtain 

similar information from the SPAC 

sponsor, its affiliates, and promoters 

(who will be in a position to know their 

own conflicts) by virtue of the 

relationship between the SPAC and the 

SPAC sponsor and between the SPAC 

and any promoters.204 In addition, we 

note that registrants can rely on 17 CFR 

230.409 and 240.12b–21 with respect to 

information unknown or not reasonably 

available. 

Another commenter recommended 

the conflicts of interest disclosures 

should include: names of all sponsors 

and their financial arrangements with 

SPACs; claims investors have on the 

SPAC if no de-SPAC transaction takes 

place; and claims investors have on the 

SPAC if investors exit before the deSPAC transaction.205 We note that all of 

those items were included in the 

proposal, and we are adopting them as 

proposed.206

A few commenters discussed issues 

related to potential SPAC and target 

company officer and director conflicts 

of interest.207 One of these commenters 

recommended the conflicts of interest 

disclosures cover SPAC officers, SPAC 

directors, target company officers, and 

target company directors.208 In 

considering the comment, we observed 

that proposed Item 1604 was 

inconsistent with proposed Items 

1603(b) and 1605(d) by not covering 

SPAC officers and directors. We do not 

believe there are any special factors 

warranting such a difference. As a 

result, we have modified the language in 

Item 1604 to require disclosure 

regarding SPAC officers and directors as 

in the other adopted items. This change 

to Item 1604(a)(4) (cover page) and (b)(3) 

(prospectus summary) will ensure the 

benefits of the rule that we discuss 

generally above will apply to these rules 

as well.209 With respect to target 

company officers and directors, we 

believe that disclosure of their conflicts 

of interest is consistent with coregistration requirements in connection 

with the final amendments to 

registration forms and with final Rule 

145a.210 As discussed in connection 

with those requirements, since the deSPAC transaction is in substance an 

offering by the target company, the 

conflicts of interest of target company 

officers and directors may be important 

to investor investment, redemption, and 

voting decisions. Thus, we have 

amended Items 1603(b), 1604(a)(4) 

(prospectus cover page) and (b)(3) 

(prospectus summary), and 1605(d) to 

require this disclosure.211 We would not 

expect registrants to provide duplicative 

disclosure merely because a person falls 

into more than one of the categories of 

persons covered by the final rules.212

One commenter recommended that 

we limit Item 1603(c) disclosure to 


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213Letter from ABA. See supra note 188 and 

accompanying text. 

214Letters from ABA, Vinson & Elkins. See supra 

notes 189, 190, 191, and 192 and accompanying 

text. 

215The Commission adopted a similar approach 

in rules regarding limited partnership roll-up 

transactions. See 17 CFR 229.900 through 229.915. 

216Letters from Jonathan Kornblatt, Michael 

Klausner and Michael Ohlrogge, NASAA. See supra 

notes 193, 194, 195, and 196 and accompanying 

text. 

217Letter from Jonathan Kornblatt. 218See letter from Michael Klausner and Michael 

Ohlrogge (‘‘If a sponsor has committed to make no 

new investments in the SPAC at the time of its 

merger, then any post-merger share value greater 

than $0 will be preferable to the sponsor than 

receiving nothing in a liquidation. If, however, the 

sponsor commits to purchase new securities in the 

SPAC at the time of the SPAC merger, then the 

share value at which a merger will be a better deal 

for a sponsor than a liquidation will be above $0.’’). 

219See letter from Vinson & Elkins, supra note 

201 and accompanying text, and Proposing Release, 

supra note 7, at 29468 (request for comment 

number 18). 

220 In final Item 1602(a)(5) and (b)(7), we have 

revised the punctuation and conjunctions compared 

to the proposal to clarify the two sets of persons 

that are to be compared in connection with the 

required potential or actual conflict of interest 

disclosure by changing the proposed phrase 

‘‘between the SPAC sponsor or its affiliates or 

promoters and purchasers in the offering’’ to 

‘‘between the SPAC sponsor, its affiliates, or 

promoters; and purchasers in the offering.’’ To 

clarify the two sets of persons to be compared in 

Item 1604(a)(4), we have added the words ‘‘, on one 

Continued 

those situations where officer or director 

fiduciary duties owed to other 

companies might reasonably be 

expected to present a potential conflict 

with a SPAC’s de-SPAC transaction 

opportunities.213 We do not agree with 

this recommendation, because we do 

not believe conflicts will only arise in 

situations where there are fiduciary 

duties owed to other companies that are 

expected to present a potential conflict 

with a SPAC’s de-SPAC transaction 

opportunities. For example, a director’s 

obligations to other companies may 

compete with his or her attention to the 

SPAC. Because we believe this 

information is material to investors, we 

are not making any changes to the 

proposal in this respect in the final rules 

we are adopting. 

Some commenters expressed the view 

that proposed Item 1605, including 

proposed Item 1605(d) concerning 

conflicts of interest in connection with 

de-SPAC transactions, would be 

redundant with current rules.214 The 

Commission is not making changes in 

the final rules we are adopting in 

response to these comments. Given the 

unique qualities of de-SPAC 

transactions, we believe registrants will 

benefit from the centralization of the 

SPAC-related requirements in the Item 

1600 series of Regulation S–K rather 

than in a different location as 

suggested.215 Regarding any potential 

for redundancy with other Commission 

rules, if there are facts and 

circumstances that may result in 

required disclosure under a current rule 

being the same as under any of the rules 

we are adopting, registrants will not be 

required to repeat disclosures (except 

where the applicable rule may require, 

such as by calling for the disclosure in 

a specific location such as the 

prospectus cover page or prospectus 

summary). 

Some commenters recommended we 

adopt certain requirements (in addition 

to those proposed) involving ‘‘breakeven’’ disclosure.216 With respect to 

disclosure of a SPAC sponsor’s ‘‘breakeven’’ price per share, one commenter 

said this would help investors 

‘‘ascertain the extent to which a 

sponsor’s position differs from that of 

other investors.’’ 217 We believe that the 

other conflicts of interest disclosures 

required by the final rules will provide 

sufficient information to allow investors 

to understand the potential differences 

in incentives between them and a SPAC 

sponsor, and as a result we are not 

adopting the suggested ‘‘break-even’’ 

disclosure. 

We are not requiring registrants to 

provide ‘‘break-even’’ price per share 

disclosure regarding non-redeeming 

investors as suggested by commenters 

because each investor would already 

know the basis at which they acquired 

the shares of the SPAC and the SPAC 

may not know this information for many 

of its investors, who could have 

acquired the shares at a variety of prices 

through the public market. We are 

likewise not requiring disclosure 

suggested by commenters that would 

provide a price at which the SPAC 

sponsor would recoup their investments 

in the SPAC. We believe such disclosure 

could be confusing for investors, as 

many SPAC sponsors may consider 

such amounts as sunk costs, which they 

do not consider when deciding whether 

to proceed with a de-SPAC transaction. 

As a commenter notes,218 SPAC 

sponsors may be incentivized to 

proceed with de-SPAC transactions 

below the initial SPAC share price; 

however, that is largely because SPAC 

sponsors lack redemption rights. 

Generally, SPAC shareholders would 

seek de-SPAC transactions that result in 

share prices that exceed their 

redemption value. SPAC sponsor 

decisions to proceed with a transaction 

may be driven by the SPAC sponsor’s 

expectation of their future deal flow and 

potential legal or reputational concerns 

among other factors. The ‘‘break-even’’ 

disclosure suggested by commenters 

would not take into account these 

factors. Moreover, none of these factors 

can be easily quantified, and the ones 

that can be quantified would be 

burdensome to produce and potentially 

difficult for investors to analyze and 

assess (given the difficulty in reliably 

quantifying those factors) and also 

would not be easily comparable across 

different SPACs (given the SPACspecific and SPAC sponsor-specific 

nature of those factors). The rules as 

adopted will improve investors’ ability 

to understand the SPAC sponsor’s 

conflicts of interest, and we are 

concerned that adding a disclosure that 

takes into account difficult-to-quantify 

factors like the ones discussed above 

would detract from the disclosures that 

we are adopting. 

In the final rules, we are not requiring 

a description of policies and procedures 

used to minimize potential or actual 

conflicts of interest. We believe the 

other disclosures we are adopting 

regarding conflicts of interest, including 

new Item 1603, will appropriately 

address investor protection concerns in 

this regard. We are also not making any 

changes that would expand the Series 

1600 of Regulation S–K disclosures 

regarding conflicts of interest beyond 

registration statements, proxy 

statements, information statements, and 

tender offer statements as proposed to 

other Exchange Act reports (such as to 

Form 10–Q, 10–K, or 8–K).219

Finally, we are making additional 

minor or technical changes in the final 

rules. First, we are making a change to 

the description of persons against whose 

interests the conflicts must be compared 

against from ‘‘unaffiliated security 

holders’’ to ‘‘unaffiliated security 

holders of the SPAC’’ in Items 1603(b) 

and 1604(a)(4) (prospectus cover page) 

and (b)(3) (prospectus summary). This 

change will avoid any potential 

ambiguity or confusion regarding 

whether target company officers and 

directors must compare their interests to 

security holders of the target company 

or security holders of the SPAC. 

Second, we are making a technical 

change in final Item 1605(d) to use ‘‘or’’ 

instead of ‘‘and’’ each time in the phrase 

‘‘held by the SPAC sponsor and the 

special purpose acquisition company’s 

officers . . . and directors.’’ This change 

makes clear the disclosure should apply 

with respect to each named person and 

not only where all such persons share 

the same interest. 

Third, we have made certain technical 

changes in some of the final rules 

regarding conflicts of interest to clarify 

the sets of persons being compared.220


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hand,’’ before the first set of persons and the words 

‘‘, on the other hand,’’ before the second set of 

persons. For clarity and consistency throughout 

Item 1603, we have also revised the term ‘‘executive 

officer(s)’’ in each place where it is used in Item 

1603(b) and (c) to refer to ‘‘officer(s).’’ 

221See 17 CFR 229.506 (‘‘Item 506’’ of Regulation 

S–K). Under Item 506, a company is required to 

provide disclosure regarding dilution when (1) the 

company is not subject to the reporting 

requirements of the Exchange Act and is registering 

an offering of common equity securities where there 

is substantial disparity between the public offering 

price and the effective cash cost to officers, 

directors, promoters, and affiliated persons of 

common equity acquired by them in transactions 

during the past five years, or which they have the 

right to acquire; or (2) the company is registering 

an offering of common equity securities and the 

company has had losses in each of its last three 

fiscal years and there is a material dilution of the 

purchasers’ equity interest. In the first instance, a 

company must provide a comparison of the public 

contribution under the proposed public offering 

and the effective cash contribution of such persons. 

In both instances, Item 506 requires disclosure of 

the net tangible book value per share before and 

after the distribution; the amount of the increase in 

such net tangible book value per share attributable 

to the cash payments made by purchasers of the 

shares being offered; and the amount of the 

immediate dilution from the public offering price 

which will be absorbed by such purchasers. 

222See proposed Items 1602(a)(3) and (4), (b)(6), 

and (c) and 1604(a)(3), (b)(4), (5), and (6), and (c) 

of Regulation S–K. 

223See proposed General Instruction VIII to Form 

S–1 and proposed General Instruction VII to Form 

F–1. 

224See (a) proposed General Instruction VIII to 

Form S–1, (b) proposed General Instruction I.1 to 

Form S–4, (c) proposed General Instruction VII to 

Form F–1, (d) proposed General Instruction I.1 to 

Form F–4, (e) proposed Item 14(f)(1) of Schedule 

14A, and (f) proposed General Instruction K to 

Schedule TO. 

225 In this context, the Commission considers the 

term over-allotment option to be interchangeable 

with the term ‘‘greenshoe option.’’ For a general 

description of the nature of a ‘‘greenshoe’’ or ‘‘overallotment option,’’ see, e.g., Patrick M. Corrigan, 

Footloose with Green Shoes: Can Underwriters 

Profit from IPO Underpricing?, 38 Yale J. on Reg. 

908, 917–918 (2021) (‘‘Underwriting agreements in 

firm commitment offerings also give underwriters 

the right, but not the obligation, to purchase an 

additional amount of shares [(‘Option Shares’)] at 

the same price as the underwriter is obligated to 

purchase the [specified number of shares set out in 

the underwriting agreement (‘Firm Shares’)]. . . . 

Underwriters typically have 30 days following the 

execution of the underwriting agreement to exercise 

their option. The closing for the Option Shares may 

occur on the same closing date as for the Firm 

Shares, or on a later date. In modern IPOs, the size 

of the green shoe option is virtually always 15% of 

the Firm Shares, an amount that constitutes the 

maximum permissible under FINRA rules.’’) 

(Footnotes omitted). 

Fourth, in final Item 1603(b), we are 

changing each reference to ‘‘the SPAC 

sponsor’’ to ‘‘any SPAC sponsor’’ 

because there can be more than one 

such sponsor. 

Fifth, we have revised the phrase 

‘‘State whether there may be actual or 

potential conflicts of interest . . .’’ in 

proposed Item 1602(a)(5) to add a 

materiality qualifier such that the 

phrase in final Item 1602(a)(5) provides 

‘‘State whether there may be actual or 

potential material conflicts of 

interest. . . .’’ This change makes 

prospectus cover page disclosure 

requirements under Item 1602(a)(5) 

consistent with the similar provisions of 

Item 1603(b), which require disclosure 

in the body of the disclosure document. 

We believe both provisions should 

contain the same materiality qualifier, 

because the provisions are related since 

Item 1602(a)(5) requires the registrant to 

provide a cross-reference to related 

disclosures in the prospectus, which 

includes disclosures made under Item 

1603(b). 

D. Dilution 

1. Proposed Rules 

Information about dilution conveys 

important information to investors 

about factors that may affect the value 

of a security holder’s interest in a SPAC. 

Dilution in current Commission filings 

is typically measured by calculating 

changes in net tangible book value per 

share.221 There are a number of 

potential sources of dilution in common 

SPAC structures, including: (a) 

shareholder redemptions, (b) SPAC 

sponsor compensation, (c) underwriting 

fees, (d) warrants, (e) convertible 

securities, and (f) PIPE financings. 

The Commission proposed several 

new rules that would require additional 

information about SPAC dilution in 

connection with registered offerings by 

SPACs, including IPOs, and in 

connection with de-SPAC 

transactions.222 With respect to 

registered offerings by SPACs (including 

IPOs) other than de-SPAC transactions, 

the Commission proposed Item 

1602(a)(3) and (4), (b)(6), and (c).223

With respect to de-SPAC transactions, 

the Commission proposed Item 

1604(a)(3), (b)(4), (5), and (6), and (c).224

Each of these proposed disclosure 

requirements is addressed in more 

detail below. 

First, with respect to SPAC IPOs, in 

Item 1602(a)(3), the Commission 

proposed that the prospectus outside 

front cover page include, among other 

things, disclosure of whether 

compensation of the SPAC sponsor and 

its affiliates may result in a material 

dilution of the purchasers’ equity 

interests. Also, the Commission 

proposed Item 1602(a)(4) to require on 

the outside front cover page of the 

prospectus, disclosure in the tabular 

format specified below the ‘‘estimated 

remaining pro forma net tangible book 

value per share at quartile intervals up 

to the maximum redemption threshold,’’ 

consistent with the methodologies and 

assumptions used in the disclosure 

provided pursuant to Item 506 of 

Regulation S–K: 

REMAINING PRO FORMA NET TANGIBLE BOOK VALUE PER SHARE

Offering Price of __ 25% of maximum 

redemption 

50% of maximum 

redemption 

75% of maximum 

redemption 

Maximum 

redemption 

Instruction 1 to Item 1602(a)(4) 

provided that, if the offering includes an 

over-allotment option, separate rows 

must be included in the tabular 

disclosure showing remaining pro forma 

net tangible book value per share with 

and without the exercise of the overallotment option.225

In addition, in Item 1602(b)(6) the 

Commission proposed that for SPAC 

IPOs, the summary prospectus include, 

among other things, disclosure of the 

extent to which compensation of the 

SPAC sponsor, its affiliates, and 

promoters may result in a material 

dilution of the purchasers’ equity 

interests. In addition to the prospectus 

cover page and prospectus summary 

requirements for SPAC IPOs, the 

Commission also proposed Item 1602(c) 

regarding dilution. This proposed item 

would require, in addition to the 

disclosure required by § 229.506 (Item 

506 of Regulation S–K), a description of 

material potential sources of future 

dilution following the registered 

offering by the special purpose 

acquisition company. This proposed 

item also would require disclosure in 

tabular format of the amount of future 

dilution from the public offering price 

that will be absorbed by purchasers of 

the securities being offered, to the extent 

known and quantifiable. 

The other dilution provisions 

proposed by the Commission related to 

de-SPAC transactions. The Commission 

proposed Item 1604(a)(3) to require on 


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226Letters from Better Markets (‘‘The disclosures 

should assist shareholders in understanding . . . 

potential sources of dilution of their shares. . . .’’), 

Bullet Point Network (‘‘We also agree with the 

SEC’s proposal to add sensitivity tables to show the 

dilution across a range of redemption 

scenarios. . . .’’), CFA Institute (‘‘we encourage a 

rapid implementation of the Proposed Rules on 

improving disclosures, transparency of 

dilution. . . .’’), CII (‘‘We generally agree . . . on 

the need to . . . bring greater clarity to dilution 

under various SPAC share redemption 

scenarios. . . .’’), Committee on Capital Markets 

Regulation (‘‘In particular, the Committee supports 

the proposed enhanced disclosures regarding . . . 

dilution. . . .’’), Consumer Federation, ICGN 

(‘‘Finally, the disclosure around dilution concerns 

. . . are also critical components for investor 

decision-making.’’), PricewaterhouseCoopers LLP 

(June 10, 2022) (‘‘PwC’’) (‘‘We believe the proposed 

disclosure changes will lead to greater transparency 

and clarity in important areas (e.g., actual or 

potential conflicts/misalignments of interests or 

actual or potential sources of dilution).’’). 

227See, e.g., Consumer Federation (‘‘more 

detailed information on the potential impact of 

dilution on the value of SPAC shares could help 

investors better understand the various sources of 

dilution and the extent to which their investments 

might drop in value, which they could then factor 

into their decision making.’’), NASAA (‘‘NASAA 

believes that some of the most important de-SPAC 

disclosures proposed are those concerning the 

potential for dilution and the potential impacts to 

returns from sponsor compensation, ‘promote’ 

shares, underwriting fees and warrants.’’). 

228Letters from ABA; Freshfields; Loeb & Loeb; 

Michael Klausner, Stanford Law School, Michael 

Ohlrogge, NYU School of Law, and Harald 

Halbhuber, NYU School of Law (June 13, 2022) 

(‘‘Michael Klausner, Michael Ohlrogge, and Harald 

Halbhuber’’); Letter from Christopher J. Capuzzi, 

Daniel L. Forman, Adam M. Harris, David B. 

Hennes, Carl P. Marcellino, and Paul D. Tropp, 

Ropes & Gray LLP (June 13, 2022) (‘‘Ropes & Gray’’); 

White & Case. 

229See, e.g., Letters from ABA (‘‘Generally, 

proposed Items 1602(a)(4), 1602(c) and 1604(c) 

require disclosures and the application of financial 

analysis tools that we do not believe are grounded 

in methodologies used by investors or financial 

experts in valuing a common share. . . .’’), Ropes 

& Gray (‘‘We respectfully submit that the 

information called for by these proposed rules 

would not provide investors or analysts with 

meaningful information in valuing SPAC shares at 

the time of a SPAC IPO.’’), White & Case (‘‘We 

submit that proposed Items 1602(a)(4) and 1602(c) 

of Regulation S–K should not be adopted . . . such 

proposed disclosure would not provide any useful 

information to investors and would produce 

inherently misleading disclosure.’’). 

230Letter from Vinson & Elkins. 

231Letter from White & Case. 

232 Id. 

233 Id. 

the outside front cover page of the 

prospectus, among other things, 

disclosure of whether compensation of 

the SPAC sponsor, its affiliates, and 

promoters may result in a material 

dilution of the equity interests of nonredeeming shareholders who hold the 

securities until the consummation of the 

de-SPAC transaction. Proposed Item 

1604(a)(3) also required the provision of 

a cross-reference, highlighted by 

prominent type or in another manner, to 

the locations of related disclosures in 

the prospectus. 

Three additional proposed rules with 

respect to de-SPAC transactions, Item 

1604(b)(4) through (6), each required 

prospectus summary disclosure. First, 

proposed Item 1604(b)(4) required, 

among other things, tabular disclosure 

of whether compensation of the SPAC 

sponsor and its affiliates has resulted or 

may result in a material dilution of the 

equity interests of unaffiliated security 

holders of the special purpose 

acquisition company. Second, proposed 

Item 1605(b)(5) required, among other 

things, disclosure of the dilutive impact, 

if any, of any financing transactions that 

have occurred or will occur in 

connection with the consummation of 

the de-SPAC transaction on unaffiliated 

security holders. Third, proposed Item 

1604(b)(6) required disclosure of the 

rights of security holders to redeem the 

outstanding securities of the special 

purpose acquisition company and the 

potential impact of redemptions on the 

value of the securities owned by nonredeeming shareholders. 

For de-SPAC transactions, the 

Commission also proposed Item 1604(c) 

to require a description of each material 

potential source of future dilution that 

non-redeeming shareholders may 

experience by electing not to tender 

their shares in connection with the deSPAC transaction. Under Item 1604(c), 

proposed Item 1604(c)(1) required the 

provision of a sensitivity analysis 

disclosure in tabular format that 

expresses the amount of potential 

dilution under a range of reasonably 

likely redemption levels. Proposed Item 

1604(c)(1) also required, at each 

redemption level in the sensitivity 

analysis, quantification of the dilutive 

impact on non-redeeming shareholders 

of each source of dilution, such as the 

amount of compensation paid or to be 

paid to the SPAC sponsor, the terms of 

outstanding warrants and convertible 

securities, and underwriting and other 

fees. Additionally, proposed Item 

1602(c)(2) required a description of the 

model, methods, assumptions, 

estimates, and parameters necessary to 

understand the sensitivity analysis 

disclosure. 

2. Comments 

A number of commenters generally 

supported some or all of the proposed 

enhanced dilution disclosure 

requirements.226 Several of these 

commenters suggested that proposed 

dilution disclosure requirements would 

provide useful information to 

investors.227 Other commenters, 

however, generally opposed or raised 

concerns regarding some or all of the 

proposed enhanced dilution disclosure 

requirements.228 Several of these 

commenters expressed views that the 

proposed disclosure requirements 

regarding dilution would not be helpful 

to investors.229 Specific comments on 

various aspects of the proposal are 

described below. 

Several commenters addressed issues 

related to levels of redemption in 

connection with proposed SPAC 

dilution disclosure. One commenter 

said that the ‘‘quantitative disclosure 

currently required under S–K Item 506 

at IPO is not helpful for investors, as the 

output is largely driven by the 

maximum redemption scenario which 

can differ based on (i) different 

provisions of the SPAC’s constituent 

documents. . .and (ii) the interpretation 

of those constituent documents.’’ 230 In 

lieu of disclosure using the 

methodology in existing Item 506 as was 

proposed, this commenter said that 

‘‘SPACs should present the per share 

amount of cash (or securities) in trust, 

under a range of hypothetical 

redemption scenarios and after giving 

effect to sponsor equity, underwriter 

compensation and IPO expenses.’’ To 

promote comparability, this commenter 

also suggested that ‘‘the hypothetical 

redemption scenarios include a 

maximum of 100% of the public shares 

(regardless of any provisions of the 

SPAC’s constituent documents that 

might theoretically limit redemptions) 

less any shares subject to a binding 

commitment to not be redeemed.’’ 

Another commenter, who expressed 

the general view that ‘‘proposed Items 

1602(a)(4) and 1602(c) of Regulation S– 

K should not be adopted,’’ said that ‘‘it 

is unclear whether a maximum 

redemption threshold for purposes of 

proposed Item 1602(a)(4) should require 

or call for anything other than the 

redemption of 100% of the SPAC’s 

public shares.’’ 231 This commenter also 

said that ‘‘a maximum redemption 

scenario for a SPAC would vary across 

different de-SPAC transactions’’ because 

of the various ways the redemption 

level is impacted, including by the 

SPACs’ governing documents, listing 

requirements, and negotiated conditions 

in the de-SPAC transaction.232 The 

commenter observed that ‘‘some deSPAC transactions are structured such 

that certain funding mechanisms, such 

as backstop, forward purchase or PIPE 

arrangements, apply only in the event of 

certain redemption thresholds, further 

complicating the ability to make the 

assumptions required by proposed Item 

1602(a)(4).’’ 233 As a result, this 

commenter asserted that ‘‘any purported 

maximum redemption scenario 

disclosed at the time of IPO cannot be 

based on reasonable assumptions given 


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234 Id. 

235Letter from White & Case. 

236Letter from CII, citing Joanna Makris, SPAC 

Market Review 2022 as ‘‘finding February 2022 

redemption rate of 89%’’ available at https://

www.boardroomalpha.com/spac-market-reviewmarch-2022/. 

237Letters from Freshfields, Vinson & Elkins, 

White & Case. 

238Letter from White & Case. 

239Letter from White & Case. 

240Letters from Freshfields, Vinson & Elkins 

(stating that the specifics of the transaction that are 

unknown include: ‘‘will there be a PIPE financing, 

at what per share valuation, will the PIPE issuance 

include warrants, will there be convertible equity 

or debt issued, what will transaction expenses be, 

are there convertible or derivative securities of the 

target that will be assumed,’’ and ‘‘Most 

importantly, the value of the target company is not 

known at the time of the IPO.’’). 

241Letter from Freshfields (stating that they did 

not think the dilution table on the cover of the 

SPAC’s IPO prospectus ‘‘will be meaningful 

because the SPAC does not yet know the amount 

of equity to be issued in a PIPE (if any) or to the 

target company’s stockholders (if any) or the extent 

to which the SPAC sponsor’s promote will be 

renegotiated in connection with the actual de-SPAC 

transaction.’’). 

242Letter from Vinson & Elkins. 

243Letters from ABA, Ropes & Gray (‘‘information 

called for by the proposed rules would not provide 

investors or analysts with meaningful information 

in valuing SPAC shares at the time of a SPAC 

IPO.’’), Vinson & Elkins, White & Case. 

244Letter from ABA. 

245Letter from Loeb & Loeb. 

246Letter from Vinson & Elkins. 

247Letter from White & Case. 

248 Id. 

249Letter from Ernst & Young LLP (June 13, 2023) 

(‘‘Ernst & Young’’). 

250 Id. 

251Letter from PwC. 

252Letter from Bullet Point Network. 

253Letter from Vinson & Elkins. 

254See Proposing Release, supra note 7, at 29470 

(request for comment number 20) (‘‘Should we 

require other information either in addition to, or 

in lieu of, the proposed dilution disclosure, such as 

disclosure of the cumulative amount of dilution 

that non-redeeming shareholders may experience or 

the amount of net cash underlying each share at the 

time of a de-SPAC transaction? If so, should we 

require that this disclosure be presented in a tabular 

format?’’). 

255Letters from CII; Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber; NASAA; Vinson 

& Elkins. 

the inherent lack of specifics available 

at the time of the IPO for a prospective 

de-SPAC transaction.’’ 234

The same commenter said that ‘‘a 

SPAC may actually become subject to a 

maximum redemption scenario that is 

lower than the quartile intervals 

required to be presented by proposed 

Item 1602(a)(4).’’ 235 One commenter 

recommended the Commission require 

dilution disclosure at a 90% redemption 

level, stating it ‘‘could be particularly 

useful to investors if recent redemption 

activity is indicative of future 

activity.’’ 236

Commenters raised concerns that 

dilution disclosure would be 

characterized by uncertainty, be based 

on hypothetical assumptions, or depend 

on unknown variables.237 One 

commenter said that the proposed 

disclosure under Item 1602(a)(4) and (c) 

would require ‘‘dilution disclosure 

informed by purely hypothetical 

assumptions’’ and that ‘‘lengthy and 

detailed caveats regarding the 

assumptions would be needed.’’ 238 As a 

result of these concerns, the commenter 

concluded that ‘‘proposed Items 

1602(a)(4) and 1602(c) of Regulation S– 

K would only confuse and mislead 

investors.’’ 239 Other commenters noted 

that dilution disclosure at the IPO stage 

would depend on unknown 

variables,240 which one of these 

commenters said will mean the 

disclosure is not meaningful.241 One of 

these commenters suggested that 

‘‘tabular disclosure and sensitivity 

analyses in SPAC IPO registration 

statements should be limited to the 

sources of dilution in existence or 

contracted at the time of the IPO.’’ 242

Several commenters expressed 

concerns that the proposed dilution 

disclosure would not provide 

meaningful information to investors.243

One of these commenters said that 

‘‘proposed Items 1602(c) and 1604(c) are 

ambiguous as to what is required to be 

considered as dilution and how that 

dilution is to be measured and 

presented.’’ 244 This commenter said 

they do not believe current Item 506 

disclosures are useful to investors and 

do not believe investors will find the 

similar disclosures proposed to be 

required by Items 1602(a)(4) and (c) and 

1604(c) to be any more useful. One 

commenter said, ‘‘the proposed 

additional dilution disclosure to be 

included in an IPO prospectus 

(proposed Item 1602) would just capture 

in one place information already being 

disclosed with perhaps some new 

caveats about potential for dilutive 

financings and accordingly not result in 

a better informed investor.’’ 245

The Commission proposed that the 

calculation of pro forma net tangible 

book value be done consistent with the 

methodologies and assumptions used in 

the disclosure provided pursuant to 

Item 506 of Regulation S–K. One 

commenter said that ‘‘[Item 506] 

presentation is not meaningful to 

investors and in some instances the 

presentation may actually show that 

there is a decrease in net tangible book 

value from the offering after giving 

effect to the redeemable shares.’’ 246

Another commenter said that, without 

an identified de-SPAC target or 

structured de-SPAC transaction, the 

limited information at the time of the 

SPAC IPO used to calculate the 

proposed Item 1602(a)(4) disclosures 

would produce ‘‘an absurd result.’’ 247

The commenter expressed the view that 

the disclosure provided based on this 

limited information would not be useful 

because ‘‘all of a SPAC’s shares sold to 

public investors in the SPAC’s IPO (the 

public shares) are required to be 

classified as temporary equity upon the 

completion of the IPO,’’ which would 

mean that ‘‘the calculation of pro forma 

net tangible book value per share in 

accordance with U.S. GAAP [Generally 

Accepted Accounting Principles] 

inevitably produces a deficit and 

remains the same constant figure across 

any assumed redemption 

thresholds.’’ 248

Another commenter said that 

‘‘proposed Item 1602(a)(4) would 

require disclosure of the estimated 

remaining pro forma net tangible book 

value per share at specified redemption 

levels consistent with the 

methodologies in Item 506 of Regulation 

S–K’’ but noted that ‘‘Item 506 does not 

provide a definition for net tangible 

book value,’’ and, as a result, the 

commenter has ‘‘observed diversity in 

such calculations.’’ 249 The commenter 

recommended ‘‘that the Commission 

include a definition of net tangible book 

value in the final rule to enhance the 

usefulness and comparability of the 

dilution disclosures for investors in 

SPAC transactions and other registered 

securities offerings as applicable.’’ 250

One commenter recommended that 

the Commission give ‘‘illustrative 

examples and calculations’’ of the 

dilution disclosure to ensure ‘‘robust, 

transparent, and consistent dilution 

disclosures.’’ 251 Another commenter 

said they ‘‘agree with the proposal to 

add sensitivity tables to show the 

dilution across a range of redemption 

scenarios and would suggest the SEC 

provide a format to standardize that 

disclosure.’’ 252 One commenter 

recommended that ‘‘sensitivity analyses 

should only be required for sources of 

dilution, such as warrants, where the 

dilutive impact varies based on 

changing equity values or other 

variables.’’ 253

In response to a request for comment 

asking whether we should require 

disclosure of net cash per share (in 

addition to, or in lieu of the proposed 

dilution disclosures),254 several 

commenters recommended we require 

net cash per share disclosure.255 One 

commenter said that, in lieu of the 

proposed dilution disclosure, ‘‘SPACs 

should present the per share amount of 


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256Letters from Vinson & Elkins. 

257Letter from NASAA. 

258Letter from CII. 

259 Id. 

260 Id. 

261Letter from Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber (providing that net 

cash per share should include: ‘‘each material 

source of future dilution and dissipation of cash 

that non-redeeming shareholders may experience 

by electing not to tender their shares in connection 

with the de-SPAC transactions and quantify its 

impact on the net cash underlying a share’’). 

262Letter from Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber, citing Klausner, 

Ohlrogge & Halhubber, Net Cash Per Share: The Key 

to Disclosing SPAC Dilution (NYU Law and 

Economics Research Paper No. 22–14, Mar. 28, 

2022, last revised Sept. 17, 2022), available at 

https://ssrn.com/abstract=4047180 (retrieved from 

SSRN Elsevier database) (see supra note 156). For 

treatment of warrants in connection with this net 

cash per share formula, see id. at 27 (‘‘All warrants 

should be valued using standard accounting 

methodologies as of the day before the merger’s 

announcement, and their aggregate value should be 

subtracted from total cash. This is consistent with 

most SPACs’ accounting treatment of warrants as a 

liability. To ensure comparability across different 

SPACs, however, we propose subtracting the value 

of the warrants even when they are structured to 

avoid liability treatment under GAAP.’’ (Footnotes 

omitted)); id. at 27, n.32 (‘‘Alternatively, SPACs 

could be required to disclose the value of warrants 

at the time their proxy statement is filed. This 

would reflect the market’s valuation of the 

warrants’ dilution.’’); but see Klausner, Ohlrogge & 

Ruan, supra note 18 at 233, n.11 (2022) (‘‘The 

concept of net cash per share is central to our 

analysis. We define that term to be cash in the 

SPAC minus underwriting fees and other fees 

incurred in connection with a SPAC’s merger minus 

the value of warrants as of the day before the 

announcement of the merger, divided by shares 

issued in the SPAC’s IPO plus shares issued to 

shares issued to PIPE investors. We follow the 

SEC’s treatment of warrants as liabilities. If we treat 

warrants as equity of the same value in the 

denominator of net cash per share, the results 

would not be significantly different. For the few 

SPACs that have convertible debt, we treat the 

conversion feature as a warrant.’’ (Emphasis 

added)). 

263 Id. 

264Letter from CII. 

265Letter from Loeb & Loeb. 

266 Id. 

267 Id. 

268Letter from Vinson & Elkins. 

269Letter from Vinson & Elkins. Regarding the 

treasury stock method for warrants, see, e.g., Donald 

E. Kieso, Jerry J. Weygandt & Terry D. Warfield, 

Intermediate Accounting, Volume 2, 17 (2019) 

(‘‘The treasury stock method applies to written call 

options and equivalents and assumes that: 1. the 

options and warrants or equivalents are exercised 

at the beginning of the year (or on the date of issue 

if it is later), and 2. the proceeds are used to 

purchase common shares for the treasury at the 

average market price during the year. If the exercise 

price is lower than the average market price, then 

the proceeds from exercise are not sufficient to buy 

back all the shares. This would result in more 

shares being issued than purchased and will 

therefore be dilutive. The excess number of the 

shares (incremental number) to be issued over the 

number of shares that would be purchased is added 

to the weighted average number of shares 

outstanding in calculating [per share ratios]. Note 

that no adjustment is made to the numerator.’’). 

270Letter from CFA Institute. 

cash (or securities) in trust, under a 

range of hypothetical redemption 

scenarios and after giving effect to 

sponsor equity, underwriter 

compensation and IPO expenses.’’ 256

Another commenter said that ‘‘the 

actual net cash per share for nonredeeming shareholders under different 

redemption scenarios should be 

displayed in an easily understandable, 

tabular format.’’ 257

A different commenter said they 

‘‘support clear disclosure of net cash per 

share after taking into account all 

sources of dilution and dissipation of 

cash, under various redemption 

scenarios.’’ 258 This commenter said that 

reductions in net cash may be 

attributable to a variety of sources, 

including: (a) sponsor compensation 

and investment terms, (b) share 

redemption, (c) exercise of warrants, 

fractional warrants and convertible 

securities, (d) PIPE financing, and (e) 

underwriting fees.259 The commenter 

also said that ‘‘[g]iven the complexity 

and contingencies involved in the deSPAC process, investors . . . need clear 

information about potential 

consequences to inform their 

understanding of the true cost of the 

business combination.’’ 260

One group of commenters said that 

‘‘the final rules for SPAC mergers 

should require SPACs to prominently 

disclose the amount of net cash 

underlying each share at the time of a 

de-SPAC transaction,’’ including on the 

cover page of the registration 

statement.261 These commenters also 

said, with respect to the proposed Item 

1604(c) requirement to describe ‘‘each 

material potential source of future 

dilution’’ for non-redeeming SPAC 

shareholders, that the dilution concept 

included in the provision reflects a 

concept of dilution that is focused on 

‘‘ownership dilution,’’ not the kind of 

dilution (and dissipation of cash) that 

reduces the net cash underlying a SPAC 

share.262 These commenters concluded 

that, as proposed, none of the 

disclosures in Item 1604(c) of 

Regulation S–K would inform investors 

about the net cash underlying a SPAC 

share. These commenters also provided 

a formula for the calculation of net cash 

per share: (a) total cash (consisting of 

the sum of cash from SPAC public 

shareholders plus cash from PIPEs or 

forward purchase agreements minus 

cash expenses minus the value of 

warrants minus the value of other equity 

derivatives), divided by (b) total shares 

(consisting of public shares plus 

founder shares plus PIPE or forward 

purchase agreement shares plus other 

shares plus shares issuable under 

rights).263 Another commenter 

supported using this calculation of net 

cash per share after taking into account 

all sources of dilution and dissipated 

cash under 25%, 50%, 75%, 90%, and 

100% redemption scenarios.264

One commenter said they ‘‘read 

proposed Item 1604(c)(1) as requiring a 

determination of the enterprise 

valuation that will result in a 

stockholder’s ‘interest per share’ 

(calculated by reference to a pro forma 

closing date balance sheet. . .). . .being 

at least equal to the $10 price per share 

paid in the IPO.’’ 265 The commenter 

said ‘‘this is the equivalent of requiring 

a traditional IPO to include in its Item 

506 dilution section alternative price 

ranges, the midpoint of which would 

not result in dilution to IPO investors,’’ 

which the commenter said ‘‘we can 

safely assume would be materially 

different from the proposed cover page 

range due to the significant disconnect 

between market prices and net book 

value per share.’’ 266 The commenter 

said ‘‘if misunderstood by the reader, 

this proposed disclosure also has the 

dangerous potential to lead a SPAC 

shareholder to view the disclosure as a 

guarantee that the stock will not trade 

down in the aftermarket.’’ 267

One commenter on the proposal said 

that ‘‘[f]or de-SPAC transactions, the 

most meaningful information would be 

the expected value per share, using the 

agreed equity value of the target 

company plus net cash proceeds from 

the de-SPAC transaction under a range 

of hypothetical redemption 

scenarios.’’ 268 The commenter said, 

‘‘Given that SPAC warrants are almost 

uniformly out of the money at the 

agreed per share equity value used in 

the de-SPAC transaction (typically the 

$10 IPO per unit price), conveying the 

potential dilutive effect of the warrants 

can be handled in many different 

ways.’’ The commenter suggested 

disclosing ‘‘the percentage ownership of 

the surviving company at various 

hypothetical share increments above 

$10 per share, utilizing the treasury 

share method.’’ 269

One commenter recommended that 

the Commission should consider 

requiring that intermediaries provide 

information about ‘‘the sponsor, actual 

and potential conflicts of interest, [and] 

how much a non-redeeming SPAC 

investor’s interest will be diluted’’ in a 

separate ‘‘Key Risks and Conflicts form’’ 

that is detached from the prospectus, so 

that the disclosure receives more 

investor attention and focus.270

One commenter said that disclosures 

about ‘‘any lock-up periods or earnout 

provisions for sponsors or underwriters 


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271Letter from NASAA. 272See letters from PwC, Ernst & Young, supra 

notes 249 and 251. 

would be of significant interest to 

investors and should be required if part 

of the SPAC offering.’’ 271

3. Final Rules 

i. Overview of Final Rules and Changes 

From Proposal 

After considering the comments 

received, regarding dilution disclosure 

in SPAC registered offerings (such as 

SPAC IPOs) other than de-SPAC 

transactions, we are adopting Item 

1602(a)(3) and (4), (b)(6), and (c) as 

proposed, except for certain 

modifications we discuss below. 

Regarding de-SPAC transactions, we are 

also adopting Item 1604(a)(3), (b)(4), (5), 

and (6), and (c) as proposed, except for 

certain modifications we discuss below. 

Each of these provisions is discussed in 

detail below. 

a. Overview of Final Item 1602 Dilution 

Disclosure (IPOs and Non-De-SPAC 

Transaction Registered Offerings) and 

Changes From Proposal 

1. Item 1602(a) 

Final Item 1602(a)(3) requires, on the 

outside front cover page of the 

prospectus in plain English, a statement 

of the amount of the compensation 

received or to be received by the SPAC 

sponsor, its affiliates, and promoters, 

the amount of securities issued or to be 

issued by the SPAC to the SPAC 

sponsor, its affiliates, and promoters 

and the price paid or to be paid for such 

securities, and whether this 

compensation and securities issuance 

may result in a material dilution of the 

purchasers’ equity interests. Final Item 

1602(a)(3) also requires the provision of 

a cross-reference, highlighted by 

prominent type or in another manner, to 

the locations of related disclosures in 

the prospectus. Final Item 1602(a)(3) is 

different from the proposal only with 

respect to changes made regarding 

SPAC sponsors and securities issuances 

discussed above in section II.B. 

Final Item 1602(a)(4) requires, with 

respect to SPAC IPOs, on the outside 

front cover page of the prospectus in 

plain English, disclosure in the tabular 

format specified at quartile intervals 

based on percentages of the maximum 

redemption threshold: the offering 

price; as of the most recent balance 

sheet date filed, the net tangible book 

value per share, as adjusted, as if the 

offering and assumed redemption levels 

have occurred and to give effect to 

material probable or consummated 

transactions (other than the completion 

of a de-SPAC transaction); and the 

difference between the offering price 

and such net tangible book value per 

share, as adjusted. 

Final Table 1 to Paragraph (a)(4) 

provides: 

REMAINING PRO FORMA NET TANGIBLE BOOK VALUE PER SHARE

Offering price of __ 

25% of 

maximum 

redemption 

50% of 

maximum 

redemption 

75% of 

maximum 

redemption 

Maximum 

redemption 

Final Instruction 1 to Item 1602(a)(4) 

provides, if the offering includes an 

over-allotment option, separate rows in 

the tabular disclosure must be included 

showing the information required by 

paragraph (a)(4) with and without the 

exercise of the over-allotment option. 

Final Item 1602(a)(4) includes several 

changes compared to the proposal. First, 

we have clarified in the final rule how 

to calculate the required dilution 

information. In response to the 

proposal, some commenters generally 

sought clarification, such as illustrative 

examples, calculations, or definitions, 

in connection with the dilution 

calculation.272 We believe the changes 

in the final rules will be simpler for 

registrants to follow and comply with 

because they provide clear steps 

regarding how the dilution disclosure 

should be determined. In addition, we 

have deleted proposed references to 

calculating dilution ‘‘consistent with the 

methodologies and assumptions used in 

the disclosure provided pursuant to 

§ 229.506 (Item 506 of Regulation S–K).’’ 

These references to Item 506 are not 

necessary given the changes made to 

clarify how to calculate the required 

dilution information. This change also 

ensures that redeemable common stock 

is not treated as temporary equity for 

purposes of the calculation in a way that 

could undermine the meaningfulness of 

the dilution disclosure as we discuss in 

more detail below in response to 

comments. Relatedly, we are revising 

Item 6 of Form S–1 to state that the 

registrant must ‘‘Provide the 

information required by Item 506 of 

Regulation S–K (§ 229.506 of this 

chapter), unless the registrant is a 

special purpose acquisition company (as 

defined in Item 1601 of Regulation S– 

K),’’ because the requirements of Item 

1602(a)(4) are intended to supplant the 

requirements of Item 506 for SPACs. 

In addition, we have deleted proposed 

references in Item 1602(a)(4) to 

‘‘estimated remaining pro forma net 

tangible book value per share’’ as the 

name for the dilution measurement and 

instead refer to ‘‘net tangible book value 

per share, as adjusted.’’ We were 

concerned that references to ‘‘estimated 

remaining pro forma net tangible book 

value per share’’ could be ambiguous 

and that registrants could misinterpret 

the term to require estimation of what 

the net tangible assets of a combined 

company might be in any ultimate deSPAC transaction. The deletion of this 

term and its replacement with the new 

term helps clarify that registrants should 

not include any estimates of the assets 

of any ultimate target company in this 

calculation. 

In addition, in final Item 1602(a)(4), 

we have replaced the proposed phrase 

‘‘at quartile intervals up to the 

maximum redemption threshold’’ with 

‘‘at quartile intervals based on 

percentages of the maximum 

redemption threshold.’’ We believe 

registrants could mistakenly interpret 

the proposed terms to require quartile 

intervals based on the total number of 

shares issued in the offering for the 

three redemption levels in the table 

other than the maximum redemption 

level. We believe this change will 

eliminate that potential for 

misinterpretation. 

2. Item 1602(b) 

Final Item 1602(b)(6) requires the 

prospectus summary to include in plain 

English in a tabular format, the nature 

and amount of the compensation 

received or to be received by the SPAC 

sponsor, its affiliates, and promoters, 

the amount of securities issued or to be 

issued by the SPAC to the SPAC 

sponsor, its affiliates, and promoters 

and the price paid or to be paid for such 


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273 Depending on the facts and circumstances, 

both qualitative and quantitative information may 

be required in the disclosures made outside of the 

table. 

securities, and, outside of the table, the 

extent to which this compensation and 

securities issuance may result in a 

material dilution of the purchasers’ 

equity interests. Final Item 1602(b)(6) is 

different from the proposal only with 

respect to changes made regarding 

SPAC sponsors and securities issuances 

discussed above in section II.B. 

3. Item 1602(c) 

Final Item 1602(c) requires disclosure 

in a tabular format for the same quartile 

intervals as in Item 1602(a)(4): the 

offering price; net tangible book value 

per share, as adjusted, determined in the 

same manner as in Item 1602(a)(4); and 

the difference between the offering price 

and such net tangible book value per 

share, as adjusted. Final Item 1602(c) 

also requires that the tabular disclosure 

must show: the nature and amounts of 

each source of dilution used to 

determine net tangible book value per 

share, as adjusted; and the number of 

shares used to determine net tangible 

book value per share, as adjusted; and 

any adjustments to the number of shares 

used to determine the per share 

component of net tangible book value 

per share, as adjusted. Final Item 

1602(c) also requires a description of 

each material potential source of future 

dilution following the registered 

offering by the special purpose 

acquisition company, including sources 

not included in the table with respect to 

the determination of net tangible book 

value per share, as adjusted. Final Item 

1602(c) also requires a description of the 

model, methods, assumptions, 

estimates, and parameters necessary to 

understand the tabular disclosure. 

Final Item 1602(c) contains several 

changes from the proposal. We have 

clarified in the final rule that Item 

1602(c) dilution should be calculated in 

the same way as in Item 1602(a)(4) and 

have deleted references in proposed 

Item 1602(c) to Item 506 of Regulation 

S–K, consistent with changes discussed 

above made to final Item 1602(a)(4) in 

this respect. In addition, we have 

clarified that the table in Item 1602(c) 

should show the nature and amounts of 

each source of dilution and the number 

of shares used in the calculation in 

order to eliminate any ambiguity and 

the potential that registrants could 

misinterpret the item to mean that the 

table merely needs to show the final 

dilution information and not the line 

items that went into its calculation. 

With respect to the proposed 

requirement to describe material 

potential sources of future dilution, the 

final rules specify that the description 

should be located outside the table. The 

final rules also state that the description 

of each material potential source of 

future dilution outside of the table 

should include ‘‘sources not included in 

the table with respect to the 

determination of net tangible book value 

per share, as adjusted.’’ We are making 

this change to clarify that the disclosure 

outside of the table is not to be merely 

duplicative of the sources of dilution 

used for the calculation of the measure 

of dilution within the table. Without 

these changes, the item could have been 

misinterpreted by registrants to require 

only disclosure of the same sources of 

dilution used in the tabular calculation 

of dilution, only in a non-tabular format. 

Depending on a SPAC’s specific facts 

and circumstances, the non-tabular 

disclosure of ‘‘each material potential 

source of future dilution’’ under Item 

1602(c) may need to discuss a broader 

set of items than ‘‘material probable or 

consummated transactions’’ that are 

included for purposes of calculating the 

tabular dilution measure.273

We have also clarified that underlying 

factors such as assumptions that are 

necessary to understand the table must 

be described in order to eliminate any 

ambiguity under the proposal that no 

such information is required beyond the 

numbers in the dilution table. This 

clarification also makes final Item 

1602(c) consistent with final Item 

1604(c), which contained a proposed 

provision to this effect (that we are 

adopting as discussed in detail below). 

b. Overview of Final Item 1604 Dilution 

Disclosure (De-SPAC Transactions) and 

Changes From Proposal 

1. Item 1604(a) 

Final Item 1604(a)(3) requires, on the 

outside front cover page of the 

prospectus in plain English, a statement 

of the amount of the compensation 

received or to be received by the SPAC 

sponsor, its affiliates, and promoters in 

connection with the de-SPAC 

transaction or any related financing 

transaction; the amount of securities 

issued or to be issued by the SPAC to 

the SPAC sponsor, its affiliates, and 

promoters and the price paid or to be 

paid for such securities in connection 

with the de-SPAC transaction or any 

related financing transaction; and 

whether this compensation and 

securities issuance may result in a 

material dilution of the equity interests 

of non-redeeming shareholders who 

hold the securities until the 

consummation of the de-SPAC 

transaction. Final Item 1604(a)(3) also 

requires the provision of a crossreference, highlighted by prominent 

type or in another manner, to the 

locations of related disclosures in the 

prospectus. Final Item 1604(a)(3) is 

different from the proposal only with 

respect to changes made regarding 

SPAC sponsors and securities issuances 

discussed above in section II.B. 

2. Item 1604(b) 

Final Item 1604(b)(4) requires that the 

prospectus summary must include in 

plain English, in a tabular format, the 

terms and amount of the compensation 

received or to be received by the SPAC 

sponsor, its affiliates, and promoters in 

connection with the de-SPAC 

transaction or any related financing 

transaction, the amount of securities 

issued or to be issued by the SPAC to 

the SPAC sponsor, its affiliates, and 

promoters and the price paid or to be 

paid for such securities in connection 

with the de-SPAC transaction or any 

related financing transaction; and, 

outside of the table, the extent to which 

that compensation and securities 

issuance has resulted or may result in a 

material dilution of the equity interests 

of non-redeeming shareholders of the 

special purpose acquisition company. 

In final Item 1604(b)(4), we revised to 

clarify that certain disclosure should 

appear outside of the table (rather than 

within it). It also makes the item 

consistent with Item 1602(b)(6) in 

requiring disclosure of the extent of the 

material dilution not merely whether or 

not there is such material dilution. Also, 

in the final rule, we have replaced the 

term ‘‘unaffiliated security holders’’ 

with ‘‘non-redeeming shareholders’’ to 

ensure consistency of usage throughout 

Item 1604. In addition, this change 

eliminates any ambiguity that might 

have caused some registrants to believe 

they need to subtract affiliated shares 

from the denominator of the net tangible 

book value per share calculation, which 

the proposal did not intend. We also 

made changes to final Item 1604(b)(4) as 

compared to the proposal with respect 

to SPAC sponsors, promoters, and 

securities issuances discussed above in 

section II.B. 

Final Item 1604(b)(5) requires the 

prospectus summary to include a brief 

description in plain English of the 

material terms of any material financing 

transactions that have occurred or will 

occur in connection with the 

consummation of the de-SPAC 

transaction, the anticipated use of 

proceeds from these financing 

transactions and the dilutive impact, if 

any, of these financing transactions on 

non-redeeming shareholders. The sole 

change from the proposal is that, in final 


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274 In addition, in final Item 1603(b)(5) we added 

the word ‘‘material’’ before the words ‘‘financing 

transactions’’ for consistency with final Item 

1604(a)(2). 

275See letters from PwC, Ernst & Young, supra 

notes 249 and 251. 

276 In final Item 1604(c) we moved the phrase 

‘‘that non-redeeming shareholders may experience 

by electing not to tender their shares in connection 

with the de-SPAC transaction’’ from the end of the 

relevant sentence to instead follow the words 

‘‘future dilution’’ for clarity. 

277While there may be exceptions depending on 

specific facts and circumstances, the presentation of 

fewer than four levels of redemption is unlikely to 

constitute a sufficient range of outcomes to inform 

investors. As discussed above, there is no 

requirement in Item 1604(c) to select four 

redemption levels as there is in Item 1602(a)(4) and 

(c), but registrants who seek to provide less than 

four redemption levels pursuant to Item 1604(c) 

should ensure such presentation is appropriate and 

tailored to the unique circumstances of the relevant 

Item 1604(b)(5), we have revised the 

term ‘‘unaffiliated security holders’’ to 

‘‘non-redeeming shareholders’’ for the 

same reasons as discussed above 

regarding Item 1604(b)(4).274

Final Item 1604(b)(6) requires the 

prospectus summary to include a brief 

description in plain English of the rights 

of security holders to redeem the 

outstanding securities of the special 

purpose acquisition company and the 

potential dilutive impact of redemptions 

on non-redeeming shareholders. We 

made one change to final Item 

1604(b)(6) compared to the proposal to 

clarify the disclosure required. Final 

1604(b)(6) contains the phrase 

‘‘potential dilutive impact of 

redemptions on non-redeeming 

shareholders’’ instead of the proposed 

phrase ‘‘impact of redemptions on the 

value of the securities owned by nonredeeming shareholders.’’ We believe 

this clarification will eliminate 

ambiguity and the potential that 

registrants could misinterpret the item 

to require undertaking valuations under 

different scenarios of the securities 

owned by non-redeeming shareholders. 

3. Item 1604(c) 

We received comments that indicated 

that we should provide a definition of 

net tangible book value or provide 

examples to enhance the comparability 

of the disclosures.275 In consideration of 

these comments, we have revised Item 

1604(c) to more clearly set forth the 

dilution disclosures and calculations it 

requires and to align this dilution 

calculation with the dilution calculation 

under Item 1602(a)(4) and (c), although, 

as we discuss herein, there are technical 

differences between the adjustments 

under Item 1602(a)(4) and (c) versus 

adjustments under Item 1604(c). 

Final Item 1604(c) requires disclosure 

in a tabular format that includes 

intervals representing selected potential 

redemption levels that may occur across 

a reasonably likely range of outcomes of: 

the offering price disclosed pursuant to 

Item 1602(a)(4) in the initial registered 

offering by the SPAC; as of the most 

recent balance sheet date filed, the net 

tangible book value per share, as 

adjusted, as if the selected redemption 

levels have occurred and to give effect 

to, while excluding the de-SPAC 

transaction itself, material probable or 

consummated transactions, and other 

material effects on the SPAC’s net 

tangible book value per share from the 

de-SPAC transaction; and the difference 

between such offering price and such 

net tangible book value per share, as 

adjusted. Final Item 1604(c) also 

requires that the tabular disclosure must 

show: the nature and amounts of each 

source of dilution used to determine net 

tangible book value per share, as 

adjusted; the number of shares used to 

determine net tangible book value per 

share, as adjusted; and any adjustments 

to the number of shares used to 

determine the per share component of 

net tangible book value per share, as 

adjusted. 

Final Item 1604(c) also requires, 

outside of the table, a description of 

each material potential source of future 

dilution that non-redeeming 

shareholders may experience by electing 

not to tender their shares in connection 

with the de-SPAC transaction, including 

sources not included in the table with 

respect to the determination of net 

tangible book value per share, as 

adjusted.276 Final Rule 1604(c)(1) 

requires, with respect to each 

redemption level, a statement of the 

company valuation at or above which 

the potential dilution results in the 

amount of the non-redeeming 

shareholders’ interest per share being at 

least the IPO price per share of common 

stock. Final Item 1604(c)(2) requires the 

provision of a description of the model, 

methods, assumptions, estimates, and 

parameters necessary to understand the 

tabular disclosure. 

Final Item 1604(c) introductory text 

and (c)(1) and (2) contain certain 

changes from the proposal. We believe 

the changes in the final rules will be 

simpler for registrants to follow and 

comply with because they provide clear 

steps regarding how the dilution 

disclosure should be determined. In 

addition, in clarifying how to calculate 

the required dilution, final Item 1604(c) 

also ensures that redeemable common 

stock is not treated as temporary equity 

for purpose of the calculation in a way 

that could undermine the 

meaningfulness of the dilution 

disclosure. As part of these 

clarifications, we have deleted the 

proposed provision in Item 1604(c)(1) 

that would have required ‘‘sensitivity 

analysis disclosure in tabular format 

that expresses the amount of potential 

dilution under a range of reasonably 

likely redemption levels.’’ We were 

concerned the meaning of that proposed 

provision could be unclear to 

registrants, particularly its references to 

‘‘sensitivity analysis.’’ We believe there 

was potential for some registrants to 

interpret the proposed provision merely 

to mean a range of redemption levels 

must be analyzed, while other 

registrants could interpret the provision 

to mean that a range of redemption 

levels must be analyzed and also that a 

sensitivity analysis must be conducted 

that reflects a range of assumptions for 

the range of redemption levels. 

We also have deleted the following 

language of proposed Item 1604(c)(1): 

‘‘At each redemption level in the 

sensitivity analysis, quantify the 

dilutive impact on non-redeeming 

shareholders of each source of dilution, 

such as the amount of compensation 

paid or to be paid to the SPAC sponsor, 

the terms of outstanding warrants and 

convertible securities, and underwriting 

and other fees.’’ We were concerned that 

the references in that proposed 

provision to certain sources of potential 

dilution could confuse registrants about 

how to calculate dilution and could 

produce inconsistent interpretations 

across different registrants. 

Final Item 1604(c) accomplishes the 

same goal as these deleted provisions in 

proposed Item 1604(c)(1) by requiring 

disclosure ‘‘in a tabular format that 

includes intervals representing selected 

potential redemption levels that may 

occur across a reasonably likely range of 

outcomes.’’ We believe the final rule 

will make it clear that the item does not 

prescribe the redemption levels for 

which dilution information must be 

provided (in contrast to Item 1602(a)(4) 

and (c)). 

Under Item 1604(c), registrants should 

not select redemption levels that are not 

possible. For example, registrants 

should not select levels that, combined 

with any other funding (such as PIPEs) 

in connection with the de-SPAC 

transaction, would result in the SPAC 

having cash that is lower than any 

minimum cash condition in the 

agreements related to the de-SPAC 

transaction. Registrants are not required 

to select exactly four levels for Item 

1604(c) (which they are required to do 

in Item 1602(a)(4) and (c)) but should 

ensure the redemption levels reasonably 

inform investors of a range of potential 

outcomes.277


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de-SPAC transaction warranting such a 

presentation. 

278 In this regard, we note that the initial 

purchasers in SPAC IPOs often resell or redeem 

their shares prior to the completion of the de-SPAC 

transaction. See, e.g., Benjamin Mullin & Amrith 

Ramkumar, BuzzFeed Suffers Wave of SPAC 

Investor Withdrawals Before Going Public, Wall St. 

J., Dec. 2, 2021. See also Klausner, Ohlrogge & 

Ruan, supra note 18. 

279See Guides for Preparation and Filing of 

Registration Statements, Release No. 33–4666 (Feb. 

7, 1964) [29 FR 2490, 2492 (Feb. 15, 1964)]; Guides 

for the Preparation and Filing of Registration 

Statements, Release No. 33–4936 (Dec. 9, 1968) [33 

FR 18617, 18619 (Dec. 17, 1968)]; Contents of 

Prospectuses and to Guides for Preparation and 

Filing of Registration Statements, Release No. 33– 

5278 (Aug. 8, 1972) [37 FR 15985, 15986 (Aug. 9, 

1972)]; Proposed Revision of Regulation S–K and 

Guides for the Preparation and Filing of 

Registration Statements and Reports, Release No. 

33–6276 (Dec. 23, 1980) [46 FR 78, 82–83 (Jan. 2, 

1981)]; Adoption of an Integrated Disclosure 

System, Release No. 33–6383 (Mar. 19, 1982) [47 FR 

11380, 11390 (Mar. 16, 1982)]. 

280Letters from ABA, Ropes & Gray, Vinson & 

Elkins, White & Case. See supra notes 243 and 244 

and accompanying text. 

281See, e.g., Klausner, Ohlrogge & Halbhuber, 

supra note 156 at 19 (2022) (‘‘Disclosure of net cash 

per share at the time of a SPAC’s merger is 

necessary to allow shareholders to make an 

informed decision as to whether to redeem their 

shares (for roughly $10 per share) or to invest in a 

proposed merger. . . . One would expect the 

amount of net cash invested in a target to be closely 

related to the value of post-merger shares that SPAC 

shareholders receive in exchange. Our research 

bears this relationship out empirically, showing 

that the lower the net cash per share that a SPAC 

delivers, the lower the post-merger share price will 

be.’’ (Footnotes omitted)). As discussed below in 

the section ‘‘Net Cash Per Share Disclosure 

Recommendations,’’ we agree with comments that 

suggested net cash per share information is 

important to investors, but we believe the net 

tangible book value per share calculation, which we 

discuss in more detail below, would substantially 

convey such information. 

Furthermore, we have clarified that 

the table in final Item 1604(c) should 

show the nature and amounts of each 

source of dilution and the number of 

shares used in the calculation in order 

to eliminate any ambiguity and the 

potential that registrants could 

misinterpret the item to mean that the 

table needs to show only the final 

dilution information and not the line 

items that went into its calculation. 

In addition, with respect to the 

proposed requirement to describe 

material potential sources of future 

dilution, the final rule specifies that the 

description should be located outside of 

the table. The final rule also states that 

each material potential source of future 

dilution outside of the table should 

include ‘‘sources not included in the 

table with respect to the determination 

of net tangible book value per share, as 

adjusted.’’ We are making this change to 

clarify that the disclosure outside of the 

table is not merely duplicative of the 

sources of dilution used for the 

calculation of the measure of dilution 

within the table. Without these changes, 

the item could have been misinterpreted 

by registrants to require disclosure of 

the same sources of dilution used in the 

tabular calculation of dilution, only in 

a non-tabular format. Depending on a 

SPAC’s specific facts and 

circumstances, the non-tabular 

disclosure of ‘‘each material potential 

source of future dilution’’ under Item 

1604(c) may need to discuss a broader 

set of items than ‘‘material probable or 

consummated transactions’’ that are 

included for purposes of calculating the 

tabular dilution measure. 

Finally, to reflect the deletion 

discussed above of the proposed 

provision in Item 1604(c)(1) regarding 

‘‘sensitivity analysis,’’ we have inserted 

in final Item 1604(c)(2) the words 

‘‘necessary to understand the tabular 

disclosure’’ instead of the proposed 

words ‘‘necessary to understand the 

sensitivity analysis disclosure.’’ 

ii. Value of SPAC Dilution Information 

to Investors as a General Matter and 

Under the Final Rules 

In adopting the final rules, we agree 

with the commenters that expressed the 

view that the dilution disclosures will 

provide helpful information to 

investors. There are a number of 

potential sources of dilution in common 

SPAC structures, including: (a) 

shareholder redemptions, (b) SPAC 

sponsor compensation, (c) underwriting 

fees, (d) warrants, (e) convertible 

securities, and (f) PIPE financings. The 

enhanced dilution disclosure required 

by the final rules will enable investors 

in a SPAC IPO and subsequent 

purchasers of SPAC shares to better 

understand the potential impact upon 

them of the various dilutive events that 

may occur over the lifespan of the 

SPAC.278

Dilution disclosure in Commission 

filings has evolved over time.279 Today, 

Commission dilution disclosure 

requirements remain important, 

including with respect to SPACs. The 

Commission disagrees with the views 

expressed by some commenters that 

dilution disclosure would not be 

meaningful for investors’ investment 

decision-making or for valuation 

purposes at the IPO stage or de-SPAC 

transaction stage.280 Investors may use 

dilution information differently 

depending on the type of registrant, 

such as whether the issuer is an 

operating company or a shell company, 

such as a SPAC. For example, with an 

operating company some ‘‘value 

investors’’ may compare the offering 

price to net tangible book value.281 For 

a SPAC, however, this specific 

comparison may be less meaningful 

than with an operating company 

because SPACs typically have limited 

assets at the time of the IPO and the 

offering price is typically fixed at $10 

per share. In addition, with an operating 

company, some ‘‘value investors’’ may 

compare the debt of the issuer to the net 

tangible book value. For a SPAC, 

however, this specific comparison may 

be less meaningful than with an 

operating company, because SPACs 

typically have limited debt at the time 

of the IPO and have limited assets. 

Furthermore, with an operating 

company, some investors may seek to 

determine a value for the issuer taking 

into account return on net tangible 

assets or by using a value calculated by 

multiplying a market average price-tonet-tangible-book-value-per-share ratio 

times the issuer’s net tangible book 

value per share. For a SPAC, however, 

these specific methods may be less 

meaningful than with an operating 

company because of the limited assets 

of the SPAC and limited, if any, net 

income at the time of the IPO. 

Dilution disclosure is important to 

SPAC investors for two reasons at both 

the IPO and de-SPAC transaction stages: 

(1) it provides investors a way of 

understanding the impact of the 

disparity in price paid by insiders and 

the price paid by investors for shares, 

and (2) it enables investor comparisons 

to other SPACs. Additionally, at the deSPAC transaction stage, dilution 

disclosure is important to SPAC 

investors for a third reason: it helps 

investors evaluate the economics of the 

de-SPAC transaction, which can inform 

their investing and voting decisions. We 

discuss these three reasons in more 

detail as follows. 

First, the difference in per share net 

tangible book value, as adjusted, as 

compared to the $10 offering price, 

demonstrates to investors how the 

typically lower-priced SPAC sponsor 

promote stake affects these investors’ 

claims on the tangible assets of the 

company. Similarly, at the de-SPAC 

transaction stage, when certain other 

transactions may become probable, the 

net tangible book value per share, as 

adjusted, will convey to investors a 

better understanding of the dilution that 

these other transactions may produce. 

Relatedly, net tangible book value per 

share, as adjusted, provides information 

to investors on dilution (in the sense of 

diminution in percentage ownership) 

resulting from the SPAC sponsor 

promote, because an increase in 

common shares in the denominator 

reduces net tangible book value per 

share, as adjusted. 


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282See, e.g., Klausner, Ohlrogge & Halbhuber, 

supra note 156 at 19 (2022) (‘‘Disclosure of net cash 

per share at the time of a SPAC’s merger is 

necessary to allow shareholders to make an 

informed decision as to whether to redeem their 

shares (for roughly $10 per share) or to invest in a 

proposed merger. . . . One would expect the 

amount of net cash invested in a target to be closely 

related to the value of post-merger shares that SPAC 

shareholders receive in exchange. Our research 

bears this relationship out empirically, showing 

that the lower the net cash per share that a SPAC 

delivers, the lower the post-merger share price will 

be.’’ (Footnotes omitted)). As discussed below in 

the section ‘‘Net Cash Per Share Disclosure 

Recommendations,’’ we agree with comments that 

suggested net cash per share information is 

important to investors, but we believe the net 

tangible book value per share calculation, which we 

discuss in more detail below, would substantially 

convey such information. 

283See, e.g., Richard Phalon, Forbes Greatest 

Investment Stories 3 (2004) (‘‘In his last years, Ben 

Graham,’’ the co-author with David Dodd of 

Security Analysis (1934), ‘‘distilled six decades of 

experience into ten criteria that would help the 

intelligent investor pick value stocks . . . The Ten: 

. . . [4.] A stock price down to two-thirds of 

tangible book value per share.’’). 

284See, e.g., ibid. (‘‘Ben Graham distilled six 

decades of experience into ten criteria . . . [6.] 

Total debt less than tangible book value.’’). 285See, e.g., Todd A. Finkle, Warren Buffett, 

Investor and Entrepreneur, (2023) (‘‘To assess a 

company’s potential as an investment vehicle,’’ the 

investors discussed in the book ‘‘are looking for a 

set of specific ratios that indicate potential for 

yielding high returns . . . Most of [these investors’] 

investments are in companies that earn ‘more than 

20 percent’ of what [one of the investors] calls the 

‘net tangible equity capital or net tangible assets’ 

required to run their businesses . . . The formula 

for returns on a company’s net tangible assets is as 

follows: Return on Net Tangible Assets = Net 

Income/Net Tangible Assets.’’). 

286See, e.g., Mario Massari, Gianfranco Gianfrate 

& Laura Zanetti, The Valuation of Financial 

Companies: Tools and Techniques, Section 5.3.1 

Market Multiples 126–127 (2014), David Frykman, 

Jakob Tolleryd, The Financial Times Guide to 

Corporate Valuation 58–59 (2012) (book-value 

based multiples work ‘‘best with a company with 

a lot of tangible assets like factories, hardware 

commodities, mines, etc. and that derives its 

revenue and cash flow from those assets. Examples 

of such companies today are banks, real estate and 

investment companies. . ..When calculating the P/ 

BV ratio for a company in distress, usually 

intangible assets are removed from the book value 

since they most probably have no resale value. That 

ratio is sometimes referred to as price/tangible book 

value . . . .’’). 

287Letter from Loeb & Loeb. See supra note 245 

and accompanying text. 

288Letters from Ernst & Young, Vinson & Elkins, 

White & Case. See supra notes 246, 247, 248, 249, 

and 250 and accompanying text. 

Second, investors may focus on the 

relative dilution in a particular SPAC 

offering as compared to other SPAC 

offerings. For example, some types of 

investors may be more focused on 

finding SPACs with the highest net 

tangible book values per share 

compared to the $10 offering price and 

less focused on other qualitative factors 

about the SPAC. 

Third, as discussed above, SPAC 

shares can be redeemed at an agreed 

upon price. Some commentators have 

emphasized that it is important for 

investors to have information at the deSPAC transaction stage that enables 

investors to value these shares on a 

basis other than the stated agreement 

price.282 The dilution information will 

help investors to evaluate the economics 

of the business combination transaction, 

assisting their investment and voting 

decision-making. Investors’ redemption 

decisions are also likely informed by the 

market price of the SPAC shares, just as 

owners of stock options base their 

exercise decisions, in part, on the value 

of the underlying stock. 

While dilution information is 

important to SPAC investors for the 

reasons discussed above, we 

acknowledge that SPAC investors may 

use dilution information differently 

than investors in an operating company. 

For example, with an operating 

company some ‘‘value investors’’ may 

compare the offering price to net 

tangible book value.283 For a SPAC, 

however, this specific comparison may 

be less meaningful than with an 

operating company because SPACs 

typically have limited assets at the time 

of the IPO and the offering price is 

typically fixed at $10 per share. In 

addition, with an operating company, 

some ‘‘value investors’’ may compare 

the debt of the issuer to the net tangible 

book value.284 For a SPAC, however, 

this specific comparison may be less 

meaningful than with an operating 

company, because SPACs typically have 

limited debt at the time of the IPO and 

have limited assets. Furthermore, with 

an operating company, some investors 

may seek to determine a value for the 

issuer that takes into account return on 

net tangible assets 285 or by using a 

value calculated by multiplying a 

market average price-to-net-tangiblebook-value-per-share ratio times the 

issuer’s net tangible book value per 

share. For a SPAC, however, these 

specific methods may be less 

meaningful than with an operating 

company because of the limited assets 

of the SPAC and limited, if any, net 

income at the time of the IPO.286

We disagree with comments that 

suggested market practice of disclosing 

dilution information obviates the need 

for the proposed rules regarding 

dilution.287 The final rules will help 

standardize dilution disclosures across 

registrants and provide a minimum 

transparent floor for disclosure, even if 

market practices change. To the extent 

potential future registrants may 

otherwise have provided these 

disclosures based on market convention 

or other reasons, such registrants are not 

likely to incur additional costs in 

preparing this disclosure. 

Some commenters suggested current 

dilution disclosure under Item 506 

produces—and the proposed dilution 

disclosure would produce—results that 

are flawed or are calculated using 

varying methods by registrants.288 We 

acknowledge the concerns expressed by 

these commenters that using a method 

of calculating Item 506’s measure of net 

tangible book value that substantively 

excludes the redeemable common stock 

classified as temporary equity may 

result in dilution disclosure that is less 

meaningful to an investor. For example, 

in a SPAC IPO, this calculation could 

produce negative net tangible book 

value per share despite the proceeds 

raised in the offering. 

iii. Discussion and Examples Regarding 

the Calculation of Net Tangible Book 

Value Per Share, As Adjusted, in SPAC 

IPOs (Item 1602(a)(4) and (c)) and in DeSPAC Transactions (Item 1604(c)) 

a. Dilution Disclosure Under Items 

1602(a)(4) and (c) and 1604(c) Generally 

After considering the comments, we 

have made changes (as described above) 

in the final rules to clarify the 

calculation of net tangible book value 

per share, as adjusted, as the measure of 

dilution in Items 1602(a)(4) and (c) and 

1604(c). Without these revisions, there 

would be a risk that some disclosure, 

even under the new rules, could present 

results that are not meaningful to 

investors, such as negative net tangible 

book value per share in some 

transactions. In addition, we believe the 

changes in the final rules will be 

simpler for registrants to follow and 

comply with because they provide clear 

steps regarding how to determine 

dilution. 

b. SPAC IPO Dilution Disclosure: 

Comparison of Item 1602(a)(4) and (c) 

Final Item 1602(a)(4) and (c) are 

similar in that they require the 

disclosure of net tangible book value per 

share, as adjusted, shown in a tabular 

format. These items, however, have four 

key differences. First, Item 1602(a)(4) 

tabular disclosure must be provided on 

the prospectus cover, while Item 1602(c) 

disclosure must be provided in the 

prospectus body. Second, unlike Item 

1602(c), registrants providing the Item 

1602(a)(4) tabular disclosure do not 

need to show individual line-items for 

each source of dilution used to 

determine net tangible book value per 

share, as adjusted, in the table; for Item 

1602(a)(4), they may simply show net 

tangible book value per share, as 

adjusted, in the table for the required 

quartiles. Third, Item 1602(c) also 


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289See accord Klausner, Ohlrogge & Halbhuber, 

supra note 156 at 21, n.10 (‘‘A post-merger 

calculation, which we explain below is an incorrect 

way to measure dilution, would include all shares 

outstanding of the combined post-merger company, 

including shares issued to shareholders of the 

target.’’). In addition, inclusion of these shares in 

the denominator is inconsistent with the numerator 

calculation as it excludes the de-SPAC transaction 

itself. 

290While we expect ‘‘probable or consummated 

transactions’’ to generally be applied similarly 

between the net tangible book value per share, as 

adjusted, calculation and Article 11 of Regulation 

S–X, we observe that the contexts of each disclosure 

are different and do not foreclose the possibility 

that different treatments of a transaction may arise 

depending on the particular circumstances. 

291See, e.g., 17 CFR 210.11–01(a)(8) 

(‘‘Consummation of other transactions has occurred 

or is probable for which disclosure of pro forma 

financial information would be material to 

investors.’’) Notwithstanding this similarity with 

Article 11 of Regulation S–X, a company should not 

title or describe ‘‘net tangible book value per share, 

as adjusted’’ as a ‘‘pro forma’’ measure, which could 

mislead investors since target company assets are 

not included in the calculation. 

292See accord Klausner, Ohlrogge & Halbhuber, 

supra note 156 at 21, n.10 (‘‘A post-merger 

calculation, which we explain below is an incorrect 

way to measure dilution, would include all shares 

outstanding of the combined post-merger company, 

including shares issued to shareholders of the 

target.’’). In addition, inclusion of these shares in 

the denominator is inconsistent with the numerator 

calculation as it excludes the de-SPAC transaction 

itself. Also, as a result of our approach of excluding 

target company assets, we have not adopted a 

commenter suggestion that would have included 

the value of the target company. See letter from 

Vinson & Elkins, supra note 268 and accompanying 

text (expressing the view that the most meaningful 

information would be a per share value of the target 

company plus net cash). 

293Letter from Vinson & Elkins. See supra note 

269 and accompanying text. 

294See Kieso, Weygandt & Warfield (discussing 

the treasury stock method), supra note 269. 

295 Id. 

296See, e.g., final Item 1604(c), Item 1602(b)(3), 

Item 1603(a)(6), and Item 1604(b)(5) and (c). 

297Letter from Vinson & Elkins. 

contains the following requirement that 

Item 1602(a)(4) does not contain—to 

describe, outside of the table, each 

material potential source of future 

dilution following the registered 

offering by the special purpose 

acquisition company, including sources 

not included in the table with respect to 

the determination of net tangible book 

value per share, as adjusted. Fourth, 

unlike Item 1602(a)(4), Item 1602(c) 

requires the provision of a description 

of the model, methods, assumptions, 

estimates, and parameters necessary to 

understand the tabular disclosure. 

With respect to the requirement in 

final Item 1602(c) to describe each 

material potential source of future 

dilution (including those not shown in 

the table), these material potential 

sources of future dilution under final 

Item 1602(c) are to be disclosed outside 

of the table. These sources may not be 

the same as transactions that must be 

shown in the dilution table required by 

Item 1602(c). This non-tabular 

disclosure of ‘‘each material potential 

source of future dilution’’ in Item 

1602(c) potentially may need to discuss 

a broader set of items than ‘‘material 

probable or consummated transactions,’’ 

although this would depend on a 

SPAC’s specific facts and 

circumstances. 

c. De-SPAC Dilution Disclosure Under 

Item 1604(c), Including Examples of 

Adjustments 

Dilution disclosure is also required in 

final Item 1604(c) in connection with 

de-SPAC transactions. An objective of 

the dilution disclosure required by Item 

1604(c) is to depict the amount of net 

assets that the SPAC will contribute to 

the post-combination entity, as also 

noted by some commenters.289 In order 

to accomplish this objective of depicting 

the amount of net assets that the SPAC 

will contribute to the post-combination 

entity, final Item 1604(c) requires three 

adjustments of the SPAC’s net tangible 

book value per share as of the most 

recent balance sheet filed. The first 

adjustment is for the redemption of the 

SPAC’s shares. This adjustment is 

important because both the amount of 

net tangible assets in the numerator (for 

example, cash or securities held through 

the trust account) and the number of 

shares in the denominator will vary, 

depending on the redemption level. The 

second adjustment is to give effect to 

material probable or consummated 

transactions other than consummation 

of the de-SPAC transaction itself. This 

adjustment is also important because 

these transactions may affect the 

amount of net tangible assets in the 

numerator and the number of shares in 

the denominator. Examples of 

transactions that could be material 

probable or consummated transactions 

include funding backstops, forward 

purchases, or PIPE financings. We 

generally expect the term ‘‘probable or 

consummated transactions’’ to be 

applied in the net tangible book value 

per share, as adjusted, calculation, 

similar to its application in 17 CFR 

210.11–01 through 210.11–03 (‘‘Article 

11’’ of Regulation S–X),290 which 

requires pro forma financial information 

that incorporates the effects of 

‘‘probable or consummated 

transactions.’’ 291 The third adjustment 

is for inclusion of other material effects 

of the de-SPAC transaction on the 

SPAC’s net tangible book value per 

share but not the de-SPAC transaction 

itself. A consummation of the de-SPAC 

transaction could have material effects 

on the amount of net tangible book 

value that the SPAC contributes to the 

post-combination entity that do not 

stem from the types of transactions 

identified in the second adjustment 

discussed above. Two examples of such 

other effects would be the issuance of 

shares contingent on consummation of 

the de-SPAC transaction as 

compensation to a SPAC sponsor and 

the expected incurrence of transaction 

expenses to consummate the de-SPAC 

transaction. 

Further, to ensure ‘‘net tangible book 

value per share, as adjusted’’ depicts the 

amount of net assets that the SPAC will 

contribute to the post-combination 

entity, calculation of the measure 

excludes the effect of the consummation 

of the de-SPAC transaction itself. Thus, 

target company assets should not be 

included in net tangible book value per 

share, as adjusted and, in de-SPAC 

transactions where the consideration 

paid for the target company is securities 

of the SPAC, the SPAC should not 

include those securities paid as 

consideration in the denominator of the 

net tangible book value per share, as 

adjusted, calculation.292

iv. Discussion of Comments 

a. Warrants 

We are not adopting one commenter’s 

recommendation that dilution from 

warrants should be conveyed using the 

treasury share method.293 A treasury 

share method approach would involve 

calculating the difference between the 

strike price of a warrant and the trading 

price of the shares of the post-de-SPAC 

transaction combined company.294 At 

the time of the dilution disclosure, those 

trading prices are not known. The 

commenter suggested using ‘‘various 

hypothetical share increments above 

$10 per share,’’ which is the typical 

SPAC IPO offering price.295 We do not 

believe that conveying the dilutive 

effect of warrants using that approach 

would be appropriate in connection 

with the dilution disclosure 

requirements we are adopting, because 

the hypothetical prices used in the 

calculation may not be realistic. Further, 

we believe there is sufficient disclosure 

about the terms of the warrants 296 that 

would enable an investor to conduct 

such analysis on the strike price of a 

warrant using assumptions of trading 

prices of shares. 

The same commenter recommended 

that ‘‘sensitivity analyses should only be 

required for sources of dilution, such as 

warrants, where the dilutive impact 

varies based on changing equity values 

or other variables.’’ 297 As discussed 

above, final Item 1604(c) does not 

include the proposed provisions related 


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298See Financial Accounting Standards Board 

Accounting Standards Codification 815–40 and 

International Financial Reporting Standard IAS 32, 

Financial Instruments: Presentation. 

299Letter from Vinson & Elkins. See supra note 

230 and accompanying text. 

300 Item 1604(c) allows more discretion over 

issuer-specific dilution information by requiring a 

range of reasonably likely redemption levels rather 

than the fixed percentages established by the table 

in Item 1602(a)(4). 

301 If the offering sizes across the SPACs being 

compared are similar and the restrictions on 

maximum redemptions in the governing documents 

of the SPACs being compared are similar, the 

percentages presented in the table may be close to 

identical across the relevant set of SPACs 

examined. Also, where the size of the offering is 

large and the restriction on redemption is small by 

comparison, the various 25, 50, and 75 percentages 

of maximum redemption may closely approximate 

25, 50, and 75 absolute percentages of securities 

sold in the offering. For example, if the offering 

raises $1 billion and the redemption restriction is 

$5 million, then the maximum redemption level 

would be 99.5% ($995 million divided by $1 

billion) and 75% of the maximum redemption level 

would be 74.625% (.75 times .995). See also Table 

1 (Number of SPAC IPOs in the U.S. Securities 

Market from 2012–2023) in section I (providing 

data, including total capital raised per year and the 

number of offerings per year, from which an average 

offering size per year may be calculated). 

302Letter from Vinson & Elkins. See supra note 

230 and accompanying text. 

303See Rule 419 (Offerings by blank check 

companies); Rule 3a51–1 (definition of ‘‘penny 

stock’’). 

304Letter from White & Case. 

to sensitivity analysis that concerned 

the commenter. For Item 1602(a)(4) and 

(c) and 1604(c), with respect to 

classification of warrants on an 

unadjusted basis, as either a liability or 

equity, registrants should follow 

applicable GAAP.298 This classification 

may affect the calculation of net tangible 

book value per share, as adjusted, 

because a liability-classified warrant 

would increase liabilities thereby 

reducing net tangible book value, while 

an equity-classified warrant would not 

do so, unless the effect of its exercise is 

included in the calculation. Whether to 

adjust net tangible book value per share 

to give effect to the exercise of a warrant 

is a judgment based on facts and 

circumstances, including whether the 

effect of the exercise would be 

consistent with the objective of the 

disclosure—to depict the amount of net 

assets the SPAC will contribute to the 

post-combination entity. When the 

exercise of the warrant is not contingent 

on the consummation of the de-SPAC 

transaction, then adjustment that 

includes the effect of the warrant’s 

exercise in net tangible book value per 

share, as adjusted, generally would not 

be appropriate because those warrants 

will remain outstanding after the deSPAC transaction. 

As discussed above, the non-tabular 

disclosure of ‘‘each material potential 

source of future dilution’’ under Item 

1604(c) potentially may need to discuss 

a broader set of items than ‘‘material 

probable or consummated transactions,’’ 

although this would depend on a 

SPAC’s specific facts and 

circumstances. Thus, whether or not a 

registrant has made an adjustment for 

warrants in net tangible book value per 

share, as adjusted, the registrant may 

need to describe how the warrants are 

a material potential source of future 

dilution. 

b. Redemptions 

We are not adopting a commenter’s 

suggestion to include a redemption 

scenario that would reflect ‘‘100% of the 

public shares (regardless of any 

provisions in the SPAC’s governing 

documents that might theoretically limit 

redemptions).’’ 299 While we 

acknowledge that the suggested 

approach would permit an identical 

comparison across SPACs at the 100% 

redemption level, as the commenter 

noted, we believe that suggested 

approach would be less meaningful to 

investors than the maximum 

redemption level approach we are 

adopting in the final rules, because that 

suggested approach would not take into 

account the governing documents and 

so would present a scenario that may 

not in fact occur in practice. We agree 

that comparability is an important goal 

as there may be certain investors who 

focus on the relative dilution in a 

particular SPAC offering as compared to 

other SPAC offerings. However, that 

comparability across SPACs should be 

balanced with the need to disclose 

information tailored to the registrant. 

The requirement in Item 1602(a)(4) and 

(c) of the final rules to provide a 

maximum redemption level (instead of 

redemption based on 100% of securities 

sold) and other redemption levels as a 

percentage of this maximum will 

provide more issuer-specific 

information than absolute 25%, 50%, 

75%, and 100% levels.300 While the 

rules we are adopting will not 

necessarily provide comparability at 

identical percentages across SPACs, we 

believe investors nevertheless may make 

valuable comparisons across SPACs 

when looking at the dilution 

information supplied at each of the 

prescribed intervals in the rule.301

The same commenter expressed the 

view that current dilution disclosure 

under Item 506 of Regulation S–K is 

unhelpful for IPO-stage investors, as the 

output is driven by the maximum 

redemption scenario which can differ 

based on (i) different provisions of the 

SPAC’s constituent documents and (ii) 

the interpretation of those constituent 

documents.302 We believe the dilution 

information requirements related to 

IPOs in Item 1602 that we are adopting 

will provide more helpful information 

to investors than current market practice 

under Item 506 with respect to SPACs, 

where, in the experience of the 

Commission staff, some registrants have 

focused solely on a maximum 

redemption scenario. Item 1602 as 

adopted will provide a greater range of 

redemption scenario dilution 

information to investors. Further, the 

Commission does not believe that 

different interpretations of a SPAC’s 

governing documents will make a SPAC 

unable to provide the required dilution 

information at the maximum 

redemption level for two reasons. First, 

a SPAC will know how to interpret its 

own governance documents. In 

addition, in the experience of the 

Commission staff, many SPACs use 

similar, well-established governing 

document provisions that set their 

maximum redemption level at a level to 

avoid the SPAC being an issuer of 

penny stock.303 We do not anticipate 

these standardized provisions will 

involve difficult interpretive issues. 

One commenter said that ‘‘a SPAC 

may actually become subject to a 

maximum redemption scenario that is 

lower than the quartile intervals 

required to be presented by proposed 

Item 1602(a)(4).’’ 304 As discussed above 

in the description of the dilution rules 

we proposed, the redemption levels 

required by Item 1602(a)(4) are ‘‘25% of 

maximum redemption,’’ ‘‘50% of 

maximum redemption,’’ and ‘‘75% of 

maximum redemption’’ and thus are 

relative to the maximum redemption 

level and are not an absolute percentage. 

To clarify for investors the percentage 

used, registrants may add information to 

the table headers. For example, where 

the maximum redemption is 97.5%, a 

registrant could add ‘‘25% of Maximum 

Redemption (24.375%).’’ For greater 

clarity, in final Item 1602(a)(4), we have 

replaced the proposed terms ‘‘at quartile 

intervals up to the maximum 

redemption threshold’’ with the terms 

‘‘at quartile intervals based on 

percentages of the maximum 

redemption threshold,’’ because we 

believe registrants could mistakenly 

interpret the proposed terms to require 

quartile intervals based on the total 

number of shares issued in the offering 

for the three redemption levels in the 

table other than the maximum 

redemption level. 

One commenter recommended the 

Commission require dilution disclosure 


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305Letter from CII. See supra note 236 and 

accompanying text. 

306Letters from Freshfields, Vinson & Elkins, 

White & Case. See supra notes 237, 238, and 240 

and accompanying text. 

307Letter from White & Case. See supra note 238 

and accompanying text. 

308See final Items 1602(c) and 1604(c)(2). 

309 In this respect, as noted above, we disagree 

with the comment that ‘‘lengthy and detailed 

caveats’’ would be ‘‘need[ed].’’ See letter from 

White & Case, supra note 238 and accompanying 

text. 

310Letters from CII; Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber; NASAA; Vinson 

& Elkins. See supra notes 254 through 264 and 

accompanying text. 

311Letter from Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber. See supra note 

261 and accompanying text. 

312Letter from Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber. See supra note 

262 and accompanying text. These commenters also 

provided a formula for the calculation of net cash 

per share: (a) Total cash (consisting of the sum of 

cash from SPAC public shareholders plus cash from 

PIPEs or forward purchase agreements minus cash 

expenses minus the value of warrants minus the 

value of other equity derivatives), divided by (b) 

Total shares (consisting of public shares plus 

founder shares plus PIPE or forward purchase 

agreement shares plus other shares plus shares 

issuable under rights). See id. 

313When calculating return on net tangible book 

value per share, some investors may exclude nonoperating assets, such as cash among others, in 

order limit the measure to those returns on net 

tangible book value per share that are sustainable. 

See, e.g., Gary R. Trugman, Understanding Business 

Valuation (2018) (recommending an analyst 

calculating return on net tangible assets ‘‘remove 

any items on the balance sheet that may be 

attributable to non-operating assets or liabilities.’’). 

However, for the avoidance of doubt on the part of 

registrants, this is not appropriate for a registrant 

with respect to the calculation on net tangible book 

value per share, as adjusted, in connection with 

dilution disclosure, which should include nonoperating tangible assets such as cash among others. 

314The calculations of net tangible book value per 

share, as adjusted, in final Item 1602(a)(4) and (c) 

and 1604(c), take into account similar elements as 

the cash component of net cash per share, such as 

the inclusion of cash held by the SPAC and 

securities purchased by the SPAC, as well as the 

removal of expenses and warrant liabilities. Net 

cash per share has aspects that make it less useful 

for investors than net tangible book value per share, 

as adjusted. First, with respect to the net cash per 

share calculation, ‘‘net cash’’ in the numerator is 

reduced by the value of the equity-classified 

awards, which would be inconsistent with GAAP. 

We do not believe this is appropriate and have not 

taken this approach with respect to net tangible 

book value per share, as adjusted (as discussed 

above). Second, the net cash per share calculation 

includes all shares issuable by rights, regardless of 

any conditions on such issuance, whereas net 

tangible book value per share, as adjusted, would 

only make an adjustment to include such shares 

where a criterion for making an adjustment is met 

(as discussed above). 

315Letter from Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber. 

316As discussed above, in combined proxy 

statements and registration statements in 

connection with de-SPAC transactions, the cover 

page of the prospectus may be further back in the 

document. 

at a 90% redemption level.305 We do not 

believe it is necessary to make such 

changes to the final rules. We believe 

the four redemption thresholds 

proposed will give investors a 

reasonable picture of the potential range 

of dilution outcomes pursuant to Item 

1602(a)(4) and (c). For Item 1604(c) in 

connection with de-SPAC transactions, 

we believe providing a prescriptive 

level of 90% would be inconsistent with 

the requirement to provide SPACspecific reasonably likely redemption 

levels. 

c. Assumptions 

Commenters raised concerns that 

dilution disclosure would be 

characterized by uncertainty, be based 

on hypothetical assumptions, or depend 

on unknown variables.306 As discussed 

above, we have made changes to final 

Items 1602(a)(4) and (c) and 1604(c) to 

clarify how registrants should calculate 

dilution. Where registrants are making 

adjustments consistent with ‘‘net 

tangible book value per share, as 

adjusted’’ or are making assumptions in 

connection with other dilution 

disclosures required under the final 

rules, we believe registrants should be 

able to provide the required dilution 

information based on reasonable 

assumptions. We do not believe that 

dilution disclosure would mislead 

investors, as suggested by one 

commenter, or that such assumptions 

would need to be presented with 

lengthy and detailed caveats.307 On the 

contrary, we believe investors will 

understand that assumptions being 

made in connection with required 

dilution disclosure do not mean the 

dilution has occurred or is certain to 

occur. The final rules require a 

description of the assumptions 

necessary to understand the tabular 

disclosure,308 and, in providing that 

disclosure, registrants may highlight 

that these are assumptions in order to 

make that point clearer for investors. 

While we do not believe that the 

assumptions necessarily need lengthy 

and detailed caveats,309 if there are facts 

and circumstances in which a registrant 

believes a lengthy or detailed discussion 

is needed, we believe that would be 

appropriate to allow investors to 

understand the accompanying tabular 

disclosure. 

d. Net Cash Per Share Disclosure 

We are not adding an explicit net cash 

per share disclosure requirement as 

several commenters recommended that 

we require.310 One group of commenters 

said net cash per share disclosure 

should be provided on the cover page of 

the registration statement.311 These 

commenters expressed the view that the 

dilution concept included in the 

proposal reflects a concept of dilution 

that is focused on ‘‘ownership dilution,’’ 

not the kind of dilution (and dissipation 

of cash) that reduces the net cash 

underlying a SPAC share.312

We do not agree with that group of 

commenters that the proposal was 

limited to dilution focused solely on 

reduction in the percentage ownership 

of a shareholder out of total shares 

deemed to be issued and outstanding. 

We agree this form of dilution described 

by commenters is an element of the 

denominator in the net tangible book 

value per share, as adjusted, calculation, 

but the numerator of the net tangible 

book value per share, as adjusted, 

calculation will capture and convey 

other information—such as existing 

cash (prior to the relevant transaction, 

e.g., IPO or de-SPAC transaction), cash 

raised in securities issuances, and cash 

paid out to holders of redeemable 

securities—of the same type that these 

commenters focus on in recommending 

disclosure of net cash per share.313

Because we believe substantially all 

the information that would be conveyed 

to an investor by a net cash per share 

measure will be conveyed by the 

required ‘‘net tangible book value per 

share, as adjusted,’’ we are not adding 

an explicit net cash per share disclosure 

requirement.314 But shareholders who 

seek to calculate ‘‘net cash per share’’ at 

different levels of redemption should 

have the information to perform this 

calculation based on the disclosure 

provided in connection with net 

tangible book value per share, as 

adjusted. 

e. Cover Page 

Regarding comments that 

recommended that de-SPAC transaction 

dilution information be presented on 

the prospectus cover page,315 the 

Commission believes it is sufficient to 

require the tabular disclosure in the 

prospectus body in Item 1604(c).316 At 

the de-SPAC stage, there will be more 

registrant-specific information included 

in the dilution disclosure, as the 

registrant will have more information 

about potential causes of dilution (such 

as expected redemption levels and 

financings that will accompany the deSPAC transaction). Due to this, these 

disclosures may not be as easily 

presentable in a straightforward way on 

the cover page. Item 1604(a)(3), 

however, will require the registrant to 

state on the prospectus cover page 

whether SPAC sponsor compensation 

and ownership may result in a material 

dilution of the equity interests of nonredeeming shareholders who hold the 

securities until the consummation of the 


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317Letter from Loeb & Loeb, supra notes 265, 266, 

and 267 and accompanying text. See also proposed 

Item 1604(c)(1) (‘‘For each redemption level in the 

sensitivity analysis, state the company valuation at 

or above which the potential dilution results in the 

amount of the non-redeeming shareholders’ interest 

per share being at least the initial public offering 

price per share of common stock.’’). 318See, e.g., Jeffrey C. Hooke, Security Analysis 

on Wall Street: A Comprehensive Guide to Today’s 

Valuation Methods 234 (1998) (showing key 

valuation data of publicly traded stocks using 

enterprise value defined as (1) market value of 

equity, plus (2) outstanding debt, minus (3) cash on 

hand). 

319Letter from Loeb & Loeb. See supra note 267 

and accompanying text. 

320Letter from CFA Institute. 

321Letter from NASAA. 

322See Item 8 of Form S–1 (incorporating 17 CFR 

229.508 (Item 508 of Regulation S–K) (Plan of 

Distribution)) and Item 4 of Form F–1 (requiring the 

furnishing of information pursuant to Part 1, Item 

9.B (Plan of Distribution) of Form 20–F). 

de-SPAC transaction and to provide a 

cross-reference highlighted by 

prominent type to the location of related 

disclosures in the prospectus. 

f. Interest Per Share Disclosure 

We disagree in part with the 

commenter who suggested that the final 

sentence of proposed Item 1604(c)(1) 

required a determination of the 

enterprise valuation that will result in a 

shareholder’s ‘‘interest per share’’ 

calculated by reference to a pro forma 

closing date balance sheet being at least 

equal to the $10 price per share paid in 

the IPO.317 The use of the term 

‘‘valuation’’ in Item 1604(c)(1) would 

not require, as suggested by the 

commenter, an ‘‘enterprise valuation’’ 

(which typically values the sum of the 

equity and debt of a company minus 

cash).318 We agree, however, with the 

general point suggested by the 

commenter that a registrant’s 

preparation of Item 1604(c)(1) 

disclosure could be assisted by 

reference to, among other potential 

sources, a pro forma balance sheet. But 

we believe this would be the case only 

where such pro forma balance sheet 

contains the number of total shares 

(calculated consistent with Item 

1604(c)), because the amount of shares 

is a critical component of the 

calculation required to provide 

disclosure under this item. The pro 

forma balance sheet may not be capable 

of serving as the sole source of this 

information, because it may show total 

shares only for certain redemption 

levels, such as zero redemptions and 

maximum redemptions; hence, it may 

not provide the total share number 

‘‘with respect to each redemption level’’ 

as required by Item 1604(c)(1). 

To further clarify, we provide the 

following basic example of disclosure 

under Item 1604(c)(1). A hypothetical 

SPAC issued shares in an IPO at $10 per 

share. After giving effect to the IPO, the 

issued and outstanding shares of the 

SPAC are 20,000,000, for a total market 

capitalization of $200,000,000. In 

connection with the de-SPAC 

transaction, the SPAC issues 65,000,000 

shares to the target company’s 

shareholders and issues 15,000,000 

shares in a private placement for a total 

of 100,000,000 outstanding shares. Two 

(out of several) redemption levels the 

SPAC has chosen to use for the 

disclosure required by Item 1604(c) are 

zero redemptions and 5,000,000 shares 

redeemed (5% of the total shares). 

Where redemptions are zero, for 

purposes of Item 1604(c)(1), the SPAC 

would have 100,000,000 total shares 

after giving effect to the de-SPAC 

transaction and related financing. 

Where redemptions are zero, the 

company valuation at or above which 

the non-redeeming shareholders’ 

interest per share would be at least the 

IPO price per share ($10 in this 

example) would be calculated as: $10 

(per share IPO price) times 100,000,000 

shares, or $1,000,000,000. Where 

5,000,000 shares are redeemed (5% of 

the total shares), the SPAC would have 

95,000,000 total shares after giving 

effect to the de-SPAC transaction and 

related financing. At this redemption 

level, the company valuation at or above 

which the non-redeeming shareholders’ 

interest per share would be at least the 

IPO price per share ($10 in this 

example) would be calculated as: $10 

(per share IPO price) times 95,000,000 

shares, or $950,000,000. For the 

remaining redemption levels, the 

registrant would provide the required 

disclosure in a similar manner. 

With respect to the commenter’s 

concern that some investors may 

misunderstand disclosure under the 

item and view it as a guarantee that the 

stock will not trade down in the 

aftermarket,319 we do not believe 

investors are likely to misunderstand 

disclosure under Item 1604(c)(1) in that 

manner. As discussed above, we believe 

it will be clear to investors that the 

various valuation figures provided at 

each of the redemption levels are not 

guarantees about movements in or levels 

of future market trading prices of the 

post-de-SPAC transaction combined 

company. In addition, to the extent a 

registrant has a concern about investor 

confusion regarding the disclosure 

required under Item 1604(c)(1), such a 

registrant could provide additional 

disclosure discussing this issue, such as, 

for example, explicitly stating that the 

required disclosure is not a guarantee 

that the trading price of the combined 

company will not be below the IPO 

price nor is the disclosure a guarantee 

the company valuation will attain one of 

the stated levels of valuation. 

Another commenter recommended 

that the Commission consider requiring 

that intermediaries provide information 

about ‘‘the sponsor, actual and potential 

conflicts of interest, [and] how much a 

non-redeeming SPAC investor’s interest 

will be diluted’’ in a separate ‘‘Key 

Risks and Conflicts form’’ that is 

detached from the prospectus, so that 

the disclosure receives more investor 

attention and focus.320 We believe that 

the disclosure we are requiring in this 

release will receive an appropriate level 

of investor attention and focus and that 

no further amendments are needed in 

this regard. 

g. Lock-Up and Earnout Provisions 

One commenter said that ‘‘any lockup periods or earnout provisions for 

sponsors or underwriters would be of 

significant interest to investors and 

should be required if part of the SPAC 

offering.’’ 321 We are not making any 

changes in response to this comment 

because the final rules already will 

require such disclosure. Where there are 

earnout provisions for SPAC sponsors, 

the registrant would need to disclose 

these pursuant to Items 1602 and 1604 

regarding compensation of SPAC 

sponsors and ownership of SPAC 

securities by SPAC sponsors. Also, 

where there are lock-ups for SPAC 

sponsors, the registrant would need to 

disclose these pursuant to Item 

1603(a)(9) regarding the material terms 

of any agreement, arrangement, or 

understanding regarding restrictions on 

whether and when the SPAC sponsor 

and its affiliates may sell securities of 

the SPAC. In connection with 

underwriters, plan of distribution 

information is required by Forms S–1 

and F–1.322

E. Prospectus Cover Page and 

Prospectus Summary Disclosure 

1. Proposed Rules 

i. Proposed Prospectus Cover Page 

Disclosure 

For registered offerings (including 

IPOs) by SPACs other than de-SPAC 

transactions, the Commission proposed 

Item 1602(a) to require information on 

the prospectus outside front cover page 

in plain English about, among other 

things: (1) the time frame for the SPAC 

to consummate a de-SPAC transaction, 

(2) redemptions, (3) SPAC sponsor 

compensation, (4) dilution (including 

simplified tabular disclosure), and (5) 

conflicts of interest. 


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323Letters from ABA (expressing support for 

proposed Items 1602 and 1604 but also expressing 

concern regarding the length and density of 

prospectus cover page and determining fairness in 

de-SPAC transactions), Better Markets, CFA 

Institute. 

324Letter from Better Markets. 

325See, e.g., letters from ABA, Loeb & Loeb, 

Ropes & Gray, Vinson & Elkins. See also 17 CFR 

229.501 (‘‘Item 501’’ of Regulation S–K) (one-page 

limit for prospectus cover page). 

326Letter from Vinson & Elkins. 

327 Id. 

328 Id. 

329 Id. 

330 In certain rules, a cover page requirement may 

be similar to but not identical with a prospectus 

summary requirement. We note that the cover page 

disclosure for Item 1602(a)(3) (exclusive of 

securities issuance disclosure) is not required to 

contain the same level of detail as required in the 

tabular disclosure in the prospectus summary under 

Item 1603(b)(6), which should contain line items for 

each compensation item. Disclosure under Item 

1603(a)(6) should provide a similar level of detail 

as under Item 1602(b)(6), except in non-tabular 

format. 

331Letter from Better Markets. See supra note 324 

and accompanying text. 

For de-SPAC transactions, the 

Commission proposed Item 1604(a) to 

require that SPACs include information 

on the prospectus outside front cover 

page in plain English about, among 

other things: (1) the fairness of the deSPAC transaction, (2) material financing 

transactions, (3) SPAC sponsor 

compensation and dilution, and (4) 

conflicts of interest. 

ii. Proposed Prospectus Summary 

Disclosure 

For registered offerings (including 

IPOs) by SPACs other than de-SPAC 

transactions, the Commission proposed 

Item 1602(b) to require in the 

prospectus summary a brief description 

in plain English about, among other 

things: (1) how the SPAC will identify 

and evaluate potential business 

combination candidates and whether it 

will solicit shareholder approval for the 

de-SPAC transaction, (2) the material 

terms of the trust or escrow account and 

the amount or percentage of the gross 

offering proceeds that the special 

purpose acquisition company will place 

in the trust or escrow account, (3) the 

material terms of the securities being 

offered, including redemption rights, 

and whether the securities are the same 

class as those held by the SPAC sponsor 

and its affiliates, (4) the period of time 

in which the SPAC intends to 

consummate a de-SPAC transaction, (5) 

any plans to seek additional financings 

and how the terms of additional 

financings may impact unaffiliated 

security holders, (6) in a tabular format, 

compensation of the SPAC sponsor, its 

affiliates, and promoters, and the extent 

to which this compensation may result 

in a material dilution of the purchasers’ 

equity interests, and (7) any material 

actual or potential conflicts of interest 

between the SPAC sponsor or its 

affiliates or promoters and purchasers in 

the offering, including those that may 

arise in determining whether to pursue 

a de-SPAC transaction. 

For de-SPAC transactions, the 

Commission proposed Item 1604(b) to 

require in the prospectus summary a 

brief description in plain English about, 

among other things: (1) the background 

and material terms of the de-SPAC 

transaction, (2) whether the SPAC 

reasonably believes that the de-SPAC 

transaction is fair or unfair to 

unaffiliated security holders, the bases 

for such belief, and whether the SPAC 

or the SPAC sponsor has received any 

report, opinion, or appraisal from an 

outside party concerning the fairness of 

the de-SPAC transaction, (3) any 

material actual or potential conflicts of 

interest between the SPAC sponsor or 

its affiliates or promoters and 

unaffiliated security holders in 

connection with the de-SPAC 

transaction, (4) in a tabular format, the 

terms and amount of the compensation 

received or to be received by the SPAC 

sponsor and its affiliates in connection 

with the de-SPAC transaction or any 

related financing transaction, and 

whether that compensation has resulted 

or may result in a material dilution of 

the equity interests of unaffiliated 

security holders of the special purpose 

acquisition company, (5) the material 

terms of any financing transactions that 

have occurred or will occur in 

connection with the consummation of 

the de-SPAC transaction, the anticipated 

use of proceeds from these financing 

transactions and the dilutive impact, if 

any, of these financing transactions on 

unaffiliated security holders, and (6) the 

rights of security holders to redeem the 

outstanding securities of the SPAC and 

the potential impact of redemptions on 

the value of the securities owned by 

non-redeeming shareholders. 

2. Comments 

Several commenters generally 

supported the proposed prospectus 

cover page and prospectus summary 

disclosure requirements.323 One of these 

commenters expressed the view that 

these requirements would assist 

shareholders in understanding: (a) the 

compensation structures for SPAC 

sponsors, (b) conflicts in the 

relationship between SPAC sponsor, 

underwriter, and shareholder, (c) 

potential sources of dilution, and (d) 

whether or not any fairness opinions 

were obtained from third parties in 

connection with the de-SPAC 

transaction.324 The commenter 

suggested this understanding would 

better equip investors to evaluate the 

wisdom of placing their money at risk 

in a SPAC, would closely align the 

information provided in SPAC IPOs 

with the information provided to 

investors in traditional IPOs, and would 

help to narrow the information 

asymmetries in the SPAC IPO model. 

Several commenters suggested the 

proposed prospectus cover page 

requirements would produce cover page 

disclosure that will be dense and longer 

than one page.325

One commenter said ‘‘requiring 

disclosure to be included at least three 

times in the document (e.g., on the 

cover page, in the summary, and in the 

body of the document where the same 

information often appears multiple 

times) seems excessive and potentially 

distracting to investors.’’ 326 This 

commenter also expressed the view that 

the Commission should not require 

disclosure of ‘‘ ‘any plans to seek 

additional financing and how such 

additional financing might impact 

shareholders’ in IPO registration 

statements.’’ 327 The commenter said 

that, at the time of the IPO, this 

disclosure would be ‘‘purely 

hypothetical,’’ and would lead to 

‘‘boilerplate’’ disclosures that would 

‘‘distract’’ investors from other more 

useful and material information.328 The 

commenter, however, said that, ‘‘if the 

SPAC already has commitments for 

additional financing at the time of the 

IPO (e.g., a forward purchase agreement 

or a backstop commitment), the material 

terms of such financings and potential 

impact on shareholders or on the deSPAC transaction should be 

disclosed.’’ 329

3. Final Rules 

After considering the comments 

received, we are adopting Items 1602(a) 

and (b) and 1604(a) and (b) as proposed 

with certain modifications discussed 

below.330

We agree with the commenter who 

expressed the view that investors will 

benefit from these provisions, including 

by better understanding factors 

including compensation, conflicts of 

interest, and dilution.331 Under the final 

rules, the key disclosures concerning 

SPAC offerings and de-SPAC 

transactions will be highlighted on the 

cover page and in the prospectus 

summary in an easily readable and 

understandable form. The disclosure 

under these items also will enable 

investors to better parse complex 

aspects of SPAC transactions. As a 

result, we believe investors will be 


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332 Item 501(b) of Regulation S–K sets forth 

disclosure requirements for the outside front cover 

page of prospectuses, such as the name of the 

registrant, title and amount of securities being 

offered, and the offering price of the securities. 

333See, e.g., letters from ABA, Loeb & Loeb, 

Ropes & Gray, Vinson & Elkins. See also Item 501 

of Regulation S–K (one-page limit for prospectus 

cover page). 

334Letter from Vinson & Elkins. See supra note 

326 and accompanying text. 

335Staff experience in reviewing current SPAC 

filings is that some SPACs repeat disclosure 

numerous times in current registration statements 

even where not required by current rules; we infer 

from this market practice that some issuers may 

believe such repetition is helpful to investors in 

understanding important facts that may not be well 

understood through an isolated reference. The final 

rules we are adopting are not inconsistent with that 

current market practice. 

336Letter from Vinson & Elkins. See supra notes 

328 and 329 and accompanying text. 

337Final Item 1602(b) provides that the disclosure 

required thereunder in the prospectus summary 

must be in the form of a ‘‘brief description.’’ We 

expect that the level of detail of the disclosure 

under final Item 1602(b)(5) of ‘‘[a]ny plans to seek 

additional financings’’ will reflect the level of 

development of such plans. A registrant is only 

required to disclose plans that are known to the 

registrant to be ‘‘plans to seek additional 

financings.’’ 

338 In connection with similar issues in the 

context of Item 1602(c) disclosure of ‘‘each material 

potential source of future dilution,’’ we discuss 

above in section II.D.3.iii that registrants may warn 

investors that the disclosure about such potential 

sources should not be misconstrued as indications 

certain events are certain to occur in the future. 

339 In addition, in final Items 1602(b)(7) and 

1604(a)(4) and (b)(3) we moved ‘‘material’’ after 

‘‘actual or potential’’ for consistency throughout 

new subpart 1600. 

better able to identify and assess 

important aspects of the transactions 

that may affect their investment and 

voting decisions. Although in current 

market practice, many SPACs already 

disclose similar information on 

prospectus cover pages,332 the final 

rules we are adopting will standardize 

this information across all registration 

statements filed by SPACs for IPOs and 

for de-SPAC transactions. In addition, 

investors may benefit from comparing 

this information not only across other 

SPAC transactions but by comparing it 

to investments contemplated in 

securities of non-SPACs where those 

registrants provide similar disclosure 

under current market practice. 

Several commenters suggested the 

proposed prospectus cover page 

requirements would produce cover page 

disclosure that will be dense and longer 

than one page.333 While we recognize 

that the new cover page requirements 

will increase the amount of information 

included on the prospectus outside 

front cover page, we believe these 

requirements will be a limited 

incremental increase compared to 

current prospectus outside front cover 

page disclosure and we do not believe 

that this incremental increase will 

undermine the overall clarity of the 

cover page disclosure. Also, we 

continue to believe outside front cover 

page prominence of the required 

information serves the key purpose of 

alerting investors to the importance of 

the information. We believe registrants 

will be able to fit the required dilution 

information in tabular form on the 

outside front cover page just as they 

currently fit required information on the 

securities offering price, underwriting 

fees, and net proceeds in tabular form 

on the outside front cover page. Based 

on Commission staff’s experience with 

current outside front cover page 

disclosure and staff’s consideration of 

how outside front cover page disclosure 

will appear under the final rules, we 

believe there will be space to add this 

additional table and other new 

disclosure required by the final rules 

without making the outside front cover 

page cramped or difficult to read. We 

also do not believe these requirements 

will compel registrants to abandon nonrequired elements that often appear on 

the outside front cover page such as 

company artwork and logos, use of large 

fonts for service provider names, and 

aesthetic use of empty space. 

One commenter on the proposal said 

requiring cover page, prospectus 

summary, and body of the document 

disclosures seems excessive and 

potentially distracting to investors.334

We disagree and believe the enhanced 

disclosures in each of the three 

locations will serve a valuable purpose 

for investors.335 The cover page 

provides the first alerts to investors 

about information that is important for 

their investment and voting decisions. 

In the prospectus summary, we believe 

the additional disclosures will reduce 

information processing costs, including 

for less financially sophisticated 

investors or investors with limited time 

to analyze the prospectus, by providing 

information in plain English about 

important SPAC features in a concise 

format. Finally, the prospectus body 

contains the detailed information 

needed for more comprehensive 

investor understanding. 

One commenter expressed the view 

that prospectus summary disclosure 

related to additional financings (other 

than committed financings) at the IPO 

stage would be hypothetical and 

boilerplate and would distract investors 

from more useful information.336 We 

agree that, if financing agreements have 

been entered into, then they must be 

disclosed. To this end, Item 1602(b)(5) 

requires disclosure of these agreements 

and how their terms may impact 

unaffiliated security holders. However, 

under final Item 1602(b)(5), as 

proposed, even if no such agreements 

have been entered at the time that Item 

1602(b)(5) is applicable, registrants are 

required to generally describe any plans 

to seek additional financings and how 

the terms of additional financings may 

affect unaffiliated security holders even 

if the actual, specific terms of any 

financing agreements (should they 

ultimately be entered) may not be 

known.337 The disclosure of these plans 

will alert investors to the potential 

aspects of the overall de-SPAC 

transaction structure, including those 

that impact future dilution, which will 

help investors make informed 

investment and voting decisions. As 

with dilution disclosure in SPAC IPOs 

that we discuss in section II.D.3 above 

(where commenters raised similar 

concerns), even where a registrant has 

not committed to a transaction or will 

not have consummated a transaction, 

registrants should be able to use 

reasonable assumptions about potential 

financing needs to provide the required 

disclosure. We disagree with the view 

that this prospectus summary 

information would be a distraction to 

investors from other important 

information. On the contrary, as we 

discuss generally above, we believe the 

prospectus summary disclosure 

regarding additional financing plans 

will highlight key issues for investors 

and the summary format will help them 

process the information, particularly 

when comparing potential investments 

in different SPACs. We do not believe 

investors will misconstrue this 

information to mean the additional 

financing is certain to occur. Registrants 

may highlight this lack of certainty in 

their disclosure if they have concerns 

their investors will misconstrue the 

information.338 We do not expect the 

additional financing prospectus 

summary disclosures will be boilerplate, 

as the additional financing disclosure 

will need to be tailored to the plans of 

the SPAC. 

In final Item 1602(a)(5), we replaced 

the proposed term ‘‘SPAC sponsor or its 

affiliates or promoters and purchasers in 

the offering’’ with the term ‘‘SPAC 

sponsor, its affiliates, or promoters; and 

purchasers in the offering.’’ We made 

the same changes to final Item 

1602(b)(7).339 Both the changes to Item 

1602(a)(5) and (b)(7) were made to 

clarify that the interests of each of the 

listed persons should be assessed 


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340 In addition, in final Item 1602(b)(5) we 

replaced the proposed term ‘‘impact’’ with the term 

‘‘affect’’ for clarity. 

341See final Item 1604(a)(1) and (b)(2). 

342See (a) section II.B (Sponsors) discussion of 

final Items 1602(a)(3) and (b)(6) and 1604(a)(3) and 

(b)(4) and (5); (b) section II.C (Conflicts of Interest) 

discussion of final Items 1602(a)(5), 1604(a)(4) and 

(b)(3), and 1602(b)(7); and (c) section II.D (Dilution) 

discussion of final Items 1602(a)(4) and 1604(b)(4) 

and (5). In addition to the changes to final Item 

1604(b)(3) discussed in other sections of this 

release, we have moved the language ‘‘in 

connection with the de-SPAC transaction’’ from the 

end of the item to the beginning of the item and 

made punctuation and paragraph numbering 

changes to clarify the comparison of interests must 

be between each of ‘‘the SPAC sponsor, SPAC 

officers, SPAC directors, SPAC affiliates or 

promoters, target company officers, or target 

company directors’’ and ‘‘unaffiliated security 

holders of the SPAC.’’ 

343Letter from Committee on Capital Markets 

Regulation. 

344Letters from ABA (‘‘To eliminate duplication, 

we recommend against adoption of Item 1605’’), 

Vinson & Elkins (‘‘The SEC should not adopt a new 

disclosure requirement with respect to material 

interests in a prospective de-SPAC transaction or 

any related financing transaction held by the 

sponsor and the SPAC’s officers and directors, as 

proposed’’). 

345Letter from ABA (specifically suggesting 

‘‘revising Items 1004(a)(2) and 1013(b) of Regulation 

M–A and Item 403 of Regulation S–K to incorporate 

the provisions of proposed Item 1605 taking into 

consideration that many issues addressed in 

proposed Item 1605 may arise and be applicable to 

business combinations that are not effected by a 

SPAC or a blind pool’’). 

346Letter from Michael Klausner and Michael 

Ohlrogge. 

347 Id. (‘‘For instance, if a PIPE investor buys a 

share for $10, but also receives a free warrant worth 

$1.50, then the PIPE investor is in effect paying 

$8.50 for the share.’’). 

348 Id. 

against the interests of ‘‘purchasers in 

the offering.’’ 340

In final Item 1604(a)(1) and (b)(2), we 

made revisions to reflect changes we are 

making to Items 1606 and 1607 that are 

discussed in section II.G.341

In final Item 1604(a)(4), following the 

phrase ‘‘State whether, in connection 

with the de-SPAC transaction, there 

may be any actual or potential material 

conflict of interest,’’ we added the 

phrase ‘‘including any material conflict 

of interest that may arise in determining 

whether to proceed with a de-SPAC 

transaction and any material conflict of 

interest arising from the manner in 

which the special purpose acquisition 

company compensates a SPAC sponsor, 

officers, and directors or the manner in 

which a SPAC sponsor compensates its 

officers and directors.’’ This change 

makes Item 1604(a)(4) required cover 

page disclosure congruent with Item 

1603(b) (non-cover page) disclosure. In 

de-SPAC transactions, the cover page 

disclosure under Item 1604(a)(4) should 

provide a cross reference to, among 

other things, the description of these 

actual or potential material conflicts of 

interest under Item 1603(b). 

We also made a number of other 

changes to the final rules related to 

prospectus cover page and prospectus 

summary disclosure that are discussed 

above in other sections of this 

release.342

F. De-SPAC Transactions: Background, 

Reasons, Terms, and Effects 

1. Proposed Item 1605 

The Commission proposed Item 1605 

of Regulation S–K to require disclosure 

of the background, material terms, and 

effects of the de-SPAC transaction, 

including: 

• A summary of the background of 

the de-SPAC transaction, including, but 

not limited to, a description of any 

contacts, negotiations, or transactions 

that have occurred concerning the deSPAC transaction; 

• A brief description of any related 

financing transaction, including any 

payments from the SPAC sponsor to 

investors in connection with the 

financing transaction; 

• The reasons for engaging in the 

particular de-SPAC transaction and for 

the structure and timing of the de-SPAC 

transaction and any related financing 

transaction; 

• An explanation of any material 

differences in the rights of security 

holders of the post-business 

combination company as a result of the 

de-SPAC transaction; 

• Disclosure regarding the accounting 

treatment and the Federal income tax 

consequences of the de-SPAC 

transaction, if material; 

• Any material interests in the deSPAC transaction or any related 

financing transaction held by the SPAC 

sponsor and the special purpose 

acquisition company’s officers and 

directors, including fiduciary or 

contractual obligations to other entities 

as well as any interest in, or affiliation 

with, the target company; and 

• A statement whether or not security 

holders are entitled to any redemption 

or appraisal rights, a summary of such 

redemption or appraisal rights, and, if 

there are no redemption or appraisal 

rights available for security holders who 

object to the de-SPAC transaction, a 

brief outline of any other rights that may 

be available to security holders. 

2. Comments: Item 1605 

One commenter stated that proposed 

Item 1605 would provide useful 

information to investors.343 Some 

commenters, however, opposed 

proposed Item 1605, stating it would be 

duplicative of existing disclosure 

requirements.344 One of these 

commenters said that, in lieu of 

adopting Item 1605, they ‘‘recommend a 

more uniform methodology to address 

conflicts of interest arising from 

business combinations in general by 

revising Items 1004(a)(2) and 1013(b) of 

Regulation M–A and Item 403 of 

Regulation S–K to incorporate the 

provisions of proposed Item 1605 taking 

into consideration that many issues 

addressed in proposed Item 1605 may 

arise and be applicable to business 

combinations that are not effected by a 

SPAC or a blind pool.’’ 345

One commenter recommended that 

we revise proposed Item 1605(b)(2), 

with respect to descriptions of related 

financings.346 The commenter said, 

‘‘PIPE investors often buy into SPAC 

deals on discounted terms compared to 

the terms offered to public shareholders 

in a SPAC.’’ The commenter said ‘‘the 

discount that PIPE investors receive is 

in the form of additional derivative 

securities, guarantees, or other complex 

financial arrangements and it is difficult 

for public investors to know the 

effective price per share at which PIPE 

investors are buying.’’ 347 The 

commenter recommended that we revise 

proposed Item 1605(b)(2) to state: ‘‘A 

brief description of related financing 

transactions, including the effective 

price per share at which investors are 

buying, after accounting for the value of 

any securities or guarantees they receive 

from the SPAC, SPAC sponsor or 

affiliate of either in connection with the 

financing transaction.’’ 348

3. Final Item 1605 

After considering the comments 

received, we are adopting Item 1605 as 

proposed, with several modifications 

discussed below. 

By providing a specialized disclosure 

rule tailored to de-SPAC transactions, 

the Item 1605 disclosure requirements 

will provide investors with information 

necessary to evaluate the reasons for a 

de-SPAC transaction and for choosing a 

particular structure and financing for 

the transaction. These requirements will 

also help promote consistent disclosure, 

allowing for greater comparability of 

these disclosures across de-SPAC 

transactions. 

Given the unique qualities of deSPAC transactions, we believe 

registrants will benefit from the 

centralization of the SPAC-related 

requirements in the Item 1600 series of 

Regulation S–K. If there are facts and 

circumstances that may result in 

required disclosure under a current rule 

being the same as under any of the rules 

we are adopting, registrants are not 


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349Letter from ABA. See supra note 345 and 

accompanying text. 

350Letter from Michael Klausner and Michael 

Ohlrogge. See supra notes 347 and 348 and 

accompanying text. 

351See disclosure requirements in (a)(5) and (a)(6) 

under Item 4 of Form S–4. 

352 In addition, in final Item 1605(b)(4) we deleted 

the phrase ‘‘after the completion of the de-SPAC 

transaction’’ for clarity and to avoid redundancy 

with the immediately preceding words ‘‘as a result 

of the de-SPAC transaction.’’ 

353Letters from Better Markets; Marcie Frost, 

Chief Executive Officer, California Public 

Employees’ Retirement System (June 9, 2022) 

(‘‘CalPERS’’); Committee on Capital Markets 

Regulation; Consumer Federation; Professor Holger 

Spamann (June 12, 2022) (‘‘Holger Spamann’’); 

NASAA; Public Citizen. 

354Letters from ABA; Andrew Tuch, Professor of 

Law, Washington University in St. Louis (June 13, 

2022) (‘‘Andrew Tuch’’); Cato Institute; CFA 

Institute; Davis Polk & Wardwell LLP (June 13, 

2022) (‘‘Davis Polk’’); Freshfields; Goodwin; Alfredo 

Ortiz, President & CEO, Job Creators Network (June 

13, 2022) (‘‘Job Creators Network’’); Jonathan 

Kornblatt; Kirkland & Ellis; Loeb & Loeb; NYC Bar; 

Paul Swegle; Ropes & Gray; Skadden Arps Slate 

Meagher & Flom LLP (June 13, 2022) (‘‘Skadden’’); 

White & Case. 

required to repeat disclosures, except 

where the applicable rule may so 

require (such as by calling for the 

disclosure in a specific location such as 

the prospectus cover page or prospectus 

summary). We are not adopting the 

recommendation that we adopt a more 

uniform methodology to address 

conflicts of interest arising from 

business combinations in general,349

because it is beyond the scope of our 

proposals concerning conflicts of 

interest and Item 1605, both of which 

are focused on SPACs. 

We are not revising Item 1605(b)(2) to 

provide more specificity on the types of 

securities or guarantees received from 

the SPAC, as suggested by one 

commenter. We are adopting Item 

1605(b)(2) as proposed to require the 

disclosure of material terms of the deSPAC transaction, including a brief 

description of any related financing 

transaction, including any payments 

from the SPAC sponsor to investors in 

connection with the financing 

transaction. In most, if not all, cases, 

Item 1605(b)(2) will require the 

registrant to disclose the price paid by 

PIPE investors and other benefits such 

as derivative securities that are acquired 

by PIPE purchasers (in addition to SPAC 

shares), because these are likely to be 

material terms. One commenter 

recommended we require ‘‘A brief 

description of related financing 

transactions, including the effective 

price per share at which investors are 

buying, after accounting for the value of 

any securities or guarantees they receive 

from the SPAC, SPAC sponsor or 

affiliate of either in connection with the 

financing transaction.’’ 350 We are not 

revising the item to adopt this 

recommendation because we believe it 

would be difficult for registrants to 

calculate accurately or would result in 

inconsistent methodologies among 

registrants, or both, with respect to how 

registrants would convert various 

features, rights, or contractual 

provisions attendant to related financing 

transactions into amounts used to adjust 

actual transaction values to achieve the 

suggested effective price; we believe the 

resulting disclosure characterized by 

these issues could mislead investors or 

undermine the ability of investors to 

make comparisons across SPACs or 

both. 

We have made a number of 

modifications in final Item 1605 as 

compared to the proposal. First, in Item 

1605(a), we have replaced the term 

‘‘Furnish’’ with the term ‘‘Provide’’ in 

the sentence ‘‘Furnish a summary of the 

background of the de-SPAC transaction’’ 

to make it clear that we intend this 

disclosure to be filed. This change will 

also make Item 1605(a) consistent with 

the other items in Item 1605 in this 

respect. 

Second, in Item 1605(b)(5) and (6), we 

have deleted the phrase ‘‘, if material’’ 

to align the phrasing with the existing 

disclosure requirements in Item 4 of 

Form S–4 351 as it was our intent to 

capture the same information at the 

same threshold and we did not intend 

for the phrasing to imply that the 

accounting treatment or Federal income 

tax consequences may not be material 

disclosure in a business combination 

transaction.352

Third, as discussed above in section 

II.C of this release regarding conflicts of 

interest, we are revising Item 1605(d) to 

address interests of target company 

officers and directors. Thus, in final 

Item 1605(d), we have added the phrase 

‘‘; or held by the target company’s 

officers or directors that consist of any 

interest in, or affiliation with, the SPAC 

sponsor or the special purpose 

acquisition company.’’ 

Fourth, in final Item 1605(d), we have 

revised the phrase ‘‘held by the SPAC 

sponsor and the special purpose 

acquisition company’s officers and 

directors’’ by replacing the term ‘‘and’’ 

with ‘‘or’’ in each instance, because the 

requirements of Item 1605(d) should 

apply disjunctively where any of the 

named persons has a material interest in 

the de-SPAC transaction or any related 

financing (and not be limited to only 

those situations where every named 

person has such an interest). 

Fifth, we revised Item 1605(b)(3), (4), 

and (6) to clarify that these requirements 

will require disclosure with respect to 

the SPAC, target company, and/or 

security holders of the SPAC or target 

company. These changes eliminate 

potential ambiguity that could have 

caused registrants to inappropriately 

interpret the items as not including 

disclosure with respect to those persons 

in connection with de-SPAC 

transactions. Accordingly, as adopted: 

• final Item 1605(b)(3) requires: ‘‘A 

reasonably detailed discussion of the 

reasons of the SPAC and the target 

company for engaging in the de-SPAC 

transaction and reasons of the SPAC for 

the structure and timing of the de-SPAC 

transaction and any related financing 

transaction;’’ 

• final Item 1605(b)(4) requires: ‘‘An 

explanation of any material differences 

in the rights of SPAC and target 

company security holders as compared 

with security holders of the combined 

company as a result of the de-SPAC 

transaction;’’ and 

• final Item 1605(b)(6) requires: ‘‘The 

Federal income tax consequences of the 

de-SPAC transaction to the SPAC, the 

target company, and their respective 

security holders.’’ 

G. Board Determination About the DeSPAC Transaction; Reports, Opinions, 

Appraisals, and Negotiations 

1. Proposed Item 1606(a) 

The Commission proposed Item 

1606(a) to address concerns regarding 

potential conflicts of interest and 

misaligned incentives in connection 

with the SPAC’s decision to proceed 

with a particular de-SPAC transaction 

and to assist investors in assessing the 

fairness of a particular de-SPAC 

transaction to unaffiliated investors. 

Specifically, the Commission proposed 

Item 1606(a) to require a statement from 

a SPAC as to whether it reasonably 

believes that the de-SPAC transaction 

and any related financing transactions 

are fair or unfair to the SPAC’s 

unaffiliated security holders, as well as 

disclosures regarding whether any 

director voted against or abstained from 

voting on, approval of the de-SPAC 

transaction or any related financing 

transaction. 

2. Comments: Item 1606(a) 

Commenters expressed differing 

views on proposed Item 1606(a). Some 

commenters supported the proposed 

requirement.353

Other commenters opposed proposed 

Item 1606(a).354 Some of these 

commenters expressed the view that 

modeling rules applicable to de-SPAC 

transactions after the going private rules 

is inappropriate because the underlying 


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355Letters from Andrew Tuch, Freshfields, 

Kirkland & Ellis, Loeb & Loeb, Skadden. 

356Letters from ABA, Cato Institute, CFA 

Institute, Davis Polk, Freshfields, Kirkland & Ellis, 

NYC Bar, Ropes & Gray, Skadden, White & Case. 

357Letter from Ropes & Gray. 

358 Id. 

359Letters from Cato Institute, CFA Institute, 

Freshfields, Goodwin, Jonathan Kornblatt, White & 

Case. 

360Letters from Davis Polk, Goodwin, Job Creators 

Network, Jonathan Kornblatt, Skadden, White & 

Case. 

361Letters from ABA, Goodwin. 

362Letters from ABA, Goodwin, NYC Bar, White 

& Case. 

363Letter from NYC Bar. 

364Letter from Vinson & Elkins. 

365Letters from ABA, Andrew Tuch, Cato 

Institute, Davis Polk, Freshfields, Job Creators 

Network, Jonathan Kornblatt, Paul Swegle. 

366Letters from ABA, Cato Institute, Davis Polk, 

Freshfields, Goodwin, Jonathan Kornblatt, Paul 

Swegle, Ropes & Gray, Skadden. 

367Letter from Cato Institute (indicating that 

disclosure of projections would raise potential 

liability for SPACs as a result of the amendments 

to the PSLRA safe harbor). 

368Letter from Andrew Tuch (‘‘In short, the 

Proposed Rules would subject de-SPACs to more 

onerous regulation than either going-private 

transactions subject to Rule 13e–3 [17 CFR 270.13e– 

3] or traditional IPOs. A way to address this is to 

apply Items 1606 and 1607 more selectively, to 

those de-SPACs raising heightened risks of selfdealing by SPAC fiduciaries, or perhaps not to 

apply these particular provisions at all.’’). 

369Letters from ABA, Davis Polk, Freshfields, 

Goodwin, Ropes & Gray, Skadden, White & Case. 

370Letters from ABA, Goodwin. 

371Letter from Davis Polk. 

372Letters from Better Markets, CalPERS, 

Committee on Capital Markets Regulation, 

Consumer Federation, Holger Spamann, NASAA, 

Public Citizen. See supra note 353 and 

accompanying text. 

373Letters from ABA, Andrew Touch, Cato 

Institute, CFA Institute, Davis Polk, Freshfields, 

Goodwin, Job Creators Network, Jonathan Kornblatt, 

Kirkland & Ellis, Loeb & Loeb, NYC Bar, Paul 

Swegle, Ropes & Gray, Skadden, White & Case. See 

supra note 354 and accompanying text. 

374Letters from ABA, Andrew Tuch, Cato 

Institute, Davis Polk, Freshfields, Job Creators 

Network, Jonathan Kornblatt, Paul Swegle. See 

supra note 365 and accompanying text. 

375Letters from ABA, Cato Institute, Davis Polk, 

Freshfields, Goodwin, Jonathan Kornblatt, Paul 

Swegle, Ropes & Gray, Skadden. See supra note 366 

and accompanying text. 

376Letters from ABA, Andrew Tuch, Cato 

Institute, CFA Institute, Davis Polk, Freshfields, 

Kirkland & Ellis, Loeb & Loeb, NYC Bar, Ropes & 

Gray, Skadden, White & Case. See supra notes 355 

and 356 and accompanying text. 

affiliate relationships present in a going 

private transaction are not present in a 

de-SPAC transaction.355 Some 

commenters observed that a fairness 

determination is not required or 

provided in an IPO and thus should not 

be required in a de-SPAC transaction.356

One commenter said proposed Items 

1606 and 1607 would represent a 

‘‘dramatic shift to de-SPAC transactions 

processes and disclosures,’’ because, in 

part, SPAC boards have not historically 

made a recommendation to shareholders 

regarding whether or not to redeem 

shares at the time of the business 

combination and fairness opinions 

obtained in connection with de-SPAC 

transactions are typically limited to 

whether the transaction is fair to the 

SPAC, not whether the transaction is 

fair to any particular class of 

shareholders.357 This commenter 

observed, ‘‘By opining on whether the 

de-SPAC transaction and related 

financings are fair to unaffiliated 

stockholders, as opposed to the SPAC 

itself, the SPAC board and any fairness 

opinion provider would essentially be 

making a recommendation regarding 

whether or not to redeem shares.’’ 358

Several commenters expressed the 

view that requiring disclosure of a 

fairness determination would result in 

increased liability and litigation risk in 

de-SPAC transactions 359 and in fewer 

de-SPAC transactions.360 A few 

commenters indicated that financial 

advisors may refuse to provide fairness 

opinions due to concerns about the 

potential liability related to delivery of 

a fairness opinion, in which case the 

SPAC board of directors would decide 

not to proceed with an otherwise 

favorable de-SPAC transaction due to 

the board’s concerns about its own 

liability.361

Other commenters expressed the view 

that proposed Items 1606 and 1607 

would effectively require de-SPAC 

transactions to be ‘‘substantively fair,’’ 

which, in the view of these commenters, 

would exceed the Commission’s 

authority.362 One of these commenters 

expressed that imposing a substantive 

obligation on the SPAC board of 

directors to undertake an analysis of the 

fairness of the de-SPAC transaction is an 

issue that is the exclusive province of 

State law.363

One commenter stated that, while the 

disclosure in proposed Item 1606(a) 

would be new, ‘‘in light of the fiduciary 

duties applicable to SPACs and their 

directors and officers,’’ the disclosure in 

proposed Item 1606(a) and (b) ‘‘would 

likely be redundant with the standard 

disclosure of the SPAC board’s reasons 

for approval of the de-SPAC 

transaction.’’ 364

Several commenters expressed 

concern that the proposed fairness 

determination disclosure requirement 

would likely or effectively require a 

SPAC to obtain a fairness opinion from 

a financial advisor 365 and raised 

concern about the cost of obtaining a 

fairness opinion.366 One of those 

commenters also expressed concern that 

the perceived requirement, under 

proposed Items 1606(a) and 1607, to 

obtain a fairness opinion could increase 

the need to include projections in the 

de-SPAC transaction disclosure 

documents in support of a SPAC 

sponsor’s fairness determination.367

Another commenter indicated that 

proposed Item 1606 (and Item 1607) 

would be burdensome and, to address 

that burden, suggested that proposed 

Item 1606 should not apply to de-SPAC 

transactions generally but only to those 

de-SPAC transactions that raise risks of 

‘‘severe conflicts of interest.’’ 368

Some commenters also said they 

prefer that any fairness determination be 

made as to the de-SPAC transaction as 

a whole (instead of the de-SPAC 

transaction and any related financing 

transaction separately) 369 and with 

respect to all of a SPAC’s shareholders 

(instead of to its unaffiliated 

shareholders).370 One of those 

commenters also suggested that a 

fairness determination should not 

include related financings because 

financial advisors providing a fairness 

opinion do not traditionally include 

such financing within the scope of the 

opinion.371

3. Final Item 1606(a) 

We continue to believe that SPACs 

and the hybrid nature of de-SPAC 

transactions present potential conflicts 

of interest and misaligned incentives 

that are not present in other types of 

business combination transactions. As a 

result, we believe that it is appropriate 

for shareholders to have more complete 

information regarding the SPAC’s 

decision to proceed with a particular deSPAC transaction. Many commenters 

that supported proposed Item 1606(a) 

expressed similar views.372 At the same 

time, we acknowledge that many 

commenters raised significant concerns 

with the proposed disclosure 

requirement.373 Some commenters 

expressed concerns that the proposed 

rule could be interpreted to require a 

fairness opinion,374 even if not 

explicitly required, and concerns about 

the cost to obtain such an opinion.375

Some commenters also expressed 

concerns about imposing requirements 

in connection with the de-SPAC 

transaction process of going public that 

do not exist in the traditional IPO 

process, such as requiring a fairness 

determination.376 Regarding these 

concerns, while we acknowledge that 

disclosures regarding the board’s 

determination to proceed with a 

particular transaction are more typically 

associated with merger transactions, as 

discussed above, the de-SPAC 

transaction is a hybrid capital raising 

transaction that marks the introduction 

of the target company to the U.S. public 


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377See generally Section 251(b) of the Delaware 

General Corporation Law (‘‘The board of directors 

. . . shall adopt a resolution approving an 

agreement of merger or consolidation and declaring 

its advisability.’’). 

378This revision also addresses the comments 

questioning the Commission’s authority to require 

a fairness determination and the comment 

expressing the view that imposing an obligation on 

a board to undertake an analysis of the fairness of 

the de-SPAC transaction is an issue that is the 

exclusive province of State law. See supra notes 

362 and 363, respectively, and accompanying text. 

379This provision allows for the possibility that 

a SPAC’s governing body may be other than a 

‘‘board of directors,’’ whether as a result of a SPAC 

being organized as an entity other than a 

corporation or being a corporation organized in a 

jurisdiction where the governing body is different 

than a ‘‘board of directors.’’ 

380See supra note 377 and accompanying text. 

381The approach taken in final Item 1606(a) also 

addresses a related commenter’s concern that 

disclosure arising from a fairness determination 

would be redundant in light of the fiduciary duties 

applicable to SPACs and their officers and 

directors. See letter from Vinson & Elkins. See also 

supra note 364 and accompanying text. 

382Letters from Cato Institute, CFA Institute, 

Davis Polk, Freshfields, Goodwin, Job Creators 

Network, Jonathan Kornblatt, Skadden, White & 

Case. See supra notes 359 and 360 and 

accompanying text. 

383Because final Item 1606(a) will require 

disclosure when a determination is required to be 

made under the law of the SPAC’s jurisdiction of 

organization, rather than imposing a separate 

fairness determination that would be more 

burdensome, we do not believe there is a need to 

limit Item 1606(a) to instances of ‘‘severe conflicts 

of interest,’’ as one commenter suggested. See letter 

from Andrew Tuch. See also supra note 368 and 

accompanying text. 

384Letters from Cato Institute, CFA Institute, 

Freshfields, Goodwin, Jonathan Kornblatt, White & 

Case. See supra note 359 and accompanying text. 

385Letters from ABA, Goodwin. See supra note 

361 and accompanying text. 

386See infra section II.G.10–12. 

387Letter from Ropes & Gray. See supra notes 357 

and 358 and accompanying text. 

388Letter from ABA, Goodwin. See supra note 

370 and accompanying text. 

389Letter from Cato Institute. See supra note 367 

and accompanying text. 

390Letters from ABA, Davis Polk, Freshfields, 

Goodwin, Ropes & Gray, Skadden, White & Case. 

See supra notes 369–371 and accompanying text. 

securities markets (similar to an IPO), 

and such introduction is done by way 

of a business combination or similar 

transaction. As a result, while we 

believe that the similarity to an IPO is 

a reason that the de-SPAC transaction 

regulatory framework generally should 

be similar to the IPO regulatory 

framework, the business combination 

element of de-SPAC transactions makes 

certain differences in the final rules that 

apply to de-SPAC transactions 

appropriate. 

In response to commenters’ concerns, 

we are revising Item 1606(a) to focus on 

situations in which a determination as 

to the advisability of the de-SPAC 

transaction is required by the law of the 

jurisdiction in which the SPAC is 

organized.377 Doing so will make clear 

that Item 1606(a) does not require the 

de-SPAC transaction to be substantively 

fair or the SPAC to make a fairness 

determination when it is not otherwise 

required to do so under applicable State 

or foreign corporate law.378

Instead, under final Item 1606(a), if 

the law of the jurisdiction of the SPAC’s 

organization requires the SPAC’s board 

of directors (or similar governing 

body) 379 to determine whether the deSPAC transaction is advisable and in the 

best interests of the SPAC and its 

shareholders, or otherwise make any 

comparable determination, the SPAC 

will be required to disclose that 

determination. Under Delaware General 

Corporation Law, a board of directors of 

a corporation that seeks to enter a 

merger or consolidation is required to 

adopt a resolution approving the 

transaction agreement and declaring its 

advisability.380 In the experience of the 

Commission staff, many SPACs 

governed by Delaware law provide a 

statement in registration statements or 

proxy statements filed for de-SPAC 

transactions that the transaction 

agreement the board approved is 

advisable and in the best interests of 

shareholders. Comparable requirements 

may apply to registrants organized 

under the laws of other jurisdictions. 

The final rule would codify existing 

disclosure practices in this regard and 

serve to standardize the disclosure 

across a variety of State or foreign law 

requirements. 

We believe that the approach taken in 

final Item 1606(a) represents an 

appropriate balance between our goal of 

providing more transparency around the 

SPAC’s decision to proceed with a 

particular de-SPAC transaction and the 

concerns raised by commenters that the 

proposed rule would create a new 

substantive corporate law 

requirement 381 as well as other 

concerns raised by commenters, 

including increased liability and risks of 

litigation and decreased de-SPAC 

transactions.382 The new disclosure 

requirement will help achieve the same 

goal sought by the proposed fairness 

determination requirement—enhancing 

SPAC security holders’ ability to assess 

the SPAC’s decision to proceed with a 

particular de-SPAC transaction— 

without imposing new procedural 

obligations regarding how such a 

decision is made. While the final rule 

will not require a SPAC to make a 

determination regarding the fairness or 

suitability of the de-SPAC transaction, if 

such a determination is required by 

applicable corporate law, we believe 

investors should be informed of that fact 

and receive appropriate disclosure (as 

described below) regarding the 

considerations that went into such a 

determination.383 The fact that many 

registrants already provide such 

disclosure supports our view that the 

factual disclosures required by the final 

rule should not impose undue costs or 

create excessive exposure to new 

liability or litigation risk. 

In addition, these changes from the 

proposal should avoid any 

misimpression that Item 1606(a) creates 

a requirement, implicit or explicit, or 

expectation that a fairness opinion must 

be obtained to comply with its 

requirements. We are mindful of 

commenters’ concerns about increased 

liability and litigation risk associated 

with such opinions.384 We are also 

mindful of comments indicating that 

financial advisors may refuse to provide 

fairness opinions due to concerns about 

the potential liability related to delivery 

of a fairness opinion and that a SPAC’s 

board of directors may decide not to 

proceed with an otherwise favorable deSPAC transaction because it cannot 

obtain a fairness opinion.385 Cognizant 

of these concerns, we reiterate that 

nothing in the final rule requires a 

SPAC to obtain a fairness opinion in 

connection with a de-SPAC transaction. 

The changes to Items 1606(a) and (b) 

and 1607 386 should also address one 

commenter’s concern that the new 

requirements would represent ‘‘a 

dramatic shift to de-SPAC transactions 

processes and disclosures’’ by requiring 

more limited disclosure aligned with 

requirements already applicable to a 

SPAC by the law of its jurisdiction of 

incorporation.387

We agree with commenters who 

stated that any rule addressing the 

board’s decision to proceed with a deSPAC transaction should focus on all of 

a SPAC’s security holders rather than 

only its unaffiliated security holders.388

In response to these comments, we have 

revised the final rule to reference 

security holders of the SPAC generally, 

in contrast to the proposed rule, which 

addressed only unaffiliated security 

holders. 

The changes to Item 1606(a) address 

one commenter’s concern that the 

perceived requirement to obtain a 

fairness opinion could increase the need 

to include projections in the de-SPAC 

transaction disclosure documents in 

support of such fairness 

determination.389

Finally, in response to commenters’ 

recommendations that proposed Item 

1606(a) be required with respect to the 

de-SPAC transaction and related 

financing as a whole,390 we are revising 


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391 Id. 

392Letters from Better Markets, CalPERS, Holger 

Spamann. 

393Letters from Committee on Capital Markets 

Regulation, Consumer Federation. 

394Letters from ABA, Goodwin, White & Case. 

395Letters from ABA, Goodwin. 

396 Id. 

397Letter from White & Case. 

398Letters from ABA, Goodwin, Ropes & Gray. 

399Letter from Skadden. 

400Letters from Better Markets, CalPERS, 

Committee on Capital Markets Regulation, 

Consumer Federation, Holger Spamann, NASAA, 

Public Citizen. See supra note 393 and 

accompanying text. 

401Letters from ABA, Goodwin, White & Case. 

See supra notes 394–396 and accompanying text. 

402This revision also addresses the comments 

questioning the Commission’s authority to mandate 

the factors that a SPAC must discuss under Item 

1606(b). See supra notes 362, 363, and 397 and 

accompanying text. 

Item 1606(a) to remove any reference to 

related financing. While the proposed 

rule was intended to result in the 

disclosure of a fairness determination 

with respect to a de-SPAC transaction as 

a whole, we were persuaded by 

commenters’ concerns that including 

‘‘any related financing’’ in the rule 

could have signaled a separate 

determination should be made with 

respect to the related financing.391 We 

continue to believe that related 

financing is usually fundamental to the 

success of the de-SPAC transaction but 

have adopted a final rule that simplifies 

the disclosure about the determinations 

made by a SPAC’s board of directors (or 

similar governing body) with respect to 

the de-SPAC transaction. On the other 

hand, given the continued importance 

to a SPAC’s shareholders of the related 

financing, we are moving the reference 

to related financing to final Item 

1606(b), which requires discussions of 

the factors considered by the SPAC 

board of directors (or similar governing 

body) in making the determination 

disclosed in response to Item 1606(a). 

This change is discussed further below. 

4. Proposed Item 1606(b) 

The Commission proposed Item 

1606(b) to supplement the fairness 

determination disclosure required by 

proposed Item 1606(a). Specifically, 

proposed Item 1606(b) would require a 

SPAC to discuss the material factors 

upon which the reasonable belief 

regarding the fairness of a de-SPAC 

transaction and any related financing 

transaction is based and, to the extent 

practicable, the weight assigned to each 

factor. 

5. Comments: Item 1606(b) 

Commenters expressed differing 

views on proposed Item 1606(b). Some 

commenters supported the proposed 

requirement generally 392 and some 

commenters specifically indicated the 

requirement would allow investors to 

conduct a better evaluation of the merits 

of a de-SPAC transaction and 

incentivize sponsors to avoid 

transactions that could potentially be 

viewed as unfair.393

Other commenters stated that the 

inclusion of a mandatory list of factors 

to be addressed in disclosure under 

proposed Item 1606(b) may force the 

SPAC to disclose information not 

actually considered by the SPAC in 

making its fairness determination.394

Some commenters also stated that the 

mandatory list of factors in proposed 

Item 1606(b) is at odds with the 

Commission’s history of implementing a 

principles-based disclosure regime and 

does not account for the fact that the 

factors relevant to making a fairness 

determination will vary from company 

to company and that different fairness 

assessors may also have different views 

on which factors are appropriate for the 

same company.395 These commenters 

proposed that the Commission modify 

proposed Item 1606(b) to provide that 

the factors should be discussed to the 

extent they were considered.396 One 

commenter said that it is ‘‘not within 

the Commission’s authority to require 

SPAC boards of directors to conform 

their deliberative processes to the 

Commission’s rules and that Item 

1606(b) impermissibly encroaches upon 

the discretion of a board to evaluate 

whatever information it deems 

appropriate in deciding to proceed with 

a transaction.’’ 397

Some commenters stated that the 

factors the proposal required to be 

discussed should not be assigned weight 

because it would not be practical or 

workable to do so, such weighting could 

result in investors placing too much or 

not enough emphasis on the factors 

described by the SPAC, and various 

members of the SPAC board will likely 

assign differing weights to differing 

factors.398 Another commenter stated 

that a weighting of factors would require 

a high degree of professional 

subjectivity, which may expose boards 

and financial institutions to liability 

which would ultimately discourage 

them from pursuing de-SPAC 

transactions.399

6. Final Item 1606(b) 

We are adopting Item 1606(b) as 

proposed, with certain modifications 

discussed below. We continue to believe 

that disclosure of the factors considered 

by a SPAC’s board of directors (or 

similar governing body) in making the 

decision to proceed with a de-SPAC 

transaction, to the extent they were 

considered, would provide shareholders 

with important information to allow 

those shareholders to make informed 

voting or investment decisions. 

While several commenters supported 

proposed Item 1606(b),400 as discussed 

above, some commenters expressed the 

view that only factors actually 

considered should be required to be 

discussed.401 This was the intent of the 

language in the proposed rule requiring 

a discussion of ‘‘factors upon which the 

belief stated in paragraph (a) . . . is 

based.’’ In light of the comments 

received, however, to clarify our intent 

in the final rule, we have added the 

terms ‘‘To the extent considered’’ to 

qualify the factors and the analysis of 

those factors required to be discussed. 

This change will avoid any potential for 

ambiguity or misinterpretation that the 

rule requires a discussion of factors not 

considered or a more extensive analysis 

of any factor considered than would 

otherwise have taken place in the 

absence of the final rule.402 As a result, 

final Item 1606(b) requires a discussion 

of a non-exclusive list of factors the 

board of directors (or similar governing 

body) considered in making any 

determination disclosed in response to 

Item 1606(a) to the extent such factors 

were considered. These factors would 

include, but not be limited to, the 

valuation of the target company, 

financial projections relied upon by the 

board of directors (or similar governing 

body), the terms of financing materially 

related to the de-SPAC transaction, any 

report, opinion, or appraisal referred to 

in Item 1607(a), and the dilution 

described in Item 1604(c). We believe 

these factors are generally matters that 

a board of directors (or similar 

governing body) is likely to consider in 

determining whether a transaction is 

advisable and in the best interests of the 

SPAC and its security holders (or in 

making a comparable determination). At 

the same time, by revising the 

disclosure requirement to make clear 

that the listed factors must be disclosed 

to the extent considered, the final rule 

reflects our understanding that the 

fiduciary duties and discussions of 

boards of directors (or similar governing 

bodies) are not uniform across 

companies or jurisdictions. Moreover, 

this change makes clear that final Item 

1606(b) does not require boards of 

directors (or similar governing bodies) 

to specifically consider the listed factors 

or, if considering them, dictate how 

thoroughly to consider them, when 

determining whether a transaction is 

advisable and in the best interests of the 


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403Letters from ABA, Goodwin, Ropes & Gray. 

See supra note 398 and accompanying text. 

404Letter from Skadden. See supra note 399 and 

accompanying text. 

405Letters from Better Markets, CalPERS, 

Committee on Capital Markets Regulation, 

Consumer Federation, Holger Spamann, NASAA, 

Public Citizen. 

406Letter from Vinson & Elkins. 

407Letters from Freshfields, Vinson & Elkins. 

408Letter from Freshfields. 

409We have moved this requirement from 

proposed Item 1606(a) to final Item 1606(e). Thus, 

we are including comments relating to that portion 

of proposed Item 1606(a) in this section. 

410Letter from Davis Polk. 

411Letter from Freshfields. 

412 Id. 

413 Id. 

414Letter from Vinson & Elkins. See supra note 

406 and accompanying text. 

SPAC and its security holders (or in 

making a comparable determination). 

Some commenters expressed concern 

with the practicability of assigning 

weight to factors, the possibility that 

shareholders would emphasize those 

weights too much or too little,403 and 

that a weighting of factors, which may 

require a high degree of professional 

subjectivity, may expose boards and 

financial institutions to liability which 

would ultimately discourage them from 

pursuing de-SPAC transactions.404

Although proposed Item 1606(b) was 

never intended to force disclosure of the 

weight of each factor where the SPAC 

board did not, or could not, conduct 

such a weighting (proposed Item 

1606(b) required a discussion of such 

weighting only ‘‘to the extent 

practicable’’), we nevertheless recognize 

commenters’ concerns and the 

possibility that the proposed item 

requirement could be misunderstood. 

Based on commenters’ suggestions, we 

have removed references to the 

weighting of factors from final Item 

1606(b) to eliminate such potential 

misinterpretation and in recognition of 

the potential practical challenges to 

assigning a weight to various factors or 

discussing such weighting. 

To reduce potential redundancy in 

the disclosure requirement, we have 

also removed the terms ‘‘in reasonable 

detail’’ from the first sentence of Item 

1606(b). Any disclosure responsive to 

Item 1606(b) is already required to be 

complete, and the deleted terms are not 

necessary to confirm that such a 

principle applies here. 

Further, as discussed above, we are 

revising Item 1606(b) to include any 

financing materially related to the deSPAC transaction in the non-exclusive 

list of factors to be discussed because 

PIPE offerings and other financings are 

a common feature of a de-SPAC 

transaction and, in some instances, the 

success of the de-SPAC transaction and 

of the post-de-SPAC company is 

dependent on the existence of related 

financing. Given the importance of such 

financing, we have revised final Item 

1606(b) to include financing materially 

related to the de-SPAC transaction in 

the non-exclusive list of factors that a 

board of directors (or similar governing 

body) would be required to discuss, to 

the extent the board of directors (or 

similar governing body) considered 

such financing. By moving the reference 

to related financing from Item 1606(a) to 

Item 1606(b), we are also eliminating 

any potential confusion that the board 

of directors (or similar governing body) 

would need to make a separate Item 

1606(a) determination for financing 

materially related to the de-SPAC 

transaction. 

7. Proposed Item 1606(c) Through (e) 

The Commission proposed Item 

1606(c) through (e) to provide 

additional information about the deSPAC transaction and any related 

financing transaction, including 

whether a majority of unaffiliated 

security holders is required to approve 

the transaction(s), the involvement of 

any unaffiliated representative acting on 

behalf of unaffiliated security holders, 

and whether the transaction(s) were 

approved by a majority of directors of 

the SPAC who are not employees of the 

SPAC. 

8. Comments: Item 1606(c) Through (e) 

Commenters expressed differing 

views on proposed Item 1606(c) through 

(e). Some commenters supported the 

proposed requirements.405

With respect to proposed Item 

1606(c), one commenter indicated that 

disclosure about whether the de-SPAC 

or related financing transaction was 

structured to require approval of at least 

a majority of unaffiliated security 

holders would be redundant due to the 

requirement of Item 21 of Schedule 14A 

to disclose similar information.406

With respect to proposed Item 

1606(d), a few commenters expressed 

the view that retention of a 

representative to act solely on behalf of 

unaffiliated security holders in the 

negotiation of the de-SPAC transaction 

is rare and that, as a result, such a 

requirement will not result in 

meaningful additional disclosure.407

One of the commenters also indicated 

that the disclosure requirement would 

not result in a change in the use of 

unaffiliated representatives.408

One commenter supported the 

proposed requirement to disclose 

whether any non-executive director 

voted against, or abstained from voting 

on, the approval of the de-SPAC 

transaction 409 and said it is consistent 

with current market practice.410

Another commenter stated that a 

requirement to identify any director that 

voted against or abstained from voting 

on the approval of the de-SPAC 

transaction would ‘‘prejudice[ ] 

companies against de-SPAC 

transactions’’ and could inhibit board 

discussions.411 This commenter said 

that this proposed requirement would 

make it more difficult and less likely 

that individual directors would oppose 

a transaction if they know that their 

objection will be made public.412 This 

commenter also recommended that the 

proposed rule be more precise about its 

applicability being only to directors of 

the SPAC.413

9. Final Item 1606(c) Through (e) 

We continue to believe that the new 

disclosures under Item 1606(c) through 

(e) will provide investors with 

important information and a better 

understanding of the process by which 

a SPAC determined to proceed with a 

particular de-SPAC transaction. We are 

adopting Item 1606(c), (d), and (e) as 

proposed, with some modifications and 

minor technical changes discussed 

below. In the final rules, we moved the 

requirement to identify any director 

who voted against, or abstained from 

voting on, approval of the de-SPAC 

transaction from proposed Item 1606(a) 

to final Item 1606(e), because, as Item 

1606(e) is generally related to issues 

involving approval of the de-SPAC 

transaction by the board of directors (or 

similar governing body), we considered 

this a more appropriate place for this 

requirement. 

We disagree with the assertion made 

by a commenter that the disclosure 

required under proposed Item 1606(c) 

would be redundant given the existing 

requirement in Item 21 of Schedule 

14A, which requires disclosure of the 

vote required for approval (among other 

things) of the matter by shareholders.414

Schedule 14A does not expressly 

differentiate among affiliated and 

unaffiliated security holders as with 

Item 1606(c). Also, a Schedule 14A may 

not be filed in connection with some deSPAC transactions. Thus, we believe the 

information provided to investors under 

Item 1606(c) is not redundant and will 

benefit investors by improving their 

understanding of the SPAC’s 

governance procedures followed in 

connection with approving the de-SPAC 

transaction. We expect this improved 

understanding will enhance investor 

voting, redemption, and other 


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415Letters from Freshfields, Vinson & Elkins. See 

supra notes 407 and 408 and accompanying text. 

416Letter from Vinson & Elkins. See supra note 

408 and accompanying text. 

417Letter from Freshfields. See supra notes 411 

and 412 and accompanying text. 

418Letters from Committee on Capital Markets 

Regulation; Consumer Federation; ICGN; Michael 

Dambra, Ph.D., CPA, University at Buffalo, SUNY, 

Omri Even-Tov, Ph.D., University of California, 

Berkeley, Kimberlyn George, University of 

California, Berkeley (June 3, 2022) (‘‘Michael 

Dambra, Omri Even-Tov, and Kimberlyn George’’). 

419Letters from ABA (‘‘with respect to proposed 

Item 1607, we believe it is unnecessary and 

unrealistic to require the filing of board books and 

other written materials presented to the board in 

connection with the reports, opinions or appraisals, 

as in the case with going-private transactions’’), 

Andrew Tuch, Ernst & Young, Goodwin, Ropes & 

Gray, Vinson & Elkins. 

420Letters from ABA, Goodwin, NYC Bar, White 

& Case. See supra note 362 and accompanying text. 

421Letters from ABA, Goodwin. 

422 Id. 

423 Id. 

424 Id. 

425Letter from Ernst & Young. 

426Letter from Andrew Tuch. 

427Letter from Ernst & Young. 

investment decisions. We have revised 

Item 1606(c) to clarify that the 

shareholder approval relates to 

shareholders of the SPAC. 

A few commenters said the use of 

unaffiliated representatives in 

negotiations is rare.415 One of those 

commenters also said the disclosure 

requirement in proposed Item 1606(d) 

would not lead to a change in market 

practices.416 We note that the proposed 

rule was not intended and the final rule 

is not intended to change market 

practices relating to the retention of any 

such unaffiliated representative. As is 

the case with final Item 1606(c) and (e), 

final Item 1606(d) is a disclosure 

requirement intended to provide 

investors with important information 

and a better understanding of the 

process by which a SPAC determined to 

proceed with a particular de-SPAC 

transaction and does not require SPACs 

to change their processes in connection 

with de-SPAC transaction approval. 

One commenter said directors will be 

more reluctant to vote against a deSPAC transaction if they know that their 

objection will be made public.417 We 

decline to revise Item 1606(e) in 

response to the commenter’s concern. 

Directors are generally subject to 

fiduciary duties imposed by State or 

foreign law. We expect that directors 

will generally seek to make voting 

decisions consistent with their duties to 

security holders or the company 

irrespective of whether that decision is 

publicly disclosed. 

We have also made conforming 

changes to Item 1606(c) through (e) to be 

consistent with final Item 1606(a), as 

discussed above. 

10. Proposed Item 1607 

The Commission proposed Item 

1607(a) to require disclosure about 

whether or not the SPAC or SPAC 

sponsor received any report, opinion, or 

appraisal from an outside party relating 

to the consideration or the fairness of 

the consideration to be offered to 

security holders or the fairness of the 

de-SPAC transaction or any related 

financing transaction to the SPAC, 

SPAC sponsor or unaffiliated security 

holders. 

The Commission proposed Item 

1607(b) to require disclosure of certain 

information about any such report, 

opinion, or appraisal from an outside 

party as well as any negotiation or 

report by an unaffiliated representative, 

including the identity of the outside 

party or unaffiliated representative, the 

qualifications of the outside party or 

unaffiliated representative, any material 

relationship between the outside party, 

its affiliates, or unaffiliated 

representative and the SPAC, SPAC 

sponsor, or their respective affiliates, 

whether the SPAC or SPAC sponsor 

determined the amount of consideration 

to be paid or the valuation of the target 

company, or whether the outside party 

recommended the amount of 

consideration to be paid or the valuation 

of the target company. Proposed Item 

1607(b) would also require a summary 

of the negotiation, report, opinion, or 

appraisal, including a description of the 

procedures followed, the findings and 

recommendations, the bases for and 

methods used to arrive at such findings 

and recommendations, any instructions 

received from the SPAC or SPAC 

sponsor, and any limitation imposed by 

the SPAC or SPAC sponsor on the scope 

of the investigation. 

The Commission proposed Item 

1607(c) to require all such reports, 

opinions or appraisals to be filed as 

exhibits to the Form S–4, Form F–4, and 

Schedule TO for the de-SPAC 

transaction or included in the Schedule 

14A or 14C for the transaction. 

11. Comments: Item 1607 

We received differing views from 

commenters. Some commenters 

generally supported proposed Item 

1607.418 Other commenters generally 

opposed, or expressed concerns 

regarding specific aspects of, proposed 

Item 1607.419 We discuss these specific 

concerns in more detail below. 

As discussed above in the comments 

on proposed Item 1606, several 

commenters stated that proposed Items 

1606 and 1607 exceed the Commission’s 

authority because they effectively 

require de-SPAC transactions to be 

‘‘substantively fair.’’ 420

Some of these commenters suggested 

that the filing of board materials 

required under Item 1607(c) is 

inappropriate because it will 

‘‘inevitably’’ result in a reduction of 

information presented to, and 

considered by, a SPAC’s board of 

directors, which may affect the board’s 

ability to fulfill its fiduciary duties.421

Given that board materials are typically 

not prepared with a view that they will 

be included in public filings and subject 

to liability, these commenters also 

expressed the view that filing such 

materials may expose their preparers to 

liability under the Securities Act and 

the Exchange Act and that the proposed 

requirement would be ‘‘impractical and 

unworkable’’ because the preparers are 

not trained to prepare any such 

materials to withstand scrutiny under 

the Federal securities laws.422 Also, the 

commenters indicated that some 

preparers will not consent to the use of 

their materials in a public filing.423

Finally, these commenters stated that 

some information included in such 

reports may be immaterial, speculative, 

or ultimately determined to be 

unreliable.424

One commenter indicated that the 

requirement in proposed Item 1607(c) to 

file as an exhibit (or include) any such 

report, opinion, or appraisal related to 

the fairness determination in addition to 

the requirement in proposed Item 

1607(b) to disclose a summary of the 

report, opinion, or appraisal could limit 

any incremental benefit an investor 

would receive from the filing of such 

reports, opinions, or appraisals.425

Another commenter stated that 

proposed Item 1607 should not apply to 

de-SPAC transactions generally but only 

to those de-SPAC transactions that raise 

risks of ‘‘severe conflicts of interest.’’ 426

Yet another commenter suggested that 

the Commission consider whether the 

incremental cost and liabilities related 

to filing the reports would have the 

unintended consequence of 

discouraging SPACs from obtaining the 

reports because SPACs would not be 

required to obtain the reports as a basis 

for their fairness determination under 

proposed Item 1606(a).427 One 

commenter also proposed that we more 

narrowly tailor Item 1607(b)(6) to deSPAC transactions and modify Item 4(b) 

of Forms S–4 and F–4 to direct filers to 

comply with the requirements of Item 

1607(b)(6), rather than 17 CFR 

229.1015(b) (‘‘Item 1015(b)’’ of 


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428Letter from Vinson & Elkins. 

429Letters from ABA, Goodwin. See supra note 

424 and accompanying text. 

430Letters from ABA, Goodwin, NYC Bar, White 

& Case. See supra note 420 and accompanying text. 

431Letter from Vinson & Elkins. See supra note 

428 and accompanying text. 

432 Item 14(b)(6) of Schedule 14A directs filers to 

comply with Item 1015(b) of 17 CFR 229.1000 

through 229.1016 (‘‘Regulation M–A’’) in the same 

manner as Form S–4 and F–4. But see the potential 

registration requirements for de-SPAC transactions, 

in the absence of an exemption, as a result of the 

adoption of Rule 145a. 

433See General Instruction L.1 to Form S–4; 

General Instruction VIII to Form S–1; General 

Instruction I.1 to Form F–4; General Instruction VII 

to Form F–1; General Instruction K to Schedule TO. 

434Letters from ABA, Goodwin. See supra note 

421 and accompanying text. 

435Letter from Ernst & Young. See supra note 427 

and accompanying text. 

436See discussion of Item 1607, infra section 

VIII.B.1.iii.f. 

437Letter from Andrew Tuch. See supra note 426 

and accompanying text. 

438Letter from Ernst & Young. See supra note 425 

and the accompanying text. 

Regulation M–A), for de-SPAC 

transactions.428

12. Final Item 1607 

We are adopting Item 1607(a) as 

proposed with the modifications 

discussed below. Final Item 1607(a) 

only requires the disclosure specified in 

Item 1607(b) if the SPAC or SPAC 

sponsor received any report, opinion 

(other than an opinion of counsel), or 

appraisal from an outside party or 

unaffiliated representative materially 

relating to a determination disclosed in 

response to Item 1606(a), the approval 

of the de-SPAC transaction, the 

consideration or the fairness of the 

consideration to be offered to security 

holders of the target company in the deSPAC transaction, or the fairness of the 

de-SPAC transaction to the SPAC, its 

security holders, or SPAC sponsor. 

Thus, if such a report, opinion, or 

appraisal from an outside party or 

unaffiliated representative was not 

received, then no disclosure will be 

required under Item 1607. 

The final rule includes some 

clarifying revisions to Item 1607(a). We 

added a reference to an ‘‘unaffiliated 

representative’’ to avoid any confusion 

arising out of references to an 

‘‘unaffiliated representative’’ in Item 

1607(b) without a corresponding 

reference in Item 1607(a). We also 

added the parenthetical terms ‘‘other 

than an opinion of counsel’’ to clarify 

that an opinion of counsel is outside of 

the rule’s scope. In addition, we 

included a reference to the target 

company in final Item 1607(a)(3) to 

specify which security holders are being 

offered the consideration. Finally, we 

reversed the order of ‘‘SPAC sponsor’’ 

and ‘‘security holders’’ in final Item 

1607(a)(4) to avoid the implication that 

the rule also applies to security holders 

of SPAC sponsor. 

To address commenters’ concerns 

regarding the possible disclosure of 

immaterial, speculative, or unreliable 

materials,429 we are revising Item 

1607(a) to limit the scope of the final 

rule to only reports, opinions, or 

appraisals that are materially related to 

any Item 1606(a) determination of the 

board of directors (or similar governing 

body) or the other matters listed in final 

Item 1607(a)(2) through (4). As they 

already do now in other filings relating 

to de-SPAC transactions, SPACs may 

continue to add any supplemental, 

explanatory discussion so that investors 

can properly understand the context 

and purpose of the disclosed reports, 

opinions, or appraisals and assess these 

reports, opinions, or appraisals 

appropriately. 

In addition, by revising Item 1606 to 

remove the requirement to disclose a 

fairness determination in the context of 

a de-SPAC transaction and making 

corresponding revisions to Item 1607, 

the final rule should address 

commenters’ concerns that proposed 

Item 1607 would exceed the 

Commission’s authority.430

We believe adopting final Item 1607 

is more consistent with the remaining 

rules applicable to SPACs and de-SPAC 

transactions than the alternative 

suggested by a commenter to instead 

update similar existing requirements in 

Form S–4 and F–4.431 Item 1607(a) is 

limited to a specific set of events and 

determinations, unlike Item 4(b) in 

Form S–4 and F–4, which more 

generally refer to reports, opinions, or 

appraisals materially relating to the 

subject transaction. Also, under the 

alternative suggested by the commenter, 

the Item 1607(b) disclosure would not 

be required to the extent a de-SPAC 

transaction is not registered on Form S– 

4 or F–4.432 Finally, we believe 

registrants will benefit from the 

centralization of the SPAC-related 

requirements in the Item 1600 series of 

Regulation S–K, which are primarily 

applied to de-SPAC transactions 

through new general instructions in the 

relevant forms and schedules,433 rather 

than through revisions to specific item 

requirements within each relevant form 

or schedule as suggested. 

Several commenters expressed 

concern that compliance with Item 

1607(c) will result in a reduction of 

information presented to the SPAC’s 

board of directors, which could 

negatively affect the ability of those 

directors to fulfill their fiduciary 

duties.434 Another commenter suggested 

that the incremental cost and liability of 

filing such materials would discourage 

a SPAC from obtaining those 

materials.435 While we recognize these 

concerns and acknowledge that the final 

rule could impact the information 

provided to the SPAC’s board of 

directors,436 we believe there remain 

significant incentives (e.g., conducting 

due diligence on the target company or 

receiving an independent evaluation of 

the proposed de-SPAC transaction) for 

boards to seek and use this information 

as part of their decision-making process 

so we do not find this a persuasive 

reason to withhold such disclosure from 

investors. Directors are generally subject 

to fiduciary duties imposed by State or 

foreign law. We expect directors to seek 

to fulfill those duties by continuing to 

inform themselves of the potential 

merits of a de-SPAC transaction with 

the assistance of outside parties despite 

the potential public nature, added cost, 

or risk of liability associated with the 

filing of any report, opinion, or 

appraisal. 

Furthermore, we believe that it would 

be impractical to require disclosure 

under Item 1607 only in instances of 

‘‘severe conflicts of interest’’ as one 

commenter suggested 437 because 

quantifying or classifying the extent of 

a conflict of interest is difficult given 

the wide variety of facts and 

circumstances in each de-SPAC 

transaction. 

We are adopting Item 1607(b) and (c) 

as proposed, with two technical 

modifications. We revised Item 

1607(b)(5) to specify that the related 

disclosure is only required for reports, 

opinions, or appraisals related to the 

fairness of the consideration to be 

offered to security holders of the target 

company in the de-SPAC transaction. 

We also revised Item 1607(c) to specify 

that the reports, opinions, or appraisals 

required to be filed are those referred to 

in Items 1607(a) and (b). 

We disagree with the comments that 

the filing of reports, opinions, or 

appraisals pursuant to Item 1607(c) 

would have limited incremental benefit 

to investors.438 Although the summary 

required by Item 1607(b)(6) provides 

investors with useful information 

regarding the preparation and findings 

or recommendations of the report, 

opinion, or appraisal, we believe that it 

is important for investors to be able to 

review the actual report, opinion, or 

appraisal being summarized and, in 

many cases, being relied upon by the 

board when considering the transaction. 

We also disagree with the comments 

that the filing of reports, opinions, or 


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439Letters from ABA, Goodwin. See supra notes 

422 and 423 and accompanying text. 

440For example, in a going-private transaction 

subject to Rule 13e–3, any report, opinion (other 

than an opinion of counsel) or appraisal from an 

outside party that is materially related to the 

transaction is required to be filed as an exhibit to 

the Schedule 13E–3. See Item 16 of Schedule 13E– 

3 and 17 CFR 229.1016(c) (Item 1016(c) of 

Regulation M–A). Additionally, in other public 

company mergers and business combinations, Item 

21(c) of Forms S–4 and F–4 requires that any report, 

opinion or appraisal materially relating to the 

subject transaction and referred to in the prospectus 

be furnished as an exhibit to such form. 

441See supra note 23. 

442 ‘‘Foreign private issuer’’ is defined in 

Securities Act Rule 405 and 17 CFR 240.3b–4(c). 

The term ‘‘foreign private issuer’’ means any foreign 

issuer other than a foreign government except for 

an issuer meeting the following conditions as of the 

last business day of its most recently completed 

second fiscal quarter: (1) More than 50% of the 

issuer’s outstanding voting securities are directly or 

indirectly held of record by residents of the United 

States; and (2) Any of the following: (i) The majority 

of the executive officers or directors are United 

States citizens or residents; (ii) More than 50% of 

the assets of the issuer are located in the United 

States; or (iii) The business of the issuer is 

administered principally in the United States. 

443The staff has historically expressed the view 

that the same information about the target company 

that would be required in a Schedule 14A should 

be included in such a Schedule TO, in view of the 

requirements of Item 11 of Schedule TO and 17 CFR 

229.1011(c) (‘‘Item 1011(c)’’ of Regulation M–A) 

and the importance of this information in making 

a redemption decision. Item 11 of Schedule TO 

states ‘‘Furnish the information required by Item 

1011(a) and (c) of Regulation M–A.’’ Item 1011(c) 

of Regulation M–A states ‘‘Furnish such additional 

material information, if any, as may be necessary to 

make the required statements, in light of the 

circumstances under which they are made, not 

materially misleading.’’ 

444Letters from ABA, Vinson & Elkins. 

445Letter from ABA. 

446 Id. 

447 Id. 

448 Id. 

449Letter from Vinson & Elkins. 

450 Id. 

451Letter from ABA. See supra note 445 and 

accompanying text. 

appraisals pursuant to Item 1607(c) 

would present their preparers with an 

‘‘impractical and unworkable’’ task or 

that the preparers would not consent to 

the public use of such materials.439

While the requirements of Item 1607(c) 

may affect how preparers price their 

services as well as the types of 

information included in their reports 

and opinions, such materials have 

historically and routinely been included 

with filings relating to transactions 

other than de-SPAC transactions,440 and 

in those cases, registrants and preparers 

have been able to navigate the 

preparation, filing, and evaluation of 

such materials. We are not aware of any 

reason (and commenters have not 

provided any specific reason) why 

materials used in de-SPAC transactions 

would be any different. 

We are also amending Item 601 of 

Regulation S–K, Schedule 14A, and 

Schedule TO to implement the final 

Item 1607(c) exhibit filing requirement. 

For Forms S–1, S–4, F–1, and F–4, 

which refer to the exhibit requirements 

in Item 601 of Regulation S–K, the Item 

1607(c) exhibit filing requirement will 

be incorporated through new 17 CFR 

229.601(b)(98) (Item 601(b)(98) of 

Regulation S–K). Schedule 14A and 

Schedule TO will incorporate the Item 

1607(c) exhibit filing requirement 

through new Item 25(b) of Schedule 14A 

and new Item 12(b) of Schedule TO, 

respectively. Because Item 1 of 

Schedule 14C generally requires 

compliance with the relevant items of 

Schedule 14A, the Item 1607(c) exhibit 

filing requirement will be incorporated 

into Schedule 14C through new Item 

25(b) of Schedule 14A. 

H. Tender Offer Filing Obligations 

1. Proposed Item 1608 

The Commission proposed Item 1608 

to codify a staff position that a Schedule 

TO filed in connection with a de-SPAC 

transaction should contain substantially 

the same information about a target 

private operating company that is 

required under the proxy rules and that 

a SPAC must comply with the 

procedural requirements of the tender 

offer rules when conducting the 

transaction for which the Schedule TO 

is filed, such as a redemption of the 

SPAC securities. Redemption rights 

offered by a SPAC to its security holders 

in connection with the de-SPAC 

transaction or an extension of the 

timeframe to complete a de-SPAC 

transaction generally have indicia of 

being a tender offer, but the Commission 

staff has not objected if a SPAC does not 

comply with the tender offer rules when 

the SPAC files a Schedule 14A or 14C 

in connection with a de-SPAC 

transaction or an extension and 

complies with Regulation 14A or 14C, 

because the Federal proxy rules would 

generally mandate substantially similar 

disclosures and applicable procedural 

protections as required by the tender 

offer rules.441 Proposed Item 1608 

would not affect the staff position for 

those SPACs that file Schedule 14A or 

14C for their de-SPAC transactions or 

extensions. SPACs that do not file a 

Schedule 14A or 14C (such as FPIs) in 

connection with the de-SPAC 

transaction (or an extension of time to 

complete a de-SPAC transaction),442

however, would be subject to the 

requirements of proposed Item 1608.443

2. Comments: Item 1608 

A few commenters generally 

supported the proposed rule but 

suggested certain changes.444

One of these commenters 

recommended the Commission codify 

and clarify that a SPAC filing a 

Schedule 14A or 14C in connection 

with a de-SPAC transaction (or seeking 

an extension of time to complete a deSPAC transaction) would neither need 

to file a Schedule TO nor comply with 

the tender offer rules.445 While 

expressing support for proposed Item 

1608, the same commenter stated that a 

SPAC stockholder’s ability to redeem its 

shares at its option does not result in the 

existence of a tender offer.446 The same 

commenter stated that SPACs that are 

FPIs and that elect to report generally on 

domestic forms and whose de-SPAC 

transaction disclosure document is 

nearly ‘‘identical’’ to a proxy or 

information statement filed by a 

domestic filer pursuant to Regulation 

14A or 14C should not have to file a 

Schedule TO.447 Finally, the commenter 

stated that such a SPAC’s investors are 

confused when presented with a proxy 

statement and a tender offer document 

that proceed as parallel but different 

processes while not having any added 

protection.448

Another commenter suggested that 

proposed Item 1608 is too broad because 

it would apply to tender offers 

conducted by SPACs but not related to 

a de-SPAC transaction.449 The same 

commenter stated that the adoption of 

proposed Securities Act Rule 145a 

would effectively require the use of 

Form S–4 or F–4 for all de-SPAC 

transactions, thus rendering Item 1608 

unnecessary.450

3. Final Item 1608 

After considering the comments, we 

are adopting Item 1608 as proposed. 

We decline to revise the final item to 

clarify that a SPAC filing a Schedule 

14A or 14C in connection with a deSPAC transaction (or seeking an 

extension of time to complete a deSPAC transaction) would neither need 

to file a Schedule TO nor comply with 

the tender offer rules, as recommended 

by a commenter.451 We do not believe 

the codification of the commenter’s 

view is necessary because Item 1608, as 

adopted, is a more precise way to 

address an exception to the standard deSPAC transaction structures that have 

been used historically. We also note that 

Item 1608 applies only if a SPAC files 

a Schedule TO for the redemption of 

securities offered to security holders 

(e.g., in connection with a de-SPAC 

transaction or an extension of the 

timeframe to complete a de-SPAC 

transaction). We have revised General 

Instruction K to Schedule TO to 


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452Letter from ABA. See supra note 446 and 

accompanying text. 

453Letter from ABA. See supra note 447 and 

accompanying text. 

454Letter from ABA. See supra note 448 and 

accompanying text. 

455Letter from Vinson & Elkins. See supra note 

449 and accompanying text. 

456 If a SPAC files a Schedule TO for any 

redemption of securities offered to security holders, 

final Item 1608 requires a Schedule TO to provide 

the information required by General Instruction L.2. 

to Form S–4, General Instruction I.2. to Form F–4, 

and Item 14(f)(2) of Schedule 14A (§ 240.14a–101), 

as applicable, in addition to the information 

otherwise required by Schedule TO. If the Schedule 

TO relates to an extension of the timeframe to 

complete a de-SPAC transaction and a target 

company has not been identified by the SPAC, we 

would not expect this information required by Item 

1608 regarding a target private operating company 

to be known or disclosed. 

457 Id. 

458For example, the redemption of securities 

offered by a foreign private issuer or in connection 

with an extension of the timeframe to complete a 

de-SPAC transaction where a Schedule 14A or 14C 

is not filed. 

459Letters from ABA; Crowe LLP (June 13, 2022) 

(‘‘Crowe’’); ICGN; PwC; Campbell Pryde, President 

and CEO, XBRL US (June 13, 2022) (‘‘XBRL US’’). 

460Letter from ICGN. 

461Letter from PwC. 

462Letters from ICGN, XBRL US. See Proposing 

Release, supra note 7, at 29476 (request for 

comment number 55) (requesting comment on 

structured data with respect to FPIs, SRCs, and 

EGCs). 

463Letter from ICGN. 

464Letter from XBRL US. 

465Letter from Vinson & Elkins. 

466Letter from PwC. 

467Letter from XBRL US. 

468Letter from Stephan Wolf, CEO, Global Legal 

Entity Identifier Foundation (June 13, 2022) 

(‘‘Global Legal Entity Identifier Foundation’’) (‘‘The 

LEI itself is a 20-digit, alpha-numeric code based on 

the ISO 17442 standard developed by the 

International Organization for Standardization 

(ISO).’’). 

separately address the requirements for 

a filing that relates to a redemption of 

securities offered to security holders 

other than in connection with a deSPAC transaction (e.g., the redemption 

of securities in connection with an 

extension of the timeframe to complete 

a de-SPAC transaction). 

With respect to the comment that the 

redemption of a SPAC’s shares at the 

option of a stockholder is not a tender 

offer,452 as noted above, the 

Commission has expressed the view that 

SPAC redemptions conducted pursuant 

to a SPAC’s organizational documents 

generally have indicia of being a tender 

offer. However, as discussed above, the 

Commission staff has not objected if a 

SPAC does not comply with the tender 

offer rules when the SPAC files a 

Schedule 14A or 14C in connection 

with a de-SPAC transaction or an 

extension and complies with Regulation 

14A or 14C. Item 1608 does not affect 

this staff position for those SPACs that 

file a Schedule 14A or 14C for their deSPAC transactions or extensions. 

Regarding the comment that FPIs 

whose de-SPAC transaction disclosure 

document is ‘‘identical’’ to a proxy or 

information statement filed by a 

domestic filer pursuant to Regulation 

14A or 14C should not have to file a 

Schedule TO,453 we note that an FPI is 

not required to comply with Regulations 

14A or 14C and, thus, any filing the FPI 

considers to be a proxy or information 

statement would not be subject to 

compliance with those regulations and 

would not be subject to the liability 

provisions associated with filings 

required to comply with those 

regulations (although the filing would 

be subject to the liability provisions 

associated with the specific filing 

made). 

Finally, with respect to the same 

commenter’s statement that investors in 

a SPAC that is an FPI and which 

delivers both a disclosure document 

similar to a proxy statement and a 

tender offer document will be confused 

without any additional protection,454

we believe the SPAC should be able to 

provide enough clarity and investor 

support regarding the purposes of each 

such document to surmount these 

concerns. 

We also received a suggestion to 

expressly state that Item 1608 is 

applicable only to tender offers 

conducted by SPACs related to a deSPAC transaction.455 We decline to 

revise Item 1608 as suggested because 

Item 1608 is intended to apply to 

Schedule TO filings by SPACs for any 

redemption of securities offered to 

security holders, which would include 

the redemption of securities offered in 

connection with an extension of the 

timeframe to complete a de-SPAC 

transaction.456

In response to a commenter’s view 

that the adoption of proposed Rule 145a 

may result in the requirement to use 

Form S–4 or F–4 for all de-SPAC 

transactions, thus rendering Item 1608 

unnecessary,457 we note that there are 

certain situations today,458 and there 

could be situations under future SPAC 

structures, in which Item 1608 would 

still be applicable and provide security 

holders with important disclosure to use 

in making their investment decision. 

I. Structured Data Requirement 

1. Proposed Item 1610 

The Commission proposed Item 1610 

to require SPACs to tag all information 

disclosed pursuant to subpart 1600 of 

Regulation S–K in Inline XBRL in 

accordance with Rule 405 of Regulation 

S–T and the EDGAR Filer Manual. 

2. Comments 

A number of commenters supported 

proposed Item 1610.459 One of those 

commenters said that tagging the 

quantitative and narrative disclosures 

would provide investors with 

searchable formats to access the 

information they would like to review, 

including potential conflicts of interests 

and potential risks.460 Another 

commenter said the provision of 

structured data will make subpart 1600 

of Regulation S–K information more 

easily accessible for purposes of 

aggregation, comparison, filtering, and 

other analysis.461

Some commenters addressed whether 

the Commission should provide 

exemptions or different requirements for 

FPIs, SRCs, or emerging growth 

companies (‘‘EGCs’’).462 One commenter 

said there was not a compelling reason 

to provide for such exemptions or 

different requirements.463 Another 

commenter said that ‘‘[u]ltimately 

requirements should be the same’’ 

across issuers ‘‘to ensure the availability 

of a complete dataset for investors,’’ but 

that ‘‘the Commission may wish to offer 

a phase-in period for smaller companies 

and [foreign private issuers] that have 

more limited resources.’’ 464

One commenter indicated they 

believe there is no need for structured 

data tagging for SPAC IPOs because 

SPAC IPOs are considerably simpler 

and easier to understand for investors 

than traditional IPOs and the 

redemption rights make an investment 

in a SPAC IPO considerably less 

risky.465 Another commenter 

recommended that the Commission 

evaluate responses from the issuer 

community regarding the costs of 

tagging this information.466

One commenter said the Commission 

should provide detailed technical 

guidance prior to the rule 

implementation, taking account of all 

possible use cases for reporting, and an 

EDGAR Beta testing environment with 

voluntary early filing allowed 12 to 15 

months prior to the first mandatory 

compliance date.467

One commenter suggested the 

Commission consider use of Legal 

Entity Identifiers (LEIs) within the 

registration process and enhanced 

disclosures of IPOs by SPACs and in deSPAC transactions.468

3. Final Item 1610 and Tagging 

Compliance Date 

After considering the comments 

received, we are adopting Item 1610 as 


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469The tagging requirements we are adopting are 

implemented by inclusion of a cross-reference to 

Rule 405 of Regulation S–T in Item 1610 of 

Regulation S–K and by revising 17 CFR 232.405(b) 

to include the proposed SPAC-related disclosures. 

We are also adopting amendments that add a 

corresponding Instruction to Schedule TO. 470Letter from ICGN. See supra note 460 and 

accompanying text. 471Letter from PwC. See supra note 461 and 

accompanying text. 472These considerations are generally consistent 

with objectives of the recently enacted Financial 

Data Transparency Act of 2022, which directs the 

establishment by the Commission and other 

financial regulators of data standards for collections 

of information. Such data standards must meet 

specified criteria relating to openness and machinereadability and promote interoperability of financial 

regulatory data across members of the Financial 

Stability Oversight Council. See James M. Inhofe 

National Defense Authorization Act for Fiscal Year 

2023, Public Law 117–263, tit. LVIII, 136 Stat. 2395, 

3421–39 (2022). 

473Letter from XBRL US. See supra note 464 and 

accompanying text. 474Furthermore, SRCs and FPIs are subject to 

Inline XBRL requirements for other filings, which 

minimizes the burden reduction associated with 

any tagging phase-in for those entities. See infra 

note 477. 

475Letter from Vinson & Elkins. See supra note 

465 and accompanying text. 

476SPACs are currently not obligated to tag any 

disclosures until they file their first post-IPO 

periodic report on Form 10–Q, Form 20–F, or Form 

40–F. See 17 CFR 229.601(b)(101)(i)(A). 

477See 17 CFR 229.601(b)(101). 

478Letter from XBRL US. See supra note 467 and 

accompanying text. 

479 Id. 

480Letter from Global Legal Entity Identifier 

Foundation. See supra note 468 and accompanying 

text. 

481See supra note 472 (regarding the Financial 

Data Transparency Act of 2022). 

482Proposing Release, supra note 7, at 29477. 

proposed,469 but we are providing a one 

year phased-in compliance date for the 

tagging requirements. 

We agree with the commenter who 

said that tagging the quantitative and 

narrative disclosures would provide 

investors with searchable formats to 

access the information they would like 

to review, including potential conflicts 

of interests and potential risks.470 We 

also agree with the commenter who said 

that the provision of structured data will 

make subpart 1600 of Regulation S–K 

information more easily accessible for 

purposes of aggregation, comparison, 

filtering, and other analysis.471

We believe that the structured data 

requirements will enhance the usability 

of the SPAC disclosures. The 

requirements we are adopting include 

detail tagging of the quantitative 

disclosures and block text tagging of the 

narrative disclosures required under 

subpart 1600. These structured data 

requirements will make SPAC 

disclosures more readily available and 

easily accessible to investors and other 

market participants for aggregation, 

comparison, filtering, and other 

analysis.472

One commenter suggested that the 

Commission may wish to ‘‘offer a phasein period for smaller companies and 

[foreign private issuers] that have more 

limited resources.’’ 473 To address these 

concerns, we have determined to 

provide a one-year phase in for the 

tagging requirements. We believe the 

additional one-year period for tagging 

compliance will help lessen burdens 

associated with the tagging 

requirements under the final rules for 

all registrants.474

We disagree with one commenter’s 

view that there is no need for structured 

data tagging for SPAC IPOs because 

SPAC IPOs are considerably simpler 

and easier to understand for investors 

than traditional IPOs and the 

redemption rights make an investment 

in a SPAC IPO considerably less 

risky.475 On the contrary, we believe 

structured data is useful to investors in 

the SPAC IPO setting (as well as the deSPAC transaction setting), particularly 

by enabling comparison and the 

extraction and analysis of information, 

as discussed above. In addition, as 

discussed above, special risks such as 

conflicts of interest and dilution in 

SPAC IPOs and de-SPAC transactions 

may be complex and enhancing investor 

ability to use, compare, and analyze the 

data will help investors assess such 

risks. 

We have not received any responses 

from the issuer community regarding 

the costs of the data tagging 

requirements, but we nonetheless do not 

believe the structured data requirements 

will unduly add to companies’ burden 

in preparing their filings based on our 

extensive experience with existing 

tagging requirements. We believe such 

incremental costs are appropriate given 

the significant benefits to investors, as 

described above. 

As a result of the requirement to tag 

SPAC IPO disclosures, SPACs will incur 

tagging compliance costs at an earlier 

stage of their lifecycle, because SPACs 

do not have to tag IPO registration 

statements under current Commission 

rules.476 While the tagging requirements 

for SPAC disclosures will impose 

additional compliance costs on 

registrants, we expect such costs will be 

modest and largely the final rules will 

simply shift the timing of such costs 

because under the current rules such 

registrants are subject to data tagging 

requirements in their first post-IPO 

periodic report on Form 10–Q, 20–F, or 

40–F,477 as discussed in greater detail in 

section VIII (Economic Analysis) below. 

One commenter recommended that 

the Commission provide an EDGAR 

beta-testing environment with voluntary 

early filing allowed 12 to 15 months 

prior to the first mandatory compliance 

date.478 In lieu of the suggested betatesting environment, we have 

determined to provide a one year 

phased-in compliance date for the 

tagging requirements, as noted above. 

This approach will provide additional 

time for registrants to prepare for the 

new requirements. It will also provide 

sufficient time for the adoption of a final 

taxonomy that will take into 

consideration initial disclosures that 

will be provided in response to the final 

rules, which should help lessen the 

compliance burden for registrants and 

improve data quality for investors by 

reducing the need for extensive custom 

tagging. The commenter also said the 

Commission should provide detailed 

technical guidance prior to the rule 

implementation, ‘‘taking account of all 

possible use cases for reporting’’ to 

ensure consistency of reported data.479

Consistent with the Commission’s 

common practice, a draft taxonomy will 

be made available for public comment, 

and the Commission will incorporate a 

final taxonomy into an updated version 

of the EDGAR system before the tagging 

requirements take effect. 

One commenter suggested the 

Commission consider use of Legal 

Entity Identifiers (LEIs) within the 

registration process and enhanced 

disclosures of IPOs by SPACs and in deSPAC transactions.480 The Commission 

is not adopting requirements regarding 

LEIs in this rulemaking but will take the 

comment under advisement.481

III. Disclosures and Liability in DeSPAC Transactions 

In light of the reliance on de-SPAC 

transactions as a vehicle for private 

operating companies to access the U.S. 

public securities markets with greater 

relative frequency than in the past, the 

Commission proposed a number of new 

rules and amendments to existing rules 

to more closely align the treatment of 

private operating companies entering 

the public markets through de-SPAC 

transactions with that of companies 

conducting traditional IPOs. In 

connection with these proposals, the 

Commission expressed the view in the 

Proposing Release that a private 

operating company’s method of 

becoming a public company should not 

negatively impact investor 

protection.482


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483See (a) proposed Item 14(f)(2) of Schedule 

14A; (b) proposed General Instruction L.2. to Form 

S–4; and (c) proposed General Instruction I.2 to 

Form F–4. See also proposed Item 1608 of 

Regulation S–K (incorporating into Schedule TO 

applicable information required by Item 14(f)(2) of 

Schedule 14A, General Instruction L.2. to Form S– 

4, and General Instruction I.2 to Form F–4). 

Proposed Item 14(f)(2)(vii) of Schedule 14A would 

have required additional disclosure for any 

directors appointed without action by the security 

holders of the SPAC. 

484 Item 18(a)(5) of Form S–4 currently requires 

disclosure pursuant to Item 403 regarding the target 

company and a SPAC’s principal shareholders, 

through Item 6 of Schedule 14A, in a Form S–4 that 

includes a proxy seeking shareholder approval of 

the de-SPAC transaction. 

485The proposed changes to Forms S–4 and F– 

4 regarding disclosure pursuant to Item 701 of 

Regulation S–K were proposed to be required in 

Part I (information required in the prospectus) of 

Form S–4 and Form F–4, whereas in Form S–1, the 

Item 701 disclosure requirement appears under Part 

II (information not required in prospectus) of the 

form. 

486Proposed General Instruction L.2 to Form S– 

4; proposed General Instruction I.2 to Form F–4. 

487See proposed General Instruction VIII to Form 

S–1 (‘‘If the securities to be registered on this Form 

will be issued in a de-SPAC transaction, attention 

is directed to the requirements of Form S–4 

applicable to de-SPAC transactions, including, but 

not limited to, General Instruction L.’’); proposed 

General Instruction VII to Form F–1 (‘‘If the 

securities to be registered on this Form will be 

issued in a de-SPAC transaction, attention is 

directed to the requirements of Form F–4 applicable 

to de-SPAC transactions, including, but not limited 

to, General Instruction I.’’). 

488Letters from ABA, CalPERS, Davis Polk, Ernst 

& Young, ICGN, NASAA, PwC. 

489See letters from ABA, PwC. 

490Letters from ABA, PwC. 

491Letter from ABA. 

492Letter from Vinson & Elkins. This commenter 

also said, ‘‘We do not believe Item 701 disclosure 

with respect to the target company, as opposed to 

the registrant, would be consistent with IPO 

disclosure or provide meaningful information to 

investors.’’ 

493Letter from Vinson & Elkins. 

494Letter from Grant Thornton LLP (June 13, 

2022) (‘‘Grant Thornton’’). 

495The regulatory text section of the Proposing 

Release inadvertently omitted Item 304 of 

Regulation S–K from proposed General Instruction 

I.2 to Form F–4. We have corrected that oversight 

in this adopting release. Additionally, the crossreferences to the applicable Items from Form 20– 

F in the case where the target is a foreign private 

issuer have been corrected from those proposed to 

align with the requirements applicable to domestic 

targets, that is Items 4, 6.E, 7.A, 8.A.7, and 16F of 

Form 20–F. In addition, in Form F–4, we have 

added the term ‘‘applicable’’ to modify ‘‘disclosure 

requirements’’ in the following sentence in General 

Instruction I in order to be consistent with similar 

language in Form S–4: ‘‘To the extent that the 

applicable disclosure requirements of Subpart 

229.1600 are inconsistent with the disclosure 

requirements of this Form, the requirements of 

Subpart 229.1600 are controlling.’’ We made similar 

changes to add the term ‘‘applicable’’ to Schedule 

14A and Schedule TO for the same reason. 

496Under the final rules, with respect to the 

requirements to provide Item 403 of Regulation S– 

K (security ownership of certain beneficial owners 

and management) information assuming the 

completion of the de-SPAC transaction and any 

related financing transaction, the Item 403 

information that must be provided is with respect 

to certain beneficial owners, directors, named 

executive officers, and directors and executive 

officers as a group (i.e., the persons identified in 

Item 403) of the post-de-SPAC transaction 

combined company and not for the target company 

as a separate entity. 

A. Non-Financial Disclosures in DeSPAC Disclosure Documents 

1. Proposed Rules 

The Commission proposed to require 

certain non-financial statement 

disclosures in connection with de-SPAC 

transactions. The Commission proposed 

that, if the target company in a de-SPAC 

transaction is not subject to the 

reporting requirements of section 13(a) 

or 15(d) of the Exchange Act, disclosure 

with respect to the target company 

pursuant to the following items in 

Regulation S–K would be required in 

the registration statement or 

schedule 483 filed in connection with the 

de-SPAC transaction: (1) §§ 229.101 

(‘‘Item 101’’) (description of business); 

(2) 229.102 (‘‘Item 102’’) (description of 

property); (3) 229.103 (‘‘Item 103’’) 

(legal proceedings); (4) 229.304 (‘‘Item 

304’’) (changes in and disagreements 

with accountants on accounting and 

financial disclosure); (5) 229.403 (‘‘Item 

403’’) (security ownership of certain 

beneficial owners and management, 

assuming the completion of the deSPAC transaction and any related 

financing transaction); 484 and (6) 

229.701 (‘‘Item 701’’) (recent sales of 

unregistered securities).485 Where the 

private operating company is an FPI, the 

proposed amended registration forms 

included the option of providing 

disclosure relating to the private 

operating company in accordance with 

Items 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E of 

Form 20–F, consistent with disclosure 

provided by FPIs in IPOs.486

Also, the Commission proposed 

amendments to Forms S–1 and F–1 to 

provide that where these forms are used 

to register securities in connection with 

a de-SPAC transaction, these forms must 

include the information required in 

Forms S–4 (in the case of Form S–1) and 

F–4 (in the case of Form F–1).487

Finally, the Commission proposed 

General Instruction K to Schedule TO 

and new Item 14(f)(1) to Schedule 14A 

to incorporate into each of those forms, 

if the filing relates to a de-SPAC 

transaction, the disclosure provisions of 

Items 1603 through 1609 of Regulation 

S–K, as well as the structured data 

provision of Item 1610 of Regulation S– 

K. 

2. Comments 

Commenters generally supported the 

Commission’s proposal to align nonfinancial disclosures for de-SPAC 

transactions with the requirements in a 

traditional IPO.488 A few commenters 

suggested the proposed disclosure 

requirements are consistent with current 

practice.489 These commenters said the 

proposed disclosure requirements 

would otherwise be required in a Form 

8–K filing following the closing of the 

de-SPAC transaction.490 One commenter 

said the proposed requirements reflect 

‘‘current best practice’’ and would not 

create a ‘‘significant burden’’ for 

targets.491

One commenter said that the 

proposed requirements, other than Item 

701, would require information ‘‘already 

disclosed with respect to target 

companies.’’ 492 In the commenter’s 

view, the proposed disclosures, 

including Item 701, ‘‘would not provide 

meaningful information or benefits to 

investors.’’ 493

Regarding the proposed amendment 

to Form S–1 to require the information 

required by Form S–4, one commenter 

recommended ‘‘the final rule include 

explicit language that such Form S–1 

should include all information for the 

private operating company that would 

have been required in a Form S–4.’’ 494

3. Final Rules 

Except for the modifications we 

discuss below, we are adopting as 

proposed: (a) General Instruction L.2 to 

Form S–4, (b) General Instruction I.2 to 

Form F–4,495 (c) Item 14(f)(2) of 

Schedule 14A, (d) General Instruction K 

to Schedule TO, (e) General Instruction 

VIII to Form S–1, and (f) General 

Instruction VII to Form F–1.496 We 

believe there will be two main benefits 

to investors from these requirements. 

First, the inclusion of these disclosures 

in a Form S–4 or Form F–4 registration 

statement will mean that any material 

misstatements or omissions contained 

therein would subject the issuers and 

other parties to liability under sections 

11 and 12 of the Securities Act, which 

would align with the protections 

afforded to investors under the 

Securities Act for disclosures provided 

in a Form S–1 or F–1 for an IPO. 

Second, as a result of these new 

requirements, this information will be 

available to investors prior to the 

inception of trading of the post-business 

combination company’s securities on a 

national securities exchange, rather than 

the earliest instance of such requirement 

being the requirement to set this 

information out in a Form 8–K due 

within four business days of the 

completion of the de-SPAC 


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497We note registrants should already be 

preparing this information in anticipation of 

making a Form 8–K filing (or a Form 20–F for an 

FPI) in connection with a de-SPAC transaction. See 

supra note 489 (letters from ABA, PwC). 

498Letter from Vinson & Elkins. See supra notes 

492 and 493 and accompanying text. 

499Letter from Grant Thornton. See supra note 

494 and accompanying text. 

500We made a similar change to Form F–1. We 

added new Item 9.E.4 to Form F–1 that provides: 

Where the registrant is a special purpose 

acquisition company (as defined in Item 1601 of 

Regulation S–K), in lieu of providing the 

information required under Item 9.E.1 and Item 

9.E.2, provide the disclosure required pursuant to 

Item 1602(a)(4) and (c) of Regulation S–K in an 

offering other than a de-SPAC transaction (as 

defined in Item 1601 of Regulation S–K) and 

provide the disclosure required under Item 1604(c) 

of Regulation S–K in connection with a de-SPAC 

transaction. 

501 In Form S–4 and Form F–4, however, there is 

a requirement to send a prospectus to security 

holders a minimum of 20 business days prior to a 

security holder meeting, or, if no meeting is held, 

other action, that is applicable when a registrant 

incorporates by reference information about the 

registrant or the company being acquired into the 

form. General Instruction A.2 of Form S–4 and 

General Instruction A.2 of Form F–4. 

502The 20-calendar day period is the same length 

of time as the 20-day advance disclosure period in 

17 CFR 240.13e–3(f)(1). In adopting a 20-day 

advance disclosure requirement for dissemination 

of documents in connection with going private 

transactions, the Commission stated this 

requirement was intended to provide reasonable 

assurance that the information required to be 

disclosed to security holders would be 

disseminated sufficiently far in advance of the 

transactions to permit security holders to make ‘‘an 

unhurried and informed’’ decision. Going Private 

Transactions by Public Companies or Their 

Affiliates, Release No. 33–6100 (Aug. 2, 1979) [44 

FR 46736 (Aug. 8, 1979)]. 

503Letters from ABA, Better Markets (supporting 

the 20-day dissemination period, stating that ‘‘[t]o 

make meaningful decisions, investors in a SPAC 

need the information regarding the proposed 

transaction in a timely manner’’ and that ‘‘[i]n the 

absence of a federally mandated minimum time 

period to disseminate information regarding the 

transaction, the potential for abuse is clear’’); 

CalPERS; CFA Institute (‘‘CFA Institute supports as 

much lead time as possible for dissemination of 

disclosure documents regarding the de-SPAC 

transaction and agrees with the proposed minimum 

of twenty (20) calendar days in advance merger 

approval vote’’); Davis Polk (‘‘the minimum 

dissemination period proposed in the amendments 

to Exchange Act rules 14a–6 and [14c–2] is a 

welcome modification to improve public 

confidence by providing a minimum period to 

review the disclosures provided in connection with 

a de-SPAC transaction.’’); ICGN (‘‘For investors, 

after a SPAC has searched for a potential business 

candidate for up to two years, time may be running 

out. Investors should be able to receive proxy and 

prospectus statements within a reasonable time 

frame that provides them with the ability to assess 

the de-SPAC business transaction and vote 

accordingly.’’); NASAA. 

504Letter from CFA Institute. 

transaction.497 As a result, shareholders 

will be able to consider this information 

when they make voting, investment, or 

redemption decisions in connection 

with a de-SPAC transaction. 

One commenter suggested that 

disclosure under the proposed 

requirements is already provided with 

respect to target companies and would 

not provide meaningful benefits to 

investors.498 We disagree with this view 

that the requirements would not provide 

meaningful benefits to investors. Also, 

we believe compliance with these 

requirements will be minimally 

burdensome where disclosure of this 

information is already market practice 

and codifying this practice will create a 

uniform, transparent, minimum floor 

standard of disclosure across 

transactions, even if market practice 

were to change in the future. 

In response to the comment 

recommending that Form S–1 should 

include explicit language that Form S– 

1 should include all information for the 

private operating company that would 

have been required in a Form S–4,499 we 

have revised General Instruction VIII of 

Form S–1 to clarify that, if the securities 

to be registered on Form S–1 will be 

issued in a de-SPAC transaction, the 

requirements of Form S–4 apply to 

Form S–1, including, but not limited to, 

Item 17 and General Instruction L. 

Similarly, in the final rules, we have 

revised General Instruction VII of Form 

F–1 to clarify that, if the securities to be 

registered on Form F–1 will be issued in 

a de-SPAC transaction, the requirements 

of Form F–4 apply to Form F–1, 

including, but not limited to, Item 17 

and General Instruction I. 

With respect to instructions in both 

General Instruction L.2 to Form S–4 and 

General Instruction I.2 to Form F–4 that 

apply with respect to the target 

company ‘‘[i]f the target company is a 

foreign private issuer,’’ we made several 

corrections from the proposal. First, we 

deleted the requirement to provide 

target company information pursuant to 

Item 3.C of Form 20–F (reasons for the 

offer and use of proceeds), because there 

is not a similar analog in the list of 

disclosure items to be provided with 

respect to the target company when the 

target company is not an FPI in the same 

instructions. Second, we deleted the 

requirement to provide target company 

information pursuant to Item 9.E of 

Form 20–F (dilution) because dilution 

information will already be required 

through the application of Item 1604 in 

the forms in connection with a de-SPAC 

transaction.500 Third, we added a 

requirement to provide target company 

information pursuant to Item 16F of 

Form 20–F (change in registrant’s 

certifying accountant), because the 

intent of the proposal was that there 

should be an analog for FPI target 

companies to Item 304 of Regulation S– 

K (changes in and disagreements with 

accountants on accounting and financial 

disclosure) in the list of disclosure items 

to be provided with respect to the target 

company when the target company is 

not an FPI in the same instructions and 

the reference to Item 16F of Form 20– 

F was inadvertently omitted from the 

proposal. 

In the final rules, we have also revised 

Item 14(f)(2) of Schedule 14A to remove 

the additional disclosure required for 

any directors appointed without action 

by the security holders of the SPAC to 

align the disclosure required under Item 

14(f)(2) of Schedule 14A with that 

required under General Instruction L.2 

to Form S–4 and General Instruction I.2 

to Form F–4. 

B. Minimum Dissemination Period 

1. Proposed Rules 

Historically, in business combination 

transactions, there has been no 

requirement under Commission rules to 

provide security holders with a 

minimum amount of time to consider 

proxy statement or other disclosures.501

In view of the unique circumstances 

surrounding de-SPAC transactions, the 

Commission proposed to amend 

Exchange Act Rule 14a–6 and Rule 14c– 

2, as well as to add instructions to 

Forms S–4 (General Instruction L.3) and 

F–4 (General Instruction I.3), to require 

that prospectuses and proxy and 

information statements filed in 

connection with de-SPAC transactions 

be distributed to security holders at 

least 20 calendar days in advance of a 

security holder meeting or the earliest 

date of action by consent, or the 

maximum period for disseminating such 

disclosure documents permitted under 

the applicable laws of the SPAC’s 

jurisdiction of incorporation or 

organization if such period is less than 

20 calendar days.502

2. Comments 

A number of commenters generally 

supported the proposed minimum 

dissemination periods for disclosure 

documents in de-SPAC transactions.503

One commenter on the proposal 

supported ‘‘as much lead time as 

possible for dissemination’’ and 

suggested the Commission ‘‘consider 

whether federal securities laws should 

override the laws of the jurisdiction of 

incorporation or organization if such 

jurisdictions allow less than 20 calendar 

days advance dissemination for deSPAC merger/proxy vote documentation 

where such de-SPAC will be trading on 

SEC regulated markets.’’ 504

Another commenter said that the 

period of 20 calendar days ‘‘is 

consistent with current market practice 


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505Letter from Davis Polk. 

506Letter from Davis Polk. 

507Letter from Vinson & Elkins. 

508Letter from Loeb & Loeb. 

509See, e.g., Del. Code Ann. tit. 8, sec. 222; Del. 

Code Ann. tit. 8, sec. 251(c) (stating, in part, that 

‘‘[d]ue notice of the time, place and purpose of the 

meeting shall be given to each holder of stock, 

whether voting or nonvoting, of the corporation at 

the stockholder’s address as it appears on the 

records of the corporation, at least 20 days prior to 

the date of the meeting [to vote on an agreement of 

merger or consolidation]’’). 

510See R. Franklin Balotti, Jesse A. Finkelstein, 

John Mark Zeberkiewicz & Blake Rohrbacher, 

Delaware Law of Corporations and Business 

Organizations, sec. 9.16 (4th ed. 2022 & Supp. 2022) 

(‘‘[t]he only statutory requirements for the notice of 

the meeting are that it state the time, place and 

purpose of the meeting and that the notice contain 

a copy of the merger agreement or a summary of the 

agreement . . . [i]n practice, of course, many such 

meetings will be governed by the federal proxy 

rules, which require that a full proxy statement be 

submitted to the stockholders.’’). 

511See, e.g., NYSE Listed Company Manual 

Section 401.03 which ‘‘recommends that a 

minimum of 30 days be allowed between the record 

and meeting dates so as to give ample time for the 

solicitation of proxies’’ and 402.05 which 

‘‘recommends the [proxy soliciting] material be 

provided 30 days prior to the meeting date in order 

to allow the firms ample time to mail the material 

to beneficial owners and receive replies from 

them.’’ 

512The requirements to ‘‘distribute’’ the various 

security holder materials under the minimum 

dissemination time periods in the rules we are 

adopting are satisfied when the materials are sent 

and not when they are received by the security 

holder. Thus, where the registrant is mailing a full 

set of hard copy materials to security holders, the 

requirement would be met when the materials are 

placed in the mail. 

513Letter from CFA Institute. See supra note 117 

and accompanying text. 

514A review, in June 2023, by the Commission 

staff of the corporation laws of each of the 50 U.S. 

States found there are currently no U.S. States with 

a maximum period of notice for a stockholder 

meeting that is less than 20 days. We acknowledge 

that there remains the possibility a U.S. State could 

change its law to provide for a maximum period of 

notice less than 20 days or foreign law could 

contain such a provision. 

515Letter from Davis Polk. See supra note 506 and 

accompanying text. 

516Letter from Vinson & Elkins. See supra note 

507 and accompanying text. 

for the solicitation period in de-SPAC 

transactions.’’ 505 The commenter said 

that, if the safe harbor from the 

Investment Company Act is adopted as 

proposed, the Commission should 

‘‘consider an exception to the minimum 

dissemination period in the event 

necessary to stay within the safe 

harbor.’’ 506

Another commenter said, ‘‘The SEC’s 

proposed solution does not align with 

the treatment of IPOs. An IPO 

prospectus is substantially final at 

launch of the IPO roadshow; however, 

since there is no required length for a 

roadshow, investors in an IPO may only 

have access to a substantially final 

version of the prospectus for a few days 

prior to making their investment 

decision.’’ 507 The commenter said that 

stockholder meeting notices required to 

be provided certain numbers of days 

prior to a stockholder meeting are 

typically included in proxy statements 

and stated that, ‘‘Under the current 

framework, the final registration 

statement or proxy statement in a deSPAC transaction is available for at least 

10 days and a preliminary version is 

typically publicly available for up to 

several months longer than in an IPO.’’ 

This commenter also stated, ‘‘The SEC 

justifies this differential treatment by 

citing the complexity of the SPAC 

structure, the conflicts of interest that 

are often present in this structure and 

the effects of dilution on non-redeeming 

shareholders, but it fails to appreciate 

that many of these same considerations 

can be present in IPO transactions and 

that this proposed rule is decidedly 

contrary to the SEC’s stated intention of 

aligning de-SPAC transactions with 

IPOs.’’ 

Another commenter appeared to 

suggest that the minimum 

dissemination period for purposes of 

proposed General Instruction L.3 to 

Form S–4 should be the same as the IPO 

‘‘48 hour’’ rule of 17 CFR 240.15c2–8 

(‘‘Rule 15c2–8’’).508

3. Final Rules 

We are adopting the amendments to 

Rules 14a–6 and 14c–2 and Forms S–4 

(General Instruction L.3) and F–4 

(General Instruction I.3) as proposed, 

except for clarifying changes discussed 

below. In addition to the need for 

enhanced disclosure in de-SPAC 

transactions, we continue to believe that 

it is important to ensure that SPAC 

security holders have adequate time to 

analyze the information presented in 

these transactions. 

Although the laws of a SPAC’s 

jurisdiction of incorporation or 

organization may require the SPAC to 

send a notice to its security holders at 

least a specified number of days before 

the security holder meeting to approve 

a proposed business combination 

transaction, the information in such 

notices is often limited.509 These laws 

do not generally require a minimum 

period of time for dissemination of other 

information about the transaction 

(including any proxy statements or 

other materials required by the Federal 

securities laws) to security holders.510

Exchange listing standards also do not 

impose such requirements.511 Without a 

minimum period for dissemination of 

prospectuses, proxy statements, and 

other materials before a security holder 

meeting (or action by consent), SPACs 

and SPAC sponsors may provide 

prospectuses or proxy or information 

statements for a de-SPAC transaction to 

the SPAC’s security holders within an 

abbreviated time frame, leaving the 

security holders with relatively little 

time to review what are often complex 

disclosure documents for these 

transactions. 

We recognize that SPACs are often 

required under their governing 

instruments and applicable exchange 

listing rules to complete de-SPAC 

transactions within a certain time frame. 

Nevertheless, given the complexity of 

the structure of SPACs, the conflicts of 

interest that are often present in this 

structure and the effects of dilution on 

non-redeeming shareholders, the 20- 

calendar day minimum dissemination 

periods we are adopting will provide an 

important investor protection by 

establishing a minimum time period for 

security holders to review prospectuses 

and proxy and information statements 

in de-SPAC transactions.512

In order to account for the prospect 

that the laws of a SPAC’s jurisdiction of 

incorporation or organization may have 

a maximum advance time period 

provision applicable to the 

dissemination of materials to security 

holders, the rules we are adopting 

include provisions that would require a 

registrant to satisfy the maximum 

dissemination period permitted under 

the applicable law of such jurisdiction 

when this period is less than 20 

calendar days to avoid conflicting with 

such a requirement. One commenter 

suggested that the Commission should 

override the laws of the jurisdiction of 

incorporation or organization of the 

SPAC where such jurisdictions provide 

a maximum period for dissemination of 

less than 20 days.513 We are not 

adopting such suggestion because we 

believe the instances where there is a 

maximum period of less than 20 days 

will be limited.514

Another commenter said that the 

Commission should consider an 

exception to the minimum 

dissemination period where necessary 

to stay within the Investment Company 

Act safe harbor.515 As discussed below 

in section VI, we are not adopting the 

proposed Investment Company Act safe 

harbor. 

One commenter suggested that the 

proposed minimum dissemination 

period is contrary to the Commission’s 

stated purpose of aligning de-SPAC 

transactions with IPOs because 

investors in IPOs typically have only 

short periods of time to review 

prospectuses.516 While we acknowledge 

that, under the final rules, investors may 


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517Letter from Davis Polk. 

518Letter from Vinson & Elkins. See supra note 

507 and accompanying text. 

519Letter from Loeb & Loeb. See supra note 508 

and accompanying text. 

520As discussed in sections III.C and IV.A, the 

Commission is adopting Rule 145a and 

amendments to registration statement forms that are 

related to certain co-registration obligations. As a 

result, in connection with de-SPAC transactions, 

Rule 15c2–8 may apply and require the delivery of 

the preliminary prospectus to any person who is 

expected to receive a confirmation of sale pursuant 

to the terms of that rule, because the target company 

is typically not such a reporting company before the 

transaction. We will continue to consider the effect 

of Rule 15c2–8 on de-SPAC transactions. At the 

present time, however, we are not making any 

changes to Rule 15c2–8. 

521The Securities Act broadly defines the term 

‘‘issuer’’ to include every person who issues or 

proposes to issue any securities. See section 2(a)(4) 

of the Securities Act [15 U.S.C. 77b]. 

522 In addition, section 6(a) requires the issuer’s 

principal executive officer or officers, principal 

financial officer, comptroller or principal 

accounting officer, and the majority of its board of 

directors or persons performing similar functions 

(or, if there is no board of directors or persons 

performing similar functions, by the majority of the 

persons or board having the power of management 

of the issuer) to sign a registration statement. When 

the issuer is a foreign entity, the registration 

statement must also be signed by the issuer’s duly 

authorized representative in the United States. 

523Proposing Release, supra note 7, at 29479. 524Proposing Release, supra note 7, at 29479. 525See section 2(a)(4) of the Securities Act. 526See Proposed Instruction 1 to the Signatures 

section of Form S–4 and Form F–4. Securities Act 

registration statement forms use the term 

‘‘registrant’’ throughout rather than the term 

‘‘issuer.’’ See, e.g., Form S–4. A ‘‘registrant’’ is a 

type of ‘‘issuer.’’ Rule 405 defines the term 

‘‘registrant’’ as ‘‘the issuer of the securities for 

which the registration statement is filed.’’ For the 

purposes of this release, we are using the terms ‘‘coregistrant’’ and ‘‘co-registration’’ to describe the 

situation where the target company must be 

included as a registrant on a registration statement 

for a de-SPAC transaction given that the target 

company is an ‘‘issuer’’ of securities in a de-SPAC 

transaction regardless of transaction structure. 

Moreover, the Commission has previously specified 

who constitutes the ‘‘registrant’’ for purposes of 

signing a Securities Act registration statement in 

certain contexts. For example, an instruction in 

Forms S–4 and F–4 requires two or more existing 

corporations to be deemed co-registrants when they 

will be parties to a consolidation and the securities 

to be offered are those of a corporation not yet in 

existence at the time of filing. See Instruction 3 to 

the signature page for Form S–4 and Form F–4. 

527Proposed General Instruction L.1 to Form S– 

4; proposed General Instruction I.1 to Form F–4. 

528Letters from Andrew Tuch; Americans for 

Financial Reform Education Fund (June 13, 2022) 

(‘‘Americans for Financial Reform Education 

Fund’’); Better Markets; CalPERS; CFA Institute; CII; 

Senator Elizabeth Warren; ICGN; KPMG LLP (June 

13, 2022) (‘‘KPMG’’); Loeb & Loeb; NASAA; Paul 

Swegle. 

have more time to review prospectuses 

in a de-SPAC transaction than in an 

IPO, we believe this is appropriate 

because in the Commission staff’s 

experience, due to the hybrid nature of 

SPAC transactions, registration 

statements in de-SPAC transactions in 

some cases are substantially lengthier 

than both the earlier IPO registration 

statement for the specific SPAC (that is 

involved in the de-SPAC transaction) 

and registration statements for IPOs of 

traditional operating companies, as the 

registration statements contain both 

IPO-like information about the target 

company and M&A-like information 

about the de-SPAC (and other related) 

transactions. Further, as noted by a 

different commenter 517 and as observed 

by Commission staff, current market 

practice appears to be that many SPACs 

deliver these disclosures to investors 

earlier than 20 calendar days prior to 

the meeting date, meaning the final 

rules we are adopting should impose 

minimal burdens in such instances and 

would provide a uniform and 

transparent minimum floor standard for 

the dissemination of such disclosure 

should market practices change. 

One commenter also said that a 

preliminary version of the final 

registration statement may be available 

for months prior to the security holder 

meeting date related to the de-SPAC 

transaction.518 We do not believe this 

fact provides a basis for not adopting the 

proposed rules regarding minimum 

dissemination periods. These 

preliminary filings may be amended 

prior to their becoming effective and, in 

the case of a combined registration and 

proxy statement that has not yet become 

effective, this disclosure would not yet 

have been delivered to security holders. 

To the extent one commenter 

appeared to suggest that the minimum 

dissemination period should be the 

same as the IPO ‘‘48 hour’’ rule of 

Exchange Act Rule 15c2–8,519 we do not 

believe a 48-hour period would provide 

investors sufficient time to review the 

disclosure, particularly given the 

complex hybrid nature of de-SPAC 

transactions. Moreover, providing only 

48 hours before the shareholder meeting 

will not provide enough time for certain 

shareholders’ votes to be considered as 

a practical matter, given that many 

shares are held through securities 

intermediaries such as broker-dealers 

and such intermediaries often require 

voting instruction forms to be submitted 

to them at least 48 hours prior to the 

shareholder meeting.520

We are making minor changes in the 

final rules compared to the proposals for 

purposes of clarity and to make the 

registration forms congruent with the 

amendments to Rules 14a–6 and 14c–2 

that we are adopting. The final rules 

provide that each of Rules 14a–6 and 

14c–2 and Forms S–4 and F–4 will 

contain the language ‘‘must be 

distributed to security holders no later 

than the lesser of 20 calendar days prior 

to the date on which the meeting of 

security holders is to be held or action 

is to be taken in connection with the deSPAC transaction.’’ Where the proposed 

amendments to Forms S–4 and F–4 

referred to the ‘‘date on which action is 

to be taken,’’ these revisions eliminate 

any potential for misinterpretation that 

the proposed language only referred to 

action by consent and not at a meeting 

of security holders. In addition, the 

terms ‘‘to be held’’ and ‘‘to be taken’’ are 

intended to clarify these rules since 

these events are in the future when 

viewed from the point in time at which 

the security holder materials are 

distributed. 

C. Private Operating Company as CoRegistrant 

1. Proposed Rules 

Under section 6(a) of the Securities 

Act, each ‘‘issuer’’ 521 must sign a 

Securities Act registration statement.522

In the Proposing Release, the 

Commission stated that a de-SPAC 

transaction marks the introduction of a 

private operating company to the U.S. 

public securities markets, and investors 

look to the business and prospects of the 

private operating company in evaluating 

an investment in the combined 

company.523 The Commission stated 

that, accordingly, it is the private 

operating company that, in substance, 

issues or proposes to issue its securities, 

as securities of the newly combined 

public company.524

Given that the target company 

therefore is, in substance, an ‘‘issuer’’ of 

securities in a de-SPAC transaction 

regardless of transaction structure,525

the Commission proposed to amend 

Instruction 1 to the signatures section of 

both Form S–4 and Form F–4 to require 

that, when the SPAC would be the 

issuer filing the registration statement 

for a de-SPAC transaction, the term 

‘‘registrant’’ would mean not only the 

SPAC but also the target company.526

The Commission also proposed to 

amend the general instructions to Forms 

S–4 and F–4 to provide that, if the 

securities to be registered on the form 

will be issued by a SPAC in a de-SPAC 

transaction, the term ‘‘registrant’’ for 

purposes of the disclosure requirements 

of the form means the SPAC.527

2. Comments 

A number of commenters generally 

supported the proposal.528 These 

commenters indicated that the coregistration proposal would better align 

liability and disclosure in de-SPAC 

transactions with IPOs. One stated that 

‘‘the proposed changes that would treat 

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529Letter from KPMG. 

530Letter from Andrew Tuch. 

531Letter from CII. 

532Letter from Better Markets. 

533Letter from NASAA. 

534Letters from ABA, Davis Polk, Freshfields, Job 

Creators Network, NYC Bar, Skadden, Vinson & 

Elkins. 

535Letter from Davis Polk. 

536Letter from ABA. 

537Letters from ABA (‘‘It is unclear if the CoRegistrant Amendment would meaningfully 

enhance disclosures and protections for investors in 

practice’’), Davis Polk (‘‘we do not expect that the 

disclosure practice will be improved by such 

amendments’’), Job Creators Network. 

538Letters from ABA (stating that ‘‘the Target and 

its affiliates—while not signatories of the Merger 

Registration Statement—may nonetheless still be 

subject to liability for disclosures in the Merger 

Registration Statement under Rule 10b–5 of the 

Exchange Act and potential enforcement actions by 

the Commission under Section 17(a) of the 

Securities Act and Section 10(b) of the Exchange 

Act, and under the proxy rules as participants in 

the proxy solicitation by the SPAC.’’), Davis Polk 

(‘‘the private operating target company and its 

affiliates are already subject to enforcement actions 

by the Commission irrespective of these 

amendments . . . .’’), Kirkland & Ellis (noting that 

‘‘alternative statutory liability schemes cover 

various aspects of the de-SPAC transaction, 

including Section 11 where appropriate.’’), NYC 

Bar, Skadden, Vinson & Elkins, Winston & Strawn 

LLP (June 13, 2022) (‘‘Winston & Strawn’’) (‘‘In 

connection with the stockholder vote to approve the 

business combination and the repurchase of shares 

from redeeming SPAC stockholders, a SPAC already 

has liability under Section 14(a) of the Exchange 

Act and the antifraud provisions of Rule 10b–5.’’). 

539Letters from ABA (noting that under current 

law ‘‘the Target’s directors and officers will ‘own’ 

the disclosures going forward . . . so there is 

already a strong incentive for the Target’s directors 

and officers to ensure the accuracy and 

completeness of the initial Merger Registration 

Statement disclosures’’), NYC Bar (‘‘it is 

unnecessary to impose additional liability on the 

Target’s directors and management in connection 

with the registration statement because those 

parties, by virtue of inheriting the disclosures of the 

registration statement and the ongoing disclosure 

obligations of the combined public company, will 

have Exchange Act liability going forward and with 

respect to historical disclosures as a result of the 

business combination.’’). 

540Letters from ABA (‘‘Inasmuch as a De-SPAC 

Transaction is fundamentally an M&A transaction, 

and no different than business combinations in 

other contexts, the Commission has never required 

targets in other business combinations in these 

circumstances to be added as co-registrants of a 

merger registration statement.’’), CFA Institute (‘‘As 

to the need to amend the merger registration 

statement forms and schedules filed in connection 

with de-SPAC mergers involving a private operating 

company target, but not other mergers, creates 

regulatory uncertainty and confusion.’’), Skadden 

(‘‘Moreover, the proposed co-registrant changes may 

occasion inconsistent treatment of de-SPAC 

transactions compared to other business 

combination transactions that are substantively 

similar and where the Commission’s concerns about 

the adequacy of target company disclosure also 

could exist.’’). See also letter from Nicholas Pappas, 

King & Wood Mallesons (June 13, 2022) (‘‘King & 

Wood Mallesons’’) (‘‘An example of the species of 

transaction in respect of which the Proposed Rules 

require qualification is where a seller is proposing 

to sell a subsidiary/target company. . . . At the 

time of running the sale process there is generally 

no intention on the part of the seller to IPO the 

target company.’’). 

541Letter from Bullet Point Network. 

542Letters from ABA, Freshfields. See also 

definitions of ‘‘issuer’’ and ‘‘registrant,’’ supra notes 

521 and 526. 

543Letter from Freshfields. 

544Letter from ABA. 

registrant at the time a Form S–4 or F– 

4 is filed would contribute to the 

Commission achieving its objective to 

better align de-SPAC transactions with 

traditional IPOs and afford investors 

with consistent protections.’’ 529

Another stated that, ‘‘By making target 

companies co-registrants, the Proposed 

Rules ensure that target operating 

companies and their directors and 

officers have strong incentives under 

section 11 to deter disclosure errors and 

other misconduct, even in 

conventionally structured deSPACs.’’ 530 Yet another stated, ‘‘We 

believe that treating both the SPAC and 

the target as an issuer under Section 6(a) 

of the Securities Act would help to align 

investor protections with those of a 

traditional IPO.’’ 531

Several of these commenters also 

indicated that the rule proposal would 

benefit investors by increasing the 

quality and reliability of the disclosure 

provided in de-SPAC transaction 

registration statements. One argued that 

the disclosures provided in de-SPAC 

registration statements should be 

‘‘enhanced’’ due to the fact that ‘‘both 

parties to the de-SPAC transaction 

[would be] liable for material 

misstatements and omissions to 

investors and shareholders,’’ 532 while 

another stated ‘‘the proposed coregistrant requirements, and attendant 

liabilities for misstatements or 

omissions, would ensure that target 

company directors, boards and 

managements make accurate 

representations regarding the status of 

the pre-merger entity.’’ 533

Other commenters generally opposed 

or had concerns regarding the 

proposal,534 generally characterizing the 

proposal as ‘‘not necessary’’ 535 or 

‘‘inappropriate.’’ 536 Several 

commenters stated that the rule 

proposal would not benefit investors or 

that the benefit would be uncertain.537

A number of commenters indicated that 

there are already strong incentives 

under the existing framework to ensure 

that disclosures in registration 

statements for de-SPAC transactions are 

accurate and complete, pointing to the 

existing liability frameworks that they 

state apply to de-SPAC transactions, 

such as sections 11 and 17(a) of the 

Securities Act, sections 10(b) and 14(a) 

of the Exchange Act, and 17 CFR 

240.10b–5 (‘‘Rule 10b–5’’), and the 

Commission’s ability to bring 

enforcement actions.538 A few of these 

commenters suggested it is unnecessary 

to impose additional liability because 

target company officers and directors, 

by virtue of their roles in the combined 

company, will effectively ‘‘own’’ any 

Exchange Act liabilities related to the 

disclosure in the de-SPAC transaction 

registration statement inherited by the 

combined company.539

Several commenters suggested the coregistrant proposal would create a 

disparity compared to traditional M&A 

business combination transactions 

where a target is not a co-registrant.540

In contrast, another commenter stated 

that de-SPAC transactions involve 

‘‘clearly different facts and 

circumstances than a non-SPAC merger 

because the SPAC board is not making 

a decision about the benefits of 

changing its operating business model 

via merger but rather is offering its 

shareholders the alternative of investing 

in the surviving company if they prefer 

that to $10 in cash.’’ 541

Other commenters suggested the coregistration proposal is inconsistent 

with existing definitions of registrant 

and issuer because, they asserted, the 

target in a de-SPAC transaction is not 

issuing or proposing to issue any 

securities pursuant to the de-SPAC 

registration statement.542

One commenter opposed the coregistration proposal and expressed the 

view that: ‘‘[i]n most de-SPAC 

transactions the shares being registered 

on the SPAC’s registration statement are 

being issued only to the target’s 

shareholders and are not being issued or 

sold by the target company. Adding the 

target company as a co-registrant means 

that, in most cases, the target company 

will have potential Section 11 liability 

with respect to its own shareholders, 

but this is not logical or intuitive and is 

not consistent with the structure of a 

traditional IPO. In a traditional IPO, a 

company’s existing shareholders at the 

time of the IPO do not receive registered 

shares and would not have potential 

Section 11 claims against the company 

due to the disclosures in the IPO 

registration statement.’’ 543

Another commenter suggested the coregistration proposal is inconsistent 

with 17 CFR 230.140 (‘‘Rule 140’’).544

The commenter said the purpose of Rule 

140—to ‘‘ensure[ ] that the requisite 

information about the underlying issuer 

is adequately disclosed so new investors 

are fully informed of the attendant risks 

and returns relating to a potential 

investment’’—is ‘‘not a concern in deSPAC transactions,’’ because ‘‘full Form 

10-type information’’ is already 

provided under current rules about the 


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545 Id. 

546 Id. 

547Letter from CFA Institute (‘‘For example, 

could such liability extend to various SPAC 

‘insiders’ who may claim they are unaffiliated and 

do not redeem, even though they have conducted 

detailed due diligence and have negotiated special 

deal terms with the SPAC such as anchor and PIPE 

investors. Moreover, would this provision extend 

the target company liability to its own, private 

company shareowners.’’). 

548Letter from KPMG (specifically noting that 

‘‘SPACs may acquire more than one operating 

company as part of a de-SPAC transaction’’). 

549Letter from Vinson & Elkins. 

550Letter from Vinson & Elkins. See also supra 

note 526 (describing Instruction 3 to the Signatures 

sections of Forms S–4 and F–4). 

551Letter from Vinson & Elkins. 

552Letter from Freshfields (‘‘This would be 

consistent with the obligations in a traditional IPO, 

where the registrant identifies in the prospectus 

who will be its directors following the IPO’’). 

553Letter from Vinson & Elkins (‘‘Putting aside 

the signatory/registrant distinction, we believe that 

the SEC should not make the target company sign 

the registration statement or be a full coregistrant’’). 

554Letter from NASAA (‘‘With this in mind, [the 

commenter] supports the attachment of Section 11 

responsibilities to the managers and directors of 

target companies.’’). 

555Letter from ABA (‘‘in many (if not 

substantially all) De-SPAC Transactions, given the 

minimum 20-day gap period between the Merger 

Registration Statement’s effectiveness and Closing, 

and significant Closing uncertainty at the time of 

registration statement effectiveness, additional 

directors (such as ‘outside’ independent directors or 

Sponsor designees) will join the Combined 

Company board just prior to or concurrent with 

Closing.’’). 

556Letter from ABA (‘‘In many De-SPAC 

Transactions, certain legacy Target directors (and 

sometimes officers) will resign immediately prior to 

Closing. So the group of individuals to whom 

Securities Act liability attaches (i.e., the persons 

signing the Merger Registration Statement) under 

the Co-Registrant Amendment is at the same time 

both under-inclusive and over-inclusive.’’). 

557Letter from Vinson & Elkins. 

558Letters from ABA (noting that, in the time 

between effectiveness and closing of the merger, 

‘‘there is a risk that the parties may terminate a DeSPAC Transaction subsequent to the Merger 

Registration Statement effectiveness date, including 

(among other reasons) for failure to obtain 

stockholder approval, failure to satisfy a ‘minimum 

cash’ or ‘maximum redemption’ closing condition, 

or failure to obtain a required regulatory or thirdparty approval. However, once the Merger 

Registration Statement has been declared effective, 

under the Co-Registrant Amendment, the Target 

would nonetheless be subject to ongoing Exchange 

Act reporting obligations for at least 12 months, 

even if a De-SPAC Transaction is terminated.’’), 

Crowe, Davis Polk, Freshfields (‘‘[I]f the Form S–4 

or Form F–4 is declared effective by the SEC, but 

the de-SPAC transaction does not close, the target, 

previously a private company, would be burdened 

with disclosure obligations as if it was a public 

company for at least the remainder of the year but 

would have no securities trading in the public 

markets.’’), Grant Thornton, KPMG. 

559Letters from ABA (‘‘The Co-Registrant 

Amendment, if adopted as proposed, would subject 

Targets to reporting obligations pursuant to Section 

15(d) of the Exchange Act following effectiveness of 

the Merger Registration Statement. Given the 

proposed 20-day minimum solicitation period prior 

to the SPAC stockholders’ meeting, it is entirely 

possible that the SPAC acquirer and the Target 

could each be required to file a quarterly report on 

Form 10–Q or annual report on Form 10–K prior to 

the Closing date.’’), KPMG (‘‘The Proposed Rules 

indicate that the target operating company would be 

an issuer, therefore subjecting it to the reporting 

obligations of a public company and requiring it to 

file a periodic report for that recently ended 

reporting period. This would create circumstances 

where multiple periodic filings, such as Forms 10– 

K or 10–Q, are required to be filed for the same 

period for multiple entities involved in the 

transaction.’’), PwC. 

560Letter from Davis Polk. 

SPAC and the target company.545 This 

commenter also said that in a de-SPAC 

transaction ‘‘no new proceeds are being 

received by the Combined Company,’’ 

which is a ‘‘notable difference’’ from 

Rule 140.546

Other commenters on the coregistration proposal requested certain 

clarifications. One commenter 

supported the co-registration 

requirement but suggested the 

Commission clarify whether ‘‘liability 

correctly or mistakenly extends to 

anyone other than unaffiliated, nonredeeming SPAC shareholder[s].’’ 547 A 

different commenter asked the 

Commission to clarify ‘‘which entities 

would be considered co-registrants in 

these types of transactions and therefore 

subject to the applicable requirements 

under the securities laws.’’ 548

Several commenters addressed issues 

related to the scope of section 11 

liability that may stem from the coregistration proposal. One commenter 

suggested that, as drafted, the proposal 

would make the target company a signer 

but not a co-registrant.549 Specifically, 

this commenter said that the proposed 

change to Instruction 1 to the Signatures 

section of the forms purports to make 

the target company a registrant ‘‘for 

purposes of this instruction’’ but that 

‘‘the change would solely require that 

the target company, along with its 

specified officers and directors, sign the 

registration statement,’’ citing for 

purposes of comparison ‘‘existing 

Instruction 3 to the Signatures section of 

the forms, which the commenter said is 

not limited solely to the Signatures 

section.’’ 550 The commenter opposed 

the proposed co-registration 

requirements and said that, ‘‘if the 

regulatory goal is exposing the target 

company and its officers and directors, 

as signatories, to Section 11 liability for 

material misstatements or omissions in 

the registration statement, the proposed 

amendment to Instruction 1 of the forms 

accomplishes that.’’ 551

Other commenters expressed views 

on which entity and which officers and 

directors should be required to sign the 

de-SPAC transaction registration 

statement. One commenter said that the 

Commission should ‘‘clarify that 

directors and executive officers of the 

target company, who will not be 

directors or executive officers of the 

target company following the 

consummation of the de-SPAC 

transaction, are not required to sign the 

registration statement used for the deSPAC transaction and are not deemed to 

be directors or executive officers of the 

target company for purposes of the 

liability provisions of the securities 

laws.’’ 552 Another commenter stated 

that the ‘‘required signatories should be 

the surviving company, which might be 

a new registrant and the directors and 

officers of that entity.’’ 553 In contrast, 

another commenter expressed the view 

that ‘‘[t]arget company managers and 

directors are responsible for providing 

the information necessary for investor 

approval of a de-SPAC merger, and must 

provide accounting information as well 

as current operations and forecasts,’’ 

because they ‘‘also profit significantly 

from selling private shares and/or 

receiving significant ownership 

positions in the post-SPAC entity.’’ 554 A 

different commenter suggested that 

liability under the co-registration 

proposal would be both over-inclusive 

and under-inclusive, because new 

officers or directors may be 

appointed 555 and because target 

company officers or directors may 

resign.556 Finally, one commenter 

pointed out that in a de-SPAC 

transaction structured as an acquisition 

of assets, the assets acquired could not 

sign a registration statement.557

A number of commenters addressed 

Exchange Act reporting company 

obligations of the target company as a 

result of proposed co-registration 

requirements. Several commenters 

raised concerns that if the target 

company is a co-registrant on a de-SPAC 

registration statement, the target 

company would become an Exchange 

Act reporting company at the time of 

effectiveness.558 Specifically, 

commenters raised concerns about the 

target company being required to file 

Exchange Act reports during the interim 

period between when the registration 

statement for the de-SPAC transaction 

becomes effective and the closing of the 

de-SPAC transaction.559

A different commenter said ‘‘the 

proposed rules should clarify that a 

target company that will ultimately not 

be the public company parent following 

the de-SPAC transaction does not 

become subject to the periodic reporting 

requirements of Section 13 of the 

Exchange Act as a result of being a coregistrant in the registration statement 

for the de-SPAC transaction.’’ 560 If a 


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561Letters from Crowe, Grant Thornton. See also 

KPMG (‘‘It is also possible that a SPAC merger is 

terminated after the effective date of a Form S–4 or 

F–4 registration statement, due to the vote from 

shareholders or for other reasons. In this situation, 

the Proposal indicates that the target operating 

company is a registrant, with ongoing filing 

obligations, but without having completed the 

merger. We recommend the Commission consider 

clarifying the reporting obligations of target 

operating companies in such circumstances.’’). See 

Staff Legal Bulletin No. 18 (CF) (Mar. 15, 2010). 

562Letters from ABA; Anonymous (Apr. 7, 2022) 

(‘‘Anonymous (Apr. 7, 2022)’’); Skadden (‘‘Given 

the potential for increased risk of liability to boards, 

we also expect D&O liability insurance premiums 

to increase significantly, further diluting the value 

of the transaction to stockholders.’’). See also letters 

from ABA, Goodwin, White & Case (each discussing 

directors and officers insurance premium costs in 

connection proposed Item 1606(a)) and Job Creators 

Network (noting that costs generally will increase, 

as ‘‘SPACs and target companies should expect 

extensive diligence requests from financial 

institutions, advisors, and their counsel in 

connection with a de-SPAC transaction’’ (citations 

omitted)). 

563Letter from ABA. 

564Letter from Vinson & Elkins. 

565Letter from Vinson & Elkins. 

566Letter from PwC. 

567Letter from Bullet Point Network. 

568 Id. 

569 Id. 

570Although target companies’ Federal securities 

law liability is not currently aligned with the 

liability of a company in a traditional IPO, they may 

be exposed to other liability (as are companies in 

a traditional IPO) from Commission enforcement 

actions or potentially to investors under anti-fraud 

statutory provisions and rules that require scienter 

or negligence to the extent the elements of the 

relevant cause of action are met. See, e.g., Exchange 

Act section 10(b) and Rule 10b–5 thereunder 

(imposing liability for false or misleading 

statements made in connection with a purchase or 

sale of securities) and, where applicable, Rule 14a– 

9 (for false and misleading statements made in 

connection with the solicitation of proxies). 

target company that does not become 

the public company parent does become 

subject to periodic reporting, the 

commenter said that ‘‘upon 

effectiveness of such registration 

statement, the target company would, as 

a result of Section 15(d) of the Exchange 

Act, automatically be required to begin 

filing 10–Ks, 10–Qs and other periodic 

reports required by the Exchange Act, 

and this would be an Exchange Act 

reporting obligation that is separate 

from the public company Exchange Act 

reporting obligation. These reports 

would be essentially the same reports as 

filed by its public parent company and 

would create significant additional 

compliance costs while resulting in no 

substantive additional public 

disclosure.’’ The commenter expressed 

the view that this was not an intended 

consequence of the rule proposal and 

said the Commission should clarify this 

aspect of the co-registration proposal. 

Some commenters suggested the 

Commission should clarify in any final 

rules whether, in a situation where the 

de-SPAC transaction is not ultimately 

consummated, a target company that is 

a co-registrant for a de-SPAC 

registration statement that has been 

declared effective may suspend its 

periodic reporting obligations under 

procedures similar to those set out in 

Staff Legal Bulletin 18 regarding 

abandoned IPOs and acquired 

issuers.561 A number of commenters 

raised concerns about costs for target 

companies as co-registrants, particularly 

with respect to the cost of directors and 

officers insurance.562 One commenter 

stated, ‘‘Targets will be forced to 

substantially enhance their D&O 

[directors and officers] liability 

insurance coverage . . . [and], if the DeSPAC Transaction is never completed 

for some reason, Targets would likely 

not be able to ‘ratchet down’ their 

coverage to more typical private 

company levels until the next policy 

renewal date.’’ 563 One commenter 

stated that co-registration would result 

in disclosure requirements that are 

inconsistent with the proposed 

revisions to Regulation S–X, raising the 

issue of whether, if there were multiple 

target companies, if each company 

would be required to provide financials 

audited in accordance with the 

standards of the Public Company 

Accounting Oversight Board (United 

States) (‘‘PCAOB’’), rather than solely 

the predecessor pursuant to proposed 

Rule 15–01(a) of Regulation S–X.564

This commenter indicated that coregistration would result in 

inconsistencies with IPOs where there 

are multiple target companies and 

queried whether all target companies 

‘‘should be required to sign the 

registration statement or just the 

accounting predecessor or acquiror, the 

one whose shareholders own the largest 

amount of the surviving company, 

etc.’’ 565 A different commenter asked 

for guidance regarding a target 

company’s section 15(d) reporting 

obligation in the case where there are 

multiple targets.566

One commenter suggested the 

Commission create a new form for deSPAC transactions.567 The commenter, 

who supported ‘‘the SEC’s stance that 

SPAC business combinations should be 

treated as de facto IPOs,’’ suggested the 

Commission align SPAC disclosures 

with Form S–1 by creating a SPACspecific form that would ‘‘closely 

resemble a traditional IPO S–1, rather 

than the traditional S–4 used for merger 

transactions.’’ 568 The commenter 

proposed that, in this new SPACspecific form, ‘‘management projections 

should not be disclosed to public SPAC 

shareholders . . . even if management 

projections have been reviewed by the 

SPAC board of directors in their role as 

shareholder fiduciaries.’’ 569

3. Final Rules 

After considering the comments 

received, we are adopting the coregistration proposal substantially as 

proposed, with some modifications. 

Under existing rules, when a SPAC or 

a holding company offers and sells its 

securities in a registered de-SPAC 

transaction, staff observed a majority of 

the relevant disclosure in the de-SPAC 

transaction registration statement is 

about the target company, but only the 

SPAC or holding company, its principal 

executive officer or officers, its principal 

financial officer, its controller or 

principal accounting officer, and at least 

a majority of its board of directors (or 

persons performing similar functions) 

are required to sign the registration 

statement for the de-SPAC transaction. 

These signers are subject to liability 

under section 11 of the Securities Act 

(along with other persons who have 

liability under section 11). In these 

situations, the private operating 

company and its officers and directors 

may therefore not incur liability as 

signatories to the registration statement 

under section 11 of the Securities Act, 

even though information about the 

target company is highly significant to 

investors and this result is unlike if the 

target company had conducted a 

traditional IPO registered on Form S–1 

or Form F–1. As discussed in more 

detail below, it is our view that in a deSPAC transaction the target company is 

an issuer of securities under section 

2(a)(4) of the Securities Act, and, 

therefore, the target company along with 

its required officers and directors must 

sign a registration statement filed by a 

SPAC or another shell company for the 

de-SPAC transaction, because both in 

substance and by operation of new 

Securities Act Rule 145a, the target 

company is issuing or proposing to 

issue securities in a de-SPAC 

transaction, regardless of the transaction 

structure. In addition, the business 

operations of the target company will be 

those that are carried on by the 

combined company going forward. The 

co-registration requirements will 

therefore enhance investor protection by 

aligning Federal securities law liability 

with the entity that is the primary 

source of the information disclosed 

about the new public operating 

company.570

Section 2(a)(4) of the Securities Act 

broadly defines the term ‘‘issuer’’ to 

include every person who issues or 

proposes to issue securities. The 


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571See, e.g., H.R. Rep. 73–85, 12 (‘‘Special 

provisions govern the definition of ‘issuer’ in 

connection with security issues of an unusual 

character. . . . [For example, in the case of an 

investment trust], although the actual issuer is the 

trustee, the depositor is the person responsible for 

the flotation of the issue. Consequently, information 

relative to the depositor and to the basic securities 

is what chiefly concerns the investor—information 

respecting the assets and liabilities of the trust 

rather than of the trustee.’’). 

572Letter from ABA. 

573See infra section IV.A. 

574See section 6(a) of the Securities Act [15 U.S.C 

77f]. 

575 In this regard, we note that the target 

company’s officers and directors are the parties 

most similarly situated to the officers and directors 

of a private company conducting a traditional IPO, 

in terms of their knowledge of, and background in, 

the company going public through a de-SPAC 

transaction. 

576Letters from ABA, Kirkland & Ellis, NYC Bar, 

Skadden, Vinson & Elkins, Winston & Strawn. See 

supra note 538. 

577See supra note 539. 578The discussion, with respect to SPACs filing 

a registration statement, applies equally to de-SPAC 

transaction structures where a holding company is 

created and files a registration statement. 579See supra note 570. 580Under section 6(a) of the Securities Act, each 

‘‘issuer’’ must sign the registration statement, and 

‘‘every person who signed the registration 

statement’’ has liability under section 11(a) of the 

Securities Act. See 15 U.S.C. 72(a) and 77k(a). The 

provisions of section 11(b) of the Securities Act 

provide limited situations where no liability under 

section 11(a) will attach but exclude issuers from 

applying that provision. See 15 U.S.C. 77k(b) 

(‘‘Notwithstanding the provisions of subsection (a) 

no person, other than the issuer, shall be liable as 

provided therein who shall sustain the burden of 

proof. . . .’’ (Emphasis added)). 

581See William O. Douglas & George E. Bates, The 

Federal Securities Act of 1933, 43 Yale L.J. 171, 173 

(1933) (‘‘The civil liabilities imposed by the Act are 

not only compensatory in nature but also in 

terrorem. They have been set high to guarantee that 

the risk of their invocation will be effective in 

assuring that the ‘truth about securities’ will be 

told.’’). See also supra note 850 and accompanying 

text (noting the importance of private rights of 

action in addition to Commission enforcement 

mechanisms as part of the Federal securities law 

statutory scheme, which provides for several 

private rights of action). 

legislative history of this broad 

definition suggests that the 

identification of the ‘‘issuer’’ of a 

security should be based on the 

economic reality of a transaction to 

ensure that, in service of the disclosure 

purpose of the Securities Act, the 

person(s) that have access to the 

information most relevant to investors 

are responsible as an ‘‘issuer’’ for 

providing such information.571

However, certain commenters asserted 

that a target company cannot fall within 

the definition of issuer in a de-SPAC 

transaction because ‘‘[t]he [t]arget in a 

De-SPAC Transaction ordinarily is not 

issuing or proposing to issue any 

securities pursuant to the Merger 

Registration Statement—it is the SPAC’s 

securities to be issued.’’ 572 We disagree. 

As explained below, even in transaction 

structures where a target company does 

not issue its own securities in the course 

of the de-SPAC transaction, it will 

always be proposing to issue the 

securities of the combined company in 

connection with the Rule 145a 

transaction that is occurring when the 

SPAC conducts a business combination 

that changes it from a shell company to 

an operating company.573

The final rules will ensure that, when 

a registration statement is filed for a deSPAC transaction, a target company, its 

principal executive officer or officers, its 

principal financial officer, its 

comptroller or principal accounting 

officer, and a majority of its board of 

directors or persons performing similar 

functions sign the registration 

statement.574 These signatories, among 

others, will be liable under section 11, 

for any material misstatements or 

omissions in the registration statement 

(subject to a due diligence defense for 

all parties other than an issuer) and will 

thereby be held accountable to investors 

for the accuracy of the disclosures in the 

registration statement that previously 

would have been signed only by the 

SPAC or a holding company and its 

officers and directors.575 We continue to 

believe such liability, and the 

corresponding accountability to 

investors, is appropriate given that it is 

the private operating company that, in 

substance, issues or proposes to issue its 

securities, as securities of the newly 

combined public company. We expect 

that this requirement will improve the 

reliability of the disclosure provided to 

investors in connection with de-SPAC 

transactions by creating strong 

incentives for such additional signing 

persons (among others who would have 

liability under section 11 as a result of 

these requirements, such as non-signing 

directors) to conduct thorough diligence 

in connection with the de-SPAC 

transaction and review more closely the 

disclosure about the target company. 

As noted above, the final rules reflect 

certain modifications to the proposed 

rules. First, we are requiring that the 

names of all co-registrants appear on the 

cover page. Second, we are clarifying 

that the target company is a registrant 

and not merely a signatory to the 

registration statement, as suggested by 

some commenters. Third, we are 

addressing scenarios where the target 

company is a business or assets. Finally, 

we are expanding the instructions to 

Forms S–4 and F–4 to also require that 

the target company and its related 

section 6(a) signatories sign a 

registration statement for a de-SPAC 

transaction filed by a holding company. 

This change is intended to ensure that 

the target company signs the registration 

statement in a transaction structure 

involving a holding company given that, 

as noted above, the target company is an 

‘‘issuer’’ of the securities in any 

registered de-SPAC transaction. We 

have also added the same requirements 

to Form S–1 and Form F–1. We discuss 

these changes to the final rules and the 

comments received on the proposal in 

more detail below. 

Several commenters suggested that 

there are already strong incentives 

under the existing framework to ensure 

that disclosures in registration 

statements for de-SPAC transactions are 

accurate and complete.576 A few of 

these commenters suggested it is 

unnecessary to impose additional 

liability because target company officers 

and directors, by virtue of their roles in 

the combined company, will effectively 

‘‘own’’ any Exchange Act liabilities 

related to the disclosure in the de-SPAC 

transaction registration statement 

inherited by the combined company.577

As commenters noted, currently when 

a SPAC578 files a registration statement 

in connection with a de-SPAC 

transaction that becomes effective, the 

SPAC is exposed to strict liability for 

material misstatements regarding all 

disclosures in the registration statement, 

including the disclosures related to the 

target company. In addition, the SPAC 

and/or target company may be exposed 

to liability from Commission 

enforcement actions or potentially to 

investors under anti-fraud statutory 

provisions and rules that require 

scienter or negligence.579

We disagree with the commenters 

who suggested that existing liability 

protections make it unnecessary for the 

target company to have strict liability 

for statements in the de-SPAC 

registration statement. In the Securities 

Act, Congress determined that an issuer 

that offers and sells its securities to the 

public using a registration statement 

should be strictly liable to investors for 

any material misstatements and 

omissions in the effective registration 

statement.580 Furthermore, strong 

private liability in registered 

transactions is one of the central tenets 

of the Securities Act.581 As discussed 

throughout this release, in a de-SPAC 

transaction, the target company is an 

issuer because it, in substance, issues or 

proposes to issue its securities, as 

securities of the newly combined public 

company. As an issuer and the primary 

source of information disclosed about 

the combined operating company in 

registered de-SPAC transactions, the 


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582Letters from ABA, Skadden. See supra note 

540. 

583Letter from Bullet Point Network. 

584Letter from Freshfields. 

585See supra section I. 

586Less commonly, the target company may be a 

public company or may be a previously public 

company that went private. 

587Letter from ABA. See Rule 140. 

588Letter from CFA Institute. 

589Letter from KPMG (specifically noting that 

‘‘SPACs may acquire more than one operating 

company as part of a de-SPAC transaction’’). 

target company and its officers and 

directors are best situated to ensure the 

accuracy and completeness of such 

disclosures. Accordingly, investors in 

de-SPAC transactions are entitled to the 

protections arising from having the 

target company and other issuers sign 

the de-SPAC registration statement, 

including strict liability for statements 

in the effective registration statement, 

regardless of any other liabilities that 

may apply. 

With respect to commenters’ 

argument that the target company, and 

its officers and directors, will ‘‘own’’ 

liability for statements made in the deSPAC registration statement going 

forward, we acknowledge that, under 

the existing framework, in specific 

situations where the target company 

survives and/or the officers and 

directors of the target company are 

officers and directors of the surviving 

company, they would potentially have 

liability, including strict liability, for 

statements in the de-SPAC registration 

statement. However, that assumption of 

liability under current regulations does 

not change the fact that in other 

transaction structures, the target 

company and its officers and directors 

may not be strictly liable for the 

statements made in any registration 

statement filed in connection with the 

de-SPAC transaction, notwithstanding 

that the target company is, in substance, 

an issuer in these transaction structures 

for the reasons discussed above. So that 

target company liability is consistent 

across de-SPAC transaction structures, 

we are adopting the co-registration 

proposal as proposed, subject to the 

changes discussed herein. 

A few commenters suggested the coregistrant proposal would create a 

disparity compared to traditional 

business combination transactions, 

because the target company is not a coregistrant in those transactions.582 In 

contrast, another commenter said, 

‘‘These are clearly different facts and 

circumstances than a non-SPAC 

merger’’ because the SPAC board is not 

deciding whether to change its 

operating business model via merger but 

rather is offering its shareholders the 

opportunity to invest in the surviving 

company.583 One commenter suggested 

that requiring the target company to sign 

a registration statement for a de-SPAC 

transaction would be inconsistent with 

how section 11 liability applies in a 

traditional IPO because, under the coregistrant proposal, the target company 

could be liable to its existing 

shareholders for information about the 

target company included in the deSPAC registration statement.584 As 

discussed above,585 the hybrid nature of 

de-SPAC transactions makes them 

distinguishable from other business 

combinations or traditional IPOs, 

because the transaction simultaneously: 

(i) functions as a form of public capital 

raising for the target company, (ii) 

transforms a shell company, that is not 

a business combination related shell 

company, into an operating company, 

and (iii) commonly represents the 

introduction of a formerly private 

company to the public markets for the 

first time. In a de-SPAC transaction, the 

target company is, in substance, acting 

as issuer of securities and therefore 

should incur section 11 liability for the 

disclosures about its business and its 

financial results and condition, which 

constitute critical information for 

investors making investment, 

redemption, and voting decisions. 

As noted above, the de-SPAC 

transaction commonly marks the 

introduction of the target company to 

the U.S. public securities markets, and 

investors look to the business and 

prospects of the target company in 

evaluating an investment in the 

combined company.586 Moreover, new 

Rule 145a recognizes that a de-SPAC 

transaction involves a sale of the 

securities of the combined company to 

the SPAC’s shareholders. Information 

relating to the target company is the 

most significant factor in investor 

decisions to participate in the de-SPAC 

transaction because the target company 

will become the operating business of 

the combined company upon 

consummation of the de-SPAC 

transaction. In addition, the target 

company is the principal beneficiary of 

the capital that the SPAC has previously 

raised and is contributing to the 

combined company. Co-registration is 

necessary in these circumstances so that 

appropriate levels of liability for the 

related disclosures attaches to the entity 

that is the primary source of the 

information disclosed—information that 

relates to and ultimately benefits the 

target company itself. Requiring the 

target company and its officers and 

directors to sign the registration 

statement will help to ensure that the 

information provided to investors in 

connection with a de-SPAC transaction 

is accurate, complete, and reliable by 

incentivizing such parties to exercise 

more care in the preparation of that 

information. 

One commenter suggested the coregistration proposal is inconsistent 

with Securities Act Rule 140, which 

according to the commenter ‘‘ensures 

that the requisite information about the 

underlying issuer is adequately 

disclosed,’’ and does not apply to deSPAC transactions, because de-SPAC 

registration statements already provide 

registrants with disclosures about the 

target company, and the target company 

already may be subject to some liability 

for disclosures contained therein.587

While Rule 140 and these new coregistration requirements both expose 

parties to liability, they do so in 

different factual situations and for 

different purposes, and therefore are not 

inconsistent. As discussed above, we 

acknowledge that disclosure about 

target companies is already included in 

de-SPAC registration statements and 

target companies may have liability 

under de-SPAC registration statements 

in some situations. However, target 

companies do not have liability as 

issuers in all transaction structures, 

notwithstanding the fact that a de-SPAC 

transaction marks the introduction of 

the target company to the U.S. public 

securities markets and investors look to 

the business and prospects of the target 

company in evaluating an investment in 

the combined company. 

One commenter supported the 

proposal but suggested that the 

Commission clarify whether ‘‘liability 

correctly or mistakenly extends to 

anyone other than unaffiliated, nonredeeming SPAC shareholder[s].’’ 588

Under the final rules, the target 

company, its section 6(a) signing 

persons, and its directors will be subject 

to the same liability as any other issuer 

(including to affiliated shareholders). 

A different commenter recommended 

that the Commission clarify ‘‘which 

entities would be considered coregistrants in these types of transactions 

and therefore subject to the applicable 

requirements under the securities 

laws.’’ 589 We have provided additional 

clarification regarding which entities 

would be a co-registrant in connection 

with changes to the instructions to 

registration forms compared to the 

proposed instructions that we discuss 

below. 

As noted above, one commenter 

suggested the proposal would make the 

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590Letter from Vinson & Elkins. 

591See Proposing Release, supra note 7, at 29480 

(request for comment number 69) (‘‘Should we also 

adopt corresponding amendments to Form S–1 and 

Form F–1 in the event that these forms are used by 

a SPAC for a de-SPAC transaction?’’). 

592See letters from Freshfields, Vinson & Elkins. 

593 15 U.S.C. 77f(a). 

594 15 U.S.C. 77k(a)(2). 

595See also 15 U.S.C. 77(k)(b)(1) (allowing for the 

potential removal of section 11 liability from 

persons who ‘‘before the effective date . . . had 

resigned from or had taken such steps as are 

permitted by law to resign from, or ceased or 

refused to act in, every office, capacity, or 

relationship in which he was described in the 

registration statement as acting or agreeing to act, 

and . . . had advised the Commission and the 

issuer in writing that he had taken such action’’). 

596 15 U.S.C. 77f(a). 

597See supra note 557 and accompanying text. 

registrant on Forms S–4 and F–4.590 We 

do not agree with this assessment 

because, as an ‘‘issuer’’ of the securities 

in a registered de-SPAC transaction, the 

target company is both a required 

signatory of the registration statement 

pursuant to section 6(a) and a 

‘‘registrant’’ under Rule 405. To that 

end, Rule 405 states that a ‘‘registrant’’ 

is a type of ‘‘issuer’’—i.e., ‘‘the issuer of 

the securities for which the registration 

statement is filed.’’ 

The proposed instruction that the 

term ‘‘registrant’’ means the SPAC for 

purposes of the disclosure obligations of 

the form was not intended to mean that 

a target company would not also be 

considered a registrant. The purpose of 

that instruction was to make clear that 

the defined term ‘‘registrant’’ on the 

form refers to the ‘‘SPAC’’ and to allow 

for a different defined term to be used 

on the form when specialized disclosure 

with respect to the ‘‘target company’’ is 

required. The proposed instruction to 

the Signatures section was intended to 

clarify that both the SPAC and target 

company and their required officers and 

directors must sign the form but would 

not have made the target company a 

‘‘signer not a registrant.’’ 

Nevertheless, to clarify this point, in 

the final rules, we are making technical 

changes to the instructions to the forms. 

In connection with the request by a 

commenter to compare the proposed 

instructions to current Instruction 3 to 

the Signatures section, we are revising 

the instructions to Forms S–4 and F–4 

to require that the names of each coregistrant appear on the cover page 

consistent with current Instruction 3. 

We are also revising the instructions to 

require that the target company and its 

related section 6(a) signatories sign a 

registration statement for a de-SPAC 

transaction filed by a holding company, 

to account for the fact that the target 

company is an ‘‘issuer’’ of the securities 

in any registered de-SPAC transaction. 

As a result, in the final rules, the last 

sentence of General Instruction L.1 of 

Form S–4 provides: ‘‘If the securities to 

be registered on this Form will be issued 

by a special purpose acquisition 

company (as such term is defined in 

Item 1601 of Regulation S–K) or another 

shell company in connection with a deSPAC transaction, the registrants also 

include the target company (as such 

term is defined in Item 1601 of 

Regulation S–K), and it must be so 

designated on the cover page of this 

Form. In such a de-SPAC transaction, 

where the target company consists of a 

business or assets, the seller of the 

business or assets is deemed to be a 

registrant instead of the business or 

assets and must be so designated on the 

cover page of this Form. Further, in 

such a de-SPAC transaction, the term 

‘registrant’ for purposes of the 

disclosure requirements of this Form 

means the special purpose acquisition 

company, and the term ‘company being 

acquired’ for the purposes of the 

disclosure requirements of this Form 

means the target company.’’ Similarly, 

we are revising the last sentence of 

Instruction 1 of the Signatures section 

and revising proposed General 

Instruction I.1 to Form F–4 and the last 

sentence of Instruction 1 of the 

Signatures section of Form F–4 in the 

same manner as with Form S–4. 

Also with respect to changes in the 

forms to implement the co-registration 

requirements, in the Proposing Release, 

the Commission solicited comment on 

whether Form S–1 and Form F–1 should 

be amended to include instructions as to 

signatures which, when used for a deSPAC transaction, would align the 

signature requirements of these forms to 

Form S–4 and Form F–4.591 Because 

Form S–1 and, where issuers are 

eligible, Form F–1, remain available for 

de-SPAC transactions, it is consistent 

with the protection of investors to 

include equivalent instructions as to 

signatures to ensure consistent liability 

for de-SPAC transactions regardless of 

which Securities Act form is used for 

registration. Accordingly, we are 

adopting amendments to the 

instructions to signatures in Form S–1 

and Form F–1 that correspond to those 

in Form S–4 and Form F–4. 

A number of commenters stated that 

liability under the co-registration 

proposal would be over and/or underinclusive with respect to the target 

company’s officers and directors. As 

discussed above, the final rules make 

clear that the target company is a coregistrant (and not merely a signer) with 

respect to the de-SPAC transaction. 

Therefore, as with any registrant, the 

target company will be required to have 

its principal executive officer or officers, 

principal financial officer and controller 

or principal accounting officer, and at 

least a majority of its board of directors 

or persons performing similar functions 

sign the registration statement. 

With respect to commenter 

suggestions that only continuing target 

company officers and directors should 

sign the registration statement,592 we do 

not believe it would be necessary or 

appropriate to adopt such a requirement 

for several reasons. First, to require 

signatures only from continuing target 

company officers and directors would 

be inconsistent with the statutory 

signature requirements under Securities 

Act section 6(a), which requires each 

issuer’s ‘‘principal executive officer or 

officers, its principal financial officer, 

its comptroller or principal accounting 

officer, and the majority of its board of 

directors or persons performing similar 

functions’’ to sign the registration 

statement.593 Moreover, non-continuing 

directors who did not sign the 

registration statement nonetheless may 

be liable under section 11, because 

section 11(a)(2) provides that the 

persons with liability to persons who 

acquired securities include ‘‘[e]very 

person who was a director of (or person 

performing similar functions) or partner 

in the issuer at the time of the filing of 

the part of the registration statement 

with respect to which his liability is 

asserted.’’ 594 Second, if a target 

company officer or director will not be 

a continuing officer or director in the 

combined company, it is within the 

control of the target company officer or 

director to resign prior to the 

effectiveness of the de-SPAC registration 

statement.595 Finally, we note that 

Securities Act section 6 requires only 

the issuer’s ‘‘principal executive officer 

or officers, its principal financial officer, 

[and] its comptroller or principal 

accounting officer,’’ but not other 

officers, to sign the registration 

statement.596 Accordingly, if the noncontinuing target company officers are 

not one of these officers, they are not 

required to sign the registration 

statement. 

The proposed definition of target 

company included a ‘‘business’’ or 

‘‘assets’’ and the proposed definition of 

‘‘de-SPAC transaction’’ included an 

‘‘acquisition of assets.’’ One commenter 

pointed out that in a de-SPAC 

transaction structured as an acquisition 

of assets, the assets acquired could not 

sign a registration statement.597 We are 

not making any changes in the final 

definitions of those terms. However, to 

align the signature requirements for the 


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598This is consistent with the functional 

approach taken in the language of section 6(a) of the 

Securities Act, whereby the signatories of a 

registration statement, who incur section 11 

liability, must include ‘‘the majority of its board of 

directors or persons performing similar functions 

(or, if there is no board of directors or persons 

performing similar functions, by the majority of the 

persons or board having the power of management 

of the issuer).’’ 

599 17 CFR 210.11–01(d) (‘‘Rule 11–01(d)’’ of 

Regulation S–X). 

600 In the unusual event that the assets do not 

meet the definition of a business, registrants may 

wish to contact the Division of Corporation Finance 

about the reporting of historical financial 

information for the assets. 

601The disclosure provided as to the assets 

acquired that constitute a business would be that 

which is required for 17 CFR 210.3–05(e), as 

applicable. 

602Letters from ABA, KPMG, PwC (also noting 

this would be the case in de-SPAC transactions 

involving multiple target companies). See supra 

note 559. 

603Letters from ABA, Crowe, Davis Polk, 

Freshfields, Grant Thornton, KPMG. See supra note 

558. 

604Letter from Davis Polk. 

605Letters from Crowe, Grant Thornton. See supra 

note 561. See also KPMG, supra note 561. 

606The term ‘‘predecessor’’ when used in this 

section has the same meaning as applied under 

Regulation S–X and the determination of financial 

statement requirements. To have a target company 

that is not the predecessor, the de-SPAC transaction 

must include multiple targets. We note that the 

overwhelming majority of de-SPAC transactions 

only involve one target. See infra discussion at note 

1226 (indicating that approximately 97% of deSPAC transactions involve only one target). 

607For example, a Form 10–K would require the 

financial statements of a non-predecessor target 

company to be audited in accordance with the 

standards of the PCAOB (17 CFR 210.1–02(d)) as 

well as disclosure of certain information specified 

in Regulation S–K, such as executive compensation 

(17 CFR 229.402). 

608See supra note 561. 

609Letters from ABA, Anonymous (Apr. 7, 2022), 

Skadden. See supra note 562. See also ABA, Job 

Creators Network, Goodwin, White & Case. See 

supra note 562. 

610 De-SPAC transaction agreements (such as 

merger agreements) commonly contain a target 

company covenant, representation, or similar 

provision that the target company will maintain its 

directors and officers insurance or contain a 

representation or warranty that the target 

company’s directors and officers insurance listed on 

the target company’s disclosure schedules to the 

agreement is in force and effect. 

acquisition of a business or assets as 

closely as possible to the signature 

requirements being adopted for all other 

target companies, we are revising the 

instructions to Forms S–4 and F–4 to 

provide that, in de-SPAC transactions 

involving the purchase of assets or a 

business, the term ‘‘registrant’’ includes 

the seller of the business or assets. As 

with target companies in non-asset 

deals, the signatories of the asset 

purchase agreement (or similar 

transaction agreement) would be the 

sellers required to sign the registration 

statement.598 When a de-SPAC 

transaction involves the sale of assets 

that meet the definition of a business in 

Article 11 of Regulation S–X,599 the 

seller of the assets must provide the 

historical financial information 

regarding the acquisition in the 

registration statement.600 Thus, such 

seller of assets and its officers and 

directors are similarly situated to the 

target company and its officers and 

directors (i.e., the seller of a business 

that will continue as the combined 

company) in a de-SPAC transaction not 

structured as an asset sale.601

Several commenters raised concerns 

that, if the target company is a coregistrant on a de-SPAC registration 

statement, then the target company 

would become an Exchange Act 

reporting company at the time of 

effectiveness and would be required to 

file reports during the interim period 

between when the registration statement 

for the de-SPAC transaction becomes 

effective and the closing of the de-SPAC 

transaction.602 Relatedly, several 

commenters noted that the target 

company would incur this reporting 

obligation even if the de-SPAC 

transaction does not ultimately close.603

In response to these concerns, some 

commenters suggested the final rules 

should either clarify that a target 

company that is a co-registrant on a deSPAC registration statement does not 

become subject to periodic reporting 

requirements,604 or, in a situation where 

the de-SPAC transaction is not 

ultimately consummated, a target 

company that is a co-registrant for a deSPAC registration statement may 

suspend its periodic reporting 

obligations under procedures similar to 

those set out in Staff Legal Bulletin 18 

regarding abandoned IPOs and acquired 

issuers.605

As ‘‘registrants’’ and ‘‘issuers,’’ target 

companies will be required by 

applicable Exchange Act provisions to 

file periodic reports after the 

effectiveness of the de-SPAC registration 

statement and until the target company 

terminates and/or suspends its 

Exchange Act report obligations. We do 

not believe an exemption from the 

Exchange Act’s reporting requirements 

is necessary or appropriate in the public 

interest or consistent with the 

protection of investors because, during 

the pendency of the de-SPAC 

transaction, SPAC investors will benefit 

from receiving updated information 

about the target company that, in 

substance and as reflected in Rule 145a, 

proposes to issue securities of the newly 

combined public company, through 

which the formerly private company 

will operate its business. In the event 

that a target company that is not the 

predecessor 606 to the shell company is 

required to file a periodic report such as 

a Form 10–K or 10–Q as a standalone 

issuer, the periodic report would be 

required to comply with the form 

requirements and doing so could require 

the disclosure of updated information 

about the target company that is not the 

predecessor that would not have been 

required in the registration statement.607

We agree with commenters,608

however, that a target company (that 

became a reporting company by virtue 

of being a co-registrant for a de-SPAC 

transaction registration statement that 

has been declared effective) may look to 

17 CFR 240.12h–3 (Exchange Act Rule 

12h–3) and Staff Legal Bulletin 18 for 

guidance regarding how it can suspend 

its reporting obligations under section 

15(d) of the Exchange Act in situations 

in which: (1) the de-SPAC transaction 

does not close, or (2) at the closing of 

the de-SPAC transaction, the target 

company is acquired and another 

company has become a public reporting 

company with respect to the combined 

business created by the de-SPAC 

transaction. 

A number of commenters raised 

concerns about costs for target 

companies as co-registrants, particularly 

with respect to the cost of directors and 

officers insurance.609 We recognize that 

the final rules, in particular the coregistration requirements, could result 

in increased costs for target companies. 

Based on Commission staff’s experience, 

target companies that enter de-SPAC 

transactions may have directors and 

officers insurance, and business 

combination agreements in connection 

with de-SPAC transactions may contain 

provisions regarding the provision of 

directors and officers insurance to target 

company officials.610 As a result, any 

increased costs incurred by target 

companies in connection with de-SPAC 

transactions with respect to directors 

and officers insurance under the final 

rules will be incremental to those 

already incurred. Furthermore, we 

believe these incremental costs are 

justified by the enhanced investor 

protections that will be realized by the 

co-registration requirements. We discuss 

our analysis of the costs and benefits of 

the final rules in more detail in section 

VIII below. 

One commenter said that coregistration would result in disclosure 

requirements that are inconsistent with 

the proposed revisions to Regulation S– 

X, raising the issue of whether, if there 

were multiple target companies, each 

company would be required to provide 


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611Letter from Vinson & Elkins. 

612See Item 1601(d) of Regulation S–K, adopted 

herein. 

613Public Law 107–204, Sec. 404(b) 116 Stat. 745 

(2002). 

614See Rule 15–01 of Regulation S–X, adopted 

herein. 

615 In an IPO where a shell company acquires 

multiple businesses in a ‘‘put together’’ transaction, 

only the predecessor(s) (in some transactions, there 

may be more than one predecessor) would be 

required to provide historical financial statements 

audited in accordance with PCAOB standards. See 

Rule 1–02(d) of Regulation S–X for the audit 

requirements and Rule 3–02(a) of Regulation S–X 

which incorporates a predecessor into these 

requirements. 

616Entities for which their financial statements 

are included in the Form S–4 or F–4 through 

application of Rule 3–05 of Regulation S–X, Rule 

3–14 of Regulation S–X, or 17 CFR 210.8–04 (‘‘Rule 

8–04’’ of Regulation S–X) that are not target 

companies would not be considered a registrant to 

the Form S–4 or F–4. 

617See supra note 606. 

618See Rule 1–02(d) of Regulation S–X, adopted 

herein. 

619 In the event a non-predecessor issuer is 

required to file a Form 10–K on a standalone basis, 

the financial statements would be required to be 

audited under PCAOB standards, pursuant to Rule 

1–02(d) of Regulation S–X because the entity is 

filing an Exchange Act report for itself and not as 

a non-predecessor issuer under Rule 15–01(a). 

620See Rule 15–01(a) of Regulation S–X, adopted 

herein. An issuer that is not a predecessor that is 

already registered under Exchange Act sections 

13(a) or 15(d) would be required to file financial 

statements audited in accordance with PCAOB 

standards pursuant to Rule 1–02(d) of Regulation S– 

X. 

621See Proposing Release at section IV.B. 

622 In addition, section 6(a) requires the issuer’s 

principal executive officer or officers, principal 

financial officer, comptroller or principal 

accounting officer, and the majority of its board of 

directors or persons performing similar functions 

(or, if there is no board of directors or persons 

performing similar functions, by the majority of the 

persons or board having the power of management 

of the issuer) to sign a registration statement. When 

the issuer is a foreign entity, the registration 

statement must also be signed by the issuer’s duly 

authorized representative in the United States. 

financial statements audited in 

accordance with PCAOB standards in 

the de-SPAC registration statement, 

rather than solely the predecessor 

pursuant to proposed Rule 15–01(a) of 

Regulation S–X.611 This commenter 

indicated that co-registration would 

result in inconsistencies with IPOs 

where there are multiple target 

companies. 

As the commenter notes, in the case 

of multiple companies being acquired 

by the SPAC, if each of those companies 

meets the definition of ‘‘target 

company’’ being adopted,612 then each 

would be required to be a co-registrant 

on the de-SPAC registration statement. 

Under the final rules all target 

companies are issuers, as defined by 

section 2(a)(7) of the Sarbanes-Oxley 

Act of 2002 (‘‘Sarbanes-Oxley Act’’),613

and therefore, under current 17 CFR 

210.1–02(d) (‘‘Rule 1–02(d)’’ of 

Regulation S–X), any audit of the 

target’s financial statements would be 

required to be performed in accordance 

with PCAOB standards by a PCAOBregistered audit firm. However, also as 

noted by the commenter, proposed Rule 

15–01(a) provided that only target 

companies that would constitute the 

predecessor for financial reporting 

purposes would be required to comply 

with Rule 15–01 of Regulation S–X in 

connection with a de-SPAC transaction 

and provide financial statements 

audited in accordance with PCAOB 

standards.614 We continue to believe 

this is the appropriate outcome given 

the hybrid nature of de-SPAC 

transactions, as it aligns the de-SPAC 

transaction financial reporting to that of 

an IPO that includes multiple 

companies.615 All target companies 

provide information that is included in 

the registration statement and therefore 

should face Securities Act liability as 

co-registrants and issuers on the deSPAC registration statement.616

In order to address the tension 

identified by the commenter, and to 

clarify that all target companies are coregistrants and issuers but only target 

companies that are predecessors 617

must provide financial statements 

audited in accordance with PCAOB 

standards, we are modifying the 

proposed revisions to the definition of 

‘‘audit (or examination)’’ in Rule 1– 

02(d) to clarify that Rule 15–01(a) 

governs the audit requirements for all 

issuers (both predecessors and nonpredecessors) that combine with a shell 

company.618 We have also added 

language to Rule 15–01(a) to clarify that 

for non-predecessor issuers—in the 

context of a registration statement or 

proxy statement filed for the 

combination with an issuer that is a 

shell company 619 (e.g., in a de-SPAC 

transaction, non-predecessor coregistrant target companies)—the term 

‘‘audit (or examination)’’ is defined as 

‘‘an examination of the financial 

statements by an independent 

accountant in accordance with either 

the standards of the PCAOB or U.S. 

generally accepted auditing standards 

(‘‘U.S. GAAS’’) as specified or permitted 

in the regulations and forms applicable 

to those entities for the purpose of 

expressing an opinion thereon.’’ 620 In 

addition to adopting the proposed 

changes to Item 17 of Form S–4 or Form 

F–4 that direct companies to Article 15 

for the financial statements required in 

a de-SPAC transaction, we have revised 

the proposed Instruction L to Form S– 

4 and Instruction I to Form F–4 to 

clarify that for purposes of the 

disclosure requirements in those forms, 

the target company is the ‘‘company 

being acquired.’’ 

As stated in the proposal,621 the 

proposed financial reporting 

requirements were intended to more 

closely align the de-SPAC transaction 

disclosures to the disclosures made 

where a shell company acquires 

multiple businesses in a ‘‘put together’’ 

transaction before an IPO. This 

approach recognizes the hybrid nature 

of the de-SPAC transaction and the fact 

that the historical financial statements 

of the predecessor(s), and in some 

circumstances the SPAC, would be the 

historical financial information that 

would be presented in the combined 

company’s Exchange Act reporting. The 

Commission proposed Article 15 of 

Regulation S–X instead of proposing a 

requirement that all target companies 

provide audited financial statements 

under the registrant disclosure 

requirements of Item 14 of Form S–4 

and Form F–4, which apply to the 

information required to be provided by 

registrants other than Form S–3 and 

Form F–3 eligible registrants, 

respectively. 

To illustrate application of the final 

rules, assume a SPAC files a Form S–4 

to register the issuance of shares to 

acquire two unrelated businesses and 

only one of the businesses will be the 

predecessor for financial reporting 

purposes. Under the final rules, each 

‘‘issuer’’ (the SPAC and the two 

unrelated businesses) must sign the 

registration statement.622 The pro forma 

financial statements included in the 

Form S–4 depict a reverse 

recapitalization with the predecessor 

and an acquisition of the other business. 

Subsequent Exchange Act reports, such 

as the next Form 10–K, will include the 

historical financial statements of the 

predecessor. In this scenario, the Form 

S–4 would require two to three years of 

historical financial statements for the 

business that will be the predecessor 

audited in accordance with PCAOB 

standards. By contrast, the nonpredecessor business will be a company 

being acquired under Item 17 of Form 

S–4 and its financial statements may be 

audited in accordance with either 

PCAOB standards or U.S. GAAS 

standards, despite it being an issuer. 

We recognize that predecessor 

determinations in de-SPAC transactions 

may include scenarios that differ from 

the above illustrative example. For 

example, a transaction with two target 

companies could instead result in a 

determination that there are two 

predecessors. In that example, the 

financial statements of both target 


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623 Determination of the predecessor(s) in a deSPAC transaction, as in any other transaction, is a 

facts and circumstances driven determination made 

by the registrant(s). 

624See 15 U.S.C. 7212(a). 

625See PCAOB Rule 3211, Auditor Reporting of 

Certain Audit Participants, available at https://

pcaobus.org/about/rules-rulemaking/rules/section_

3/section-3-auditing-and-related-professionalpractice-standards-rule-3211-amended. Note 2 to 

PCAOB Rule 3211 states that the rule requires the 

filing of a report on Form AP regarding an audit 

report only the first time the audit report is 

included in a document filed with the Commission. 

Subsequent inclusion of precisely the same audit 

report in other documents filed with the 

Commission does not give rise to a requirement to 

file another Form AP. See id. 

626Letters from Crowe, Grant Thornton. 

627Letter from Bullet Point Network. 

628See infra section III.E discussion of PSLRA 

Safe Harbor. 

629See infra discussion in section III.E proximate 

to notes 836 and 858. 

630See, e.g., 17 CFR 229.10(f) (‘‘Item 10(f)’’ of 

Regulation S–K); 17 CFR 210.8–01 (‘‘Rule 8–01’’ of 

Regulation S–X), 17 CFR 210.8–02 (‘‘Rule 8–02’’ of 

Regulation S–X), 17 CFR 210.8–03, 17 CFR 210.8– 

07, and 17 CFR 210.8–08 (‘‘Rule 8–08’’ of 

Regulation S–X); Item 1A of Form 10 and Form 10– 

K; Item 3.02 of Form 8–K. An FPI is not eligible to 

use the scaled disclosure requirements for SRCs 

unless it uses the forms and rules designated for 

domestic issuers and provides financial statements 

prepared in accordance with U.S. GAAP. 

Instruction 2 to Item 10(f) of Regulation S–K; 

Instruction 2 to definition of ‘‘smaller reporting 

company’’ in Securities Act Rule 405 and Exchange 

Act Rule 12b–2. 

631 17 CFR 229.305(e) (Item 305(e) of Regulation 

S–K). 

632The definition of ‘‘smaller reporting company’’ 

is set forth in Securities Act Rule 405, Exchange Act 

Rule 12b–2, and Item 10(f) of Regulation S–K. 

633See 17 CFR 229.10(f)(2)(i) and (f)(2)(ii) (‘‘Item 

10(f)(2)(ii)’’ of Regulation S–K). In re-determining 

SRC status annually, a registrant is required to 

measure its public float as of the last business day 

of its most recently completed second fiscal quarter. 

634See 17 CFR 229.10(f)(2)(iii); Securities Act 

Rule 405; Exchange Act Rule 12b–2. 

635A Form 8–K with Form 10 information is filed 

pursuant to Items 2.01(f), 5.01(a)(8), and/or 9.01(c) 

of the form. 

636Proposed Item 10(f)(2)(iv) of Regulation S–K; 

proposed paragraph (3)(iv) in the definition of 

‘‘smaller reporting company’’ in Securities Act Rule 

405; proposed paragraph (3)(iv) in the definition of 

‘‘smaller reporting company’’ in Exchange Act Rule 

12b–2. 

637Proposed Item 10(f)(2)(iv)(A) of Regulation S– 

K; proposed paragraph (3)(iv)(A) in the definition 

of ‘‘smaller reporting company’’ in Securities Act 

Rule 405; proposed paragraph (3)(iv)(A) in the 

definition of ‘‘smaller reporting company’’ in 

Exchange Act Rule 12b–2. 

638Proposed Item 10(f)(2)(iv)(B) of Regulation S– 

K; proposed paragraph (3)(iv)(B) in the definition of 

‘‘smaller reporting company’’ in Securities Act Rule 

405; proposed paragraph (3)(iv)(B) in the definition 

of ‘‘smaller reporting company’’ in Exchange Act 

Rule 12b–2. 

companies must be audited in 

accordance with PCAOB standards.623

Section 102 of the Sarbanes-Oxley Act 

makes it ‘‘unlawful for any person that 

is not a registered public accounting 

firm to prepare or issue . . . any audit 

report with respect to any issuer.’’ 624

The final rules do not change this 

requirement for issuers to engage 

PCAOB-registered accounting firms, and 

therefore all issuers, including nonpredecessor target companies, will need 

to engage a PCAOB-registered audit firm 

when the de-SPAC transaction requires 

audited historical financial statements 

(but, as discussed above, the PCAOBregistered firm could audit the financial 

statements of non-predecessor target 

companies either under the standards of 

the PCAOB or U.S. GAAS). We 

acknowledge commenter concerns that, 

because PCAOB Rule 3211 requires a 

registered audit firm to file a Form AP 

with the PCAOB when its audit report 

for an issuer is included in a filing with 

the Commission,625 multiple Forms AP 

may be required for a single transaction 

where the related registration statement 

requires audit reports for multiple 

issuers and when more than one 

registered audit firm was involved.626

To the extent that the PCAOB deems it 

necessary to provide guidance or take 

other action in response to the final 

rules, the Commission and its staff will 

work with the PCAOB, as appropriate. 

Regarding a commenter’s suggestion 

that the Commission create a new S–1- 

like form for de-SPAC transactions, 

which should not include management 

projections,627 we do not believe that is 

necessary. The amendments to existing 

registration statement forms that we are 

adopting in this release accomplish our 

enhanced disclosure goals, including 

addressing similarities between IPOs 

and de-SPAC transactions, and 

appropriately take into account the 

business combination context of deSPAC transactions. With respect to 

projections in registration statements, as 

we discuss in detail below, our final 

definitions of ‘‘blank check company’’ 

should address the commenter’s 

concerns regarding the use of 

projections in de-SPAC transaction 

registration statements.628 In addition, 

as noted below, there is no prohibition 

under current rules on including 

projections in registration statements on 

Form S–1 or F–1.629

D. Re-Determination of Smaller 

Reporting Company (SRC) Status 

1. Proposed Rules 

SRCs constitute a category of 

registrants that are eligible for scaled 

disclosure requirements in Regulation 

S–K and Regulation S–X and in various 

forms under the Securities Act and the 

Exchange Act.630 For example, SRCs are 

not required to provide quantitative and 

qualitative information about market 

risk pursuant to 17 CFR 229.305 (Item 

305 of Regulation S–K).631 In general, an 

SRC is a company that is not an 

investment company, an asset-backed 

issuer or a majority-owned subsidiary of 

a parent that is not an SRC and (1) had 

a public float of less than $250 million, 

or (2) had annual revenues of less than 

$100 million during the most recently 

completed fiscal year for which audited 

financial statements are available and 

either had no public float or a public 

float of less than $700 million.632 SRC 

status is determined at the time of filing 

an initial registration statement under 

the Securities Act or Exchange Act for 

shares of common equity and is redetermined on an annual basis.633 Once 

a company determines that it is not an 

SRC, it will retain this non-SRC status 

unless it determines, when making its 

annual determination, that its public 

float was less than $200 million or, 

alternatively, that its public float and 

annual revenues fell under certain 

thresholds.634

The Commission proposed to require 

a re-determination of SRC status 

following the consummation of a deSPAC transaction through proposed 

amendments to the definition of 

‘‘smaller reporting company’’ in each of 

Securities Act Rule 405, Exchange Act 

Rule 12b–2, and Item 10(f) of Regulation 

S–K. Specifically, the Commission 

proposed that the post-de-SPAC 

transaction registrant must re-determine 

its SRC status prior to the time it makes 

its first Commission filing, other than 

the Form 8–K filed with Form 10 

information,635 and reflect this redetermination in the issuer’s next 

periodic report.636

The Commission also proposed, in 

connection with this re-determination: 

(a) that public float be measured as of 

a date within four business days after 

the consummation of the de-SPAC 

transaction; 637 and (b) that annual 

revenues be measured using the annual 

revenues of the target company as of the 

most recently completed fiscal year 

reported in the Form 8–K filed with 

Form 10 information.638 The 

Commission did not propose any 

changes to the float and revenue 

thresholds in the current definitions of 

‘‘smaller reporting company.’’ 

2. Comments 

Broadly categorized, commenters on 

the SRC re-determination proposal 

focused on four areas: (1) general 

comments, including those with general 

expressions of support for or opposition 

to the proposals, (2) timing and redetermination of public float, (3) 

ramifications of loss of SRC status, and 

(4) requests for guidance. In addition, in 

response to a request for comment from 


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639Letters from KPMG, PwC. 640Letter from KPMG. 641Letter from PwC. 642Letters from Ernst & Young, Vinson & Elkins. 643Letter from Ernst & Young. 644Letter from Vinson & Elkins. 645Letter from ABA. 646Letter from Vinson & Elkins. 

647Letter from Vinson & Elkins. 

648Letter from Vinson & Elkins. 

649Letters from Ernst & Young (‘‘For example, the 

proposed redetermination timing could result in a 

post-business combination company losing its SRC 

status and having to provide an additional year of 

audited financial statements (i.e., for the year 

preceding the earliest period included in the Form 

S–4/proxy) in a follow-on registration 

statement. . . .’’), Grant Thornton (‘‘the proposed 

rule would preclude the post-combination entity to 

use scaled disclosure alternatives in registration 

statements filed after it files the first periodic report 

on Form 10–Q but before it files its first annual 

report on Form 10–K.’’), Vinson & Elkins (‘‘If the 

post-closing public float exceeds $700 million, the 

post-closing company would be required to include 

three years of audited financial statements in its 

annual report and any registration statement, which 

may be more than what was included in the Form 

S–4 or proxy statement filed in connection with the 

de-SPAC transaction.’’). 

650Letter from Ernst & Young. 

651Letter from Ernst & Young. 

652Letter from Grant Thornton (‘‘We note that 

while the provision in Section 7(a)(2)(A) of the 

Securities Act for providing only two years of 

audited financial statements is limited to initial 

registration statements, the SEC staff does not object 

if emerging growth companies (EGCs) do not 

present, in other registration statements, audited 

financial statements for any periods prior to the 

earliest audited period presented in its initial 

registration statement,’’ citing Generally Applicable 

Questions on Title I of the JOBS Act, Question 12). 

653Letter from Grant Thornton. 

654Letter from BDO USA, LLP (June 13, 2022) 

(‘‘BDO’’). See CDI 215.02 Division of Corporation 

Finance, Compliance and Disclosure 

Interpretations: Regulation S–K, Section 215.02, 

available at https://www.sec.gov/divisions/corpfin/ 

guidance/regs-kinterp.htm. 

655The Commission views this comment from 

BDO, which discussed considering the amended 

‘‘super 8–K’’ as the first annual report following the 

de-SPAC transaction, as a different comment than 

the one from Grant Thornton, supra note 653, 

which discussed considering the amended ‘‘super 

8–K’’ as the first periodic report following the deSPAC transaction. 

the Commission in the Proposing 

Release, several commenters addressed 

issues of re-determination of the 

following: accelerated filer and large 

accelerated filer status, EGC status, and 

FPI status. 

A few commenters generally 

supported the proposed redetermination of SRC status following a 

de-SPAC transaction.639 One commenter 

noted that such re-determination would 

‘‘generally align that determination with 

that of an IPO.’’ 640 Another commenter 

noted that such re-determination was a 

signal that ‘‘the Commission appears to 

be forestalling a situation in which a 

company that would not have been 

eligible to use the scaled disclosures 

and other accommodations available to 

a smaller reporting company if it had 

become public through a traditional 

initial public offering would, 

nonetheless, be eligible to take 

advantage of those accommodations 

based on the smaller reporting company 

status of the pre-merger SPAC.’’ 641

Others opposed, or raised concerns 

regarding, the proposed redetermination of SRC status following a 

de-SPAC transaction.642 One commenter 

stated that such a re-determination 

immediately after the de-SPAC 

transaction is inconsistent with the 

Commission’s objective of aligning the 

requirements with those of IPOs.643

Another commenter indicated that the 

change could be problematic for certain 

transactions, such as ‘‘where (1) the 

SPAC is an SRC and the legal acquirer, 

(2) the target company was an SRC prior 

to the closing of the de-SPAC 

transaction and filed two years of 

audited financial statements and (3) the 

post-closing public float exceeds $700 

million.’’ 644

One commenter stated they did not 

object to re-determination based on 

public float within a short time 

following closing of the de-SPAC 

transaction.645

Another commenter recommended an 

alternative approach to re-determining 

SRC status similar to the determination 

of SRC status used by an IPO company 

filing its initial registration statement 

under Item 10(f)(2)(ii) of Regulation S– 

K but based on ‘‘the revenues and 

public float of the target company that 

will be the predecessor for financial 

reporting purposes.’’ 646 This 

commenter proposed the public float 

should be calculated ‘‘as the agreed 

value of the equity consideration 

payable to the owners of the target 

company, plus the total outstanding 

shares of the SPAC (valued at $10 per 

share, or whatever the agreed per-share 

valuation of the equity consideration is), 

plus any common equity to be issued to 

finance the de-SPAC transaction.’’ 647

The commenter further stated, ‘‘The 

surviving company should have the 

option to redetermine its status based on 

the number of shares outstanding after 

the closing of the de-SPAC transaction 

(i.e., reflecting redemptions and any 

equity not issued in the financing 

transaction or as equity consideration), 

consistent with the last sentence of S– 

K Item 10(f)(2)(ii)(C).’’ 648

Several commenters addressed the 

ramifications of the loss of SRC status. 

Commenters observed that one such 

ramification is that a registration 

statement filed after the point at which 

non-SRC status must be reflected could 

require incremental disclosure for a 

non-SRC, such as an additional year of 

financial statements beyond what was 

provided in the Form S–4 in connection 

with a de-SPAC transaction.649 One of 

these commenters suggested, ‘‘An 

alternative approach would be for a 

company, upon completion of a deSPAC transaction, to transition into or 

out of SRC status in conjunction with 

the annual report to be filed for the year 

of the transaction based upon the public 

float as of the later of four business days 

after the merger transactions or the end 

of the second fiscal quarter.’’ 650 The 

commenter also added, ‘‘Such a revision 

could still result in an SRC merging 

with a public shell exiting SRC status 

more quickly than under current rules 

while mitigating the burden and 

inconsistency of providing incremental 

information not previously required for 

companies accessing the public market 

shortly after the de-SPAC 

transaction.’’ 651

Another commenter recommended 

that the Commission consider whether 

‘‘accommodations may be warranted to 

the post-combination entity regarding 

presentation of audited financial 

statements and related information 

(such as MD&A or separate financial 

statements of significant equity method 

investees) for periods prior to those 

presented in the Form S–4 or F–4 for the 

private operating company.’’ 652

One commenter recommended that 

the Commission clarify whether an 

amendment to a Form 8–K with Form 

10 information (often referred to as a 

‘‘super 8–K’’) to include pre-acquisition 

annual financial statements of the 

private operating company ‘‘will be 

deemed to be the first periodic report for 

the purposes of effectiveness of the SRC 

status in connection with a de-SPAC 

transaction’’ in circumstances where a 

de-SPAC transaction is consummated 

shortly after the fiscal year-end of the 

private operating company but before its 

financial statements for that annual 

period are required in a Form 10 

registration statement.653

Another commenter recommended, 

for purposes of determining whether the 

post-de-SPAC registrant may exclude 

management’s assessment of internal 

control over financial reporting in the 

Form 10–K covering the fiscal year in 

which the transaction was 

consummated, that the Commission 

codify the staff’s view 654 that a SPAC’s 

need to file an amended super 8–K to 

update the target company’s financial 

statements for its most recent year-end 

is the equivalent to the first annual 

report.655

Another commenter stated that the 

Commission ‘‘should revisit and revise 


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656Letter from Vinson & Elkins. 

657Proposing Release, supra note 7, at 29481 

(request for comment number 74) (‘‘Should we 

similarly require a re-determination of emerging 

growth company status, accelerated filer status, 

large accelerated filer status and/or foreign private 

issuer status upon the completion of a de-SPAC 

transaction?’’). 

658See letters from BDO (‘‘If a de-SPAC 

transaction is considered the equivalent of an IPO, 

it is not clear why the post-merger filer status 

would be treated differently for a company that 

chooses one going-public transaction over the 

other.’’), Ernst & Young (‘‘We recommend aligning 

the determination of EGC status, filer status and 

foreign private issuer status for the post-business 

combination company with the requirements that 

apply to a traditional IPO. We believe that, if the 

post-business combination company is not eligible 

to file a Form S–3 shelf registration statement, it 

would be consistent to disregard the SPAC’s 

reporting history for purposes of determining filer 

status (i.e., a post-business combination company 

would generally be a non-accelerated filer). Such 

entities should also be permitted to ‘reset’ the EGC 

clock of five years for considering their status as an 

EGC. We have observed an evolution in the 

structuring of SPAC transactions (e.g., use of a 

double-dummy structure) that can achieve certain 

financial reporting results (e.g., filer status and 

foreign private issuer status). Therefore, we support 

aligning the redetermination requirements so that 

the transaction structure would not result in 

financial reporting differences.’’), Fenwick & West 

LLP (June 7, 2022) (‘‘Fenwick’’) (‘‘The de-SPAC 

Issuer should benefit from the transition, grace 

periods and other accommodations following the 

Closing Date that IPO Issuers benefit from following 

the Effective Date (for example, the de-SPAC Issuer 

should benefit from the same exemption from 

Sarbanes-Oxley Act Section 404(a) compliance 

under Item 308 of Regulation S–K [17 CFR 229.308] 

in respect of its first Annual Report on Form 10– 

K filed after the Closing Date.’’), Vinson & Elkins. 

659Letters from KPMG (‘‘we recommend the 

Commission consider clarifying the determination 

of the combined company’s filer status upon 

consummation of the de-SPAC transaction.’’), PwC 

(‘‘We believe that the underlying policy objectives 

associated with each type of filer status should be 

evaluated to determine whether the goals would be 

furthered by re-determination. . . .For instance, in 

proposing that the post-business combination 

company re-determine its smaller reporting 

company status shortly after consummating the deSPAC transaction. . . .We support the proposal to 

require timely re-determination in this 

circumstance. We believe a similar analysis should 

be undertaken with respect to other statuses.’’). 

660Letters from Ernst & Young (‘‘We recommend 

aligning the determination of EGC status, filer status 

and foreign private issuer status for the postbusiness combination company with the 

requirements that apply to a traditional IPO. . . . 

Such entities should also be permitted to ‘reset’ the 

EGC clock of five years for considering their status 

as an EGC.’’), KPMG (recommending the 

Commission consider clarifying the determination 

of a combined company’s filer status, including 

EGC status, upon consummation of a de-SPAC 

transaction), PwC (supporting SRC re-determination 

proposal and stating that ‘‘We support the proposal 

to require timely re-determination in this 

circumstance. . . . We believe a similar analysis 

should be undertaken with respect to other 

statuses.’’), Vinson & Elkins. 

661Letters from Ernst & Young, KPMG, Vinson & 

Elkins. 

662Letter from Ernst & Young. 

663Letter from Vinson & Elkins. 

664See letter from Freshfields. 

665Based on data from SPACInsider (using fields 

‘‘IPO Date’’ (2021) and ‘‘SPAC Status’’ (Searching)), 

the Commission staff observed that out of 163 

SPACs that had an IPO in 2021 and had not found 

a target company by the end of 2021, only two 

SPACs had outstanding shares of more than 

70,000,000. Assuming a per share price of $10 at 

the time of the IPO and no changes in outstanding 

shares since the time of the IPO, the Commission 

staff views this data as indicating that the 161 other 

SPACs among that cohort did not have a float at the 

time of IPO of more than $700 million, the 

threshold under paragraph (2)(ii) of the definition 

of ‘‘smaller reporting company’’ in Rule 12b–2. (In 

an actual public float calculation for purposes of the 

‘‘smaller reporting company’’ definition, affiliate 

shares would be subtracted from total outstanding 

shares used in this example, resulting in a lower 

value than produced in this example, because the 

applicable value would be multiplied by fewer 

shares.) With respect to the $100 million revenue 

test under paragraph (2) of the definition of 

‘‘smaller reporting company’’ in Rule 12b–2, 

income statement items such as ‘‘Interest earned on 

marketable securities held in trust account’’ and 

‘‘Unrealized gain on marketable securities held in 

trust account’’ are generally not revenue for SPACs 

and SPACs typically do not record revenue. 

666See Item 10(f)(2) of Regulation S–K; Securities 

Act Rule 405; Exchange Act Rule 12b–2. 

its guidance in 5230.1 of the Division of 

Corporation Finance’s Financial 

Reporting Manual, which could result 

in more information being required in a 

Super 8–K . . . than would be required 

in a Form S–1 for the target 

company.’’ 656

In response to a request for comment 

in the Commission in the Proposing 

Release,657 several commenters 

addressed issues of re-determination of 

filer status, EGC status, and FPI status. 

Some commenters recommended that 

the Commission should put post-deSPAC transaction registrants on the 

same footing with respect to filer status 

as a company that has recently 

undertaken an IPO, because, otherwise, 

where a post-de-SPAC transaction 

registrant inherits the SPAC’s reporting 

history, this could impact the timing of 

when the post-de-SPAC transaction 

registrant becomes subject to accelerated 

filing obligations.658 Other commenters 

suggested the Commission should 

further analyze or consider the issue.659

A few commenters recommended that 

the EGC status of the combined 

company following a de-SPAC 

transaction should be re-determined 

upon consummation of the de-SPAC 

transaction.660

Several commenters, including some 

who made recommendations regarding 

EGC status, recommended that the 

Commission provide for redetermination of FPI status in 

connection with the de-SPAC 

transaction.661

One commenter noted that they have 

‘‘observed an evolution in the 

structuring of SPAC transactions (e.g., 

use of a double-dummy structure) that 

can achieve certain financial reporting 

results (e.g., filer status and foreign 

private issuer status)’’ and expressed 

support for ‘‘aligning the 

redetermination requirements so that 

the transaction structure would not 

result in financial reporting 

differences.’’ 662

Another commenter stated: ‘‘Allowing 

redetermination of foreign private issuer 

status would result in disclosure 

requirements and filer status 

determinations that are consistent with 

what would apply if the target company 

went public via an IPO, without regard 

to the de-SPAC transaction structure. A 

de-SPAC transaction may be structured 

so that an entity other than the SPAC is 

the acquiror for tax reasons, due to the 

domicile of the surviving company, or 

due to required consents and approvals 

applicable to the target company. 

Aligning the disclosure requirements so 

that, for example, a target company that 

would have qualified as a foreign 

private issuer could be acquired by a 

domestic SPAC and then the surviving 

company could be immediately eligible 

for foreign private issuer status would 

allow de-SPAC transactions to be 

structured in the best interests of 

shareholders.’’ 663 Similar views were 

expressed by another commenter.664

3. Final Rules and Guidance 

After considering the comments 

received, we are adopting amendments 

regarding SRC re-determination as 

proposed with certain modifications 

discussed below. We are not adopting 

requirements, as suggested by several 

commenters, to re-determine filer status, 

EGC status, or FPI status upon the 

completion of a de-SPAC transaction. 

We are providing guidance, however, 

concerning FPI status, as discussed 

further below. 

Currently, most SPACs qualify as 

SRCs,665 and Commission rules permit 

a post-business combination company 

after a de-SPAC transaction 666 to retain 

this status until its next annual 

determination date in cases where the 

legal entity that was the SPAC is the 

legal entity that is the combined 

company in connection with the deSPAC transaction. Under current rules, 

the absence of a re-determination of SRC 

status upon the completion of these deSPAC transactions has permitted certain 

post-business combination companies to 

avail themselves of scaled disclosure 

and other accommodations when they 

otherwise would not have qualified as a 

SRC had they become public companies 

through a traditional IPO. The final 

rules will help level the playing field 

with a traditional IPO in this respect 

and reduce information asymmetries 

that result when a target company 


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667 In the Proposing Release, the Commission 

said, if a SPAC qualified as an SRC before a deSPAC transaction and was the legal acquirer in the 

de-SPAC transaction, the post-business 

combination company would continue to be able to 

rely on the scaled disclosure accommodations for 

SRCs when filing a registration statement between 

the re-determination date and the post-business 

combination company’s first periodic report. 

Proposing Release, supra note 7, at 29480. For the 

avoidance of any doubt on the part of registrants 

related to the references to ‘‘legal acquirer’’ in the 

Proposing Release, the Commission is clarifying 

that the final rules we are adopting—that provide 

re-determined SRC status be reflected in filings 45 

days after consummation of the de-SPAC 

transaction—are not strictly limited to that 

particular transaction structure for the de-SPAC 

transaction and apply to any post-de-SPAC 

transaction combined company registrant that is the 

same legal entity as the legal entity that was a SPAC 

(prior to the de-SPAC transaction) regardless of the 

structure of the de-SPAC transaction. 

668Letter from Vinson & Elkins. See supra notes 

646, 647, and 648 and accompanying text. 

669See id. 

670Letters from Ernst & Young, Grant Thornton, 

Vinson & Elkins. See supra note 649. 

671See letters from Vinson & Elkins (indicating 

that the issue is particularly acute ‘‘if the postclosing company’s first annual report is due shortly 

after closing or the company is required to file a 

registration statement after the company’s first 

periodic report,’’ and advocating for a 

redetermination based on Item 10(f)(2)(ii) (as 

discussed above), but stating that ‘‘longer periods or 

accommodations could ameliorate the issues with 

the proposed amendments to S–K Item 10(f)’’), 

Ernst & Young (indicating that ‘‘companies [could 

be] required to provide additional information in a 

follow-on registration statement as soon as four 

days after the de-SPAC transaction’’). 

672Section 230.401(a) of title 17 of the CFR states 

that a registration statement shall conform to the 

applicable rules and forms in effect on the initial 

filing date of such registration statement, and the 

rule would apply to SRC status. Accordingly, if the 

registrant is an SRC at the initial public filing date 

of the resale registration statement, then it may 

comply with rules for an SRC in subsequent 

amendments of that registration statement. 

673Letter from Grant Thornton. See supra note 

652 and accompanying text. 

chooses to go public through a de-SPAC 

transaction.667

As adopted, a post-de-SPAC 

transaction registrant must re-determine 

its SRC status prior to the time it makes 

its first Commission filing, other than 

the Form 8–K filed with Form 10 

information, with public float measured 

as of a date within four business days 

after the consummation of the de-SPAC 

transaction and annual revenues 

measured using the annual revenues of 

the target company as of the most 

recently completed fiscal year reported 

in such Form 8–K. 

We disagree with the commenter who 

recommended an alternative approach 

similar to the SRC determination for IPO 

companies under Item 10(f)(2)(ii) of 

Regulation S–K but based on the 

revenues and public float of the target 

company that will be the predecessor 

for financial reporting purposes.668 In 

an IPO, with respect to public float, Item 

10(f)(2)(ii) looks to: the estimated 

offering price per share at the time of 

filing of the registration statement; the 

number of shares of common stock 

outstanding that are held by nonaffiliates before the offering; and the 

number of shares of common stock to be 

sold at the estimated offering price. Item 

10(f)(2) of Regulation S–K also gives the 

registrant the option to recalculate its 

public float at the time the company 

completes the IPO. As described above, 

under the commenter’s suggested 

approach, the SRC determination would 

be made prior to the filing of the deSPAC registration statement or proxy 

statement using an ‘‘agreed value’’ 

method.669 Although Item 10(f)(2)(ii) 

does allow for the use of estimations in 

the IPO context, we believe that the 

approach we are adopting, which 

focuses on a determination of SRC 

status based on actual post-transaction 

public float, is a more effective measure 

of the registrant’s size in the context of 

a de-SPAC transaction. While in many 

cases the commenter’s suggested 

recalculation after closing to capture the 

actual number of shares outstanding 

would result in the same determination 

of SRC status post-transaction, the 

adopted approach helps to ensure the 

appropriate level of disclosures to 

investors both before and after the 

closing of the transaction. 

Pursuant to the final rules, the fourbusiness-day window to calculate the 

public float threshold following a deSPAC transaction would begin the first 

business day after the day of closing of 

the de-SPAC transaction and end four 

business days later (on the due date for 

the Form 8–K with Form 10 information 

that the post-de-SPAC transaction 

combined company registrant is 

required to file after the completion of 

a de-SPAC transaction). Each of the 

number of shares outstanding that are 

held by non-affiliates and the price per 

share would be determined on the same 

day within the four-business-day 

window. This window will provide 

some flexibility for issuers to measure 

public float compared to the annual redetermination of SRC status (which is 

determined based on a single business 

day, the last business day of the most 

recently completed second fiscal 

quarter). This four-business-day 

window will allow for a more accurate 

reflection of a post-business 

combination company’s public float in 

view of the limited trading history of the 

common equity securities of the postbusiness combination company 

following a de-SPAC transaction. 

Under the proposed rule, a post-deSPAC transaction registrant would be 

required to reflect its re-determined SRC 

status in its next periodic report after 

the filing of the Form 8–K with Form 10 

information (often referred to as a 

‘‘super 8–K’’). We are aware that, if a 

registrant loses SRC status upon redetermination, there may be certain 

ramifications. Several commenters 

observed that one such ramification is 

that a registration statement filed after 

the point at which non-SRC status must 

be reflected could require incremental 

disclosure for a non-SRC, such as an 

additional year of financial statements 

beyond what was provided in the Form 

S–4 in connection with a de-SPAC 

transaction.670 Inclusion of such 

incremental disclosure as a result of 

losing SRC status might present 

challenges for some registrants in 

situations where a periodic report 

becomes due shortly after the closing of 

the de-SPAC transaction.671

In response to these comments, in a 

change from the proposal, the final rules 

provide that a registrant does not need 

to reflect non-SRC status in any filing 

that is due in the 45-day period 

following the consummation of the deSPAC transaction; the registrant would 

begin to reflect non-SRC status in filings 

made no later than after the end of this 

45-day period. In contrast, under the 

proposal, a registrant would have 

needed to reflect non-SRC status in its 

next periodic report that could be due 

as soon as one day after the filing of the 

‘‘super 8–K,’’ which is due a maximum 

of four days after the consummation of 

the de-SPAC transaction. We believe the 

final rule represents a reasonable 

compromise between the proposed 

rule’s transition period (until the next 

periodic report, which could be as soon 

as one day after the de-SPAC 

transaction) and a commenter’s 

recommended transition period (until 

filing of the next Form 10–K, which 

could be as long as nearly 15 months). 

Another benefit of affording this 

additional time to registrants that lose 

SRC status upon re-determination is 

that, where the registrant intends to file 

a resale registration statement shortly 

after the de-SPAC transaction, the 

registrant will retain its SRC status for 

purposes of any such resale registration 

statement filed during this additional 

time period.672

We are not adopting the commenter’s 

recommendation to exclude, in post-deSPAC transaction filings, any financial 

statements that predate the financial 

statements presented in the Form S– 

4.673 In our view a registrant that is redetermined to be a non-SRC should not 

be able to avail itself of the scaled-down 

requirements applicable to SRCs. 


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674We understand that most post-de-SPAC 

registrants would be EGCs and would not be 

required to file the additional year of financial 

statements in reliance on the EGC accommodations. 

675Letter from Grant Thornton. See supra note 

653. 

676Letter from BDO that references Division of 

Corporation Finance, Compliance and Disclosure 

Interpretations: Regulation S–K, Section 215.02, 

which discusses the application of management’s 

assessment of internal control over financial 

reporting (ICFR) in Item 308(a) of Regulation S–K 

when there has been a reverse acquisition between 

an issuer and a private operating company. See 

further discussion of the application of ICFR at infra 

note 685. 

677Letter from Vinson & Elkins. 

678The four existing conditions for qualifying as 

an accelerated filer are that an issuer: (i) had an 

aggregate worldwide public float of $75 million or 

more, but less than $700 million, as of the last 

business day of the issuer’s most recently 

completed second fiscal quarter; (ii) has been 

subject to the requirements of 15 U.S.C. 78m 

(Exchange Act section 13(a)) or 15 U.S.C. 78o(d) 

(Exchange Act section 15(d)) for a period of at least 

twelve calendar months; (iii) has filed at least one 

annual report pursuant to those sections; and (iv) 

the issuer is not eligible to use the requirements for 

SRCs under the revenue test in paragraph (2) or 

(3)(iii)(B) of the ‘‘smaller reporting company’’ 

definition in Rule 12b–2, as applicable. For a large 

accelerated filer, conditions (ii) through (iv) are the 

same, but condition (i) is that an issuer had an 

aggregate worldwide public float of $700 million or 

more, as of the last business day of the issuer’s most 

recently completed second fiscal quarter. See 

paragraphs (1) and (2) in the definition of 

‘‘accelerated filer and large accelerated filer’’ in 

Rule 12b–2. 

679See paragraphs (1), (2), and (3) in the 

definition of ‘‘accelerated filer and large accelerated 

filer’’ in Rule 12b–2. 

680See paragraph (1)(ii) in the definition of 

‘‘accelerated filer and large accelerated filer’’ in 

Rule 12b–2 (‘‘The issuer has been subject to the 

requirements of section 13(a) or 15(d) of the Act (15 

U.S.C. 78m or 78o(d)) for a period of at least twelve 

calendar months;’’) and paragraph (2) in the 

definition. 

681 If a new holding company is created to effect 

the de-SPAC transaction and the new holding 

company is the post-de-SPAC transaction combined 

company that will continue to be an Exchange Act 

reporting company, the same logic applies because 

the holding company would be the Exchange Act 

reporting successor to the SPAC. See definition of 

‘‘Succession’’ in Exchange Act Rule 12b–2, 17 CFR 

240.12g–3. 

682See Form 10–Q, General Instruction A.1; Form 

10–K, General Instruction A(2). 

683 17 CFR 229.308(b). A registrant’s status as an 

accelerated filer or a large accelerated filer triggers 

the requirement contained in section 404(b) of the 

Sarbanes-Oxley Act to have the auditor provide an 

attestation report on internal control over financial 

reporting. 

684See letters from BDO, Ernst & Young, Fenwick, 

Vinson & Elkins. 

Furthermore, we believe the adopted 

approach will provide registrants with 

sufficient time to prepare the additional 

incremental information that may be 

required in a situation where the 

registrant has lost its SRC status. We 

further note that a registrant that loses 

SRC eligibility may continue to be an 

EGC, which includes certain scaled 

reporting accommodations. In light of 

new Rule 15–01(b), which requires a 

business combining with a shell 

company to comply with Regulation S– 

X as if the transaction were an IPO of 

common equity securities, we believe 

that if the registrant retained its EGC 

status after the transaction, then the 

registrant would not be required to 

present audited financial statements for 

any period prior to the earliest audited 

period presented in connection with the 

de-SPAC transaction. We evaluated 

whether a minimum transition period 

should be longer or shorter than 45 

days. We concluded that 45 days 

provided an appropriate balance 

between providing investors with the 

scaled-up information as soon as 

reasonably possible and providing 

registrants with time to prepare for 

compliance and the ability, in a limited 

number of instances,674 to avoid the 

costs of preparing an additional year of 

audited financial statements beyond 

what was required in the Form S–4. 

Commenters also requested guidance 

on certain issues. One commenter 

recommended that the Commission 

clarify whether an amendment to a 

‘‘super 8–K’’ could be the first periodic 

report for the purposes of effectiveness 

of the SRC status.675 Under the final 

rules, any filing made 45 days after the 

consummation of the de-SPAC 

transaction must reflect re-determined 

SRC status, including a filing to amend 

a ‘‘super 8–K.’’ 

Unrelated to SRC re-determination, 

other commenters recommended 

codification of, or revisions to, staff 

guidance relating to the position that a 

SPAC’s need to file an amended Form 

8–K to update the target company’s 

financial statements for its most recent 

year-end is the equivalent to the first 

annual report 676 and, separately, the 

guidance in FRM 5230.1, which 

summarizes the Commission’s basis for 

requiring Form 10 information under 

Item 2.01(f) of Form 8–K and how the 

staff looks to the accounting acquirer’s 

SRC-eligibility at the time of the 

transaction for purposes of the 

disclosure in the Form 8–K.677 We do 

not believe that such codification or 

revisiting of the referenced staff 

guidance is necessary in connection 

with the final amendments. We believe 

the guidance in FRM 5230.1 is 

consistent with the final rules because 

the final rules look to the target 

company’s SRC-eligibility in all shell 

company transactions, including where 

the target company is the accounting 

acquirer. 

Rule 12b–2 provides the definitions of 

accelerated filer and large accelerated 

filer, including requisite conditions.678

Accelerated filer and large accelerated 

filer status are re-determined annually 

as of the end of the issuer’s fiscal 

year.679 For a new registrant that just 

completed an IPO, however, a period of 

at least twelve months would need to 

elapse before it would be required to 

comply with rules as an accelerated filer 

or a large accelerated filer.680 In 

contrast, after consummation of the deSPAC transaction, depending on the 

timing of the SPAC IPO and the deSPAC transaction, because of the 

SPAC’s reporting history, where the 

legal entity that was the SPAC is the 

same legal entity that is the post-deSPAC transaction combined company, 

the post-de SPAC transaction combined 

company may not have the same period 

until it must make filings pursuant to 

accelerated filer or large accelerated filer 

status as compared to a registrant that 

just completed an IPO.681 By virtue of 

being an accelerated or large accelerated 

filer, among other differences compared 

to a non-accelerated or non-large 

accelerated filer, the post-de-SPAC 

transaction combined registrant would 

be required to: (a) file its periodic 

reports sooner than otherwise 

required; 682 and (b) subject its 

management’s assessment of internal 

controls over financial reporting to 

auditor attestation.683 As noted above, 

several commenters recommended that 

the Commission put post-de-SPAC 

transaction registrants on the same 

footing with respect to filer status as a 

company that has recently undertaken 

an IPO.684

One of the main consequences of the 

approach suggested by these 

comments—that the reporting history of 

the SPAC should be disregarded such 

that the post-de-SPAC transaction 

combined company could recommence 

the 12-month period that must elapse 

(pursuant to paragraphs (1)(ii) and (2)(ii) 

in the definition of ‘‘accelerated filer 

and large accelerated filer’’ in Rule 12b– 

2) before it is possible to acquire 

accelerated or large accelerated filer 

status—would be to delay 

management’s assessment of internal 

control over financial reporting and 

outside auditor attestation of 

management’s assessment for 

companies that are not EGCs. We do not 

believe it is necessary or appropriate to 

amend the filer status requirements for 

this reason; however, we note that the 

Commission staff has taken the position 

that under certain conditions, the 

Commission staff would not object if the 

post-combination registrant were to 

exclude management’s assessment of 

internal control over financial reporting 

in the Form 10–K covering the fiscal 


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685See Division of Corporation Finance, 

Compliance and Disclosure Interpretations: 

Regulation S–K, Section 215.02, available at https:// 

www.sec.gov/divisions/corpfin/guidance/regskinterp.htm, which states that the staff would not 

object if a surviving issuer in a reverse acquisition 

were to exclude management’s assessment of 

internal control over financial reporting (ICFR) in 

the Form 10–K covering the fiscal year in which the 

reverse acquisition was consummated when it is 

not possible to conduct an assessment of the private 

operating company’s ICFR in the period between 

the consummation date of the reverse acquisition 

and the date of management’s assessment of ICFR 

required by Item 308(a) of Regulation S–K and 

when the internal controls of the shell company 

may be insignificant when compared to the 

consolidated entity. 

686Section 101(a) of the JOBS Act amended the 

Securities Act and the Exchange Act to provide in 

section 2(a)(19) of the Securities Act (15 U.S.C. 

77b(a)(19)) and section 3(a)(80) of the Exchange Act 

(15 U.S.C. 78c(a)(80)) a definition of ‘‘emerging 

growth company.’’ These statutes provided as 

follows. An ‘‘emerging growth company’’ is an 

issuer that had total annual gross revenues of less 

than $1,000,000,000 (as such amount is indexed for 

inflation every 5 years by the Commission to reflect 

the change in the Consumer Price Index for All 

Urban Consumers published by the Bureau of Labor 

Statistics, setting the threshold to the nearest 

1,000,000) during its most recently completed fiscal 

year. An issuer that is an emerging growth company 

as of the first day of that fiscal year shall continue 

to be deemed an emerging growth company until 

the earliest of—(A) the last day of the fiscal year of 

the issuer during which it had total annual gross 

revenues of $1,000,000,000 (as such amount is 

indexed for inflation every 5 years by the 

Commission to reflect the change in the Consumer 

Price Index for All Urban Consumers published by 

the Bureau of Labor Statistics, setting the threshold 

to the nearest 1,000,000) or more; (B) the last day 

of the fiscal year of the issuer following the fifth 

anniversary of the date of the first sale of common 

equity securities of the issuer pursuant to an 

effective registration statement under this 

subchapter; (C) the date on which such issuer has, 

during the previous 3-year period, issued more than 

$1,000,000,000 in non-convertible debt; or (D) the 

date on which such issuer is deemed to be a ‘‘large 

accelerated filer’’, as defined in 17 CFR 240.12b–2, 

or any successor thereto. 

687Pursuant to Securities Act Rule 405 and 

Exchange Act Rule 12b–2, the term ‘‘emerging 

growth company’’ means an issuer that had total 

annual gross revenues of less than $1.235 billion 

during its most recently completed fiscal year. 

Pursuant to these rules, if an issuer qualifies as an 

‘‘emerging growth company’’ on the first day of its 

fiscal year, it maintains that status until the earliest 

of: (i) the last day of the fiscal year of the issuer 

during which it had total annual gross revenues of 

$1.235 billion or more; (ii) the last day of its fiscal 

year following the fifth anniversary of the first sale 

of its common equity securities pursuant to an 

effective registration statement under the Securities 

Act; (iii) the date on which the issuer has, during 

the previous three-year period, issued more than $1 

billion in nonconvertible debt; or (iv) the date on 

which the issuer is deemed to be a ‘‘large 

accelerated filer’’ (as defined in Exchange Act Rule 

12b–2). 

688 In 2017, the Commission changed the $1 

billion revenue threshold in these rules to $1.07 

billion to account for inflation and, effective Sept. 

20, 2022, the Commission further changed this 

$1.07 billon threshold to account for inflation to 

$1.235 billion. See Inflation Adjustments and Other 

Technical Amendments Under Titles I and III of the 

Jobs Act, Release No. 33–10332 (Mar. 31, 2017) [82 

FR 17545 (Apr. 12, 2017)]; Inflation Adjustments 

under Titles I and III of the JOBS Act, Release No. 

33–11098 (Sept. 9, 2022) [87 FR 57394 (Sept. 20, 

2022)]. 

689With respect to the $1.235 billion revenue 

threshold in the definition of ‘‘emerging growth 

company’’ under Securities Act Rule 405 and 

Exchange Act Rule 12b–2, a pre-IPO SPAC may 

have limited or no revenue and post-IPO SPACs 

typically do not record revenue (because income 

statement items such as ‘‘Interest earned on 

marketable securities held in trust account’’ and 

‘‘Unrealized gain on marketable securities held in 

trust account’’ are generally not revenue). With 

respect to the large accelerated filer provision in 

these rules: (a) paragraph (2)(ii) in the definition of 

‘‘accelerated filer and large accelerated filer’’ in 

Rule 12b–2 requires that the issuer has been subject 

to the requirements of Exchange Act section 13(a) 

or 15(d) for a period of at least twelve calendar 

months, a period that generally would not yet have 

elapsed for a newly public SPAC after an IPO and 

(b) paragraph (2)(i) in the definition of ‘‘accelerated 

filer and large accelerated filer’’ in Rule 12b–2 

requires aggregate worldwide market value of the 

voting and non-voting common equity held by nonaffiliates be $700 million or more, as of the last 

business day of the issuer’s most recently 

completed second fiscal quarter, a value threshold 

that many SPACs may be below. See supra note 665 

(discussing frequency of SPACs with a market 

capitalization of greater than $700 million). 

690Paragraph (2)(ii) of the definition of ‘‘emerging 

growth company’’ under Securities Act Rule 405 

and Exchange Act Rule 12b–2. For example, in a 

case where the legal entity that is the SPAC 

becomes the post-de-SPAC transaction combined 

company, the five-year reference period would run 

from the date of the IPO of the SPAC and not the 

date of the de-SPAC transaction. 

691Paragraphs (2)(i) and (iii) of the definition of 

‘‘emerging growth company’’ under Securities Act 

Rule 405 and Exchange Act Rule 12b–2. 

692Paragraph (2)(iv) of the definition of 

‘‘emerging growth company’’ under Securities Act 

Rule 405 and Exchange Act Rule 12b–2. 

693See letters from Ernst & Young, KPMG, PwC, 

Vinson & Elkins, supra note 660. 

694Proposing Release, supra note 7, at 29481 

(request for comment number 74). See letters from 

Ernst & Young, KPMG, Vinson & Elkins. 

695See supra note 442. 

696Paragraph (2) of the definition of ‘‘foreign 

private issuer’’ in Securities Act Rule 405. 

697Paragraph (3) of the definition of ‘‘foreign 

private issuer’’ in Securities Act Rule 405. 

698Paragraph (3) of the definition of ‘‘foreign 

private issuer’’ in Securities Act Rule 405. 

699See definitions of ‘‘foreign issuer’’ and 

‘‘foreign private issuer’’ in Securities Act Rule 405. 

700As the target will be the predecessor to the 

SPAC and will report as a domestic registrant after 

the de-SPAC transaction, including reporting its 

financial statements on an Item 2.01 Form 8–K 

within four business days after the transaction, the 

target should comply with Regulation S–X and 

provide financial statements in accordance with 

U.S. GAAP. 

year in which the transaction was 

consummated.685 Since the staff 

position about management’s 

assessment of internal control over 

financial reporting is broader than the 

transactions covered by this rulemaking, 

as it applies to reverse acquisitions 

between an issuer and a private 

operating company, we did not codify it 

as part of this rulemaking. 

In 2012, the Jumpstart Our Business 

Startups Act amended the Securities Act 

and Exchange Act to add provisions 

regarding and to define an ‘‘emerging 

growth company.’’ 686 Commission rules 

also define an ‘‘emerging growth 

company.’’ 687 The Commission has 

amended the definition of ‘‘emerging 

growth company’’ in the past to adjust 

the total annual revenue threshold in 

these rules for inflation.688

A SPAC typically qualifies as an 

EGC.689 A post-de-SPAC transaction 

combined company would lose EGC 

status on the last day of its fiscal year 

following the fifth anniversary of the 

first sale of its common equity securities 

pursuant to an effective Securities Act 

registration statement.690 A post-deSPAC transaction combined company 

may also lose EGC status on the last day 

of a fiscal year during which it had total 

annual gross revenues of $1.235 billion 

or on the date on which it has issued 

more than $1 billion in nonconvertible 

debt during the previous three-year 

period.691 Finally, a post-de-SPAC 

transaction combined company may 

also lose EGC status on the date on 

which it is deemed to be a ‘‘large 

accelerated filer’’ (as defined in 

Exchange Act Rule 12b–2).692

Several commenters recommended 

that the EGC status of the combined 

company following a de-SPAC 

transaction should be re-determined 

upon consummation of the de-SPAC 

transaction.693 As with filer status, we 

are not adopting any amendments 

concerning EGC status at this time but 

will consider whether future 

adjustments are appropriate. 

Several commenters addressed 

determination of FPI status issues raised 

in a request for comment.694

A new registrant, such as a SPAC in 

an IPO, makes the determination of its 

FPI status 695 as of a date within 30 days 

prior to filing its initial registration 

statement.696 A reporting registrant that 

seeks to file as an FPI is required to 

determine its FPI status once a year on 

the last business day of its second fiscal 

quarter.697 A registrant that qualifies as 

an FPI upon such determination is 

immediately able to use the forms and 

rules designated for FPIs.698

A domestic SPAC (e.g., incorporated 

in a U.S. State) that intends to enter a 

de-SPAC transaction with a foreign 

target company would be required to 

file a Form S–4 (and not a Form F–4), 

because a domestic issuer cannot 

qualify as an FPI.699 Accordingly, where 

a domestic SPAC combines with a target 

company that is an FPI, the financial 

statements of the foreign target company 

would have to be presented in 

accordance with U.S. GAAP in Form S– 

4,700 among other differences that exist 


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701 Item 17 of Form S–4. 

702Letters from Ernst & Young, Freshfields, 

KPMG, Vinson & Elkins. See supra notes 662, 663, 

and 664 and accompanying text. 

703Letters from Freshfields, Vinson & Elkins. See 

supra notes 663 and 664 and accompanying text. 

704Section 27A of the Securities Act and section 

21E of the Exchange Act. The PSLRA does not 

impact the Commission’s ability to bring 

enforcement actions relating to forward-looking 

statements. 

705Section 27A(b) of the Securities Act and 

section 21E(b) of the Exchange Act. The 

Commission has defined the term ‘‘blank check 

company’’ for purposes of and in Rule 419 as a 

development stage company that is issuing ‘‘penny 

stock,’’ as defined in Exchange Act Rule 3a51–1, 

and that has no specific business plan or purpose, 

or has indicated that its business plan is to merge 

with or acquire an unidentified company or 

companies, or other entity or person. SPACs that 

raise more than $5 million in a firm commitment 

underwritten IPO may be excluded from this 

definition of ‘‘blank check company’’ because they 

are not selling ‘‘penny stock.’’ See Penny Stock 

Definition for Purposes of Blank Check Rule, 

Release No. 33–7024 (Oct. 25, 1993) [58 FR 58099 

(Oct. 29, 1993)]. The Commission’s definition of 

‘‘blank check company’’ in Rule 419 was adopted 

in 1992 to implement provisions of the Penny Stock 

Reform Act relating to registration statements filed 

by blank check companies offering penny stock. 

This definition predates the PSLRA (which was 

enacted in 1995) and has not been amended since 

it was adopted by the Commission. 

706Proposing Release, supra note 7, at 29482. 

707Proposing Release, supra note 7, at 29482, 

n.162 and preceding text, citing, see, e.g., Matt 

Levine, Money Stuff: Maybe SPACs Are Really IPOs, 

Bloomberg, Apr. 12, 2021; Eliot Brown, ElectricVehicle Startups Promise Record-Setting Revenue 

Growth, Wall St. J., Mar. 15, 2021; Public Statement 

on SPACs, IPOs and Liability Risk under the 

Securities Laws (Division of Corporation Finance, 

Apr. 8, 2021). 

708Proposing Release, supra note 7, at 29482, 

n.163 and preceding text, citing, see, e.g., Dambra, 

Even-Tov & George, supra note 36; AFR Letter, 

supra note 30; Park Testimony, supra note 30; Usha 

R. Rodrigues & Michael Stegemoller, SPACs: Insider 

IPOs (SSRN Working Paper, 2021). 

709Proposing Release, supra note 7, at 29482. 

710See, e.g., Securities Act section 27A(b)(7) 

(‘‘The terms ‘blank check company’, ‘rollup 

transaction’, ‘partnership’, ‘limited liability 

company’, ‘executive officer of an entity’ and ‘direct 

participation investment program’, have the 

meanings given those terms by rule or regulation of 

the Commission.’’). 

711The target company typically cannot rely on 

the PSLRA safe harbor because at the time the 

statement is made it is not subject to the reporting 

requirements of section 13(a) or section 15(d) of the 

Securities Exchange Act of 1934 and thus does not 

meet the requirements of section 27A(a)(1) of the 

Securities Act. 

712The Commission also proposed to amend the 

definition to remove the reference to ‘‘development 

stage company’’ on the basis that the reference was 

unnecessary for purposes of the proposed 

definition. 

between the requirements of Form S–4 

and Form F–4.701

If such a domestic SPAC registrant 

were to reincorporate under the laws of 

a foreign country prior to the filing of 

the registration statement in connection 

with a de-SPAC transaction, that 

reincorporation may require the foreign 

SPAC, as a new entity, to file an initial 

registration statement. The new entity’s 

FPI status would be determined as of a 

date within 30 days prior to the filing 

of the initial registration statement, as 

described above. If the new foreign 

entity were to qualify as an FPI, it may 

be eligible to file a Form F–4 registration 

statement in connection with the deSPAC transaction. Currently, the FPI 

status of the post-de-SPAC transaction 

combined company would not affect the 

registration form to be filed in 

connection with the de-SPAC 

transaction, regardless of whether the 

SPAC was an existing registrant or a 

new foreign entity. Also, currently, 

where the legal entity that was the 

SPAC is not an FPI and is the legal 

entity that is the combined company 

following the de-SPAC transaction, even 

where the combined company may meet 

the definition of an FPI after the deSPAC transaction, the combined 

company would need to wait until the 

end of the next second fiscal quarter to 

re-determine its status as an FPI. 

Several commenters recommended 

that we should provide for redetermination of FPI status in 

connection with a de-SPAC 

transaction.702

We have considered these comments 

and recognize that, depending on the 

structure of a specific de-SPAC 

transaction, there may be some factspecific circumstances in which an FPI 

registration statement may be used. For 

example, a SPAC’s use of an FPI 

registration statement (e.g., Form F–4) 

and compliance with FPI rules in 

connection with the de-SPAC 

transaction may be appropriate when, as 

of a date within 30 days prior to the 

filing of the de-SPAC transaction 

registration statement, the SPAC is a 

foreign issuer that is entering a de-SPAC 

transaction with a target company that 

is an FPI but is not a shell company, the 

legal entity that is the SPAC will be the 

legal entity that is the combined 

company registrant following the deSPAC transaction, and the combined 

company registrant created in 

connection with the de-SPAC 

transaction is expected to be an FPI at 

the time of consummation of the deSPAC transaction. 

Contrary to the suggestion of some 

commenters,703 we believe that earlier 

re-determination of FPI status would be 

inappropriate when a SPAC is a 

domestic SPAC (and therefore not a 

foreign issuer) prior to the de-SPAC 

transaction but enters a de-SPAC 

transaction with an FPI target company. 

If the legal entity that is the SPAC is a 

domestic entity, the combined company 

following the de-SPAC transaction 

would also be a domestic entity, in 

which case use of FPI forms would not 

be appropriate. 

E. PSLRA Safe Harbor 

1. Proposed Rules 

The PSLRA provides a safe harbor for 

forward-looking statements under the 

Securities Act and the Exchange Act, 

under which a company is protected 

from liability for forward-looking 

statements in any private right of action 

under the Securities Act or Exchange 

Act when, among other conditions, the 

forward-looking statement is identified 

as such and is accompanied by 

meaningful cautionary statements.704

Under the PSLRA, the safe harbor is not 

available, however, when a forwardlooking statement is made in connection 

with, among other things, an offering by 

a blank check company, an offering by 

an issuer of penny stock, or an IPO.705

The Proposing Release discussed the 

Commission’s concerns about the use of 

forward-looking statements, such as 

projections, in connection with deSPAC transactions.706 The Commission 

stated that some market participants in 

de-SPAC transactions may not exercise 

the same level of care in preparing 

forward-looking statements, such as 

projections, as in a traditional IPO.707

The Commission also noted that a 

number of commentators had raised 

concerns about the use of projections 

that they believe to be unreasonable in 

de-SPAC transactions.708 In addition, 

the Commission stated that it saw no 

reason to treat blank check companies 

differently for purposes of the PSLRA 

safe harbor depending on whether they 

raise more than $5 million in a firm 

commitment underwritten IPO and thus 

are not selling penny stock.709

To address these concerns, the 

Commission proposed using its 

statutory authority under the PSLRA to 

amend the definition of ‘‘blank check 

company’’ 710 to include companies that 

would otherwise meet the Securities Act 

Rule 419 definition of ‘‘blank check 

company,’’ except that they are not 

issuers of penny stock (such as a SPAC 

in a de-SPAC transaction).711

Specifically, the Commission proposed 

a revised definition of ‘‘blank check 

company’’ to be located in Securities 

Act Rule 405 that would, for purposes 

of the PSLRA, remove the ‘‘penny 

stock’’ condition from the rule and 

define the term as ‘‘a company that has 

no specific business plan or purpose or 

has indicated that its business plan is to 

engage in a merger or acquisition with 

an unidentified company or companies, 

or other entity or person.’’ 712


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713Proposed amendments to 17 CFR 230.137 

(‘‘Rule 137’’), 230.138 (‘‘Rule 138’’), 230.139 (‘‘Rule 

139’’), 230.163A (‘‘Rule 163A’’), 230.164 (‘‘Rule 

164’’), 230.174 (‘‘Rule 174’’), 230.430B (‘‘Rule 

430B’’), and 230.437a (‘‘Rule 437a’’). The 

Commission proposed that the term ‘‘blank check 

company issuing penny stock’’ be defined as a 

company that is subject to Rule 419. Due to current 

Federal Register formatting requirements, the 

Commission also proposed technical changes to 

Rules 163A and 164 to move the Preliminary 

Note(s) in these rules to introductory paragraphs of 

the respective rules. 

714Letters from Andrew Tuch, Americans for 

Financial Reform Education Fund (‘‘Amending the 

definition of a ‘blank check company’ and ensuring 

that the forward-looking projections of SPACs are 

subject to the same level of legal liability that 

currently exists for IPOs is an important step to 

protect investors.’’), Better Markets (‘‘Perhaps one of 

the most important provisions in the Proposal is the 

provision clarifying that the statutory safe harbor in 

the PSLRA does not apply to forward-looking 

statements made in connection with a de-SPAC 

transaction.’’), CFA Institute, CII, Consumer 

Federation, Senator Elizabeth Warren, ICGN, 

NASAA. 

715Letter from CFA Institute. 

716Letter from NASAA. 

717Letters from Consumer Federation, NASAA. 

718Letter from Senator Elizabeth Warren. 

719Letter from Better Markets. 720Letter from Senator Elizabeth Warren. 

721Letter from Consumer Federation. 

722Letters from Americans for Financial Reform 

Education Fund, Better Markets, CFA Institute, CII, 

Senator Elizabeth Warren. 

723Letter from Americans for Financial Reform 

Education Fund. 

724Letter from Better Markets. 725Letter from CFA Institute. 726Letter from CII. 727Letter from Senator Elizabeth Warren. 728Letters from Better Markets, CII, Consumer 

Federation, Senator Elizabeth Warren. See also 

letter from Anonymous (Oct. 11, 2022) (‘‘Please do 

not permit SPAC sponsors, their CEO or their board 

members to engage with the public in such a way 

that could create a false representation of . . . 

[p]rojections of value. . . .’’). 729Letter from CII. 730Letter from Consumer Federation. 

The Commission proposed 

corresponding technical changes to Rule 

419, the rule the Commission adopted to 

implement provisions of the Penny 

Stock Reform Act relating to registration 

statements filed by blank check 

companies offering penny stock, that 

were intended to maintain consistency 

with that rule’s historic scope which is 

limited to blank check companies that 

issue penny stock. Similarly, the 

Commission proposed a new definition 

in Rule 405, ‘‘Blank check company 

issuing penny stock,’’ and proposed 

conforming amendments to existing 

references to ‘‘blank check company’’ as 

defined in Rule 419 in various 

Securities Act rules in order to maintain 

the scope of those rules.713

2. Comments 

A number of commenters expressed 

general support for the proposal.714 One 

of these commenters said, ‘‘Both the 

regular IPO and de-SPAC approaches for 

taking a new, emerging company public 

should be treated similarly in this 

critical area for market integrity—the 

legitimacy of forward-looking 

projections.’’ 715 Other commenters said 

they did not see a reason SPACs should 

be treated differently than traditional 

IPO participants 716 or companies that 

issue penny stock 717 with respect to 

forward-looking statements. One 

commenter focused on the benefits of 

mitigating the risk of harm to investors, 

stating that the proposal ‘‘would 

significantly curb SPAC sponsors’ 

abilities to make overblown and false 

projections, and increase their liability 

when this fraud occurs.’’ 718 Another 

commenter said that ‘‘[t]his safe harbor 

enables SPAC sponsors and 

underwriters to make future projections 

of the performance of the SPAC to 

investors with relative impunity. This 

legal loophole enables SPAC sponsors to 

sell investors on bold projections that 

have little basis in reality. These legal 

loopholes, including the PSLRA safe 

harbor, among others, have created a 

regulatory arbitraged race-to-the-bottom 

IPO model. . . .’’ 719 This commenter 

further said, ‘‘It is clear that far too 

many SPAC sponsors have utilized the 

PSLRA safe harbor to paint bold and 

enticing pictures of the financial 

outlook of their post-merger companies 

that were divorced from reality. . . . 

The safe harbor from the PSLRA for 

forward-looking statements in de-SPAC 

transactions has fueled this trend, 

undermined public confidence in our 

capital markets, and harmed investors 

by enabling SPAC sponsors to make 

reckless projections about future 

financial performance. In any final rule, 

the Proposal must retain the 

clarification that the PSLRA safe harbor 

does not apply in connection with deSPAC transactions.’’ A separate 

commenter similarly said that 

‘‘amending the definition of a ‘blank 

check’ company in The Private 

Securities Litigation Reform Act of 1995 

would prevent SPACs from exploiting 

the safe harbor provision to make 

overblown and fraudulent 

projections.’’ 720 Another commenter 

said the proposal ‘‘would resolve 

ambiguities about how the law applies 

in this context and promote 

accountability for SPAC market 

participants.’’ 721

A number of commenters suggested 

that unreasonably optimistic or inflated 

projections are prevalent in de-SPAC 

transactions.722 One of these 

commenters said that SPACs sometimes 

make ‘‘utterly absurd forward-looking 

projections.’’ 723 This commenter also 

said, ‘‘Post-merger investors in SPACs, 

who are predominantly retail investors, 

are often lured by ambitious projections 

of growth—made with the protection of 

the safe harbor—and unfortunately have 

already lost significant amounts of 

money as a result.’’ A different 

commenter said, ‘‘In fact, it is nearly 

impossible to ignore the research and 

findings of the wild and indiscriminate 

use of projections in de-SPAC 

transactions by sponsors with seemingly 

little care given to the accuracy or 

reality of those projections.’’ 724 Another 

of these commenters said that ‘‘too 

many of these de-SPAC forward-looking 

statements are an exercise in creative 

writing, baseless hype and 

embellishment.’’ 725 Another commenter 

said, ‘‘We believe historical uncertainty 

surrounding the availability of the safe 

harbor may have contributed to the 

proliferation of unreasonably optimistic 

forward projections that would not have 

been made if liability had more clearly 

paralleled the traditional IPO 

regime.’’ 726 Finally, one commenter 

said that ‘‘SPACs are rife with 

disclosures that border on or cross into 

outright fraud’’ and that ‘‘there have 

been multiple cases where companies 

used inflated information about their 

financials, their future business, or even 

their underlying technology.’’ 727

Several commenters expressed 

support for the proposal because they 

believed it would curb the use of 

unrealistic and potentially misleading 

projections that harm investors.728 One 

of these commenters said, ‘‘We support 

the proposal’s revision to the definition 

of ‘blank check company’ to ensure that 

the safe harbor against a private right of 

action for forward-looking statements 

under the PSLRA is not available. We 

believe this clarification may reduce the 

inclusion of unreasonably optimistic 

forward projections in SEC filings, 

which may in turn help SPAC investors 

avoid overestimating future revenues 

and other measures of future company 

performance.’’ 729 Another of these 

commenters said that ‘‘the proposal’s 

approach to amend the definition of 

blank check company for purposes of 

the PSLRA safe harbor for forwardlooking statements’’ would ‘‘strengthen 

incentives for SPACs to avoid 

potentially unrealistic and potentially 

misleading forward-looking statements 

and to expend more effort or care in the 

preparation and review of forwardlooking statements.’’ 730 Another 

commenter said, ‘‘The Commission’s 

proposal to amend the definition of 

‘blank check company’ to remove the 

safe harbor in the Private Securities 

Litigation Reform Act of 1995 for 


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731Letter from Senator Elizabeth Warren. 

732Letters from ABA; Amanda M. Rose, Professor 

of Law, Vanderbilt University Law School (June 16, 

2022) (‘‘Amanda Rose’’); American Securities 

Association; Bullet Point Network; Cato Institute; 

Cowen; Goodwin; Job Creators Network; Loeb & 

Loeb; Michael Dambra, Omri Even-Tov, and 

Kimberlyn George; Jennifer W. Han, Executive Vice 

President, Chief Counsel & Head of Regulatory 

Affairs, Managed Funds Association (June 13, 2022) 

(‘‘Managed Funds Association’’); NYC Bar; Paul 

Swegle; SPAC Association; Kristi Marvin, 

SPACInsider (June 13, 2022) (‘‘SPACInsider’’); 

Vinson & Elkins; Winston & Strawn. Also, the Small 

Business Capital Formation Advisory Committee 

recommended that projections in de-SPAC 

transactions should be covered by the liability safe 

harbor provisions of the PSLRA, supra note 40. 

733Letter from Cato Institute. 

734Letter from SPAC Association. 

735Letter from Goodwin. 

736Letter from Cowen. 

737Letters from ABA, Cato Institute, Paul Swegle, 

Winston & Strawn. 

738Letter from American Securities Association. 

739Letter from Cato Institute. 

740Letter from Paul Swegle. 

741Letter from Winston & Strawn. 

742Letter from ABA. See also letter from 

Goodwin. 

743Letters from ABA, Job Creators Network, 

Kirkland & Ellis. Section 508 of the Penny Stock 

Reform Act amended Securities Act section 7 to 

provide for new section 7(b)(3) that provides: ‘‘For 

purposes of paragraph (1) of this subsection, the 

term ‘blank check company’ means any 

development stage company that is issuing a penny 

stock (within the meaning of section 3(a)(51) of the 

Securities Exchange Act of 1934) and that—(A) has 

no specific business plan or purpose; or (B) has 

indicated that its business plan is to merge with an 

unidentified company or companies.’’ 

744Letter from ABA. 

forward-looking statements would 

significantly curb SPAC sponsors’ 

abilities to make overblown and false 

projections, and increase their liability 

when this fraud occurs.’’ 731

Other commenters were generally 

opposed to the proposal.732 Some 

commenters who expressed general 

opposition to the proposal discussed the 

value of forward-looking information to 

investors. One of these commenters 

said, ‘‘This safe harbor incentivizes the 

disclosure of potentially valuable 

information as to a company’s future 

outlook.’’ 733 Another of these 

commenters said, ‘‘By removing the safe 

harbor provisions from SPAC mergers, 

the proposed rules would replicate the 

biggest flaw of IPOs, hindering investor 

visibility toward management 

expectations and related future 

prospects.’’ 734 A number of commenters 

focused on comparing de-SPAC 

transactions to other kinds of 

transactions in their comments. One of 

the commenters who expressed general 

opposition to the proposal said, ‘‘We 

believe there are important distinctions 

between a De-SPAC Transaction and a 

traditional IPO that justify maintaining 

the PSLRA safe harbor in the form 

enacted by Congress.’’ This commenter 

said, ‘‘The PSLRA safe harbor . . . does 

not cover all forward-looking 

statements. It contains a number of 

exclusions. . . . [One] category of 

exclusions cover[s] situations—like 

tender offers, roll-up and going-private 

transactions—where companies are 

compelled by law to share projections 

with investors. In such situations, there 

is less risk that liability will chill 

disclosure and the safe harbor exclusion 

can be understood as an effort to 

increase the accuracy of disclosures.’’ 

Further, this commenter said, 

‘‘Projections disclosure in De-SPAC 

Transactions fall under this . . . 

category.’’ 735 Another commenter who 

generally opposed the proposal 

questioned whether it would benefit 

investors, stating that ‘‘the 

Commission’s proposal to remove the 

PSLRA safe-harbor for de-SPAC 

transactions is unnecessarily broad with 

no real benefit to investors.’’ 736

A number of commenters on the 

proposal provided views related to the 

statutory authority of the Commission to 

amend the definition of blank check 

company as proposed. These comments 

fell into two main categories. First, some 

of these commenters suggested the 

Commission does not have discretion to 

adopt or amend a definition of blank 

check company for purposes of the 

PSLRA that differs from the current 

Rule 419 definition (which includes the 

qualification the relevant company is 

issuing penny stock).737 One of these 

commenters said, ‘‘The elimination of 

the safe harbor for forward-looking 

statements under the Private Securities 

Litigation Reform Act (PSLRA) is 

unlawful. The Proposal would—without 

any authorization by Congress—amend 

the definition of a ‘blank check’ 

company under the PSLRA to prevent 

SPACs from utilizing the PSLRA safe 

harbor for forward-looking statements. 

Given that de-SPAC transactions 

necessarily involve making a good deal 

of projections, there has been an 

underlying assumption that the PSLRA 

safe harbor applies to such 

projections. . . . The SEC should drop 

this idea and recognize that it has no 

legal authority under law to change 

Congressional statutes on its own.’’ 738

Another of these commenters said that 

‘‘this change alters the scope and effect 

of the PSLRA by substantially revising 

the definition that Congress relied on 

when it wrote the statute. Such an 

alteration to the statute’s scope should 

be made by Congress, not the 

Commission.’’ 739 Another of these 

commenters said, ‘‘I believe the SEC 

would be overreaching its authority in 

eliminating the availability of the 

PSLRA safe harbor for forward-looking 

statements in de-SPAC transactions. The 

Projection Proposal would change the 

existing definition of ‘blank check 

company’ for purposes of the PSLRA by 

removing the ‘penny stock’ condition. 

That was the definition Congress 

specifically relied upon when it wrote 

the PSLRA. I believe it would be 

improper for the SEC to willfully ignore 

statutory language in this manner.’’ 740

Another commenter said that ‘‘de-SPAC 

transactions were not within the scope 

of issuers and transactions excluded 

from the PSLRA by Congress. The 

PSLRA excludes from the safe harbor, 

among other things, forward-looking 

statements made in connection with an 

IPO, and an offering of securities by a 

blank check company or by an issuer 

that issues penny stock.’’ 741 This 

commenter also said that SPACs are not 

blank check companies subject to Rule 

419 nor do SPACs issue penny stock. 

This commenter also stated, ‘‘In 

transactions where the de-SPAC 

transaction is structured with the SPAC 

as the surviving company, the 

transaction is not an IPO of the SPAC. 

As a result, we believe the proposed 

expansion of the exclusions from the 

PSLRA that were legislated by Congress 

are not merely clarifying or interpretive 

in nature; rather, they go beyond the 

Commission’s rulemaking authority and 

should be addressed by statute.’’ 

Finally, one commenter said the 

proposed changes regarding the 

definition of blank check company 

‘‘appears inconsistent with the 

exemptive authority found in Section 

27A(g) and (h), which makes clear the 

Commission’s ability to extend the 

scope of the safe harbor protections 

rather than narrow them.’’ 742

Second, some commenters suggested 

that the Commission’s proposed 

definition of blank check company is 

inconsistent with the Penny Stock 

Reform Act’s statutory definition of 

blank check company, which includes 

the qualification that the relevant 

company is issuing penny stock and 

which predated the PSLRA.743 One of 

these commenters stated, ‘‘As the 

Commission noted, the current 

definition of ‘blank check company’ 

predates the enactment of the PSLRA in 

1995 and evidences a clear intent to 

exclude from that definition SPACs that 

raise more than $5 million in a firm 

commitment underwritten IPO for not 

selling ‘penny stock.’ ’’ 744 Another of 

these commenters said that ‘‘the SPAC 

Proposal’s proposed elimination of the 

PSLRA safe harbor . . . is illegal for 


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745Letter from Job Creators Network, citing 

Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 

467 U.S. 837, 844 (1984) (statutory citations have 

been omitted from the quotation). 

746 Id., citing see, e.g., Van Hollen, Jr. v. FEC, 811 

F.3d 486, 492 (D.C. Cir. 2016) (for the principle, 

according to the commenter, that ‘‘[at] Chevron step 

two, courts look at how Congress ‘elsewhere 

defines’ the specific term at issue’’). 

747 Id. (statutory citation omitted). 

748 Id., citing Chem. Mfrs. Ass’n v. EPA, 919 F.2d 

158, 163 (D.C. Cir. 1990) (footnotes omitted). 

749Letter from Kirkland & Ellis. 

750 5 U.S.C. 551 et seq. 

751Letter from American Securities Association. 

752Letter from Job Creators Network. 

753Letters from Bullet Point Network, CFA 

Institute (‘‘both the regular IPO and de-SPAC 

approaches for taking a new, emerging company 

public should be treated similarly in this critical 

area for market integrity—the legitimacy of forwardlooking projections.’’), NASAA (‘‘We see no reason 

why de-SPAC transactions should be treated 

differently than penny stock issuers or traditional 

IPO participants with respect to forward looking 

statements.’’). 

754Letters from Bullet Point Network (expressing 

the view that the inapplicability of the PSLRA safe 

harbor to traditional IPOs ‘‘effectively prohibit[s] 

management projections from S–1 filings’’ and that 

‘‘[t]his relegates the topic to the game of ‘20 

questions’ privileged investors play. Asking the 

right questions in the right way allows these 

investors to get valuable information others don’t 

get, while technically staying on the right side of 

the published rules. Issuers can essentially transmit 

projections by helping research analysts employed 

by their underwriters develop financial estimates, 

the substance of which are communicated verbally 

to privileged investors in private meetings ahead of 

an IPO.’’); SPACInsider (‘‘It’s quite common for a 

company that is going through the traditional IPO 

process to talk to a bank’s research analyst, discuss 

their forward earnings, at which point, the analyst 

then models out the company into the future and 

then . . . ONLY distributes that information to the 

bank’s key and favored clients (which usually pay 

the bank a lot of money in trading fees). This is a 

far less democratic and equitable process to the 

investing public, and in particular, retail investors 

. . . . This is in contrast to the SPAC process in 

which all investors get a free look at projections by 

filing them publicly, not just the wealthiest 

investors.’’ (Emphasis in the original)); Ropes & 

Gray (‘‘a key challenge of the traditional IPO market 

is that it ends up depriving retail investors from 

participating in IPOs through an IPO allocation, and 

such investors are often unable to purchase at the 

same price as institutional investors. Retail 

investors in companies that access the public 

markets through traditional IPOs also do not have 

the same access to third-party analysis as larger 

institutional investors who have ready access to the 

research analyst community. SPAC transactions 

have served to democratize the process in enabling 

prospective investors to have the ability to 

participate on equal footing with initial investors 

. . . by way of . . . access to information.’’); SPAC 

Association (‘‘we believe that an opposite result 

may take place if these proposed rules were to be 

promulgated: the public may be deprived of 

potentially helpful information and that same 

information will only be made available to 

institutional investors in private settings, like what 

happens in the IPO market . . . . ’’); Vinson & 

Elkins (‘‘Projections are used in IPOs—they are just 

customarily not included in the registration 

statement and prospectus. Instead, they are 

disclosed to analysts at the investment banks, who 

use them to assist in pricing the securities and in 

building the analysts’ models for disclosure to 

institutional investors.’’); White & Case (‘‘issuers in 

IPOs indirectly provide investors with financial 

projections by sharing their financial models, 

including projections, with research analysts, who 

then provide their models to their institutional 

investor clients considering whether to participate 

in the IPO.’’). 755Letter from Bullet Point Network. See also 

letter from Ropes & Gray (‘‘if these proposed rules 

were to be promulgated: the public may be deprived 

of potentially helpful information and that same 

information will only be made available to 

institutional investors in private settings, like what 

happens in the IPO market’’). 

756Letters from Bullet Point Network 

(recommending that the PSLRA safe harbors 

Continued 

[the] reason [that]: it proposes an 

unreasonable definition of ‘blank check 

company.’ The PSLRA generally 

provides a safe harbor for forwardlooking statements, but the safe harbor 

is not available for ‘blank check 

companies.’ The PSLRA states that the 

term ‘blank check company’ has ‘the 

meaning[ ] given . . . by rule or 

regulation of the Commission,’ but of 

course the SEC does not have carte 

blanche to define the term however it 

wants—its proposal must be 

‘reasonable.’ ’’ 745 The commenter also 

said, ‘‘The SEC’s discretion in defining 

blank check company is accordingly 

cabined and informed by other relevant 

statutory provisions.’’ 746 This 

commenter also said, ‘‘In particular, 

Congress has already defined a blank 

check company in the Securities Act, 

and the only absolute requirement in 

that definition is that the company issue 

‘penny stocks.’ ’’ 747 This commenter 

further stated that ‘‘the SPAC Proposal 

would eliminate the penny stock 

requirement, even though Congress has 

made clear that that requirement is the 

core aspect that defines a blank check 

company. The SPAC Proposal’s 

definition of blank check company is 

hardly ‘reasonable’ when it eliminates 

the core of Congress’s definition of that 

term within the same statutory regime, 

nor is it ‘consistent with the statute’s 

purpose’ to allow the SEC to relabel any 

entity it chooses as a blank check 

company by disregarding the core 

aspect of what makes a blank check 

company.’’ 748 Another of these 

commenters said, ‘‘The Proposal to 

redefine ‘blank check company’ is not a 

clarification of existing law. We disagree 

with the Commission that the proposed 

amendment to the definition of ‘blank 

check company’ is a clarification that 

the statutory safe harbor of the PSLRA 

is not available for forward-looking 

statements made in connection with 

offerings by SPACs. As noted by the 

Commission, the current definition of a 

‘blank check company’ predates the 

enactment of the PSLRA and this 

amendment changes the applicability of 

the PSLRA safe harbor.’’ 749

Finally, in addition to these two main 

groups of comments related to statutory 

authority issues, one commenter 

expressed the view that the proposed 

changes to the definition of ‘‘blank 

check company’’ are contrary to the 

Administrative Procedure Act of 

1946 750 because ‘‘the SEC is seeking to 

amend the PSLRA on its own without 

any explicit statutory authority or 

directive from Congress.’’ 751 A different 

commenter argued that the proposal was 

‘‘unlawful, arbitrary, and capricious’’ 

because Congress already defined blank 

check company in the Securities Act 

and ‘‘the only absolute requirement in 

that definition is that the company issue 

‘‘ ‘penny stocks.’ ’’ 752

A number of commenters focused on 

comparing de-SPAC transactions to two 

categories of other kinds of transactions: 

(1) traditional IPOs and (2) other 

business combinations. Some 

commenters supported the proposal 

with respect to rules related to the 

PSLRA safe harbor on the basis that it 

would level the playing field with 

IPOs.753 Other commenters, however, 

expressed concerns regarding how the 

playing field for traditional IPOs 

operates with respect to the interaction 

of issuers who provide projections, 

research analysts, and investors. These 

commenters generally observed that, in 

traditional IPOs, issuers often provide 

projections to securities analysts who 

often share these projections with 

certain institutional investors (on a 

private and informal basis, i.e., not in 

the form of published research reports) 

but these issuers do not make this 

information available to other investors, 

particularly retail investors.754 One 

commenter said, ‘‘The [PSLRA] Safe 

Harbor, and subsequently Regulation 

FD, . . . had the desirable effect of 

leveling the playing field so that certain 

investors with access to management 

meetings and sell-side research analysts 

do not have an information advantage 

over less well-resourced retail 

investors.’’ 755 But the commenter 

indicated that, because ‘‘IPOs . . . are 

expressly excluded from the [PSLRA] 

Safe Harbor and Regulation FD is only 

applicable to companies that are already 

public, . . . companies do not provide 

any projections or forward-looking 

statements in the S–1s relating to their 

IPOs but generally do hold private 

meetings with qualified institutional 

investors.’’ Some commenters suggested 

that, instead of the proposed rule 

changes, IPO regulation should be put 

on a level playing field with de-SPAC 

transactions by Commission rule 

amendments or through statutory 

amendment to extend the PSLRA safe 

harbor to IPOs.756


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‘‘should be available for IPOs of all Types [defined 

by the commenter as traditional IPOs, SPAC 

business combinations and Direct Listings], but 

should only be available for projections that serve 

the public interest by clearly communicating the 

risk and uncertainty associated with the projections 

in a standardized format.’’), Loeb & Loeb, Kirkland 

& Ellis, SPACInsider. See also letter from ABA 

(‘‘This also appears inconsistent with the exemptive 

authority found in Section 27A(g) and (h), which 

makes clear the Commission’s ability to extend the 

scope of the safe harbor protections rather than 

narrow them.’’), Amanda Rose (discussing ‘‘serious 

questions about the wisdom of the existing 

exclusion for communications made in connection 

with an IPO, which has the practical effect of 

silencing nearly all public disclosure of 

management projections in connection with IPOs to 

the detriment of reasonable investors’’), SPAC 

Association (‘‘By removing the safe harbor 

provisions from SPAC mergers, the proposed rules 

would replicate the biggest flaw of IPOs, hindering 

investor visibility toward management expectations 

and related future prospects.’’). 

757Letters from ABA, Amanda Rose, Cato 

Institute, Cowen, Goodwin, Vinson & Elkins, NYC 

Bar. Also, the Small Business Capital Formation 

Advisory Committee recommended that projections 

in de-SPAC transactions should be covered by the 

liability safe harbor provisions of the PSLRA, 

because management projections are an important 

part of the rationale for companies in determining 

whether to engage in a merger with a SPAC and 

they are necessary when financial intermediaries 

provide fairness opinions related to de-SPAC 

transactions. See supra note 40. 

758Letter from ABA. 

759Letter from Cato Institute (footnotes omitted). 

760Letter from Vinson & Elkins. 

761Letter from NYC Bar. 

762Letter from Cowen. 

763Letters from American Securities Association; 

CFA Institute; Cowen (‘‘if the SPAC receives a 

fairness opinion from a financial advisor (as the 

proposing release suggests will be required) that 

fairness opinion will be based on projections, 

which will have to be disclosed to investors.’’). 

764Letter from American Securities Association. 

765Letter from CFA Institute. 

766Letters from Cowen, SPAC Association, 

Winston & Strawn. 

767Letter from Winston & Strawn. 

768Letters from ABA, Amanda Rose, Cato 

Institute, CFA Institute, Goodwin, Kirkland & Ellis, 

Managed Funds Association, NYC Bar, SPAC 

Other commenters, however, 

suggested de-SPAC transactions should 

be treated differently than IPOs because 

de-SPAC transactions involve business 

combinations, which may be subject to 

disclosure obligations under State 

law.757 One of these commenters said 

that ‘‘unlike companies undertaking a 

traditional IPO, SPACs are compelled by 

a combination of federal securities 

regulation and state corporate law to 

share Target projections with 

stockholders.’’ 758 This commenter also 

said, ‘‘To truly place De-SPAC 

Transactions on a ‘level playing field’ 

with traditional IPOs in connection with 

forward-looking statements, the 

Commission would have to change its 

disclosure requirements in connection 

with De-SPAC Transactions and 

somehow override the state fiduciary 

obligations that compel disclosure of 

projections.’’ Another of these 

commenters said that ‘‘SPACs will not 

be able to avoid liability by refraining 

from speaking, as many traditional IPOs 

do. SPAC sponsors generally must 

provide forward-looking information in 

connection with the de-SPAC 

transaction to satisfy state fiduciary 

requirements in connection with 

mergers.’’ 759 Another of these 

commenters said, ‘‘With respect to 

forward looking statements, the SEC’s 

‘de-SPAC transactions are merely IPOs 

of the target company’ theory has flaws. 

Specifically, the SPAC is a publicly 

traded company . . . and the directors 

and officers of the SPAC have fiduciary 

duties. They are required to conduct 

substantial diligence (arguably more 

than underwriters in an IPO), and are 

required to disclose the material reasons 

for approving and proposing the deSPAC transactions to the SPAC’s 

shareholders, which frequently include 

projections provided to the directors in 

connection with their evaluation of the 

de-SPAC transaction.’’ 760 Another of 

these commenters said that ‘‘traditional 

IPOs and de-SPAC transactions are 

fundamentally different transactions. 

Financial projections are not required to 

be included, and are rarely included, in 

IPO registration statements. On the 

other hand, both Delaware 

jurisprudence and the Commission’s 

staff now require inclusion of 

management projections in proxy 

statements and registration statements 

on Form S–4/F–4 where such 

projections were relied upon by a board 

of directors in approving a 

transaction.’’ 761 This commenter also 

said, ‘‘The projections included in the 

de-SPAC transaction registration 

statement or proxy statement are not 

included in order to promote capital 

formation. In fact, such projections are 

generally only current as of the date a 

board of directors approved the 

execution of the acquisition agreement. 

Such projections are not typically 

updated because they are being 

provided to SPAC shareholders to 

evaluate the board of directors’ 

recommendation to approve the deSPAC transaction, rather than to solicit 

a new investment. As such, projections 

are often out of date, or ‘stale’, by the 

time the SPAC’s shareholders receive 

them. Issuers generally include 

disclosure to the effect that investors 

should not consider projections to be 

financial guidance, and investors are 

generally cautioned not to place undue 

reliance on such projections.’’ Another 

commenter said, ‘‘Under Delaware case 

law, the Board has a fiduciary duty to 

disclose to investors in a merger proxy 

(often in an S–4 registration statement) 

the projections it utilized in making its 

decision. Moreover, if the SPAC 

receives a fairness opinion from a 

financial advisor (as the proposing 

release suggests will be required) that 

fairness opinion will be based on 

projections, which will have to be 

disclosed to investors. Therefore, unlike 

a typical IPO, in the vast majority of deSPAC transactions, projections will 

have to be disclosed, which further 

underscores the reasonableness of 

giving such statements PSLRA safe 

harbor protection, just as they would 

have in a typical M&A transaction that 

was not a de-SPAC.’’ 762

Furthermore, other commenters 

suggested de-SPAC transactions should 

be treated differently than IPOs, because 

of concerns about the interaction of the 

proposed changes regarding availability 

of the PSLRA safe harbor with other 

proposals in the Proposing Release.763

One of these commenters said, ‘‘This 

aspect of the Proposal is in direct 

opposition to the provisions of the 

Proposal that require the SPAC to 

disclose the material reasons for which 

the SPAC believes its proposed deSPAC transaction is fair to its public 

shareholders.’’ 764 Another of these 

commenters said, ‘‘The combination of 

removing the safe harbor while adding 

amendments to Item 10(b) of Regulation 

S–K and Item 1609 of Regulation [S–K] 

essentially mandating some level of 

[forward-looking statement] projections, 

goes beyond leveling de-SPACs with 

IPOs.’’ 765

Some commenters suggested the 

proposal would create inconsistency by 

making the PSLRA safe harbor 

unavailable for one kind of business 

combination transaction (de-SPAC 

transactions) but not for other kinds of 

business combination transactions.766

One of these commenters said, ‘‘The 

Commission stated that the proposed 

change to the PSLRA definition is 

necessary to align traditional IPOs more 

closely with de-SPAC transactions. 

However, the Commission’s position is 

inconsistent with the provisions of 

Regulation M–A, which actually require 

disclosure of target company projections 

if the SPAC’s board relied on such 

projections when approving the deSPAC transaction. There is no similar 

requirement in the IPO context. We can 

see no justification for treating a deSPAC transaction differently from any 

other stock-for-stock merger for this 

purpose.’’ 767

A number of commenters suggested 

the proposal would have a chilling 

effect on the use of projections that 

investors find useful.768 One of the 


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Association, Vinson & Elkins, Winston & Strawn. 

See also letter from Davis Polk (stating that the 

absence of the safe harbor will not ‘‘have a 

substantial impact’’ but may ‘‘be an additional 

factor that will cause many investment banks to 

refuse to participate in de-SPAC transactions to 

avoid liability’’). 

769Letter from ABA. 

770Letter from Cato Institute. 

771Letter from Kirkland & Ellis. 

772Letter from Amanda Rose, including 

attachment of a forthcoming article that was 

published as: Amanda M. Rose, SPAC Mergers, 

IPOs, and the PSLRA’s Safe Harbor: Unpacking 

Claims of Regulatory Arbitrage, 64 William & Mary 

L. Rev. 1757, 1806 (2023), available at https://

scholarship.law.wm.edu/cgi/ 

viewcontent.cgi?article=3995&context=wmlr 

(emphasis in original). 

773 Id. at 1806. 

774Letters from ABA, Kirkland & Ellis, NYC Bar. 

See also letter from Vinson & Elkins (‘‘However, the 

expansion of underwriter liability to cover de-SPAC 

transactions may cause an increased focus on 

projections, and more thorough discussion 

regarding the assumptions and considerations 

underlying the projections, as well as material risks 

that could cause such projections to not be satisfied. 

Where projections are not a material consideration 

for a SPAC board, under the Proposed Rules that 

SPAC will be less likely to disclose projections.’’). 

775Letter from ABA. 

776Letter from Kirkland & Ellis. 

777Letter from NYC Bar. 

778Letters from Andrew Tuch, Davis Polk, 

Kirkland & Ellis. See also letter from Jeffrey M. 

Solomon, Chair and Chief Executive Officer, Cowen 

Inc. (June 8, 2022) (‘‘Cowen’’) (‘‘If the perceived 

‘problem’ is unreasonable projections or projections 

not being made in good faith, it should be noted 

that such unreasonable, bad-faith projections would 

not qualify for PSLRA (or any other) safe harbor 

protection in the first instance, irrespective of the 

stay of discovery. . . .’’). 

779Letter from Andrew Tuch. 

780Letter from Davis Polk. 

781Letter from Kirkland & Ellis. 

782Letters from ABA, Cowen, Winston & Strawn. 

783Letter from ABA. 

784Letter from Cowen. Securities Act Rule 175 

and Exchange Act Rule 3b–6 were adopted in 1979. 

See Safe Harbor for Projections, Release No. 33– 

6084 (June 25, 1979) [44 FR 38810 (July 2, 1979)]. 

The PSLRA was enacted in 1995. 

785Letter from Winston & Strawn. 

commenters said that ‘‘we believe the 

removal of the PSLRA safe harbor 

would have a significant chilling effect 

on De-SPAC Transactions’’ and that this 

‘‘chilling effect is also demonstrated by 

the fact that IPO issuers rarely publicly 

include projections in the registration 

statement.’’ 769 One of these commenters 

said the proposal ‘‘undoubtedly will’’ 

reduce ‘‘the amount of potentially 

relevant information presented to 

investors’’ and suggested this would 

negatively affect investor ability to 

accurately value combined companies 

in de-SPAC transactions.770 Another of 

the commenters said that ‘‘the proposed 

amendment may discourage the 

disclosure of projections—especially 

given the Commission’s broad 

statements on potential underwriter 

liability.’’ 771 A different commenter 

referred to an article that said, ‘‘Offering 

[mandated forward-looking] disclosures 

safe harbor protection may decrease 

their accuracy relative to a world in 

which safe harbor protection were not 

available, if companies emboldened by 

the liability shield approach the 

preparation of such disclosures with 

less care or honesty than they otherwise 

would. But it could also increase the 

quality of the disclosures by reducing an 

incentive that might otherwise exist to 

negatively bias projections or obfuscate 

them, which has the twin effects of 

making them less vulnerable to attack in 

litigation and less useful to 

investors.’’ 772 The same article also said 

allowing a safe harbor to apply to 

forward-looking statements in de-SPAC 

transactions ‘‘might also work to lower 

liability insurance premiums.’’ 773

Commenters also expressed concerns 

about the combined effect of the 

proposed change in PSLRA safe harbor 

availability and proposed 17 CFR 

230.140a (‘‘Rule 140a’’) concerning 

underwriters.774 One of these 

commenters said, ‘‘In particular, when 

coupled with other proposed 

amendments that would require 

disclosure of a fairness determination 

(effectively mandating the provision of 

projections) as well as impose 

underwriter liability in a De-SPAC 

Transaction, we believe removal of the 

PSLRA safe harbor protections would 

have a chilling effect on De-SPAC 

Transactions and significantly 

disadvantage a De-SPAC Transaction 

compared to a traditional IPO.’’ 775

Another of these commenters said, ‘‘We 

do have a concern that the proposed 

amendment may discourage the 

disclosure of projections—especially 

given the Commission’s broad 

statements on potential underwriter 

liability.’’ 776 Another of these 

commenters said, ‘‘The elimination of 

the PSLRA safe harbor, combined with 

the Commission’s proposed Rule 140a, 

may have a chilling effect on the use of 

projections in de-SPAC transactions, 

which may preclude investors from 

receiving information that sponsors and 

boards of directors rely in part on in 

connection with valuation 

determination.’’ 777

Other commenters, however, 

expressed the view that PSLRA safe 

harbor availability does not 

meaningfully affect existing disclosure 

practices.778 One of these commenters 

said that ‘‘the availability of the PSLRA 

safe harbor may not be a significant 

factor in determining the use of forwardlooking statements in de-SPACs.’’ 779

Another of these commenters said that 

‘‘the safe harbor has never provided a 

meaningful shield from liability’’ and 

that ‘‘we do not expect that the absence 

of the safe harbor will have a substantial 

impact on current market disclosure 

practices and we do not object to the 

disapplication of the safe harbor to deSPAC transactions.’’ 780 Another of these 

commenters said, ‘‘In our experience, 

the availability of the PSLRA safe harbor 

for forward-looking statements in 

certain de-SPAC transactions does not 

alter the decision on the presentation of 

projections. Conversely, where the safe 

harbor is clearly available, such as for 

follow-on offerings by existing public 

companies, it remains rare to see the 

inclusion of projections in the actual 

offering documents.’’ 781

Several commenters observed that 

other safe harbors in Commission rules 

and legal doctrines protecting against 

liability under common law would 

continue to be available with respect to 

forward-looking statements 

notwithstanding the proposed changes 

regarding the availability of the PSLRA 

safe harbor.782 One of these commenters 

said, ‘‘An issuer’s ability to rely on the 

judicial ‘bespeaks caution’ doctrine may 

mitigate to some extent liability 

concerns associated with providing 

projections.’’ 783 Another of these 

commenters said that 17 CFR 230.175 

(‘‘Rule 175’’ under the Securities Act) 

and 17 CFR 240.3b–6 (‘‘Rule 3b–6’’ 

under the Exchange Act), which were 

‘‘adopted . . . prior to the PSLRA . . . 

provide safe harbor protection similar to 

that of the PSLRA safe harbor.’’ 784 This 

commenter also said that under the 

‘‘judicially-created ‘bespeaks caution’ 

doctrine . . . now accepted in 11 

federal judicial circuits . . . forwardlooking statements accompanied by 

sufficient cautionary language’’ are 

rendered ‘‘non-actionable under 

securities laws if such statements are 

proved incorrect in the future.’’ Under 

the bespeaks caution doctrine, this 

commenter said, ‘‘Essentially, the same 

requirements apply as would under the 

PSLRA to obtain protection—that the 

forward-looking statements be 

accompanied by ‘meaningful cautionary 

language.’ ’’ Another of these 

commenters said that ‘‘even if the 

proposed amendment is adopted, under 

the so-called ‘bespeaks caution’ 

doctrine, SPACs should still be able to 

make forward-looking statements in the 

absence of the PSLRA safe harbor.’’ 785

A different commenter stated that the 

main difference between the PSLRA and 

the other safe harbors is that ‘‘the 

PSLRA safe harbor provides a stay of 

discovery while a motion to dismiss 

based upon the safe harbor protections 

is under review by the court,’’ and that 


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786Letter from Cowen. 

787Letter from Winston & Strawn. 

788Letters from Cato Institute, Jonathan Kornblatt 

(‘‘It is arguably much better to have a responsible 

party issuing projections rather than have a void of 

such filled by bloggers or posters on social media. 

Individual investors may be far better served by 

having the C-suite as an accountable source of 

information instead of an anonymous chat room. I 

hope the Commission will keep in mind that the 

purpose of the PSLRA safe harbor was to encourage 

companies to share their forecasts with investors, 

and that shielding the liability risk was necessary 

to encourage such disclosure.’’), Kirkland & Ellis, 

Paul Swegle. 

789Letter from Cato Institute. 

790Letter from Kirkland & Ellis. 

791Letter from Paul Swegle. 

792Letters from Kirkland & Ellis, Winston & 

Strawn. 

793Letter from Kirkland & Ellis. 

794Letter from Kirkland & Ellis. 

795Letter from Winston & Strawn. 

796Letters from American Securities Association, 

Anonymous (Apr. 7, 2022). In addition, one 

commenter discussed generally the occurrence of 

litigation as a check against ‘‘inaccurate 

projections’’ already under the status quo. See letter 

from Vinson & Elkins (stating, ‘‘We do not believe 

an amendment (and the proposed change is not a 

‘clarification’) would improve the quality of 

projections in connection with de-SPAC 

transactions. SPACs and target companies already 

have strong incentives to make sure that the 

projections are as reasonable as possible. They may 

face suits over inaccurate projections . . .,’’ and 

noting in a footnote, ‘‘The PSLRA safe harbor only 

protects against civil suits, and in a civil case it is 

not a shield against a fraud claim.’’) (Other 

footnotes omitted). 

797Letter from American Securities Association. 

798Letter from NASAA. 

799Letters from Managed Funds Association; 

Michael Dambra, Omri Even-Tov, and Kimberlyn 

George. 

800Letter from Managed Funds Association. 

801Letter from Michael Dambra, Omri Even-Tov, 

and Kimberlyn George. 

802Letter from SPAC Association. 

803Letters from Jonathan Kornblatt, Vinson & 

Elkins. 

804Letter from Cowen. 

‘‘[t]he Commission’s proposal, in 

stripping away the protection of the 

PSLRA safe harbor for projections in deSPAC transactions, has in actuality not 

increased anyone’s exposure for the 

projections—it has simply increased the 

cost of defense.’’ 786 Another of these 

commenters expressed the view that the 

proposal ‘‘would only increase 

transaction costs and administrative 

burdens on de-SPAC transactions.’’ 787

Some commenters questioned the 

need for the amendments, expressing 

the view that investors are well-capable 

of assessing the reasonableness of 

projections used by SPACs.788 One of 

these commenters said, ‘‘The 

Commission is concerned that investors 

are misled by forward-looking 

statements, but some researchers have 

found that hype, if present, does not 

sway investors and that forecasts are 

often related to positive outcomes. 

These types of findings should lead the 

Commission to question whether an 

effective prohibition on forward-looking 

disclosure in traditional IPOs is itself a 

good policy idea where it may inhibit 

price discovery and capital 

formation.’’ 789 Another commenter said 

that ‘‘the proposed amendment with 

respect to the PSLRA will not 

meaningfully affect the quality of 

projections made available for the 

review of the SPAC’s board of directors 

and PIPE investors, if any’’ and that, 

‘‘the proposed revisions to Item 10(b) 

and Item 1609(a) will assist in the 

comparability of projections included in 

the disclosure of materials reviewed by 

the board of directors of a SPAC. In this 

way, investors will be able to assess for 

themselves whether underlying 

assumptions are reasonable rather than 

rely on the assertions of commentators 

in the market.’’ 790 Another of these 

commenters said, ‘‘It is also already 

standard practice to disclose key 

underlying risks and assumptions 

regarding projections and I find it hard 

to believe that investors are incapable of 

thoughtfully weighing projections 

together with a company’s other 

disclosures in their decision-making 

processes.’’ 791

Some commenters suggested that the 

need to alter the availability of the 

PSLRA safe harbor is overstated.792 One 

of these commenters said that, because 

target companies may register securities 

in a de-SPAC transaction, in that 

situation, the PSLRA safe harbor is 

already not available to them.793 This 

commenter also suggested the need to 

alter the availability of the PSLRA is 

overstated because boards of directors of 

SPACs review projections, including 

related assumptions and cautionary 

language, consistent with their fiduciary 

duty of care.794 A different commenter 

suggested the need to alter the 

availability of the PSLRA safe harbor is 

overstated because the PSLRA safe 

harbor only affects private litigation and 

does not prevent the Commission from 

pursuing claims for misleading 

disclosure.795

Several commenters suggested that 

the proposal would invite litigation 

against SPACs.796 One commenter said, 

‘‘The intent of removing the safe harbor 

for de-SPAC transactions is 

undeniable—it would open SPACs to a 

flood of private litigation that, when 

added to other provisions of the 

Proposal, would effectively kill the 

existing SPAC market.’’ 797

Other commenters suggested 

alternative policy approaches and other 

recommendations in connection with 

projection disclosure. One commenter 

suggested the Commission should 

restrict the use of projections because 

‘‘[a]s written, the Proposal would leave 

the door open for projections for which 

there are little to no reasonable basis, 

when an issuer has no historical 

operations, and when the company or 

asset acquisition is speculative in nature 

without any disclosure’’ and because 

‘‘[s]ponsors, target companies and 

underwriters that would become liable 

under the Proposal may attempt to 

evade liability by combining boilerplate 

risk factors with forward looking 

cautionary information that prefaces 

claims of unreasonable upside potential 

to investors.’’ 798 Other commenters 

suggested the Commission should 

mandate qualifying language or 

additional disclosure around the use of 

projections.799 One of these commenters 

said, ‘‘Rather than barring forwardlooking projections entirely, we 

recommend that the Commission 

instead consider requiring any such 

projections to include appropriate 

qualifying language, including the 

background and assumptions 

underlying such projections, along with 

any downside case analysis that was 

done in preparation of such 

projections.’’ 800 This commenter said, 

‘‘We believe that such an approach 

would be consistent with the disclosurebased approach the Commission has 

used in similar circumstances, 

including in the case of Regulation G 

[12 CFR part 244] with respect to the 

regulation of the use of financial 

measures that vary from those included 

within generally accepted accounting 

principles.’’ Another of these 

commenters said that ‘‘rather than 

barring such young growth firms from 

providing forward looking information, 

we feel that additional disclosure 

should be provided around these 

forecasts.’’ 801

One commenter suggested that, 

instead of adopting the PSLRA proposal, 

the Commission should require that 

earnings statements include a 

comparison of past projections in 

earning statements to actual results in 

order to enhance issuer 

accountability.802 Other commenters 

suggested that market forces would hold 

accountable issuers with unmet 

projections by preventing future capital 

access.803

Two other alternative policy 

approaches suggested by commenters 

were that: (a) the safe harbor should be 

made unavailable only to the ‘‘maker’’ 

of the statement but that others such as 

‘‘underwriters (or sellers) could 

continue to enjoy the full protection of 

the PSLRA;’’ 804 and (b) the safe harbor 


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805Letter from Charles Pieper. 

806Letter from CFA Institute. 

807Letter from Vinson & Elkins (footnotes 

omitted). 

808The final rules and concomitant unavailability 

of the PSLRA safe harbor for forward-looking 

statements are not intended to have any retroactive 

effect related to forward-looking statements made 

prior to the effective date of the final rules. 

809 In this subsection III.E.3, where we refer to 

‘‘blank check companies’’ in connection with our 

discussion of the final rules, unless otherwise 

indicated, we are referring to blank check 

companies that are not limited by any qualification 

that the company is an issuer of penny stock. 

810 Depending on specific facts and 

circumstances, protections other than the PSLRA 

safe harbors may apply in connection with forwardlooking statements. See letters from ABA, Cowen, 

Winston & Strawn, supra notes 782, 783, 784, and 

785 and accompanying text, and discussion below 

proximate to note 840. 

811For example, the definition of ‘‘forwardlooking statement’’ in the PSLRA is similar to the 

content of Securities Act Rule 175 (which pre-dated 

the PSLRA). Compare Securities Act section 

27A(i)(1) (15 U.S.C. 77z–2(i)(1)), with 17 CFR 

230.175(c). 

812See infra note 818 and accompanying text. 

should be unavailable for longer-term 

projections (where the commenter 

provided the example of a statement 

‘‘we will penetrate 50% of [total 

addressable market] in 10 years’’) but 

available for short-term projections 

(where the commenter provided the 

example of a statement ‘‘we expect to 

make revenue in 1 year or have positive 

[free cash flow] in 2 years’’).805

One commenter said the Commission 

should ‘‘monitor the effects of the safe 

harbor removal for de-SPACs on the 

availability and quality of forwardlooking information critical for SPAC 

investor decisions on merger approval 

votes and exercising redemption 

rights.’’ 806 Finally, one commenter said, 

‘‘While some de-SPAC transactions are 

in form ‘initial public offering[s]’ (e.g., 

where the target or a new company is 

formed to acquire the SPAC), it is 

inappropriate to deem a de-SPAC 

transaction where an existing public 

company stays public (e.g., where the 

SPAC survives the de-SPAC transaction 

as the publicly traded company) as an 

‘initial public offering.’ ’’ This 

commenter suggested the Commission 

should provide an interpretation that 

de-SPAC transactions are ‘‘tender 

offers’’ which would make the PSLRA 

safe harbor unavailable.807

3. Final Rules 

After considering the comments 

received, we are adopting a new 

definition of ‘‘blank check company’’ in 

Securities Act Rule 405 and Exchange 

Act Rule 12b–2 under the PSLRA. The 

new definition of ‘‘blank check 

company’’ in Rule 405 provides that for 

purposes of section 27A of the 

Securities Act of 1933 (15 U.S.C. 77z– 

2), the term blank check company 

means a company that has no specific 

business plan or purpose or has 

indicated that its business plan is to 

engage in a merger or acquisition with 

an unidentified company or companies, 

or other entity or person. The new 

definition of ‘‘blank check company’’ in 

Rule 12b–2 provides that for purposes of 

section 21E of the Securities and 

Exchange Act of 1934 (15 U.S.C. 78u– 

5), the term blank check company 

means a company that has no specific 

business plan or purpose or has 

indicated that its business plan is to 

engage in a merger or acquisition with 

an unidentified company or companies, 

or other entity or person. 

We are not amending Securities Act 

Rule 419 as proposed. Instead, as 

discussed in detail below, we are 

adopting a definition of ‘‘blank check 

company’’ under the PSLRA in 

Securities Act Rule 405 and Exchange 

Act Rule 12b–2 to clarify that such 

definitions are solely for purposes of the 

PSLRA and not for purposes of any 

other rules (including rules the 

Commission adopted pursuant to 

mandates under the Penny Stock 

Reform Act, such as Securities Act Rule 

419). The final rules have the same 

substantive effect as the proposal, 

notwithstanding the different approach 

taken.808

We also are not adopting any 

amendments as proposed to Securities 

Act Rules 137, 138, 139, 163A, 164, 174, 

405, 430B, and 437a, because the 

definition of blank check company in 

Rule 419 that these rules cross-reference 

will not be changed as a result of the 

final rules. In addition, we also are not 

adopting a definition of ‘‘blank check 

company issuing penny stock’’ in 

Securities Act Rule 405 as proposed. 

This proposed amendment is also 

unnecessary since the definition of 

‘‘blank check company’’ in Rule 419 

will not change. 

Having considered the comments 

received, we continue to believe that it 

is appropriate that forward-looking 

statements made in connection with deSPAC transactions should be treated 

similarly with forward-looking 

statements made in traditional IPOs, 

because the de-SPAC transaction results 

in public shareholders acquiring a 

formerly private company, similar to an 

IPO. In both IPOs and de-SPAC 

transactions, similar informational 

asymmetries exist between issuers (and 

their insiders and early investors) and 

public investors and there are similar 

risks of generating unfounded interest 

on the part of investors. In both IPOs 

and de-SPAC transactions, there is no 

track record of public disclosure to help 

investors evaluate projections. 

Moreover, these risks do not disappear 

merely because a blank check company 

raised more than $5 million in a firm 

commitment underwritten IPO (and 

therefore may not be issuing penny 

stock). The definitions of ‘‘blank check 

company’’ we are adopting and the 

concomitant changes to the availability 

of the PSLRA will help protect investors 

because blank check companies 809 may 

take more care in avoiding the use of 

forward-looking statements that are 

unreasonable. As we discuss in detail 

below, we are not barring the use of 

forward-looking statements and 

recognize that forward-looking 

statements can provide useful and 

necessary disclosure.810

We disagree, based on the text of the 

PSLRA, with the commenters who 

expressed the view that the PSLRA does 

not give the Commission authority to 

amend the Commission’s definition of 

‘‘blank check company’’ that existed at 

the time the PSLRA was adopted. On 

the contrary, in providing in the PSLRA 

that definitions, including blank check 

company, ‘‘have the meanings given 

those terms by rule or regulation of the 

Commission,’’ Congress expressly 

provided the Commission the authority 

to define these terms and to amend 

those definitions, consistent with the 

text, structure, and purpose of the 

PSLRA. 

The text of the PSLRA demonstrates 

in other ways as well that the 

Commission has the authority to define, 

and amend its definition of, ‘‘blank 

check company.’’ For example, Congress 

did not use tracking language in the 

PSLRA to define blank check 

companies, such as by a statutory 

definition of blank check company that 

closely resembles or mirrors the 

definition in the rules of the 

Commission at the time of the 

legislation. In contrast, with respect to 

other defined terms in the PSLRA, 

Congress did provide long-form 

definitions (rather than crossreferencing by citation an existing 

Commission rule) that closely resemble 

the content of definitions in 

Commission rules.811 Congress also did 

not define the term blank check 

company in the PSLRA by referencing 

the statutory definition in section 7(b)(3) 

of the Securities Act, as Congress did 

elsewhere in the PSLRA where it 

defined terms related to forward-looking 

statement safe harbors by crossreferencing to those terms.812 The 

absence in the PSLRA of such a 


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813 15 U.S.C. 77z–2(b)(1)(C); 15 U.S.C. 78u– 

5(b)(1)(C). 

814See, e.g., S. Rep. No. 104–98 (1995); H.R. Rep. 

No. 104–369 (1995) (Conf. Rep.). 

815Letter from ABA. See also letter from 

Goodwin. Securities Act section 27A(g) (15 U.S.C. 

77z(g)) provides: ‘‘In addition to the exemptions 

provided for in this section, the Commission may, 

by rule or regulation, provide exemptions from or 

under any provision of this title, including with 

respect to liability that is based on a statement or 

that is based on projections or other forwardlooking information, if and to the extent that any 

such exemption is consistent with the public 

interest and the protection of investors, as 

determined by the Commission.’’ Securities Act 

section 27A(h) (15 U.S.C. 77z(h)) provides: 

‘‘Nothing in this section limits, either expressly or 

by implication, the authority of the Commission to 

exercise similar authority or to adopt similar rules 

and regulations with respect to forward-looking 

statements under any other statute under which the 

Commission exercises rulemaking authority.’’ 

816Regarding Securities Act section 27A(b)(7), see 

supra note 710. 

817See supra note 710. 

818For example, Congress defined the terms 

‘‘penny stock’’ and ‘‘investment company’’ in the 

PSLRA by cross-referencing existing statutory 

provisions providing definitions of those terms. The 

PSLRA added Securities Act section 27A(i)(2) (15 

U.S.C. 77z–2(i)(2)) (‘‘The term ‘investment 

company’ has the same meaning as in section 3(a) 

of the Investment Company Act of 1940.’’) and 

section 27A(i)(3) (15 U.S.C. 77z–2(i)(3)) (‘‘The term 

‘penny stock’ has the same meaning as in section 

3(a)(51) of the Securities Exchange Act of 1934, and 

the rules and regulations, or orders issued pursuant 

to that section.’’). 

819H.R. Rep. No. 101–617, at 23 (1990) (‘‘The bill 

thus mandates that the Commission adopt new 

blank check rules which the Committee expects 

will contain at least three critical elements: (1) 

information regarding the company to be acquired 

by the blank check company prior to or after the 

date the registration becomes effective; (2) 

limitations on the use of proceeds of blank check 

offerings and the distribution of the securities of the 

issuer until such time as adequate disclosure has 

been made; and (3) a right of rescission for 

shareholders who disapprove of the disclosed 

acquisition.’’); Penny Stock Reform Act of 1990, 

H.R. 4497, 101st Cong., sec. 9(a)(2) (1990). 

820H.R. Rep. No. 101–617, at 22 (1990) (‘‘nearly 

70 percent of all penny stock issues offered in 1988 

and through the third quarter of 1989 were blank 

checks; money raised with no purpose stated for its 

use.’’); Penny Stock Market Fraud (Part 2): Hearing 

on H.R. 4497 Before the Subcomm. on Telecomm. 

and Fin. of the Comm. on Energy and Com., 101st 

Cong. 31 (1990) (Statement of Hon. Richard C. 

Breeden, Chairman, Securities and Exchange 

Commission) (‘‘The Commission recognizes that 

blank check offerings have been used extensively 

for abusive and fraudulent practices in the penny 

stock market. We empathize with the desire to ban 

these types of offerings.’’); The Securities Law 

Enforcement Remedies Act of 1989: Hearing on S. 

647 Before the Subcomm. on Sec. of the Comm. On 

Banking, Housing, and Urban Aff., 101st Cong. 351 

(1990) (testimony of Joseph Goldstein, Associate 

statutory cross-reference to define the 

term blank check company is consistent 

with Congress’s express grant of 

authority to the Commission, as 

discussed above, to define these terms 

and amend them consistent with the 

text, structure, and purpose of the 

PSLRA. 

In addition, the PSLRA safe harbors 

provide that they are unavailable to 

issuers that issue ‘‘penny stock.’’ 813 The 

1995 version of the definition of blank 

check company in Securities Act Rule 

419 contained (and still contains) a 

restriction that it applies only to 

companies issuing penny stock. This 

suggests that Congress did not intend to 

permanently fix the Commission’s 

definition of ‘‘blank check company’’ to 

the 1995 version of that definition in 

Securities Act Rule 419, because it 

would have been redundant for 

Congress to include a carve-out for 

blank check companies that are penny 

stock issuers and also carve out penny 

stock issuers. 

Furthermore, we also do not agree, 

based on the legislative history of the 

PSLRA, with commenters that asserted 

that Congress fixed the definition of 

‘‘blank check company’’ to the 

Commission’s rules as they existed in 

1995, when the PSLRA was enacted. 

Commission staff reviewed the complete 

legislative history of the PSLRA and 

found no evidence of any intent on the 

part of Congress to fix the definition of 

‘‘blank check company’’ as the term was 

defined in Securities Act Rule 419 at the 

time of the adoption of the PSLRA in 

1995.814 The staff also found no 

evidence in the legislative history of the 

PSLRA of any intent on the part of 

Congress to restrict the authority of the 

Commission to amend the definition of 

this term. 

One commenter said the proposed 

change regarding the definition of blank 

check company ‘‘appears inconsistent 

with the exemptive authority found in 

section 27A(g) and (h), which makes 

clear the Commission’s ability to extend 

the scope of the safe harbor protections 

rather than narrow them.’’ 815 We 

disagree. While Securities Act sections 

27A(g) and 27A(h) and Exchange Act 

sections 21E(g) and 21E(h) provide the 

Commission with authority to create 

new exemptions, subject to the 

conditions that they are in the public 

interest and protect investors, and 

clarify that the PSLRA did not limit the 

ability of the Commission to create new 

safe harbors for forward-looking 

statements, there is no limitation in 

these provisions on the express 

authority provided under Securities Act 

section 27A(i)(7) and Exchange Act 

section 21E(i)(5) to define ‘‘blank check 

company.’’ 816

With respect to the commenters who 

expressed the view that the 

Commission’s definition of ‘‘blank 

check company’’ under the PSLRA may 

not be broader than the statutory 

definition of this term in the Penny 

Stock Reform Act, nothing in the text of 

either statute limits the Commission’s 

definition for the term ‘‘blank check 

company’’ for purposes of the PSLRA to 

be no broader (i.e., not contain a 

qualification that the issuer issue penny 

stock) than how this term is defined in 

the Penny Stock Reform Act (i.e., 

containing a qualification that the issuer 

issue penny stock). 

Congress did not define ‘‘blank check 

company’’ in the PSLRA with language 

that tracks the definition of ‘‘blank 

check company’’ under the Penny Stock 

Reform Act.817 In contrast, with respect 

to other defined terms in the PSLRA, 

Congress did define terms using 

language that closely tracks existing 

definitions in other sources, such as the 

definition of ‘‘forward-looking 

statement’’ in the PSLRA which is 

similar to Securities Act Rule 175 and 

Exchange Act Rule 3b–6 (which both 

pre-dated the PSLRA). 

Also, Congress did not define ‘‘blank 

check company’’ in the PSLRA by crossreferencing the definition of ‘‘blank 

check company’’ in Securities Act 

section 7(b)(3) that was added by the 

Penny Stock Reform Act, but, instead, 

Congress defined ‘‘blank check 

company’’ and other defined terms in 

the PSLRA as having ‘‘the meanings 

given those terms by rule or regulation 

of the Commission.’’ In contrast, with 

respect to other defined terms in the 

PSLRA, Congress did cross-reference 

existing statutes as a means of supplying 

definitions for those terms.818

Furthermore, the PSLRA legislative 

history does not evidence an intent by 

Congress to require the Commission’s 

PSLRA ‘‘blank check company’’ 

definition to be fixed to a specific 

definition (e.g., to be no broader than 

the Penny Stock Reform Act definition). 

In contrast, Congress did fix the 

definition in the Penny Stock Reform 

Act. The legislative history of the Penny 

Stock Reform Act documents Congress’s 

concerns that overbroad restrictions on 

‘‘blank check company’’ issuances, with 

respect to penny stock abuses, could 

interfere with legitimate capital raising 

in connection with that statute. The 

legislative history of the Penny Stock 

Reform Act—which mandated the 

Commission to adopt restrictions on 

blank check companies and ultimately 

led the Commission to adopt Rule 

419 819—documents that Congress was 

concerned about blank check companies 

in connection with penny stock abuses 

(the focus of the legislation) because 

blank check companies were viewed as 

providing a large inventory of securities 

that fed into the market for penny 

stocks.820 The legislative history of the 


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Director, Division of Enforcement, Securities and 

Exchange Commission, stating that ‘‘from the 

enforcement side, we have seen widespread abuse 

with blank checks. They are a very popular vehicle 

for committing penny stock fraud.’’). 

821Penny Stock Market Fraud (Part 2): Hearing on 

H.R. 4497 Before the Subcomm. on Telecomm. and 

Fin. of the Comm. on Energy and Com., 101st Cong. 

31–32 (1990) (Statement of Hon. Richard C. 

Breeden, Chairman, Securities and Exchange 

Commission) (‘‘If blank checks were outlawed, it 

would be relatively easy for promoters to specify a 

particular field of investment, essentially turning 

what had been a blank check offering into a blind 

pool. While these, too, could be barred, the blind 

pool financing approach has been used for years by 

legitimate issuers in venture capital, real estate, oil 

and gas exploration, and equipment leasing 

programs. Thus, a proven mechanism for raising 

capital for productive uses could be eliminated or, 

at least, subjected to costs and additional 

regulation. While the bill grants the Commission 

powers to define which issuers could be subject to 

regulation we are concerned that, at least as it is 

currently written, any such definition would most 

likely be circumvented by unethical issuers.’’); 

Penny Stock Market Fraud (Part 2): Hearing on H.R. 

4497 Before the Subcomm. on Telecomm. and Fin. 

of the Comm. on Energy and Com., 101st Cong. 47– 

48 (1990) (Testimony of Richard C. Breeden, 

Chairman, U.S. Securities and Exchange 

Commission) (‘‘H.R. 4497 would prohibit both 

blank check and certain blind pool offerings. 

However, blind pool financings have been used for 

years by issuers in venture capital, real estate, oil 

and gas exploration programs, equipment leasing 

and other areas. Thus, substantial costs and burdens 

could be imposed on this kind of financing 

technique for which disclosure regulation has been 

adequate in the past, and which has been an 

important source of producing capital.’’) Penny 

Stock Market Fraud (Part 2): Hearing on H.R. 4497 

Before the Subcomm. on Telecomm. and Fin. of the 

Comm. on Energy and Com., 101st Cong. 189 (1990) 

(Statement of John Guion, President, National 

Association of Publicly Traded Companies) (‘‘There 

has been much said about blank check and blind 

pools. Our comment here is that they have been 

used legitimately by some organizations, 

particularly in gas and oil exploration, and I would 

assume that the subcommittee would take that into 

consideration in resolving that particular area.’’). 

The U.S. House of Representatives documented 

these concerns in House Report No. 101–617 (1990) 

to accompany H.R. 4497. See H.R. Rep. No. 101– 

617, at 22 (1990) (‘‘While Commission Chairman 

Richard Breeden and NASD enforcement director 

John Pinto agreed that blank check offerings were 

a source of problems, they were also of the view 

that blank check offerings could be and were used 

in legitimate business transactions outside of the 

penny stock arena. Accordingly, they opposed an 

outright ban of all blank check offerings.’’). 

Ultimately H.R. 4497 was not approved by the 

House of Representatives. The House of 

Representatives and the Senate approved the same 

versions of S. 647, which became law when it was 

signed by the President. See govtrack (regarding 

H.R. 4497 and S. 647 in the 101st Congress), 

available at https://www.govtrack.us/congress/bills/ 

101/s647 and https://www.govtrack.us/congress/ 

bills/101/hr4497. 

822Letter from American Securities Association, 

supra note 751. See also letter from Job Creators 

Network, supra note 751. 

823Proposing Release, supra note 7, at 29481– 

29482. 

824The Proposing Release requested comment on 

the following: ‘‘Should we consider retaining a 

separate definition of ‘‘blank check company’’ for 

purposes of Rule 419?’’ See Proposing Release, 

supra note 7, at 29482 (request for comment 

number 78). 

825Notwithstanding several references to section 

21E of the Exchange Act in the Proposing Release, 

we did not propose an Exchange Act rules 

definition of ‘‘blank check company’’ in the 

Proposing Release to accompany the proposed 

amendments to the Securities Act rules and 

Regulation S–K. We are adopting an Exchange Act 

rule definition of ‘‘blank check company’’ as well 

as a Securities Act rule definition, because this 

approach should be clearer for registrants and other 

relevant parties and is more consistent with how 

the Commission has traditionally exercised its 

authority to define terms in the acts. 

826Letters from ABA, Job Creators Network. See 

supra notes 743, 744, 745, 746, 747, and 748 and 

accompanying text. See also letter from Kirkland & 

Ellis, supra note 749 and accompanying text. 

827Letter from Cato Institute, supra note 759 and 

accompanying text; letter from NYC Bar, supra note 

761 and accompanying text. 

Penny Stock Reform Act indicates that 

members of Congress were aware of 

concerns expressed by hearing 

witnesses that, if regulation of blank 

check companies were unduly 

restrictive, this could disrupt funding 

for investment vehicles such as private 

equity investment entities, particularly 

in real estate, hydrocarbons and 

technology sectors.821

Some commenters suggested that the 

proposed changes to the definition of 

‘‘blank check company’’ are contrary to 

the Administrative Procedure Act of 

1946, because the Commission does not 

have explicit statutory authority to make 

the changes.822 The final rules are 

consistent with the express statutory 

authority of the Commission as 

discussed above. 

Notwithstanding the foregoing, the 

final rules include technical changes 

from the proposal to clarify that the 

definitions of ‘‘blank check company’’ 

that we are adopting are solely for 

purposes of the PSLRA and not for 

purposes of any rules the Commission 

adopted pursuant to mandates under the 

Penny Stock Reform Act, such as Rule 

419. In the Proposing Release, the 

Commission proposed moving the 

definition of blank check company out 

of Rule 419 (into Rule 405) and 

amending Rule 419 to use the proposed 

blank check company definition with a 

qualification in Rule 419 (that would be 

outside of that definition) limiting the 

applicability of Rule 419 to issuers of 

penny stocks.823 We are adopting a 

definition of ‘‘blank check company’’ 

that will be located in Securities Act 

Rule 405, as proposed, but that includes 

revised language stating that the 

definition is ‘‘For purposes of section 

27A of the Securities Act of 1933 (15 

U.S.C. 77z–2).’’ As a result, we are not 

amending Rule 419 as the Commission 

proposed; thus, the existing definition 

of ‘‘blank check company’’ in Rule 419 

will remain unchanged.824 We are also 

adding to Exchange Act Rule 12b–2 a 

nearly identical definition of ‘‘blank 

check company’’ as with the final 

Securities Act Rule 405 definition, 

except that it provides that the 

definition is ‘‘For purposes of section 

21E of the Securities and Exchange Act 

of 1934 (15 U.S.C. 78u–5).’’ 825

As discussed above, some 

commenters did not support the 

proposal or expressed a view it is 

inappropriate to adopt the proposal 

because of concerns related to the 

definition of ‘‘blank check company’’ in 

the Penny Stock Reform Act.826 We do 

not agree with the commenters that 

suggested we could not adopt the 

proposed definition of blank check 

company on these grounds. However, in 

order to make clear that we are using 

our authority to define terms under the 

PSLRA and not under the Penny Stock 

Reform Act, we are not amending Rule 

419 as proposed. Rather, we are 

amending Securities Act Rule 405 and 

Exchange Act Rule 12b–2, as discussed 

above. The final rules have the same 

substantive effect as the proposal 

notwithstanding the different approach 

taken. 

As discussed above, some 

commenters suggested that projections 

are rarely used in traditional IPOs.827

Traditional IPOs, however, may include 

projections. IPO issuers commonly 

provide certain disclosures about the 

future in their registration statements, 

including estimates in historical 

financial statements and disclosure 

provided pursuant to 17 CFR 229.303 

(‘‘Item 303’’ of Regulation S–K) 

(Management’s Discussion and Analysis 

of Financial Condition and Results of 

Operations) and Items 5 and 9 of Form 

20–F. In an IPO, disclosures under Item 

303 of Regulation S–K (for example, 

which may include statements about the 

effects of changing prices and future 

economic performance) are outside the 

bounds of the PSLRA safe harbor (which 

is not applicable to IPOs pursuant to 

Securities Act section 27A(b)(2)(D)). In 

any offering, including an IPO, 

estimates in financial statements 

prepared in accordance with generally 

accepted accounting principles are 

outside the bounds of the PSLRA safe 

harbor pursuant to Securities Act 

section 27A(b)(2)(A). 

Issuers in certain types of IPOs also 

often include industry- or offeringspecific projections. For example, 

Commission staff has observed that real 

estate investment trusts may disclose 

dividend distribution plans and 

anticipated cash available for 

distribution (sometimes referred to by 

industry participants as the ‘‘Magic 

Page’’). One commenter also noted that 

‘‘while it may not be common in certain 


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828Letter from Winston & Strawn. 

829 In connection with the disclosure of any 

determination of a board of directors under Item 

1606(a), Item 1606(b) requires a discussion of 

financial projections relied upon by the board of 

directors. See supra section II.G. In certain 

situations, it is also possible a fair summary of 

projections would be required under State law. See, 

e.g., In re Pure Resources Inc. S’holders Litig., 808 

A.2d 421, 449 (Del. Ch. 2002) (requiring a fair 

summary of the substantive work performed by 

investment bankers advising a board of directors); 

In re Netsmart Technologies, Inc. S’holders Litig., 

924 A.2d 171, 176 (Del. Ch. 2007) (‘‘In the context 

of a cash-out merger, reliable management 

projections of the company’s future prospects are of 

obvious materiality to the electorate.’’); Louden v. 

Archer-Daniels-Midland Co., 700 A.2d 135, 145 

(Del. 1997) (‘‘Speculation is not an appropriate 

subject for a proxy disclosure.’’); In re PNB Holding 

Co. S’holders Litig., 2006 WL 2403999, at *16 (Del. 

Ch. Aug. 18, 2006) (‘‘our law has refused to deem 

projections material unless the circumstances of 

their preparation support the conclusion that they 

are reliable enough to aid the stockholders in 

making an informed judgment.’’). 

830Letters from ABA, Amanda Rose, Cato 

Institute, Cowen, Goodwin, Vinson & Elkins, NYC 

Bar. See supra notes 757, 758, 759, 760, 761, and 

762 and accompanying text. See also 

recommendation of the Small Business Capital 

Formation Advisory Committee, supra note 40. 

831Letters from American Securities Association, 

CFA Institute, Cowen. See supra note 763. 

832See supra note 829. 

833One commenter expressed similar views in 

connection with their comments on proposed Item 

1609. See letter from Freshfields (‘‘The projections 

are included in the de-SPAC offering document in 

order to describe the basis upon which the board 

of directors of the SPAC approved the de-SPAC 

transaction—not to serve as a basis for investors to 

make an investment decision.’’). 

834For example, final Item 1609 requires certain 

disclosure where projections no longer reflect the 

views of a SPAC’s or a target company’s 

management or board of directors (or similar 

governing body) regarding the future performance 

of their respective companies. 

835Letters from Bullet Point Network, Ropes & 

Gray, SPACInsider, SPAC Association, Vinson & 

Elkins, White & Case. See supra note 754. In 

addition, certain comments also expressed concerns 

about the potential chilling effect on the use of 

projections in the SPAC market due to the 

combination of the change in the PSLRA safe harbor 

availability and proposed Rule 140a concerning 

underwriters. We expect the same incentives to take 

more care in avoiding the use of unreasonable 

forward-looking statements will apply to 

underwriters. See letter from NYC Bar, supra note 

777 and accompanying text. See also letter from 

Vinson & Elkins, supra note 774. 

836See supra note 834 regarding required 

disclosures where projections no longer reflect 

views on future performance. 

837Letters from SPAC Association, Winston & 

Strawn. 

838Letter from Bullet Point Network. 

839See supra section III.C. 

840Letters from ABA, Cowen, Winston & Strawn. 

See supra notes 782, 783, 784, 785, 786, and 787 

and accompanying text. 

industries, many types of IPO issuers 

(e.g., REITs [real estate investment 

trusts], yieldcos, and master limited 

partnerships) do regularly disclose 

projections in their IPO registration 

statements and those projections are 

expected, and relied upon, by 

underwriters and institutional and retail 

investors.’’ 828 Furthermore, the fact that 

registrants in traditional IPOs (where 

there is no PSLRA safe harbor available) 

provide projections voluntarily and 

provide them to comply with applicable 

requirements reinforces our view that 

blank check companies will be able to 

provide projections where they may be 

required to disclose projections they 

have relied upon under Commission 

rules or may be required to disclose 

projections under State law.829

Some commenters expressed concern 

with the proposal because State law 

may require disclosure of certain 

projections 830 or because of the 

interaction of the proposed change in 

safe harbor availability with other 

aspects of the proposal, such as Item 

1609.831 We do not believe, under the 

final rules, that registrants will be 

unable to provide a fair summary 832 of 

any projections considered material and 

reliable that the registrant considers to 

be required to be disclosed under State 

law or will be unable to provide the 

disclosure required by Item 1609. As 

discussed in detail below, the final rules 

we are adopting do not bar SPACs from 

making forward-looking statements or 

any required disclosures. The changes 

to the availability of the PSLRA safe 

harbor in connection with the definition 

of blank check company we are 

adopting will help protect investors by 

incentivizing SPACs to take more care 

in avoiding the use of forward-looking 

statements that are unreasonable. 

In addition, investors are likely to 

understand the difference between: (i) 

on one hand, third-party projections 

provided to the management of a SPAC 

about a target company prior to the 

business combination agreement with 

the target company; and (ii) on the other 

hand, disclosure by registrants in 

registration statements in connection 

with de-SPAC transactions that include 

SPAC or target company management 

projections regarding certain financial 

statement line items or financial 

measures in future years with respect to 

the target company that is intended to 

guide investors in connection with the 

de-SPAC transaction.833 To the extent a 

SPAC is concerned that security holders 

may rely on a summary of third-party 

projections that the SPAC believes it is 

required to disclose under State law in 

instances where the SPAC believes the 

projections are no longer reliable, a 

SPAC could provide supplemental 

disclosure advising and alerting security 

holders of this fact.834

Some commenters suggested that the 

proposal potentially would have a 

chilling effect on the use of projections 

in de-SPAC transactions and give rise to 

one of the perceived downsides of an 

IPO, where a limited group of 

institutional investors may receive 

issuer projections indirectly (i.e., from 

securities analysts who have received 

projections directly from the issuer).835

While we acknowledge that there may 

be increased liability for projections 

disclosed in connection with de-SPAC 

transactions, we believe the rules we are 

adopting are necessary to protect 

investors receiving such projections. As 

we discuss in connection with other 

comments expressing concerns there 

may be a chilling effect on projection 

use, the final rules do not prohibit the 

use of projections in connection with 

blank check company business 

combinations. As in an IPO and as 

SPACs have done in the past, SPACs 

will continue to be able to disclose 

projections in connection with de-SPAC 

transactions after the effective date of 

the final rules, and securities analysts 

may elect to use such forward-looking 

statements as appropriate. In some 

cases, a SPAC may decide to qualify its 

disclosure to put it in the proper 

context.836

Some commenters suggested the 

proposal would create inconsistency by 

making the PSLRA safe harbor 

unavailable for one kind of business 

combination transaction (de-SPAC 

transactions) but not for other kinds of 

business combination transactions.837 In 

contrast, another commenter said that 

‘‘[t]he rationale for treating SPAC 

business combinations differently from 

other mergers with respect to the 

disclosure of projections is exactly that 

the SPAC is a shell company designed 

exclusively to merge with a private 

company seeking public listing and 

SPAC shareholders have an 

unconditional right to redeem for the 

initial price per share paid (typically 

$10 per share).’’ 838

As discussed above, there are certain 

differences between SPACs and other 

business combination transactions due 

to the hybrid nature of de-SPAC 

transactions.839 In light of these 

differences, we believe it is appropriate 

to take a different regulatory approach 

with respect to de-SPAC transactions— 

including in connection with the final 

definitions of ‘‘blank check company’’ 

we are adopting—in order to ensure that 

investors in these hybrid transactions 

are adequately protected. 

As discussed above, several 

commenters addressed protections from 

liability in Commission rules and in 

common law other than the PSLRA safe 

harbor.840 We agree with commenters 

that these protections for defendants 


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841With respect to Securities Act Rule 175, which 

defines the term fraudulent statement to include, 

among other things, a statement which is an untrue 

statement of a material fact and a statement false or 

misleading with respect to any material fact, see, 

e.g., Wielgos v. Commonwealth Edison Co., 892 

F.2d 509, 513 (7th Cir. 1989) (court determined that 

Rule 175 applies to actions under Securities Act 

section 11 even though liability under that section 

does not depend on fraud). See also Arazi v. 

Mullane, 2 F.3d 1456, 1468 (7th Cir. 1993) (‘‘Bally’s 

public statements fell within the safe harbor created 

by Exchange Act Rule 3b–6, and the plaintiffs have 

failed to allege with the particularity required by 

Fed.R.Civ.P. 9(b) that these statements lacked a 

reasonable basis.’’), Roots Partnership v. Lands’ 

End, Inc., 965 F.2d 1411 (7th Cir. 1992) 

(‘‘Defendants . . . are entitled to dismissal under 

Rule 175. . . .’’). With respect to the bespeaks 

caution doctrine, see, e.g., In re Donald J. Trump 

Casino Sec. Litig.-Taj Mahal Litig., 7 F.3d 357, 371– 

373 (3d Cir. 1993) (upholding district court grant of 

defendant’s motion to dismiss claims that included 

section 11 claims and applying bespeaks caution 

doctrine), In re Worlds of Wonder Sec. Litig., 35 

F.3d 1407, 1427 n.3 (9th Cir. 1994) (‘‘The plaintiffs 

appear to contend that, if the bespeaks caution 

doctrine is viable, it applies only to section 10(b) 

claims and not to section 11 claims. This argument 

is plainly wrong. . . . [C]ourts have applied the 

doctrine to section 11 claims as well as section 

10(b) claims.’’), I. Meyer Pincus & Assoc., P.C. v. 

Oppenheimer & Co., Inc., 936 F.2d 759, 763 (2d Cir. 

1991) (‘‘The statements contained within the 

prospectus clearly ‘bespeak caution’. . . .’’ and 

‘‘We conclude that Pincus can prove no set of facts 

which would demonstrate that the language . . . of 

the prospectus, read in context, is materially 

misleading. . . . The complaint thus fails to state 

a claim under either Section 11 of the 1933 Act [or] 

Section 10(b) of the 1934 Act.’’). 

842 15 U.S.C. 77z–2(f), 15 U.S.C. 78u–5(f). See 

letters from Cowen, Winston & Strawn. See supra 

notes 786 and 787 and accompanying text. We note 

these final rules do not affect the stay of discovery 

during the pendency of a decision on a motion to 

dismiss under Securities Act section 27(b)(1) (15 

U.S.C. 77z–1(b)(1)) or Exchange Act section 

21D(b)(3)(B) (15 U.S.C. 78u–4(b)(3)(B). 

843Letters from Andrew Tuch, Davis Polk, 

Kirkland & Ellis. See supra notes 778, 779, 780, and 

781 and accompanying text. See also letter from 

Cowen, supra note 778. 

844Compare Miller v. Champion Enters., Inc., 346 

F.3d 660, 672 (6th Cir. 2003) (‘‘[I]f the statement 

qualifies as ‘forward-looking’ and is accompanied 

by sufficient cautionary language, a defendant’s 

statement is protected regardless of the actual state 

of mind.’’), and Harris v. Ivax Corp., 182 F.3d 799, 

803 (11th Cir. 1999) (‘‘[I]f a statement is 

accompanied by ‘meaningful cautionary language,’ 

the defendants’ state of mind is irrelevant.’’), with 

Lormand v. US Unwired, Inc., 565 F.3d 228, 244 

(5th Cir. 2009) (‘‘Because the plaintiff adequately 

alleges that the defendants actually knew that their 

statements were misleading at the time they were 

made, the safe harbor provision is inapplicable to 

all alleged misrepresentations.’’), and In re Enron 

Corp. Securities, Derivative & ERISA Litigation, 235 

F.Supp.2d 549, 576 (S.D. Tex. 2002) (‘‘The safe 

harbor provision does not apply where the 

defendants knew at the time that they were issuing 

statements that the statements contained false and 

misleading information and thus lacked any 

reasonable basis for making them.’’). Compare also 

Brief for Securities and Exchange Commission as 

Amicus Curiae, Slayton v. Am. Express Co., No. 08– 

5442–cv (2d Cir. 2010) (‘‘[T]o remove a forwardlooking statement from the protection of the safe 

harbor, a plaintiff must show that the defendant (i) 

actually knew (ii) that the statement was 

misleading.’’), with Amanda M. Rose, SPAC 

Mergers, IPOs, and the PSLRA’s Safe Harbor: 

Unpacking Claims of Regulatory Arbitrage (May 19, 

2022), at 26–27, available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=3945975, submitted as attachment to letter from 

Amanda Rose (‘‘Prongs A and B of the PSLRA’s safe 

harbor are written in the disjunctive, meaning that 

if either prong is met the suit must be 

dismissed. . . . This reading of the safe harbor was 

critiqued by some as giving rise to a ‘right to lie’ 

on the part of defendants, but it can be defended 

from a public policy perspective in light of the 

broader goals of the legislation . . . mistaken 

scienter determinations are a real risk in suits 

challenging forward-looking statements due to the 

phenomenon of hindsight bias, and the need to 

fight over this fact-laden issue may preclude early 

termination of the case, inviting strike suit 

litigation.’’). 

845Letters from Kirkland & Ellis, Winston & 

Strawn. 

846Letter from Kirkland & Ellis. See also letter 

from Andrew Tuch (‘‘Just as the legal structure of 

de-SPACs determines the threat of liability to 

transaction participants, it also determines the 

application of the PSLRA safe harbor.’’). 

847Letter from Kirkland & Ellis. 

848Proposing Release, supra note 7, at 29462, 

n.33, and at 29482; letters from Americans for 

Financial Reform Education Fund, Better Markets, 

CFA Institute, CII, Senator Elizabeth Warren, supra 

notes 722–727 and accompanying text. The 

Commission has brought a number of enforcement 

actions involving SPACs alleging the use of baseless 

or unsupported projections about future revenues 

and the use of materially misleading underlying 

financial projections. See, e.g., SEC v. Ulrich Kranz 

and Paul Balciunas, No. 23–cv–06332 (C.D. Cal. 

filed Aug. 4, 2023); In the Matter of Momentus, Inc., 

et. al., Exchange Act Release No. 34–92391 (July 13, 

2021); SEC vs. Hurgin, et al., Case No. 1:19–cv– 

05705 (S.D.N.Y., filed June 18, 2019); In the Matter 

of Benjamin H. Gordon, Exchange Act Release No. 

34–86164 (June 20, 2019); SEC vs. Milton, Case No. 

1:21–cv–6445 (S.D.N.Y., filed July 29, 2021). 

849Letter from Winston & Strawn. 

remain potentially applicable, 

depending upon specific facts and 

circumstances.841 We disagree, 

however, with the commenters who 

stated that adopting a new definition of 

blank check company under the PSLRA 

will merely increase costs such as by 

eliminating the stay of discovery during 

the pendency of a motion for summary 

judgment.842 Rather, we believe that 

removal of the procedural protections 

under the PSLRA will incentivize 

SPACs and other blank check 

companies to take greater care to avoid 

the use of forward-looking statements 

that are unreasonable. We analyze the 

impact of costs related to the final 

definition of blank check company in 

section VII (Economic Analysis). 

With respect to commenters that 

expressed the view that the PSLRA safe 

harbor availability does not 

meaningfully affect existing disclosure 

practices,843 we do not agree that the 

PSLRA safe harbor has no effect on the 

accuracy and reliability of disclosure. 

For example, with respect to knowingly 

misleading statements, courts are split 

on whether knowingly false or even 

fraudulent forward-looking statements 

are protected by the PSLRA safe 

harbor; 844 whereas removing any doubt 

about the applicability of the safe harbor 

would incentivize parties to take care to 

avoid the use of unreasonable forwardlooking statements. We do agree, 

however, as discussed above, that the 

removal of the PSLRA safe harbor will 

not eliminate forward-looking 

statements. 

Some commenters suggested the need 

to alter the availability of the PSLRA 

safe harbor is overstated.845 One of these 

commenters said that, because target 

companies may register securities in a 

de-SPAC transaction, in that situation, 

the PSLRA safe harbor is already not 

available to them.846 We agree that, 

since the PSLRA safe harbor is not 

applicable to non-reporting companies 

and is not applicable to IPOs, in certain 

deal structures where a non-publicly 

traded target company is registering 

securities that it is offering in the deSPAC transaction, the PSLRA safe 

harbor is already unavailable. There are, 

however, a number of de-SPAC 

transactions that are not structured in 

this manner. 

This commenter also suggested the 

need to alter the availability of the 

PSLRA is overstated because boards of 

directors of SPACs review projections, 

including related assumptions and 

cautionary language, consistent with 

their fiduciary duty of care.847 Despite 

these existing fiduciary duties, as 

discussed by commentators cited in the 

Proposing Release and by several 

commenters on the Proposing Release, 

there have been uses of projections in 

de-SPAC transactions that appear to be 

unreasonable, unfounded, or potentially 

misleading, particularly where the target 

company is an early stage company with 

no or limited sales, products, or 

operations.848 Therefore, we believe that 

the final rules will supplement such 

State legal or equitable doctrines 

imposing fiduciary duties and help 

ensure blank check companies take 

more care to avoid the use of 

unreasonable forward-looking 

statements. 

A different commenter suggested the 

need to alter the availability of the 

PSLRA safe harbor is overstated because 

the PSLRA safe harbor only affects 

private litigation and does not prevent 

the Commission from pursuing claims 

for misleading disclosure.849 We 

disagree with this view to the extent 

that it implies there is no need for 

investor private rights of action under 

the Federal securities laws when 

Commission enforcement actions are 

available. We consider that view to be 

inconsistent with the Federal securities 


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850See, e.g., Securities Act section 11 (15 U.S.C. 

77k); Securities Act section 12 (15 U.S.C. 77l). 

851Letters from Anonymous (Apr. 7, 2022), 

American Securities Association, Vinson & Elkins. 

852See also supra note 844 (discussing splits 

among courts on whether knowingly false or 

fraudulent forward-looking statements are protected 

by the PSLRA safe harbor). 

853Letters from Managed Funds Association 

(referring to the proposal as ‘‘barring forwardlooking projections entirely’’); Michael Dambra, 

Omri Even-Tov, and Kimberlyn George (referring to 

the proposal as ‘‘barring . . . young growth firms 

from providing forward looking information.’’). See 

supra notes 800 and 801 and accompanying text. 

854 Id. 

855Letters from ABA, Amanda Rose, Cato 

Institute, CFA Institute, Goodwin, Kirkland & Ellis, 

NYC Bar, SPAC Association, Vinson & Elkins, 

Winston & Strawn. See supra notes 768, 769, 770, 

771, and 772 and accompanying text. 

856Letter from NASAA. See supra note 798 and 

accompanying text. 

857See supra note 756 (letters from Bullet Point 

Network, Loeb & Loeb, Kirkland & Ellis, 

SPACInsider). See also letters from ABA, Amanda 

Rose, SPAC Association, supra note 756. 

858 Disclosure of Projections of Future Economic 

Performance, Release No. 33–5362 (Feb. 2, 1973) 

[38 FR 7220 (Mar. 19, 1973)]. With respect to 

development of policies towards projections, see 

also Guides for Disclosure of Projections of Future 

Economic Performance, Release No. 33–5992 (Nov. 

7, 1978) [43 FR 53246 (Nov. 15, 1978)]; Rescission 

of Guides and Redesignation of Industry Guides, 

Release No. 33–6384 (Mar. 16, 1982) [47 FR 11476 

(Mar. 16, 1982)]. 

859See letters from Americans for Financial 

Reform Education Fund, Better Markets, CFA 

Institute, CII, Senator Elizabeth Warren, supra notes 

722–727 and accompanying text. 860For the same reason, we disagree with the 

commenters who suggested the Commission should 

expand the PSLRA safe harbor to apply to IPOs. See 

letters from Bullet Point Network, Loeb & Loeb, 

Kirkland & Ellis, SPACInsider, supra note 756 and 

accompanying text. See also letters from ABA, 

Amanda Rose, SPAC Association, supra note 756. 

The concerns we have about the use of forwardlooking statements in de-SPAC transactions and 

other business combinations involving blank check 

companies discussed above are equally prevalent in 

traditional IPOs. 

861See Item 1609 of Regulation S–K. See also 

letter from Managed Funds Association supra note 

800. 

862Letters from Jonathan Kornblatt, Vinson & 

Elkins. 

863See letter from Amanda Rose. 

864Business combination agreements (such as 

merger agreements) between a company and a blank 

check company commonly contain a company 

covenant, representation, or similar provision that 

the company will maintain its directors and officers 

insurance or contain a representation or warranty 

that the company’s directors and officers insurance 

listed on the company’s disclosure schedules to the 

agreement is in force and effect. 

law statutory scheme, which provides 

for several private rights of action.850

Several commenters suggested that 

the proposal regarding the change in 

availability of the PSLRA safe harbor 

would invite litigation against 

SPACs.851 While it is possible that 

litigation may increase as a result of the 

removal of the PSLRA safe harbor 

protections, it is also possible litigation 

may not increase or may decrease if 

some issuers who otherwise would have 

provided unreasonable projections 

instead provide reasonable projections 

as a result of the final rules.852

Several commenters provided a range 

of views on how the proposal could or 

should change the current use of 

forward-looking statements, such as 

projections. Some commenters 

expressed concerns that the proposal 

would bar issuers from using 

projections.853 These commenters 

suggested that, rather than barring the 

use of projections, the Commission 

should mandate qualifying language or 

additional disclosure around the use of 

projections.854 Other commenters 

expressed concerns that the proposal 

would have a chilling effect on the use 

of projections.855 Another commenter 

suggested the Commission should 

restrict the use of projections.856 Other 

commenters asked the Commission to 

expand the PSLRA safe harbor to cover 

IPOs.857

The final definition of ‘‘blank check 

company’’ we are adopting would not 

prohibit the use of projections in SPAC 

registration statements. In this respect, 

the final rules are not a departure from 

the Commission’s general policies 

towards projections held since 1973 

when the Commission moved away 

from its previous ‘‘long standing policy 

generally not to permit projections to be 

included in prospectuses and reports 

filed with the Commission.’’ 858 That the 

final definition of ‘‘blank check 

company’’ does not prohibit projections 

is also consistent with existing 17 CFR 

229.10(b) (‘‘Item 10(b)’’ of Regulation S– 

K), which we are amending in this 

release, and new Regulation S–K Item 

1609. These rules both relate to the use 

of projections, including those of 

SPACs—rules which would be 

unnecessary if projections were barred 

in registration statements of blank check 

companies. 

We recognize that forward-looking 

statements can provide useful and 

necessary disclosure to investors, and 

that such statements may be mandated 

by State and/or fiduciary legal 

obligations. We also recognize that 

removing certain liability protections for 

these forward-looking statements could 

lead some blank check companies to 

provide fewer forward-looking 

statements or no forward-looking 

statements compared with what they 

might have provided in the absence of 

the final rules. However, we believe the 

definition of ‘‘blank check company’’ 

that we are adopting and the 

concomitant impact on the availability 

of the PSLRA safe harbors are necessary 

and appropriate to help address 

concerns over the misuse of forwardlooking statements in de-SPAC 

transactions and other business 

combinations involving blank check 

companies.859 These risks to investors 

are present in de-SPAC transactions just 

as in IPOs; in both transactions, there is 

no track record of public disclosure for 

a target company to help investors 

evaluate forward-looking statements.860

The final definition of ‘‘blank check 

company’’ we are adopting will better 

protect these investors by incentivizing 

blank check companies to take more 

care in avoiding the use of unreasonable 

forward-looking statements. In addition, 

we note that the final rules require a 

discussion of qualifying information, 

such as assumptions, in connection 

with the use of projections in de-SPAC 

transactions as recommended by one of 

the commenters, which will further 

enhance investor protections in 

connection with such forward-looking 

statements.861

Some commenters suggested that 

market forces would hold issuers with 

unmet projections accountable by 

preventing future capital access.862

While accountability-imposing market 

reactions potentially could limit future 

capital-raising ability of some SPACs 

that provide unreasonable projections, 

relying solely on such market-based 

protections would not provide investors 

with any recourse at the time the 

projections are made. In addition, some 

companies may not return to the capital 

markets in the future to raise additional 

cash. In such cases, to the extent that 

market accountability mechanisms may 

operate in the manner suggested by 

these commenters, we believe that the 

passage of time creates risks that such 

accountability mechanisms may be less 

likely to operate as theorized. 

One commenter suggested allowing 

the PSLRA safe-harbor to apply to deSPAC transactions might lower liability 

insurance premiums.863 We recognize 

that removal of PSLRA safe-harbor 

protection from SPACs could result in 

increased insurance costs for target 

companies. Based on Commission staff’s 

experience, companies that enter 

business combination agreements with 

blank check companies may have 

directors and officers insurance, and 

such business combination agreements 

may contain provisions regarding the 

provision of directors and officers 

insurance to company officials.864 As a 

result, any increased costs incurred by 

companies in connection with business 

combinations with blank check 

companies with respect to directors and 

officers insurance under the final rules 

will be incremental to those already 


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865Letter from SPAC Association. 

866Letter from Cowen. 

867See, e.g., Securities Act section 27A(a) (15 

U.S.C. 77z–2(a)) (‘‘This section shall apply only to 

a forward-looking statement made by—(1) an issuer 

that, at the time that the statement is made, is 

subject to the reporting requirements of section 

78m(a) or section 78o(d) of this title; (2) a person 

acting on behalf of such issuer; (3) an outside 

reviewer retained by such issuer making a 

statement on behalf of such issuer; or (4) an 

underwriter, with respect to information provided 

by such issuer or information derived from 

information provided by the issuer.’’). Exchange 

section 21E(a) contains similar provisions. 

868As noted by a commenter and as discussed 

above, other safe harbors, such as Securities Act 

Rule 175 and Exchange Act Rule 3b–6 and the 

bespeaks caution may continue to apply, depending 

on specific facts and circumstances. In contrast to 

the PSLRA, Rules 175 and 3b–6 do not explicitly 

refer to statements made by underwriters. Rules 175 

and 3b–6 apply to statements ‘‘made by or on behalf 

of an issuer or by an outside reviewer retained by 

the issuer.’’ 

869Letter from Charles Pieper. 

870We note that 17 CFR 229.10(b)(1), as amended 

in this release, sets out the policy of the 

Commission that registrant assessments of future 

performance must have a reasonable basis. In 

addition, 17 CFR 229.10(b)(2), as amended in this 

release, provides: ‘‘The period that appropriately 

may be covered by a projection depends to a large 

extent on the particular circumstances of the 

company involved. For certain companies in certain 

industries, a projection covering a two- or threeyear period may be entirely reasonable. Other 

companies may not have a reasonable basis for 

projections beyond the current year.’’ Blank check 

companies should consider whether projections 

that extend a substantial period into the future, 

such as the 10-year projection provided in the 

commenter’s example, are consistent with this 

policy. 

871Letter from Vinson & Elkins. See supra note 

807. 

872 In particular, see supra section III.C and infra 

section IV.A. 

873Proposing Release, supra note 7, at 29461, 

n.21. 

874Proposing Release, supra note 7, at 29483. 

875See Proposing Release, supra note 7, at 29486. 

incurred. Furthermore, we believe these 

incremental costs are justified by the 

enhanced investor protections that will 

be realized by the incentives created by 

the final rules for blank check 

companies to take care to avoid the use 

of forward-looking statements that are 

unreasonable. We discuss our analysis 

of the costs and benefits of the final 

rules in more detail in section VIII 

below. 

One commenter suggested the 

Commission should require that 

earnings statements include a 

comparison of past projections to actual 

results in order to enhance issuer 

accountability.865 While we recognize 

the potential benefits of such disclosure, 

in order to achieve our goals of 

incentivizing SPACs and other blank 

check companies to take more care in 

avoiding the use of unreasonable 

forward-looking statements, we do not 

believe it is necessary to adopt the 

commenter’s suggestion and believe that 

these goals will be achieved by the final 

rules. 

Another commenter suggested that 

the safe harbor should be made 

unavailable only to the ‘‘maker’’ of the 

statement but that others such as 

‘‘underwriters (or sellers) could 

continue to enjoy the full protection of 

the PSLRA.’’ 866 ‘‘Sellers’’ are not one of 

the enumerated persons whose forward 

looking statements are covered by the 

PSLRA safe harbors.867 With respect to 

underwriters, Securities Act section 

27A(a)(4) provides that section 27A’s 

safe harbor for forward-looking 

statements applies only to a forwardlooking statement ‘‘made by’’ certain 

persons, including ‘‘an underwriter, 

with respect to information provided by 

such issuer or information derived from 

information provided by the issuer.’’ 

Exchange Act section 21E(a)(4) contains 

similar provisions. Sections 27A(a)(4) 

and 21E(a)(4) do not explicitly discuss 

situations where an underwriter is not 

the maker of the statement. Securities 

Act section 27A(g) and Exchange Act 

section 21E(g) give the Commission 

exemptive authority to adopt rules or 

regulations to provide exemptions from 

or under any provision of the PSLRA 

‘‘with respect to liability that is based 

on a statement or that is based on 

projections or other forward-looking 

information if and to the extent that any 

such exemption is consistent with the 

public interest and the protection of 

investors, as determined by the 

Commission.’’ We are not exercising 

that authority and are not adopting the 

commenter’s suggestion with respect to 

sellers and underwriters because we do 

not believe that it is consistent with the 

public interest and the protection of 

investors to expand the protections of 

the PSLRA safe harbors in this manner 

and believe it would be inconsistent 

with the purpose of the final rules to 

incentivize blank check companies to 

take more care in avoiding the use of 

unreasonable forward-looking 

statements.868

Another commenter suggested that 

the safe harbor should be unavailable 

for longer-term projections (where the 

commenter provided the example of a 

statement, ‘‘we will penetrate 50% of 

[total addressable market] in 10 years’’) 

but available for short-term projections 

(where the commenter provided the 

example of a statement, ‘‘we expect to 

make revenue in 1 year or have positive 

[free cash flow] in 2 years.’’) 869 We 

believe that it is equally important for 

investor protection purposes that blank 

check companies take care to avoid the 

use of unreasonable short-term 

projections as well as unreasonable 

longer-term projections.870 Therefore, 

we are not adopting this suggestion. 

One commenter said it is 

inappropriate to deem a transaction to 

be a de-SPAC transaction where the 

SPAC survives as an IPO and suggested 

the Commission should provide an 

interpretation that de-SPAC transactions 

are ‘‘tender offers’’ which would make 

the PSLRA safe harbor unavailable.871

We disagree with the view de-SPAC 

transactions should not be considered 

the IPO of the target company. As we 

discuss in detail in this release,872 the 

de-SPAC transaction is functionally the 

IPO of the target company. While 

redemption rights exercisable by 

security holders in connection with the 

de-SPAC transaction (or extension of the 

timeframe to complete a de-SPAC 

transaction) generally have indicia of a 

tender offer,873 the business 

combination component of the de-SPAC 

transaction is typically structured as a 

statutory merger, and not as a tender 

offer. Therefore, we disagree with the 

commenter’s suggestion that entire deSPAC transactions could be interpreted 

or viewed as tender offers. 

F. Underwriter Status and Liability in 

Securities Transactions 

1. Proposed Rule 

The Commission proposed Rule 140a 

to clarify that anyone who acts as an 

underwriter in a SPAC IPO and 

participates in the distribution 

associated with a de-SPAC transaction 

by taking steps to facilitate such 

transaction, or any related financing 

transaction, or otherwise participates 

(directly or indirectly) in the de-SPAC 

transaction is engaged in the 

distribution of securities of the 

surviving public entity and, therefore, is 

an ‘‘underwriter’’ within the meaning of 

section 2(a)(11) of the Securities Act.874

In this way, the proposed rule was 

intended to clarify that liability 

protections similar to those in 

traditional underwritten IPOs would 

apply to de-SPAC transactions in which 

a statutory underwriter has participated. 

The Commission also described in the 

Proposing Release some of the activities 

sufficient to establish a SPAC IPO 

underwriter as a participant in the 

distribution of target company 

securities, as securities of the combined 

company.875 The Proposing Release 

stated that the discussion of such 

activities was non-exhaustive and not 

intended to limit the definition of 

underwriter for purposes of section 

2(a)(11) of the Securities Act. 


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14236 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

876Letters from Andrew Tuch, Americans for 

Financial Reform Education Fund, Better Markets, 

Bullet Point Network, CII, Consumer Federation, 

Senator Elizabeth Warren, ICGN, Mohammed Ali 

Rashid (May 7, 2022) (‘‘Mohammed Ali Rashid’’), 

NASAA, Public Citizen. 

877Letters from Andrew Tuch, ABA, Anonymous 

(May 9, 2022) (‘‘Anonymous (May 9, 2022)’’), 

American Securities Association, Committee on 

Capital Markets Regulation, CFA, Cleary Gottlieb 

Steen & Hamilton LLP (June 13, 2022) (‘‘Cleary 

Gottlieb’’), Cowen, Davis Polk, Fenwick, 

Freshfields, Goodwin, ICGN, Cato Institute, Job 

Creators Network, King & Wood Mallesons, 

Kirkland & Ellis, Loeb & Loeb, Managed Funds 

Association, NYC Bar, Paul Swegle, Ropes & Gray, 

Securities Industry and Financial Markets 

Association (June 10, 2022) (‘‘SIFMA’’), Skadden, 

SPAC Association, Usha Rodrigues and Mike 

Stegemoller (May 31, 2022) (‘‘Usha Rodrigues and 

Mike Stegemoller’’), Vinson & Elkins, White & Case, 

Winston & Strawn. 

878Letters from ABA, Anonymous (May 9, 2022), 

Committee on Capital Markets Regulation, Cowen, 

Davis Polk, Goodwin, Cato Institute, Managed 

Funds Association, Paul Swegle, SIFMA, Skadden, 

Vinson & Elkins. 

879Letters from ABA, Anonymous (May 9, 2022), 

American Securities Association, Cleary Gottlieb, 

Cowen, Davis Polk, Freshfields, Goodwin, King & 

Wood Mallesons, Kirkland & Ellis, Loeb & Loeb, 

Managed Funds Association, NYC Bar, Ropes & 

Gray, SIFMA, Skadden, Tony Crom (May 18, 2022), 

Usha Rodrigues and Mike Stegemoller, Vinson & 

Elkins, White & Case, Winston & Strawn. 

880Letters from Andrew Tuch, ABA, Davis Polk, 

Ropes & Gray, White & Case. 

881See Small Business Capital Formation 

Advisory Committee recommendations, supra note 

40. 

882Letters from Davis Polk, Kirkland & Ellis, NYC 

Bar, SIFMA, Vinson & Elkins. 

883Letters from ABA, Cleary Gottlieb, Cowen, 

Davis Polk, Freshfields, Goodwin, SIFMA. 884Letters from ABA, Cleary Gottlieb, Cowen, 

Davis Polk, Freshfields, Goodwin, SIFMA. 885Letters from ABA, SIFMA. 886Letters from ABA, American Securities 

Association, CFA, Cowen, Cleary Gottlieb, Davis 

Polk, Freshfields, Goodwin, Kirkland & Ellis, 

Managed Funds Association, Ropes & Gray, SIFMA, 

Skadden, Vinson & Elkins, White & Case, Winston 

& Strawn. 

887Letter from Cowen. 

888Letters from Americans for Financial Reform 

Education Fund, Better Markets, Consumer 

Federation, ICGN, Mohammed Ali Rashid, Managed 

Funds Association, NASAA. 

889Letters from ABA, Davis Polk, Freshfields, 

Goodwin, Kirkland & Ellis, Managed Funds 

Association, Skadden, Vinson & Elkins. 

890Letters from ABA, Better Markets, Davis Polk, 

ICGN, Ropes & Gray, Vinson & Elkins, White & 

Case. 

891Letter from Cowen. 

892Letter from NYC Bar. 

893Letter from Vinson & Elkins. 

894Letter from Usha Rodrigues and Mike 

Stegemoller. 

895Letters from ABA, Committee on Capital 

Markets Regulation, Davis Polk, Ropes & Gray, 

SIFMA, Winston & Strawn. 

896New High Risk Ventures, Release No. 33–5275 

(July 27, 1972) [37 FR 16011, 16013 (Aug. 9, 1972)] 

(‘‘Also unique is the importance of the underwriter 

in the distribution of the securities. His role is 

central as the intermediary between the issuer and 

the investing public. Correspondingly, the public 

looks to the underwriter for protection and expects 

him to verify the accuracy of the statements in the 

registration statement.’’). 

897 15 U.S.C. 77b(a)(11). 

898See Definition of Terms ‘‘Underwriter’’ and 

‘‘Brokers’ Transactions,’’ Release No. 33–5223 (Jan. 

11, 1972) [37 FR 591, 592 (Jan. 14, 1972)] (‘‘Rule 

144 Adopting Release’’) (‘‘The term underwriter is 

broadly defined in section 2[(a)](11) of the 

Act. . . . Thus, an investment banking firm which 

arranges with an issuer for the public sale of its 

securities is clearly an ‘underwriter’ under that 

section. Not so well understood is the fact that 

individual investors who are not professionals in 

the securities business may be ‘underwriters’ within 

the meaning of that term as used in the Act if they 

act as links in a chain of transactions through which 

securities move from an issuer to the public.’’). See 

also Harden v. Raffensperger, Hughes & Co., 65 

F.3d 1392, 1400 (7th Cir. 1995) (‘‘Both the Supreme 

Court and this court have interpreted broadly the 

phrases ‘participate in’ and ‘participation’ found in 

2. Comments 

Several commenters generally 

supported proposed Rule 140a.876

However, several other commenters 

expressed concerns about the potential 

impact on transaction participants and 

the overall market if proposed Rule 140a 

were adopted.877 Several commenters 

also expressed concerns about increased 

costs if proposed Rule 140a were 

adopted.878 In addition, numerous 

commenters expressed concerns that the 

proposed rule could result in increased 

liability and/or litigation risk for 

transaction participants.879 Several 

commenters also expressed broader 

concerns about the effects of proposed 

Rule 140a on M&A transactions other 

than de-SPAC transactions.880 A 

Commission advisory committee 

recommended that participants who 

would have underwriter liability should 

be clearly identified and participants 

should be held accountable to the same 

extent they would be in traditional 

IPOs.881

Several commenters disagreed with 

the discussion in the Proposing Release 

regarding what it means to participate in 

a distribution.882 A number of 

commenters asserted that proposed Rule 

140a was inconsistent with the statutory 

text of section 2(a)(11), other 

Commission rules, and case law 

construing the application of section 11 

to parties other than named 

underwriters.883 In particular, 

commenters argued that the term 

‘‘underwriter’’ as used in section 

2(a)(11) does not have unlimited 

applicability to capture anyone 

associated with an issuance of securities 

within its meaning.884 Some 

commenters argued that no person in a 

de-SPAC transaction purchases with a 

view to distribution or sells for an issuer 

or participates in any purchase, offer, or 

sale of securities for distribution or that 

a de-SPAC transaction generally does 

not involve underwriters.885

Some commenters questioned the 

scope of the section 11 liability that 

would attach to any underwriter under 

the proposed rule.886 In addition, 

commenters questioned how a court 

would apportion damages among 

underwriters were Rule 140a to be 

adopted as proposed.887 While some 

commenters stated that underwriter 

status would improve diligence 

performed by parties in a de-SPAC 

transaction,888 other commenters 

disagreed that proposed Rule 140a 

would improve diligence performed in 

de-SPAC transactions.889

To the extent the Commission were to 

adopt Rule 140a, some commenters 

requested specific changes or additional 

provisions related to the rule. Several 

commenters asked the Commission to 

limit the scope of proposed Rule 140a 

underwriter liability in a de-SPAC 

transaction to disclosures akin to those 

in a traditional IPO.890

Several commenters proposed 

alternatives to adopting Rule 140a, 

including: 

• Relying on statutory ‘‘seller’’ 

liability under Securities Act section 

12(a)(2);891

• Requiring a SPAC to file a current 

report upon announcement of a signed 

agreement to consummate a de-SPAC 

Transaction;’’ 892

• Mandating ‘‘a new role for an 

investment bank in de-SPAC 

transactions for all exchange-listed 

SPACs;’’ 893 and 

• Establishing a maximum threshold 

on redemptions in order for a de-SPAC 

transaction to proceed.894

Finally, several commenters asked the 

Commission to apply proposed Rule 

140a on a prospective basis or to adopt 

a phase in period.895

3. Declining To Adopt Proposed Rule 

140a; Commission Guidance on 

Underwriter Status in De-SPAC 

Transactions 

As discussed in the Proposing 

Release, underwriters play an important 

role in the U.S. financial markets, acting 

as gatekeepers for the investing public 

in the distribution of a new issuer’s 

securities to the public markets for the 

first time.896 Section 2(a)(11) of the 

Securities Act defines underwriter as 

‘‘any person who has purchased from an 

issuer with a view to, or offers or sells 

for an issuer in connection with, the 

distribution of any security, or 

participates or has a direct or indirect 

participation in any such undertaking, 

or participates or has a participation in 

the direct or indirect underwriting of 

any such undertaking.’’ 897 The 

Commission and courts generally have 

emphasized that such concepts should 

be applied broadly and not 

formulaically.898


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15 U.S.C. 77b(11). In Pinter v. Dahl, 486 U.S. 622, 

108 S. Ct. 2063, 100 L.Ed.2d 658 (1988), for 

example, the Supreme Court discussed whether the 

Congress intended to impose liability under section 

12[(a)](1) of the Securities Act on those collateral 

to the offer or sale of a security. Rejecting the 

possibility, the Court commented, in dictum, that 

‘Congress knew of the collateral participation 

concept and employed it in the Securities Act. . . . 

Liabilities and obligations expressly grounded in 

participation are found elsewhere in the Act, see, 

e.g., 15 U.S.C. 77b(11).’ Dahl, 486 U.S. at 650 n. 26, 

108 S. Ct. at 2080 n. 26. The Court’s footnoted 

discussion makes clear that, in its view, one who 

‘participates,’ or ‘takes part in,’ an underwriting is 

subject to section 11 liability.’’). 

899A ‘‘spin-off’’ is a transaction by which a parent 

company distributes shares of a subsidiary to the 

parent company’s shareholders. These transactions 

are frequently accompanied by the creation of a 

public market for the subsidiary’s securities via 

listing on a national securities exchange. See, e.g., 

Spin Offs and Shell Corporations, Release No. 33– 

4982 (July 14, 1969) [34 FR 11581 (July 15, 1969)] 

(‘‘Spin Offs Release’’) (‘‘It is accordingly the 

Commission’s position that the shares which are 

distributed in certain spin offs involve the 

participation of a statutory underwriter and are 

thus, in those transactions, subject to the 

registration requirements of the Act. . . .’’). See 

also Revisions to Rules 144 and 145, Release No. 

33–8869 (Dec. 6, 2007) [72 FR 71546, 71559 (Dec. 

17, 2007)] (‘‘The presumptive underwriter provision 

in Rule 145 is no longer necessary in most 

circumstances. However, based on our experience 

with transactions involving shell companies that 

have resulted in abusive sales of securities, we 

believe that there continues to be a need to apply 

the presumptive underwriter provision to reporting 

and non-reporting shell companies and their 

affiliates and promoters.’’). 

900Proposing Release, supra note 7, at 29485. 

901Letter from ABA. 

902See Geiger v. SEC, 363 F.3d 481, 487 (D.C. Cir. 

2004) (finding that head trader and salesman, 

respectively, at a securities brokerage firm, who 

made resales in broker transactions over a two-week 

period of 133,333 shares of the roughly 25 million 

shares then outstanding, were engaged in a 

distribution within the meaning of section 2(a)(11) 

of the Securities Act and that one ‘‘did not have to 

be involved in the final step of [a] distribution to 

have participated in it’’). See also R.A Holman v. 

SEC, 366 F.2d 446, 449 (2d Cir. 1966) (finding that 

a distribution ‘‘comprises the entire process by 

which in the course of a public offering the block 

of securities is dispersed and ultimately comes to 

rest in the hands of the investing public’’) (internal 

quotation marks omitted). 

903Such transactions historically have been 

known as ‘‘going public through the back door.’’ 

See, e.g., Leib Orlanski, Going Public Through the 

Back Door and the Shell Game, 58 Va. L. Rev. 1451 

(1972), available at https://heinonline.org/HOL/ 

Page?public=true&handle=hein.journals/ 

valr58&div=72&start_

page=1451&collection=usjournals&set_as_

cursor=0&men_tab=srchresults. 

904For example, shareholders of a SPAC become 

shareholders of a combined operating company by 

operation of State or local law in a statutory merger. 

905Letter from ABA. 

906See the discussion regarding the broad 

definition of ‘‘sale’’ in section 2(a)(3) and the 

related examples in infra section IV.A.3.i. 

907See infra section IV.A. As discussed below, 

Rule 145a applies regardless of the structure the deSPAC transaction may take. 

908Letter from ABA. 

909Letter from SIFMA. 

910See 2 Louis Loss, Joel Seligman & Troy 

Paredes, Securities Regulation 3.A.3 (6th ed. 2019) 

(‘‘The term underwriter is defined not with 

reference to the particular person’s general business 

but on the basis of his or her relationship to the 

particular offering. . . . Any person who performs 

one of the specified functions in relation to the 

offering is a statutory underwriter even though he 

or she is not a broker or dealer.’’). 

Having considered the comments 

received on proposed Rule 140a and 

given the broad nature of the definition 

of underwriter in section 2(a)(11), we 

are not adopting Rule 140a. Although 

we agree with commenters that the term 

underwriter does not have ‘‘unlimited 

applicability,’’ as further explained 

below, the statutory definition of 

underwriter, itself, encompasses any 

person who sells for the issuer or 

participates in a distribution associated 

with a de-SPAC transaction. To assist 

parties in applying section 2(a)(11) to 

de-SPAC transactions, we are providing 

the following general guidance 

regarding statutory underwriter status. 

For the avoidance of doubt, this 

guidance does not implement proposed 

Rule 140a. Rather than promulgate a 

rule clarifying when a specific party is 

an underwriter for de-SPAC 

transactions, we intend to follow the 

Commission’s longstanding practice of 

applying the statutory terms 

‘‘distribution’’ and ‘‘underwriter’’ 

broadly and flexibly, as the facts and 

circumstances of any transaction may 

warrant. 

i. A De-SPAC Transaction Is a 

Distribution of Securities 

The concept of distribution within 

section 2(a)(11) is not limited to a 

transaction taking the form of a 

traditional IPO or traditional capital 

raising. For example, a spin-off is not 

traditional capital raising; yet, in certain 

circumstances, has been found to 

constitute a distribution of securities for 

the purposes of section 2(a)(11).899 In 

the Proposing Release, the Commission 

stated that the de-SPAC transaction 

marks the introduction of the private 

operating company to the public capital 

markets and is effectively how the 

private operating company’s securities 

‘‘come to rest’’—in other words, are 

distributed—to public investors as 

shareholders of the combined 

company.900

Some commenters asked the 

Commission to better explain the 

distribution that occurs in a de-SPAC 

transaction.901 Although the word 

‘‘distribution’’ has no definition in the 

Securities Act, the term ‘‘distribution’’ 

refers to the entire process in a public 

offering through which a block of 

securities is dispersed and ultimately 

comes to rest in the hands of the 

investing public.902 In a traditional IPO, 

an underwriter distributes shares in a 

private company to investors thereby 

providing access to capital and the 

public markets. Although different in 

form from traditional capital raising in 

an IPO, the purpose of a de-SPAC 

transaction is to provide the target 

company with capital and access to the 

public markets.903 In the course of such 

a transaction, regardless of the 

transaction structure, public 

shareholders of the SPAC become 

owners of the combined operating 

company through the business 

combination.904 Given this, in the 

context of a de-SPAC transaction, 

interests in the typically private target 

company are dispersed to the public via 

a business combination with a SPAC. 

The distribution is therefore the process 

by which the SPAC’s investors, and 

therefore the public, receive interests in 

the combined operating company. 

One commenter asserted that not 

every de-SPAC transaction would 

involve a distribution of securities 

because in at least some de-SPAC 

transactions the target company is not 

‘‘selling’’ or ‘‘distributing’’ any 

securities in the transaction.905 As 

discussed elsewhere in this release, 

however, the statutory concepts of offer 

and sale have a very broad meaning and 

can encompass situations in which 

there is no actual exchange of 

securities.906 However, assuming, for 

the sake of addressing this commenter’s 

argument, that a distribution requires a 

‘‘sale’’ that meets the definition of such 

term under section 2(a)(3), we are 

adopting Rule 145a, which deems there 

to be a sale from the combined company 

to the SPAC’s existing shareholders 

even in de-SPAC transaction structures 

where the target company is not 

‘‘selling’’ or ‘‘distributing’’ its own 

securities into the market.907

ii. Statutory Underwriters in De-SPAC 

Transactions 

While one commenter asserted that 

there is not always a distribution of 

securities associated with a de-SPAC 

transaction,908 another asserted that the 

de-SPAC distribution ‘‘occurs directly 

from the issuer to the counterparties to 

the business combination, without the 

involvement of underwriters.’’ 909 It is 

well established that the statutory 

definition of underwriter is not limited 

to traditional underwriters in firm 

commitment IPOs, but also includes 

anyone who otherwise meets the 

statutory definition.910 Anyone in this 

second category is generally known as a 

‘‘statutory underwriter’’ because, 

although they may not be named as an 

underwriter in a given offering and may 

not engage in activities typical of a 


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911Rule 144 Adopting Release, supra note 898, at 

596. 

912Letters from Davis Polk, Kirkland & Ellis, NYC 

Bar, SIFMA, Vinson & Elkins. 

913Many such commenters have pointed to In re 

Lehman Bros. Mortgage-Backed Sec. Litig., 650 F.3d 

167 (2d Cir. 2011) as evidence that the Second 

Circuit has more narrowly defined the concept of 

participant in a distribution. See letters from ABA, 

Cleary Gottlieb, Committee on Capital Markets 

Regulation, Kirkland & Ellis, SIFMA, Skadden, 

Vinson & Elkins, Winston & Strawn. There, the 

Court held that the various credit rating agency 

defendants could not be liable as underwriters 

section 2(a)(11). See also commenter references to 

Silvercreek Mgmt., Inc. v. Citigroup, Inc., 346 F. 

Supp. 3d 473, 507–09 (S.D.N.Y. 2018); In re REFCO, 

Inc. Sec. Litig., 2008 WL 3843343, at *4 (S.D.N.Y. 

Aug. 14, 2008). 

914Similarly, section 12(a)(2) imposes liability 

upon anyone, including underwriters, who offers or 

sells a security, by means of a prospectus or oral 

communication, which includes an untrue 

statement of a material fact or omits to state a 

material fact necessary in order to make the 

statements, in the light of the circumstances under 

which they were made, not misleading, to any 

person purchasing such security from them. 15 

U.S.C. 77l(a)(2). 

915See the defenses to section 11 liability in 15 

U.S.C. 77k(b). 

916 15 U.S.C. 77k(b)(3). 

917Letters from ABA, Andrew Tuch, Davis Polk, 

Ropes & Gray, White & Case. 918See supra section I and infra section IV.A.3. 919As stated above, throughout this release, we 

use ‘‘shell company’’ and ‘‘reporting shell 

company’’ in lieu of the phrases ‘‘shell company, 

other than a business combination related shell 

company’’ and ‘‘reporting shell company, other 

than a business combination related shell 

company.’’ See supra note 41 for the definition of 

‘‘reporting shell company.’’ 

named underwriter, they nevertheless 

meet the definition of underwriter in the 

statute. As such, the statute applies to 

such parties in the same way as it would 

to a named underwriter in a firm 

commitment offering. In addition, the 

Commission has previously stated that 

‘‘the statutory language of section 

2[(a)](11) is in the disjunctive. Thus, it 

is insufficient to conclude that a person 

is not an underwriter solely because he 

did not purchase securities from an 

issuer with a view to their distribution. 

It must also be established that the 

person is not offering or selling for an 

issuer in connection with the 

distribution of the securities, does not 

participate or have a direct or indirect 

participation in any such undertaking, 

and does not participate or have a 

participation in the direct or indirect 

underwriting of such an 

undertaking.’’ 911

Several commenters disagreed with 

the discussion in the Proposing Release 

regarding what it means to participate in 

a distribution.912 These commenters 

asserted that some courts have adopted 

a narrower view of the concept of 

‘‘participation’’ than what was 

discussed in the Proposing Release.913

We acknowledge that some courts have 

declined to find that parties other than 

named underwriters were acting as 

distribution participants. These cases, 

however, arose in more conventional 

capital raising contexts and were based 

on the particular facts and 

circumstances before the court. It is far 

from clear that the cases cited by the 

commenters should be determinative of 

how the concepts of ‘‘distribution’’ and 

‘‘underwriter’’ apply in the context of a 

de-SPAC transaction, which combines 

elements of both a traditional IPO and 

an M&A transaction. 

We acknowledge that in a de-SPAC 

transaction, there is generally no single 

party accepting securities from the 

issuer with a view to resell such 

securities to the public in a distribution 

in the same manner as a traditional 

underwriter in traditional capital 

raising. Nevertheless, in a de-SPAC 

distribution, there would be an 

underwriter present where someone is 

selling for the issuer or participating in 

the distribution of securities in the 

combined company to the SPAC’s 

investors and the broader public. 

Depending on the facts and 

circumstances, such an entity could be 

deemed a ‘‘statutory underwriter’’ even 

though it may not be named as an 

underwriter in any given offering or 

may not be engaged in activities typical 

of a named underwriter in traditional 

capital raising. Section 11 would apply 

as it would to anyone acting as 

underwriter with respect to a registered 

de-SPAC transaction, and such person 

will have liability for any material 

misstatement or omission in the 

registration statement.914 Similarly such 

person would have any defenses 

available to the parties upon whom the 

statute imposes liability.915

The prior discussion is not intended 

to signal that we believe that every deSPAC transaction or offering of 

securities generally involves or needs 

the involvement of an underwriter. But 

where a distribution and an underwriter 

are present, the party acting as 

underwriter will need to perform the 

necessary due diligence of the 

disclosures made in connection with the 

registered offering of securities or face 

full exposure to liability without the 

benefit of the due diligence defense 

under the Securities Act of 1933.916

iii. A De-SPAC Transaction Is 

Distinguishable From Other M&A 

Transactions 

By its terms, proposed Rule 140a 

would have applied only to SPAC IPO 

underwriters that took steps to facilitate 

a de-SPAC transaction or any related 

financing transaction, or otherwise 

participated (directly or indirectly) in 

the de-SPAC transaction. However, as 

noted above, commenters indicated that 

the proposal raised numerous questions 

about whether other parties that 

similarly facilitate de-SPAC transactions 

would be subject to liability and, 

whether a similar analysis applies to 

other types of transactions, such as more 

‘‘traditional’’ M&A transactions (i.e., 

those not involving a SPAC).917

In response to these comments, we 

note that Rule 140a was not intended to 

address any business combination 

transaction not involving a de-SPAC 

transaction. Similarly, the guidance 

presented in this release is not intended 

to influence current practice in 

traditional M&A, as the two situations 

are readily distinguishable. As 

discussed above,918 although de-SPAC 

transactions have many of the same 

features of traditional M&A transactions, 

they have a different purpose. While 

they take the form of a business 

combination, de-SPAC transactions 

serve as the means by which a private 

company may enter the public market 

for the first time and thus are the 

equivalent of an IPO by the target 

company. Indeed, it is in recognition of 

this unique method of conducting a 

public offering that we are adopting 

Rule 145a and the co-registration 

requirements to account for the fact that 

the combined company in a de-SPAC 

transaction is effectively acting as an 

issuer engaged in a sale of its securities 

to the public shareholders of the SPAC. 

We reiterate, however, that nothing in 

this release is intended to limit or alter 

the definition of underwriter for 

purposes of section 2(a)(11) of the 

Securities Act. 

IV. Business Combinations Involving 

Shell Companies 

In response to concerns regarding the 

use of shell companies 919 as a means of 

accessing the U.S. capital markets, the 

Commission proposed new rules that 

would apply to business combination 

transactions involving shell companies, 

which include de-SPAC transactions. 

First, the Commission proposed new 

Rule 145a under the Securities Act that 

would deem such business combination 

transactions to involve a sale of 

securities to a reporting shell company’s 

shareholders. The Commission is 

adopting that rule as proposed as 

discussed below. Second, the 

Commission proposed new Article 15 of 

Regulation S–X and related 

amendments to more closely align the 

required financial statements of private 

operating companies in connection with 

these transactions with those required 


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920The requirements in Form S–4, Form F–4, and 

Schedule 14A for an acquisition of a business were 

developed at a time when acquirers were generally 

operating companies, and these requirements do 

not specifically address transactions involving shell 

companies. For example, Form S–4 was adopted by 

the Commission in 1985, which predates the origins 

of SPACs in the 1990s. See Business Combination 

Transactions; Adoption of Registration Form, 

Release No. 33–6578 (Apr. 23, 1985) [50 FR 18990 

(May 6, 1985)]. 

921See Proposing Release, supra note 7, at 29488. 

922 Id. at 29489. 

923Letters from Andrew Tuch, Bullet Point 

Network, ICGN, Public Citizen. See also letter from 

Jorge Stolfi (May 30, 2022) (‘‘Jorge Stolfi’’) (‘‘Ideally, 

ANY merger involving a publicly traded company 

should require evaluation and approval of the stock 

of the proposed merged company’s stock by the 

SEC, as if it was a new security.’’). 

924Letters from Andrew Tuch, ICGN, Jorge Stolfi, 

Public Citizen. 

925Letter from Andrew Tuch. 

926Letter from IGCN. 

927Letters from ABA, Freshfields, Kirkland & 

Ellis, NYC Bar, Vinson & Elkins, Winston & Strawn. 

928Letters from ABA, Freshfields, Loeb & Loeb, 

Vinson & Elkins. See infra section VIII. 

929Letter from Vinson & Elkins. 

930Letter from ABA. 

931Letters from Freshfields, Kirkland & Ellis, NYC 

Bar, Vinson & Elkins. 

932Letters from ABA, Kirkland & Ellis, SIFMA. 

933Letter from Kirkland & Ellis. 

934Letter from Winston & Strawn. 

935Letter from Vinson & Elkins. 

936 Id. 

937Letter from ABA. 

938Letters from Kirkland & Ellis, Vinson & Elkins. 

939Letter from Kirkland & Ellis. 

940Letter from Vinson & Elkins. 

in registration statements on Form S–1 

or F–1 for an IPO.920 The Commission 

is adopting those rules mostly as 

proposed, with certain changes 

discussed below. The issues the 

Commission is addressing with the 

adoption of both of these sets of final 

rules are common to these shell 

company transactions, regardless of 

whether the shell company is a SPAC. 

A. Shell Company Business 

Combinations and the Securities Act of 

1933 

1. Proposed Rule 

The Commission proposed Rule 145a 

to address the use of reporting shell 

companies as a means to enter the U.S. 

capital markets without Securities Act 

registration and the related disclosures 

which are intended to protect investors. 

The rule was proposed due to the 

significant increase in such reporting 

shell company business combination 

transactions, including through the use 

of a SPAC, in an effort to provide 

reporting shell company shareholders 

with more consistent Securities Act 

protections regardless of transaction 

structure.921 Proposed Rule 145a would 

deem any direct or indirect business 

combination of a reporting shell 

company that is not a business 

combination related shell company 

involving another entity that is not a 

shell company to involve a sale of 

securities to the reporting shell 

company’s shareholders. While nothing 

in proposed Rule 145a would prevent or 

prohibit the use of a valid exemption, if 

available, for the deemed sale of 

securities to the reporting shell 

company’s shareholders, the 

Commission stated that the exemption 

under section 3(a)(9) of the Securities 

Act generally would not be available for 

the sales covered by the proposed 

rule.922 The proposed rule would not 

apply to the merger of an existing 

reporting shell company into a new 

shell company where the surviving 

company remains a shell. 

2. Comments 

Several commenters generally 

supported proposed Rule 145a.923 Some 

of these commenters pointed to investor 

protection concerns related to SPACs 

and de-SPAC transactions and the 

benefits associated with registration 

under the Securities Act.924 In this 

regard, some commenters pointed out 

that the reform contemplated by Rule 

145a would help prevent certain 

disparities in regulation for transactions 

that vary in legal structure but not in 

economic substance, ensuring that 

unaffiliated security holders enjoy the 

protections that come from investing in 

a registered offering.925 Other 

commenters noted that the likely 

registration of de-SPAC transactions as 

a result of Rule 145a would result in 

enhanced liabilities for signatories to 

any registration statement and 

underwriter and expert liability, thereby 

ensuring investors receive fair and 

reliable information.926

Other commenters generally opposed, 

or expressed concerns regarding, 

proposed Rule 145a.927 Some 

commenters discussed the potential 

costs and effects of proposed Rule 

145a.928 Certain commenters questioned 

the Commission’s authority to adopt 

Rule 145a where, in commenters’ views, 

no distribution of securities actually 

occurs 929 or for situations in which 

there is neither a vote nor any securities 

changing hands as there is no traditional 

‘‘investment decision.’’ 930 Some 

commenters asserted that proposed Rule 

145a is unnecessary for the protection of 

investors and that de-SPAC 

transactions, in particular, are already 

accompanied by a full set of 

disclosures.931 Other commenters 

asserted that proposed Rule 145a 

conflicted with proposed Rule 140a 

because proposed Rule 140a implied 

that there is a single distribution 

occurring between a SPAC’s IPO and the 

de-SPAC transaction.932

One commenter asserted that not all 

shell company business combinations 

are similar and, in particular, that deSPAC transactions are not comparable 

to shell company transactions with 

microcap companies.933 Another 

commenter stated that it is unclear to 

them why de-SPAC transactions should 

be treated differently than other reverse 

mergers.934

A number of commenters requested 

that the Commission clarify and/or 

modify aspects of proposed Rule 145a. 

In particular, a commenter requested, if 

Rule 145a were adopted, that ‘‘[i]n the 

spirit of aligning treatment of IPOs and 

de-SPAC transactions, Rule 145 [17 CFR 

230.145] should be revised to not apply 

to any transaction that Rule 145a 

applies to.’’ 935 The same commenter 

requested that the Commission limit the 

scope of proposed Rule 145a so as not 

to apply to business combination related 

shell companies.936 Another commenter 

asked us to further clarify the 

application or operation of proposed 

Rule 145a.937 In particular, this 

commenter asked that the Commission 

clarify the intended trigger for the 

application of Rule 145a in a de-SPAC 

transaction. 

Finally, certain commenters 

questioned the Commission’s 

explanation of the application of section 

3(a)(9) in Rule 145a transactions.938 In 

particular one commenter stated that 

they did not agree that the ‘‘deemed 

exchange’’ should be integrated with the 

exchange of the private company’s 

securities for interests in the SPAC, 

such that section 3(a)(9) would be 

unavailable because a proxy solicitor is 

paid to solicit proxies from SPAC 

shareholders in connection with the 

shareholder vote on a de-SPAC 

transaction.939 The commenter asserted 

that any vote associated with the deSPAC transaction and the related proxy 

solicitation is irrelevant to whether the 

transaction would be deemed a sale 

under existing rules. A different 

commenter asserted that if there is an 

exchange it is embodied in the 

redemption decision, not the vote in 

connection with a de-SPAC transaction, 

and thus payment of compensation for 

a proxy solicitor should not prevent 

reliance on Securities Act section 

3(a)(9).940


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941Although other private liability may apply in 

situations where disclosures are provided to 

investors in connection with business combinations 

involving reporting shell companies, such liability 

is not as extensive as the protections investors 

receive under the Securities Act. See Douglas & 

Bates, supra note 581. 942As noted above, certain commenters asserted 

that proposed Rule 145a was inconsistent with 

proposed Rule 140a because proposed Rule 140a 

implied that there is a single distribution occurring 

between a SPAC’s IPO and its de-SPAC transaction. 

Letters from ABA, Kirkland & Ellis, SIFMA. As 

discussed in further detail above, we are not 

adopting proposed Rule 140a; rather, we have noted 

that the statutory definition of underwriter is 

sufficient to encompass any person who sells for 

the issuer or participates in a distribution 

associated with a de-SPAC transaction. See supra 

section III.F. 

943Proposing Release, supra note 7, at 29489. We 

reiterate the Commission’s previous position on 

structuring transactions to avoid shell company 

status in adopting the 2005 shell company 

limitations. See Use of Form S–8, Form 8–K, and 

Form 20–F by Shell Companies, Release No. 33– 

8587 (July 15, 2005) [70 FR 42234, 42236, n.32 (July 

21, 2005)] (‘‘Shell Company Adopting Release’’). 

Rule 145a as well as any other requirements 

applicable to reporting shell company business 

combinations apply in situations where, in 

substance, a shell company business combination is 

used to convert a private company into a public 

company. For example, the requirements applicable 

to reporting shell company business combinations 

adopted herein will apply to any company that sells 

or otherwise disposes of its historical assets or 

operations in connection with or as part of a plan 

to combine with a non-shell private company in 

order to convert the private company into a public 

one. This is true regardless of whether such sale or 

disposal of the legacy assets or operations occurs 

prior to or after the consummation of the business 

combination. 

944By its terms, Rule 145a only impacts business 

combinations involving shell companies that are 

not business combination related shell companies. 

The term ‘‘business combination related shell 

company’’ is defined in Securities Act Rule 405 and 

Exchange Act Rule 12b–2 as a shell company that 

is: ‘‘(1) Formed by an entity that is not a shell 

company solely for the purpose of changing the 

corporate domicile of that entity solely within the 

United States; or (2) Formed by an entity that is not 

a shell company solely for the purpose of 

completing a business combination transaction (as 

defined in 17 CFR 230.165(f)) among one or more 

entities other than the shell company, none of 

which is a shell company.’’ Neither a SPAC nor any 

entity formed for facilitating a transaction with a 

SPAC is ever a business combination related shell 

company because neither of these entities would be 

a shell company formed solely for the purpose of 

changing the corporate domicile solely within the 

United States or formed solely for the purpose of 

completing a business combination transaction 

among one or more entities other than the shell 

company, none of which is a shell company. See 

Proposing Release, supra note 7, at 29489, n.243. 

945See letter from Vinson & Elkins. 

946See letter from ABA. 

947 15 U.S.C. 77b(a)(3). 

948See Spin Offs Release, supra note 899, at 

11581 (The Commission explained that the theory 

had been advanced that since a sale is not involved 

in the distribution of the shares in a spin off that 

registration is not required and that even if it is 

required, no purpose would be served by filing a 

registration statement and requiring the delivery of 

a prospectus since the persons receiving the shares 

are not called upon to make an investment 

judgment. However, such a theory ignores what 

appears to be the primary purpose of the spin off 

in numerous circumstances which is to create 

quickly, and without the disclosure required by 

registration, a trading market in the shares of the 

issuer. As the Commission explained, devices of 

this kind contravene the purpose, as well as the 

specific provisions, of the Securities Act, which are 

to provide full and fair disclosure of the character 

of the securities sold in interstate and foreign 

commerce and through the mails, and to prevent 

frauds in the sale thereof.). 

949See Registration of Certain Transactions 

Involving Mergers, Consolidations and Acquisitions 

of Assets, Release No. 33–5316 (Oct. 6, 1972) [37 

FR 23631, 23633 (Nov. 7, 1972)] (Short form 

mergers that do not require a vote or consent are 

not within the scope of Rule 145(a). However, if a 

security is to be issued in such short form mergers, 

the Commission stated that it is of the opinion that 

the transaction involves an ‘‘offer,’’ ‘‘offer to sell,’’ 

‘‘offer for sale,’’ or ‘‘sale,’’ within the meaning of 

section 2(a)(3) of the Securities Act, and 

accordingly that such transactions are subject to the 

registration provisions of the Securities Act unless 

an exemption is available.). 

950See, e.g., In the Matter of Capital General 

Corp., Release No. 33–7008 (July 23, 1993) (‘‘Capital 

General’’) in which the Commission concluded that 

Capital General’s unregistered distributions of 

securities in a shell company as purported gifts 

were a sale in violation of section 5 because value 

accrued to the defendants ‘‘by virtue of the creation 

of a public market for the issuer’s securities, and the 

fact that, as a public company, the issuer could be 

sold for greater consideration.’’ 

3. Final Rule 

We are adopting Rule 145a as 

proposed. Currently, investors in 

reporting shell companies may not 

always receive the disclosures and other 

protections afforded by the Securities 

Act at the time when there is a 

fundamental change in the nature of 

their investment due to the business 

combination involving another entity 

that is not a shell company.941

To address this, Rule 145a specifies 

that a sale occurs from the posttransaction company to the existing 

shareholders of a reporting shell 

company in situations where a reporting 

shell company that is not a business 

combination related shell company 

enters into a business combination 

transaction involving another entity that 

is not a shell company.942 In these 

situations, Rule 145a deems there to be 

a share exchange implicating the 

requirements and protections of section 

5 of the Securities Act because the 

interests the former reporting shell 

company shareholders owned have been 

exchanged for something entirely 

different—interests in an operating 

company in the course of a transaction 

whereby the former reporting shell 

company provides the operating 

company with access to the public 

markets. The sale identified by the rule 

occurs regardless of whether securities 

are changing hands in the business 

combination transaction, and thus the 

transaction will need to be registered in 

accordance with the Securities Act 

unless an exemption from registration is 

available. The final rule also applies 

regardless of transaction structure or the 

form of business combination (e.g., 

statutory merger, share exchange, stock 

purchase, asset purchase, etc.). 

As discussed in the Proposing 

Release, Rule 145a will apply to any 

reporting shell company that has 

assumed the appearance of having more 

than ‘‘nominal’’ assets or operations.943

However, as proposed and for the 

avoidance of doubt, the final rule will 

not have any impact on traditional 

business combination transactions 

between operating businesses, including 

transactions structured as traditional 

reverse mergers and traditional business 

combination transactions that make use 

of only business combination related 

shells.944 In addition, we note that Rule 

145a is not intended to change the 

treatment of any transaction, whether or 

not involving a shell company, under 

State or other Federal laws, including, 

but not limited to, State corporate law 

and the Internal Revenue Code. Finally, 

because it is premised upon the change 

in the nature of a security when a 

reporting shell company changes its 

status to an operating company, Rule 

145a specifically does not apply to a 

transaction where a reporting shell 

company combines with another shell 

company. Below we respond to various 

objections raised by commenters 

regarding the proposal and provide 

additional explanation to clarify the 

scope and application of Rule 145a. 

i. Arguments Regarding No Investment 

or Vote 

Some commenters questioned the 

Commission’s authority to adopt Rule 

145a because, in the commenters’ view, 

a sale cannot be deemed to occur in 

situations where no actual distribution 

of securities occurs 945 or there is no 

traditional ‘‘investment decision.’’ 946

Section 2(a)(3) of the Securities Act 

broadly defines the terms ‘‘sale’’ or 

‘‘sell’’ to include every contract of sale 

or disposition of a security or interest in 

a security, for value.947 Finding it 

necessary for investors to have the 

protections of the Securities Act, the 

Commission has previously applied this 

definition broadly, including in cases 

where there is no affirmative decision 

from investors to buy or sell securities. 

For example, the Commission has 

previously determined that the 

following transactions may involve a 

sale even where there is no vote or 

investment decision: spin-offs, split-offs 

and similar transactions; 948 short-form 

mergers; 949 and distributions of ‘‘free 

stock.’’ 950


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951Letters from ABA, Kirkland & Ellis. 

952Letter from ABA. 

953Letter from Kirkland & Ellis. 

954We note that this rule does not change the 

conclusion that a merger with a reporting shell 

company may constitute the offer and sale of 

securities to other parties for which registration 

under the Securities Act or an exemption would be 

required. For example, where a SPAC survives the 

de-SPAC transaction, the SPAC will frequently 

issue its securities to shareholders of the private 

company in exchange for their interests in the 

private company. Such a transaction would still 

require registration or an exemption from 

registration. 

955As discussed above, Rule 145a is limited to 

business combinations that involve reporting shell 

companies. See supra section IV.A.3. 

956See SEC v. Datronics Engineers, Inc., 490 F.2d 

250 (4th Cir. 1973) cert. denied, 416 U.S. 937 (1974) 

(‘‘Datronics’’) (finding a sale under the Securities 

Act requiring registration or an exemption from 

registration when a parent company, Datronics, 

created shell subsidiaries for the purpose of 

merging them with private companies. Datronics 

reserved approximately one-third of the shares of 

the post-merger subsidiary for itself and distributed 

the remainder to its shareholders without 

registration. Secondary market trading of the shares 

began promptly. Datronics’ only business purpose 

was to create a trading market for the shares). See 

also SEC v. Harwyn Industries Corp., 326 F. Supp. 

943 (S.D.N.Y. 1971) (‘‘Harwyn’’). In Harwyn, the 

court found a sale under the Securities Act 

requiring registration or an exemption from 

registration when each of several subsidiaries of the 

public parent acquired assets from a corporation in 

exchange for a controlling interest in the subsidiary. 

The parent then spun off shares of the subsidiaries 

to its stockholders in an unregistered transaction, 

creating over-the-counter trading markets in the 

shares. The court stated that ‘‘value’’ was received 

by Harwyn and other insiders ‘‘in the form of a 

contribution of substantially new assets to each 

subsidiary and the creation of a public market in 

the shares.’’ 

957See Datronics, supra note 956, at 253–254 

(‘‘Value accrued to Datronics in several ways. First, 

a market for the stock was created by its transfer 

to so many new assignees—at least 1000, some of 

whom were stockbroker-dealers, residing in various 

States. Sales by them followed at once—the District 

Judge noting that ‘in each instance dealing 

promptly began in the spun-off shares’. [sic] This 

result redounded to the benefit not only of 

Datronics but, as well, to its officers and agents who 

had received some of the spun-off stock as 

compensation for legal or other services to the spinoff corporations. Likewise, the stock retained by 

Datronics was thereby given an added increment of 

value.’’); Harwyn, supra note 956, at 954 (‘‘We see 

no reason to construe §§ 2[(a)](3) and 5 as requiring 

that the ‘value’ requiring registration must flow 

from the immediate parties who received the stock, 

in this case Harwyn’s shareholders.’’). 

958See Capital General, supra note 950, at *11 

(The Commission found that ‘‘the analysis of 

whether a sale occurred focuses not only on 

whether the recipient of the securities gives 

something of value in exchange for the securities, 

but also on whether value is received from any 

other source. Harwyn Industries and Datronics also 

make clear that the analysis must include the entire 

transaction—the distribution of the issuer’s shares, 

and subsequent change in control of the issuer—to 

determine whether value was received from the 

distribution.’’). 

959 Id. 

960Letter from ICGN. 

961See 15 U.S.C. 77b(a)(3). 

Similarly, here, we have concluded 

that, notwithstanding the fact that there 

may be no traditional investment 

decision or vote in connection with a 

business combination transaction where 

a shell company changes its status from 

a shell company to an operating 

company through a business 

combination, such a change is 

nonetheless a sale of securities for the 

purposes of section 2(a)(3) because 

investors are exchanging their interests 

in a shell company for interests in a 

combined public operating company, 

which is a transaction ‘‘for value.’’ 

a. The ‘‘For Value’’ Requirement 

Several commenters questioned 

whether the constructive sale would be 

‘‘for value,’’ within the meaning of this 

term in section 2(a)(3).951 We disagree 

with the commenter that asserted that, 

similar to an ordinary M&A transaction, 

a de-SPAC transaction will not result in 

a fundamental change in the nature of 

the security held by SPAC stockholders 

that would constitute an exchange of 

value and, thus, should not be deemed 

to constitute consideration in 

connection with the business 

combination.952 Likewise, we disagree 

with the commenter that asserted that 

even though the specific target company 

is unidentified at the time of the SPAC’s 

IPO, when acquired, a SPAC security 

represents an investment in a target 

company because the sole purpose of a 

SPAC is to engage in a business 

combination.953

A change in a reporting shell 

company’s status via a business 

combination with an operating company 

results in the reporting shell company 

investors effectively exchanging their 

security representing an interest in the 

reporting shell company, an entity that 

has no or nominal operations and either 

(i) no or nominal assets; (ii) assets 

consisting solely of cash and cash 

equivalents; or (iii) assets consisting of 

any amount of cash and cash 

equivalents and nominal other assets, 

for a new security representing an 

interest in a combined operating 

company.954 This is a change in the 

nature of the investment, which does 

not occur in traditional M&A 

transactions.955 Although shell 

company shareholders may not actually 

be receiving shares from the combined 

public operating company, they have 

surrendered ‘‘value’’ for purposes of 

section 2(a)(3) because, unlike a 

business combination not involving a 

reporting shell company and an 

operating company, they have 

effectively surrendered their shares in a 

public shell company for shares in a 

fundamentally different company, a 

combined operating company. In 

addition, unlike a business combination 

that does not involve a reporting shell 

company and an operating company, 

such a transaction involves the use of a 

public shell to create a public market for 

the combined operating company.956

Moreover, courts 957 and the 

Commission 958 have determined that it 

does not matter what party in the course 

of a transaction receives value—as long 

as any party receives value, the ‘‘for 

value’’ requirement in section 2(a)(3) is 

satisfied. In particular, transactions 

involving the use of public shells to 

provide access to the public markets 

have been found to constitute a sale 

under section 2(a)(3) of the Securities 

Act.959 We view a reporting shell 

company (that is not a business 

combination related shell company) 

merging with a private operating 

company as similarly providing access 

to the public markets, and thus creating 

value. Therefore, the business 

combination transaction is a sale which 

entitles the reporting shell company’s 

existing shareholders, who are the 

investors acquiring securities in this 

sale, to all applicable protections 

provided by the Securities Act. 

Finally, one commenter asked that we 

clarify within the rule text that the sale 

contemplated by Rule 145a would be ‘‘a 

disposition of a security or an interest 

in a security . . . for value.’’ 960

Although, as we explain above, we agree 

with the commenter that such a 

transaction would be ‘‘for value,’’ we do 

not believe it is necessary to add that 

detail within the text of Rule 145a 

because the Securities Act, itself, 

already contains the ‘‘for value’’ 

requirement in section 2(a)(3).961

ii. No Additional Registration Statement 

Required Where a Shell Company 

Business Combination Is Already 

Registered 

If, in the course of a business 

combination with a reporting shell 

company, the exchange of the shell 

company shares for securities of the 

surviving combined operating business 

is already being registered, then there is 

no need to register any additional 

transaction under the Securities Act to 

comply with Rule 145a because the 

transaction that is recognized as a sale 

by Rule 145a is already being registered. 

For example, in many de-SPAC 

transactions, an actual exchange of 

securities between the SPAC’s existing 

shareholders and the target company or 

a new holding company is already being 

registered at the time of the business 


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962Share exchanges in which the target company 

survives the business combination as the public 

entity are commonly referred to as ‘‘Target-on-Top’’ 

structures. Alternatively, the combining entities 

may also form a new holding company such that 

both holders of the SPAC and the target company 

receive securities in the holding company in 

exchange for their existing interests in the target 

company. 

963This would typically be any transaction where 

the SPAC survives the business combination as the 

public company. Such transactions are commonly 

referred to ‘‘SPAC-on-Top.’’ Where registration is 

required for a Rule 145a constructive sale, the 

registration statement should register the exchange 

of the number of outstanding shares that represent 

the interests of all shareholders of the shell 

company immediately preceding the business 

combination. 

964Letters from Freshfields, Kirkland & Ellis, NYC 

Bar, Vinson & Elkins. 

965For example, investors in a reporting shell 

company undergoing a business combination in 

which there is no shareholder vote and no 

redemption feature currently may receive no 

disclosure about the pending business combination 

until four business days after closing at which time 

the shell company would be required to file a Form 

8–K to provide the disclosure required by Items 

5.06 and 9.01. Even though pursuant to these items 

shareholders will receive the equivalent of Form 10 

information about the combined company, 

investors will still not receive certain transactionspecific information that would be required in a 

Securities Act registration statement. For example, 

a Securities Act registration statement would 

require disclosure of a summary of the terms of the 

acquisition agreement and the reasons of the 

registrant and of the company being acquired for 

engaging in the transaction. See Items 4(a)(1) and 

(2) of Form S–4. 

966See letter from Loeb & Loeb. 

967See id. 

968See Shell Company Adopting Release, supra 

note 943. 

969See id. 

970See letter from Kirkland & Ellis. 

combination transaction.962 In these 

circumstances, the transaction that Rule 

145a construes as a sale is typically 

already being registered because the 

SPAC’s existing shareholders are 

receiving securities of the combined 

company in exchange for their shares of 

the SPAC. Where Securities Act 

registration of this transaction is already 

occurring, Rule 145a would not require 

the filing of an additional registration 

statement. However, Rule 145a only 

applies with respect to a shell 

company’s existing security holders. 

The surviving company in a de-SPAC 

transaction must give separate 

consideration as to whether a 

registration statement or exemption 

would be required for any offer and sale 

of securities to the target company’s 

security holders. 

iii. Where Rule 145a Requires 

Registration in the Absence of an 

Exemption 

However, in transaction structures 

where reporting shell company 

shareholders are not actually 

exchanging their shell company shares 

for securities of a combined operating 

company, the parties will need to 

consider Rule 145a in structuring the 

transaction. For example, in a de-SPAC 

transaction structured such that the 

shareholders of the SPAC keep their 

existing shares in the SPAC throughout 

the business combination transaction, 

and those interests change into interests 

in the combined company, the parties 

would need to consider the impact of 

Rule 145a on the transaction and either 

register the transaction or find an 

exemption for the constructive exchange 

between the shell company’s pretransaction shareholders and the 

surviving combined company.963 Such 

transactions would be situations 

implicating a Rule 145a constructive 

sale. 

iv. Investor Protection and Liability 

While we acknowledge, as several 

commenters have argued,964 that certain 

transactions, such as de-SPAC 

transactions, may already be 

accompanied by a set of disclosures 

provided to the reporting shell 

company’s shareholders, the timing and 

nature of such disclosures may not be 

equivalent,965 and such disclosures do 

not have equivalent levels of investor 

protection as there currently would be 

in a transaction involving Securities Act 

registration. To the extent that Rule 

145a transactions are registered, 

registration would result in enhanced 

liabilities for the registrant and other 

parties who have liability under the 

Federal securities laws with respect to 

the registration statement, including 

potential underwriter liability (as 

described elsewhere in this release) and 

liability under Securities Act section 

11(a)(4) for experts. Given the change in 

the nature of an investor’s security 

when a reporting shell company engages 

in a business combination transaction 

with an operating company, Rule 145a 

is designed to ensure that shareholders 

more consistently receive the full 

protections of Securities Act disclosure 

and liability provisions, as applicable, 

and that such investor protections will 

apply regardless of transaction 

structure. 

v. Market for Shell Company Mergers 

A commenter asserted that the 

Commission had not previously found it 

necessary to adopt a provision like Rule 

145a to regulate shell company mergers 

‘‘and was amenable at that time to allow 

such transactions to proceed so long as 

public investors were given current and 

complete information about the new 

business they owned.’’ 966 The 

commenter further asserted that 

proposed Rule 145a no longer reflects 

this Commission position on shell 

company mergers and can be expected 

‘‘to shut down [the shell company] 

market.’’ 967 We disagree. Although the 

Commission adopted rules and rule 

amendments addressing the use of Form 

S–8, Form 8–K, and Form 20–F by shell 

companies,968 the Commission is not 

precluded from revisiting shell 

company transactions and considering 

the investor protections applicable to 

these transactions. In this regard, we 

believe Rule 145a complements the 

disclosure protections that the 

Commission adopted in 2005.969 In 

addition, we do not believe that a 

requirement to register a transaction or 

find an applicable exemption when a 

reporting shell company becomes an 

operating company, would ‘‘shut down 

the market.’’ Indeed, depending on the 

structure, many business combinations 

involving reporting shell companies are 

already registered under the Securities 

Act. 

vi. Perceived Conflicts Between NonSPAC Reporting Shell Companies and 

SPACs 

A commenter stated that an 

investment in a SPAC transaction is not 

comparable to other reporting shell 

company business combinations.970 In 

particular, the commenter indicated that 

an investor in a non-SPAC reporting 

shell company does not necessarily 

invest in a company seeking a business 

combination opportunity. While we 

acknowledge that non-SPAC shell 

companies typically have some 

investors that predated the company’s 

shell company status, this distinction is 

not relevant for this purpose because the 

effect of a business combination 

transaction in both cases is the same. 

Both involve a situation where a public 

shell company is no longer going to be 

a shell company and the nature of the 

investor’s shares has changed to an 

investment in an entirely new operating 

business. Moreover, the purpose of the 

transaction is to provide the formerly 

private company with access to the 

public markets. As such, the concerns 

that we are addressing in adopting Rule 

145a are present in both non-SPAC 

reporting shell company business 

combinations and de-SPAC 

transactions. 

vii. Perceived Analogies to Traditional 

Reverse Mergers 

A commenter argued that de-SPAC 

transactions should not be distinguished 


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971Letter from Winston & Strawn. 

972Although the commenter seeks to analogize 

de-SPAC transactions to reverse mergers in 

traditional M&A, such transactions are readily 

distinguishable. With respect to other reverse 

mergers not involving shell companies, although 

the entity surviving the transaction may acquire 

new assets or new lines of business as a result of 

the transaction, it is not changing the actual nature 

of the investment—from a company with no 

operations to an operating company—and it is not 

a means to provide a company access to the public 

markets for the first time. 

973See supra section III.C. 

974 Id. 

975Letter from ABA. 

976Letter from Winston & Strawn. 

977See supra section IV.A.3.iii regarding when a 

shell company must consider registering the sale 

identified by Rule 145a. 

978Letters from Kirkland & Ellis, Vinson & Elkins. 

979H.R. Rep. No. 152, 73rd Cong. 1st Sess. 25 

(1933). 

980The Commission has stated that the rationale 

for the section 3(a)(9) exemption, in part, is that the 

market already has adequate familiarity with the 

issuer, and thus, the protections under the 

registration provisions of the Securities Act are not 

necessary. See, e.g., Form for Registration of 

Securities When Issuers Qualify Under Certain 

Proposed Rule, Release No. 33–5011 (Oct. 7, 1969) 

[34 FR 17033, 17033 (Oct. 18, 1969)] (‘‘[T]he 

exemption in section 3(a)(9) of the Act applies only 

where the issuer of the convertible security and the 

security issuable on conversion is the same. In such 

a situation the information available to the trading 

markets through periodic reports filed by the issuer 

under the Securities Exchange Act should provide 

an adequate substitute for the disclosure which 

would be provided by the registration and 

prospectus delivery provisions of the Securities 

Act.’’). 

981Letters from Kirkland & Ellis, Vinson & Elkins. 

from other reverse mergers because the 

accounting predecessor in a reverse 

merger is not currently deemed to be 

engaged in a distribution of its securities 

to stockholders of the non-predecessor 

entity.971 We do not agree with the 

commenter’s analogy because in 

traditional mergers, regardless of the 

accounting treatment of the respective 

parties, the issuer of securities whose 

offer and sale is registered is the entity 

whose securities are being sold to 

investors (e.g., in a share exchange, the 

entity whose securities are being offered 

in exchange for outstanding securities of 

another entity).972 The commenter 

further asserted that if the SPAC is not 

actually issuing securities, the SPAC 

should not be a ‘‘registrant’’ and that, to 

the extent Rule 145a is adopted, only 

the target should be considered a 

registrant. We disagree, in part, with 

this argument. While we agree that the 

target company must be a registrant in 

all registered de-SPAC transactions,973

we see no basis to disregard the SPAC’s 

status as a registrant, where applicable, 

even in cases where the SPAC is issuing 

securities only within the meaning of 

Rule 145a. Rule 145a is designed to 

identify a sale between the combined 

company and pre-business combination 

shareholders of the reporting shell 

company. For the reasons discussed 

above, we view this to be a sale even if 

the reporting shell company is not 

actually issuing securities. Given that 

this constructive sale occurs even if 

shares do not actually change hands, we 

decline to narrow Rule 145a by 

concluding that a sale occurs in a deSPAC transaction only by the target 

company. To the extent that the choice 

of transaction structure may impact who 

is a registrant that must sign a 

registration statement, that is a separate 

analysis.974

Additionally, some commenters asked 

for clarification regarding the intended 

trigger for the application of Rule 145a 

in a de-SPAC transaction 975 and who 

would be the exchanging parties in a 

Rule 145a constructive sale.976 As 

discussed above, Rule 145a specifies 

that a sale occurs from the posttransaction company to the existing 

shareholders of a reporting shell 

company in situations where a reporting 

shell company that is not a business 

combination related shell company 

enters into a business combination 

transaction involving another entity that 

is not a shell company. Pursuant to Rule 

145a, all existing holders of the 

reporting shell company’s shares, at the 

time of the business combination, are 

constructively exchanging their 

securities for securities in the combined 

company, whether or not these investors 

are actually exchanging any shares to 

complete the business combination.977

The surviving public company will be 

the entity that is constructively selling 

the securities of the combined company. 

viii. Section 3(a)(9) Does Not Apply to 

Rule 145a Constructive Sales 

Having considered the views of 

commenters regarding the application of 

the section 3(a)(9) exemption in Rule 

145a constructive sales,978 we continue 

to believe section 3(a)(9) would not be 

available for a transaction that is a Rule 

145a constructive sale. There are several 

features of these transactions which cast 

doubt on the availability of the 

exemption. In particular, section 3(a)(9) 

was designed to facilitate ‘‘certain 

voluntary readjustment[s] of [an 

issuer’s] obligations.’’ 979 A reporting 

shell company business combination 

with an operating company is not 

merely a voluntary readjustment, but 

the combination of such an entity with 

an entirely new business. 

In addition, the four requirements of 

an exchange qualifying for the section 

3(a)(9) exemption are as follows: 

• Same issuer—the issuer of the old 

securities being surrendered must be the 

same as the issuer of the new securities; 

• No additional consideration from 

the security holder; 

• Offer must be made exclusively 

with existing security holders; and 

• No commission or compensation 

may be paid for soliciting the exchange. 

The failure to meet any single one of 

these requirements would be enough to 

preclude use of the section 3(a)(9) 

exemption. 

First, section 3(a)(9) is limited to 

securities exchanged by the issuer with 

its existing shareholders. In the case 

where shareholders of a reporting shell 

company constructively exchange their 

shares with securities of the combined 

entity, we view the combined entity to 

be a different issuer than the shell that 

originally issued the securities even if 

the reporting shell company is the entity 

that survives the merger. Although the 

combined company may retain the legal 

identity of the shell for the purposes of 

State or local law, it is substantively a 

new entity. To hold otherwise would 

place form over substance, given that 

the use of the section 3(a)(9) exemption 

is premised upon an investor’s 

familiarity with the company in which 

they have already invested.980

Second, the section 3(a)(9) exemption 

would not be available where the Rule 

145a constructive sale occurs in 

connection with the offer and sale of 

securities to target company security 

holders. Such a sale would not occur 

exclusively to the reporting shell 

company’s existing security holders. 

Thus, where interests in the existing 

reporting shell are also being exchanged 

with the target company’s shareholders, 

the exchange would not be exclusively 

with the reporting shell company’s 

existing security holders and section 

3(a)(9) would not be available to exempt 

the deemed sale to the reporting shell 

company shareholders. 

Finally, section 3(a)(9) is not available 

where a commission or other 

remuneration is paid or given directly or 

indirectly for soliciting participation in 

the deemed exchange. This would 

occur, for example, if a proxy solicitor 

is compensated to solicit the reporting 

shell company’s shareholders for proxy 

votes in connection with the business 

combination. Certain commenters 

asserted that section 3(a)(9) of the 

Securities Act should not be rendered 

unavailable simply because a proxy 

solicitor is paid to solicit proxies from 

SPAC shareholders in connection with 

the shareholder vote on a de-SPAC 

transaction.981 As discussed above, Rule 

145a deems there to be a share exchange 

in situations, such as de-SPAC 


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982For example, approval of the business 

combination, the authorization of additional shares, 

revisions to the articles of incorporation, or a 

reincorporation to a different jurisdiction. 

983See, e.g., Note A to Schedule 14A (‘‘Where any 

item calls for information with respect to any matter 

to be acted upon and such matter involves other 

matters with respect to which information is called 

for by other items of this schedule, the information 

called for by such other items also shall be given. 

For example, where a solicitation of security 

holders is for the purpose of approving the 

authorization of additional securities which are to 

be used to acquire another specified company, and 

the registrants’ security holders will not have a 

separate opportunity to vote upon the transaction, 

the solicitation to authorize the securities is also a 

solicitation with respect to the acquisition.’’). 

984We use the term ‘‘business’’ throughout, rather 

than ‘‘private operating company’’ (or ‘‘target 

company’’) as it encompasses both terms. In the 

Proposing Release, the Commission stated, in a 

business combination transaction involving a shell 

company, the private operating company would 

meet the definition of a ‘‘business’’ in Rule 11–01(d) 

of Regulation S–X. Proposing Release, supra note 7, 

at 29491, n.253. In connection with the adoption of 

final Rule 15–01(b) in this release, we reiterate that, 

in a business combination transaction involving a 

shell company, a ‘‘business’’ includes but is not 

limited to a private operating company or a target 

company that is not an asset acquisition. 

985The term ‘‘predecessor’’ when used in this 

section has the same meaning as applied in its use 

under Regulation S–X and determination of 

financial statement requirements. 

986See Proposing Release, supra note 7, at 29490– 

29494. See also proposed amendments to Forms S– 

4, F–4, and 8–K and to Regulation S–X. 

987Commission staff has provided informal 

guidance to address practical questions related to 

financial reporting issues for shell company 

mergers in the FRM. 

988See proposed Rule 15–01(a) of Regulation S– 

X, proposed Rule 1–02(d), proposed Instruction 1 

to Item 17(b)(7) of Form S–4 (adding requirement, 

in a de-SPAC transaction to provide the financial 

statements required by § 240.15–01 (Rule 15–01 of 

Regulation S–X)), proposed Instruction 1 to Item 

17(b)(5) of Form F–4 (adding requirement, in a deSPAC transaction to provide the financial 

statements required by § 240.15–01 (Rule 15–01 of 

Regulation S–X) at Proposing Release, supra note 7, 

at 29491. 

989See Proposing Release supra note 39, at 29491. 990See definition of the term ‘‘business 

combination related shell company’’ in Securities 

Act Rule 405 and Exchange Act Rule 12b–2. 991Letters from PwC, RSM US LLP (May 25, 

2022) (‘‘RSM’’) (‘‘We believe the proposed rule, if 

finalized, would appropriately codify current SEC 

staff guidance and align the level of audit assurance 

required for the target private operating company in 

business combination transactions involving a shell 

company with the current requirements for an audit 

of a private operating company in a traditional IPO 

to be performed in accordance with the standards 

of the Public Company Accounting Oversight 

Board.’’), Vinson & Elkins. 

992Letter from ABA. 

transactions, where a reporting shell 

company that is not a business 

combination related shell company 

enters into a business combination 

transaction involving another entity that 

is not a shell company. In our view, if 

shareholder approval is being solicited 

on a matter that is required to 

accomplish a reporting shell company 

business combination,982 and 

compensation is being paid for such 

solicitation, then that is, in substance, a 

solicitation for approval of the Rule 

145a transaction. This is consistent with 

views the Commission previously has 

expressed in analogous contexts. For 

example, the Commission has 

previously taken the position that where 

a solicitation of security holders is for 

the purpose of approving the 

authorization of additional securities 

which are to be used to acquire another 

specified company, and the security 

holders will not have a separate 

opportunity to vote upon the 

transaction, the solicitation to authorize 

the securities is also a solicitation with 

respect to the acquisition.983

Accordingly, if a proxy solicitor is 

compensated to solicit the reporting 

shell company’s shareholders for proxy 

votes in connection with the 

shareholder vote on a de-SPAC 

transaction, such solicitation would 

mean the transaction would not qualify 

for the section 3(a)(9) exemption for the 

Rule 145a constructive sale. 

B. Financial Statement Requirements in 

Business Combination Transactions 

Involving Shell Companies 

After a business combination 

involving a shell company, the financial 

statements of a business 984 that will be 

a predecessor 985 to the shell company 

registrant become those of the registrant 

for financial reporting purposes. 

How a business chooses to become a 

public company could affect its 

financial statement disclosures due to 

differences in the requirements of 

registration statements on Form S–1 or 

F–1 (for IPOs) and the requirements of 

registration statements on Form S–4 or 

F–4 (regarding business combination 

transactions). In our view, a company’s 

choice of the manner in which it goes 

public should not generally result in 

substantially different financial 

statement disclosures being provided to 

investors. 

In the Proposing Release, the 

Commission proposed amendments to 

its forms and rules to more closely align 

the financial statement reporting 

requirements in business combinations 

involving a shell company registrant 

and a business with those in traditional 

IPOs.986 The financial statement 

requirements that are being adopted 

under the final amendments are based, 

in part, on current Commission staff 

guidance for transactions involving 

shell companies.987 In proposing to 

codify this guidance, the Commission 

sought to reduce any asymmetries 

between financial statement disclosures 

in business combination transactions 

involving shell companies and 

traditional IPOs. 

1. Proposed Rule 15–01(a), Rule 1– 

02(d), and Form Instructions: Audit 

Requirements 

In the Proposing Release, the 

Commission proposed Rule 15–01(a), 

amendments to Rule 1–02(d), and 

related new instructions to Forms S–4 

and F–4.988 The Commission noted in 

the Proposing Release that these 

changes would align the level of audit 

assurance required for the target 

business in business combination 

transactions involving a shell company 

with the audit requirements for an 

IPO.989 Specifically, proposed Rule 15– 

01(a) provided that the term ‘‘audit (or 

examination),’’ when used with respect 

to financial statements of a business that 

is or will be a predecessor to a shell 

company,990 means an examination of 

the financial statements by an 

independent accountant in accordance 

with the standards of the PCAOB for the 

purpose of expressing an opinion 

thereon. The Commission also proposed 

to amend Rule 1–02(d) to include the 

following new provision: ‘‘See § 210.15– 

01(a) for definition of an audit when 

used in regard to financial statements of 

a company that will be a predecessor to 

an issuer that is a shell company (other 

than a business combination related 

shell company).’’ The combined effect 

of the proposals would be that a 

predecessor to a shell company, 

including one that is a target private 

operating company, would be required 

to comply with the same definition of 

audit as in Rule 1–02(d) of Regulation 

S–X for its audited financial statements 

as if it were filing for an IPO. 

2. Comments: Rule 15–01(a), Rule 1– 

02(d), and Form Instructions: Audit 

Requirements 

We received comments from several 

commenters that were supportive of 

proposed Rule 15–01(a), because it 

would codify existing staff guidance.991

No commenters opposed proposed Rule 

15–01(a), the proposed amendments to 

Rule 1–02(d), or the proposed new 

instructions to Forms S–4 and F–4. One 

commenter recommended that we adopt 

an exception to the audit requirements 

applicable to SPACs to permit the audits 

of the financial statements of target 

companies that would otherwise be 

eligible for multijurisdictional 

disclosure system (‘‘MJDS’’) reporting to 

be able to use Canadian Generally 

Accepted Auditing Standards 

(‘‘Canadian GAAS’’).992

As noted in section III.C above, one 

commenter said that co-registration 


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993Letter from Vinson & Elkins. 

994See FRM at Sections 1140.5 and 2200.7 that 

discusses ‘‘Audit Requirement for Non-Reporting 

Target’’ in relation to Form S–4 or F–4 when the 

registrant is a SPAC. In addition, Section 4110.5 

includes a chart that outlines the staff’s views on 

the application of certain PCAOB requirements in 

various filings with the SEC, which includes 

transactions involving a shell company. 

995For ease of reference, when we refer to 

disclosures in a ‘‘proxy statement,’’ the same 

discussion applies to ‘‘information statement.’’ 

Information statements call for the same 

information as a proxy statement. See Item 1 of 

§ 240.14c–101 (Schedule 14C). 

996See supra section III.C for additional 

discussion regarding the definition of audit for 

issuers that are not predecessors in business 

combination transactions with a shell company 

involving multiple targets. 

997See FRM at Section 12250.1, which stipulates 

in a reverse recapitalization by a non-public 

company with a public shell company, the financial 

statements of the non-public company filed in the 

Form 8–K or Form 20–F must be audited by a 

public accounting firm registered with the PCAOB. 

Further, the auditor would need to be independent 

under PCAOB and Commission independence rules 

for all years required to be in the Form 8–K. For 

Form 20–F, the auditor of the non-public company 

that is an FPI must comply with the PCAOB and 

Commission independence rules for at least the 

latest fiscal year as long as the auditor is 

independent in accordance with home-country 

standards for earlier periods. 

998See infra section VIII.A. There were 

approximately 17 out of 583 de-SPAC transactions 

between 1990–2022 that had two or more targets. 

999See Multijurisdictional Disclosure and 

Modifications to the Current Registration and 

Reporting System for Canadian Issuers, Release No. 

33–6902 (June 21, 1991) [56 FR 30036 (July 1, 

1991)] (adopting the MJDS system). 

1000See General Instruction B to Form 40–F. 

would result in disclosure requirements 

that are inconsistent with the proposed 

revisions to Regulation S–X, raising the 

issue of whether, if there were multiple 

target companies, each company would 

be required to provide financial 

statements audited in accordance with 

PCAOB standards in the de-SPAC 

registration statement, rather than solely 

the predecessor pursuant to proposed 

Rule 15–01(a) of Regulation S–X.993

This commenter indicated that coregistration would result in 

inconsistencies with IPOs where there 

are multiple target companies. 

3. Final Rule 15–01(a), Rule 1–02(d), 

and Form Instructions: Audit 

Requirements 

After considering the comments, we 

are adopting Rule 15–01(a), the 

amendments to Rule 1–02(d), and the 

instructions to Forms S–4 and F–4 

largely as proposed, with a few 

modifications discussed below. 

In the past, the Commission staff has 

advised shell companies that it expects 

the financial statements of the 

predecessor, including a private 

operating company, in a transaction 

involving a shell company, to be 

audited under the same standards as a 

registrant in an IPO, because, at 

consummation, the financial statements 

of the business become that of the shell 

company.994 As noted in section III.C 

above, the amendments to Form S–4 

and Form F–4 will result in each 

business that is reported as a company 

being acquired on Form S–4 or F–4 

being an issuer under section 2(a)(7) of 

the Sarbanes-Oxley Act. The final 

amendments to Rule 1–02(d) have been 

modified to refer any entity that is 

involved in a combination with a shell 

company to Rule 15–01(a), which in 

turn provides rules as to the level of 

audit assurance required depending on 

whether the entity in the combination is 

a predecessor or non-predecessor. 

Consistent with existing staff guidance 

and the proposal, an entity that is or 

will be a predecessor, whether it is part 

of a shell company transaction or an 

issuer under the amendments to Form 

S–4 and Form F–4 that is part of a shell 

company transaction, will be required to 

have its financial statements audited by 

an independent accountant in 

accordance with the standards of the 

PCAOB. Consistent with the level of 

assurance in an IPO involving multiple 

businesses today, the financial 

statements of an entity that is not a 

predecessor that are included in a 

registration statement or proxy 

statement 995 filed for a combination 

with an issuer that is a shell company 

may be audited in accordance with 

either the standards of the PCAOB or 

U.S. GAAS as specified or permitted in 

the regulations and forms applicable to 

those entities for the purpose of 

expressing an opinion thereon.996 The 

final rule has been revised from that 

proposed in order to codify existing staff 

practice that the predecessor in a shell 

company transaction that does not 

involve a SPAC and is not an issuer be 

audited by an independent accountant 

registered with the PCAOB.997 In 

addition, the final rule refers to ‘‘entity’’ 

instead of ‘‘issuer,’’ as proposed, in 

order for the rule to apply to shell 

company business combinations that are 

not de-SPAC transactions. All issuers in 

a de-SPAC transaction would still need 

a PCAOB-registered audit firm in 

accordance with section 102 of the 

Sarbanes-Oxley Act to perform the 

audit. Further, these amendments that 

permit U.S. GAAS audits for the 

financial statements of an issuer that is 

not the predecessor apply to a small 

subset of de-SPAC transactions 

involving multiple target companies 

where there may be an issuer that is a 

not a predecessor.998

We are not adopting amendments to 

permit the use of Canadian GAAS in 

connection with de-SPAC transactions 

involving a Canadian business. Under 

current rules, a registrant must meet the 

MJDS requirements and register on an 

MJDS form in order to rely on such 

accommodations.999 Also, under current 

rules, a SPAC that satisfies the MJDSeligibility requirements and is involved 

in a de-SPAC transaction involving a 

Canadian business that also meets the 

MJDS-eligibility requirements once 

combined is permitted to use Canadian 

GAAS post-combination if it files on an 

MJDS form. Moreover, virtually all 

MJDS issuers provide audit opinions 

under PCAOB standards, even though 

they are able to provide audit opinions 

under Canadian GAAS, so it is unclear 

whether any Canadian registrants would 

provide audit opinions under Canadian 

GAAS even if that were an option at the 

time of filing the registration 

statement.1000 MJDS accommodations 

go beyond the use of Canadian GAAS. 

In final Rule 1–02(d), we have deleted 

the proposed term ‘‘financial statements 

of a company’’ and replaced it with the 

term ‘‘financial statements of an issuer.’’ 

The use of ‘‘issuer’’ rather than 

‘‘company’’ will ensure consistency 

with related provisions in Rule 15–01. 

We have revised proposed Instruction 

1 to Item 17(b)(7) of Form S–4 and 

Instruction 4 to Item 8 of Form 20–F by 

replacing ‘‘provide the financial 

statements required by § 240.15–01 

(Rule 15–01 of Regulation S–X)’’ with 

‘‘see § 240.15–01 (Rule 15–01 of 

Regulation S–X),’’ because the financial 

statement requirements extend beyond 

Rule 15–01. We further revised 

Instruction 4 to Item 8 of Form 20–F by 

clarifying that it is applicable for filings 

on Form 20–F filed pursuant to General 

Instruction A.(d) of this form and for 

registration statements, so that a shell 

company would not consider Rule 15– 

01 when it is filing its annual report in 

due course before acquiring a business. 

Also, for this Instruction 4, we revised 

‘‘shell company that will acquire a 

business’’ to ‘‘shell company that is 

combining with a business,’’ in order for 

the reference to Rule 15–01 to apply in 

more structures. Lastly, we have revised 

each of these instructions to remove 

reference to the predecessor because the 

instruction would apply to a nonpredecessor as well. 

4. Proposed Rule 15–01(b): Number of 

Years of Financial Statements 

Currently, a registration statement in 

connection with a de-SPAC transaction 

on Form S–4 or F–4 and a proxy or 

information statement must include 

financial statements of the target 


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1001See Items 17(b)(7) and 17(b)(8) of Form S–4; 

Items 17(b)(5) and 17(b)(6) of Form F–4; Item 14 of 

Schedule 14A; and Instruction 1 of Schedule 14C. 

Balance sheets as of the end of the two most recent 

fiscal years are always required. 

1002Only two years of these financial statements 

may be required in other scenarios, such as when 

the registrant is an SRC. 

1003The Commission proposed to use the term 

‘‘business’’ in this context, rather than ‘‘private 

operating company’’ (or ‘‘target company’’ which 

would have been a different, potentially narrower, 

set of persons than a ‘‘business’’ in the context of 

the proposed rule’s reference to ‘‘any shell 

company,’’ which thereby was not limited to 

SPACs) in order to be consistent with the 

provisions in Regulation S–X that define and use 

‘‘business,’’ such as Rule 11–01(d) of Regulation S– 

X. 

1004See Proposing Release, supra note 39, at 

29491. 

1005Letters from Ernst & Young, PwC, RSM. 

1006Financial statements being provided under 

Rule 3–05 or 8–04 of Regulation S–X, 17 CFR 

210.8–06 (‘‘Rule 8–06’’ of Regulation S–X), or Rule 

3–14 of Regulation S–X for a business being 

acquired by the predecessor are addressed in Rule 

15–01(d) and the number of years of financial 

statements provided would be based on the 

significance test in those rules, which is two years 

or less. 

1007See supra sections III.C and IV.A. (discussing 

co-registration of target companies and Rule 145a 

respectively). 

1008Letters from ABA, PwC, RSM. 

1009See Form F–4, Item 17(b)(5) (for company 

being acquired that may not use Form F–3 and is 

not a reporting company, include financial 

statements that would have been required to be 

company for the same number of years 

as would be required by the target 

company in an annual report and any 

subsequent interim periods, which 

could require three years of 

comprehensive income, changes in 

stockholders’ equity, and cash flows 

even if the target company qualifies as 

an EGC.1001 In contrast, in a traditional 

IPO under the Securities Act, a 

registrant that qualifies to be an EGC 

may provide only two years of these 

financial statements.1002

In the Proposing Release, the 

Commission proposed Rule 15–01(b) in 

order to align the number of fiscal years 

required to be included in the financial 

statements for a business 1003 that will 

be the predecessor(s) in a shell company 

business combination with the financial 

statements required to be included in a 

Securities Act registration statement for 

an IPO of equity securities.1004 Proposed 

Rule 15–01(b) provided that when the 

registrant is a shell company, and the 

financial statements of a business that 

will be a predecessor(s) to the shell 

company registrant are required in a 

registration statement or proxy 

statement, the shell company registrant 

must file financial statements of that 

business(es) in accordance with 

§§ 210.3–01 through 210.3–12 and 

210.10–01 (Articles 3 and 10 of 

Regulation S–X) or §§ 210.8–01 through 

210.8–08 (Article 8), if applicable, as if 

the filing were a Securities Act 

registration statement for the IPO of that 

business’s equity securities. The effect 

of proposed Rule 15–01(b) would be 

that, when the registrant filing is a shell 

company (which would include, but not 

be limited to, any SPAC), the Forms S– 

4 or F–4 or proxy statement may include 

only two years of statements of 

comprehensive income, changes in 

stockholders’ equity, and cash flows for 

the business(es) that would be the 

predecessor when those business(es) 

would qualify as an EGC and/or SRC if 

it were doing its own IPO for equity 

securities. 

5. Comments: Rule 15–01(b): Number of 

Years of Financial Statements 

Several commenters supported this 

proposed rule, noting generally that it 

would align the number of fiscal years 

required to be included in the financial 

statements for a private company that 

will be the predecessor in a shell 

company combination with those that 

would be required for a traditional 

IPO.1005 No commenters opposed the 

proposed rule. 

6. Final Rule 15–01(b): Number of Years 

of Financial Statements 

Having considered the comments 

received, we are adopting Rule 15–01(b) 

largely as proposed, except for certain 

revisions, in order to align the number 

of fiscal years required to be included in 

the financial statements for a business 

that will combine with a shell company 

registrant with the financial statements 

required to be included in a Securities 

Act registration statement for an IPO of 

equity securities. We are clarifying that 

a business that is combining with a shell 

company registrant, beyond just the 

predecessor, must comply with the 

financial statement requirements of 

Regulation S–X as if the filing were a 

registration statement for its own IPO by 

removing the reference to predecessor in 

this rule. Absent this revision, three 

years of financial statements for a 

business that would be an EGC but is 

not a predecessor may be required, 

which would exceed the two years 

required for a predecessor that qualifies 

as an EGC.1006 We believe that the 

predecessor and another business 

combining with the shell company 

registrant should both be subject to Rule 

15–01(b). Further, we are replacing the 

proposed term ‘‘the registrant’’ with 

‘‘such registrant’’ to recognize there may 

be multiple registrants and promote 

readability. Also, in the final sentence of 

the rule, we have revised the phrase ‘‘if 

it were filing a registration statement 

itself’’ to delete the word ‘‘itself’’ and 

replace it with the word ‘‘alone’’; we 

believe the term ‘‘alone’’ will more 

clearly convey the intent of the rule.1007

Last, we added to final Rule 15–01(b), 

as well as Rule 15–01(c) and (d), ‘‘for 

which audited financial statements are 

available’’ to ‘‘most recently completed 

fiscal year’’ in order to conform to its 

usage in Item 10(f)(2) of Regulation S– 

K. 

7. Proposed Rule 15–01(c): Age of 

Financial Statements 

In the Proposing Release, the 

Commission proposed Rule 15–01(c) 

regarding the age of predecessor 

financial statements. The proposed rule 

provided that the financial statements of 

a business that will be the predecessor 

to a shell company must comply with 

the requirements in 17 CFR 210.3–12 

(‘‘Rule 3–12’’ of Regulation S–X) (Rule 

8–08 when that business would qualify 

to be an SRC based on its annual 

revenues as of the most recently 

completed fiscal year, if it were filing a 

registration statement alone) in 

determining the age of the financial 

statements of the predecessor business 

in the registration statement or proxy 

statement of the registrant. 

8. Comments: Rule 15–01(c): Age of 

Financial Statements 

Several commenters indicated 

support for proposed Rule 15–01(c).1008

No commenters opposed the proposed 

rule. 

9. Final Rule 15–01(c): Age of Financial 

Statements 

We are adopting Rule 15–01(c) largely 

as proposed, with certain modifications 

discussed below. 

Currently—with respect to companies 

being acquired that do not meet Form 

S–3 use requirements and are not 

subject to the reporting requirements of 

either section 13(a) or 15(d) of the 

Exchange Act, which is the case with 

most target companies in de-SPAC 

transactions—Form S–4 (under Item 

17(b)(7)) requires inclusion of financial 

statements that would be required in an 

annual report sent to security holders 

under 17 CFR 240.14a–3(b)(1) and (2) 

(Rule 14a–3(b)(1) and (2)), if an annual 

report is required. In summary, Rule 

14a–3(b)(1) and (2) require the inclusion 

of consolidated audited balance sheets 

as of the end of the two most recent 

fiscal years and consolidated audited 

statements of income and cash flows for 

each of the three most recent fiscal years 

prepared in accordance with Regulation 

S–X. Form F–4 is similar in this 

respect.1009 The position of the 


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included in an annual report on Form 20–F); Form 

20–F, Item 17(b) (The financial statements shall 

disclose an information content substantially 

similar to financial statements that comply with 

U.S. generally accepted accounting principles and 

Regulation S–X.). 

1010See FRM 2200.8. As further described in 

Section 2045.5 of the FRM, while the age of 

financial statements is dependent on the registrant’s 

requirements and eligibility for relief under Rule 3– 

01(c) of Regulation S–X, after a reverse acquisition 

accounted for as a business combination, the 

position of the Commission’s staff is that the 

accounting acquirer’s ability to meet those 

requirements should be considered in determining 

the need to update. 

1011See Rule 3–12 of Regulation S–X, which 

stipulates for registrants that are not FPIs and are 

not large accelerated filers or accelerated filers that 

the balance sheet date in an initial registration 

statement must not be more than 134 days old, 

except that third quarter data is timely through the 

45th day after the most recent fiscal year-end. For 

FPIs, Rule 3–12 requires compliance with the age 

requirements in Form 20–F. Form 20–F requires 

financial statements of an FPI must be as of a date 

within nine months of the effective date of a 

registration statement, and audited financial 

statements for the most recently completed fiscal 

year must be included in registration statements 

declared effective three months or more after fiscal 

year-end. 

1012See Rule 8–08 of Regulation S–X, which 

states financial statements may be as current as of 

the end of the third fiscal quarter when the 

anticipated effective or mailing date falls within 45 

days after the end of the fiscal year, or if the date 

falls within 90 days of the end of the fiscal year and 

(1) if a reporting company, all reports due were 

filed; (2) in good faith the company expects to 

report income in the fiscal year just completed; and 

(3) it reported income in at least one of the two 

previous fiscal years. 

1013See supra sections III.C and IV.A. (discussing 

co-registration of target companies and Rule 145a 

respectively). 

1014See Item 17 of Form S–4 and Form F–4; 

§ 240.14A–3(b); Items 13 and 14 of Schedule 14A. 

1015See 17 CFR 230.408(a) (‘‘Rule 408(a)’’ under 

the Securities Act); 17 CFR 240.12b–20 (‘‘Rule 12b– 

20’’ under the Exchange Act). 

1016See FRM at Section 2005.5. If a company 

being acquired that is not the predecessor acquired 

a business, the registrant must evaluate Securities 

Act Rule 408 and disclose the financial statements 

for that acquired business when omission of those 

financial statements would render the financial 

statements for the company being acquired 

substantially incomplete or misleading. 

1017Rule 8–04 applies when the registrant or, 

depending on the context, its predecessor would 

qualify to be an SRC based on its annual revenues 

as of the most recently completed fiscal year if it 

were filing a registration statement alone. 

1018For ease of reference, in this section, when 

we refer to ‘‘business,’’ we also mean ‘‘real estate 

operation.’’ When we refer to ‘‘Rule 3–05,’’ we also 

mean Rule 3–14 of Regulation S–X. When we refer 

to ‘‘Rule 8–04,’’ we also mean 17 CFR 210.8–06 

(‘‘Rule 8–06’’ of Regulation S–X). 

Commission’s staff is that the 

requirement to update target company 

financial statements in a Form S–4 is 

based on the obligation of the registrant 

filing the Form S–4 to update under 

Rule 3–12 (or Rule 8–08 for a smaller 

reporting company). Rule 3–12 

addresses the age of financial statements 

at the effective date of a registration 

statement or at the mailing date of a 

proxy statement.1010 A registration 

statement on Form S–1 for an IPO 

would also require application of Rule 

3–12 1011 (or Rule 8–08 1012 for SRCs), 

regarding the age of financial statements 

at the effective date of a registration 

statement or at the mailing date of a 

proxy statement. However, Rule 3–12 

requires application of Rule 3–01(c), 

which permits reporting companies 45 

more days to update annual financial 

statements when certain conditions are 

met. 

Absent this amendment, the required 

financial statements of each company 

being acquired in a Form S–4, because 

the shell company is a reporting 

company, would not have the same age 

requirements as those in the context of 

an initial registration statement. 

Thus, in order to align the age 

requirements for financial statements for 

each business involved in a business 

combination with a shell company filed 

on Form S–4 or F–4 with those for an 

issuer in an IPO on Form S–1 or F–1, 

we are adopting final Rule 15–01(c). 

Further, we revised the rule to clarify 

that Rule 3–12 or 8–08 must be applied 

to each business involved in a business 

combination with a shell company as if 

the financial statements were included 

in an initial registration statement. 

Based on the Commission staff’s 

experience reviewing filings in de-SPAC 

transactions and other shell company 

business combination transactions, Rule 

15–01(c) is consistent with existing 

market practice for the age of financial 

statements, where they are updated 

similar to an IPO. We further revised the 

rule to clarify that the rule applies to 

any business being acquired by a shell 

company, and not only a predecessor, 

that is included in registration statement 

under Item 17 of Form S–4, in order to 

ensure that the financial statements of 

non-predecessors are subject to the same 

age requirements. Also, in the 

parenthetical in the final sentence of the 

rule, we have revised the phrase ‘‘if it 

were filing a registration statement 

itself’’ to delete the word ‘‘itself’’ and 

replace it with the word ‘‘alone’’; we 

believe the term ‘‘alone’’ will more 

clearly convey the intent of the rule.1013

10. Proposed Rules: 15–01(d), 1– 

02(w)(1), 3–05(b)(4)(ii), 3–14(b)(3)(ii): 

Acquisition of a Business or Real Estate 

Operation by a Predecessor 

Currently, the financial statements of 

a business that is, or will be, the 

predecessor to a shell company 

registrant are required in registration 

statements or proxy statements related 

to the business combination.1014 Aside 

from the predecessor, the financial 

statements of any other businesses that 

have been, or are probable to be, 

acquired may also be required.1015 For 

example, ‘‘Shell Company A’’ and 

‘‘Target Business B’’ are part of a 

business combination and a Form S–4 

registration statement is filed. Target 

Business B, the predecessor, acquired 

‘‘Company C’’ before the Form S–4 was 

filed, so Company C is not another 

company being acquired by Shell 

Company A (the registrant) as Company 

C will have been subsumed into Target 

Business B before the Form S–4 is filed. 

The proposed rules and amendments 

addressed the financial reporting 

required for Company C in this nonexclusive example. 

Commission staff has taken the 

position that existing Securities Act 

Rule 408(a) and Exchange Act Rule 12b– 

20, elicit financial statements of a 

business (e.g., ‘‘Company C’’ in the 

above example) acquired or probable of 

being acquired by the target business 

(e.g., ‘‘Target Business B’’ in the 

example) in a shell company business 

combination filed in a registration 

statement or proxy statement only when 

omission of those financial statements 

would render the target business’s 

financial statements substantially 

incomplete or misleading.1016 The 

Commission proposed Rule 15–01(d) of 

Regulation S–X to reduce the judgment 

required in determining when to 

include financial statements of a 

business other than the shell company 

registrant or its predecessor and instead 

provide certainty by requiring 

application of Rule 3–05 or Rule 8–04 

of Regulation S–X,1017 aligning with the 

reporting in an IPO when there is a 

similar acquisition. These provisions 

would dictate when the financial 

statements of a non-predecessor 

business 1018 that has been acquired, or 

is probable to be acquired, by a shell 

company registrant or its predecessor 

should be included in the registration 

statements or proxy statements related 

to the business combination. 

Since proposed Rule 15–01(d) would 

require the application of Rule 3–05 or 

8–04, which in turn would require 

application of 17 CFR 210.1–02(w)(1) 

(‘‘Rule 1–02(w)(1)’’ of Regulation S–X) 

in measuring significance, the 

Commission also proposed amendments 

to Rule 1–02(w)(1) and a new Rule 15– 

01(d)(1) to change how significance is 

measured in a shell company business 

combination transaction. 

The existing significance tests in 17 

CFR 210.1–02(w) (‘‘Rule 1–02(w)’’ of 

Regulation S–X), as applied to 

acquisitions involving shell companies 

where significance would be measured 


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1019Rule 1–02(w) requires the financial 

information of the registrant, which may be a shell 

company, to be used as the denominator for the 

significant subsidiary tests. 

1020See Proposing Release, supra note 7, at 

29492. 

1021See Rule 3–05 (generally requiring the filing 

of financial statements of an acquired business 

when the conditions in Rule 1–02(w) related to 

significant subsidiary exceed 20%). 

1022As a co-registrant, target companies will have 

an Exchange Act reporting obligation. See supra 

sections III.C and IV.A (discussing co-registration of 

target companies and Rule 145a respectively). 

1023Letters from ABA (expressing support for 

Rule 15–01(d) but suggesting changes to Rule 15– 

01(d)(2)), Freshfields (expressing support for Rule 

15–01(d)(1) but suggested changes to proposed Rule 

15–01(d)(2)), ICGN (supporting Article 15), PwC 

(expressing support for Regulation S–X changes to 

align with an IPO with respect to acquisitions by 

a predecessor but suggesting changes be made to 

proposed Rule 15–01(d)(2)), Vinson & Elkins 

(expressing support for Rule 15–01 but suggesting 

changes to proposed Rules 15–01(d)(2) and 15– 

01(e)), Winston & Strawn (expressing general 

support for Regulation S–X proposed amendments 

but suggesting changes to proposed Rule 15– 

01(d)(2)). See also letters from BDO, Deloitte & 

Touche LLP (June 7, 2022) (‘‘Deloitte’’), Ernst & 

Young, KPMG, Loeb & Loeb, RSM (expressing 

general support for proposed Regulation S–X 

amendments). 

1024Letters from ABA, BDO, Freshfields, 

Goodwin, PwC, Vinson & Elkins, Winston & 

Strawn. 

1025 Id. 

1026Rule 3–05(b)(4)(ii) of Regulation S–X. 

1027Letters from ABA, Freshfields, Goodwin, 

Vinson & Elkins, Winston & Strawn. 

1028Letter from PwC. 

1029 Id. 

1030Letters from ABA, Freshfields, PwC, RSM, 

Vinson & Elkins. 

against the shell company registrant, 

appeared inconsistent with the reasons 

underlying the sliding scale approach 

adopted in Rule 3–05 (or Rule 8–04). 

The sliding scale approach recognizes 

that certain acquisitions have a greater 

impact on a company than others and 

those acquisitions should result in 

additional financial information about 

the acquired business. The significance 

tests in Rule 1–02(w) 1019 do not address 

the scenario when there is both a shell 

company registrant and a business that 

is or will be its predecessor. Because a 

shell company has nominal activity and 

therefore the denominator for the tests 

would be minimal, the application of 

such tests generally result in an 

acquisition being significant at the 

maximum level, which suggests that the 

existing sliding scale for business 

acquisitions may not be effective in the 

context of a shell company business 

combination transaction.1020 In order to 

address the ineffectiveness of the 

existing sliding scale in these specific 

transactions, the proposed amendments 

to Rule 1–02(w) would require the 

significance of the acquired business 

that is not the predecessor to be 

calculated using the predecessor’s 

financial information as the 

denominator instead of that of the shell 

company registrant. 

The Commission also proposed Rule 

15–01(d)(2) to specify when the 

proposed Rule 15–01(d)-required 

financial statements, through 

application of Rule 3–05 (or Rule 8–04), 

for a business that is not the predecessor 

to a shell company, would be required 

to be filed if such financial statements 

are properly omitted from a registration, 

information, or proxy statement under 

Regulation S–X. Specifically, 17 CFR 

210.3–05(b)(4)(i) (‘‘Rule 3–05(b)(4)(i)’’ of 

Regulation S–X) provides that financial 

statements of a recently acquired or to 

be acquired business may be omitted 

from a registration or proxy statement 

when the significance of that 

acquisition, under the required 

significance tests in Rule 3–05, is 

measured at 50% or less. Rule 3–05 

further provides that such omitted 

financial statements must be filed under 

cover of Form 8–K within 75 days after 

consummation of the acquisition.1021 A 

company that is not required to register 

a class of securities under the Exchange 

Act is not required to file a current 

event report, such as Form 8–K, and we 

are not changing that in our final 

rules.1022 However, the Commission 

proposed in Rule 15–01(d)(2) that the 

financial statements of the business 

acquired by the shell company or the 

predecessor that were properly omitted 

under Rule 3–05 from the previouslyfiled registration or proxy statement 

would be required as part of the alreadyrequired Item 2.01(f) Form 8–K filed 

with Form 10 information within four 

business days of the de-SPAC 

transaction. The Commission also 

proposed amendments to Rules 3–05 

and 3–14 to refer to Rule 15–01(d)(2) for 

completeness and to avoid confusion on 

when such financial statements are due 

when a shell company business 

combination transaction is involved. 

11. Comments: Rules 15–01(d), 1– 

02(w)(1), 3–05(b)(4)(ii), 3–14(b)(3)(ii): 

Acquisition of a Business or Real Estate 

Operation by a Predecessor 

Several commenters expressed 

general support for proposed Rule 15– 

01(d) or general support for proposed 

changes to Regulation S–X.1023

However, each of the commenters who 

were generally supportive of Rule 15– 

01(d) and a few other commenters 

suggested changes to Rule 15– 

01(d)(2).1024 Specifically, these 

commenters observed that the proposed 

rule could accelerate the filing of 

financial statements of an acquired 

business in a Form 8–K that have 

previously been omitted from a 

registration statement, compared to the 

timing that would be required after an 

IPO, and recommended that we conform 

the timing.1025 After an IPO, a registrant 

must file the omitted financial 

statements no later than 75 days after 

consummation of the acquisition.1026 In 

contrast, commenters suggested the 

proposed rule could give the combined 

company insufficient time to prepare 

the financial statements of the acquired 

business because the proposed rule 

could require the omitted financial 

statements to be filed sooner than 75 

days after the relevant acquisition in 

cases where the Form 8–K filed in 

connection with the consummation of 

the de-SPAC transaction is filed earlier 

than 71 days after such acquisition.1027

One commenter recommended ‘‘that 

the Commission address the interaction 

between proposed Rule 15–01(d)(2) of 

Regulation S–X and the company’s 

reporting requirements under section 

15(d) as it relates to recently acquired 

businesses (or real estate operations) 

which are excluded from a registration 

or proxy or information statement 

prepared in connection with the deSPAC transaction.’’ 1028

This same commenter also 

recommended that Rule 15–01(d) 

reference Rule 3–14 for real estate 

operations the same way the proposed 

rule referenced Rules 3–05 and 8–04 for 

businesses so that the acquisition of real 

estate operations is explicitly 

addressed.1029

Several commenters supported,1030

and no commenters opposed, the 

proposed amendments to Rule 1– 

02(w)(1) that required that the 

significance of acquired businesses be 

measured using the predecessor’s 

financial information as the 

denominator, instead of the shell 

company’s, because use of the 

predecessor’s financial statements for 

the denominator should produce results 

more consistent with the sliding scale 

approach in Rule 3–05. 

12. Final Rules 15–01(d), 1–02(w)(1), 3– 

05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition of 

a Business or Real Estate Operation by 

a Predecessor 

We are adopting new Rule 15–01(d) 

introductory text and (d)(1) and (2), as 

well as the amendments to Rules 1– 

02(w)(1), 3–05, and 3–14, substantially 

as proposed, except for certain 

modifications discussed below. New 

Rule 15–01(d) and corresponding 

amendments more closely align the 

financial reporting of an acquired 

business in a shell company business 

combination transaction reported on 


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1031See infra section III.C. 

1032We are adopting as proposed the amendment 

to Instructions to paragraph (b)(5) and (b)(6) of Item 

17 of Form F–4. This amendment requires a 

reconciliation under Item 18 of Form 20–F when a 

shell company acquires a foreign business that will 

be a predecessor that prepares financial statements 

on the basis of a comprehensive body of accounting 

principles other than U.S. GAAP. Absent this 

amendment, the foreign business being acquired 

would present a reconciliation under Item 17 of 

Form 20–F, which does not include the disclosures 

required under U.S. GAAP. A predecessor that 

applies IFRS, as adopted by the IASB, in financial 

statements presented in Form F–4 would not have 

to present a reconciliation to U.S. GAAP, pursuant 

to Item 17(c) of Form 20–F. 

1033Letters from ABA, Freshfields, Vinson & 

Elkins, Winston & Strawn. See supra note 1027. 

1034Letter from PwC. 

1035 Id. 

1036We also changed the plural term 

‘‘businesses’’ to singular ‘‘business’’ and changed 

the related plural verb ‘‘are’’ to singular ‘‘is’’ in Rule 

15–01(d), as well as in Rule 15–01(d)(1), in order 

to be consistent throughout Rule 15–01(d). 

Form S–4 or F–4 or proxy statement 

with that in an IPO by requiring 

application of Rule 3–05 or 8–04 of 

Regulation S–X to acquisitions of a 

business or real estate operation, 

respectively, by a predecessor to the 

shell company. They are also consistent 

with the Commission staff observations 

that current market practice applies 

Rule 3–05 (or Rule 8–04) to acquisitions 

by the business that will be the 

predecessor. 

In the context of a registration 

statement on Form S–4 or F–4, the 

acquired business financial statements 

addressed in Rule 15–01(d) that are filed 

pursuant to Rule 3–05 do not represent 

financial statements of a company being 

acquired that would be a co-registrant in 

a shell company business 

combination.1031 For example, the 

financial statements of a business when 

its acquisition is cross-conditioned on 

the acquisition of a predecessor would 

ordinarily fall under Item 17 of Form S– 

4 or Form F–4, rather than under Rule 

3–05. Judgment may be required in 

other examples when determining 

whether the financial statements of a 

business would be required under Item 

17 of Form S–4 or Form F–4 1032 as a 

‘‘company being acquired’’ or under the 

provisions of Rule 3–05 for a significant 

acquisition. 

New Rule 15–01(d)(1) directs 

registrants to Rule 1–02(w)(1) in order to 

determine how significance is measured 

in certain shell company business 

combination transactions. New Rule 15– 

01(d)(2) clarifies when and how 

financial statements for a recently 

acquired or to be acquired business 

should be filed. 

We have made a few revisions to the 

final rule in response to comments 

received and some other revisions to 

improve the clarity of the final rules. 

First, consistent with commenters’ 

suggestions,1033 we revised Rule 15– 

01(d)(2) from the proposal so that when 

the financial statements of a recently 

acquired business that is not or will not 

be the predecessor to the shell company 

are omitted from a registration statement 

or proxy statement pursuant to Rule 3– 

05(b)(4)(i) of Regulation S–X, those 

financial statements must be filed in a 

Form 8–K by the later of the filing of the 

Form 8–K filed pursuant to Item 2.01(f) 

or 75 days after consummation of the 

acquisition. This revision does not 

accelerate the filing of such financial 

statements when compared to the 

application of Rule 3–05(b)(4)(i) outside 

of a shell company transaction. 

In response to a comment about the 

interaction of this rule and section 15(d) 

of the Exchange Act,1034 which includes 

requirements relating to periodic 

reporting on Forms 10–K and 10–Q and 

current reporting on Form 8–K, the 

revised rule specifies that a business 

whose financial statements are omitted 

from the registration statement in 

reliance on Rule 3–05(b)(4)(i) will be 

required to file those financial 

statements in a Form 8–K. 

Next, we have revised Rule 15–01(d) 

to add references to Rule 3–14 and Rule 

8–06 regarding real estate operations, 

which were inadvertently omitted from 

the proposal, as noted by a 

commenter.1035 For similar reasons we 

have also revised Rule 15–01(d)(2) to 

change the reference from ‘‘recently 

acquired business’’ to ‘‘recently 

acquired business or real estate 

operation.’’ We reference ‘‘real estate 

operation’’ in the context of Rule 15– 

01(d) and not the other rules in Article 

15 because a real estate operation can 

meet the definition of a business under 

17 CFR 210.11–01(d) (‘‘Rule 11–01(d)’’ 

of Regulation S–X), but the permitted 

financial statement presentation for an 

acquired real estate operation (Rule 3– 

14) is different than that for other 

acquired businesses (Rule 3–05). Where 

the rules in Article 15, other than Rule 

15–01(d), refer to ‘‘business,’’ such 

references contemplate a real estate 

operation. 

Unrelated to commenter feedback, we 

revised the parenthetical in Rule 15– 

01(d) related to when Rules 8–04 and 8– 

06 for SRCs will apply to clarify that 

these rules would apply when the 

predecessor qualifies as an SRC. 

We also made several technical 

changes to improve the clarity of each 

of final Rule 15–01(d) introductory text 

and (d)(1) and (2). In final Rule 15– 

01(d), in place of the proposed term 

‘‘when that business,’’ we have inserted 

instead the term ‘‘when the 

predecessor.’’ This change will help 

clarify which entity’s SRC status is 

being referred to. Also, we have changed 

the term ‘‘itself’’ to ‘‘alone’’ for the same 

reasons the same change was made in 

Rule 15–01(b) and (c) as discussed 

above.1036

We also removed from final Rule 15– 

01(d) references to acquisitions by a 

shell company, because we determined 

that the financial statements for 

acquisitions by a shell company would 

be required by Item 17 of Form S–4 or 

F–4 as a ‘‘company being acquired’’ and 

not required through application of Rule 

3–05 or 3–14. Relatedly, we revised 

Rules 1–02(w), 3–05, and 3–14 so that 

they pertain to acquisitions by a 

predecessor rather than an acquisition 

by a shell company. Lastly, we 

reorganized some of the language in 

Rule 15–01(d)(2) to improve the 

readability of the requirement. 

We are adopting the amendments to 

Rule 1–02(w) largely as proposed, 

except for two modifications discussed 

below. Final Rule 1–02(w) provides for 

the use of the predecessor’s financial 

statements as the denominator in the 

significance tests, which determine 

when financial statements are required 

for an acquired business, instead of 

those of the shell company registrant. 

We expect the rule will produce results 

more consistent with the objective of the 

sliding scale approach in Rule 3–05 and 

appropriately differentiate for investors 

those acquisitions that have a greater 

impact to the predecessor than others. 

In the final rule, we made some 

technical changes and the modification 

already discussed above, in relation to 

final Rule 15–01(d), to remove the 

reference to acquisitions by a shell 

company. In the final rule, we also 

added the terms ‘‘consolidated’’ before 

‘‘predecessor’’ and ‘‘those of’’ before 

‘‘the shell company registrant’’ as well 

as eliminated ‘‘the subsidiaries 

consolidated’’ for clarity. We also added 

‘‘shell company’’ before ‘‘registrant’’ in 

order to clarify which registrant should 

not be used as part of the significance 

test. 

13. Proposed Rule 15–01(e): Financial 

Statements of a Shell Company 

Registrant After the Combination With 

Predecessor 

In recent years, the Commission staff 

has received questions on whether the 

historical financial statements of a shell 

company registrant are required in 

filings made after a business 

combination. The Commission proposed 

new Rule 15–01(e) to allow a shell 

company, including a SPAC, to exclude 


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1037Once the financial statements of the registrant 

include the period in which the de-SPAC 

transaction was consummated, the financial 

statements required would be those of the 

predecessor for all historical periods presented. 

1038Letters from Ernst & Young, PwC, RSM. 

1039Letter from RSM. 

1040Letters from Ernst & Young, Freshfields. See 

also letter from Vinson & Elkins, which stated: ‘‘We 

disagree that financial statements of the SPAC 

could ever be material to an investor in the 

combined company, as surmised by the SEC in the 

Proposing Release, but if they were material then 

Exchange Act Rule 12b–20 or Securities Act Rule 

408(a) would require their disclosure.’’ 

1041Letters from Freshfields, Vinson & Elkins 

(both highlighting that Rule 15–01(e), as proposed, 

would permit the financial statements of the shell 

company for periods prior to the consummation of 

the acquisition to be omitted once the financial 

statements of the predecessor have been filed for all 

required periods through the acquisition date, 

whereas the Proposing Release refers to financial 

statements of the shell company (and not the 

predecessor)). See Proposing Release, supra note 7, 

at 29493. 

1042Letter from Vinson & Elkins. 

1043Proposing Release, supra note 7, at 29493. 

1044A registrant that would be required to include 

the financial statements of a shell company is a new 

holding company that is created where a SPAC and 

a target company merge into that new holding 

company. 

1045A reverse recapitalization is considered to be 

an equivalent to the issuance of stock by a private 

company for the net monetary assets of a shell 

company accompanied by a recapitalization. 

1046Proposing Release, supra note 7, at 29493. 

the financial statements of the shell 

company, for periods prior to a business 

combination that results in the 

combined entity no longer being a shell 

company, once the following conditions 

have been met: (1) the financial 

statements of the predecessor, as that 

term is used in financial reporting, have 

been filed for all required periods 

through the acquisition date, and (2) the 

financial statements of the combined 

entity registrant include the period in 

which the acquisition was 

consummated, which would also 

include the accounting for the business 

combination. 

In the example of a de-SPAC 

transaction, assuming the first condition 

is met, the financial statements of the 

SPAC, as a shell company, would 

generally no longer be relevant or 

meaningful to an investor once the 

financial statements of the registrant 

include the period in which the deSPAC transaction was consummated for 

any filing.1037

14. Comments: Rule 15–01(e): Financial 

Statements of a Shell Company 

Registrant After the Combination With 

Predecessor 

Several commenters were supportive 

of the proposed rule.1038 One of these 

commenters expressed the view that 

shell company financial statements 

would no longer be relevant or 

meaningful once the financial 

statements of the registrant include the 

period in which the combination was 

consummated.1039

Two commenters, however, asserted 

that the financial statements of the shell 

company should no longer be required 

in any filings made after consummation 

of a transaction because the shell 

company’s financial statements would 

no longer be relevant or material.1040

Two commenters highlighted an 

inconsistency between the proposed 

rule text and the discussion of the 

proposed rule in the Proposing Release 

as it relates to one of the conditions for 

when the shell company’s financial 

statements may be omitted.1041

15. Final Rule 15–01(e): Financial 

Statements of a Shell Company 

Registrant After the Combination With 

Predecessor 

We are adopting Rule 15–01(e) 

substantially as proposed, except for 

modifications discussed further below. 

The final rules reflect our belief that the 

financial statements of a shell company 

would be necessary and material to an 

investor until such time that the 

combined registrant’s financial 

statements include the period in which 

the acquisition was consummated. 

We disagree with commenters’ 

assertions that the shell company’s 

financial statements would provide no 

material information prior to the point 

in time when the financial statements of 

the combined entity registrant include 

the period in which the acquisition was 

consummated. Specifically, we note that 

the shell company’s financial statements 

may include material information about 

its equity or outstanding derivative 

financial instruments. While we 

understand, as a commenter 

asserted,1042 that application of 

Securities Act Rule 408(a) may result in 

inclusion of the shell company’s 

financial statements in a registration 

statement because of a determination 

that they are material, we believe that 

the new rule appropriately eliminates a 

determination that could result in the 

financial statements’ exclusion and the 

related regulatory uncertainty involved 

in such judgment because we believe 

the shell company’s financial statements 

would be material. The staff has not 

objected to the registrant excluding the 

historical financial statements of the 

shell company from periodic reports 

once the financial statements include 

the period in which the acquisition or 

recapitalization was consummated.1043

Further, in the staff’s experience with 

reviewing these filings, the registrant 

has continued to include the historical 

shell company’s financial statements 

until that time period. Thus, the new 

rule codifies the existing staff view and 

current practice. 

In response to the comments on the 

inconsistency between the proposed 

rule text and the discussion in the 

Proposing Release, we added 

‘‘registrant’’ to ‘‘shell company’’ for 

clarity that the shell company in this 

rule represented a registrant. As a 

registrant, the shell company is required 

to file financial statements for all 

required periods through the acquisition 

date under Exchange Act section 13(a) 

or 15(d) and rules thereunder. 

In final Rule 15–01(e), we have made 

a change from the proposal to include 

a provision that has a similar effect as 

the proposed amendments to Rule 11– 

01(d) would have had if we had adopted 

them. This added provision states that 

if a registrant 1044 is to acquire or has 

acquired a shell company, the financial 

statements of the shell company are 

required to be included in any filing 

that requires the registrant’s financial 

statements, as if the shell company were 

the registrant for the filing, unless the 

financial statements of the registrant 

include the period in which the 

acquisition of the shell company was 

consummated. As also discussed below, 

as a result of this change, it is 

unnecessary to adopt proposed Rule 11– 

01(d) which would have had a similar 

effect. 

The final rule will provide clarity as 

to when the financial statements of a 

shell company are required after a shell 

company business combination 

transaction. The final rule applies 

regardless of whether the business 

combination is accounted for by the 

shell company as a forward acquisition 

of the business, which may be a private 

operating company, or as a reverse 

recapitalization of the business.1045

Under the final rule, the historical 

financial statements of the shell 

company will be required in all filings 

that require financial statements 

(including registration statements and 

the Form 8–K with Form 10 information 

filed following the de-SPAC transaction) 

filed prior to the first periodic report, 

such as Form 10–Q, that includes those 

post-business combination financial 

statements.1046 For example, under the 

final rule, registration statements filed 

before the first periodic report filed with 

the post-business combination financial 

statements, such as a registration 

statement to register the resale of shares 

issued in connection with a PIPE 

financing filed shortly after the de-SPAC 


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1047Proposing Release, supra note 7, at 29494. 

1048Proposing Release, supra note 7, at 29493. By 

contrast, application of Rule 3–05 to a significant 

business under Rule 11–01(d) requires its financial 

statements to continue to be filed in any subsequent 

registration statements until the acquired business 

is included in the registrant’s results for at least 

nine months subsequent to acquisition. As 

proposed, the application of Rule 3–05 would 

require the SPAC financial statements for a longer 

duration subsequent to the de-SPAC transaction 

than the application of proposed Rule 15–01(e). 

1049This rule permits in certain circumstances 

the use of pro forma amounts that depict significant 

business acquisitions and dispositions 

consummated after the latest fiscal year-end for 

which the registrant’s financial statements are 

required to be filed for the registrant’s financial 

information in the significance tests. Such pro 

forma use is permitted if the registrant has filed 

audited financial statements for any such acquired 

business for the periods required by Rule 3–05, 8– 

04, or 3–14 and the pro forma information required 

by 17 CFR 210.11–01 through 210.11–02. 

1050Proposing Release, supra note 7, at 29493. 

The Commission also said in the Proposing Release 

that, pursuant to the proposed amendment to Rule 

11–01(d) that would stipulate that the SPAC is a 

business, an acquisition of the SPAC would be 

considered an acquisition of a business, and the 

conditions under Rule 11–01(b)(3)(i)(B) to use pro 

forma financial statements depicting the acquisition 

as the denominator in the significance tests may be 

met. Proposing Release, supra note 7, at 29493, 

n.273. 

1051Proposing Release, supra note 7, at 29494. 

1052Letters from Davis Polk, Vinson & Elkins, 

Ernst & Young. 

1053Letter from Freshfields. 

1054Letter from Davis Polk. 

1055 Id. 

1056 Id. 

1057Letter from Ernst & Young. 

1058Letter from Vinson & Elkins (also expressing 

the view that Exchange Act Rule 12b–20 or 

Securities Act Rule 408(a) would require disclosure 

of the SPAC’s financial statements if they were 

material). 

1059 Id. 

1060Letter from Ernst & Young. 

1061Letter from Freshfields. 

transaction, will require the SPAC’s 

financial statements. 

16. Proposed Rule 11–01(d) 

The Commission proposed to amend 

Rule 11–01(d) of Regulation S–X to state 

that a SPAC is a business for purposes 

of the rule. While Rule 11–01(d) states 

that an entity is presumed to be a 

business, consideration of the 

continuity of the SPAC’s operations 

prior to and after the de-SPAC 

transaction may lead some parties to 

conclude that the SPAC is not a 

business.1047 The Commission noted in 

the Proposing Release that, given the 

significant equity transactions generally 

undertaken by a SPAC, the Commission 

believes the financial statements of the 

SPAC could be material to an investor, 

particularly when they underpin 

adjustments to pro forma financial 

information in a transaction when an 

operating company is the legal acquirer 

of a SPAC. 

As a result of the proposed rule, an 

issuer that is not a SPAC may be 

required to file financial statements of 

the SPAC in a resale registration 

statement on Form S–1.1048

Further, the proposed amendment to 

Rule 11–01(d) would change the 

application of 17 CFR 210.11– 

01(b)(3)(i)(B) (‘‘Rule 11–01(b)(3)(i)(B)’’ 

of Regulation S–X) 1049 by allowing the 

significance of a future acquired 

business to be compared to the pro 

forma amounts related to the shell 

company and target company business 

combination transaction in filings made 

after the consummation of the business 

combination transaction.1050 The impact 

of such application would be that the 

shell company’s financial statements, 

including its cash, would be part of the 

pro forma financial information and 

would likely increase the denominator 

in the significance tests compared to 

measuring the significance of an 

acquisition against only the target 

private operating company’s financial 

information. While the Commission did 

not propose amendments to Rule 11– 

01(b)(3)(i)(B), the Proposing Release 

sought feedback on the potential change 

in its application as a result of the 

proposed amendments to Rule 11– 

01(d).1051

17. Comments: Rule 11–01(d) 

Several commenters opposed the 

proposed amendments to Rule 11–01(d) 

that would treat the SPAC as a business 

for purposes of 17 CFR 210.11–01.1052

One commenter, while not specifically 

referring to proposed Rule 11–01(d), 

expressed views consistent with support 

for the rule.1053

One commenter that opposed the 

amendments said that the SPAC 

historical financial statements are not 

relevant to the ongoing business of the 

target operating company.1054 The 

commenter said that the balance sheet 

of the combined public company will 

already reflect the impact of the 

combination of the SPAC with the target 

operating company.1055 The commenter 

also said that the proposed amendment 

would result in significant additional 

compliance costs while resulting in no 

substantive additional public 

disclosure.1056

One commenter expressed the view 

that the proposed amendment is 

contradictory to current Rule 11–01(d)’s 

requirement to evaluate whether there is 

sufficient continuity of the acquired 

entity’s operations prior to and after the 

transaction so that disclosure of prior 

financial information is material to an 

understanding of future operations.1057

Another commenter expressed similar 

views, asserting that, ‘‘[i]n a de-SPAC 

transaction there is no continuity of 

operations between the SPAC and the 

surviving company, and the SPAC’s 

revenue producing activities (interest on 

short term U.S. government securities or 

money market funds investing in the 

same) do not continue post-closing and 

are not material to investors in the 

surviving company.’’ 1058

This commenter also said, ‘‘[w]hile 

there is a presumption that a separate 

entity, such as a SPAC, is a business, 

none of the attributes identified in S–X 

Rule 11–01(d)(2) for evaluation of 

whether a lesser component of a 

business constitutes a business (i.e. 

physical facilities, employee base, 

market distribution system, sales force, 

customer base, operating rights, 

production techniques or trade names) 

remain after the de-SPAC transaction.’’ 

Current Rule 11–01(b)(3)(i)(B) permits 

pro forma information to be used in the 

denominator of significance tests under 

certain circumstances. This commenter 

also said that ‘‘[t]he use of pro forma 

financials should only be allowed to the 

extent they would be permitted for an 

acquisition in connection with a 

pending or completed IPO.’’ 1059

One commenter said that the 

proposed amendment to Rule 11–01(d) 

is contradictory to proposed Rule 15– 

01(e), about which the Proposing 

Release stated: ‘‘the financial statements 

of the SPAC, as a shell company, would 

generally no longer be relevant or 

meaningful to an investor after a deSPAC transaction once the financial 

statements of the registrant include the 

period in which the de-SPAC 

transaction was consummated for any 

filing.’’ 1060 The commenter expressed a 

similar view with respect to pro forma 

information as the foregoing, stating that 

the historical financial statements of the 

SPAC are not necessary for the purposes 

of the pro forma financial information. 

The commenter said, ‘‘[f]or example, the 

trust account amounts in the pro forma 

information significantly differ from 

actual amounts due to transaction costs 

and redemptions. Any private 

investment in public equity (PIPE) 

transaction is also not reflected in the 

historical SPAC financials, and much of 

the SPAC’s historical income statement 

activity is generally eliminated in the 

preparation of the pro forma financial 

statements.’’ 

One commenter, while not 

specifically referring to proposed Rule 

11–01(d), expressed views consistent 

with proposed Rule 11–01(d).1061 The 

commenter said, ‘‘we agree that the pro 

forma financial information that gives 

effect to the shell company transaction 


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1062Letter from Ernst & Young. 

1063See supra section IV.B.15. 

1064 If Rule 3–05 were applied to the SPAC 

because the SPAC was considered a business under 

Proposed Rule 11–01(d), then financial statements 

of the SPAC may be required in registration 

statements of the registrant until the SPAC has been 

included in the registrant’s financial statements for 

at least nine months. 

1065Proposing Release, supra note 7, at 29493. 

1066Proposing Release, supra note 7, at 29294. 

1067Letter from PwC. 

1068Letter from Ernst & Young. 

1069As discussed above, we are adopting Rule 

15–01(b) largely as proposed, with certain technical 

modifications in the final rule. 

1070Proposing Release, supra note 7, at 29494 

(request for comment number 109). 

1071Letters from BDO, PwC, Deloitte, RSM, 

Freshfields, Vinson & Elkins. 

1072Letter from BDO. 

1073Letter from Ernst & Young. See supra note 

1068. 

1074Letters from BDO, PwC, Deloitte, RSM, 

Freshfields, Vinson & Elkins. See supra note 1071. 

should be allowed to be used as the 

denominator in measuring the 

significance of other acquisitions not 

involving a predecessor.’’ The 

commenter also indicated that the use of 

pro forma financial information to 

measure significance should not be 

limited to acquisitions that occur 

subsequent to a de-SPAC transaction. 

The commenter said, ‘‘[i]n most deSPAC transactions there are numerous 

other contemporaneous transactions 

occurring that affect the target’s capital 

structure and, as a result, using 

proforma financial statements for 

measuring significance can produce a 

more accurate analysis of an acquiree’s 

significance.’’ 

18. Decline To Adopt Rule 11–01(d) 

After considering the comments 

received, we are not adopting the 

proposed amendment of Rule 11–01(d), 

because we agree with a commenter’s 

feedback 1062 that it would be 

contradictory to proposed Rule 15– 

01(e). In this regard, the proposed 

amendment to Rule 11–01(d) could 

require filing of the shell company’s 

financial statements in subsequent 

registration statements despite Rule 15– 

01(e) potentially permitting their 

omission.1063 Instead we are making 

revisions to proposed Rule 15–01(e) to 

require that, if a registrant is to acquire 

or has acquired a shell company, the 

financial statements of the shell 

company must be filed, as if the shell 

company were the registrant for the 

filing, unless the financial statements of 

the registrant include the period in 

which the acquisition was 

consummated. Accordingly, in 

structures where another issuer is the 

legal acquirer of a shell company, that 

issuer will look to final Rule 15–01(e), 

rather than Rules 11–01(d) and 3–05, for 

determining whether financial 

statements of the shell company are 

required in filings made subsequent to 

the transaction. Final Rule 15–01(e) will 

require financial statements of the SPAC 

in registration statements filed 

subsequent to the de-SPAC transaction 

when the de-SPAC transaction has not 

yet been reflected in in the financial 

statements filed by the registrant. In 

contrast to the proposed rule,1064 the 

final rule would not require financial 

statements of the SPAC once the deSPAC transaction has been reported on 

in the financial statements filed by the 

registrant. The final rules reflect our 

view that the financial statements of the 

SPAC could be material to an investor. 

As highlighted in the Proposing 

Release, application of the proposed 

amendment to Rule 11–01(d) that would 

treat a shell company as a business 

could have resulted in significance 

testing of a future acquired business 

(i.e., numerator) being measured against 

pro forma amounts that combine the 

shell company and target private 

operating company (i.e., 

denominator).1065 Because the proposed 

amendment to Rule 11–01(d) is not 

being adopted, the shell company will 

not be included in the denominator, 

similar to how proceeds from an 

offering would not be included in the 

comparison. 

19. Proposed Item 2.01(f) of Form 8–K 

Item 2.01(f) of Form 8–K currently 

requires a shell company registrant to 

file, after an acquisition, the information 

that would be required if the registrant 

were filing a general form for the 

registration of securities on Form 10 

under the Exchange Act. The 

Commission proposed to revise this 

item to refer to ‘‘acquired business,’’ 

rather than ‘‘registrant,’’ in an effort to 

clarify that the information provided 

relates to the acquired business for 

periods prior to consummation of the 

acquisition and not the shell company 

registrant.1066

20. Comments: Item 2.01(f) of Form 8– 

K 

One commenter supported the 

proposed amendment to refer to 

‘‘acquired business’’ instead of 

‘‘registrant.’’ 1067 Another commenter 

recommended that we use the term 

‘‘predecessor,’’ instead of ‘‘acquired 

business,’’ in order to avoid potential 

confusion with acquired businesses that 

are not the predecessor.1068

Currently, a Form 8–K filed pursuant 

to Item 2.01(f) may require three fiscal 

years of financial statements for an 

acquired business that is the 

predecessor to a shell company, while 

only two fiscal years may be required in 

the Form S–4 for the de-SPAC 

transaction for the same company under 

Rule 15–01(b).1069 For example, an EGC 

that is not an SRC would need to 

present an additional year of financial 

statements within four business days of 

consummation of the de-SPAC 

transaction. Several commenters 

responded to a request for comment that 

asked whether we should amend the 

Form 8–K requirement to provide an 

exception to the required Form 10 typeinformation so that the financial 

statements of the acquired business 

need not be presented for any period 

prior to the earliest audited period of 

that acquired business previously 

presented in connection with a 

registration, proxy, or information 

statement of the registrant.1070 Each of 

the commenters that responded to the 

request for comment supported the 

exception,1071 with one commenter 

stating that it was not clear why an 

earlier annual period would be required 

in the Form 8–K filed after 

consummation of the merger when such 

information was not considered 

necessary for an investment decision by 

the SPAC’s shareholders.1072 No 

commenters opposed such an exception. 

21. Final Item 2.01(f) of Form 8–K 

We are adopting the proposed 

amendments to Item 2.01 of Form 8–K, 

with modifications made in response to 

comments received. We agree with the 

commenter’s recommendation that we 

use the term ‘‘predecessor,’’ instead of 

‘‘acquired business,’’ in order to avoid 

potential confusion with acquired 

businesses that are not the 

predecessor.1073

We agree with the comments 

suggesting that, when the predecessor 

meets the conditions of an EGC at the 

time of filing the Form 8–K, the 

registrant should not be required to 

present audited financial statements for 

any period prior to the earliest audited 

period presented in the predecessor’s 

financial statements in connection with 

a de-SPAC registration or proxy 

statement of the registrant.1074 The final 

rule provides that, when, at the time of 

filing of the Item 2.01(f) Form 8–K, the 

predecessor meets the conditions of an 

‘‘emerging growth company,’’ as defined 

in Securities Act Rule 405 or Exchange 

Act Rule 12b–2, the registrant need not 

present audited financial statements for 

the predecessor for any period prior to 

the earliest audited period presented in 

its financial statements included in a 

previously filed registration or proxy 


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1075Proposing Release, supra note 7, at 29494. 

1076Letter from PwC. 

1077See, e.g., Shell Company Adopting Release, 

supra note 943. Also affiliates of any non-issuer 

party to a transaction identified in 17 CFR 

230.145(a) must consider 17 CFR 230.145(c) and 

(d). 

1078These rules and limitations generally do not 

apply to shell companies that qualify as ‘‘business 

combination related shell companies’’ as defined in 

Rule 405. 

1079See 17 CFR 230.144(i), 17 CFR 230.145(c) and 

(d); Revisions to Rules 144 and 145, Release No. 33– 

8869 (Dec. 6, 2007) [72 FR 71546 (Dec. 17, 2007)]. 

1080See General Instruction A.1, Form S–8 (17 

CFR 239.16b); Shell Company Adopting Release, 

supra note 943. 

1081See 17 CFR 230.165(e)(2)(ii); 17 CFR 

230.163A(b)(3)(ii); Securities Offering Reform, 

Release No. 33–8591 (July 19, 2005) [70 FR 44722 

(Aug. 3, 2005)]. 

1082See 17 CFR 230.137(d)(2); 17 CFR 

230.138(a)(4); 17 CFR 230.139(a)(1)(ii). 

1083See letters from ABA, American Securities 

Association, Cowen, Ernst & Young, Fenwick, 

Freshfields, Goodwin, Vinson & Elkins, White & 

Case, Winston & Strawn. 

1084The reference to the most closely related 

GAAP measure called for by the proposed 

amendments to Item 10(b) would not require a 

reconciliation to that GAAP measure. The need to 

provide a GAAP reconciliation would continue to 

be governed by Regulation G and Item 10(e) of 

Regulation S–K. 

statement for the transaction resulting in 

the loss of shell company status. 

22. Proposed Rules 3–01, 8–02, 10– 

01(a)(1): Balance Sheets of Predecessors 

Currently, 17 CFR 210.3–02 (‘‘Rule 3– 

02’’ of Regulation S–X) requires that 

statements of comprehensive income be 

filed for the registrant and its 

predecessors. Rules 3–01 and 8–02 and 

17 CFR 210.10–01(a)(1) (‘‘Rule 10– 

01(a)(1)’’ of Regulation S–X), however, 

specify that balance sheets be filed for 

the registrant but do not specifically 

refer to balance sheets of predecessors. 

In the Proposing Release, the 

Commission proposed amendments to 

Rules 3–01, 8–02, and 10–01(a)(1) of 

Regulation S–X to refer specifically to 

financial statements of predecessors 

(consistent with the provision in current 

Rule 3–02 regarding statements of 

comprehensive income).1075

23. Comments: Rules 3–01, 8–02, 10– 

01(a)(1): Balance Sheets of Predecessors 

One commenter expressed support for 

the proposed amendments.1076 No 

commenters opposed the proposed 

amendments. 

24. Final Rules 3–01, 8–02, 10–01(a)(1): 

Balance Sheets of Predecessors 

We are adopting the amendments 

largely as proposed, with a technical 

modification discussed below. We do 

not believe the intent of current Rules 

3–02, 8–01, and 10–01(a)(1) is to require 

a predecessor’s statements of 

comprehensive income without the 

balance sheets as that would not be 

considered a complete set of financial 

statements, which would be 

inconsistent with Article 3 of Regulation 

S–X. 

These final amendments are 

consistent with existing financial 

reporting practices of registrants. We do 

not expect the final amendments to 

result in any changes in disclosures. 

Finally, we made a technical revision 

to Rule 8–02 to add ‘‘and its subsidiaries 

consolidated’’ to ‘‘registrant’’ in order to 

conform to Rule 3–01. 

25. Other Shell Company Matters 

In order to deter potential abuses 

involving shell company 

transactions,1077 the Commission has 

adopted various rules and limitations 

over the years, some of which apply to 

former shell companies.1078 For 

example: 

• For a person to resell securities 

initially issued by a shell company in 

reliance on 17 CFR 230.144, a former 

shell company must satisfy the 

requirements of 17 CFR 

230.144(i)(2);1079

• A former shell company may not 

use Form S–8 until at least 60 calendar 

days after the company is no longer a 

shell company and has filed current 

Form 10 information;1080

• For three years following the 

change in shell company status, a 

former shell company is an ‘‘ineligible 

issuer’’ under Rule 405 that may not, 

among other things, use free writing 

prospectuses for communications 

during a registered offering or rely on 

the safe harbor of Rule 163A from 

section 5(c) of the Securities Act for prefiling communications;1081 and 

• For three years following the 

change in shell company status, a 

broker-dealer may not rely on the safe 

harbors of Securities Act Rules 137, 138, 

and 139 for research reports regarding a 

former shell company.1082

Several commenters asked the 

Commission to carve out a post-deSPAC transaction combined company 

from these and other former shell 

company limitations and to make 

certain safe harbors available to the 

combined company that are not 

available to former shell companies.1083

Generally, these commenters expressed 

the view that doing so would more 

closely align the rules that apply to 

target companies that enter the public 

markets through a de-SPAC transaction 

with the rules that apply to companies 

that conduct a traditional IPO. 

We are not adopting changes to these 

limitations or to other rules and 

limitations related to former shell 

companies that may apply to the 

combined company at this time. In light 

of the comments we received and taking 

into account the rules being adopted 

herein and market practices that may 

develop as a result, we believe that 

further consideration of potential 

application of these rules and 

limitations to the combined company is 

warranted. 

V. Enhanced Projections Disclosure 

A. Proposed Items 10(b) and 1609 of 

Regulation S–K 

1. Proposed Rules 

Current Item 10(b) of Regulation S–K 

provides Commission guidance with 

respect to factors to be considered in 

formulating and disclosing 

management’s projections of future 

economic performance that applies to 

all filings made with the Commission. 

The Commission proposed to amend 

Item 10(b) of Regulation S–K to expand 

and update the Commission’s views on 

the use of such projections. The 

proposed amendments to Item 10(b) 

continued to state the Commission’s 

view that projected financial 

information included in filings must 

have a reasonable basis. To address 

specific concerns with respect to the 

format of projections, namely that some 

companies may present projections 

more prominently than actual historical 

results (or the lack of historical results 

where they have no operations at all) or 

use non-GAAP financial measures in the 

projections without a clear explanation 

or definition of such measures, the 

Commission proposed amending Item 

10(b) to state that: 

• Any projected measures that are not 

based on historical financial results or 

operational history should be clearly 

distinguished from projected measures 

that are based on historical financial 

results or operational history; 

• It generally would be misleading to 

present projections that are based on 

historical financial results or 

operational history without presenting 

such historical measure or operational 

history with equal or greater 

prominence; and 

• The presentation of projections that 

include a non-GAAP financial measure 

should include a clear definition or 

explanation of the measure, a 

description of the GAAP financial 

measure to which it is most closely 

related,1084 and an explanation why the 


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1085The Commission stated a similar view in 

2003. See Conditions for Use of Non-GAAP 

Financial Measures, Release No. 33–8176 (Jan. 22, 

2003), section II.B.2 [68 FR 4820 (Jan. 30, 2003)]. 

1086Letters from ABA (except for proposed Items 

1609(b) and (c)); Americans for Financial Reform 

Education Fund; Chris Barnard (May 27, 2022) 

(‘‘Chris Barnard’’); Goodwin (except for proposed 

Items 1609(b) and (c)); ICGN; Julianna Marandola 

(Apr. 30, 2002); Michael Dambra, Omri Even-Tov, 

and Kimberlyn George. 

1087Proposing Release, supra note 7, at 29493 

(request for comment number 111) (‘‘Instead of 

applying to all filings covered by Item 10(b), as 

proposed, should the proposed updated guidance 

apply solely to filings relating to business 

combination transactions (including de-SPAC 

transactions), while retaining the existing Item 10(b) 

guidance for other filings?’’). 

1088Letters from ABA; Chris Barnard; Goodwin; 

Michael Dambra, Omri Even-Tov, and Kimberlyn 

George. 

1089Letter from Michael Dambra, Omri Even-Tov, 

and Kimberlyn George (‘‘We note that the 

announcement of a prospective de-SPAC 

transaction often results in an immediate and 

substantial increase in the trading volume of the 

securities of the SPAC, based on the terms of the 

transaction that have been disclosed and the limited 

information publicly available on the private 

operating company at the time of the 

announcement, which is far less extensive than that 

of a newly public company after a traditional initial 

public offering.); Proposing Release, supra note 7, 

at 29504 (request for comment number 150) 

(‘‘Should we consider requiring additional 

disclosures, such as more disclosure on the private 

operating company or risk factor disclosure, in a 

Form 8–K filed pursuant to Item 1.01 of the form 

disclosing that the parties have entered into a 

business combination agreement? If so, what 

additional disclosure should we require? Should we 

amend Item 1.01 of Form 8–K to require the filing 

of the business combination agreement as an exhibit 

to the Form 8–K filing (as opposed to allowing the 

agreement to be filed as an exhibit to a subsequent 

periodic report)? What other amendments should 

we consider in this regard?’’). 

1090Letter from Michael Dambra, Omri Even-Tov, 

and Kimberlyn George. 

1091Letter from ICGN. 

1092Letter from NASAA. 

1093Letter from Chris Barnard. 

1094The interpretations relate to whether certain 

forecasts are considered non-GAAP financial 

measures, as that term is used in Item 10(e) of 

Regulation S–K and Regulation G. 

1095Letters from ABA, Goodwin. 

1096Proposing Release, supra note 7, at 29496 

(request for comment number 113) (‘‘Are there 

different ways of presenting financial projections 

that would be beneficial to investors? For example, 

should we require registrants to present some or all 

financial projections in a separately captioned 

section of a Commission filing?’’). 

1097Letter from Kirkland & Ellis. 

1098Letters from ABA, Goodwin. 

1099Proposing Release, supra note 7, at 29496 

(request for comment number 115) (‘‘As proposed, 

Item 1609 of Regulation S–K would apply only to 

de-SPAC transactions. Should we expand the scope 

of the item to apply to all companies that publicly 

disclose financial projections in Commission 

filings?’’). 

1100Letters from ABA, Goodwin, Vinson & Elkins. 

1101Letter from Chris Barnard. 

non-GAAP financial measure was used 

instead of a GAAP measure.1085

Finally, the Commission proposed 

amending Item 10(b) to clarify that it 

would apply to a target company’s 

projections when they are presented to 

investors through the registrant’s 

Commission filings. Pursuant to the 

proposed amendments, the guidance in 

amended Item 10(b) would apply to any 

projections of future economic 

performance of both the registrant and 

persons other than the registrant (which 

would include a target company in a deSPAC transaction), that are included in 

the registrant’s Commission filings. 

The Commission proposed Item 1609 

of Regulation S–K, which would apply 

only to de-SPAC transactions, to require 

a registrant to provide the following 

disclosures: 

• With respect to any projections 

disclosed in the filing, the purpose for 

which the projections were prepared 

and the party that prepared the 

projections; 

• All material bases of the disclosed 

projections, all material assumptions 

underlying the projections, and any 

factors that may impact such 

assumptions (including a discussion of 

any material growth rates or discount 

multiples used in preparing the 

projections, and the reasons for 

selecting such growth rates or discount 

multiples); and 

• Whether the disclosed projections 

reflect the view of the board or 

management of the SPAC or target 

company, as applicable, as of the date 

of the filing; if not, then a statement 

regarding the purpose of disclosing the 

projections and the reasons for any 

continued reliance by management or 

the board on the projections. 

2. Comments 

A number of commenters generally 

supported the proposed items.1086 In 

addition, some of these commenters, in 

response to issues raised in a request for 

comment in the Proposing Release,1087

indicated that the updated guidance in 

proposed Item 10(b) should apply to all 

filings.1088

In a comment letter that addressed 

issues raised in a request for comment 

in the Proposing Release, one group of 

commenters expressed support for the 

proposals but stated that ‘‘[w]e are 

opposed to mandating the disclosure of 

certain financial statement line items 

(e.g., revenue, EBITDA [earnings before 

interest, taxes, depreciation, and 

amortization], etc.)’’ and said, ‘‘Some of 

the proposals regarding Item 10(b) of 

Regulation S–K and Item 1609 . . . 

should also extend to the investor 

presentations disclosed as an 

attachment to the Form 8–K.’’ 1089 These 

commenters said their analysis and that 

of others ‘‘suggests that the market 

response to a de-SPAC transaction and 

financial projections occur at the time of 

the merger announcement.’’ 1090

Several commenters addressed the 

reasonableness of projections made 

concerning companies with no 

operating history. One of the 

commenters who supported the 

proposed amendments recommended 

that we adopt an additional provision 

providing that ‘‘if a registrant does not 

have a history of operations for the basis 

of the projections, then it is possible to 

acquire an outside review of the 

projections as support for the 

‘reasonable’ projections.’’ 1091 Another 

commenter said, ‘‘As for the proposed 

amendments to Regulation S–K on the 

use of projections, we believe not only 

that non-GAAP metrics need to be 

conspicuously highlighted and marked 

for investor review, but also that 

disclosures should state succinctly that 

issuers with no historical operations or 

completed negotiations for company/ 

asset acquisitions do not have a 

reasonable basis for projections.’’ 1092

Another commenter recommended 

that Item 1609(b) include a requirement 

to disclose sensitivity testing of the key 

assumptions underlying the 

projections.1093

A few commenters also sought 

clarification that the staff guidance 

provided in Questions 101.01, 101.02 

and 101.03 of the Compliance and 

Disclosure Interpretations relating to 

Non-GAAP Financial Measures (last 

updated December 13, 2022) 1094 will 

continue to apply, notwithstanding 

adoption of proposed Item 

10(b)(2)(iv).1095

In response to a request for 

comment,1096 one commenter stated 

that we should not require projections 

to be presented in a separately 

captioned section of a Commission 

filing because doing so would ‘‘change 

the purpose’’ for which the projections 

were prepared.1097 On the other hand, a 

few commenters stated that such a 

requirement would be consistent with 

current practice and unlikely to lead to 

significant changes in the information 

disclosed or create undue burdens on 

registrants.1098

In comment letters that addressed 

issues raised in a request for comment 

in the Proposing Release,1099 some 

commenters suggested that Item 1609 

should apply to all filings,1100 while one 

commenter expressed support for 

limiting the applicability of Item 1609 to 

de-SPAC transaction filings only.1101

Some commenters who supported Item 

1609 applying to all filings emphasized 

that Item 1609 should apply to all 

companies that disclose financial 

projections in Commission filings (and 


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1102Letters from ABA, Goodwin. 

1103Letters from ABA, Goodwin. 

1104Letters from ABA, Goodwin. 

1105Letter from Loeb & Loeb. 

1106Letters from ABA, Freshfields, Goodwin, 

Kirkland & Ellis. 

1107Letters from ABA, Goodwin, Kirkland & Ellis. 

1108Letters from ABA, Goodwin. 

1109 Id. 

1110 Id. 

1111 Id. 

1112Letter from Freshfields. 

1113 Id. 

1114Letters from Freshfields, Kirkland & Ellis. 

1115Letter from Bullet Point Network. 

1116 Id. 

1117 Id. 

1118 Id. 

1119Some commenters indicated that the updated 

guidance in Item 10(b) should apply to all filings. 

See supra note 1088 and accompanying text. 

1120Letter from Michael Dambra, Omri Even-Tov, 

and Kimberlyn George. See supra notes 1089–1090 

and accompanying text. 

1121Letter from ICGN. See supra note 1091 and 

accompanying text. 

1122Letter from NASAA. See supra note 1092 and 

accompanying text. 

not just to de-SPAC transactions as 

proposed) in connection with business 

combinations in which the target is at 

an early stage and has a limited 

financial track record and the 

transaction may involve more 

significant dilution.1102

A few commenters indicated that 

proposed Item 1609(b) is likely to 

reduce the disclosure of projections in 

Commission filings but acknowledged 

that the rules are unlikely to 

‘‘significantly impact the willingness of 

parties to De-SPAC Transactions to 

continue preparing and disclosing 

projections’’ because the disclosure of 

projections is compelled by certain 

other Federal and State 

requirements.1103

A few commenters stated that the 

requirement in proposed Item 1609(b) to 

discuss the material bases and 

assumptions underlying projections, 

despite the inclusion of a materiality 

qualifier, is unduly prescriptive, may 

result in the inclusion of ‘‘inputs and 

assumptions that are not material to an 

investor’s understanding of the 

projections’’ and may lead registrants 

towards a conservative approach of 

disclosing growth rates or discount 

multiples in order to protect against 

future claims that such inputs were 

material.1104 Another commenter, 

however, said that ‘‘asking for more 

clarity in assumptions and identifying 

where they came from strike us as very 

sensible.’’ 1105

With respect to Item 1609(c), some 

commenters indicated that registrants 

should not have to affirm the validity of 

projections as of the date of the filing 

because it would be unduly burdensome 

and inconsistent with the purpose of the 

preparation of the projections.1106 The 

commenters also suggested that the 

disclosure requirement may result in the 

need to prepare an updated set of 

projections, which would be expensive 

and time-consuming.1107 Two 

commenters suggested an alternative 

approach to Item 1609(c) involving 

several elements.1108 First, they 

suggested requiring disclosure of ‘‘(i) the 

date as of which the projections were 

prepared and (ii) the views of the 

preparer of the projections as of such 

date of preparation and, if different, the 

date upon which the SPAC board 

approved the transaction.’’ 1109 Second, 

they suggested that registrants should be 

permitted to ‘‘disclaim any duty to 

update the projections as of a later date 

except to the extent there is a material 

lapse in time and change in 

circumstances.’’ 1110 Third, they 

suggested ‘‘the Commission may seek 

disclosure confirming whether the 

projections still reflect management’s 

views on future performance and/or 

describing what consideration the board 

gave to obtaining updated projections or 

a lack of reliance upon the 

projections.’’ 1111

Also regarding Item 1609(c), one 

commenter expressed the view that 

projections are included in a de-SPAC 

transaction disclosure document to 

describe the basis upon which the 

directors of the SPAC approved the 

transaction, not to serve as a basis for 

investors to make an investment 

decision.1112 The commenter also 

indicated that ‘‘projections are routinely 

disclosed in proxy statements and 

registration statements as the basis for 

fairness opinions issued at the time of 

the execution of the merger agreement 

of the public merger, but the SEC has 

not historically required the parties to 

the merger to confirm the projections in 

connection with each filing.’’ 1113

Some commenters expressed the view 

that the proposed rule was not 

sufficiently specific in its use of the 

phrase ‘‘as of the date of the filing’’ and 

that the requirement could be 

interpreted to require compliance with 

this item in the original filing and all 

subsequent amendments.1114

One commenter made a number of 

suggestions with respect to the 

disclosure of projections in IPOs of all 

types, including in de-SPAC 

transactions.1115 First, the commenter 

recommended requiring disclosure of 

management’s assessment of the 

probability of achieving any forecasts 

provided and the major assumptions 

underlying all forecasts provided.1116

Second, the commenter suggested that 

when financial projections are 

disclosed, to qualify for the PSLRA safe 

harbor, the directors, management and 

other affiliates must agree to a lock-up 

on sales of shares until the combined 

company has released audited financial 

statements for its first full fiscal year 

following the transaction.1117 Third, the 

commenter suggested requiring 

disclosure of the track record of the 

company, the sponsor, or the chief 

executive officer or chief financial 

officer for meeting past projections 

disclosed.1118

3. Final Rules 

We are adopting the amendment of 

Item 10(b) as proposed and new Item 

1609 substantially as proposed, except 

for clarifying revisions that we discuss 

below. 

With respect to the final amendment 

to Item 10(b), we note that the rule is 

Commission guidance that already 

applies to all filings made with the 

Commission and this aspect of Item 

10(b) precedes the revisions to the rule 

adopted in this release.1119 We also note 

that Item 1609 applies only to de-SPAC 

transactions. 

In response to one commenter’s 

opposition to an obligation to present 

certain specific line items in all 

projections,1120 we note that the 

Commission guidance in Item 10(b) 

does not mandate the inclusion of any 

specific line item. Instead, the final 

amendment to Item 10(b) acknowledges 

that projections have traditionally 

included certain line items, but 

registrants are free to determine which 

line items are appropriate to include in 

projections. 

With respect to the recommendation 

to revise the rule to allow a company 

with no history of operations to obtain 

an outside review of projections,1121 we 

note that neither Item 10(b) nor Item 

1609 prevents companies from 

obtaining any such outside review. 

With respect to the suggestion from a 

commenter that non-GAAP financial 

metrics should be highlighted for 

investor review,1122 we believe the 

provisions of Item 10(e) already address 

this concern. With respect to the same 

commenter’s suggestion that we require 

a statement from the registrant when a 

target company has no history of 

operations or a negotiated acquisition 

that the projections disclosed do not 

have a reasonable basis, we believe the 

provisions of Items 10(b) and 1609 and 

other rules adopted in this release will 


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1123See, e.g., Item 1605, Item 1606(b), and Item 

1607. 

1124Letters from ABA, Goodwin. See supra note 

1095 and accompanying text. 

1125Letter from Kirkland & Ellis. See supra note 

1097 and accompanying text. 

1126Letters from ABA, Goodwin, Vinson & Elkins. 

See supra note 1100 and accompanying text. 

1127Letters from ABA, Goodwin. See supra notes 

1103–1104 and accompanying text. 

1128Letter from Chris Barnard. See supra note 

1101 and accompanying text. 

1129Letters from ABA, Goodwin. See supra note 

1104 and accompanying text. 

1130 In addition, in final Item 1609(b) we replaced 

the proposed term ‘‘impact’’ with the term ‘‘affect’’ 

for clarity. 

1131Two examples of ‘‘discount rates’’ are: (1) the 

weighted average cost of capital used to discount 

to present value the future cash flows over the 

period of years projected in a discounted cash flow 

analysis and (2) the rate applied to the terminal 

value in a discounted cash flow analysis to 

calculate its present value. 

1132Letters from ABA, Goodwin, Kirkland & Ellis. 

See supra note 1107 and accompanying text. 

1133Letters from ABA, Goodwin, Freshfields, 

Kirkland & Ellis. See supra notes 1106–1107 and 

1112–1113 and accompanying text. 

provide sufficient information about the 

basis for any disclosed projections.1123

With respect to commenters’ request 

for clarification that certain staff 

guidance will continue to apply 

notwithstanding adoption of proposed 

Item 10(b)(2)(iv),1124 we confirm that 

the final rules do not impact the staff’s 

guidance in Questions 101.01, 101.02 

and 101.03 of the Compliance and 

Disclosure Interpretations related to 

Non-GAAP Financial Measures. 

With respect to commenters’ 

responses to our request for comment 

that we should not require projections 

to be presented in a separately 

captioned section of a filing,1125 we note 

that we have not added such a 

requirement to the presentation of 

projections. 

In the final rules, we made three 

technical revisions to Item 10(b). First, 

in final Item 10(b)(2)(i), we replaced the 

term ‘‘foregoing measures of income’’ 

with the term ‘‘foregoing measures of 

income (loss).’’ Second, in final Item 

10(b)(2)(iii), we replaced the term 

‘‘historical financial measure’’ with the 

term ‘‘historical financial results.’’ We 

believe these changes will enhance 

clarity and avoid potential ambiguity. 

Third, we made revisions in final Item 

10(b)(2)(iv) to require a description of 

the GAAP financial measure ‘‘most 

directly comparable’’ to the non-GAAP 

measure, rather than ‘‘most closely 

related’’ (as proposed). We made this 

change in final Item 10(b)(2)(iv) to 

create consistency with the terms used 

in existing Item 10(e)(1)(i)(A) of 

Regulation S–K, which requires the 

inclusion of the directly comparable 

financial measure or measures 

calculated and presented in accordance 

with GAAP whenever one or more nonGAAP financial measures are included 

in a filing with the Commission. 

With respect to commenters’ views 

that Item 1609 should apply to all 

companies that publicly disclose 

financial projections in Commission 

filings,1126 we decline to expand the 

coverage of Item 1609 beyond SPACs 

since the specialized disclosure 

requirements in new subpart 1600 of 

Regulation S–K are intended to only 

apply to SPAC IPOs and de-SPAC 

transactions. Item 10(b), as updated in 

this release, will continue to provide 

helpful guidance for all companies that 

publicly disclose projections in 

Commission filings. 

With respect to commenters who 

expressed concern there could be an 

uncertain impact on the use of 

projections under Item 1609,1127 we 

note that final Item 1609 does not 

restrict the registrant’s ability to disclose 

projections and is not intended to alter 

the registrant’s determination as to 

whether or not projections should be 

disclosed under other Federal or State 

law requirements. Rather, if a registrant 

determines to include projections in a 

filing in connection with a de-SPAC 

transaction, Item 1609 creates a level of 

consistency for the presentation of 

projections that would make the 

information more useful to investors. 

With respect to the recommendation 

that Item 1609(b) include a requirement 

to disclose sensitivity testing of the key 

assumptions underlying the 

projections,1128 we believe that such a 

requirement would be inconsistent with 

the general approach of Item 1609, 

which does not prescribe a specific 

format for the projections and does not 

require specific line items to be 

included in the projections. 

With respect to the comment that the 

requirement in Item 1609(b) to discuss 

material growth rates or discount 

multiples used in preparing the 

projections is unduly prescriptive and 

may result in the over-inclusion of 

certain immaterial information,1129 we 

note that this requirement includes a 

materiality qualifier, which makes clear 

that Item 1609(b) is not intended to 

capture immaterial information and 

does not require disclosure of growth 

rates or discount rates that are not 

material. 

In final Item 1609(b), we have added 

a materiality qualifier to the 

requirement to disclose any factors that 

may impact the material assumptions 

underlying the projections to clarify that 

only material factors are required to be 

disclosed. In final Item 1609(b), we have 

also made two technical revisions to the 

proposal in order to improve the clarity 

of this item and avoid potential 

ambiguity.1130 First, we have replaced 

the proposed terms ‘‘material growth 

rates’’ with the terms ‘‘material growth 

or reduction rates’’ throughout final 

Item 1609(b), because projections may 

involve some line items in financial 

statements that are projected to increase 

and others that are projected to 

decrease. Second, we have replaced the 

proposed term ‘‘discount multiples’’ 

with the term ‘‘discount rates’’ 

throughout final Item 1609(b) to reflect 

more closely the terminology for the 

relevant concept that is frequently used 

by valuation professionals.1131

With respect to the proposed 

requirement in Item 1609(c)—to include 

a statement regarding whether or not 

projections disclosed in a filing reflect 

the current views of the SPAC or target 

company management or board of 

directors as of the date of filing— 

commenters expressed concerns that the 

requirement would be unduly 

burdensome, may involve an expensive 

and time-consuming effort to update the 

projections,1132 and would be 

inconsistent with the purpose of the 

preparation of the projections and 

current market practice.1133 We 

acknowledge that if the SPAC or the 

target company determines to affirm 

that the projections disclosed in a filing 

reflect the current views of the SPAC or 

target company management or board of 

directors, the SPAC or the target 

company, as applicable, would likely 

undertake additional analysis with 

respect to the projections, whether to 

provide updated projections or 

otherwise. If the SPAC or the target 

company determines to state that the 

disclosed projections do not reflect the 

current views of the SPAC or target 

company management or board of 

directors, we believe the additional 

burden created by final Item 1609(c) is 

likely to be considerably less because 

the level of analysis undertaken, if any, 

will be minimal as compared to the 

analysis undertaken to affirm that the 

disclosed projections reflect the current 

views of the SPAC or target company 

management or board of directors. For 

example, if the target company chooses 

not to affirm that its projections reflect 

the current view of management due to 

a significant lapse of time, we do not 

believe target company management 

will update the projections or rerun its 

analysis in order to make that choice. 

We believe the required disclosure 

reflects an appropriate balance between 

the benefits to investors of this 


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1134Letters from Freshfields, Kirkland & Ellis. See 

supra note 1114 and accompanying text. 1135For example, a statement made in response 

to Item 1609(c) as of the date of the final Form S– 

4 amendment prior to the registrant’s request for 

acceleration of effectiveness could be considered to 

be made as of the ‘‘most recent practicable date 

prior to the date of the disclosure document 

required to be disseminated to security holders’’ if 

the date of the final prospectus disseminated to 

shareholders is within five days following 

effectiveness of the subject registration statement on 

Form S–4. If additional disclosure is included in 

the Form S–4 amendment to support the statement 

required by Item 1609(c), the Commission staff will 

need adequate time to review the new disclosure 

before the registrant’s request for acceleration of 

effectiveness of the Form S–4 is submitted as is the 

case currently when new disclosure is included in 

a Form S–4 amendment. 

1136Letters from ABA, Goodwin. See supra notes 

1108–1111 and accompanying text. 

1137Section III.E.3 discusses final definitions of 

‘‘blank check company’’ and related availability of 

PSLRA safe harbors in connection with comments 

received providing comparative analysis of deSPAC transactions to other types of transactions. 1138Letter from Bullet Point Network. 

disclosure and the costs of compliance 

with the rule requirements. The 

required disclosure should help 

investors better assess the continued 

reliability of the projections through the 

current views of the SPAC or target 

company management or board of 

directors. We also note that Item 1609(c) 

does not impose a duty to update the 

disclosed projections. Item 1609(c) only 

requires a statement as to whether or not 

the disclosed projections reflect the 

view of the SPAC or target company 

management or board of directors about 

its future performance as of the most 

recent practicable date prior to the date 

of the disclosure document required to 

be disseminated to shareholders. We 

revised Item 1609(c) to replace the 

proposed terms ‘‘state whether the 

projections’’ and ‘‘disclose whether the 

target company’’ with the terms ‘‘state 

whether or not the projections’’ and 

‘‘disclose whether or not the target 

company’’, respectively, for purposes of 

clarity. 

In response to commenters who said 

that the proposed terms ‘‘as of the date 

of the filing’’ were unclear and could be 

interpreted to require compliance with 

this item in the original filing and all 

subsequent amendments,1134 we are 

making one change to final Item 1609(c) 

to improve the clarity of this item and 

avoid potential ambiguity. We replaced 

the proposed term ‘‘as of the date of the 

filing’’ with the term ‘‘as of the most 

recent practicable date prior to the date 

of the disclosure document required to 

be disseminated to security holders’’ 

throughout final Item 1609(c). This 

change is intended to clarify that the 

statement required by Item 1609(c) on 

whether or not the projections reflect 

the view of management or the board of 

directors (or similar governing body) 

about future performance must be made 

as of a recent date prior to, and as close 

as is feasible to, the date of the 

disclosure document disseminated to 

security holders.1135 Thus, the Item 

1609(c) statement is not required to be 

made as of the filing date of the initial 

or preliminary filing and as of each 

amendment thereto. 

For several reasons we discuss below, 

we are not adopting the alternative 

approach suggested by two commenters 

that involved several elements, 

including: (1) that disclosure should be 

required that provides the date the 

projections were prepared and the views 

of the preparer of the projections as of 

the date of preparation, (2) that, with 

certain exceptions, registrants should be 

permitted to disclaim any duty to 

update the projections, and (3) that the 

Commission may seek disclosure 

confirming whether the projections still 

reflect management’s views on future 

performance.1136 First, there is nothing 

in final Item 1609 that prevents the 

disclosure of the date of the projections 

or the projection preparer’s views. 

Depending on the facts and 

circumstances, this information could 

be material to investors. In addition, we 

note that, where an outside party is the 

preparer of a report, opinion, or 

appraisal that materially relates to any 

of certain criteria set out in final Item 

1607(a), final Item 1607(b)(6) requires a 

summary of such report, opinion, or 

appraisal that includes, among other 

things, a summary of findings and 

recommendations. Second, as we 

discuss immediately above, Item 1609(c) 

does not impose a duty to update the 

projections disclosed in a filing. Also, as 

we discuss above in section III.E.3, to 

the extent a SPAC is concerned that 

security holders may rely on the 

projections disclosed in a filing in 

instances where the SPAC believes 

security holders should not rely on 

them, a SPAC could provide 

supplemental disclosure advising and 

alerting security holders of this fact, 

including by noting factors such as the 

date of the projections (and discussing 

any staleness issues) and the 

independence from the SPAC of the 

third-party that conducted the 

analysis.1137 Third, we do not agree 

with the suggestion that having the 

Commission seek disclosure confirming 

the ongoing reliability of the projections 

included in the filing would better 

ensure that investors have information 

about the ongoing reliability of those 

projections than a disclosure rule. On 

the contrary, registrants will be in a 

better position to know about the 

ongoing reliability of projections 

concerning the SPAC or the target 

company and to make the related 

disclosures under final Item 1609 than 

the Commission, which would need to 

determine when it may be necessary to 

request the confirmatory disclosure 

depending on the particular facts and 

circumstances of the SPAC or the target 

company. 

For several reasons we discuss below, 

we are also not adopting the following 

suggestions of one commenter with 

respect to the disclosure of projections 

in IPOs of all types, including in deSPAC transactions: (1) requiring 

disclosure of management’s assessment 

of the probability of achieving any 

forecasts provided, (2) requiring as a 

condition to qualify for the PSLRA safe 

harbor when projections are disclosed 

that directors, management and other 

affiliates must agree to a lock-up on 

sales of shares until the company has 

released audited financial statements for 

its first full fiscal year following the 

transaction, and (3) requiring disclosure 

of the track record of the company, the 

sponsor, or the chief executive officer or 

chief financial officer for meeting past 

projections disclosed.1138 First, we 

believe that management’s assessment 

of the probability of achieving any 

forecasts provided would require a high 

degree of subjectivity and such 

disclosure would likely not be useful to 

investors without significant additional 

disclosure regarding the assessment, 

including the bases and assumptions 

that underlie the assessment, which 

disclosure could be distracting or 

confusing to investors. We also believe 

that such disclosure may cause 

investors to place undue reliance on the 

probability or projections disclosed. 

Second, we believe requiring a longterm lock-up as a condition to qualify 

for the PSLRA safe harbor has potential 

far-reaching implications for the parties 

involved and the market that are 

uncertain. Third, we believe the track 

records for meeting projections 

disclosed in prior transactions would 

not necessarily be relevant to an 

investor’s evaluation of the projections 

disclosed with respect to the de-SPAC 

transaction that is the subject of the 

filing and may not be useful without 

significant additional disclosure 

regarding the facts and circumstances of 

the prior transactions. Such additional 

disclosure, if added, could become 

distracting or confusing for investors 

trying to evaluate the projections 

disclosed with respect to the subject deSPAC transaction. 

We are amending General Instruction 

B to Form 8–K to require the 


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1139Letter from Michael Dambra, Omri Even-Tov, 

and Kimberlyn George. See supra notes 1089–1090 

and accompanying text. 

1140 15 U.S.C. 80a–3(a)(1)(A). Section 3(a)(1)(A) 

defines an ‘‘investment company’’ as any issuer that 

is or holds itself out as being engaged primarily, or 

proposes to be engaged primarily, in the business 

of investing, reinvesting, or trading in securities. 

See infra note 1146. 

1141For purposes of this section, the terms 

‘‘SPAC,’’ ‘‘De-SPAC transaction,’’ and ‘‘target 

company’’ have the same meaning as set forth in 

Item 1601 of Regulation S–K. See supra section II.A 

(Definitions). 

1142See, e.g., supra note 25 and accompanying 

text; see also Proposing Release, supra note 7, at 

nn.7–8 and accompanying text. 

1143See Kristi Marvin, 49 Law Firms Unite and 

Push Back on Recent SPAC Litigation, SPAC Insider 

(Aug. 27, 2021), available at https://

www.spacinsider.com/news/spacinsider/49-lawfirms-unite-push-back-on-spac-litigation; Alison 

Frankel, Law Profs Defend Theory that SPAC is 

Illegal under the Investment Company Act, Reuters 

(Nov. 1, 2021). 

1144This guidance is intended to address the 

status of a SPAC from the time of the SPAC’s initial 

offering until it completes its de-SPAC transaction. 

The remaining company (or companies) after the 

de-SPAC transaction may also raise separate 

questions of Investment Company Act status. 

1145Section 3(a)(1)(C) defines an investment 

company as any issuer that is engaged or proposes 

to engage in the business of investing, reinvesting, 

owning, holding, or trading in securities, and that 

owns or proposes to acquire investment securities 

having a value exceeding 40% of the value of the 

company’s total assets (exclusive of Government 

securities and cash items) on an unconsolidated 

basis. Section 3(a)(2) of the Investment Company 

Act generally defines ‘‘investment securities’’ to 

include all securities except Government securities, 

securities issued by employees’ securities 

companies, and securities issued by majorityowned subsidiaries of the owner which are not 

investment companies or certain private investment 

companies. If a SPAC owns or proposes to acquire 

40% or more of its total assets in investment 

securities, it would likely need to register under the 

Investment Company Act unless an exclusion from 

the definition applies. 

1146To assess an issuer’s primary engagement 

under section 3(a)(1)(A), and in other contexts 

under the Investment Company Act, we historically 

have looked at (1) the company’s historical 

development; (2) its public representations of 

policy; (3) the activities of its officers and directors; 

(4) the nature of its present assets; and (5) the 

sources of its present income (known as the 

‘‘Tonopah factors’’). See In the Matter of Tonopah 

Mining Co., 26 SEC. 426 (July 21, 1947). The 

Commission has also considered the activities of 

the company’s employees, in addition to company’s 

officers and directors, in determining a company’s 

primary business. See, e.g., 17 CFR 270.3a–8 (Rule 

3a–8 under the Investment Company Act); 

Snowflake Inc., Release No. IC–34049 (Oct. 9, 2020) 

[85 FR 65449 (Oct. 15, 2020)] (notice), Release No. 

IC–34085 (Nov. 4, 2020) (order); Lyft Inc., Release 

No. IC–33399 (Mar. 14, 2019) [84 FR 10156 (Mar. 

19, 2019)] (notice), Release No. IC–33442 (Apr. 8, 

2019) (order). 

1147See, e.g., letters from ABA, Davis Polk, 

Goodwin. 

1148See, e.g., letters from Consumer Federation; 

Robert J. Jackson, Jr. and Professor John Morley 

(June 13, 2022) (‘‘Robert Jackson and John Morley’’). 

1149See, e.g., letters from Goodwin, Skadden, 

Vinson & Elkins, White & Case. 

1150Letters from Consumer Federation (‘‘From the 

time that a SPAC goes public until the time a 

business combination with a private company is 

completed, a SPAC functions like a mutual fund, 

investing in Treasuries, money market funds, or 

other cash-like securities, while providing initial 

investors a fixed income–equivalent return. . . . 

‘Nearly all’ SPAC IPO investors treat SPACs like 

mutual funds.’’), Robert Jackson and John Morley 

(‘‘SPAC investors clearly understand SPACs to be 

substitutes for mutual funds and other types of 

investment companies’’ and noting that ‘‘[i]n the 

median SPAC, nearly three quarters of investors 

choose to redeem rather than hold their shares 

through the completion of the SPAC’s acquisition. 

When they redeem, they avoid any exposure to the 

SPAC’s future operations, taking only the return on 

the SPAC’s securities portfolio.’’) (Emphasis in 

original). See also Alex Wittenberg and Jack Pitcher, 

Saba Capital’s Boaz Weinstein Recommends 

SPACs, CDS as Fed Tightens, Bloomberg (January 

28, 2022), available at https://www.bloomberg.com/ 

news/articles/2022-01-28/saba-s-weinsteinrecommends-spacs-cds-as-fed-tightens#xj4y7vzkg 

(SPACs are misunderstood because they’re ‘‘fixedincome products’’ quoting Weinstein). 

1151Letters from Consumer Federation; Robert 

Jackson and John Morley. 

1152Letters from Skadden (stating that a safe 

harbor would facilitate the ability to raise capital 

‘‘without the specter of strike lawsuits’’ but that 

some conditions included in the proposed safe 

harbor were ‘‘unnecessarily restrictive’’), Robert 

Jackson and John Morley (arguing that a safe harbor 

is ‘‘necessary to eliminate any doubt that the 

[Investment Company Act] applies to SPACs’’ and, 

among other things, that we should shorten the 

information set forth in paragraphs (a) 

and (b) of Item 1609 in any Form 8–K 

report or exhibit to such report that 

relates to a de-SPAC transaction and 

includes projections that relate to the 

performance of the SPAC or the target 

company. One commenter indicated 

that the market response to a de-SPAC 

transaction and the disclosed financial 

projections occurs at the time of the 

merger announcement, and ‘‘[s]ome of 

the proposals regarding Item 10(b) of 

Regulation S–K and Item 1609 as 

discussed above should also extend to 

the investor presentations disclosed as 

an attachment to the Form 8–K.’’ 1139

The issue noted by this comment raises 

significant investor protection concerns, 

and we are amending the General 

Instructions to Form 8–K and revising 

proposed Item 1609(a) in response. 

Based on the Commission staff’s 

experience, Form 8–K filings in 

connection with the announcement of a 

de-SPAC transaction may contain 

projections in the exhibits to the Form 

8–K filings, including in investor 

presentation materials featuring 

projections that also have been provided 

by the SPAC to PIPE investors. These 

projections may begin to shape 

investors’ decisions concerning the deSPAC transaction even before a 

registration or proxy statement in 

connection with the de-SPAC 

transaction is filed. We believe investors 

would benefit from the background and 

context provided by the application of 

new Item 1609 to those projections. 

Finally, we revised Item 1609(c) to 

replace the proposed term ‘‘board’’ with 

the terms ‘‘board of directors (or similar 

governing body)’’ for purposes of clarity 

and consistency with other final rules. 

VI. The Status of Spacs Under the 

Investment Company Act 

A. Background 

The Commission proposed Rule 3a– 

10 under the Investment Company Act, 

which would have provided a safe 

harbor from the definition of investment 

company under section 3(a)(1)(A) of the 

Investment Company Act 1140 for certain 

SPACs.1141 As discussed in the 

Proposing Release, in recent years, the 

number of SPACs has grown 

dramatically,1142 and some SPACs and 

their sponsors have sought to operate 

SPACs in ways that suggest that SPACs 

and their sponsors should increase their 

focus on evaluating when a SPAC could 

be an investment company. Such 

developments sparked debate about the 

status of SPACs as investment 

companies under the Investment 

Company Act.1143 For the reasons 

discussed below, we are not adopting 

the proposed safe harbor. 

Instead, we are setting forth below our 

views on facts and circumstances that 

are relevant to whether a SPAC meets 

the definition of investment company 

under the Investment Company Act.1144

Like any other issuer, depending on the 

facts and circumstances, a SPAC may 

meet the definition of investment 

company under section 3(a)(1)(A) or 

3(a)(1)(C) 1145 or both. The views below 

are intended to assist SPACs in 

analyzing their status under these 

sections, particularly with regard to how 

SPACs may apply the five-factor test 

that is traditionally used to determine 

whether an issuer is an investment 

company under section 3(a)(1)(A) 

(known as the Tonopah factors).1146

The Commission received comments 

that represented a range of views and 

positions on proposed Rule 3a–10. 

While some commenters expressed the 

view that SPACs are not investment 

companies,1147 others stated that SPACs 

are unregistered investment 

companies.1148 Similarly, while some 

commenters disagreed with the 

Commission’s concern that investors 

might view SPACs as fund-like 

investments,1149 other commenters 

asserted that SPAC shareholders often 

treat SPACs like investment 

companies 1150 and should be regulated 

under the Investment Company Act 

accordingly.1151

Commenters also held varying views 

about the need for a Commission safe 

harbor. Some commenters believed that 

a safe harbor would provide clarity.1152


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permitted acquisition periods under the safe 

harbor). See also letter from Vinson & Elkins (‘‘We 

are supportive of a safe harbor, but believe 

proposed Rule 3a–10 should be revised 

substantially.’’). 

1153See, e.g., letters from ABA (‘‘there is no 

apparent need or basis for this safe harbor’’), Loeb 

& Loeb (‘‘we are not inclined to consider the ‘safe 

harbor’. . . as either safe or necessary’’). See also 

letter from Ropes & Gray. 

1154Letter from Consumer Federation (‘‘The 

proposed safe harbor allows SPACs to function as 

investment companies without having to comply 

with the investor protections afforded by the 

Investment Company Act’’). See also letter from 

Lucas Schwartz (‘‘no safe harbor should be carved 

out to create yet another privileged investment 

instrument’’). 

1155Letter from Davis Polk. 

1156See, e.g., letters from NYC Bar, Ropes & Gray. 

See also recommendation of the Small Business 

Capital Formation Advisory Committee, supra note 

40. 

1157See, e.g., letters from ABA, Kirkland & Ellis, 

Managed Funds Association. 

1158See, e.g., letters from Consumer Federation; 

Robert Jackson and John Morley. 

1159See, e.g., letters from Better Markets; 

Consumer Federation; Robert Jackson and John 

Morley. 

1160Letter from Robert Jackson and John Morley. 

1161 In addition, SPACs may also need to be 

mindful that section 48(a) of the Investment 

Company Act generally makes it unlawful for any 

person to do indirectly through another person or 

entity what would be unlawful for the person to do 

directly. 

1162See supra note 1146 (discussion of factors 

considered in determining an issuer’s status as an 

investment company under section 3(a)(1)(A)). As 

discussed below, a SPAC’s activities may become 

more difficult to distinguish from an investment 

company the longer the SPAC takes to achieve its 

business purpose. 

1163See supra note 5 and accompanying text. 

1164Any references to the SPAC’s assets refer to 

both the assets held in a trust or escrow account and 

any assets held by the SPAC directly. 

1165A SPAC that does not hold any securities 

would generally not implicate the Investment 

Company Act, unless it proposes to engage in the 

business of being an investment company as 

defined in section 3(a)(1) of the Investment 

Company Act. See Proposing Release, supra note 7, 

at n. 550. 

1166As stated in the Proposing Release, a SPAC 

that purchases multiple companies as part of a 

single transaction would not be engaging in the 

types of activities that raise investor protection 

concerns addressed by the Investment Company 

Act as it would still be seeking to be primarily 

engaged in the business of an operating company 

or companies after the de-SPAC transaction and not 

be engaged in investment management activities. 

Proposing Release, supra note 7, at 29500. 

1167See supra note 1146. 

1168The term ‘‘money market fund’’ refers to 

those money market funds registered under the 

Investment Company Act and regulated pursuant to 

17 CFR 270.2a–7 (Rule 2a–7 under the Investment 

Company Act). 

Other commenters, including some that 

believed SPACs are not investment 

companies, believed the proposed safe 

harbor was unnecessary.1153 In contrast, 

some commenters suggested that the 

proposed safe harbor was unnecessary 

because SPACs are investment 

companies that should be subject to the 

Investment Company Act.1154 Finally, 

one commenter stated that it welcomed 

the Commission’s efforts to provide 

clarity but suggested that instead of 

adopting a safe harbor, the Commission 

should issue interpretive guidance on 

the activities that SPACs could 

undertake that would cause a SPAC to 

become an investment company.1155

Commenters also expressed differing 

opinions about the proposed safe 

harbor’s duration limits. Some 

commenters stated that the duration 

limits were unnecessary and potentially 

harmful to SPACs and their 

investors.1156 Some of these 

commenters suggested that if duration 

limits are to be included in the safe 

harbor, the duration limits should be 

lengthened to require SPACs to 

complete the de-SPAC transaction 

within 36 months (with no interim 

target agreement duration limit) to 

match national securities exchanges’ 

current listing standards.1157 In contrast, 

other commenters argued that the 

proposed duration limits were too long, 

and suggested that the Commission 

should require a SPAC to announce a 

de-SPAC transaction within 12 months 

and complete the transaction within 18 

months.1158 In their view, any 

additional leeway would provide SPACs 

with special treatment not afforded to 

‘‘transient investment companies’’ as 

permitted under 17 CFR 270.3a–2 

(‘‘Rule 3a–2’’ under the Investment 

Company Act), and thus would not be 

consistent with the Commission’s 

approach in that rule.1159 One of these 

commenters also argued that shorter 

duration limits would benefit investors 

by reducing the number of ‘‘low quality 

de-SPAC transactions to which 

investors are exposed.’’ 1160

As discussed above, depending upon 

the facts and circumstances, a SPAC 

may meet the definition of ‘‘investment 

company’’ in section 3(a)(1) of the 

Investment Company Act.1161 Given the 

fact-based, individualized nature of this 

determination and because, depending 

on the facts and circumstances, a SPAC 

could be an investment company at any 

stage of its operation such that a specific 

duration limitation may not be 

appropriate, we have decided not to 

adopt proposed Rule 3a–10. Rather, 

whether a SPAC is an investment 

company under section 3(a)(1) is based 

on the particular facts and 

circumstances, which a SPAC should 

evaluate both at its inception and 

throughout its existence. No one 

specific duration period is the sole 

determinant of a SPAC’s status under 

the Investment Company Act. The 

duration of a SPAC, however, should be 

considered in its analysis of the longstanding factors that are considered in 

the determination of an issuer’s status as 

an investment company under section 

3(a)(1)(A) of the Act, including, for 

example, a SPAC’s historical 

development and the activities of its 

officers, directors and employees.1162

B. SPAC Activities 

Typically, a SPAC is organized for the 

purpose of merging with or acquiring 

one or more operating companies.1163

The SPAC thereby provides its 

shareholders with the opportunity to 

own interests in a public entity that, in 

contrast to an investment company, 

will, as a result of the de-SPAC 

transaction, either be an operating 

company, or will, through a primarily 

controlled company, operate such 

operating company. Nevertheless, a 

SPAC might engage in certain activities 

that would raise serious questions about 

whether it is an investment company 

under the Investment Company Act, 

including activities that would affect a 

SPAC’s analysis under the Tonopah 

factors. By way of illustration, some 

activities of a SPAC that would raise 

concerns about its status as an 

investment company under the 

Investment Company Act include: 

1. The Nature of SPAC Assets and 

Income 

A SPAC may hold, or propose to hold, 

assets 1164 that would weigh heavily in 

favor of it being an investment 

company.1165 For example, if a SPAC 

were to invest in corporate bonds, or not 

engage in a de-SPAC transaction but 

instead acquire a minority interest in a 

company with the intention of being a 

passive investor, such activities would 

affect the analysis of the SPAC’s status 

under section 3(a)(1)(C). In this regard, 

a SPAC that owns or proposes to acquire 

40% or more of its total assets in 

investment securities would likely need 

to register under the Investment 

Company Act unless an exclusion from 

the definition applies. Such activities 

would also weigh in favor of a SPAC 

being considered to be primarily 

engaged in the business of investing, 

reinvesting, and trading in securities 

under section 3(a)(1)(A).1166 In addition, 

a SPAC whose income is substantially 

derived from such assets would further 

suggest that the SPAC is an investment 

company under section 3(a)(1)(A).1167

A SPAC that holds only the sort of 

securities typically held by SPACs 

today, such as U.S. Government 

securities, money market funds 1168 and 

cash items prior to the completion of the 

de-SPAC transaction, and that does not 


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1169See supra note 1146. 1170See In the Matter of Tonopah Mining Co., 

supra note 1146; Daxor Corp., Initial Dec. Rel. 428 

(Aug. 31, 2011) (‘‘The Commission next considers 

how and where the issuer’s employees spend their 

time and effort. Where employees spend 

considerable time managing the investment 

securities, there is greater likelihood that the issuer 

is primarily engaged in the investment business.’’ 

(Citation omitted)). 

1171 15 U.S.C. 80b–2(a)(11). 

1172See Request for Comment on Certain 

Information Providers Acting as Investment 

Advisers, Release No. IA–6050 (June 15, 2022) [87 

FR 37254 (June 22, 2022)]. 

1173See supra note 1146 (discussion of Tonopah 

factors). As discussed previously, given the other 

factors in the analysis, however, we note that a 

SPAC could be an investment company at any stage 

of its operation. 

1174See Proposing Release, supra note 7, at 

29501; cf. Goodwin (‘‘We acknowledge that after 

some period of time without [c]losing [a de-SPAC 

transaction], a SPAC will appear not to be focused 

on consummating a De-SPAC transaction.’’). 

1175See Investment Company Act Rule 3a–2 and 

Securities Act Rule 419. We note that while 

exchange listing rules contemplate potentially 

longer SPAC lifespans, those rules were adopted for 

a different regulatory purpose and do not address 

investment company status concerns. 1176Specifically in adopting Rule 419, the 

Commission stated that ‘‘although [an escrow or 

trust account established by blank check companies 

that comply with Rule 419 under the Securities Act] 

may be an investment company under the 

Investment Company Act of 1940, in light of the 

purposes served by the regulatory requirement to 

establish such an account, the limited nature of the 

investments, and the limited duration of the 

account [i.e., 18 months], such an account will 

neither be required to register as an investment 

company nor regulated as an investment company 

as long as it meets the requirements of Rule 419.’’ 

Blank Check Offerings, supra note 3, at text 

accompanying n.32; see also 17 CFR 

230.419(e)(2)(iv) (‘‘If a consummated acquisition(s) 

meeting the requirements [of Rule 419] has not 

occurred by a date 18 months after the effective date 

of the initial registration statement, funds held in 

the escrow or trust account shall be returned [to 

investors.]’’). As noted in the Proposing Release, 

SPACs are not subject to the requirements of Rule 

419. See Proposing Release, supra note 7, at nn.12– 

13 and accompanying text. 

1177See Rules 3a–2 and 419. 

propose to acquire investment 

securities, would be more likely not to 

be considered an investment company 

under section 3(a)(1)(C). While U.S. 

Government securities and money 

market funds are securities for purposes 

of section 3(a)(1)(A), asset composition 

is only one of the factors that should be 

considered in analyzing a SPAC’s status 

under the Investment Company Act. For 

example, an issuer that holds these 

assets, but whose primary business is to 

achieve investment returns on such 

assets would still be an investment 

company under section 3(a)(1)(A). 

2. Management Activities 

Another significant factor in the 

analysis of whether a SPAC is an 

investment company under section 

3(a)(1)(A) is the actions of its officers, 

directors, and employees.1169 For 

example, we would have serious 

concerns if a SPAC held its investors’ 

money in securities, but the SPAC’s 

officers, directors, and employees did 

not actively seek a de-SPAC transaction 

or spent a considerable amount of their 

time 1170 actively managing the SPAC’s 

portfolio for the primary purpose of 

achieving investment returns. Such 

activities would affect the analysis as to 

whether the SPAC was primarily 

engaged in seeking to complete a deSPAC transaction and weigh more in 

favor of the SPAC being primarily 

engaged in the business of investing, 

reinvesting, or trading in securities such 

that it would be an investment company 

under the Investment Company Act. 

Depending on the facts and 

circumstances, the management of a 

SPAC also could cause SPAC sponsors 

to come within the definition of 

‘‘investment adviser’’ in section 

202(a)(11) of the Investment Advisers 

Act of 1940.1171 That section generally 

defines an investment adviser as any 

person who, for compensation, engages 

in the business of advising others, either 

directly or through publications or 

writings, as to the value of securities or 

as to the advisability of investing in, 

purchasing, or selling securities, or any 

person who, for compensation and as 

part of a regular business, issues or 

promulgates analyses or reports 

concerning securities. The definition 

generally includes three elements for 

determining whether a person is an 

investment adviser: (i) the person 

provides advice, or issues analyses or 

reports, concerning securities; (ii) the 

person is in the business of providing 

such services; and (iii) the person 

provides such services for 

compensation. Each element must be 

met in order for a person to be deemed 

an investment adviser.1172

3. Duration 

When evaluating whether it is an 

investment company under section 

3(a)(1)(A), a SPAC whose assets and 

income are substantially composed of, 

and derived from, securities should be 

mindful of the length of time that it has 

been operating prior to entering into an 

agreement with a target company and 

then completing the de-SPAC 

transaction with that company.1173

While the duration of a SPAC is not the 

sole determinant of its status under the 

Investment Company Act, a SPAC’s 

activities may become more difficult to 

distinguish from those of an investment 

company the longer the SPAC takes to 

achieve its stated business purpose.1174

For example, when a SPAC operates 

without completing a de-SPAC 

transaction with a target company, 

particularly where its assets are 

substantially composed of and its 

income derived from securities, its 

duration may indicate that its historical 

development is that of an investment 

company even if its representations say 

otherwise. Similarly, the longer that a 

SPAC takes to achieve its stated 

business purpose, the more questions 

arise as to whether its officers, directors, 

and employees are more engaged in 

achieving investment returns from the 

securities the SPAC holds rather than in 

achieving the SPAC’s stated business 

purpose. Accordingly, after a certain 

period of time, a SPAC’s historical 

development and director, officer, and 

employee activities, together with its 

asset composition and sources of 

income may suggest that the SPAC is 

primarily engaged in the business of 

investing, reinvesting, and trading in 

securities. 

In evaluating whether a SPAC has 

reached such a point in time, a SPAC 

should consider how its duration falls 

within the framework of the Investment 

Company Act, the rules thereunder, and 

past Commission positions, including 

Rule 3a–2 under the Investment 

Company Act and the Commission’s 

position regarding Rule 419 under the 

Securities Act.1175 Rule 3a–2 provides a 

one-year safe harbor to so-called 

‘‘transient investment companies’’ 

which are issuers that, as a result of an 

unusual business occurrence may be 

considered an investment company 

under the statutory definitions but 

intend to be engaged in a noninvestment company business. In 

addition, the Commission took the 

position that accounts of certain blank 

check companies relying on Rule 419 

need not be required to be regulated 

under the Investment Company Act in 

part because, among other things, the 

rule limits the duration of such accounts 

to 18 months and restricts the nature of 

investments.1176 A SPAC that operates 

beyond these timelines raises concerns 

that the SPAC may be an investment 

company, and these concerns increase 

as the departure from these timelines 

lengthens. Thus, a SPAC needs to be 

cognizant that, depending on the facts 

and circumstances, it could be viewed 

as a fund-like investment if it operates 

beyond the duration limits 

contemplated in other similar contexts. 

Accordingly, we believe that a SPAC 

should reassess its status and analyze 

whether it has become an investment 

company if it has, for example, failed to 

enter into an agreement with a target 

company beyond such timelines.1177


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1178Section 2(b) of the Securities Act (15 U.S.C. 

77b(b)) and section 3(f) of the Exchange Act (17 

U.S.C. 78c(f)) require the Commission, when 

engaging in rulemaking where it is required to 

consider or determine whether an action is 

necessary or appropriate in the public interest and 

to consider, in addition to the protection of 

investors, whether the action will promote 

efficiency, competition, and capital formation. 

Further, section 23(a)(2) of the Exchange Act (17 

U.S.C. 78w(a)(2)) requires the Commission, when 

making rules under the Exchange Act, to consider 

the impact that the rules would have on 

competition and prohibits the Commission from 

adopting any rule that would impose a burden on 

competition not necessary or appropriate in 

furtherance of the Exchange Act. 

1179See discussion in section I. Like above, our 

discussion of de-SPAC transactions and target 

companies generally focuses on target companies 

that are private operating companies, but we also 

address situations where the target company of a 

de-SPAC transaction may comprise an operating 

company that is a public company, a business, or 

assets, or combinations of multiple thereof. See 

Item 1601(d) of Regulation S–K. 

1180The SPAC process begins when a SPAC 

conducts an IPO and ends when the SPAC 

combines with a target company in a de-SPAC 

transaction. 

1181See, e.g., Sris Chatterjee, N.K. Chidambram & 

Gautam Goswani, Security Design for a NonStandard IPO: The Case of SPACs, 69 J. Int’l Money 

& Fin. 151 (2016). 

1182A well-known example of adverse selection 

is the ‘‘market for lemons,’’ in which sellers of used 

cars know the quality of the car, but buyers do not. 

Because buyers have less information than sellers 

(information asymmetry) and cannot differentiate 

the ‘‘good’’ cars from the ‘‘lemons,’’ their bids will 

be lower to reflect this uncertainty. In response, the 

sellers of high-quality products may exit the market, 

causing further decline in buyers’ willingness to 

pay, which could cause the market to fall apart or 

‘‘unravel’’ entirely, and no used cars to be 

purchased. See, e.g., George Akerlof, The Market for 

‘‘Lemons’’: Quality Uncertainty and the Market 

Mechanism, 84 Qtr. J. Econ. 488 (1970). For 

examples of existing market solutions to this 

adverse selection, see Proposing Release, supra note 

7, at 29506. 

1183See, e.g., letters from Americans for Financial 

Reform Education Fund; Better Markets; Robert 

Jackson and John Morley. See also Lora Dimitrova, 

Perverse Incentives of Special Purpose Acquisition 

Companies, the ‘‘Poor Man’s Private Equity Funds,’’ 

63 J. Acct. & Econ. 99 (2017); Klausner, Ohlrogge 

& Ruan, supra note 18. 

1184Throughout this section, ‘‘investor’’ can refer 

to any current or a potential security holder of a 

company, though it is generally understood that 

costs and benefits may accrue to such investors 

heterogeneously based on size, sophistication, and 

affiliation. 

1185We refer to SPACs throughout this analysis 

as shorthand but acknowledge that the various 

controlling parties of a SPAC that are involved in 

the decision making of the SPAC (including the 

SPAC sponsor, management, board, or other 

governing group) may have disparate incentives, 

each adding their own complexity to the principalContinued 

When considering its status under the 

Investment Company Act, a SPAC 

should consider all relevant facts and 

circumstances, including, among other 

things the length of time that it has been 

operating prior to entering into an 

agreement with a target company and 

then completing the de-SPAC 

transaction with that company. 

4. Holding Out 

A SPAC that holds itself out in a 

manner that suggests that investors 

should invest in its securities primarily 

to gain exposure to its portfolio of 

securities prior to the de-SPAC 

transaction would likely be an 

investment company under the 

definition in section 3(a)(1)(A). For 

example, if a SPAC were to market itself 

primarily as a fixed-income investment, 

as an alternative to an investment in a 

mutual fund, or as an opportunity to 

invest in Treasury securities or money 

market funds, it would likely be holding 

itself out as being primarily engaged in 

the business of investing, reinvesting, or 

trading in securities. Accordingly, such 

a SPAC would likely be an investment 

company under section 3(a)(1)(A). 

5. Merging With an Investment 

Company 

If a SPAC were to engage or propose 

to engage in a de-SPAC transaction with 

a target company that meets the 

definition of investment company, such 

as a closed-end fund or a business 

development company, the SPAC is 

likely to be an investment company 

under section 3(a)(1)(A) of the 

Investment Company Act because it 

would be proposing to be engaged in the 

business of investing, reinvesting and 

trading in securities as set out in section 

3(a) of that Act. A SPAC that seeks to 

engage in a de-SPAC transaction with an 

investment company would, at some 

point prior to the de-SPAC transaction, 

be proposing to engage in the business 

of being an investment company. 

C. Conclusion 

Depending upon the facts and 

circumstances, a SPAC may meet the 

definition of investment company in 

section 3(a)(1)(A) or 3(a)(1)(C) (or both) 

of the Investment Company Act. To the 

extent that a SPAC’s activities— 

including any of those discussed 

above—may cause it to fall within one 

or more of these definitions, a SPAC 

should consider options that would 

bring it into compliance such as 

changing its operations, winding down 

its operations, or registering as an 

investment company under the 

Investment Company Act. The 

Investment Company Act imposes 

registration, reporting, governance and 

minimum capital requirements on 

investment companies. Issuers that meet 

the definition of investment company 

but fail to comply with the Investment 

Company Act’s provisions, or otherwise 

qualify for an exclusion or exemption 

from the provisions of the Act, could, 

among other things, be subject to 

enforcement action by the Commission 

or to private litigation. 

VII. Other Matters 

If any of the provisions of these rules, 

or the application thereof to any person 

or circumstance, is held to be invalid, 

such invalidity shall not affect other 

provisions or application of such 

provisions to other persons or 

circumstances that can be given effect 

without the invalid provision or 

application. 

Pursuant to the Congressional Review 

Act, the Office of Information and 

Regulatory Affairs has designated this 

rule as a ‘‘major rule,’’ as defined by 5 

U.S.C. 804(2). 

VIII. Economic Analysis 

We are mindful of the costs and 

benefits of these new rules and 

amendments. The discussion below 

addresses the potential economic effects 

of the new rules and amendments, 

including the likely benefits and costs, 

as well as the potential effects on 

efficiency, competition, and capital 

formation.1178 We have analyzed the 

expected economic effects of the new 

rules and amendments relative to the 

current baseline, which consists of the 

existing regulatory framework of 

disclosure requirements and liability 

provisions, current market practices, 

and the distribution of participants and 

their characteristics. 

A SPAC is a shell company organized 

for the purpose of combining with one 

or more target companies.1179 Like 

traditional IPOs, SPACs provide target 

companies with a way to raise capital 

through public markets. To that end, as 

noted above, the SPAC process is 

unique in that the de-SPAC transaction 

is a hybrid transaction that contains 

elements of both an IPO and an M&A 

transaction.1180 Under the current 

regulatory framework, the SPAC process 

allows the target company to raise 

capital through public markets without 

requiring the same level of disclosure or 

incurring the same liability as with a 

traditional IPO.1181 As such, some 

commenters and academics have 

expressed the view that, compared to 

traditional IPOs, de-SPAC transactions 

raise additional ‘‘adverse selection’’ 1182

concerns stemming from information 

asymmetry and conflicts of interest 

between SPAC investors and managers 

that are not fully resolved by market 

forces.1183

The final rules include a number of 

additional disclosure requirements that 

help address information asymmetries 

between investors 1184 and the 

SPAC,1185 which will enable investors 


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agent dynamic. However, the existence and general 

nature of the relationship between investors and the 

SPAC ‘‘agent’’ is not significantly different based on 

which specific agent is considered, thus the 

reference to the SPAC broadly. When this 

generalization does not hold, we provide more 

precise explanations. 

1186See supra section III.C. 

1187See supra section III.E. 

1188See supra section III.A. 

1189See supra section III.D. 

1190See, e.g., infra sections VIII.B.1.iii.c, VIII.B.3. 

1191See, e.g., Orie E. Barron & Hong Qu, 

Information Asymmetry and the Ex Ante Impact of 

Public Disclosure Quality on Price Efficiency and 

the Cost of Capital: Evidence from a Laboratory 

Market, 89 Acct. Rev. 1269 (2014), available at 

https://ssrn.com/abstract=2312812 (retrieved from 

SSRN Elsevier database) (high-quality public 

disclosure leads to increased price efficiency and 

decreased cost of capital); Ulf Bru ̈ ggemann, Aditya 

Kaul, Christian Leuz & Ingrid Werner, The Twilight 

Zone: OTC Regulatory Regimes and Market Quality 

(Research Paper No. 3126379, Mar. 1, 2018, last 

revised June 12, 2018), available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=3126379 (retrieved from SSRN Elsevier 

database) (increased disclosure regimes lead to 

increased liquidity and lower crash risk). 

1192See SPAC to the Future III, IPO Edge (Nov. 

10, 2021) (remarks of panelist Chris Weekes, 

Managing Director and Co-Head of SPACs, Cowen), 

available at https://ipo-edge.com/join-spac-to-thefuture-iii-with-nasdaq-cowen-gallagher-ve-icrmorrow-sodali-morganfranklin-featuring-gigcapitalhennessy-and-switchback/. 

1193See letters from Virtu Financial Inc. (June 13, 

2022) (‘‘Virtu’’), Skadden, Kirkland & Ellis, 

Committee on Capital Markets Regulation. 

1194See letters from Danial Hemmings, Institute 

of European Finance, Bangor University and Aziz 

Jaafar, University of Sharjah (June 29, 2023); Tom 

Nohel, Department of Finance, Imperial College and 

Quinlan School of Business, Loyola University– 

Chicago, Felix Feng, Michael G. Foster School of 

Business, University of Washington, Xuan Tian, 

PBC School of Finance, Tsinghua University, 

Wenyu Wang, Kelley School of Business, Indiana 

University, and Yufeng Wu, Gies College of 

Business, University of Illinois Urbana-Champaign 

(Feb. 7, 2023); Michael Goffman, Hebrew University 

of Jerusalem and Yuchi Yao, University of 

Rochester (July 19, 2022 and Dec. 31, 2022); 

Alexander Groh, Professor of Finance, EMLYON 

Business School, France (Sept. 2, 2022 and Dec. 5, 

2022); Michael Klausner, Michael Ohlrogge, 

Amanda Rose and Emily Ruan (July 11, 2022); 

Michael Klausner, Michael Ohlrogge, and Harald 

Halbhuber; Holger Spamann; Debarshi Nandy, 

Barbara and Richard M. Rosenberg Professor of 

Global Finance, Brandeis International Business 

School, Yaxuan Wen, Ph.D. Candidate in 

International Economics and Finance, Brandeis 

International Business School, and Mengnan Zhu, 

Assistant Professor of Finance, Dickinson College 

(June 7, 2022), citing Yaxuan Wen & Mengnan 

to make more informed investment and 

voting decisions. For example, at the 

SPAC IPO stage, as discussed in detail 

in the sections below, the rules require 

disclosures about dilution, 

compensation, and conflicts of interest, 

among other things. As another 

example, at the de-SPAC transaction 

stage, the rules require disclosures 

related to the information considered by 

the SPAC in its assessment of the 

transaction, such as projections or 

assessments by third parties, among 

other things. 

The final rules also include several 

provisions to help ensure that 

shareholders more consistently receive 

the full protections of Securities Act 

disclosure and liability provisions in 

connection with the de-SPAC 

transaction. For example, because the 

target company is effectively an ‘‘issuer’’ 

of the securities in any registered deSPAC transaction, the rules require that 

the target company sign the registration 

statement filed in connection with the 

de-SPAC transaction.1186 Because 

signatories are subject to section 11 

liability for material omissions and 

misstatements, we expect this 

requirement to increase incentives for 

targets to ensure the accuracy of the 

disclosures in de-SPAC transaction 

registration statements. We are also 

adopting definitions of ‘‘blank check 

company’’ for PSLRA safe harbor 

purposes that would not contain a 

qualification that the company issues 

penny stock. As a result, the safe harbor 

for forward-looking statements under 

the PSLRA will be unavailable to SPACs 

and other blank check companies, 

regardless of whether they would have 

qualified as an issuer of penny stock. 

This approach will help incentivize 

such blank check companies taken to 

take greater care when making forwardlooking statements.1187

Certain rules we are adopting are 

intended to align disclosures in deSPAC transactions more closely to those 

of traditional IPOs. For example, certain 

non-financial disclosures regarding a 

target company that are currently not 

filed by the company until a Form 8–K, 

within four business days after the 

completion of a de-SPAC transaction, 

will be required to be included in the 

disclosures that are filed in connection 

with a de-SPAC transaction (on Form S– 

4 or F–4, a proxy or information 

statement, or a Schedule TO).1188 Also, 

the combined company following a deSPAC transaction will be required to redetermine its eligibility for SRC status 

and reflect any change in status in its 

filings, beginning 45 days after 

consummation of the de-SPAC 

transaction.1189

We are also adopting final rules that 

apply to shell companies more broadly. 

Rule 145a deems any business 

combination involving a reporting shell 

company and another entity that is not 

a shell company to involve a sale of 

securities to the reporting shell 

company’s shareholders. Currently, 

investors in reporting shell companies 

may not always receive the disclosures 

and other protections afforded by the 

Securities Act at the time when there is 

a fundamental change in the nature of 

their investment due to the business 

combination involving another entity 

that is not a shell company. In addition, 

the amendments to Regulation S–X 

more closely align the financial 

statement requirements in business 

combinations between a shell company 

and a non-shell company with those 

required in connection with traditional 

IPOs. 

As discussed in section I, market 

participants have raised concerns that 

disclosures that currently accompany 

SPAC IPOs and de-SPAC transactions 

do not provide investors with adequate 

information to assess the potential risks 

of investing in SPACs and the ways in 

which the SPAC sponsor and other 

affiliates stand to gain from these 

transactions. We expect the final rules 

to elicit information regarding SPAC 

transactions that is more consistent, 

useful, and readily comparable.1190 As a 

result, investors will be able to make 

more informed voting and investment 

decisions, resulting in more efficient 

pricing of securities.1191 Moreover, by 

reducing information asymmetry and 

agency costs, we expect the final rules 

to result in less adverse selection than 

might otherwise occur at the de-SPAC 

transaction stage, which should 

encourage greater investor participation. 

We further anticipate that, by 

addressing the liability of various 

parties in de-SPAC transactions and 

other shell company business 

combinations, the final rules will 

incentivize parties to exercise greater 

care in disclosing information in 

connection with relevant business 

combinations, increasing the protections 

afforded to investors. Overall, we expect 

the final rules will enhance the 

protection of investors and promote 

market efficiency. 

SPACs and their target companies 

may incur costs related to the public 

disclosure of the newly required 

information. The costs will be lower for 

parties that already provide such 

disclosures voluntarily in response to 

market demands.1192 We are also 

mindful that some aspects of this 

rulemaking may deter some forms of 

communications or some transactions 

that might otherwise be economically 

beneficial to issuers or investors (or 

both). We discuss these considerations 

in more detail below. 

We received several comments 

specifically addressing the economic 

analysis of the Proposing Release.1193 A 

number of commenters shared the 

results of quantitative analyses that 

addressed SPAC-related issues 

considered by the proposed rules.1194


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‘‘Cliff’’ Zhu, Is Going Public via SPAC Regulatory 

Arbitrage? A Textual Analysis Approach (2022), 

https://ssrn.com/abstract=4066641 or https://

dx.doi.org/10.2139/ssrn.4066641; Usha Rodrigues 

and Mike Stegemoller; Snehal Banerjee, Associate 

Professor of Finance and Accounting, UC San 

Diego, and Martin Szydlowski, Assistant Professor 

of Finance, University of Minnesota (Apr. 1, 2022). 

1195For our estimates of the paperwork burdens 

associated with the rules and amendments for 

purposes of the Paperwork Reduction Act of 1995 

(‘‘PRA’’), see infra section X. These PRA burden 

estimates pertain to ‘‘collections of information,’’ as 

that term is defined in the PRA, and therefore 

reflect only the hours and costs to prepare required 

disclosures, as required by that Act. As a result, 

these PRA estimates do not reflect the full economic 

effects or full scope of economic costs of the rules 

and amendments that are discussed in this analysis. 

1196See, e.g., letter from Committee on Capital 

Markets, noting significant increases in the number 

of traditional IPOs in 2020 and especially 2021. See 

also data collected, cleaned, and made available by 

Jay Ritter on SPAC IPOs and overall IPO activity 

available at https://site.warrington.ufl.edu/ritter/ 

ipo-data/ (last accessed 10/24/2023). 

1197 Data from Dealogic, based on IPO listing date 

for offerings with a confirmed pricing date. 

1198See also supra note 665. 

1199Based on status disclosed by SPACs in the 

financials filed after the IPO, if available, otherwise 

from Form S–1 or Form F–1. 

1200SPACs first were listed on the AMEX in 2005. 

The Commission approved the NYSE’s proposed 

rule change to adopt listing standards to permit the 

listing of SPACs on May 6, 2008, and approved 

Nasdaq’s proposed rule change to adopt listing 

standards to permit the listing of SPACs on July 25, 

2008. See Release No. 34–57785 (May 6, 2008) [73 

FR 27597 (May 13, 2008)] (SR–NYSE–2008–17); 

Release No. 34–58228 (July 25, 2008) [73 FR 44794 

(July 31, 2008)] (SR–NASDAQ–2008–013). See also 

Release No. 34–63366 (Nov. 23, 2010) [75 FR 74119 

(Nov. 30, 2010)] (SR–NYSEAmex–2010–103) (notice 

Continued 

We discuss these comments below in 

our analysis of the costs and benefits of 

the final rules. We also discuss the 

anticipated impacts on efficiency, 

competition, and capital formation and 

assess several reasonable policy 

alternatives. Where possible, we have 

attempted to quantify the economic 

effects of the final rules.1195 In many 

cases, however, we are unable to do so 

because we lack access to data that 

would allow us to quantify the effects 

with a reasonable degree of accuracy. 

Further, even in cases where the 

Commission has some data, 

quantification is not practicable due to 

the number and type of assumptions 

necessary to quantify certain economic 

effects, which render any such 

quantification unreliable. Where we are 

unable to quantify the economic effects 

of the final rules, we provide a 

qualitative assessment of the potential 

effects. 

A. Baseline and Affected Parties 

The baseline against which the costs, 

benefits, and the effects on efficiency, 

competition, and capital formation of 

the final rules and amendments are 

measured consists of the current state of 

the SPAC market, current practice as it 

relates to SPAC IPOs and subsequent 

business combination transactions 

between SPACs and private operating 

companies, and the current regulatory 

framework. 

We begin by discussing current 

market practices related to SPAC IPOs 

in section VIII.A.1. We then discuss deSPAC transactions in section VIII.A.2. 

1. SPAC Initial Public Offerings 

The parties most likely to be directly 

affected by the final rules regarding 

specialized disclosure requirements for 

SPACs in IPOs and other registered 

offerings are: SPAC sponsors and their 

affiliates or potential SPAC sponsors 

intending to organize a new SPAC; 

current SPAC officers, SPAC directors, 

or promoters; SPAC investors; and any 

other market participants whose service 

or activities involve analysis of the 

information, data, and disclosures 

related to SPACs in these offerings. 

In addition, if the adoption of the 

final rules alters the incentives for other 

parties (e.g., SPAC sponsors or 

underwriters) to participate in or be 

involved with SPAC transactions, we 

would expect secondary impacts on the 

prospects or opportunities of private 

companies that would be potential 

target companies of such newlyorganized SPACs. The final rules also 

may affect parties who provide advisory 

or other services to SPACs or SPAC 

sponsors in connection with SPAC 

transactions through additional 

disclosures about the parties and 

provided services or potential liability. 

Table 2 shows the estimated number 

of SPAC IPOs since 1990. They peaked 

in 2021, following a similar trend in 

traditional IPOs.1196 In 2023, there were 

an additional 31 SPAC IPOs.1197

The vast majority of SPACs claim 

either SRC or EGC status, with the 

majority claiming both.1198 For 

example, all of the 86 SPAC IPOs in 

2022 claimed EGC status and 84 

claimed SRC status.1199

i. SPAC Exchange Listings 

SPAC listings have migrated from the 

over-the-counter (OTC) market to three 

national securities exchanges: first, 

NYSE American (formerly, the 

American Stock Exchange (‘‘AMEX’’)); 

then, the Nasdaq Stock Market 

(‘‘Nasdaq’’) and the New York Stock 

Exchange (‘‘NYSE’’) (see Table 2).1200


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Table 2. Number of SPAC IPOsa 

1990- 2001- 2006- 2011- 2016- 2021 2022 2023 2000 2005 2010 2015 2020 

Nasdaq 18 0 3 56 248 433 74 27 

NYSE 0 0 1 0 147 178 10 4 

AMEX/NYSE 0 6 78 0 5 2 2 0 American 

OTC 0 35 46 11 0 0 0 0 

• Estimates for 1990 to 2023 are based on all SPACs that conducted an IPO with a confirmed pricing 

date through the end of 2023, identified by Dealogic, SPACinsider, Audit Analytics, and staff manual 

review. Values reflect the total over the period in the column headers rather than annual averages. 
14264 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

of filing and immediate effectiveness of proposed 

rule change to adopt additional criteria for the 

listing of SPACs). 1201NYSE Listed Company Manual Section 

102.06; Nasdaq Listing Rule IM–5101–2; NYSE 

American Company Guide Section 119. The Rules 

of the CBOE BZX Exchange, Inc. provide another 

example of listing requirements that are 

substantially similar to those described in this 

section. See CBOE BZX Rule 14.2(b). 1202NYSE Listed Company Manual Section 

102.06; Nasdaq Listing Rule IM–5101–2(a); NYSE 

American Company Guide Section 119(a). 1203NYSE Listed Company Manual Section 

102.06(e); Nasdaq Listing Rule IM–5101–2(b); NYSE 

American Company Guide Section 119(b). 1204NYSE Listed Company Manual Section 

102.06(d); Nasdaq Listing Rule IM–5101–2(c); NYSE 

American Company Guide Section 119(c). 1205NYSE Listed Company Manual Section 

102.06(a); Nasdaq Listing Rule IM–5101–2(d); NYSE 

American Company Guide Section 119(d). 1206 Id. 

1207NYSE Listed Company Manual Section 

102.06(c); Nasdaq Listing Rule IM–5101–2(e); NYSE 

American Company Guide Section 119(e). 

1208See Robert Berger, SPACs: An Alternative 

Way to Access the Public Markets, 20 J. Applied 

Corp. Fin. 68 (2008) (‘‘Though privately negotiated, 

tailored transactions, SPACs can provide companies 

with access to the public markets in ways that a 

traditional IPO cannot. SPAC mergers typically 

exhibit . . . specialized SPAC management teams 

that add experience that is difficult to replicate.’’). 

1209See SPACInsider, 1H–2021 Report, available 

at https://mcusercontent.com/764dc55fe6da1e

37d427265ad/files/b90cf236-0845-f778-e35cdb7417200d35/1H_2021_SPAC_Report.pdf. 

1210Based on staff analysis of data from 

SPACInsider. SPACs with sponsor type ‘‘Sponsor’’ 

were counted as individually sponsored. 

1211This estimate is based on staff analysis of 

Dealogic of SPAC IPOs registered with the SEC with 

a confirmed pricing date. 

1212 Id. Some commenters asserted that 

underwriters may have become more reluctant to 

participate in SPAC IPOs as a result of proposed 

Rule 140a, which would have deemed a SPAC IPO 

underwriter that takes steps to facilitate a de-SPAC 

transaction, or any related financing transaction, or 

otherwise participates (directly or indirectly) in the 

de-SPAC transaction to be engaged in the 

distribution of the securities of the surviving public 

entity in a de-SPAC transaction within the meaning 

of section 2(a)(11) of the Securities Act. See 

Proposing Release, supra note 7, at 29486. See, e.g., 

letter from White and Case. A decrease in the 

supply of underwriters providing services to SPACs 

may have resulted in fewer SPAC IPOs because 

SPAC IPOs are typically structured as underwritten 

offerings. Conversely, it could also be the case that 

the decline in SPACs activity during this period, 

which may be due to other reasons, could naturally 

result in fewer underwriters. 

1213SPACs that conduct a firm commitment IPO 

and raise more than $5 million in the offering are 

not subject to the requirements of Securities Act 

Rule 419. See supra note 3. 

1214This estimate is based on staff analysis of 

data as described in supra note 1211. See also letter 

from Sagiv Shiv, Managing Director, Head of MA 

and Advisory, ACP Capital Markets LLC (March 24, 

2023), noting that the SPAC underwriting fee 

percentage is based on IPO proceeds, not the nonredeemed share of these proceeds at the de-SPAC 

stage. 

1215See supra note 1214. 

1216 Id. 

1217See Proposing Release, supra note 7, at 

29486. This practice has not changed since the 

NYSE, Nasdaq, and NYSE American 

have rules setting forth listing 

requirements for a company whose 

business plan is to complete an IPO and 

engage in a business combination.1201

Among other things, the rules of all 

three exchanges permit the initial listing 

of SPACs only if at least 90% of the 

gross proceeds from the IPO and any 

concurrent sale by the SPAC of equity 

securities will be deposited in a trust 

account.1202 The rules of these 

exchanges further require that, within 

three years of the effectiveness of its IPO 

registration statement (or such shorter 

period specified in the registration 

statement under Nasdaq and NYSE 

American rules or its constitutive 

documents or by contract under NYSE 

rules), the SPAC complete a business 

combination(s) having an aggregate fair 

market value of at least 80% of the value 

of the net assets in the trust account 

excluding certain costs.1203 The rules of 

NYSE, Nasdaq, and NYSE American 

require that a business combination 

meeting this 80% requirement be 

approved by a majority of the SPAC’s 

independent directors.1204 The rules of 

all three exchanges also require, if a 

shareholder vote is held, that a majority 

of the shares voted at the shareholder 

meeting approve a de-SPAC transaction 

meeting this 80% requirement.1205 In 

addition, the rules of all three exchanges 

provide that, if a business combination 

transaction meeting this 80% 

requirement is approved and 

consummated, public shareholders 

voting against the transaction must have 

the right to convert their shares of 

common stock into a pro rata share of 

the aggregate amount then in the trust 

account net of taxes and working capital 

disbursements.1206 Under the rules of 

all three exchanges, if a shareholder 

vote on a business combination 

transaction is not held, the SPAC must 

provide all shareholders with the 

opportunity to redeem all their shares 

for cash equal to their pro rata share of 

the aggregate amount then in the trust 

account net of taxes and working capital 

disbursements, pursuant to Rule 13e–4 

and Regulation 14E under the Exchange 

Act, which regulate issuer tender 

offers.1207

ii. SPAC Sponsors 

SPACs are managed by SPAC 

sponsors, who spend time and effort 

managing the SPAC process and 

searching for a suitable target to 

complete a de-SPAC transaction. 

Sponsors also invest in the SPAC and 

are compensated with a portion of 

ownership in the combined company 

that results from the de-SPAC 

transaction, which means that such 

compensation will generally only be 

realized if a de-SPAC transaction 

occurs. Commentators have suggested 

that one reason a SPAC might provide 

a more attractive route to the public 

markets than a traditional IPO is 

because the target company may benefit 

from the leadership and professional 

advice from one or more individuals 

composing the SPAC sponsor, including 

in some cases beyond the 

consummation of the de-SPAC 

transaction and into the life of the 

resulting combined public company.1208

Although the majority of sponsors from 

2019 through the first half of 2021 were 

financial institutions, a sizable fraction 

(47%) of companies classified as SPACs 

were self-reported as sponsored by 

individuals.1209 This percentage has 

been increasing, as 66% of SPACs with 

IPOs in the second half of 2021 and 

83% in 2022 were sponsored by 

individuals.1210

iii. SPAC IPO Underwriters 

Underwriters of SPAC IPOs may be 

affected by the final rules, to the extent 

they are liable for IPO disclosures or any 

involvement in de-SPAC transactions. 

During the period 1990–2022, the 

average number of named underwriters 

participating in a SPAC IPO was 2.4.1211

In 2022, the average was 2.1. Although 

we are not aware of any database listing 

investment banks that are willing to 

provide underwriting services for 

SPACs, there were six investment banks 

that participated in at least ten SPAC 

IPOs in 2021 that did not participate in 

any SPAC IPOs in 2022 or in the first 

two quarters of 2023.1212 All of these 

SPAC IPOs were done via a firm 

commitment underwriting.1213 The 

average fee charged by SPAC IPO 

underwriters from 1990–2022 was 

approximately 5.4% of IPO 

proceeds.1214 The average underwriting 

fee has declined from approximately 

6.9% in the 1990s and 2000s to 

approximately 5.2% in the 2010s and 

2020s.1215 The average underwriting fee 

for SPACs in 2022 was 5.1%.1216 SPAC 

IPO underwriters may provide services 

to a SPAC or its eventual target 

company both before and after the 

completion of an IPO. For example, a 

SPAC IPO underwriter may help a 

SPAC identify potential target 

companies, provide financial advisory 

services to the SPAC or the target 

company, or act as a PIPE placement 

agent. As discussed in the Proposing 

Release, current SPAC IPO underwriter 

practice is to defer a portion of the 

underwriting fee until, and conditioned 

upon, the completion of the de-SPAC 

transaction.1217 Prior to 2004, SPAC IPO 


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Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14265 

proposal. The average deferred fee in 2022 through 

the first two quarters of 2023 was 3.3% of IPO 

proceeds. 1218This conclusion is based on staff analysis. 

See supra note 1211. See also Yochanan 

Shachmurove & Milos Vulanovic, Specified Purpose 

Acquisition Company IPOs, in The Oxford 

Handbook of IPOs 301 (Douglas Cumming & Sofia 

Johan eds., 2018). 1219See, e.g., Gu ̈l Okutan Nilsson, Incentive 

Structure of Special Purpose Acquisition 

Companies, 19 Eur. Bus. Org. L. Rev. 253 (2018) 

(‘‘[R]ecent SPACs seem to be experimenting with 

issuing certain ‘rights’ . . . defined as the ‘right to 

receive one-tenth of a SPAC share upon 

consummation of the business combination’. Unlike 

in the case of warrants, shareholders are not 

required to pay for receiving these shares. ‘Rights’ 

can also trade separately and even the shareholders 

who convert their shares can keep them. If the 

business combination cannot be completed, rights 

expire worthless.’’). 1220Early practice for SPACs often involved the 

offered unit containing multiple in-the-money 

warrants. See, e.g., Lola Miranda Hale, SPAC: A 

Financing Tool with Something for Everyone, J. of 

Corp. Acct. & Fin. Jan./Feb. 2007, at 67 (‘‘The 

typical structure involves the offering of a unit 

consisting of common stock and one or two separate 

warrants for common stock. In a two-warrant unit, 

the unit price is $6, including one share of common 

stock and two warrants . . . . Typically, each 

warrant entitles the holder to purchase one share 

of common stock at a price of $5 each.’’); Carol 

Boyer & Glenn Baigent, SPACs as Alternative 

Investments: An Examination of Performance and 

Factors that Drive Prices, 11 J. Private Equity, 

Summer 2008, at 8 (‘‘SPACs typically sell in units 

that are priced at $6, and each unit is composed of 

one common share and two warrants that give 

investors the right to buy two more shares for $5 

each.’’). Staff analysis of Dealogic data suggests unit 

offerings of 1 common stock and two warrants was 

typical between 2000 and 2005. Such structures 

reappear after 2020 but as a much smaller 

proportion of all unit structures. 

1221See Gahng, Ritter & Zhang, supra note 30. 

1222Early SPACs typically offered one or two inthe-money warrants. See supra note 1220. More 

recent SPAC structures offer out-of-the-money 

fractional warrants. See supra note 1221. 

1223See, e.g., Gu ̈l Okutan Nilsson, Incentive 

Structure of Special Purpose Acquisition 

Companies, 19 Eur. Bus. Org. L. Rev. (2018), supra 

note 1219. 

underwriters typically did not defer 

their fee until completion of the deSPAC transaction.1218 During the period 

2005–2022, we estimate that the average 

size of the deferred SPAC IPO 

underwriting fee was 3.1% of IPO 

proceeds (3.4% if excluding the cases 

where there was no deferred fee), or 

approximately 56% of total SPAC IPO 

underwriting fees. We have not 

observed significant differences in the 

structure or level of SPAC IPO 

underwriting fees and deferred fees, as 

disclosed at the IPO stage, when 

comparing SPACs that have completed 

a de-SPAC transaction versus SPACs 

that did not do so. 

iv. Public Warrants 

Most SPAC IPOs register the offering 

of a unit composed of a common share, 

warrants, or fractions thereof, and—in 

some cases—rights.1219 Currently, SPAC 

units usually include one common 

share and one or more fractional out-ofthe-money warrants.1220 Public 

warrants, i.e., those issued to nonaffiliated shareholders, give the holder 

the right to purchase common stock, 

typically at an exercise price of $11.50, 

for up to five years after the completion 

of the de-SPAC transaction.1221

As SPAC offerings have evolved, 

however, the dilutive potential of the 

warrant component of a SPAC offering 

unit appears to have somewhat 

diminished. As indicated in Figure 1, 

across all the years included in Table 1, 

many SPACs offer units with fractional 

warrant components. In more recent 

years (2019–2022, inclusive), the 

majority of SPACs that have conducted 

an IPO offered units with fractional 

warrants representing half a share or 

less. The result of this trend is that 

warrant features have in some respects 

become less dilutive in more recent 

years.1222 SPAC sponsors also often 

acquire warrants, with some studies 

estimating the amount of those 

acquisitions representing 3–5% of the 

IPO proceeds.1223

2. De-SPAC Transactions 

At the de-SPAC transaction stage, the 

primary parties affected by the new 

disclosure requirements include SPACs, 

SPAC sponsors, investors (including 

PIPE investors if any), and target 

companies. Additionally, the final rules 

to amend or otherwise clarify the 

existing liability framework would 

affect those same parties (and certain 

individuals at those parties). 

As illustrated in Table 3, based on 

staff analysis of SPAC IPOs that 

registered a sale of securities between 

1990 and 2023, approximately twoVerDate Sep<11>2014 20:01 Feb 23, 2024 Jkt 262001 PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 E:\FR\FM\26FER2.SGM 26FER2

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Figure 1. Warrants offered in SPAC IPO Units, 1990-2022a 

4S.0% --------------------------

140.0% 

!fl 35.0% ---------------.ra-----------

0 !j 30.0% 

~ 25.0% -------------..---11•----------

e: 20.0% ------------- 0 

«> 15.0% ------------- f 10.0% -----------....--

i:i.. S.0% ---------,c:_.. 

0.0% -~--------.-.. 

0.10 0.11 0.13 0.17 0.20 0.25 0.33 o.so 0.75 1.00 1.50 2.00 10.00 

SPAC JPO Wammt Offering (Units) 

All Years 201!>·2022 

• The estimated distribution is based on the warrant offering information presented in either the IPO prospectus or 

the Form S-1 or Form F-1 registration statement filed in connection with all SPACs identified in Table 1. 
14266 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1224Staff analysis based on the sample of SPAC 

IPOs described in Table 2 note a that reflect all 

confirmed, completed activity as of Dec. 31, 2023. 

1225Studies performed in 2016 or later reviewing 

the 2003–2013 cohort of SPACs found that 

approximately 51.5% of SPACs that had an IPO 

during the decade successfully completed a deSPAC transaction and 21.6% were still publicly 

traded three years later in 2016. See, e.g., Milos 

Vulanovic, SPACs: Post-Merger Survival, 43 

Managerial Fin. 679, 679–699 (2017); Kamal Ghosh 

Ray & Sangita Ghosh Ray, Can SPACs Ensure M&A 

Success?, 16 Advances in Mergers & Acquisitions 

83, 83–97 (2017). 

1226Target counts are from Dealogic’s SPAC M&A 

data. 

1227See Meghan Leerskov, Shell Mergers and 

SPACs: A Statistical Overview of Alternative Public 

Offering Methods, in The Issuer’s Guide to PIPES: 

New Markets, Deal Structures, and Global 

Opportunities 281 (Steven Dresner ed., 2015). 

1228See Klausner, Ohlrogge & Ruan, supra note 

18. The authors analyzed data for the 47 public 

company SPACs that entered into a business 

combination with a target company, and thereby 

brought the operating company public, between Jan. 

2019 and June 2020. 

1229 Id. 

1230 Id. 

1231See Michael Levitt, Valerie Jacob, Sebastian 

Fain, Pamela Marcogliese, Paul Tiger, & Andrea 

Basham, 2021 De-SPAC Debrief, Freshfields.us (Jan. 

24, 2022), available at https://blog.freshfields.us/ 

post/102hgzy/2021-de-spac-debrief. The difference 

between average and median PIPEs in this sample 

reflects that the data is positively skewed, implying 

that, while some deals may involve little or no 

additional financing via PIPEs, other deals feature 

large investments outside the SPAC IPO process. 

1232See supra note 1203 which discusses deSPAC transaction 80% minimum cash conditions. 

We note that while there may be more instances in 

which PIPE financing functions to ensure that the 

cash requirements of a de-SPAC transaction are met 

in recent years, the difference between the average 

and median amount of PIPE financing raised 

(respectively approximately $300 million and $200 

million) and the average and median consideration 

paid to target shareholders (respectively 

approximately $2 billion and $1.25 billion) point to 

PIPE offerings facilitating larger acquisitions. See 

Michael Levitt, Valerie Jacob, Sebastian Fain, 

Pamela Marcogliese, Paul Tiger, & Andrea Basham, 

2021 De-SPAC Debrief, Freshfields.us (Jan. 24, 

2022), available at https://blog.freshfields.us/post/ 

102hgzy/2021-de-spac-debrief. 

thirds (65%) of all SPACs following 

their IPOs announced a de-SPAC 

transaction, and about one-half (49%) 

completed such transactions.1224 It is 

possible that SPACs currently searching 

for target companies may still identify 

target companies, complete de-SPAC 

transactions, and thereby increase the 

fractions of SPACs with announcements 

and completed transactions. This deSPAC transaction completion rate of 

approximately one-half is generally 

consistent with previous research 

findings (which may have used different 

ranges or filters for their samples).1225

Currently, the typical SPAC discloses 

in its IPO prospectus that it is formed 

for the purpose of effecting a business 

combination with one or more 

businesses. Most SPACs pursue only 

one target company for a de-SPAC 

transaction. Of the 583 business 

combination transactions with operating 

companies that occurred over the 1990– 

2022 period involving SPAC IPOs 

approximately 3% of transactions (17 of 

583) involved two or more target 

companies (15 transactions involved 

two target companies and two 

transactions involved three target 

companies).1226

i. PIPEs in Connection With De-SPAC 

Transactions 

PIPEs have supported de-SPAC 

transactions since approximately 

2005.1227 However, in some recent deSPAC transactions, PIPEs have played a 

larger role than they have historically 

played, and this has given rise to 

concern about the potential dilutive 

effects of PIPEs on SPAC shareholders 

and how well these dilutive effects 

might be understood by other investors. 

According to a recent study analyzing 

the 47 registered de-SPAC transactions 

that occurred between January 2019 and 

June 2020, the median cash raised 

through third-party PIPE investors was 

approximately 25% of the cash raised in 

the de-SPAC transactions.1228 The same 

study found that, following these 

transactions, the median portion of the 

post de-SPAC company owned by SPAC 

shareholders including the sponsor was 

35% and the median portion owned by 

the sponsor alone was 12%.1229 Because 

PIPE investors may receive confidential 

information with which to make an 

investment decision (including one-onone conversations with the target 

company’s management, which may 

convey soft information that enables 

PIPE investors to assess management 

abilities or determine their level of 

confidence in the management team) 

and may also engage in extended and 

detailed due diligence on the SPAC and 

target company,1230 their participation 

has at times been considered a benefit 

to SPAC IPO investors, providing a 

positive signal of the expected future 

financial performance of the post-deSPAC transaction combined company. 

As the SPAC market has evolved, so 

too has the role of PIPEs that support, 

and in some cases enable, de-SPAC 

transactions. In 2021, according to one 

study, approximately 95% of de-SPAC 

transactions included PIPE financings 

and the average ($316 million) and 

median ($210 million) amounts raised 

in PIPE financings were similar to the 

average size of the SPAC trust account 

at the time of the IPO.1231 This may 

reflect that in more recent SPACs, in 

addition to enabling larger deals, some 

PIPEs may provide capital to ensure that 

a deal that otherwise may fail due to a 

high redemption rate can proceed to 

completion, although many PIPE 

offerings in connection with a de-SPAC 

transaction still appear to facilitate 

larger acquisitions rather than replace 

SPAC share redemptions.1232 In these 

cases, the ownership stake of the PIPE 


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Table 3. SP AC Outcomes, Grouped by IPO Year, 1990-20233 

SPAC IPO Year 1990- 2001- 2006- 2011- 2016- 2021 2022 2023 2000 2005 2010 2015 2020 

Number ofIPOs in Year 18 41 128 67 400 613 86 31 

De-SPAC Transaction Announced 17 41 108 59 334 282 47 8 

De-SPAC Transaction Completed 17 35 64 52 319 175 11 0 

Liquidated 1 6 64 15 71 258 12 0 

a Estimates reported here are based on the respective samples of SP AC IPOs (see Table 2 note a) that reflect all 

confirmed, completed activity as of Dec. 31, 2023. Transactions announced, transactions completed, and SPAC 

liquidations for each time period are based on realized future outcomes of the SPAC IPOs during that time period 

rather than the year of the announcement, completion, or liquidation. 
Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14267 

1233Assuming the price of shares sold to PIPE 

investors is the same as or less than the IPO price, 

this outcome would also occur if the PIPE 

investments simply exceeded the size of the SPAC 

IPO proceeds without redemptions, but such cases 

have not been commonly observed. In a review of 

PIPE finance raised in connection with de-SPAC 

transactions that occurred between Jan. 2018 and 

June 2021, the Commission staff found that while 

PIPE proceeds ranged on average from 60% to 88% 

of SPAC IPO proceeds, net of redemptions, these 

proceeds represented up to 137% on average (in 

calendar year 2019) of SPAC IPO proceeds (raised 

from SPAC shareholders whose shares were not 

redeemed) at the consummation of the de-SPAC 

transaction. De-SPAC transactions were less reliant 

on funding through PIPEs in 2022 than in 2021, 

according to one study, finding PIPEs were less 

common in de-SPAC transactions (70% compared 

to 95% in 2021) and were smaller in both absolute 

size (averaging approximately $128 million in 2022, 

compared to $316 million for the 2021) and size 

relative to the SPAC trust account (less than 50% 

in the 2022 deals, compared to nearly 100% in the 

2021 deals). See Freshfields, 2022 De-SPAC Debrief: 

A Comprehensive Review of All 102 De-SPAC 

Transactions that Closed in 2022, Freshfields.us 

(Jan. 2023), available at https://www.freshfields.us/ 

490963/globalassets/noindex/documents/2022-despac-debrief.pdf. 

1234See Freshfields, 2022 De-SPAC Debrief: A 

Comprehensive Review of All 102 De-SPAC 

Transactions that Closed in 2022, Freshfields.us 

(Jan. 2023), available at https://www.freshfields.us/ 

490963/globalassets/noindex/documents/2022-despac-debrief.pdf. 

1235See Jongha Lim, Michael Schwert & Michael 

Weisbach, The Economics of PIPEs, 45 J. Fin. 

Intermediation 100832 (2021). These results are 

based on a sample of 3,001 PIPE transactions by 

U.S. firms listed on NYSE or Nasdaq between 2001 

and 2015. 

1236See Gahng, Ritter & Zhang, supra note 30. We 

note that discount calculations involve several 

methodological assumptions regarding the 

valuation of warrants and the treatment of transfers. 

For example, another study finds that between 2019 

and June 2020, the median discount received by 

PIPE investors was 5.5% relative to the market 

value of the publicly traded SPAC shares and that, 

in 37% of SPACs with PIPE deals, PIPE investors 

received a 10% discount or more. See Klausner, 

Ohlrogge, & Ruan, supra note 18. 

1237 17 CFR 229.1609. 

1238See Kimball Chapman, Richard M. Frankel & 

Xiumin Martin, SPACs and Forward-Looking 

Disclosure: Hype or Information? (Working Paper, 

Oct. 20, 2021), available at https://ssrn.com/ 

abstract=3920714 (retrieved from SSRN Elsevier 

database). 

1239See, e.g., Dambra, Even-Tov & George, supra 

note 36. 

1240See Elizabeth Blankespoor, Bradley E. 

Hendricks, Gregory S. Miller & DJ Stockbridge, A 

Hard Look at SPAC Projections, 68 Mgmt. Sci. 4742 

(2022), available at https://doi.org/10.1287/ 

mnsc.2022.4385. 

1241 17 CFR 229.1607(a)(4). 

1242Michael Levitt, Valerie Jacob, Sebastian Fain, 

Pamela Marcogliese, Paul Tiger, & Andrea Basham, 

supra note 1231. 

1243See supra note 1234. 

1244See Tingting Liu, The Wealth Effects of 

Fairness Opinions in Takeovers, 53 Fin Rev. 533 

(2018) (finding that fairness opinions are positively 

related to bidders’ shareholder value and postmerger operating performance after the adoption of 

FINRA Rule 2290 in Dec. 2007 which regulates the 

identification and disclosure of conflicts of interest 

of FINRA members—e.g., broker-dealers with 

investment banking or valuation businesses— 

rendering fairness opinions.) The study’s sample is 

of deals that occurred between 1995 and 2015, 

involving a publicly traded bidder that the study 

identified as seeking to acquire a majority of the 

target’s shares. As discussed by the authors, it is 

difficult to estimate the fraction of deals that 

involve a fairness opinion since, according to the 

authors, the use of fairness opinions is required to 

be disclosed only if bidders are required to file 

proxy statements in connection with the solicitation 

of shareholder votes. They note that listing rules of 

the NYSE, NYSE American (named Amex in the 

study), and Nasdaq require a bidder shareholder 

vote only when the bidder plans to issue 20% or 

more new equity to finance a deal. In other words, 

according to the authors, if the bidder issues less 

than 20% of its outstanding shares or uses cash as 

consideration to pay for the acquisition, the bidder 

would not be required to disclose the fairness 

opinion even if the firm had obtained one. 

investors in the combined company may 

exceed that of the non-redeeming SPAC 

investors.1233 PIPE investors may, 

therefore, come to have a larger stake in 

the combined company than SPAC IPO 

investors anticipated when making an 

initial investment. In 2022, this trend 

may have lessened slightly, with only 

71% of de-SPAC transactions including 

PIPE financing, and the average ($128 

million) and median ($92 million) 

amounts raised in PIPE financings were 

smaller than the average and median 

(both $269 million) sizes of the SPAC 

trust account at the time of the IPO.1234

PIPEs are typically priced at a 

discount relative to the market value of 

the publicly traded securities. For 

example, one study of PIPE transactions 

(including but not limited to de-SPAC 

transactions) indicates that the average 

discount for PIPE investors is 11.2% 

(compared to the market value of those 

securities), and for the subsample of 

PIPEs that do not include warrants, the 

average discount is 5.7%.1235 Another 

study that focused on PIPEs in de-SPAC 

transactions of SPACs that conducted an 

IPO in or after 2015 and that completed 

a de-SPAC by March 2021 estimates that 

the mean discount for PIPE investors 

was approximately 20%.1236

ii. Use of Projections in Connection 

With De-SPAC Transactions 

Item 1609 of Regulation S–K will 

require certain enhanced disclosures 

about any projections disclosed in deSPAC transactions.1237 Hence, Item 

1609 will potentially affect preparers 

and users of financial projections 

related to de-SPAC transactions, 

including SPACs, SPAC boards of 

directors, SPAC sponsors, target 

companies, both sets of controlling 

shareholders and management, and 

current and prospective investors. 

Three recent papers discuss the use of 

projections by SPACs and target private 

operating companies in de-SPAC 

transactions. Chapman, Frankel, and 

Martin (2021) collected data on SPACs 

with IPO dates from 2015 to 2020.1238

The authors found that 87% (249 out of 

285) of de-SPAC transactions were 

accompanied by at least one forecast. 

Dambra, Even-Tov, and George (2022) 

focus on de-SPAC transactions between 

January 1, 2010, and December 31, 2020. 

The authors restricted their sample to 

transactions with a single target and 

excluded SPACs that delisted before the 

merger effective date, traded on the OTC 

market, or focused on the biotechnology 

industry, yielding a sample of 142 

observations.1239 They identified 128 

target private companies (90.1%) that 

provided at least one form of forecast 

(e.g., revenue or net income) in investor 

presentations. Blankespoor, Hendricks, 

Miller, and Stockbridge (2022) reviewed 

a sample of 963 SPAC IPOs completed 

between January 1, 2000, and July 1, 

2021.1240 The authors removed 

companies ‘‘that are still seeking a 

merger target, have liquidated, are 

foreign, or have not publicly filed their 

roadshow’’ and arrived at a sample of 

389 SPACs. Of this sample, 312 

(80.21%) SPACs provided a revenue 

forecast. These three studies suggest that 

the use of projections is common in deSPAC transactions. 

iii. Use of Fairness Opinions 

Item 1607 of Regulation S–K will 

require disclosures related to any report, 

opinion (other than an opinion of 

counsel) or appraisal received by the 

SPAC or the SPAC sponsor from an 

outside party or unaffiliated 

representative materially relating to, 

among other things, the fairness of the 

de-SPAC transaction to the SPAC, its 

security holders or SPAC sponsor if the 

SPAC or SPAC sponsor receives such a 

report, opinion, or appraisal.1241 Thirdparty providers of fairness opinions may 

factor the requirement for these 

disclosures into how they price their 

services as well as the types of 

information included in their reports 

and opinions. As such, this disclosure 

requirement may affect SPACs’ 

determination of whether to obtain 

fairness opinions. 

In 2021, only 15% of de-SPAC 

transactions disclosed that they were 

supported by fairness opinions, 

according to one study.1242 In 2022, that 

proportion increased to 32%.1243 In 

contrast, a broader study of M&A 

transactions (not limited to SPACs) 

found that 85% of bidders obtained 

fairness opinions.1244

iv. Changes in Jurisdiction of the 

Combined Company 

In considering the potential economic 

effects of the final rules, we have taken 

into consideration elements of both the 


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14268 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1245See infra note 1364. 

economic and the regulatory baseline, 

including consideration of variations 

between the applicable legal 

frameworks in the jurisdictions in 

which SPACs are organized. Table 4 

presents information on the jurisdiction 

of organization for each SPAC that 

conducted its IPO after 1990 and 

completed a de-SPAC transaction before 

2022. The first two columns state the 

percentage of SPACs that later had deSPAC transactions that were originally 

organized in each of six listed 

jurisdictions at the time of their IPO. 

The second two columns state—for each 

originating jurisdiction—the percentage 

of combined companies that have their 

jurisdiction of organization in the listed 

jurisdictions following a de-SPAC 

transaction. 

While the majority of SPACs that 

subsequently consummated a de-SPAC 

transaction remain organized in the 

same location, Table 4 indicates that, for 

some SPACs, the jurisdiction of 

organization of the combined company 

may change (compared to the SPAC’s 

jurisdiction) in connection with the deSPAC transaction. As a result, SPACs 

may face changes in prevailing legal 

standards that arise from a change in 

jurisdiction of organization. To the 

extent that different jurisdictions have 

different disclosure requirements and 

provide differing levels of investor 

protections, the baseline regulatory 

framework will vary across SPACs and 

may change upon the de-SPAC 

transaction. For example, the 

incremental impact of the minimum 

dissemination period requirement may 

vary by jurisdiction.1245

BILLING CODE 8011–01–P 


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1246See supra section III.E. 

BILLING CODE 8011–01–C 

3. Blank Check Companies 

We are adopting final rules that define 

‘‘blank check company’’ for purposes of 

the PSLRA safe harbor provisions 

regarding forward-looking 

statements.1246 The final rules will 

affect SPACs and any other companies 

that would otherwise meet the Rule 419 

definition of ‘‘blank check company’’ 

except that they are not issuers of penny 


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Table 4. Distribution of Combined Company Jurisdiction of Organization by SP AC 

Jurisdiction of Organization, 1990-2022a 

Organization at IPO 

Cayman Islands 

Marshall Islands 

Massachusetts 

% of IP Os that Later 

de-SPAC 

28.3% 

0.4% 

0.2% 

Organization Post deSP AC 

Delaware 

Cayman Islands 

Netherlands 

Israel 

Luxembourg 

Republic of Ireland 

Ireland 

United Kingdom 

Jersey (Bailiwick of Jersey) 

Ontario 

Marshall Islands 

Massachusetts 

% of Total 

Number of 

Organization 

atIPO 

60.3% 

26.0% 

3.8% 

3.8% 

2.3% 

0.8% 

0.8% 

0.8% 

0.8% 

0.8% 

100.0% 

100.0% 

• Estimates are based on the subsample ofSPAC IPOs that subsequently completed a de-SPAC transaction. Data 

on state of organization is obtained from a combination of sources, including Dealogic, Audit Analytics, and SEC 

filings available on EDGAR. These estimates reflect all confirmed, completed activity as of Dec. 31, 2022. 
14270 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1247See supra sections VIII.A.3. 1248This estimate is based on staff review of all 

registrants, by unique CIK, that filed at least one 

registration statement, or quarterly or annual report 

in 2022 and for which the term ‘‘penny stock’’ did 

not appear in any of these filings according to a text 

search from Intelligize. This approach to identifying 

penny stock issuers may be subject to errors as 

studies have found that self-reported SIC codes may 

contain errors that could cause a higher number of 

issuers to be counted as affected parties than should 

be counted. See, e.g., Murat Aydogdu, Chander 

Shekhar & Violet Torbey, Shell Companies as IPO 

Alternatives: An Analysis of Trading Activity 

Around Reverse Mergers, 17 Applied Fin. Econ. 

1335 (2007) (‘‘Not all firms that use SIC code 6770 

are actually blank checks. For instance, companies 

are required to file Form 12 after an acquisition to 

notify the SEC of their new SIC code. Many fail to 

file as they acquire operations in a business with 

a more descriptive SIC code, yet they continue to 

use 6770.’’). Our estimate does not seek to reclassify 

potential errors in this case because we are not able 

to distinguish when the classification error would 

represent a mistake made by a registrant that knows 

it is not a blank check company for SIC code 

purposes versus when the registrant is mistaken in 

its belief that it is a blank check company for SIC 

code purposes. In the latter case, even if mistaken 

about its blank check company status for SIC code 

purposes, the party may still be affected by the final 

rules because they may currently make, or believe 

they are able to make, forward-looking statements 

that would fall under the PSLRA safe harbors. 

1249 If a previously non-public shell company 

files a registration statement, the financial 

statements included in the registration statement 

would be required to comply with Regulation S–X, 

including final Rule 15–01. We currently lack the 

data necessary to estimate the number of shell 

companies that are private that could be impacted 

by Article 15 if they file such a registration 

statement. As a result, this data is not included in 

the estimates discussed in our analysis. 

1250The portion of non-SPAC shell company 

mergers may be overstated if some of the filings 

reflect changes in shell company status that are not 

a result of a business combination, such as a change 

in business model. 

1251This estimate is based on staff review of all 

registrants’ self-reported status as a shell company 

on the cover page of the most recent annual report 

(Form 10–K, 20–F, or 40–F) or an amendment 

thereto filed in calendar year 2022 by unique CIKs 

of entities that are not already identified as SPACs. 

1252As of year-end 2021, the average market 

capitalization of a non-SPAC shell company was 

$154,731,262 while the average market 

capitalization of a SPAC was $306,204,218. Based 

on the most recent periodic disclosure filed per 

registrant before Dec. 31, 2021, the average total 

assets of a non-SPAC shell was $33,666,553 while 

the average of total assets of a SPAC was 

$309,570,778. 

1253This estimate is based on a cross-tabulation, 

by unique CIK, of potentially affected parties 

identified as blank check companies (supra note 

1248) and as shell companies (supra note 1251). 

1254See, e.g., General Instruction I.2 of Form S– 

4 (If the target company, as defined in Item 1601(d) 

of Regulation S–K (17 CFR 229.1601(d)), in a deSPAC transaction is not subject to the reporting 

requirements of either section 13(a) or 15(d) of the 

Exchange Act, certain additional information with 

respect to the target company must be provided). 

stock, which currently seek to rely on 

the PSLRA safe harbor. The final rules 

also may affect investors and other 

market participants’ access to the 

informational content of forwardlooking statements or potential remedies 

in the case of material omissions from, 

or material misstatements in, a 

prospectus or registration statement or 

in connection with the purchase or sale 

of a security. 

We estimate that, in addition to 

potentially affected SPACs, as 

previously discussed,1247 the final rules 

also may affect approximately 32 nonSPAC entities that self-identified as 

blank check companies but would not 

meet the current definition of ‘‘blank 

check company’’ under Rule 419 given 

that they did not self-identify as penny 

stock issuers.1248

4. Shell Company Business 

Combinations 

Securities Act Rule 145a and Article 

15 of Regulation S–X may affect SPACs 

and other shell companies (other than 

business combination related shell 

companies) involved in business 

combination transactions. To the extent 

that Rule 145a transactions are 

registered, investors would receive 

disclosures in a registration statement, 

and registration would result in 

enhanced liabilities for the registrant 

and other parties who have liability 

under Securities Act section 11 with 

respect to the registration statement. 

Article 15 of Regulation S–X will affect 

the financial statements associated with 

business combinations involving shell 

companies and thereby affect parties 

that are typically associated with the 

preparation, review, and dissemination 

of financial statements.1249

Table 5 below illustrates that the 

proportion of de-SPAC transactions to 

non-SPAC reporting shell company 

business combinations has increased 

due to the recent increase in the number 

of SPACs entering the market and 

subsequently merging with target 

companies.1250 In 2016, only 8% of all 

targets acquired by a reporting shell 

company merged with a SPAC. The 

proportion increased to 76% in 2021 

and 65% in 2022. 

We estimate that, in addition to 

existing SPACs that have yet to 

complete a de-SPAC transaction (as of 

the end 2022, there were 324 such 

SPACs according to the figures reported 

in Table 3), approximately 156 

additional existing non-SPAC reporting 

shell companies may be affected by the 

final rules.1251 Almost all of these nonSPAC reporting shell companies trade 

in the OTC market and are smaller than 

SPACs in terms of market capitalization 

and total assets.1252 We further estimate 

that approximately 7.7% (12) of these 

shells may also be affected by the 

definition of the term ‘‘blank check 

company’’ for purposes of the PSLRA in 

the final rules.1253

B. Benefits and Costs of the Adopted 

Rules 

1. Disclosure-Related Rules 

i. Definitions (Item 1601) 

New Item 1601 defines certain parties 

and transactions to which the 

requirements of subpart 1600 of 

Regulation S–K apply. Defining the 

terms ‘‘special purpose acquisition 

company,’’ ‘‘de-SPAC transaction,’’ 

‘‘SPAC sponsor,’’ and ‘‘target company’’ 

establishes the scope of the parties and 

transactions subject to the requirements 

of subpart 1600 and any other rules, 

including other final rules, that rely on 

these definitions and thereby provides 

both registrants and investors notice of 

the associated obligations and 

expectations.1254

As discussed above, in response to 

commenters, the Commission is 

adopting Item 1601 with 


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Table 5. Distribution by Year of Shell-Mergers Reported on Form 8-Ka 

2016 2017 2018 2019 2020 2021 2022 

SPAC 8.3% 9.5% 22.9% 37.0% 51.4% 76.1% 64.9% 

Non-SPAC 91.7% 90.5% 77.1% 63.0% 48.6% 23.9% 35.1% 

• Based on Form 8-Ks by calendar year of filing that contain Item 5.06 (Change in Shell 

Company Status) disclosures, based on data from lntelligize, omitting duplicate reports from 

the same issuer filed on the same day. 
Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14271 

1255See supra section II.A. 

1256We acknowledge there may exist 

heterogeneity in risk preferences among investors, 

but this does not substantially change the incentive 

misalignment with the SPAC’s incentives. 

1257See supra sections II.B and II.C. 

1258See supra section II.E for more information 

about current disclosure requirements. 

1259See, e.g., George Loewenstein, Cass R. 

Sunstein & Russell Golman, Disclosure: Psychology 

Changes Everything, 6 Ann. Rev. Econ. 391 (2014). 1260Salience detection is a key feature of human 

cognition allowing individuals to focus their 

limited mental resources on a subset of the 

available information and can cause them to overweight this information in their decision-making 

processes. See, e.g., Daniel Kahneman, Thinking 

Fast and Slow (2013); Susan Fiske & Shelley E. 

Taylor, Social Cognition: From Brains to Culture (3d 

ed. 2017). Moreover, for financial disclosures, 

research suggests that increasing signal salience is 

particularly helpful in reducing limited attention of 

individuals with lower education levels and 

financial literacy. See, e.g., Victor Stango & 

Jonathan Zinman, Limited and Varying Consumer 

Attention: Evidence from Shocks to the Salience of 

Bank Overdraft Fees, 27 Rev. of Fin. Stud. 990 

(2014). 

1261Existing research notes that individuals bear 

costs in absorbing information and that the ability 

of individuals to process information is not 

unbounded. See Richard Nisbett & Lee Ross, 

Human Inference: Strategies and Shortcomings of 

Social Judgment (1980); David Hirshleifer & Siew 

Hong Teoh, Limited Attention, Information 

Disclosure, and Financial Reporting, 36 J. Acct. & 

Econ. 337 (2003). 

1262See, e.g., John Hattie, Visible Learning: A 

Synthesis of Over 800 Meta-Analysis Related to 

Achievement (2008). 

1263See Izak Benbasat & Albert Dexter, An 

Investigation of the Effectiveness of Color and 

Graphical Information Presentation Under Varying 

Time Constraints, 10 MIS Q. 59 (1986). 

1264See infra section VIII.B.1.ii.b. for the 

discussion of Item 1602(a)(4), which would require 

that the prospectus cover page include a simplified 

dilution table depicting the estimated remaining net 

tangible book value, as adjusted, per share at 

quartile intervals up to the maximum redemption 

threshold. 

modifications.1255 We have designed the 

rules with particular types of parties 

and transactions in mind and we have 

endeavored to define these parties and 

transactions in a way that is consistent 

with our understanding of current 

market usage. Overly narrow definitions 

will generally result in reduced costs 

and benefits. Conversely, overly broad 

definitions may introduce unintended 

costs to market participants without 

necessarily providing commensurate 

benefits, as they may be less applicable 

to settings we are not explicitly 

contemplating today. 

ii. SPAC IPOs and Other Registered 

Offerings 

At the SPAC IPO stage, there are 

information asymmetries between 

potential SPAC investors and the SPAC, 

making it challenging for investors to 

differentiate between SPACs and other 

investment options and to differentiate 

among SPACs. A SPAC sponsor looking 

to secure IPO investments may have 

incentives to obscure information that 

would be relevant to potential 

investors.1256 Information regarding the 

specifics of the SPAC that informs 

investors about the probability of 

completion of a de-SPAC transaction 

and the potential payoffs to the investor 

of such a transaction is important for 

investment decisions. For example, 

information about the SPAC sponsor or 

potential conflicts of interest of the 

SPAC sponsor may factor into investors’ 

decisions.1257 This information should 

also benefit investors attempting to 

differentiate between investments in 

alternative SPACs. 

a. Prospectus Cover Page, Summary, and 

Other Disclosures (Item 1602) 

Item 1602 requires a prospectus filed 

in connection with a SPAC’s IPO to 

disclose information in plain English on 

certain features unique to SPAC 

offerings and the potential associated 

risks, in addition to the information 

currently required by Item 501 of 

Regulation S–K and 17 CFR 229.503(a) 

(Item 503 of Regulation S–K), on the 

prospectus cover page and in the 

prospectus summary, as discussed 

above.1258 On the cover page, SPACs 

will be required to disclose, among 

other information: the proposed 

timeline of the SPAC to consummate a 

de-SPAC transaction; redemption terms; 

compensation (including securities 

issued to certain SPAC insiders); any 

actual or potential conflict of interest of 

the SPAC sponsor, its affiliates, or 

promoters; and a tabular disclosure of 

net tangible book value per share, as 

adjusted, for various redemption levels. 

In the prospectus summary, SPACs will 

be required to disclose, among other 

information, the manner in which the 

SPAC will identify and evaluate 

potential business combination 

candidates, period of time in which the 

SPAC intends to consummate a deSPAC transaction and its plans in the 

event it does not consummate such a 

transaction within the time period 

including the timeline and potential 

extensions, the material terms of the 

trust or escrow account, plans to seek 

additional financing (and the impact on 

shareholders), and details on the impact 

of compensation and securities 

issuances on dilution. These additional 

disclosures are meant to reduce the 

information asymmetry between the 

SPAC and potential investors. These 

disclosures will provide enhanced 

information for investors to assess their 

investment and voting decisions and to 

differentiate between the SPAC and 

other investment options. 

We expect Item 1602 will also reduce 

SPAC investors’ information processing 

costs. Investors in SPACs vary in 

financial sophistication and ability to 

process the information provided in 

SPAC IPO prospectuses, and the 

potential benefits may accrue more to 

investors that are less financially 

sophisticated. Specifically, because 

investors are likely to allocate their 

attention selectively,1259 requiring 

disclosure regarding important features 

and associated risks of SPAC 

investments on the prospectus cover 

page and in the prospectus summary 

will increase the likelihood that 

investors focus on the salient 

information by making it more 

noticeable and easier to parse.1260 In 

addition, the new disclosures in the 

prospectus summary may further reduce 

information processing costs by 

providing information about important 

SPAC features in plain English and in 

a concise format.1261

Item 1602(b)(6) will require tabular 

disclosure in the prospectus summary 

regarding the nature and amount of the 

compensation received or to be received 

by, as well as the amount of securities 

issued or to be issued to, the SPAC 

sponsor, its affiliates, and promoters 

separately, and the extent to which this 

may result in a material dilution of the 

purchasers’ equity interests. There is 

empirical evidence that visualization 

improves individuals’ perception of 

information.1262 For example, one 

experimental study shows that tabular 

reports can lead to better decisionmaking.1263 Because information about 

compensation received by and securities 

issued to SPAC sponsors and others 

may be important to SPAC investor 

decision-making, the tabular format of 

these required disclosures may help 

those investors (especially those that are 

less financially sophisticated) more 

easily process the implications of such 

compensation or securities issuances 

thereby potentially improving their 

investment decisions.1264

More broadly, Item 1602 will 

standardize these disclosures across all 

registration statements filed for SPAC 

IPOs, which may make it less costly for 

investors to compare terms across 

offerings and thereby promote better 

investment decisions to the extent these 

lower costs facilitate broader or more 

comprehensive analysis. 

Finally, to the extent the additional 

disclosures on the cover page and in the 

prospectus summary would increase 

investors’ awareness of SPAC sponsors’ 

incentives and potential conflicts of 

interest, they may have an incremental 

disciplining effect on SPAC sponsors’ 

behavior. For example, if SPAC 


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14272 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1265Letters from ABA, Loeb & Loeb, Ropes & 

Gray, Vinson & Elkins. See supra note 325 and 

accompanying text. 

1266A similar concern was raised by a letter from 

Vinson & Elkins. 

1267 In this section and throughout the Economic 

Analysis, references to dilution of SPAC investor 

interests refer to the dilutive effects on nonredeeming public shareholders, unless otherwise 

specified. 

1268Based on staff review, many SPACs set 

maximum redemption thresholds to maintain a 

minimum of $5,000,000 net tangible assets to avoid 

meeting the definition of a ‘‘penny stock’’ in 17 CFR 

240.3a51–1(g)(1). 

sponsors face greater scrutiny from 

investors, they may take additional care 

in finding and negotiating terms with 

various parties or take steps to mitigate 

the extent of any conflict of interests 

they will have to disclose. 

The additional required disclosures 

on the prospectus cover page and in the 

prospectus summary may increase 

compliance costs for SPACs to the 

extent that they will need to provide 

more information in their IPO 

prospectuses than they currently 

provide. We believe that SPACs are 

likely to have this information readily 

available. In addition, based on the 

experience of the Commission staff 

reviewing current SPAC filings, SPACs 

often already disclose some of this 

information, such as the time frame for 

the SPAC to consummate a de-SPAC 

transaction. Thus, we expect that the 

additional compliance costs resulting 

from these new items will not be 

significant. 

Investors may also experience 

additional economic costs from these 

new disclosures. In particular, it is 

possible that, by requiring more items to 

be added to the cover page and the 

prospectus summary, the salience of the 

current required disclosures on the 

cover page and in the prospectus 

summary may be reduced because they 

will have to compete with the new 

required disclosures for investors’ 

attention, a concern voiced by some 

commenters.1265 In addition, because 

Item 501(b) of Regulation S–K limits the 

information on the outside cover page to 

one page, it is possible that, under 

certain facts and circumstances, the 

amount of information required to be 

included could reduce the readability of 

the cover page. As a result, some 

investors may pay less attention to the 

cover page as a whole. Conversely, it is 

possible that investors may overweigh 

the salience of certain disclosures of 

potential outcomes, such as tentative 

plans to seek additional financing, 

potentially assuming them to be 

statements of greater certainty than 

intended.1266 However, this potential 

cost could be mitigated by firms 

providing clarity as to their assumptions 

and expectations regarding these 

disclosures. 

b. Dilution (Item 1602(a)(4) and (c)) 

SPAC investors may experience 

dilution from various transactions by a 

number of parties at various stages of a 

SPAC’s lifecycle, and understanding 

these potential dilutive impacts is 

important for investment and other 

decisions.1267 As an example of such a 

source of dilution, in different 

transactions over the life cycle of the 

SPAC, there may be variations in the 

amount of consideration paid in 

exchange for shares of the SPAC that 

will cause dilutive or anti-dilutive 

effects. One specific example of such 

variations involves the SPAC sponsors’ 

‘‘promote,’’ which is typically obtained 

at a nominal value (e.g., $25,000, which 

depending on specific facts and 

circumstances could result in a per 

share purchase price of several cents) 

compared to the SPAC IPO purchase 

price (typically $10 per share). SPAC 

IPO shares are also commonly bundled 

with warrants and rights, resulting in 

the potential future impacts on net 

tangible book value per share, which 

may be dilutive or anti-dilutive of net 

tangible book value per share depending 

on whether the exercise price exceeds 

net tangible book value per share at the 

time. 

The impact of dilution is further 

magnified by a common feature in many 

SPACs whereby public shareholders 

may redeem their shares before the deSPAC transaction and have their 

original investment returned plus a prorata amount of earnings (typically 

interest) accrued on the original 

investment proceeds held in the trust 

account. Following these redemptions, 

the non-redeeming IPO investors will 

own a relatively smaller portion of the 

SPAC relative to the portion owned by 

the SPAC sponsor (SPAC sponsor shares 

are typically not redeemable). This 

change in the relative portion of shares 

generally has a dilutive effect because 

the IPO investors often contribute more 

per share to net tangible book value 

(typically $10/share) than do SPAC 

sponsors (typically several cents per 

share, as mentioned above). 

To put the effects of redemption in 

context, we present the historical 

redemption levels below in Figure 2. 

Figure 2 presents the average realized 

redemptions from de-SPAC transactions 

between 2010 and 2022. As shown in 

Figure 2, typically just over half of the 

public shareholders opt to redeem their 

shares on average before the de-SPAC 

transaction (the average redemption 

level for de-SPACs from 2010 to 2022 

was 55% and the median was 65%), but 

that the level of redemptions is not 

consistent over time. For example, in 

2022 the average redemption level was 

85%, whereas the average in 2020 and 

2021 was 38% and 45%, respectively. 

This time-series variation in average 

redemption rates is not a result of 

variation in the average maximum 

redemption rate, which has remained 

relatively steady at just above 90% since 

2015.1268


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Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14273 

1269See supra section II.D. 

1270 Id. 

1271We note that while this example suggests the 

redemptions resulted in dilution as measured by 

net tangible book value per share, as adjusted, the 

resultant concentration of ownership may be seen 

by the non-redeeming shareholders as beneficial. 

1272See supra section II.D. 

1273 Id. 

Understanding the sources and extent 

of dilution, including the impact of 

potential redemptions, is important for 

investors to make informed decisions 

and efficiently allocate capital. As 

discussed above, the final rules require 

new disclosures about the sources and 

extent of expected dilution, which we 

expect will reduce the information 

asymmetry between the various SPAC 

participants by providing information 

that investors can use to form their 

expectations about the investment value 

of a SPAC.1269 Further, we are requiring 

disclosures that demonstrate the 

changing effect on dilution that various 

levels of redemptions might have.1270

The dilution disclosures in Item 

1602(a)(4) and (c) require measuring 

dilution using net tangible book value 

per share, adjusted as if the offering 

(and assumed redemption levels) have 

occurred and giving effect to material 

probable or consummated transactions 

(other than the de-SPAC transaction 

itself). Net tangible book value per 

share, as adjusted, captures effects from 

changes in net tangible book value, as 

adjusted, in the numerator (for example, 

returning cash to redeeming 

shareholders or other transactions that 

change the amount of assets held in the 

SPAC trust account), and/or the number 

of shares outstanding in the 

denominator (for example, redemptions 

of shares or other transactions that 

change the total shares outstanding). 

As a simple illustrative example of 

how net tangible book value per share, 

as adjusted, reflects various dilutive 

effects, a hypothetical SPAC might 

conduct an IPO at $10/share, and sell 80 

shares, resulting in $800 in the trust 

account. The SPAC sponsor might 

receive promote shares equal to 25% of 

the IPO shares sold, or 20 shares, 

bringing the total shares outstanding to 

100 (for simplicity, we omit the typical 

nominal amount SPAC sponsors often 

pay for their promote). Assuming no 

other expenses, the net tangible book 

value per share, as adjusted, in this 

simplified hypothetical would be $800/ 

100 shares or $8/share. In this 

hypothetical example, if 75% of public 

shareholders, representing 60 total 

shares, were to redeem their shares for 

$10/share, then $600 would be removed 

from the trust account and paid to those 

redeeming shareholders, and the SPAC 

would be left with $200 in the trust 

account, 20 shares owned by the public 

shareholders, and 20 shares owned by 

the sponsor. In this case, the net 

tangible book value per share, as 

adjusted, would be $200/40 or $5/share. 

This $5/share value can be thought of as 

reflecting that, of the $10/share invested 

by public investors in the IPO, only half 

remains to be invested in the target. It 

can also be seen to reflect the fact that 

the SPAC sponsor and the nonredeeming public investors now have an 

equal ownership (where initially there 

was a 4:1 ownership ratio), and the 

SPAC sponsor owns half of the 

remaining shares.1271

At the SPAC IPO stage, we expect that 

the tabular disclosure of net tangible 

book value per share, as adjusted, under 

Item 1602(a)(4) and (c) typically may 

include fewer sources of dilution that 

factor into such calculation as compared 

to the number of sources of dilution that 

factor into tabular disclosure of 

value.1272 While many SPACs adopt a 

standard structure and set of governing 

terms, and we expect the sources of 

dilution to be broadly similar across 

SPACs at the IPO stage, we expect the 

final rules will enable investors to better 

differentiate the SPAC from other 

investment opportunities and, where 

they exist, identify differences among 

individual SPACs. 

Specifically, Item 1602(a)(4) requires 

registration statements on Form S–1 or 

Form F–1 filed by SPACs, including for 

an IPO, to include on the cover page a 

tabular disclosure of net tangible book 

value per share, as adjusted, as of the 

most recent balance sheet date at 

quartile intervals based on the 

percentages of the maximum 

redemption threshold, and the 

difference between this value and the 

offering price.1273 This net tangible book 

value measure must be adjusted ‘‘as if’’ 

the offering and assumed redemption 

levels, under Item 1602(a)(4), have 

occurred and to give effect to material 

probable or consummated transactions 

(other than the completion of the deSPAC transaction itself). 


khammond on DSKJM1Z7X2PROD with RULES2ER26FE24.001</GPH>

Figure 2. Realized Redem tions at de-SP Aca 

Average Realized Redemption 

100% V, 

QJ 90% .... 

ro 80% ..r:: 

V') 70% ~ 

.0 60% ro 

E 50% - QJ 

QJ 40% "O 

QJ 30% a:: 

'+- 20% 0 

?fi;. 10% 

0% 

~ ~ ~<o ~ ~ ~ a,<::> Cl,..,, a,'\- ~ ~ ~ ~ ~ ~ ~ 1,<::> 1,<::> t;;:f~ 

~~ ~ 

Year 

a The redemption realizations are based on the sample of SPA Cs identified in Table 2. 
14274 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1274See supra section II.D for a more detailed 

description of the disclosure requirements. 

1275Some commenters raised this issue. See, e.g., 

letter from Loeb & Loeb. See supra note 245 and 

accompanying text. With regard to outstanding 

share information, see, e.g., 17 CFR 210.5–02 (Rule 

5–02 of Regulation S–X) (requiring disclosure of the 

title of each class of stock, the number authorized, 

the number outstanding, and the dollar amount 

thereof) and Item 11(e) of Form S–1 (requiring 

financial statements that meet the requirements of 

Regulation S–X). 

1276A similar concern was raised by a 

commenter. See letter from White & Case. 

1277See Klausner, Ohlrogge, & Ruan, supra note 

30 (finding that ‘‘SPAC shareholders bear all costs’’ 

associated with the dilution of cash associated with 

the SPAC structure and redemptions, based on 

empirical analysis of post-merger performance 

using the sample of de-SPAC transactions occurring 

between Jan. 2019 and June 2020). 

1278See Gahng, Ritter & Zhang, supra note 30; 

Klausner, Ohlrogge, & Ruan, supra note 30. 

1279See Hattie, supra note 1262; Benbasat & 

Dexter, supra note 1263. 

1280See supra note 221. 

1281 Id. SPAC IPO registration filings currently 

include dilution disclosures, and these disclosures 

typically present dilution given 100% redemption. 

1282See, e.g., letters from Bullet Point Network, 

CII, Consumer Federation. 

1283Letter from Consumer Federation. 

1284See Klausner, Ohlrogge & Ruan, supra note 

18. 

Item 1602(a)(3) also requires a further 

cover page disclosure of whether the 

compensation or issuance of securities 

described in Item 1602(a)(3) may result 

in material dilution of the purchasers’ 

equity interests. Item 1602(b)(6) requires 

in the prospectus summary similar 

disclosure to that of Item 1602(a)(3) but 

specifies that the registrant should 

describe the extent (rather than 

‘‘whether,’’ as required in Item 

1602(a)(3)) to which the associated 

compensation or issuance of securities 

may result in material dilution of the 

purchasers’ equity interests. 

Item 1602(c) requires that registered 

offerings by SPACs (other than de-SPAC 

transactions) provide a description of 

each material potential source of future 

dilution following the registered 

offering (e.g., a SPAC’s IPO). The item 

also requires tabular disclosure for the 

same quartile intervals as in Item 

1602(a)(4) of the net tangible book value 

per share, as adjusted, and the natures 

and amounts of dilution used to 

determine the values in the tabular 

disclosure, as well as other information 

necessary to understand the disclosure, 

among other things.1274 These new 

disclosures will provide investors with 

more detailed information on the 

potential sources of dilution which may 

better enable them to form expectations 

regarding the future value of their 

securities, including their shares should 

they opt not to redeem. 

We expect these dilution disclosures 

at the SPAC IPO stage will facilitate 

investor differentiation between SPACs 

as an investment and other non-SPAC 

investments by highlighting the sources 

of potential dilution and demonstrating 

their effects for investors to incorporate 

into their investment decisions. While 

some of this information is available 

elsewhere as required by existing 

disclosures (e.g., outstanding share 

information),1275 these dilution 

disclosures centralize and standardize 

that information, making it more salient 

and readily available for investors to 

understand the material differences in a 

SPAC in contrast with other 

investments. Similarly, we expect the 

additional detail of potential sources of 

dilution and tabular disclosure of net 

tangible book value per share, as 

adjusted, to provide relevant 

comparison information to investors 

seeking to differentiate between SPACs. 

Together, we expect this information 

will help investors to better understand 

the effects of dilution on their 

investments and ultimately to make 

better-informed investment decisions. 

We acknowledge that it is possible the 

dilution disclosures could be 

interpreted by investors as conveying 

more certainty about the sources or 

effects of dilution (or lack or omission 

thereof, where those sources are not 

deemed probable) than is intended by 

the SPAC.1276 However, the requirement 

in Item 1602(c) that the SPAC include 

a ‘‘description of the model, methods, 

assumptions, estimates, and parameters 

necessary to understand the tabular 

disclosure’’ should mitigate this 

possibility, and provide investors 

sufficient context to fully understand 

the disclosure’s underlying assumptions 

and limitations they impose. 

We expect the dilution disclosures at 

the IPO stage to provide valuable 

information to investors, both to 

compare between SPAC IPOs, and as a 

baseline against which they can 

compare the de-SPAC dilution 

disclosures, if and when a de-SPAC 

transaction is proposed. We expect this 

dilution disclosure to be especially 

informative for SPAC investors who 

remain investors in the combined 

company, as historically they have been 

greatly impacted by the abovementioned dilution effects.1277 Further, 

if investors do not understand the full 

extent of the dilution, it may not be 

fully reflected in market prices, and 

thus we expect that requiring clear and 

concise dilution disclosures will 

ameliorate this potential mispricing 

(especially so for potential warrants or 

other derivative securities) and improve 

overall allocative efficiency.1278

Given the empirical evidence that 

visualization improves individuals’ 

perception of information 1279 and that 

any dilution caused by redemption may 

have an adverse effect on investors who 

choose not to redeem, we expect that 

the tabular format of these disclosures 

will help investors (especially those that 

are less financially sophisticated) more 

easily process the financial implications 

of dilution and consequently improve 

their investment decisions. 

Moreover, the required dilution 

disclosure should provide prospective 

SPAC investors with information (with 

the aforementioned benefits of the 

tabular format) that more accurately 

represents the dilution that they might 

experience if they invest in the SPAC, 

as compared to current Item 506 

disclosures with regard to the effect of 

potential redemptions.1280 SPACs 

currently disclose the potential dilution 

pursuant to Item 506, and commonly 

focus solely on a single maximum 

redemption scenario.1281 This single 

threshold may be less useful to investors 

than the new tabular presentation of 

quartile intervals of redemption levels 

because the actual redemptions in 

connection with a de-SPAC transaction 

rarely reach the maximum allowable 

amount. Commenters largely agreed 

with this assessment,1282 with one 

commenter noting that ‘‘more detailed 

information on the potential impact of 

dilution on the value of SPAC shares 

could help investors better understand 

the various sources of dilution and the 

extent to which their investments might 

drop in value’’ and that this information 

could ‘‘factor into their decision 

making.’’ 1283

The reasoning that a tabular 

disclosure at multiple levels of 

redemption will better inform 

expectations of the ultimate dilution is 

supported by the evidence in Figure 2, 

which demonstrates that while the 

maximum redemption level has been 

very stable over time, the actual 

redemption levels have been typically 

far below the maximum threshold. The 

final rules will provide investors with 

more granular information about 

potential dilution across multiple 

redemption levels than previously 

required, which should provide 

information more congruent with the 

observed variation in dilution—such as 

that shown by the variation from one 

year to another of average realized 

redemption percentages in Figure 2. 

This, in turn, should allow investors to 

better anticipate the effects of such 

dilution on future returns to these 

investors from their investment and 

better inform their investment decisionmaking.1284


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1285Letter from White & Case. 

1286For a detailed discussion of certain potential 

sources of dilution and the calculation of net 

tangible book value per share, as adjusted, see supra 

section II.D.3. We note that many of these sources 

of dilution captured by net tangible book value per 

share, as adjusted, follow treatment under GAAP, 

thus the cost of calculating them is expected to be 

low, and in many cases required otherwise as part 

of the SPAC financial disclosures. 

1287Several commenters similarly expressed the 

view that Item 506 net tangible book value is less 

relevant to SPAC investors. See, e.g., letter from 

White & Case (stating that the current net tangible 

book value calculation according to U.S. GAAP 

‘‘produces a result that is not practically relevant 

to prospective investors in the public shares 

whatsoever.’’). 

1288The information acquisition costs mentioned 

would entail gathering, processing, and 

incorporating the information from the Item 506 

dilution disclosure into investors’ existing 

information and decisions. 

1289Additionally, Item 1602(a)(5) and (b)(7) will 

require similar conflict of interest disclosures to be 

displayed prominently on the prospectus cover 

page and summary, respectively. We expect this 

prominence will further heighten the benefits 

discussed in this section, while incurring limited 

additional compliance cost, as the information is 

largely already disclosed elsewhere in Item 1603. 

1290See supra section II.B for more information 

about current disclosure requirements. 

1291Academic literature provides some evidence 

that characteristics of a SPAC sponsor, such as 

Continued 

The disclosures may not include some 

dilution effects in some SPAC 

structures. For example, as one 

commenter explained, ‘‘some de-SPAC 

transactions are structured such that 

certain funding mechanisms, such as 

backstop, forward purchase or PIPE 

arrangements, apply only in the event of 

certain redemption thresholds.’’ 1285 We 

agree that there are significant 

intricacies involved in SPAC structures 

that are not known at the time of the 

SPAC IPO, and that those intricacies can 

impact the extent and patterns of 

dilution faced by non-redeeming 

shareholders. However, we believe there 

is still significant benefit to investors in 

a tabular presentation of dilution at 

different redemption levels for those 

sources of dilution that qualify as 

‘‘material probable or consummated 

transactions’’ as required under the final 

rule. Further, we note that the 

requirement for non-tabular disclosure 

of ‘‘each material potential source of 

future dilution’’ under Item 1602(c) may 

discuss a broader set of items than those 

that are included for purposes of 

calculating the tabular dilution measure, 

which could capture some of the 

complex effects explained by the 

commenter. Further, the final rules 

regarding dilution disclosures should 

provide more clarity into these complex 

effects than the current, more simplified 

disclosures pursuant to Item 506. 

We expect the final rules to reduce 

the costs to investors of conducting a 

dilution analysis. Without the tabular 

disclosures we are requiring, each 

shareholder wishing to understand the 

net effects of all the financing 

arrangements would have to calculate 

the various conditions themselves— 

which would require a full 

understanding of the terms and extents 

to which they interact—before being 

able to calculate the ultimate impact on 

dilution. Under the final rules, this 

process will be completed by the 

registrant, which already has the full 

understanding of conditions and terms 

and is best suited to conduct said 

calculations. 

The tabular format of the disclosures 

required by Item 1602(a)(4) and (c) will 

standardize the presentation of dilution 

information, which we expect will 

allow investors to analyze and compare 

more easily across SPACs. This increase 

in comparability should allow investors 

to compare the structural differences in 

dilution across SPACs which, to the 

extent relevant, should improve 

investment and capital allocation 

decisions. 

We expect the incremental 

compliance costs of the final dilution 

disclosure requirements at the SPAC 

IPO stage to be low for two reasons. 

First, registrants should already have 

the underlying information at their 

disposal and are therefore unlikely to 

incur significant additional costs to 

procure the necessary data (especially 

so since SPACs currently conduct a 

dilution calculation pursuant to Item 

506). 

Second, while Item 1602(a)(4) and (c) 

require registrants to account in the 

tabular disclosure for material probable 

sources of dilution and analyze several 

levels of redemption, which may require 

the services or input of quantitative 

specialists, the material probable 

sources of dilution are generally 

common across SPAC offerings and are 

generally well known and quantifiable. 

For example, sources of dilution at the 

IPO stage may include shareholder 

redemptions, SPAC sponsor 

compensation or ‘‘promote,’’ general 

and administrative expenses, 

underwriting fees, warrants, and other 

convertible securities.1286 Because of 

the consistency that a tabular format 

should promote, it is likely that a 

standard approach based on best 

practices will emerge, reducing 

registrant costs over time. 

We are also amending Form S–1 to no 

longer require Item 506 dilution 

disclosures for SPAC filings because the 

dilution disclosures required in Item 

1602 will replace those generic dilution 

disclosures. We believe these Item 506 

disclosures are less informative in the 

SPAC setting because, based on the 

Commission staff’s experience 

reviewing recent SPAC filings, SPACs 

classify the redeemable shares as 

temporary equity and exclude the cash 

raised from sales of those shares from 

the net tangible book value. This 

classification results in a dilution 

measure that excludes the vast majority 

of the SPAC’s cash holdings.1287 Thus, 

to the extent that current Item 506 

dilution calculations are duplicative of 

or less relevant to investment decisions 

than the dilution disclosures at the 

SPAC IPO required by the final rules, 

we expect the exclusion of the Item 506 

dilution disclosures will lessen 

information acquisition costs for 

investors without omitting important 

information.1288 Removing the Item 506 

disclosure requirement will also remove 

any disclosures costs that would have 

otherwise been incurred by registrants 

to produce those disclosures. 

c. Sponsors and Conflicts of Interest 

(Item 1603) 

At the SPAC IPO, new Item 1603(a) 

requires disclosure of certain 

information regarding a SPAC sponsor, 

its affiliates, and any promoters. This 

item requires, among other information, 

disclosures concerning the SPAC 

sponsor that include the following: 

name, form of organization, controlling 

persons, general character of business, 

and any arrangements or other 

agreements between the sponsor and the 

SPAC, its officers, directors, or affiliates 

with respect to determining whether to 

proceed with a de-SPAC transaction. 

This item also requires, among other 

information, disclosures about the SPAC 

sponsor, its affiliates, and promoters 

that include the following: their 

experience; material roles and 

responsibilities and the nature and 

amounts of their compensation and 

reimbursements and SPAC securities 

issued to them or to be issued to 

them.1289 To the extent that such 

disclosures are not already provided or 

are only partially provided, this new 

disclosure requirement will provide 

investors with additional information 

related to the experience and incentives 

(such as those due to characteristics of 

the compensation structure) for the 

SPAC sponsor and the other parties 

subject to these disclosures.1290

These disclosures about the SPAC 

sponsor, affiliates, and promoters may 

benefit investors by enabling them to 

better evaluate the circumstances that 

may impact their investment decision 

regarding a specific SPAC.1291 Given 


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experience or network, may be indicative of the 

SPAC’s ability to select and execute quality 

transactions. See, e.g., Chen Lin, Proposing Release, 

supra note 7, at 29462, n.30. Additionally, the 

staff’s general experience in observing the SPAC 

industry is that market participants often emphasize 

the skill or experience of the SPAC sponsor as 

important to the performance of the SPAC. 

1292See, e.g., supra notes 128 and 182. 

1293The common practice of a SPAC disclosing 

the presence of actual or potential conflicts of 

interest as a material risk factor predates SPACs 

listing on national exchanges. See Vijay M. Jog & 

Chengye Sun, Blank Check IPOs: A Home Run for 

Management (Working Paper, 2007), available at 

https://ssrn.com/abstract=1018242 (retrieved from 

SSRN Elsevier Database). This evidence suggests 

that most SPACs are generally aware of these actual 

or potential conflicts and would therefore only bear 

costs insofar as our new requirements would 

involve providing greater detail or specificity in the 

disclosures of conflicts of interest. 

1294There may be circumstances in which 

analysis of the law and governing documents of 

another company may be required to determine if 

a role at that company carries fiduciary obligations 

(such as those that might be commonly owed by a 

director of a corporation to stockholders depending 

upon applicable law). Examples of this include 

situations in which: (1) the role at the other 

company is an officer role, (2) the relationship with 

the other company is as a controlling stockholder, 

or (3) the role is one where the person is involved 

in governance of another company that is an 

alternative entity (such as a limited liability 

company or limited partnership). 

1295See supra section II.I. 

that investor expectations about the 

investment value of a SPAC incorporate 

expectations about the target search 

process and resulting de-SPAC 

transaction, investors assessments likely 

rely on specifics about the SPAC 

sponsor and SPAC compensation 

structure, which these disclosures 

should help ensure is available. 

Item 1603(a) may increase compliance 

costs at the SPAC IPO, mainly in the 

form of collecting, preparing, and filing 

the required information for disclosures 

about SPAC sponsors, their affiliates, 

and their promoters. While SPAC 

sponsors, their affiliates, and promoters 

may be external to the SPAC, we believe 

the close relationships typically 

between the SPAC and these parties will 

enable the SPAC to request the data 

required to be disclosed under the final 

rules with little additional difficulty 

compared to compiling the same 

information from persons internal to the 

SPAC, such as its officers and directors 

subject to the rules. Overall, we do not 

expect registrant compliance costs to be 

substantial because most of this 

information should be readily available; 

some of this information is currently 

being provided by SPACs, as suggested 

by commenters.1292 The extent to which 

this information is already being 

provided will affect both the additional 

compliance costs and marginal 

information benefits commensurately. 

The final rules will create a uniform and 

transparent framework across-the-board, 

maintaining a minimum floor standard 

should market practice change. 

Item 1603(b) requires disclosure of 

conflicts of interest between: (1) a SPAC 

sponsor or its affiliates; the SPAC’s 

officers, directors, or promoters; or the 

target company’s officers and directors 

and (2) the unaffiliated security holders 

of the SPAC. We expect these disclosure 

requirements will enable investors to 

better assess any actual or potential 

material conflict of interest, including 

any material conflict of interest that may 

arise in determining whether to proceed 

with a de-SPAC transaction and any 

material conflict of interest arising from 

the manner in which the SPAC 

compensates SPAC sponsors, officers, 

and directors or the manner in which 

SPAC sponsors compensate its officers 

and directors. Such enhanced ability to 

evaluate conflicts should benefit 

investors by enabling them to more 

accurately assess potential adverse 

selection risks, thereby facilitating better 

investment decisions. Further, 

information about conflicts of interest at 

the SPAC IPO stage should improve 

investors’ ability to differentiate 

investments in a SPAC from other 

investment opportunities and to 

differentiate one SPAC from another 

SPAC. 

With respect to the conflicts of 

interest disclosures required by Item 

1603(b), SPACs could bear direct costs 

associated with: (i) reviewing and 

preparing disclosures describing any 

such conflict of interest; (ii) developing 

and maintaining methods for tracking 

any such conflict of interest; and (iii) 

seeking legal or other advice. While the 

additional direct costs associated with 

Item 1603(b) disclosure requirements 

will depend on the extent to which a 

SPAC already provides this disclosure 

under current practices, we expect these 

costs to generally be low.1293 SPACs 

may also incur additional indirect costs 

if, although not required under 

Commission rules, they choose to take 

actions to mitigate any identified 

conflict of interest as a result of the final 

rule. For example, there may be cases 

where the SPAC would not have 

otherwise reviewed the conflicts or in 

cases where the SPAC would not have 

taken actions to mitigate any identified 

conflict of interest but for the 

requirement to publicly disclose the 

conflicts. However, to the extent a SPAC 

takes such mitigating actions, there will 

also be an indirect benefit to investors 

who will face less adverse selection 

costs as a result. 

Item 1603(c) requires disclosure about 

the fiduciary duties that a SPAC’s 

officers and directors owe to other 

companies. We expect that this 

disclosure will allow investors to assess 

the extent to which the officers and 

directors may face outside obligations, 

including the possibility that they might 

be compelled to act in the interest of 

another company that competes with 

the SPAC. The extent that a SPAC’s 

officers or directors owe fiduciary duties 

to other companies may also limit the 

attention that they are able to provide to 

the SPAC. We expect that these 

disclosures will benefit investors by 

allowing them to better assess the ability 

and incentives of the officers and 

directors managing the SPAC. 

We do not expect the disclosures of a 

SPAC officer’s or director’s fiduciary 

duties to other companies pursuant to 

Item 1603(c) will generally impose 

significant costs on SPACs. Officers and 

directors who manage the business of 

the SPAC should know their own roles 

in connection with other companies, so 

this information is likely known and 

easily accessible to the SPAC. 

Depending on specific facts and 

circumstances of a SPAC, however, the 

SPAC officers and directors may incur 

costs to comply with Item 1603(c) if 

they must research or seek the advice of 

counsel to determine whether a 

fiduciary relationship with another 

company exists. These costs may be 

minimal where little or no research or 

outside advice is required, such as in 

the absence of any other fiduciary 

relationships or when those 

relationships are already known. 

However, those costs are likely to 

increase as more research or outside 

advice is required.1294 These additional 

costs (and the corresponding benefits) 

will be mitigated to the extent a newly 

formed SPAC would have provided Item 

1603(c)-type disclosure even in the 

absence of the final rule. 

d. Structured Data Requirement (Item 

1610) 

Item 1610 requires all disclosures in 

Items 1601 through 1609 of Regulation 

S–K to be tagged in Inline XBRL.1295 We 

expect that this requirement will 

augment the informational benefits of 

the new disclosure requirements at the 

SPAC IPO stage by making them easier 

to retrieve, aggregate, compare, filter, 

and analyze. 

These final rules should be especially 

beneficial for investors differentiating 

between SPAC features, particularly due 

to the standardization of SPAC IPO 

disclosures, as specified in Items 1602 

and 1603. Together, we expect the 

adopted disclosure rules will facilitate 

investors’ ability to process more 


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1296See, e.g., Joung W. Kim, Jee-Hae Lim & Won 

Gyun No, The Effect of First Wave Mandatory XBRL 

Reporting Across the Financial Information 

Environment, 26 J. Info. Sys. 127 (2012) (finding 

evidence that ‘‘mandatory XBRL disclosure 

decreases information risk and information 

asymmetry in both general and uncertain 

information environments’’); Yuyun Huang, Jerry 

Parwada, Yuan George Shan & Joey (Wenling) Yang, 

Insider Profitability and Public Information: 

Evidence from the XBRL Mandate (working paper, 

Sept. 17, 2019, last revised May 28, 2020), available 

at https://ssrn.com/abstract=3455105 (retrieved 

from SSRN Elsevier database) (finding that XBRL 

levels the playing field between insiders and noninsiders, in line with the hypothesis that ‘‘the 

adoption of XBRL enhances the processing of 

financial information by investors and hence 

reduces information asymmetry’’). We do not 

expect these findings to materially differ with 

regards to Inline XBRL requirements. 

1297See, e.g., Jeff Zeyun, Hyun A. Hong, JeongBon Kim & Ji Woo Ryou, Information Processing 

Costs and Corporate Tax Avoidance: Evidence from 

the SEC’s XBRL Mandate, 40 J. Acct. & Pub. Policy 

106822 (2021) (finding XBRL reporting decreases 

likelihood of firm tax avoidance because ‘‘XBRL 

reporting reduces the cost of IRS monitoring in 

terms of information processing, which dampens 

managerial incentives to engage in tax avoidance 

behavior’’); Paul A. Griffin, Hyun A. Hong, JeonBon Kim & Jee-Hae Lim, The SEC’s XBRL Mandate 

and Credit Risk: Evidence on a Link between Credit 

Default Swap Pricing and XBRL Disclosure (Am. 

Acct. Assoc. Annual Meeting conference paper, 

Aug. 6, 2014) available at https://

www.business.kaist.edu/_prog/seminar/ 

download.php?file=seminar_1_

1478854039.pdf&ori_filename=paper.pdf&filedr=kr 

(finding XBRL reporting enables better outside 

monitoring of firms by creditors, leading to a 

reduction in firm default risk); Elizabeth 

Blankespoor, The Impact of Information Processing 

Costs on Firm Disclosure Choice: Evidence from the 

XBRL Mandate, 57 J. Acct. Research 919 (2019), 

available at https://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=3463897 (retrieved from 

SSRN Elsevier database) (finding ‘‘firms increase 

their quantitative footnote disclosures upon 

implementation of XBRL detailed tagging 

requirements designed to reduce information users’ 

processing costs,’’ and ‘‘both regulatory and nonregulatory market participants play a role in 

monitoring firm disclosures,’’ suggesting ‘‘that the 

processing costs of market participants can be 

significant enough to impact firms’ disclosure 

decisions’’). While these studies looked at operating 

company financial statement disclosures rather 

than SPAC disclosures specifically, given the 

general similarity in disclosure settings, the 

findings of these studies suggest that the Inline 

XBRL requirements in the final rules could directly 

or indirectly (i.e., through information 

intermediaries, such as financial media, data 

aggregators, and academic researchers) provide 

investors in SPACs with similar benefits. 1298See, e.g., Nina Trentmann, Companies Adjust 

Earnings for Covid–19 Costs, But Are They Still a 

One-Time Expense?, Wall St. J., Sept. 24, 2020 

(citing an XBRL research software provider as a 

source for the analysis described in the article); 

Bloomberg Lists BSE XBRL Data, XBRL.ORG (2018); 

Rani Hoitash & Udi Hoitash, Measuring Accounting 

Reporting Complexity with XBRL, 93 Acct. Rev. 259 

(2018). 

1299For example, Item 1603 consists largely of 

narrative disclosure regarding the SPAC sponsor 

but also includes quantitative disclosure regarding 

the compensation paid (or to be paid) to the SPAC 

sponsor, its affiliates, and any promoters. 

1300See supra section II.I. 

1301See 17 CFR 229.601(b)(101)(i)(A). 

1302An AICPA survey of 1,032 reporting 

companies with $75 million or less in market 

capitalization in 2018 found, for fully outsourced 

XBRL creation and filing, an average cost of $5,850 

per year, a median cost of $2,500 per year, and a 

maximum cost of $51,500 per year. This 

represented a 45% decline in average cost and a 

69% decline in median cost since 2014. See AICPA, 

XBRL Costs for Small Companies Have Declined 

45% Since 2014 (2018), available at https://

us.aicpa.org/content/dam/aicpa/interestareas/frc/ 

accountingfinancialreporting/xbrl/ 

downloadabledocuments/xbrl-costs-for-smallcompanies.pdf; Letter from Nasdaq, Inc., Mar. 21, 

2019, to the Request for Comment on Earnings 

Releases and Quarterly Reports; Release No. 33– 

10588 (Dec. 18, 2018) [83 FR 65601 (Dec. 21, 2018)] 

(stating that a 2018 Nasdaq survey of 151 listed 

registrants found an average XBRL compliance cost 

of $20,000 per quarter, a median XBRL compliance 

cost of $7,500 per quarter, and a maximum XBRL 

compliance cost of $350,000 per quarter). 

1303See supra note 31 and accompanying text. 

information across a wider sample of 

SPAC IPOs (due to Items 1602 and 1603 

requiring SPAC specific information in 

a standardized format) at a lower 

relative cost (due to the tagging 

requirements in Item 1610). 

Research evidence suggests that XBRL 

requirements for public operating 

company financial statement 

disclosures mitigate information 

asymmetry by reducing information 

processing costs, thereby making the 

disclosures easier to access and 

analyze.1296 Reductions in information 

processing costs may facilitate the 

monitoring of companies by external 

parties, and, as a result, influence 

companies’ behavior, including their 

disclosure choices.1297

In addition, we expect Inline XBRL 

will facilitate increased insight into the 

specialized SPAC IPO disclosures, and 

will allow for easier, less costly 

comparisons with other SPACs by 

providing additional functionality such 

as detailed filtering by criteria such as 

offering size, dilutive impact, or SPAC 

sponsor name.1298 Also, as with Inline 

XBRL tagging of financial statements 

and notes, the specialized SPAC 

disclosures will include tagged narrative 

discussions in addition to tagged 

quantitative values.1299 Tagging 

narrative disclosures in the context of 

SPAC IPOs should facilitate beneficial 

analyses, such as automatic comparison 

or redlining of these disclosures against 

those provided by other SPACs or 

targeted assessments of specific SPAC 

specialized disclosures. For example, 

without Inline XBRL tagging, using the 

search term ‘‘warrant’’ to search through 

the text of all SPAC IPO registration 

statements to determine how many such 

offerings disclosed the inclusion of 

warrants as part of the SPAC sponsor 

‘‘promote’’ could return many narrative 

disclosures outside of that discussion 

(e.g., disclosures related to warrants 

offered to investors as part of the IPO). 

We expect the requirement to tag 

SPAC-specific disclosures in Inline 

XBRL will impose compliance costs on 

SPACs at an earlier stage of their life 

cycle than under the current baseline. 

Currently, SPACs are required to tag 

financial statements (including notes) 

and cover page information in certain 

registration statements and periodic 

reports in Inline XBRL.1300 However, 

SPACs are currently not obligated to tag 

any disclosures until they file their first 

post-IPO periodic report on Form 10–Q, 

Form 20–F, or Form 40–F.1301

Various preparation solutions have 

been developed and used by operating 

companies to fulfill XBRL tagging 

requirements, and some evidence 

suggests that XBRL compliance costs 

have decreased over time for smaller 

companies.1302 Generally, registrants 

without prior experience using such 

compliance solutions often incur initial 

implementation costs associated with 

Inline XBRL tagging, such as costs 

associated with licensing Inline XBRL 

compliance software and training staff 

to use the software to tag the 

disclosures. Because SPACs are shell 

companies, which have no or nominal 

operations, it may be more likely that 

SPACs outsource their tagging 

obligations to a third-party service 

provider. In such cases, a SPAC would 

avoid the aforementioned software 

licensing and training costs but incur 

the costs of retaining such third-party 

services. 

iii. De-SPAC Transactions 

Given the hybrid nature of the deSPAC transaction (i.e., that it contains 

elements of both an IPO and an M&A 

transaction), the de-SPAC transaction 

involves information asymmetries and 

incentives that are different from those 

present at the SPAC IPO stage or in 

traditional IPOs. The de-SPAC 

transaction represents the introduction 

of the target company to the SPAC 

shareholders, who typically vote on 

approval of the de-SPAC transaction 

and decide whether to redeem their 

shares.1303 We expect both voting and 

redemption decisions will benefit from 

the informational improvements and 

liability protections arising from the 

final rules. 

a. Sponsors and Conflicts of Interest 

(Item 1603) 

As discussed above, Item 1603 

includes, among other things, disclosure 

of details about the SPAC sponsor, its 

affiliates, and promotors, and conflicts 

of interest generally between those 

parties and SPAC shareholders. Similar 

to the final rule requirements that apply 


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1304See supra section VIII.B.1.ii. 

1305 Id. 

1306See supra section II.E for more information 

about the regulatory baseline. The prospectus is a 

part of the registration statement. 

1307See discussion in supra section VIII.B.1.ii.b. 

Also note that Item 1604(c) is discussed separately 

in the following section. 

1308See supra notes 1262 and 1263 and 

accompanying text. 1309See supra section II.C for more detail on the 

specifics of the required conflict of interest 

disclosures. 1310See supra note 1265 and accompanying text. 

at the SPAC IPO stage discussed above, 

at the de-SPAC transaction stage, Item 

1604(a)(4) and (b)(3) require certain 

conflict of interest disclosures to be 

displayed prominently on the 

prospectus outside front cover page and 

in the summary. 

We expect the benefits of Item 1603 

(and Item 1604(a)(4) and (b)(3)) in 

connection with disclosures at the deSPAC transaction stage on a proxy, 

information, or registration statement or 

on a Schedule TO to be largely the same 

as the effects of the same Item 1603 

disclosures made in connection with the 

SPAC IPO, as discussed above.1304

These benefits, however, may be 

incrementally greater insofar as the 

disclosures could also guide voting and 

redemption decisions at the de-SPAC 

transaction stage, which would not 

occur in connection with a SPAC 

IPO.1305 We similarly expect the costs of 

compliance with Item 1603 (and Item 

1604(a)(4) and (b)(3)) to be comparable 

at the de-SPAC transaction stage to the 

costs of compliance at the SPAC IPO 

stage, as discussed above. However, 

because application of Item 1603 (and 

Item 1604(a)(4) and (b)(3)) at the SPAC 

IPO stage results in SPACs already 

having prepared and disclosed much of 

the required information, the costs of 

updating those disclosures for evolved 

circumstances at the de-SPAC 

transaction stage should be lower. 

b. Prospectus Cover Page, Summary, 

and Other Disclosures (Item 1604) 

Currently, a de-SPAC transaction may 

be registered on a Form S–4 or Form F– 

4, and, to the extent that a de-SPAC 

registration statement must be filed due 

to the operation of Rule 145a, we expect 

that there will be additional registered 

de-SPAC transactions as a result of the 

final rules. Item 1604(a) and (b) require 

any prospectus at the de-SPAC 

transaction stage to include certain 

information about the de-SPAC 

transaction on the outside front cover 

page and in the prospectus summary, 

similar to the requirements of Item 1602 

at the SPAC IPO stage.1306 This includes 

disclosure on the cover page of, among 

other information: the determination, if 

any, of the board of directors (or similar 

governing body) of the SPAC disclosed 

in response to Item 1606(a) and, if 

applicable, that the SPAC or the SPAC 

sponsor received a report, opinion, or 

appraisal referred to in Item 1607(a); 

descriptions of certain material 

financing transactions; compensation 

received or to be received by the SPAC 

sponsor, its affiliates and promoters 

(including securities issued); and any 

actual or potential conflict of interest 

between specified parties of the SPAC 

and target on the one hand and 

unaffiliated security holders of the 

SPAC on the other hand. In the 

prospectus summary, SPACs will be 

required to include a brief description 

of, among other information: the 

background and material terms of the 

de-SPAC transaction; the determination, 

if any, of the board of directors (or 

similar governing body) of the SPAC 

disclosed in response to Item 1606(a) 

and any reports, opinions or appraisals 

referred to in Item 1607(a); any actual or 

potential material conflict of interest 

between specified parties of the SPAC 

and target on the one hand and 

unaffiliated security holders of the 

SPAC on the other hand; compensation 

received or to be received by the SPAC 

sponsor, its affiliates, and promoters 

(including securities issued) in tabular 

format and the impact of these 

compensation and securities issuances 

on dilution in narrative form; the 

material terms of certain financing 

transactions; and the redemption rights 

of security holders and the potential 

dilutive impact of redemptions on the 

value of the securities owned by nonredeeming shareholders. 

We expect that final Item 1604(a) and 

(b) will have similar potential direct 

benefits for investors as those we 

discussed for Item 1602 above—that is, 

the additional disclosures on the deSPAC transaction prospectus cover page 

and in the prospectus summary may 

increase the likelihood that investors 

pay attention to and process this 

information by making it more 

salient.1307 Additionally, the new 

disclosures in the de-SPAC transaction 

prospectus summary may reduce 

information-processing costs for 

investors, particularly less financially 

sophisticated investors, by providing 

certain SPAC-specific disclosures in a 

concise format. Moreover, as with Item 

1602(b)(6) at the IPO stage, Item 

1604(b)(4) requires tabular disclosure in 

the prospectus summary regarding the 

terms and amount of the compensation 

received or to be received by the SPAC 

sponsor, its affiliates, and promoters 

and the amount of securities issued or 

to be issued by the SPAC to the SPAC 

sponsor, its affiliates, and promoters 

and the price paid or to be paid for such 

securities in connection with the deSPAC transaction or any related 

financing transaction, and, outside of 

the table, the extent to which that 

compensation and securities issuance 

has resulted or may result in a material 

dilution of the equity interests of nonredeeming shareholders of the SPAC. 

Presenting this information in tabular 

format may further help reduce 

information-processing costs for some 

investors.1308 Additionally, Item 1604(a) 

and (b) standardize the required 

information across all registration 

statements filed for de-SPAC 

transactions, making it potentially easier 

and less costly for investors to compare 

terms across de-SPAC transactions by 

different SPACs. Overall, because of the 

aforementioned beneficial effects of 

increasing investors’ attention and 

reducing their information processing 

costs, we expect the additional 

disclosures on the prospectus cover 

page and in the prospectus summary 

will help improve the compounding of 

important information into investors’ 

investment decisions at a relatively 

lower cost. 

In addition to the direct benefits 

discussed above, certain information 

that Item 1604 requires registrants to 

disclose may benefit investors through 

incrementally improved SPAC 

governance. For example, the inclusion 

of disclosures regarding material 

potential or actual conflicts of interest 

could increase investors’ attention to 

such issues, allowing them to identify 

and focus in on those conflicts they 

deem potentially adverse to their own 

interests.1309 In turn, the disclosures 

may have an ex ante disciplining effect 

on SPAC sponsors and others whose 

conflicts must be disclosed that could 

mitigate the potential costs to investors 

of those conflicts of interests. 

The additional information that Item 

1604(a) and (b) require in the de-SPAC 

transaction prospectus may increase 

compliance costs for SPACs if it would 

result in SPACs needing to gather and 

disclose information they would not 

otherwise have provided in a de-SPAC 

transaction. Additionally, as with Item 

1602, it is possible that the disclosures 

required under Item 1604 could result 

in additional processing costs for 

investors.1310 However, to the extent 

that a SPAC may have otherwise 

intended to disclose information similar 

to that required under Item 1604, which 

based on staff review of existing filings 

is often the case, or where the SPAC has 


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1311We note that even when SPACs would have 

otherwise intended to disclose similar information, 

the final rules should still provide value to the 

extent they result in more consistent 

standardization than has, or would have, arisen 

organically. 

1312At this later stage, the SPAC likely has more 

information with which to estimate the number of 

shareholders it expects to redeem their shares, 

potentially allowing for more informative outcome 

choices in the tabular disclosure. 

1313 In this respect, Item 1604(c) tabular dilution 

disclosure should be similar to Item 1602(c) tabular 

dilution disclosure as, in order to quantify the 

source of dilution for purposes of the table, 

registrants should present it as an individual lineitem in the calculations in the table. 

1314See supra section VIII.B.ii.b. 

1315See supra note 221. 

1316The specific levels selected would be 

informative to the extent registrants choose 

redemption levels specific to their circumstances, 

rather than adopting fixed or industry standard 

ranges. 

1317See Hattie, supra note 1262; Benbasat & 

Dexter, supra note 1263. 

1318 If, as mentioned above (supra note 1316), 

registrants adopt industry standard redemption 

levels for the purposes of this disclosure, then the 

decrease in registrant-specific information will be 

concomitant with an increase in comparability due 

to the industry standard. 

this information readily available, these 

additional costs and benefits would be 

mitigated.1311

c. Dilution (Item 1604(a)(3), (b)(4), (5), 

and (6), (c)) 

By the time a SPAC finds a target 

company and prepares its de-SPAC 

transaction, many facts and 

circumstances that affect dilution and 

the financial position of the SPAC have 

changed, both when compared to the 

SPAC at its IPO stage as well as when 

compared to other SPACs. The result of 

this evolution is that, unlike at the 

SPAC IPO stage when most SPACs 

exhibit similar features, de-SPAC 

transactions are often more complex and 

idiosyncratic. By the time of the deSPAC transaction, many new sources of 

dilution are likely to have arisen. For 

example, a SPAC may determine a 

potential PIPE investment or potential 

change to a SPAC sponsor’s 

compensation or securities issued to a 

SPAC sponsor is a ‘‘material probable 

transaction.’’ Pursuant to Item 1604(c), 

in calculating dilution, a SPAC will be 

required to make adjustments to net 

tangible book value per share, as 

adjusted, to reflect such events. 

Item 1604(a)(3) requires the outside 

cover page of the prospectus at the deSPAC transaction stage to contain a 

statement as to whether certain 

compensation and securities issuances 

disclosed pursuant to this item may 

result in a material dilution of the 

equity interests of non-redeeming 

shareholders who hold the securities 

until the consummation of the de-SPAC 

transaction. Item 1604(b)(4) requires 

disclosure in the prospectus summary of 

the extent to which certain 

compensation and securities issuances 

have resulted or may result in a material 

dilution of the equity interests of nonredeeming shareholders of the SPAC. 

Item 1604(b)(5) requires disclosure of 

the dilutive impact on non-redeeming 

shareholders that any financing 

transactions associated with the deSPAC transaction may have. Item 

1604(b)(6) requires disclosure of the 

potential dilutive impact on nonredeeming shareholders of the rights of 

security holders to redeem their 

outstanding securities. 

Item 1604(c) requires tabular 

disclosure of the impact from dilutive 

sources on net tangible book value per 

share, as adjusted, at intervals 

representing selected potential 

redemption levels that may occur across 

a reasonably likely range of outcomes. 

Specifically, Item 1604(c) requires 

disclosure of the net tangible book value 

per share, as adjusted, as if the selected 

redemption levels have occurred and to 

give effect to, while excluding the deSPAC transaction itself, material 

probable or consummated transactions 

and other material effects on the SPAC’s 

net tangible book value per share, as 

adjusted, from the de-SPAC transaction. 

The requirement in Item 1604(c) to 

provide these disclosures across ‘‘a 

reasonably likely range of outcomes’’ 

instead of the fixed quartiles required in 

Item 1602(c) will allow registrants to 

account for facts and circumstances that 

are unique to each SPAC and allow for 

more customized disclosures that still 

conform to a consistent and comparable 

format.1312

The tabular disclosure in Item 1604(c) 

is also required to include separate 

quantification of the dilutive impact 

from each source of dilution, which will 

provide detailed disaggregated 

information on the various sources of 

dilution.1313 Lastly, Item 1604(c)(1) 

requires disclosure at each redemption 

level of the company valuation at or 

above which the potential dilution 

results in the amount of the nonredeeming shareholders’ interest per 

share being at least the initial public 

offering price per share of common 

stock. 

Generally, we expect Item 1604(c) to 

result in similar benefits and costs as 

those discussed above with regard to 

dilution disclosures at the SPAC IPO 

stage.1314 As the disclosure calculations 

in Item 1604(c) will likely include 

additional factors—such as ‘‘material 

probable transactions’’—that were not 

included in the SPAC IPO stage 

disclosures, we expect these disclosures 

at the de-SPAC transaction stage will be 

more informative for investor 

expectations about dilution. 

Consequently, our discussion below 

focuses on the novel aspects of dilution 

disclosures at the de-SPAC transaction 

stage (as compared to dilution 

disclosure at the IPO stage) and should 

be considered in addition to our 

discussion above of the costs and 

benefits of dilution information at the 

SPAC IPO stage. 

The dilution disclosure at redemption 

levels across a ‘‘reasonably likely range 

of outcomes’’ required in Item 1604(c) 

will provide investors with information 

that should more accurately represent 

the dilution that they might experience 

if they choose not to redeem their 

shares, as compared to current 

disclosures.1315 Further, the specific 

redemption levels registrants choose to 

include in the table should convey 

information about registrant 

expectations of redemption scenarios 

that should allow investors to better 

anticipate the effects of the dilution on 

their investment value.1316 In addition, 

as discussed above, we expect that the 

tabular format of this disclosure will 

further help investors (especially those 

that are less financially sophisticated) 

more easily process the financial 

implications of dilution.1317

Allowing registrants discretion to 

select ‘‘reasonably likely’’ redemption 

levels may impact the comparability of 

these disclosures across SPACs to the 

extent that the final rule results in tables 

with different numbers of chosen 

redemption scenarios or at different 

values or with differences in both 

respects. On the other hand, such 

allowance should result in registrants 

selecting redemption levels based on 

registrant-specific information (for 

example, if a PIPE investment has a firm 

commitment to buy if redemption 

thresholds are reached), which could 

result in disclosures that are more 

informative to investors. We expect the 

informational value of de-SPACtransaction-specific redemption 

sensitivity will offset the reduced direct 

comparability across SPACs.1318 Also, 

to the extent there is reduced direct 

comparability, we expect this will be 

mitigated by some investors using 

analytic techniques to infer dilution at 

redemption levels other than those 

selected by registrants. 

We expect some incremental 

compliance costs from Item 1604(c) for 

registrants in future de-SPAC 

transactions that did not already intend 

to provide disclosures similar in nature 


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1319See supra section VIII.B.1.ii.b. 

1320See supra section II.F.1 for information about 

the regulatory baseline. 

1321Redemption decisions by investors can have 

significant impacts on the dilution faced by nonredeeming shareholders. See supra sections 

VIII.B.1.ii.b and VIII.B.1.iii.c. 

1322This is also consistent with comments 

received. See supra note 352. 

1323Again, we note that even when SPACs would 

have otherwise intended to disclose similar 

information, the final rules should still provide 

value to the extent they result in more consistent 

standardization than has, or would have, arisen 

organically. 

1324 Given the data in Table 4, this would apply 

to most SPACs. 

to what is required by this item. Many 

of these incremental costs to registrants 

are similar to those at the SPAC IPO 

stage discussed above, such as the costs 

of aggregating data and employing 

quantitative expertise. Factors that 

mitigate those costs are also similar to 

those at the IPO stage discussed above, 

such as data availability and adoption of 

standard practices.1319 To the extent the 

multiple dilution disclosures at the deSPAC transaction stage capture more 

transactions and complexity than those 

at the IPO stage, we expect the 

associated costs to registrants to be 

relatively higher than those incurred by 

the SPAC at the IPO stage. However, we 

also expect these Item 1604 dilution 

disclosures will have greater 

informational value to investors at this 

later, more heterogeneous stage. 

d. Background, Material Terms, and 

Effects of the De-SPAC Transaction 

(Item 1605) 

Item 1605(a) through (c) of Regulation 

S–K require disclosure of the 

background of the de-SPAC transaction 

(e.g., description of any contacts, 

negotiations, transactions that have 

occurred), material terms of the deSPAC transaction, and effects of the deSPAC transaction and any related 

financing transactions. Item 1605(d) 

requires disclosure of any material 

interests in the de-SPAC transaction or 

any related financing transaction: (i) 

held by the SPAC sponsor or the SPAC’s 

officers or directors, including fiduciary 

or contractual obligations to other 

entities as well as any interest in, or 

affiliation with, the target company; or 

(ii) held by the target company’s officers 

or directors that consist of any interest 

in, or affiliation with, the SPAC sponsor 

or the SPAC.1320 These disclosures 

under Item 1605(a) through (d) should 

benefit investors by providing them 

with detailed information about the deSPAC transaction, thereby enabling 

them to make more informed 

investment decisions (including voting 

and redemption decisions, if allowed). 

For example, the required disclosure 

could allow investors to assess whether 

the de-SPAC transaction or any related 

financing transaction has been 

structured in a manner that would 

benefit the SPAC sponsor to the 

detriment of the other security holders 

of the SPAC. 

Item 1605(e) requires disclosure as to 

whether security holders are entitled to 

any redemption or appraisal rights, and 

if so, a summary of the redemption or 

appraisal rights. These disclosures 

should help investors to better 

understand their rights and assess the 

impact of any redemption or appraisal 

rights on a proposed de-SPAC 

transaction, including whether the 

existence of such rights might lead some 

investors to redeem their securities after 

voting in favor of a de-SPAC 

transaction.1321

Item 1605 could increase registrants’ 

compliance costs related to de-SPAC 

transactions. The magnitude of the 

incremental increase in these costs will 

depend on the amount of information 

that SPACs and target companies would 

have intended to disclose in connection 

with future de-SPAC transactions in the 

absence of the final rule. Based on staff 

experience of market practice and 

current disclosure requirements, we 

expect registrants to have already 

planned to disclose much of what is 

required by Item 1605(a), (b), (d), and 

(e).1322 The disclosures required by Item 

1605(c) are not common practice in the 

staff’s experience; thus, they may result 

in additional costs to registrants (for 

example, this disclosure may require 

additional legal advice and management 

time to gather and analyze information 

to assess the effects of the de-SPAC 

transaction). To the extent that 

registrants already intended to disclose 

information required by Item 1605 or 

have the information readily available, 

the incremental increase in these costs 

and benefits would be mitigated.1323

e. Board Determination About the DeSPAC Transaction (Item 1606) 

If the law of the jurisdiction in which 

the SPAC is organized requires its board 

of directors (or similar governing body) 

to determine whether the de-SPAC 

transaction is advisable and in the best 

interests of the SPAC and its 

shareholders, or otherwise make any 

comparable determination, Item 1606(a) 

requires disclosure of that 

determination. Item 1606(b) requires a 

discussion of the material factors 

considered in making the 

determination, including but not limited 

to, to the extent considered, the target 

company valuation, financial 

projections relied upon by the board of 

directors (or similar governing body) of 

the SPAC, and the terms of financing 

materially related to the de-SPAC 

transaction. Item 1606(c) through (e) 

require disclosure about the de-SPAC 

transaction, including whether a 

majority of unaffiliated security holders 

is required to approve the de-SPAC 

transaction, the involvement of any 

unaffiliated representative acting on 

behalf of unaffiliated security holders, 

whether the de-SPAC transaction was 

approved by a majority of the directors 

(or members of similar governing body) 

of the SPAC who are not employees of 

the SPAC, and if known after making 

reasonably inquiry, the reason behind 

any abstentions or votes against the 

transaction. 

Investors should benefit from the 

requirements of Item 1606(a) and (b) as 

disclosure thereunder will reduce 

information asymmetry between the 

SPAC investors and the SPAC by 

providing information about the board’s 

determination and decision making 

regarding the de-SPAC transaction. 

Information disclosed under Item 

1606(c) through (e) will benefit 

investors by providing further details 

about the de-SPAC transaction 

bargaining and voting process, 

including important information 

regarding potential dissenting director 

votes, which could potentially mitigate 

conflicts of interest. These disclosures 

provide information that collectively 

should allow investors to understand 

the multiple factors undergirding the 

decisions of the board, thereby 

improving investment decision-making 

by investors in connection with the deSPAC transaction. 

We expect Item 1606(a) and (b) will 

result in limited increases in 

compliance costs for registrants because 

this information should be readily 

available to the SPAC as the directors 

are likely to have already assembled the 

information necessary to provide these 

disclosures in carrying out their 

fiduciary duties to the SPAC, and the 

disclosure is only required if the law of 

the jurisdiction in which the SPAC is 

organized requires such board 

determination.1324 Similarly, we expect 

the compliance costs of Item 1606(c) 

through (e) to be minimal as, again, the 

information is likely readily available, 

for example because it is recorded in 

board meeting minutes or found in 

governance documents. To the extent 

that registrants already intended to 

disclose some of the information 

required by Item 1606 or have this 

information readily available, the 


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1325Letter from Freshfields. 

1326 Id. The commenter did not provide reasoning 

nor evidence for the conclusion that the final rule 

would inhibit private discussion among board 

members, and we are not aware of any economic 

cost imposed by the final rule that would affect 

such private conversations. 

1327See supra section II.G.12. 

1328The Item 1607(c) requirements to file reports, 

opinions, or appraisals as exhibits to the schedule 

or to include them in the schedule if the schedule 

does not have filing requirements are relevant to 

Schedules TO, 14A and 14C. 

1329With respect to affiliates of the SPAC 

sponsor, we do not expect there will be 

information-gathering costs in addition to those 

already incurred in connection with Item 1603(a)(7) 

(regarding indirect material interests in the SPAC 

sponsor). We discuss those costs above in 

connection with the discussion of Item 1603, supra 

section VIII.B.1.ii.c. 

incremental increase in the registrant’s 

costs would be mitigated. 

One commenter raised the possibility 

that requiring the identification of 

members of the governing body that do 

not vote for the transaction (and the 

reasoning for their abstention or vote 

against) might disincentivize them to 

vote accordingly and ‘‘could also have 

the effect of inhibiting discussion 

among directors at board meetings.’’ 1325

Directors are generally subject to 

fiduciary duties imposed by State or 

foreign law. As a result, we expect that 

directors will generally seek to make 

voting decisions consistent with those 

fiduciary duties to shareholders or the 

company irrespective of whether they 

will be identified as voting against the 

transaction or abstaining. Further, while 

it is possible that directors could believe 

they face increased cost to dissenting 

publicly (via their official recorded vote) 

because of this requirement, we do not 

expect the final rules will detrimentally 

limit any private conversations among 

the board of directors, contrary to the 

assertion of the commenter.1326

Consequently, we do not believe this 

requirement will result in significant 

instances of de-SPAC transactions being 

approved even when the majority of 

directors would have voted against 

approval but for the final rule, because 

in those cases, we expect the privately 

dissenting majority to communicate 

their dissent and successfully vote to 

not approve the transaction, in which 

case no disclosures would be required 

for such failing votes. 

f. Reports, Opinions, Appraisals, and 

Negotiations (Items 1607) 

Item 1607(a) requires disclosure of the 

information required by Item 1607(b) if 

the SPAC or the SPAC sponsor received 

any report, opinion (other than an 

opinion of counsel), or appraisal from 

an outside party or an unaffiliated 

representative referred to in Item 

1606(d) that materially relates to any 

determination disclosed in response to 

Item 1606(a), the approval of the deSPAC transaction, the consideration or 

fairness of the consideration to be 

offered to security holders of the target 

company in the de-SPAC transaction, or 

the fairness of the de-SPAC transaction 

to the SPAC, its security holders, or 

SPAC sponsor. Item 1607(b) requires, 

among other things, disclosure about the 

preparer of the reports, opinions or 

appraisals referred to in Item 1607(a) or 

negotiations or reports described in 

response to Item 1606(d), and a 

summary of those negotiations, reports, 

opinions or appraisals.1327 Item 1607(c) 

requires all reports, opinions, or 

appraisals referred to in Item 1607(a) 

and (b) to be filed as exhibits to the 

registration statement (e.g., Form S–4, 

Form F–4) or schedule or included in 

the schedule if the schedule does not 

have exhibit filing requirements.1328

The Item 1607 disclosures will help 

ensure that SPAC shareholders have 

access to information that the SPAC or 

a SPAC sponsor received from an 

outside party or unaffiliated 

representative (referred to in Item 

1606(d)) when determining whether to 

proceed with a de-SPAC transaction. We 

expect this additional information will 

improve investors’ ability to make 

informed investment decisions and thus 

will contribute to price efficiency of the 

combined company. Moreover, we 

expect the reduction in asymmetric 

information will contribute to improved 

liquidity of the combined company. 

As discussed above, Item 1607 

requires, among other things, with 

respect to certain reports, opinions, or 

appraisals: a summary of findings and 

recommendations; filing of the report, 

opinion, or appraisal; and a summary of 

the bases for and methods of arriving at 

the findings and recommendations. We 

expect the requirements of Item 1607 

will improve investor investment 

decision-making. For example, the 

summary of findings and 

recommendations should help investors 

understand the report contents. Even 

where a report is brief, it may be written 

in a particular standardized format that 

the outside party requires in connection 

with all such reports they provide, 

which some investors may have 

difficulty understanding. The summary 

version disclosed in the filing may 

present the information in a narrative 

fashion that enhances investor 

understanding. If investors prefer 

additional details, they can consult the 

actual report filed with the filing that 

contains the summary. Additionally, the 

requirement to disclose the bases and 

methods underlying the findings should 

provide important information to the 

investor that may not be part of the 

report itself but may be necessary to 

understand the basis for the report’s 

conclusions. 

The Item 1607 disclosures should also 

help investors assess the reliability and 

relevance of the report. In particular, we 

expect disclosure related to 

compensation, method of selection, and 

material relationships will help 

investors understand the incentives, 

potential conflicts of interest, or 

potential biases that could influence the 

outside party in preparing the report, 

opinion, or appraisal. Similarly, we 

expect the disclosure requirements 

related to identity, qualifications, 

instructions, limitations on scope of the 

investigation, will help investors assess 

the relevance of the report to their 

assessment of the proposed 

combination. 

We expect the cost of gathering the 

information necessary to make the 

required Item 1607 disclosures related 

to identity, qualifications, 

compensation, selection process, 

instructions and limitations on the 

scope of the investigation will not be 

significant because we expect that the 

information required will generally be 

readily available to the registrant or the 

outside party that prepared the report or 

both. 

Regarding material relationships, we 

expect the limited two-year look-back 

period will limit the burden on the 

SPAC to research relevant past 

relationships. We expect the SPAC and 

SPAC sponsor (or advisor or other 

unaffiliated representative) will have 

this information readily available in 

internal records, such as agreements 

between the relevant persons or records 

of financial transactions. We expect, 

however, the SPAC or its advisors will 

incur some costs to perform additional 

research in order to ensure it has 

identified the affiliates of the outside 

party.1329

The incremental costs and benefits of 

the final rules will be somewhat 

mitigated to the extent that some of 

these disclosures would otherwise be 

required to comply with other rules, 

such as Regulation M–A or FINRA Rule 

5150. 

Item 1607(c) requires the filing of the 

relevant report, opinion, or appraisal. 

As a result of this requirement, 

registrants will need to ensure the 

report, opinion, or appraisal is 

formatted so it can be filed in EDGAR. 

Based on the Commission staff’s 

experience, we do not expect registrants 


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1330 In 2021, the average costs for fairness 

opinions obtained by SPAC acquirers where such 

information was presented in an SEC filing was 

approximately $270,000. See supra section VIII.A.2. 

1331See, e.g., letter from Goodwin (‘‘Most 

professionals preparing these materials are not 

trained to prepare these documents in a manner 

that would be appropriate for public disclosure.’’). 

1332See supra section II.H. 

1333 Id. 

1334A study of 462 de-SPAC transactions that 

were completed in 2020 and 2021 found that 

approximately 99% of such transactions were 

accompanied by proxy disclosures and 81% 

involved a related filing of a registration statement 

on either Form S–4 or Form F–4. Of the 81% of deSPAC transactions that involved the filing of a 

registration statement, 85.4% were accompanied by 

a proxy statement on Schedule 14A, and the 

remaining 14.6% were accompanied by an 

information statement on Schedule 14C as a result 

of a consent solicitation. See Michael Levitt, Valerie 

Jacob, Sebastian Fain, Pamela Marcogliese, Paul 

Tiger, & Andrea Basham, supra note 1231. In a 

corresponding report covering transactions that 

were completed in 2022, approximately 87% of deSPAC transactions involved a registration statement 

filing on either Form S–4 or F–4, of which 

approximately 91% were accompanied by a proxy 

statement and 9% by an information statement as 

a result of a consent solicitation. See Freshfields, 

2022 De-SPAC Debrief: A Comprehensive Review of 

All 102 De-SPAC Transactions that Closed in 2022, 

Freshfields.us (Jan. 2023), available at https://

www.freshfields.us/490963/globalassets/noindex/ 

documents/2022-de-spac-debrief.pdf. 

1335See Proposing Release, supra note 7, at 

29529, n.501. The historic use of a Schedule TO in 

connection with a de-SPAC transaction corresponds 

to a period when share redemption was more 

limited and de-SPAC transactions were more 

commonly targeted by hedge funds engaged in 

‘greenmailing.’ See, e.g., Lucian Bebchuk, Alon 

Brav, Wei Jiang & Thomas Keusch, Dancing with 

Activists, 137 J. Fin. Econ. 1 (2020) (describing 

‘‘greenmail’’ as an event in which a company 

targeted by an activist shareholder (such as a hedge 

fund) purchases shares from the activist at a 

premium to the market price). In the SPAC context, 

the activists were most commonly hedge funds that 

would threaten to prevent an acquisition by voting 

against a de-SPAC transaction and redeeming a 

large enough block of shares to cross the SPAC’s 

redemption threshold if the SPAC refused to buy 

back its shares at a premium. See, e.g., Leerskov, 

supra note 1227 (‘‘Many of these funds are arbitrage 

investors . . . turning a profit by voting against an 

acquisition, therefore recouping their initial 

investment while holding the associated warrants 

against any possible upside from a successful 

acquisition. Additionally, more investors began 

threatening to veto potential SPAC mergers in 2006 

and 2007 unless they received deal sweeteners. 

Mostly, investors asked to be bought out at a 

premium in exchange for their votes in favor of a 

merger.’’). This activity decreased, as did the use of 

a Schedule TO in connection with a de-SPAC 

transaction, as SPAC redemption thresholds 

increased in the early 2000s from approximately 

20% on average to approximately 80% on average. 

See, e.g., Milan Lakicevic, Yochanan Shachmurove 

& Milos Vulanovic, Institutional Changes of 

Specified Purpose Acquisition Companies (SPACs), 

28 N. Am. J. Econ. & Fin. 149 (2014) (20.47% to 

84.24% from 2003–2006 to 2009–2012); Vulanovic, 

supra note 1225 (20% to 81.52% from 2003–2013). 

1336Additionally, relatively few de-SPAC 

transactions have historically involved the filing of 

a Schedule TO alone. See supra note 1335 and 

accompanying text. 

1337See letter from ABA. 

1338See supra section V; infra section VIII.B.4. 

1339See supra section III. For additional 

information about the regulatory baseline for Item 

1609, see supra section V.A. 

to incur substantial costs in formatting 

or paying a vendor to format the 

relevant material for filing in EDGAR. 

The final rules may also impact the 

cost of obtaining third-party reports.1330

For example, some parties may be 

concerned about liability related to 

reliance on their report, which may 

prompt them to increase the cost of 

providing the report.1331 Additionally, 

disclosure requirements about the bases 

and methods underlying the findings 

may prompt registrants to ask third 

parties to include fully comprehensive 

descriptions of their methods and bases, 

which would potentially increase the 

fees charged by those third parties. 

Finally, the compensation disclosures 

could result in the revelation of 

competitive business information, 

which may influence fees for these 

services. 

Finally, while Item 1607 does not 

mandate registrants to obtain any report, 

opinion, or appraisal, we acknowledge 

that it is possible that the requirement 

could prompt some registrants to obtain 

reports, opinions or appraisals to avoid 

the appearance of failing to adequately 

assess the target companies’ prospects 

and financial condition. As discussed in 

the baseline, approximately 68% of deSPAC transactions in 2022 did not 

disclose that a fairness opinion was 

obtained in connection with the 

transaction. Conversely, the requirement 

may also deter some SPACs from relying 

on third-party reports, choosing instead 

to rely on internal assessments (as Item 

1607 does not apply to internal work 

product). As a result, some SPACs may 

fail to identify low-quality targets 

during the due-diligence process, to the 

extent that such internal assessments do 

not include the depth of analysis or 

expertise that would ordinarily be 

reflected in a fairness opinion. Finally, 

any impact of the rule on decisions to 

obtain third-party opinions or 

valuations could depend on the 

prospects of the target company. That is, 

sponsors may be more likely to seek 

third-party opinions for deals that they 

view as being more likely to result in 

favorable opinions. 

g. Tender Offer Filing Obligations (Item 

1608) 

We are adopting Item 1608 of 

Regulation S–K to codify the staff 

position that a Schedule TO filed in 

connection with a de-SPAC transaction 

should contain substantially the same 

information about a target company that 

is required under the proxy rules and 

clarify that a SPAC must comply with 

the procedural requirements of the 

tender offer rules when conducting any 

transaction for which a Schedule TO is 

filed, which includes extensions as well 

as de-SPAC transactions.1332 For 

example, Item 1608 clarifies that SPACs 

that file a Schedule TO for a redemption 

must comply with the procedural 

requirements of Rule 13e–4 and 

Regulation 14E, such as the 

requirements to keep the redemption 

period open for at least 20 business days 

and to include a fixed expiration 

date.1333

There were 23 Schedule TOs filed by 

21 SPACs from 2020 to 2022.1334 A 

minority of these Schedule TO filings 

(approximately 35% or 8 Schedule TOs) 

occurred alone i.e., without the 

concurrent filing of a proxy statement 

(Schedule 14A), information statement 

(Schedule 14C), or registration 

statement (Form S–4 or F–4) that would 

provide additional disclosures regarding 

the de-SPAC transaction. These findings 

are consistent with our review of 

Schedule TO filings from 2000–2021 in 

the Proposing Release.1335

Given that the staff has historically 

expressed the view that a Schedule 

TO 1336 should include the same 

information about the target company 

that would be required in a Schedule 

14A, in view of the requirements of Item 

11 of Schedule TO and Item 1011(c) of 

Regulation M–A and the importance of 

this information in making a 

redemption decision, Item 1608 is 

unlikely to result in a meaningful 

difference in the nature or amount of 

information provided by registrants. 

Further, Rule 145a may reduce the 

number of SPACs filing a standalone 

Schedule TO in connection with a deSPAC transaction thereby also reducing 

the number of potential parties affected 

by Item 1608 going forward. While we 

recognize that, for other redemption 

events where only a Schedule TO is 

filed—for instance, when a SPAC 

intends to extend or is otherwise not 

engaging in a concurrent de-SPAC 

transaction—an individual SPAC may 

incur incremental additional transaction 

and logistic costs,1337 we nevertheless 

expect the aggregate costs associated 

with these requirements to remain small 

because such events are rare. 

h. Enhanced Projections Disclosure 

Requirements (Item 1609) 

Item 1609 complements the 

amendments to Item 10(b) of Regulation 

S–K 1338 and applies to projections 

made in a filing (or any exhibit thereto) 

in connection with a de-SPAC 

transaction.1339 Item 1609 requires 

registrants to disclose the purpose for 


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1340Blankespoor, Hendricks, Miller & 

Stockbridge, supra note 1240, empirically found 

that: revenue forecasts occur among 80% of SPACs, 

only 35% of firms meet or beat those forecasts, and 

SPACs have growth targets that are approximately 

three times larger than expected (compared to a 

matched samples of IPO and established firms). 

1341Michael Dambra, Omri Even-Tov & 

Kimberlyn Munevar, Are SPAC Revenue Forecasts 

Informative? 98 Acct. Rev. 1 (2023), empirically 

found that revenue forecasts are positively 

associated with abnormal returns in a short window 

around the merger announcement—and further, 

that this response is driven by retail investors, with 

no such response from institutional investors (based 

on 13F holding filings)—but negatively correlated 

over longer horizons. The paper caveats that 

structural differences between firms could also 

explain the retail investor trading trends, which 

would dampen the extent to which protections 

accrue to retail investors. 

1342 D. Eric Hirst, Lisa Koonce & Shankar 

Venkataraman, How Disaggregation Enhances the 

Credibility of Management Earnings Forecasts, 45 J. 

Acct. Res. 811 (July 17, 2007), available at https:// 

doi.org/10.1111/j.1475-679X.2007.00252.x 

(experimentally shows that disaggregated forecasts, 

which include forecasts of individual income 

statement line items, e.g., revenue and costs, are 

more credible to investors than aggregated forecasts 

that provide only the bottom-line earnings 

forecasts). See also, Zahn Bozanic, Darren T. 

Roulstone, & Andrew Van Buskirk, Management 

Earnings Forecasts and Other Forward-looking 

Statements, 65 J. Acct. & Econ. 1 (2018), available 

at https://doi.org/10.1016/j.jacceco.2017.11.008 

(demonstrating that non-earnings-forecast of items 

other than earnings forward-looking statements can 

generate significant responses from both investors 

and analysts and finding that the forward-looking 

statements, even statements unrelated to earnings, 

can provide value-relevant information to the 

capital market participants). 

1343Auditing literature provides evidence that 

audit quality increases and misreporting decreases 

when engagement partners are required to sign the 

audit report or when their identities are disclosed. 

Joseph V. Carcello & Chan Li, Costs and Benefits of 

Requiring an Engagement Partner Signature: Recent 

Experience in the United Kingdom, 88 Acct. Rev. 

1511 (2013) (documenting evidence that audit 

quality and audit fees increase in the first year 

when engagement partners are required to sign the 

audit report in the United Kingdom); Allen D. Blay, 

Eric S. Gooden, Mark J. Mellon & Douglas E. 

Stevens, Can Social Norm Activation Improve Audit 

Quality? Evidence From an Experimental Audit 

Market, 156 J. Bus. Ethics 513 (2019) 

(experimentally demonstrates that PCAOB’s 

requirement of disclosing engagement partners’ 

identity can reduce misreporting). 

1344 Increased liability costs could occur due to 

the adoption of the PSLRA amendments resulting 

in projection disclosures no longer being afforded 

protection under the PSLRA, thereby increasing the 

expected costs to registrants of forward-looking 

disclosures. See infra section VIII.B.2.ii. 

1345For example, if a target has a new product 

line it has yet to announce, but factors the product 

line into its disclosed projections, it may be 

required to disclose the product line as one of the 

‘‘material bases’’ for the projections. Consequently, 

disclosure of this new product line could inform 

the target’s competitors about the new product line 

earlier than the target would find otherwise optimal 

and result in the target choosing not to undertake 

the action (i.e., go public) that would require such 

Continued 

which the projections were prepared 

and the party that prepared the 

projections. It also requires a discussion 

of all material bases of the disclosed 

projections and all material assumptions 

underlying the projections, and any 

material factors that may affect such 

assumptions. 

If the projections relate to the 

performance of the SPAC, the rule 

requires a statement of whether or not 

the projections reflect the view of the 

SPAC’s management or board about its 

future performance as of the most recent 

practicable date prior to the date of the 

disclosure document required to be 

disseminated to security holders. If the 

projections relate to the target company, 

the rule requires disclosure of whether 

the target company has affirmed to the 

SPAC that its projections reflect the 

view of the target company’s 

management or board about its future 

performance as of the most recent 

practicable date prior to the date of the 

disclosure document required to be 

disseminated to security holders. If the 

projections no longer reflect the views 

of the SPAC’s or the target company’s 

management or board regarding the 

future performance of their respective 

companies as of the most recent 

practicable date prior to the date of the 

disclosure document required to be 

disseminated to security holders, the 

rule requires a statement of the purpose 

of disclosing the projections and the 

reasons for any continued reliance by 

the management or board on the 

projections. 

We expect Item 1609, along with the 

amendments to Item 10(b), will result in 

improved disclosure about forwardlooking information provided to 

investors, allowing them to better 

understand and consider the disclosed 

projections when making their 

investment decisions. We also expect 

that the final rules will result in 

increased standardization of the 

presentation of projections, which will 

further reduce information acquisition 

costs and facilitate comparisons across 

SPACs. 

The required disclosure of preparers’ 

identities and purposes for which the 

projections were prepared should 

mitigate information asymmetry 

between the SPAC and investors as 

those disclosures may reveal preparers’ 

potential conflicts of interest or allow 

assessment of their qualifications or 

abilities to perform projections. This is 

expected to be beneficial as the existing 

academic literature provides evidence 

that SPAC projections are common but 

often overly optimistic.1340 Another 

study found that optimistic forecasts are 

correlated with retail investor trading 

behavior but not so for institutional 

investor trading, indicating that retail 

investors may benefit more from the 

disclosures.1341

We also expect the final rule will 

benefit investors by providing them 

with the information necessary to better 

determine the degree to which they may 

wish to rely on projections. Specifically, 

the requirement to discuss material 

bases and assumptions and their 

underlying rationales should enable 

investors to understand how the 

projections were derived, and 

subsequently how investors may choose 

to incorporate these projections into 

their expectations and decision-making. 

The requirement to disclose whether 

any projections disclosed in a filing still 

reflect the views of management or the 

board of the SPAC or target company (as 

the case may be) may also help investors 

evaluate the reliability of the 

projections. Because we expect the 

company that is the subject of the 

projections to have more information 

about itself than outsiders, this 

information also could reduce 

information asymmetry between the 

SPAC and/or target company and 

investors regarding the reliability of 

those projections. Overall, the adopted 

disclosure under Item 1609 should 

benefit investors by helping them assess 

whether and to what extent to rely on 

projections used in a de-SPAC 

transaction in making voting, 

redemption, and investment 

decisions.1342

As discussed above, Item 1609 

requires registrants to identify providers 

of projections. Studies of the behavior of 

auditors of financial statements found 

that similar identification was 

associated with audit quality increases 

and misreporting decreases.1343 We 

expect Item 1609 will have analogous 

effects and will increase preparers’ 

sense of accountability and potentially 

increase preparers’ incentives to make 

reliable projections. We expect this 

benefit will apply regardless of whether 

the projections are provided by the 

management or board of the SPAC or 

the target company or a third-party 

provider. 

We do not expect the direct 

compliance costs of Item 1609(a) and (b) 

to be substantial because companies 

should have the required information 

readily available given that the 

information required to be disclosed 

largely is what is necessary to perform 

the projections in the first place. 

However, there may be indirect costs 

to these amendments, such as 

registrants incurring increased liability 

costs1344 or increased proprietary or 

other disclosure costs,1345 especially in 


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disclosure. See, e.g., Michael Dambra, Laura Casares 

Field & Matthew T. Gustafson, The JOBS Act and 

IPO Volume: Evidence That Disclosure Costs Affect 

the IPO Decision, 116 J. Fin. Econ 121 (2015) 

(presenting evidence that firms make decisions not 

to IPO because of such proprietary costs). Such 

costs were discussed by commenters, see letter from 

Michael Dambra, Omri Even-Tov, and Kimberlyn 

George, citing Dambra, Even-Tov & Munevar, supra 

note 1341. 

1346See supra note 363 and accompanying text. 

1347Letters from ABA, Freshfields, Goodwin 

Procter, Kirkland & Ellis. 

1348See supra sections III.E, VIII.B.2. 

1349 If SPACs determine that it is necessary to 

update their projections, further costs might be 

incurred if they also believe any fairness or best 

interest determination based on those projections 

also requires updating, a concern voiced by one 

commenter. See letter from Kirkland & Ellis. 

1350We differentiate between information in the 

projections, such as the projections being updated 

to reflect new facts or circumstances, and 

information about the projections, such as investors 

being able to assess whether or how they should 

factor those projections into their expectations (for 

example, knowing to discount outdated 

projections). 

1351See Elizabeth Blankespoor, Ed deHaan & Iva ́n 

Marinovic, Disclosure Processing Costs, Investors’ 

Information Choice, and Equity Market Outcomes: 

A Review, 70 J. Acct. & Econ. 1 (2020). The authors 

suggest that it is costly to process firms’ disclosures, 

even for the most sophisticated investors, and they 

conceptualize processing costs as awareness cost, 

acquisition cost, and integration cost. 

1352See supra sections II.I and VIII.B.1.ii.d. 

1353See supra section VIII.B.1.ii.d. 

1354See supra note 476 and accompanying text. 

1355See supra note 1302 and accompanying text. 

combination with the co-registration 

requirement and the definitions of 

blank-check company for the purposes 

of the PSLRA we are also adopting. If 

SPACs believe these indirect costs are 

sufficiently high, these amendments 

could dampen their willingness to 

disclose projections, which could lead 

to a decrease in the amount of forwardlooking information made available to 

investors. If this leads SPACs to omit 

projections that are informative to 

investors, their absence could result in 

increased valuation uncertainty. This 

effect could impact some SPACs more 

than others, depending on the 

disclosure requirements of their local 

jurisdictions, or on other factors.1346 In 

these cases, if SPACs view these 

additional indirect costs to be too high, 

this dampening effect could result in 

not only a decrease in disclosure of 

projections, but a reduction in the 

utilization of projections by the SPAC 

entirely. However, as the potential 

dampening is likely to affect projections 

without reasonable bases more than 

those with reasonable bases (because the 

former are likely to be more difficult 

and costly to justify quantitatively and 

thus be seen as a larger litigation risk), 

we expect the potential for this 

dampening to be heightened in cases 

where the projections are more 

uncertain. 

We also acknowledge that the 

requirements of Item 1609(c) may 

impose additional costs on SPACs due 

to the timing mismatch between the 

original preparation of projections and 

their inclusion in subsequent filings, as 

echoed by some commenters.1347

Further, given the co-registrant rules 

and new definitions of blank check 

company,1348 disclosures made in 

response to Item 1609(c) will not benefit 

from the PSLRA safe harbor and could 

be subject to greater litigation risk than 

under the baseline, and thus could 

create further liability costs for the 

SPAC and target. Therefore, the 

provisions of Item 1609(c) might result 

in one or more of: (a) increased 

compliance costs due to additional prefiling verification of circumstances, 

data, assumptions, etc., that underlie the 

projections (and updating if so1349); (b) 

disclosure that the board continues to 

rely on the projections because they 

have no expectation that circumstances 

have changed; or (c) disclosure 

acknowledging that the projections were 

based on past facts and circumstances, 

which may have changed and thus are 

no longer relied upon by the SPAC, but 

are still being included to provide 

insight into historical decision-making 

or for some other reason. These 

outcomes might result in increased 

information in the projections (in the 

case of (a) above), increased information 

about the projections (in the case of (b) 

or (c) above), and/or increased liability 

costs for the registrants (in the case of 

(b) or (c) above).1350

To the extent that Item 1609 elicits 

additional contextual information 

disclosures related to SPAC projections, 

investors could incur incremental costs 

in processing the added information.1351

i. Structured Data Requirement (Item 

1610) 

As with the specialized disclosure 

requirements applicable to SPACs at the 

IPO stage as discussed above, Item 1610 

also requires that the disclosures 

prepared in compliance with respective 

sections of subpart 1600 of Regulation 

S–K applicable to de-SPAC transactions 

be tagged in Inline XBRL.1352 For the 

same reasons discussed above, we 

expect that the tagging requirement for 

de-SPAC transaction disclosures will 

augment the informational benefits to 

investors resulting from the new 

disclosure requirements.1353 For 

example, tagging the disclosure of terms 

and amounts of the compensation 

received or to be received by a SPAC 

sponsor and its affiliates in connection 

with a de-SPAC transaction and the 

potential dilutive effects related to such 

compensation could allow investors to 

make quantitative and qualitative 

comparisons to similar disclosure in 

other de-SPAC transactions. 

Additionally, the tagging requirement 

will make it easier to compare both 

numeric values and narrative discussion 

to those presented at the SPAC’s IPO 

stage. 

Unlike the Inline XBRL tagging 

requirement being adopted for SPAC 

specialized disclosures, which applies 

to registration statements for IPOs, the 

tagging requirement being adopted for 

de-SPAC transaction disclosures 

typically will not impose a tagging 

obligation on a SPAC to which the 

SPAC was not previously subject 

because a SPAC would be subject to 

Inline XBRL tagging obligations as of 

their first periodic report on Form 10– 

Q, Form 20–F, or Form 40–F.1354 As 

such, the Inline XBRL tagging 

requirement for de-SPAC transaction 

disclosures for the SPAC will be limited 

to the cost of selecting, applying, and 

reviewing Inline XBRL tags to a new set 

of disclosures or paying a third party to 

do so. The tagging requirement being 

adopted will impose compliance costs 

on SPACs at an earlier stage of the SPAC 

life cycle than under the baseline. As 

noted above, there is some indication 

that data-tagging costs in general have 

trended downward in the years since 

the initial adoption of XBRL 

requirements for SEC filings, and due to 

their similarities we expect this trend to 

hold for Inline XBRL tagging costs as 

well.1355

j. Re-Determination of SRC Status 

The final rules provide that, upon the 

consummation of a de-SPAC 

transaction, an issuer must re-determine 

its status as an SRC prior to its first 

filing, other than pursuant to Items 

2.01(f), 5.01(a)(8), and/or 9.01(c) of 

Form 8–K, following the de-SPAC 

transaction and reflect this redetermination in its filings, beginning 

45 days after consummation of the deSPAC transaction. As an example of the 

effect of the final rules, consider a SPAC 

that qualifies as an SRC that conducts a 

de-SPAC transaction with a target 

company that results in a postcombination company that does not 

qualify as an SRC. Under current rules, 

the company would retain the SRC 

status throughout the fiscal year that 

includes its next re-determination date 

(at second fiscal quarter-end of that 

fiscal year), which could be up to 18 

months if the de-SPAC transaction 

occurs at the beginning of the third 

quarter. In contrast, that same target 


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1356See infra section III.D for more information 

on the regulatory baseline. 

1357See supra note 1191. 

1358See supra 633 and accompanying text. 

1359Because SRC status entails lower disclosure 

and regulatory compliance costs, it is likely that 

firms would prefer to have SRC status than not. 

1360Florian Kiesel, Nico Klingelho ̈fer, Dirk 

Schiereck & Silvio Vismara, SPAC Merger 

Announcement Returns and Subsequent 

Performance, 29 Eur. Fin. Mgmt. 399, 399–420 

(2023). 

1361Because SPACs would have an existing 

history of audits, including for the filings required 

as part of the de-SPAC transaction, we expect the 

cost of auditing the additional historical year would 

be mitigated. We note that the opposite scenario, 

namely a non-SRC SPAC resulting in a postcombination firm that is re-determined to be an SRC 

would file fewer years of financials in subsequent 

registration statements. However, this scenario does 

not represent a concomitant reduction of cost, 

because those auditing or other costs would already 

be incurred. 

1362Specifically, the final rules require 

dissemination no later than the lesser of 20 calendar 

days prior to the date on which the meeting of 

security holders is to be held or action is to be taken 

in connection with the de-SPAC transaction or the 

maximum number of days permitted for 

disseminating the prospectus under the applicable 

laws of the jurisdiction of incorporation or 

organization. 

1363The final minimum dissemination rules do 

not apply with respect to Schedule TO. The 

combined effect of certain tender offer rules 

currently effectively provides for a comparable, 

slightly longer minimum 20-business-day period for 

investors to make decisions. See 17 CFR 240.14e– 

1 under the Exchange Act (prohibiting tender offers 

that are held open for less than 20 business days 

from the date the tender offer is first published or 

sent to security holders). 

1364For example, while Delaware General 

Corporation Law only requires that due notice of an 

upcoming meeting be provided 20 days prior to the 

event (in connection with certain transactions such 

as mergers) and does not mandate a minimum 

Continued 

company going public via a traditional 

IPO might not qualify for SRC status at 

all. Under the final rules, the postcombination company will have 45 days 

following the de-SPAC transaction 

before the loss of SRC status will have 

to be reflected. 

The final rules should result in a level 

of disclosure appropriate to the postcombination entity’s facts and 

circumstances and be similar to those 

applicable in the traditional IPO setting. 

We expect this will reduce any 

regulatory arbitrage by requiring a target 

company going public through a deSPAC transaction to provide an 

appropriate level of information to 

investors as it would were it to conduct 

a traditional IPO.1356 For larger target 

companies, this will require more 

comprehensive and detailed disclosure 

to investors soon after the de-SPAC 

transaction is consummated. Overall, 

we expect these final rules will increase 

investor protection by allowing 

investors to assess the combined 

company more thoroughly through 

access to information appropriate to the 

post-combination company’s float and 

revenues. Large target companies may 

also reap the benefit of reduced cost of 

capital insofar as providing additional 

historical periods of financial statement 

data improves price efficiency.1357

The re-determination of SRC status is 

based on annual revenues and the 

public float on the measuring day, with 

such public float being measured within 

the four-business day window following 

the de-SPAC transaction. The 

calculation of public float depends on 

the market price at which the common 

equity was last sold on that selected 

date, or the average of the bid and asked 

prices of the common equity. The public 

float calculation allows for secondary 

market trading to determine the public 

float of the SPAC used for SRC redetermination. To the extent that the 

secondary market might not reflect all 

the information about the postcombination business within four 

business days, this could result in an 

inappropriate determination of SRC 

status or lack thereof. However, this 

reflection of market price in SRC status 

determination exists at every second 

quarter-end1358 for public companies, 

and thus does not reflect a cost relative 

to the baseline, timing differences 

notwithstanding. Further, because the 

final rule allows for up to four business 

days to re-determine this public float, 

there is some flexibility for firms to 

avoid volatility they deem temporary, 

although this discretion also implies 

potential information asymmetry costs 

to the extent firm discretion would bias 

towards SRC status.1359

The final rules will increase 

compliance costs compared to the 

baseline for combined companies that 

do not meet the SRC definition as of the 

accelerated re-determination date. 

Those companies may need to provide 

more detailed disclosure to investors 

sooner after the de-SPAC transaction 

than they would under current 

disclosure requirements. To the extent 

that the amendment to the public float 

calculation timing creates an effective 

difference between the IPO and deSPAC transaction settings, whereby the 

latter is affected by secondary market 

trading where the former is not, the 

effect of this difference is not expected 

to systematically generate inefficiencies 

with regards to the de-SPAC transaction 

setting. This is because the effect of 

market trading on the public float 

calculation could result in both 

increases and decreases in post-deSPAC transaction public float (based on 

observations of historical de-SPAC 

outcomes).1360

A potential cost of the redetermination is that, under certain 

circumstances, a SPAC that qualifies as 

an SRC could file two years of audited 

financial statements in conjunction with 

the de-SPAC transaction, but then upon 

re-determination lose its SRC 

qualification, and potentially be 

required to include an additional year of 

audited financial statements in 

subsequent registration statements. This 

scenario would result in additional 

costs, such as engaging audit services 

for the additional historical year, that 

would not be incurred without the redetermination.1361 These costs, 

however, are partially mitigated by the 

provision in the final rules of the 45-day 

window before SRC status is required to 

be reflected following a de-SPAC 

transaction. For combined companies 

that, based on public float calculations 

as within four business days following 

the de-SPAC transaction, no longer 

qualify for SRC status under the final redetermination rules, this window allows 

them to continue to reflect SRC status 

on registration statements filed within 

this 45-day window after the de-SPAC 

transaction, thereby avoiding those extra 

costs associated with the loss of SRC 

status. 

Some of the companies that lose SRC 

status but meet the EGC definition could 

avail themselves of the accommodations 

associated with EGC reporting 

requirements, which could mitigate 

some of the disclosure costs required by 

the adopted amendment. 

k. Minimum Dissemination Period 

We are adopting final rules that 

require a minimum dissemination 

period for registration statements, proxy 

statements, and information statements 

filed in connection with de-SPAC 

transactions.1362 We expect these rules 

will benefit SPAC shareholders by 

providing a minimum amount of time to 

review the information disclosed in 

these documents before making voting, 

redemption, and investment 

decisions.1363 To the extent that this 

results in investors having more time to 

review the information than they would 

otherwise have, the minimum 

distribution period will allow them to 

more thoroughly consider their choices. 

This amendment will likely provide its 

greatest potential benefits to SPAC 

shareholders in de-SPAC transactions 

where there are no required advance 

dissemination periods, such as in the 

cases of SPACs that are not organized in 

a jurisdiction with equivalent delivery 

requirements for notices of stockholder 

meetings,1364 do not file a Schedule 


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period for dissemination of proxy statements or 

joint prospectus/proxy statements required by the 

Federal securities laws. As noted in the Proposing 

Release (supra, note 7, at 29531), Commission staff, 

in reviewing filings, has observed that the notices 

of the meeting mandated by Delaware General 

Corporation Law are often included in the proxy 

statement or joint prospectus/proxy statements, 

with many companies then delivering the proxy 

statements or joint prospectus/proxy statements in 

time to meet the Delaware General Corporation Law 

notice requirement. See also letter from Vinson & 

Elkins (‘‘Under the existing regulatory framework, 

which is dictated by the laws of the SPAC’s 

jurisdiction of formation and the proxy rules, 

SPACs are typically required to deliver notice of the 

special meeting not less than 10 days before the 

meeting and, if the SPAC is a Delaware entity and 

will be directly merging with another entity, such 

notice is typically required at least 20 days before 

the meeting. This notice is included at the 

beginning of the SPAC’s proxy statement and 

effectively requires that final versions of all proxy 

materials be delivered to the SPAC’s shareholders 

at least 10 days (or 20 days, as applicable) before 

the SPAC’s special meeting.’’ (Footnotes omitted)). 

See also Table 4 in section VIII.A.2.iv. 

1365Because a Schedule TO filed in connection 

with a de-SPAC transaction must already be filed 

20 business days in advance of the close of the 

redemption period, the 20-calendar-day minimum 

dissemination period will not have an incremental 

effect. 

1366There will be no incremental effect on the 

dissemination of Form S–4 or F–4 in connection 

with a de-SPAC transaction if the form incorporates 

information by reference because a 20-business-day 

minimum dissemination requirement already 

applies, a period lengthier than 20 calendar days. 

See supra note 501. 

1367We note discussion in section III.B clarifying 

that the deadline is met when the materials are 

mailed; thus, the delivery timing is not a 

consideration. See supra note 512. 

1368Where the target is an FPI, the amendment 

includes the option for accordant disclosures. See 

supra section III.A.1. 

1369The Form 8–K with Form 10 information 

(often referred to as the ‘‘Super 8–K’’) is due four 

business days after consummation of the de-SPAC 

transaction. See Item 2.01(f), Form 8–K. 

1370 Items 2.01(f), 5.01(a)(8), and 9.01(c) of Form 

8–K each provide that if any required disclosure 

under these items has been previously reported, the 

registrant may, in lieu of including that disclosure 

in the Form 8–K, identify the filing in which that 

disclosure is included. 

1371Because some filers incorporate disclosure by 

reference from more than one source, the total 

percentage of usage across sources exceeds 100%. 

TO,1365 or do not incorporate 

information by reference in their Form 

S–4/F–4 filings.1366

The costs of this amendment, 

including printing and mailing costs, 

management time, and or consulting 

fees, may be limited by the fact that, 

under the baseline, SPACs may have 

incentives to provide the required 

disclosure materials in advance of a 

minimum deadline. For example, as 

retail ownership of its shares increases, 

a SPAC may face increasing pressure to 

communicate with its investors earlier, 

more extensively, and with greater 

frequency to ensure that a quorum will 

be present at the shareholder meeting to 

approve a de-SPAC transaction and that 

a sufficiently high number of votes are 

cast in favor of the transaction. In these 

cases, we do not expect the final rules 

will cause a change in behavior for firms 

already submitting these statements 20 

calendar days or greater in advance. 

The additional time required by the 

amendment could, in effect, shorten a 

SPAC’s time to otherwise complete a 

business combination within its limited 

lifespan, and this amendment will 

remove the option value inherent in the 

existing flexibility in dissemination 

timing. Costs associated with adopting 

this proposal could also increase in 

proximity to the SPAC’s dissolution 

date, because, under such conditions, 

logistical costs like expedited reviewing 

and printing would accrue.1367 It is also 

possible that the minimum 

dissemination period could cause 

SPACs to enter into sub-optimal deals 

earlier in the process to avoid the risk 

of failing to acquire a company later in 

the window, or, in the extreme, a deSPAC transaction would not be able to 

proceed due to these new timing 

requirements. However, as discussed 

above, we believe such costs would 

rarely be incurred given the significance 

of a de-SPAC transaction to SPACs and 

targets and the amount of time that 

SPACs have to find a target and engage 

in a de-SPAC transaction relative to the 

length of the dissemination period. 

Rather, we believe it is more likely that 

SPACs and targets will account for the 

amended dissemination period in 

establishing a timeline for their business 

combination in the event that it would 

not have already been met or otherwise 

required. 

Furthermore, because we are also 

adopting Rule 145a, which will require 

the filing of a registration statement or 

reliance on an exemption for a de-SPAC 

transaction, and because de-SPAC 

transactions can incorporate 

information by reference, we expect 

there may be few future de-SPAC 

transactions to which the minimum 

dissemination period requirement 

would impose an otherwise additional 

binding time constraint. 

l. Aligning Non-Financial Disclosures in 

De-SPAC Disclosure Documents 

We are adopting amendments such 

that target companies in a de-SPAC 

transaction not subject to the reporting 

requirements of section 13(a) or 15(d) of 

the Exchange Act must include in their 

registration statement or schedule filed 

in connection with the de-SPAC, 

disclosures relating to the target 

company that would be provided in a 

Form S–1 or F–1 for an IPO. These final 

amendments would require disclosure 

with respect to the target comprising: (1) 

Item 101 (description of business); (2) 

Item 102 (description of property); (3) 

Item 103 (legal proceedings); (4) Item 

304 (changes in and disagreements with 

accountants on accounting and financial 

disclosure); (5) Item 403 (security 

ownership of certain beneficial owners 

and management), assuming the 

completion of the de-SPAC transaction 

and any related financing transaction; 

and (6) Item 701 (recent sales of 

unregistered securities).1368 The final 

amendments also require, where a Form 

S–1 or Form F–1 is used to register 

securities in connection with a de-SPAC 

transaction, that these registration 

statements include the information 

required in Form S–4 and Form F–4, 

respectively, and that any Schedule TO 

or Schedule 14A filed for a de-SPAC 

transaction incorporate the disclosure 

provisions of Items 1603 through 1609 

and the structured data provision of 

Item 1610. 

The costs and benefits of these final 

amendments depend on the baseline 

level of information available that is 

required to be disclosed in the Form 8– 

K with Form 10 information that is 

currently disclosed in advance of the 

filing of the Form 8–K.1369 To assess the 

extent to which registrants may already 

disclose Form 10 information about the 

target company in a different 

Commission filing before filing the 

Form 8–K, the staff examined the 

frequency and scope of incorporation by 

reference in such 8–K filings, finding 

that 95% of the 8–K filers incorporated 

at least one of the required Form 10 

items by reference.1370 Most of the Form 

8–K filings that incorporated items by 

reference referred to disclosures 

previously filed in a proxy or 

information statement (88% of filers), 

and 46% of these filings incorporated 

disclosures from a registration statement 

filed in connection with the de-SPAC 

transaction.1371


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1372While these items are less frequently 

incorporated by reference, their absence may not 

indicate missing information. For example, filers 

may not have provided Item 304 or Item 701 

disclosures in earlier filings because there were no 

changes in or disagreements with accountants on 

accounting and financial disclosures or recent sales 

of unregistered securities to report. When 

disclosures are presented in the Form 8–K, Item 304 

disclosures are incorporated by reference in 

approximately 32% of filings and newly disclosed 

in 68% of filings. Similarly, for Item 701 

disclosures, the proportions of Forms 8–K that 

incorporate by reference and include new 

disclosure, are respectively approximately 35% and 

65%. 

Figure 3 shows the information that is 

incorporated by reference in the Forms 

8–K filed in connection with de-SPAC 

transactions, as identified by the item 

requirement of Regulation S–K. 

Disclosures pursuant to Item 101 

(description of business), Item 102 

(description of property), and Item 103 

(legal proceedings) of Regulation S–K 

are most commonly incorporated by 

reference. Less frequently incorporated 

by reference are disclosures pursuant to 

Item 304 (changes in and disagreements 

with accountants on accounting and 

financial disclosure), Item 403 (security 

ownership of certain beneficial owners 

and management, assuming the 

completion of the de-SPAC transaction 

and any related financing transaction), 

and Item 701 (recent sales of 

unregistered securities) of Regulation 

S–K.1372 Thus, to the extent that 

registrants already provide this 

information in the proxy statements, 

information statements, registration 

statements, and Schedules TO filed in 

connection with the de-SPAC 

transaction, the benefits and costs of 

compliance with the final amendments 

may be mitigated. 

These final amendments will ensure 

information about the target company is 

provided before shareholders 

potentially make voting, redemption, or 

investment decisions in connection 

with the de-SPAC transaction (whereas 

under the baseline this information is 

required to be included in a Form 8–K 

with Form 10 information that must be 

filed within 4 business days after the 

completion of a de-SPAC transaction). 

This timing change could reduce 

potential opportunities to engage in 

regulatory arbitrage, minimize 

differences in informational content, 

timing, and presentation, and 

potentially provide investors with more 

information about the target company 

when making such decisions, relative to 

the baseline. The benefits of such 

alignment to unaffiliated investors 

would depend on the ability of investors 

to otherwise procure such information 

prior to the filing of the Form 8–K with 

Form 10 information. 

As a result of the final amendments, 

investors may obtain disclosure 

required by Item 403 of Regulation S– 

K regarding the target company’s 

beneficial ownership structure before 

making a voting, redemption, or 

investment decision in connection with 

the de-SPAC transaction, which could, 

in some cases, represent a meaningful 

change to the informational 

environment in advance of the 

completion of a de-SPAC transaction, 

particularly when this information may 

be critical to an investor’s ability to 

evaluate potential conflicts of interest. 

In addition, the disclosures may allow 

investors to identify potential 

misalignments of interests between nonredeeming shareholders and other 

parties to the de-SPAC transaction. The 

final amendments therefore should 

provide increased investor protections 

and generally improve the information 

environment for investors making a 

voting, redemption, or investment 

decision in connection with the deSPAC transaction. 

The final amendments require 

disclosure of information that must 

already be included in the ‘‘Super 8–K’’ 

filed after closing of the de-SPAC 

transaction. Thus, we expect the 

compliance costs of these amendments 

to be low to the extent they will 

primarily stem from the accelerated 

filing timeline for these disclosures 

(with the exception of cases involving 

failed de-SPAC transaction votes), 

although we recognize that some items 

may be more costly to disclose earlier 

than others. Further, these additional 

compliance costs should be limited to 

the extent they are consistent with 


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Figure 3. Incorporation by Reference in Form 8-K by Regulation S-K Disclosure Item in 

de-SP AC Transactionsa 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

101 102 103 304 403 701 

Regulation S-K Disclosure Item Number 

• Data here represents the frequency of incorporation by reference per item that would be affected by the amendment 

as a percent of Forms 8-K that could be identified, based on staff review, as filed in connection with a de-SP AC 

transaction that occurred between Jan. 1, 2006, and Dec. 31, 2022, that incorporated any item by reference. 
14288 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1373Letters from ABA, PwC. 

1374See supra section III.C. 

1375See supra section III.C. 

1376See supra note 22 and accompanying text. 

1377Adverse selection describes a situation in 

which investors have incomplete information about 

potential de-SPAC targets and thus have difficulty 

distinguishing good investments from bad 

investments. As a result, investors may be less 

willing to participate in the SPAC market out of fear 

of choosing a bad investment. Higher quality 

information about targets mitigates this problem 

and encourages investor participation and the 

health of the SPAC market overall. 

1378See letters from ABA, Skadden. 

1379See supra section VIII.A for discussion of 

SPAC sponsors’ interests in completing the deSPAC transaction. 

1380See letters from ABA, NYC Bar. See 

discussion of these comments in section III.C 

(regarding whether current requirements provide 

sufficient incentives in connection with discussion 

of the final rules). 

existing practice, as suggested by 

commenters.1373

2. Liability-Related Rules 

In addition to the rules discussed 

above pertaining to disclosures, we are 

adopting rules and amendments to 

clarify and amend the existing liability 

framework to resolve certain 

ambiguities and protect investors. In 

this section, we discuss the potential 

costs and benefits of requiring that the 

target company be treated as a coregistrant on a Form S–4, Form F–4, 

Form S–1, or Form S–4 filed in 

connection with a de-SPAC transaction. 

In addition, we discuss the amendment 

to the definitions of ‘‘blank check 

company’’ for purposes of the PSLRA to 

remove the ‘‘penny stock’’ condition. 

i. Target Company as Co-Registrant 

Currently, a SPAC, the target 

company, or a holding company may 

file the registration statement for a deSPAC transaction depending on the 

structure of the transaction. When the 

SPAC or holding company files the 

registration statement for a de-SPAC 

transaction, section 11 liability may not 

apply to the target company. Given that 

the target company effectively is an 

‘‘issuer’’ of securities in a de-SPAC 

transaction regardless of transaction 

structure, the final rules will require 

that the target company and its related 

section 6(a) signatories sign these 

registration statements when filed by a 

SPAC or another shell company.1374 In 

addition, in a de-SPAC transaction 

where the target company consists of a 

business or assets, the seller of the 

business or asset is deemed to be a 

registrant instead of the business or 

assets. 

The primary benefit of this rule will 

be to align potential section 11 liability 

applicable to the target company in a 

de-SPAC transaction with such liability 

that may apply in a traditional IPO 

because, given that the transaction is 

essentially its IPO, it is the target 

company that, in substance, issues or 

proposes to issue its securities or, 

pursuant to new Rule 145a, the 

securities of the combined company.1375

Under current rules, when the target 

company does not file this registration 

statement, it would not have section 11 

liability for any information about its 

business and operations in the 

registration statement even though, like 

a traditional IPO, investors look to the 

business and prospects of the target 

company in evaluating an investment in 

the combined company. Significant 

information asymmetries also arise 

because the filer likely must rely on the 

target company providing this 

information for inclusion in the 

registration statement.1376 While 

exposing the target company to section 

11 liability may increase costs (such as 

compliance costs or the target company 

obtaining directors and officers 

insurance where it does not already 

have coverage and perceives a need to 

have coverage), ensuring that the target 

company is subject to such liability for 

a de-SPAC registration statement should 

give the target company stronger 

incentives to provide higher quality 

information about its financial 

condition and future prospects. Thus, 

we expect that the final rule will lead 

to better informed voting and 

investment decisions and reduce 

adverse selection with regard to deSPAC transactions.1377

A few commenters compared deSPAC transactions and M&A 

transactions generally, in which targets 

typically do not sign a registration 

statement filed by the acquiror and do 

not share liability as a signing party. 

They argued that, if market forces 

ensure sufficient information about the 

target reaches investors in traditional 

M&A transactions, market forces should 

serve the same function in de-SPAC 

transactions.1378 However, as noted 

elsewhere in this release, while the deSPAC transaction is a type of M&A 

transaction, we believe de-SPAC 

transactions can be distinguished from 

other M&A transactions due to their 

hybrid nature. Specifically, the de-SPAC 

transaction simultaneously: (i) functions 

as a form of public capital raising for the 

target company, (ii) transforms a shell 

company, that is not a business 

combination related shell company, into 

an operating company, and (iii) 

commonly represents the introduction 

of a formerly private company to the 

public markets for the first time. 

Moreover, SPACs sponsors—who often 

have significant influence over the deSPAC—may have weaker incentives 

than acquiring firm managers in 

traditional M&A transactions to perform 

detailed due diligence on information 

supplied by the target company, because 

SPAC sponsors benefit from a 

completed de-SPAC transaction at 

nearly any price.1379 In addition, this 

information may be more important to 

investors because unlike a traditional 

M&A transaction, the SPAC has no 

business operations of its own, and the 

business and operations of the target 

company will typically be the sole 

business and operations of the 

combined company after the business 

combination. The final rules would 

address these misaligned market 

incentives by assigning strict liability 

under section 11 to the target company, 

which is in the best position to ensure 

the accuracy of the disclosures. 

Another reason we expect the final 

rules will produce a more optimal 

solution than reliance on existing 

market incentives is that we do not 

expect ‘‘inherited liability’’ of target 

company officials to effectively address 

the information asymmetry and 

incentive misalignment issues, as 

suggested by a few commenters.1380 To 

the extent the target company survives 

and/or the officers and directors of the 

target company are officers and 

directors of the surviving company, they 

would potentially have liability for 

statements in the de-SPAC registration 

statement. However, that future 

assumption of liability does not change 

the fact that, under current regulations, 

depending on the transaction structure, 

the target company and its officers and 

directors may not have liability at the 

time of sale for the statements made in 

any registration statement filed in 

connection with the de-SPAC 

transaction. The final rules ensure that 

target company directors and signing 

officers have liability for statements 

made in the de-SPAC registration 

statement, regardless of whether they 

remain with the surviving company 

following the de-SPAC transaction. 

The final rules regarding ‘‘coregistration’’ may be associated with 

additional administrative or other costs. 

First, in connection with the filing of 

the registration statement, the coregistrant requirements could increase 

compliance costs of target companies 

and introduce the prospect of new 

potential costs if the target company 

incurs section 11 liability. Compliance 

costs compared to the baseline may 

increase in cases where the target would 

not otherwise have been a registrant of 


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1381Letters from ABA (‘‘Targets will be forced to 

substantially enhance their D&O liability insurance 

coverage to cover potential federal securities law 

liability substantially earlier in the De-SPAC 

Transaction process than is currently the case. 

Moreover, if the De-SPAC Transaction is never 

completed for some reason, Targets would likely 

not be able to ‘ratchet down’ their coverage to more 

typical private company levels until the next policy 

renewal date.’’); Anonymous (Apr. 7, 2022); 

Skadden (‘‘Given the potential for increased risk of 

liability to boards, we also expect D&O liability 

insurance premiums to increase significantly, 

further diluting the value of the transaction to 

stockholders.’’). See also letters from ABA, 

Goodwin, White & Case (each discussing directors 

and officers insurance premium costs in connection 

proposed Item 1606(a)) and Job Creators Network 

(noting that costs generally will increase, as ‘‘SPACs 

and target companies should expect extensive 

diligence requests from financial institutions, 

advisors, and their counsel in connection with a deSPAC transaction’’ (citations omitted)). 

1382These target companies may have directors 

and officers coverage for several reasons: (a) to 

cover the target company in connection with any 

liability to investors in connection with material 

misstatements or omissions in the registration 

statement, (b) to cover the target company in 

connection with government enforcement actions 

and investigations, (c) to cover the expense of the 

company in indemnifying directors and officers for 

their liability, and (d) to cover the liability of 

directors and officers where they are not 

indemnified by the target company. 

1383See supra note 558 and accompanying text. 1384See supra section III.C.3 for discussion of 

reporting obligations. We also note that although 

these filings will create costs, investors should also 

benefit from these ongoing disclosures. 1385See supra note 624 and accompanying text. 

1386Target counts are from Dealogic’s SPAC M&A 

data. 

1387See supra section VIII.A.3. See also supra 

section III.E for more information about the 

regulatory baseline. 

a registration statement for the de-SPAC 

transaction. For example, the target 

company may elect to employ service 

providers (such as legal, accounting, or 

financial advisers) to a greater degree or 

may elect to have its management spend 

more time preparing and reviewing the 

registration statement disclosure, since 

under the final rules, the target 

company, its directors, and its section 

6(a) signatories will potentially be liable 

for material misstatements in or material 

omissions from any effective de-SPAC 

transaction registration statement 

pursuant to section 11. Potential target 

companies may also be deterred from 

engaging in a de-SPAC transaction due 

to this potential liability, which could 

result in fewer public companies. 

Second, target companies may elect to 

spend more money than under the 

baseline for directors and officers 

insurance coverage, although this would 

not be a direct compliance cost of the 

final rules. A number of commenters 

raised such concerns.1381 Based on staff 

experience reviewing filings involving 

SPACs, most target companies already 

have directors and officers 

insurance.1382 Where a target company 

expects to enter a de-SPAC transaction, 

following the adoption of the final rules, 

we expect that some of these target 

companies may seek to expand their 

existing coverage due to the potential 

added liability from the above filings, 

resulting in a higher premium. We note 

costs for additional insurance may help 

offset or substitute for the potential 

increase in liability-related costs 

discussed earlier. 

Third, depending on when the 

business combination closes, the target 

company may incur compliance costs in 

connection with periodic and current 

reporting, because, as a registrant of a 

de-SPAC transaction registration 

statement, once this registration 

statement is effective, the target 

company will become an Exchange Act 

reporting company.1383 This would, 

among other things, require the filing of 

Exchange Act periodic reports on Forms 

10–K, 10–Q, and 20–F where applicable, 

and current reports on Forms 8–K and 

6–K after the effectiveness of any 

registration statement for the de-SPAC 

transaction and until the target company 

is able to terminate/suspend its 

Exchange Act reporting obligations.1384

This additional cost to target companies 

may be mitigated to some degree by the 

fact that much of the information they 

will have to disclose under the final 

rules is information that, under the 

baseline, either was already compiled 

and disclosed as part of the de-SPAC 

transaction or would be required in 

disclosures of the combined company 

after the de-SPAC transaction. However, 

in cases of de-SPAC transactions for 

which a registration statement becomes 

effective but the business combination 

does not close, which based on staff 

experience is very rare, the final rules 

will impose a cost upon those target 

companies that would not be incurred 

under the baseline, which could affect 

the cost and benefit calculations of 

target companies when choosing 

whether to go public through a de-SPAC 

transaction. 

Finally, we expect audit costs may 

increase for a minority of target 

companies as a result of the coregistration requirement. Under the 

current regulatory regime, filings of U.S. 

public companies must be audited by 

PCAOB-registered auditors, including 

financials of predecessor target 

companies.1385 As co-registrants to a deSPAC transaction, non-predecessor 

target companies will also need to 

obtain audits from PCAOB-registered 

auditors. We expect relatively few 

targets would need to change auditors as 

a result of the co-registration 

requirement for several reasons. First, 

many target companies may have 

already decided to work with PCAOB 

auditors in advance of seeking an 

acquisition with a public company. 

Second, we expect there to be relatively 

few de-SPAC transactions involving 

non-predecessor target companies. For 

example, approximately 97% of deSPAC transactions from 1990–2022 

involved a single predecessor target.1386

Finally, any cost related to this 

requirement would be limited because 

audits of the target company’s 

operations and financials for filings 

subsequent to the de-SPAC transaction 

closing would need be conducted by 

PCAOB-registered auditors under the 

current regulatory regime. With respect 

to cost of conducting the audits in 

accordance with PCAOB standards, for 

predecessor target companies, and 

PCAOB or GAAS standards for nonpredecessor target companies, we do not 

anticipate meaningful additional costs. 

These costs may be factors that a 

target company that seeks to become 

public considers when evaluating the 

route of a traditional IPO versus a deSPAC transaction. As such, under the 

final rules, the additional costs for target 

companies, balanced against reduced 

adverse selection faced by investors, 

potentially drawing more investors to 

the SPAC market, may tilt the relative 

attractiveness of seeking a public listing 

away from a de-SPAC transaction 

towards a traditional IPO or away from 

public listing entirely. The extent to 

which these factors influence such a 

decision would depend on a variety of 

factors, such as target company 

preferences toward the de-SPAC 

transaction method of going public— 

based on views of the process such as 

its level of transaction costs, its timing, 

and its certainty of closing. 

ii. PSLRA Safe Harbor 

As discussed in section III.E, we are 

adopting new Securities Act and 

Exchange Act rule definitions of ‘‘blank 

check company’’ under the PSLRA. The 

effect of the final rules will be that the 

PSLRA statutory safe harbors will be 

unavailable for forward-looking 

statements made in connection with a 

de-SPAC transaction involving an 

offering of securities by a SPAC or other 

issuer meeting the final definitions of 

‘‘blank check company.’’ 1387

These provisions of the final rules 

have two related benefits: (1) an 

increase in the likelihood that such 

issuers will take more care in avoiding 

the use of unreasonable forward-looking 

statements, and (2) an increase in the 

likelihood that investors will have 


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1388 In this subsection VIII.B.2.ii, where we refer 

to ‘‘blank check companies’’ in connection with our 

discussion of the final rules, unless otherwise 

indicated, we are referring to blank check 

companies that are not limited by any qualification 

that the company is an issuer of penny stock. 

1389See, e.g., letter from CFA Institute (‘‘FLS are 

regularly used in connection with de-SPAC merger 

transactions and are considered key information for 

assessing prospects for the newly merged entity.’’); 

Anne Beyer, Daniel A. Cohen, Thomas Z. Lys & 

Beverly R. Walther, The Financial Reporting 

Environment: Review of the Recent Literature, 50 J. 

Acct. & Econ. 296–343 (2010) (Using a sample from 

1994 to 2007, this article shows management 

earnings forecasts contributed over half (55%) of 

the accounting-based information to the market that 

explained quarterly stock return variance.); 

Moonchool Kim & Jay R. Ritter, Valuing IPOs, 53 

J. Fin. Econ. (1999) (finding that valuing IPOs with 

comparable firm multiples using analyst forecasts of 

future accounting performance rather than 

historical numbers improves accuracy 

substantially). 

1390Letters from Americans for Financial Reform 

Education Fund (‘‘Post-merger investors in SPACs, 

who are predominantly retail investors, are often 

lured by ambitious projections of growth—made 

with the protection of the safe harbor—and 

unfortunately have already lost significant amounts 

of money as a result. . . . In some cases, SPACs 

have lost up to 75% of their value since 2021. Retail 

investors are estimated to have lost about $4.8 

billion, or 23% of the $21.3 billion of their total 

$21.3 billion in SPACs.’’), Better Markets, CFA 

Institute, CII, Senator Elizabeth Warren (‘‘In 2021, 

nearly half of all companies with less than $10 

million of annual revenue that went public through 

a SPAC ‘have failed or are expected to fail to meet 

the 2021 revenue or earnings targets they provided 

to investors.’ These companies fell short on revenue 

projections by an average of 53%.’’ (Referencing a 

WSJ analysis)). 

1391Blankespoor, Hendricks, Miller & 

Stockbridge, supra note 1240, finds that combined 

companies meet or beat 35% of revenue projections. 

This percentage declined as the forecast period 

increased; SPACs meet or beat 42% of 1-year 

forecasts but 0% of four-year forecasts. Note that 

unbiased forecasts should approximately overshoot 

as often as undershoot the eventual true value, and 

thus forecasts should be expected to meet or beat 

true values approximately 50% of the time. 

1392See supra notes 1240 and 1341. 

1393See letter from Cato Institute, which cites 

Kimball Chapman, Richard Frankel, & Xiumin 

Martin, SPACs and Forward-Looking Disclosure: 

Hype or Information (Research Paper No. 3920714, 

last revised Oct. 21, 2021), available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=3920714 (retrieved from SSRN Elsevier 

database). Using a sample of 420 SPACs with IPOs 

between 2015 and 2020, the authors find ‘‘a 

negative association between the redemption rate 

and Forecast Intensity [the number of performance 

metrics forecasted times the number of years 

forecasted] and the forecasted revenue growth rate, 

which is the opposite of what the opportunistic 

disclosure hypothesis would predict. In other 

words, we fail to find evidence of ‘hyping’ when 

analyzing the association between the redemption 

rate and SPAC disclosures.’’ The authors caveat that 

this inference ‘‘is based on the assumption that the 

perceived deal quality as measured by redemption 

rate is an unbiased estimate of deal quality.’’ Put 

another way, the authors argue that since other 

studies have observed a positive correlation 

between lower investor redemption levels and 

higher de-SPAC-period stock performance, the fact 

that they find an association between lower investor 

redemption levels and forecast intensity and growth 

rates suggests high forecasts are associated with 

better de-SPAC performance in the year following 

the de-SPAC. Thus, they assert SPAC forecasts do 

not display ‘‘hype.’’ We find this conclusion 

problematic. Finding that more intense or higher 

raw forecasts are associated with better SPAC 

performance does not mean there is no hype, 

because both low and high growth rates can be 

exaggerated. The study also finds ‘‘no evidence of 

a subsequent return reversal in the de-SPAC 

period’’ that is more prevalent for the SPACs with 

the highest raw forecast growth rates, which the 

authors argue would have been evidence of overly 

optimistic ‘‘hype.’’ However, the paper’s regressions 

include four sets of returns as dependent variables 

in a single specification: the returns before merger 

announcement, right around announcement, after 

announcement to the day before closing, and 

trading day 0 to 1 year after closing. This approach 

hinders statistical inference since standard errors 

are not appropriately corrected for 

heteroskedasticity and the design decision to 

include multiple return windows simultaneously in 

a single regression results in biased estimations of 

the control variables included as regressors, making 

it difficult to draw firm conclusions from the 

results. 

1394While the Commission has brought 

enforcement actions alleging the use of baseless or 

unsupported projections about future revenues and 

the use of materially misleading underlying 

financial projections involving both SPACs and 

other reporting companies (see supra note 848), 

removal of the PSLRA safe harbors for SPACs will 

add liability for forward-looking statements in any 

private right of action under the Securities Act or 

Exchange Act. 

1395Several commenters expressed this view. See, 

e.g., letters from Cato Institute, Kirkland & Ellis, 

Paul Swegle. 

1396See supra section VIII.A. 

1397See supra section II.C (discussing rules 

requiring disclosure of conflicts of interest between 

public investors and SPAC sponsors). 

1398See supra note 1394. 

1399For example, Item 1609(b) of Regulation S– 

K requires disclosure of material assumptions that 

underlie projections. This additional detail may 

confidence in the forward-looking 

statements made by such issuers. 

First, the final rules will benefit 

investors by incentivizing SPACs and 

other blank check companies 1388 to take 

greater care to avoid making forwardlooking statements that are 

unreasonable. There is broad 

acknowledgement that forward-looking 

statements can be important for 

investors to aid their valuation of 

securities.1389 As noted above, however, 

several commenters have raised 

concerns that forward-looking 

statements used in de-SPAC 

transactions are overly optimistic and 

thus less useful for investors.1390 Some 

academic research has found SPAC 

forward-looking statements to be overly 

optimistic 1391 and suggests, with 

caveats, that less sophisticated investors 

are more likely to be swayed by such 

projections.1392 One study finds, 

however, little evidence of ‘‘hype’’ in 

SPAC forecasts.1393 As a result of the 

final definitions of ‘‘blank check 

company’’ for purposes of the PSLRA, 

we expect SPACs and other affected 

blank check companies will take greater 

care to avoid unreasonable forwardlooking statements because these issuers 

will be concerned there may be a higher 

risk of incurring potential costs or 

liability in such cases as compared to 

the baseline.1394 The reduced likelihood 

of unreasonable statements should 

allow investors to make better 

investment and voting decisions. The 

potential for improvement in decisionmaking may be particularly pronounced 

in de-SPAC transactions as there is 

typically no prior public history of 

filings or financial information for 

investors to draw upon to help 

determine the reasonableness of 

projections. 

It is possible the market already 

discounts to some extent overly 

optimistic claims in forward-looking 

statements by SPACs who were 

operating under the assumption that 

their disclosures were subject to PSLRA 

safe harbor protections, reducing the 

potential harm from such forwardlooking statements that this rule is 

intended to ameliorate.1395 In this 

regard, we note that sophisticated 

investors are more likely to discount 

overly optimistic forward-looking 

statements, and thus the final rules may 

benefit less sophisticated investors 

more. 

By incentivizing SPACs and other 

blank check companies to avoid 

unreasonable forward-looking 

statements, the final rules will also 

benefit investors and issuers by 

increasing the likelihood that those 

investors will have confidence that the 

forward-looking statements are reliable. 

If investors are aware that SPACs are 

taking greater care to avoid 

unreasonable forward-looking 

statements, investors may be able to 

analyze SPAC opportunities with 

greater precision, resulting in less 

adverse selection and encouraging 

investment and capital formation. 

Similar benefits will accrue to investors 

in registered securities offerings of nonSPAC registrants that meet the final 

definitions of ‘‘blank check company,’’ 

although this is less likely to have a 

significant impact on the overall market 

due to the limited number of business 

combinations involving these issuers, as 

observed in recent years.1396

Considering the final rules 

holistically, we note that Item 1609 of 

Regulation S–K, amended Item 10(b) of 

Regulation S–K, and other provisions of 

the final rules intended to increase 

investor awareness of potential conflicts 

of interest 1397 may prompt SPACs to 

improve their projections because of the 

reasons discussed above 1398 and/or 

allow investors to better understand and 

evaluate projections,1399 which could 


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allow investors to better assess the validity of 

projections and detect over-optimism. 

1400 Increased legal costs could also concern other 

transaction participants such as third-parties hired 

to prepare projections if they determine the 

disclosure of the projections would subject them to 

liability. They may seek compensation for bearing 

this additional liability. See letter from ABA. 

1401See letter from Amanda Rose. 

1402See, e.g., letter from Winston & Strawn. 

1403We note that the absence of forward-looking 

statements regarding a de-SPAC transaction will not 

preclude investors from valuing the business 

combination, as financial projections supplied by 

an entity to be valued are not a requirement for 

deriving its valuation. 

1404See, e.g., letters from Cato Institute, CFA 

Institute, Managed Funds Association, NYC Bar, 

SPAC Association, Winston & Strawn. 

1405See, e.g., letters from Bullet Point Network, 

SPACInsider, Ropes & Gray, SPAC Association, 

Vinson & Elkins, White & Case. 

1406See, e.g., letters from ABA, Andrew Tuch, 

Cato Institute, CFA Institute, Goodwin Procter, NYC 

Bar, Paul Swegle, Vinson & Elkins, Winston & 

Strawn. See also supra note 829. 

1407See letter from Cato Institute. 

1408See letter from Committee on Capital Markets 

Regulation. We note that no tests for statistical 

significance of these differences in size and 

industry distribution were conducted and thus we 

cannot confirm that SPAC and IPO markets are 

different. See also letter from Yuchi Yao (Dec. 15, 

2023), which provides a theoretical analysis 

suggesting SPACs and IPOs could serve different 

types of firms that wish to go public. 

1409See supra section IV.A.2 for more 

information about the regulatory baseline. 

reduce the incremental benefit of the 

removal of the PSLRA safe harbor in 

isolation. 

This provision of the final rules may 

entail additional costs. First, SPACs and 

other blank check companies may 

experience greater legal and related 

costs in connection with defending 

actions brought against them under the 

Federal securities laws, particularly if 

the combined company that results from 

a business combination transaction 

underperforms relative to any forwardlooking statements.1400 The clarity the 

rule provides about the absence of the 

PSLRA safe harbor may increase the risk 

of such legal action. This cost would be 

mitigated by the extent that directors 

and officers of the SPAC and the target 

company have relevant directors and 

officers liability insurance, though the 

cost of that insurance to cover 

potentially increased legal risk may also 

likely be higher relative to the 

baseline.1401

Second, SPACs and other blank check 

companies may incur additional costs 

related to efforts by these companies to 

ensure projections they provide 

investors are not unreasonable.1402 For 

example, SPACs and other blank check 

companies may employ service 

professionals (such as lawyers, 

accountants, and financial advisers) to a 

greater extent, by having them spend 

more time reviewing projections. Also, 

SPACs and other blank check 

companies may decide to devote more 

management time to prepare and 

validate projections. 

Third, given the potential legal and 

preparation costs, a SPAC or other blank 

check company may decide not to 

provide forward-looking statements it 

otherwise would have provided in 

connection with a business combination 

absent the final rules. In this case, 

investors may have less information, 

potentially negatively impacting their 

ability to accurately value these 

companies and allocate their 

investments accordingly to the extent 

such forward-looking statements would 

have been informative.1403 A number of 

commenters expressed this concern.1404

This could result in information only 

being revealed to market participants in 

de-SPAC transactions to the extent 

SPACs are able, like IPOs, to provide 

investors forward-looking information 

indirectly through securities 

analysts.1405 Potential loss of 

information in SPACs may be mitigated 

in situations where a SPAC or other 

blank check company may be required 

to provide forward-looking statements 

under State law or think investors need 

such information to fully assess the 

proposed business combination 

transaction.1406

Fourth, if potential SPACs (or other 

blank check companies) or target 

companies determine forward-looking 

statement disclosures are necessary but 

are not willing to provide such 

statements without PSLRA protections, 

fewer SPACs could form and/or 

impacted blank check companies such 

as SPACs may decide not to enter into 

a business combination transaction, 

such as a de-SPAC transaction. In 

addition, potential target companies 

may decide not to go public by way of 

a de-SPAC transaction. In particular, as 

stated by a commenter, the combination 

of the increased liability associated with 

forward-looking statements and any 

State law fiduciary requirements to 

provide such disclosure could result in 

de-SPAC transactions, on net, facing 

more liability than IPOs, which have the 

ability to avoid such liability by not 

providing forward-looking 

projections.1407 This could lead to fewer 

public investment opportunities for 

investors to the extent potential SPAC 

target companies do not go public 

another way, i.e., via the IPO market. 

One commenter provided data showing 

that the firms SPACs have taken public 

are smaller in average market 

capitalization and are not distributed in 

precisely the same industries as firms 

taken public through IPOs. This might 

suggest SPAC and IPO markets do not 

fully overlap.1408 Relatedly, a target 

company’s ability to raise capital may 

also be reduced, although these 

companies may be able to ameliorate 

any reduction in capital formation if 

they receive funding from other capital 

sources, such as unregistered equity 

investments. 

3. Shell Company-Related Rules 

In addition to the rules discussed 

above, we are also adopting rules and 

amendments to address further areas of 

incongruity in requirements that guide 

the disclosures and liabilities in the 

context of shell-companies more 

broadly, excluding those that are 

business combination related shell 

companies. 

i. Rule 145a 

Rule 145a deems any business 

combination of a reporting shell 

company (that is not a business 

combination related shell company) 

involving an entity that is not a shell 

company to involve a sale of securities 

under the Securities Act to the reporting 

shell company’s shareholders. To the 

extent that an exemption is unavailable 

for a de-SPAC transaction, the 

transaction must be registered. Rule 

145a is intended to address concerns 

regarding the use of reporting shell 

companies generally as a means by 

which private companies access the 

U.S. capital markets. One reason for 

these concerns is that reporting shell 

company shareholders may not receive 

the Securities Act protections (including 

disclosure and liability) they receive in 

a traditional IPO because of transaction 

structure. Under the final rule, these 

deemed sales will need to be registered 

under the Securities Act unless there is 

an applicable exemption.1409

Currently, if a reporting shell 

company buys a target company by 

issuing its shares as consideration for 

the interests of the target shareholders, 

reporting shell company investors are 

unlikely to receive a Securities Act 

registration statement in connection 

with the transaction. In this example, 

the reporting shell company 

shareholders would not receive the 

protections afforded by the Securities 

Act, including any enhanced disclosure 

or liability that would be available if the 

transaction were registered under the 

Securities Act. 

Rule 145a should provide 

shareholders in a reporting shell 

company that is not a business 

combination related shell company, 


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1410 Investor inertia refers to the tendency to 

avoid trading. See, e.g., Laurent E. Calvert, John Y. 

Campbell & Paolo Sodini, Fight or Flight? Portfolio 

Rebalancing by Individual Investors, 124 Q. J. Econ. 

301 (2009) (‘‘observing little aggregate rebalancing 

in the financial portfolio of participants’’). 

1411 In registered public offerings, the extent to 

which disclosure is required is set forth in detail 

in Commission registration statement forms, 

Regulation S–K and Regulation S–X. The disclosure 

that may be required in an exempt offering, on the 

other hand, is primarily driven by section 10(b) of, 

and Rule 10b–5 under, the Exchange Act, which 

enable a buyer to recover against a seller that, 

among other things, makes an untrue statement of 

a material fact or omits to state a material fact 

necessary in order to make the statements made, in 

the light of the circumstances under which they 

were made, not misleading in connection with a 

sale of a security. 

1412 Id. 

1413See generally supra section VIII.B.2 for a 

discussion of the costs of increased liability. 

1414See Michael Minnis, The Value of Financial 

Statement Verification in Debt Financing: Evidence 

from Private U.S. Firms, 49 J. Acct. Research 457, 

457–506 (2010). Using a large sample of privately 

held U.S. firms, the author found that audited firms 

enjoy a lower interest rate than unaudited firms, 

and that lenders place more weight on audited 

financial information in setting the interest rate. See 

also Mathieu Luypaert & Tom Van Caneghem, Can 

Auditors Mitigate Information Asymmetry in 

M&As? An Empirical Analysis of the Method of 

Payment in Belgian Transactions, 33 Auditing: A 

Journal of Practice & Theory 57, 57–91 (2014). This 

study finds that audits can mitigate information 

asymmetry about the target’s value, reducing the 

need for a contingent payment. 

1415See supra note 1351. 

engaged in a business combination 

involving a non-shell company, with 

more consistent Securities Act 

protections, regardless of the structure 

used for the business combination. 

Because of this consistency, we expect 

the rule will bolster investor protection 

for reporting shell company 

shareholders and reduce the 

information asymmetry between such 

investors in the reporting shell company 

and the target company. Specifically, we 

expect this rule to be of particular 

benefit to shareholders in reporting 

shell companies that may not otherwise 

receive timely information about the 

intended target company, or potentially 

even notification that the reporting shell 

company is entering into a business 

combination until after the transaction 

has occurred. Additionally, receipt of 

registration materials may highlight 

salient information (e.g., as required by 

subpart 1600 of Regulation S–K for 

transactions involving SPACs) for 

reporting shell company shareholders 

who might otherwise not receive or 

overlook it (or those who are vulnerable 

to inertia 1410) and call attention to the 

nature in which their investment will be 

transformed should they continue to 

hold their securities. For these reasons, 

we expect Rule 145a will result in more 

consistent information (i.e., timing, 

disclosure, and format) for investors and 

thereby improve price discovery and 

capital formation. Even if an exemption 

were available for the transaction (and, 

as a result, shareholders do not receive 

a registration statement in connection 

with the deemed sale), Rule 145a would 

still confer informational benefits to 

affected reporting shell company 

shareholders as such shareholders 

would receive whatever information the 

shell company concludes must be 

provided to satisfy section 10(b).1411

Because it is unclear the extent to which 

reporting shell company shareholders 

may be able to anticipate whether such 

an exemption would be available, the 

full extent to which Rule 145a will 

result in these expected price or capital 

formation benefits is unclear.1412

Under Rule 145a in certain business 

combination transactions where 

reporting shell companies, including 

SPACs, are parties, the combined 

company will be required to register the 

deemed sale of its securities to the pretransaction reporting shell company 

shareholders at the time of the business 

combination, unless there is an 

available exemption. We expect this 

will increase costs in those cases where 

the business combination is not 

structured in a manner that otherwise 

would need to be registered. These costs 

could include, in the extreme case, all 

costs associated with conducting a 

registered offering of securities, such as 

preparing a Securities Act registration 

statement, if no exemption is available. 

The rule may also introduce 

opportunity costs in the form of 

transactions that might otherwise have 

occurred but would be disincentivized 

under the new requirements. For 

example, under current rules, a business 

combination involving a reporting shell 

company can be structured to avoid 

registration entirely, if, for example, any 

securities issued to the target company’s 

shareholders in exchange for their 

interests in the target can be issued 

under an exemption. Because Rule 145a 

deems such a transaction to involve a 

sale to reporting shell company 

shareholders that will need to be 

registered (unless there is an applicable 

exemption), affected parties may opt not 

to pursue such a transaction to avoid the 

new transaction costs involved. 

To the extent that the final rule 

requires the filing of a Securities Act 

registration statement, we expect extra 

costs associated with greater care in 

preparation and review of the 

disclosures therein due to the 

applicability of section 11.1413 Also, 

there could be some costs associated 

with timing issues generated by any 

Commission staff review of any 

registration statement. Some of these 

costs may be mitigated to the extent that 

the reporting shell company or target 

company is already preparing disclosure 

documents, particularly Securities Act 

registration statements, in connection 

with a business combination that would 

be covered by Rule 145a. For example, 

in a de-SPAC transaction, the SPAC 

and/or target company may already be 

preparing a Schedule 14A, 14C, or TO, 

or a Form S–4, F–4, S–1, or F–1. 

Reporting shell companies and SPACs 

also typically prepare Forms 8–K 

containing Form 10 disclosures that are 

filed shortly after the business 

combination. 

ii. Financial Statement Requirements in 

Business Combination Transactions 

Involving Shell Companies 

Article 15 of Regulation S–X and 

related amendments aim to more closely 

align the financial statement reporting 

requirements in business combinations 

involving a shell company and a private 

operating company with those in 

traditional IPOs. These amendments 

should ensure the appropriate level of 

investor protections by reducing the 

potential for regulatory arbitrage by 

private companies that go public 

through a business combination with a 

shell company rather than a traditional 

IPO. Furthermore, the disclosure and 

audit requirements (e.g., Rule 15–01(a)) 

should reduce information asymmetry 

between financial statement disclosures 

in business combination transactions 

involving shell companies, including 

de-SPAC transactions, and traditional 

IPOs, which may in turn benefit private 

operating companies going public by 

reducing the cost of capital.1414 The 

rules and amendments that clarify 

applicable definitions and requirements 

(e.g., Rule 15–01(b), (c), (d), and (e)), are 

expected to reduce potential ambiguity 

faced by registrants by codifying certain 

existing interpretive positions, as 

discussed above in section IV.B and 

improve comparability. 

The final rules and amendments 

should allow investors to more readily 

locate and process relevant information 

and reduce processing costs, and should 

increase investor confidence in the 

reporting provided by entities involved 

in these business combinations.1415 In 

turn, these improvements should lead to 

more efficient voting, redemption, and 

investment decisions. Many of the final 

rules and amendments codify existing 

staff guidance or financial reporting 

practices. Thus, to the extent that 

registrants are already preparing 

statements and reports in a manner 


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1416See supra section IV.B for additional 

regulatory baseline information. 

1417See Phillip Lamoreaux, Does PCAOB 

Inspection Access Improve Audit Quality? An 

Examination of Foreign Firms Listed in the United 

States, 61 J. Acct. & Econ. 313, 313–337 (2016) 

(documenting that PCAOB-inspected auditors, 

compared to auditors not subject to PCAOB 

inspections, provide higher quality audits, which 

are reflected by more going concern opinions, more 

reported material weaknesses, and less earnings 

management). 

1418See Michael Minnis, The Value of Financial 

Statement Verification in Debt Financing: Evidence 

from Private U.S. Firms, 49 J. Acct. Research 457, 

457–506 (2010) (finding that audited financial 

statements have more predictive power for future 

cash flows, which may explain lower cost of capital 

as well as greater reliance by lenders). 

1419This is a modification from the Proposing 

Release (Proposing Release, supra note 7, at 29492) 

in response to comments, allowing for the same 75- 

day grace period as in the IPO setting. See supra 

section IV.B.12. 

consistent with the rules and 

amendments, the incremental benefits 

and costs will be limited. Below, we 

discuss the benefits and costs of each 

individual item under Rule 15–01 of 

Regulation S–X and the other 

amendments.1416

a. Rule 15–01(a) Audit Requirements of 

a Predecessor 

Rule 15–01(a), in connection with the 

amendments to Rule 1–02(d) and related 

new instructions to Forms S–4 and F– 

4 aligns the level of audit assurance 

required in business combination 

transactions involving a shell company 

with that for an IPO. The rule requires 

the financial statements of a business 

that is or will be a predecessor to a shell 

company to be audited in accordance 

with the standards of the PCAOB, which 

are the same auditing standards 

required in an IPO registration 

statement. This amendment will codify 

existing staff guidance. Rule 15–01(a) 

permits non-predecessor businesses to 

be audited under PCAOB standards or 

U.S. GAAS, aligning with the audit 

standards that would be applied in an 

IPO registration statement. 

Rule 15–01(a) should benefit investors 

by clarifying that the financial 

statements of a business that is or will 

be a predecessor to a shell company are 

to be audited in accordance with 

PCAOB standards consistent with a 

traditional IPO.1417 To the extent that 

investors use the audited financial 

statements to project future cash flows, 

the new rule also may benefit shell 

companies and target companies by 

lowering their cost of capital.1418 The 

final rules may, however, increase the 

compliance costs (e.g., audit costs) of 

the business combination. To the extent 

that registrants are, in practice, already 

including financial statements of target 

companies audited under PCAOB 

standards, the above incremental 

benefits and costs likely would be 

limited. 

b. Rule 15–01(b) Number of Years of 

Financial Statements 

Under Rule 15–01(b), a shell company 

registrant will be permitted to include 

in its Form S–4/F–4/proxy or 

information statement balance sheets as 

of the end of the two most recent fiscal 

years and two years of statements of 

comprehensive income, changes in 

stockholders’ equity, and cash flows for 

the target company where both the shell 

company and a target company would 

qualify as an EGC, and this 

determination would not be dependent 

on whether the shell company has filed 

or was already required to file its annual 

report. Rule 15–01(b) will align the 

number of years required to be disclosed 

in the financial statement between deSPAC transactions and traditional IPOs. 

For those transactions affected by the 

rule, registrants that qualify for EGC 

status and are not SRCs should benefit 

from reduced cost of producing audited 

financial statements because this rule 

will reduce the number of years of 

financial statements required from three 

years to two years. In those cases, this 

rule could cause some information loss 

for investors. However, investors would 

still have access to two years of 

financial statements for the target 

company, the same amount that would 

be required had the target company 

gone public via a traditional IPO. In 

addition, the omitted ‘‘third year’’ of 

financial statements would be the oldest 

information and thus may provide less 

incremental value to investors than the 

two most recent fiscal years. 

c. Rule 15–01(c) Age of Financial 

Statements of the Predecessor 

Rule 15–01(c) provides that the age of 

financial statements for a business that 

will be acquired by a shell company in 

a registration statement or proxy 

statement will be based on the age 

requirements in Rule 3–12 or 8–08 of 

Regulation S–X, rather than the target 

company provisions in Item 17 of Form 

S–4. Because this amendment is 

generally consistent with existing 

market practice, we do not expect it to 

have significant economic effects for 

registrants or investors. This rule will 

align disclosure requirements across the 

different routes of going public, which 

may reduce compliance uncertainty for 

registrants and their predecessors and 

increase investor confidence. 

d. Rule 15–01(d) Acquisition of a 

Business or Real Estate Operation by a 

Predecessor 

Rule 15–01(d) requires application of 

Rule 3–05 or 8–04 (or Rule 3–14 or 8– 

06, respectively, as relates to a real 

estate operation), the Regulation S–X 

provisions related to financial 

statements of an acquired business or 

real estate operation, to an acquisition 

by a predecessor of a shell company 

registrant. This amendment is consistent 

with the current market practice of 

applying Rule 3–05 (or Rule 8–04) to 

acquisitions by the business that will be 

the predecessor, therefore we believe 

that the incremental benefits and costs 

should be limited. 

Rule 15–01(d)(1) pertains to the 

calculation of significance tests and 

refers to Rule 1–02(w) of Regulation S– 

X, which we are amending as well, to 

require that the significance of the 

acquired business be calculated using 

the predecessor’s financial information 

as the denominator instead of that of the 

shell company registrant. The use of the 

shell company registrant, which has 

nominal activity, for the denominator in 

materiality tests under current rules 

results in limited to no sliding scale for 

business acquisitions, including those 

made by the target company that will be 

the predecessor to the shell company 

because every acquisition would be 

significant and thus require financial 

statements. The adopted amendment 

may alleviate compliance burdens to the 

extent that it would no longer require 

inclusion of financial statements of 

acquired businesses or real estate 

operations that formerly would have 

been in excess of a significance test in 

Rule 1–02(w). 

Rule 15–01(d)(2) requires a shell 

company that omits from a registration 

statement or proxy statement the 

financial statements of a recently 

acquired business or real estate 

operation that is not or will not be its 

predecessor pursuant to Rule 3– 

05(b)(4)(i) or 17 CFR 210.3–14(b)(3)(i) of 

Regulation S–X to file those financial 

statements in a Form 8–K by the later of 

the filing of the Item 2.01(f) Form 8–K 

or 75 days after consummation of the 

acquisition.1419 This amendment will 

both harmonize the timing with that in 

the IPO setting and alleviate ambiguity 

regarding the timing in which these 

financial statements are required to be 

filed, which we expect will facilitate 

compliance for the registrant. 

Additionally, this amendment should 

help ensure that investors receive 

predictable and timely disclosure about 

the acquired business, facilitating better 

informed capital market decisionmaking. 


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1420See Securities Act Rule 408(a); Exchange Act 

Rule 12b–20. 1421Letters from Freshfields, Vinson & Elkins. 

As a result of these final amendments, 

we expect registrants’ compliance 

burden will likely be reduced. 

Although, the final amendments to the 

significance test may reduce the 

information available to investors about 

business acquisitions by the target 

company that will be the predecessor to 

the shell company, it may also reduce 

investors’ information processing costs 

by focusing on financial statements of 

acquired businesses that are significant 

rather than those of all acquired 

businesses. We also believe any 

potential costs to investors as a result of 

decreases in disclosure may be 

mitigated by the fact that registrants 

must otherwise disclose material 

information about the acquisition that is 

necessary to make the required 

statements not misleading.1420

Therefore, we believe that investors will 

still be presented with all the salient 

information required to make informed 

investment decisions. 

e. Rule 15–01(e) Financial Statements of 

a Shell Company Registrant After the 

Combination With Predecessor 

Rule 15–01(e) allows a registrant post 

combination to exclude the preacquisition financial statements of a 

shell company (including a SPAC) for 

periods prior to the business 

combination that results in the 

combined entity no longer being a shell 

company once the following conditions 

have been met: (1) the financial 

statements of the predecessor, as that 

term is used in financial reporting, have 

been filed for all required periods 

through the acquisition date, and (2) the 

financial statements of the combined 

entity registrant include the period in 

which the acquisition was 

consummated, which would also 

include the accounting for the business 

combination. In the vast majority of 

cases, the target is a predecessor 

business, and therefore, in effect, this 

rule requires historical financial 

information for the shell and target 

companies up to and including the 

acquisition, after which the financial 

statements of the shell can be omitted, 

because at that point they are not 

expected to continue providing investor 

relevant information (at least not 

beyond the extent to which they are 

reflected in the registrant’s financials). 

Rule 15–01(e) has been revised from the 

proposal to clarify that similar 

requirements apply in cases where the 

target acquires the shell company. This 

will, in effect, apply the same 

requirement for reporting SPAC 

financials post-combination regardless 

of the structure of the de-SPAC 

transaction. 

It is possible that Exchange Act Rule 

12b–20 or Securities Act Rule 408(a), 

which both require disclosure of 

additional information ‘‘necessary to 

make the required statements, in the 

light of the circumstances under which 

they are made, not misleading,’’ could 

prompt firms to include these financials 

notwithstanding the newly final Rule 

15–01(e), as mentioned by several 

commenters.1421 However, under the 

baseline, the decision to disclose these 

financials comes from the SPAC 

management and could result in fewer 

disclosures than desired by investors. 

Thus, requiring the disclosure of SPAC 

financials as adopted will provide a 

consistent set of information for 

investors to use in their decisionmaking. Further, it will harmonize such 

disclosures across SPACs, allowing for 

more meaningful comparison. To the 

extent that SPAC financials are already 

known, and relatively less complex than 

those for the target operating company, 

we expect the additional cost of 

providing such financials to be limited 

(compared to relying on existing 

materiality discretion on behalf of the 

SPAC). 

Rule 15–01(e) should reduce 

disclosure requirements for, and 

associated costs of disclosing, 

information that may no longer be 

relevant or meaningful to investors 

when the pre-business combination 

financial statements of the shell 

company are included in previous 

filings and the historical financial 

statements of the shell company likely 

are no longer representative of the 

combined company. To the extent that 

this rule is consistent with existing 

practice, whereby after a reverse 

recapitalization a registrant may omit 

historical SPAC financial statements 

once the financial statements of the 

combined company were reflected in a 

periodic filing, we do not expect this 

rule to result in a significant change in 

disclosure behavior. In addition, to the 

extent that the final rule extends the 

practice to forward acquisitions, we 

expect the final rule will reduce 

compliance costs related to continued 

filing of previous year financial 

statements of a shell company. Investors 

may also benefit from the increased 

efficiency in processing post-business 

combination filings that exclude 

uninformative historical SPAC 

financials. 

f. Other Amendments 

We are adopting an amendment to 

Item 2.01(f) of Form 8–K, which will 

apply to all shell companies, that 

clarifies that the information required 

by Item 2.01(f) of Form 8–K should 

relate to the ‘‘acquired business that is 

its predecessor’’ and not the 

‘‘registrant,’’ as currently stated in the 

Form 8–K. This amendment is intended 

to eliminate any potential 

misunderstanding as to the entity for 

which Item 2.01(f) disclosure is 

necessary. The increased clarity may 

reduce registrants’ compliance costs to 

the extent there is currently any 

confusion. In turn, investors may also 

benefit from the timely disclosure of 

information about an ‘‘acquired 

business that is the predecessor’’ due to 

registrants’ more consistent application 

of Item 2.01(f). We are also adopting 

revisions to Item 2.01(f) to Form 8–K 

stipulating that when the predecessor 

meets the conditions of an EGC, the 

registrant does not need to present 

audited financial statements of the 

predecessor for periods prior to the 

earliest of those presented in the deSPAC registration, proxy, or information 

statement of the registrant. This 

amendment will harmonize the required 

disclosures of Form 10 information with 

the requirements of Rule 15–01(b) and 

should reduce registrants’ compliance 

costs to the extent they were required to 

produce a greater number of years of 

audited financial statements under the 

baseline. 

We are also adopting amendments to 

Rules 3–01, 8–02, and 10–01(a)(1) of 

Regulation S–X to clarify that the 

requirement of ‘‘balance sheets’’ would 

apply to both the registrant and its 

predecessors. Because these 

amendments codify existing financial 

reporting practices necessary for a 

complete set of financial statements, 

they should not impact registrants’ 

compliance costs, and should reduce 

uncertainty regarding regulatory 

requirements. 

4. Enhanced Projections Disclosure 

(Amendments to Item 10(b) of 

Regulation S–K) 

Item 10(b) of Regulation S–K sets 

forth the Commission’s views on 

important factors to be considered in 

formulating and disclosing projections 

in filings with the Commission. The 

final amendments update this guidance, 

broadening the scope of covered 

projections and adding detail on the 

formatting of disclosed projections. 

More specifically, the final amendments 

state that the guidelines also apply to 

projections of future economic 


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1422See Anne Beyer, Daniel A. Cohen, Thomas Z. 

Lys, & Beverly R. Walther, The Financial Reporting 

Environment: Review of the Recent Literature, 50 J. 

Acct. & Econ. 296, 296–343 (2010) (employing a 

sample from 1994 to 2007 to show how 

management forecasts provide over half of 

accounting-based information to the market). 

1423See Claude Francoeur, Yuntian Li, Zvi 

Singer, & Jing Zhang. Earnings Forecasts of Female 

CEOs: Quality and Consequences, Rev. Acct. Stud. 

(2022). The authors of the study obtained the 

management earnings forecast data from IBES. IBES 

is a database that includes quantitative (numeric) 

company earnings forecasts collected from press 

releases and transcripts of corporate events. To the 

extent that some of the management earnings 

forecasts in the IBES database are not included in 

SEC filings, these figures may overstate the activity 

that would be affected. However, because the study 

sample is drawn from a period after the adoption 

of Regulation FD, we believe the likelihood an IBES 

record would not also be present in an SEC filing 

is low. It is more likely that these figures may 

understate the number of affected projections, 

because the database does not include all public 

reporting companies and because management may 

provide financial projections that are not captured 

by the IBES database. See also Zahn Bozanic, 

Darren T. Roulstone & Andrew Van Buskirk, 

Management Earnings Forecasts and Other 

Forward-looking Statements, 65 J. Acct. & Econ. 1 

(2018) (indicating that approximately 33% of Form 

8–K filings of earnings announcements include at 

least one quantitative forecast). 

1424While, in the extreme case, the interaction 

between the adopted definitions of ‘‘blank check 

company’’ under the PSLRA and jurisdictional 

requirements for certain forward-looking 

disclosures may disincentivize companies from 

engaging in de-SPAC transactions which, as 

discussed below, could affect capital formation, it 

is not expected to affect the efficiency of those 

transactions that do occur. 

1425For example, SPAC sponsors could set up 

structures that are more or less dilutive to investors 

Continued 

performance of persons other than the 

registrant, such as the target company in 

a business combination transaction, that 

are included in the registrant’s filings. 

The amendments to Item 10(b) also state 

that projections that are not based on 

historical financial results or 

operational history should be clearly 

distinguished from those that are. In 

addition, the final amendments state 

that it generally would be misleading to 

present projections that are based on 

historical financial results or 

operational history without presenting 

such historical financial results or 

operational history with equal or greater 

prominence. Finally, for projections that 

include non-GAAP financial measures, 

the amendments to Item 10(b) state that 

the presentation should include a clear 

definition or explanation of the nonGAAP financial measures, a description 

of the most closely related GAAP 

financial measure, and an explanation 

why the non-GAAP measure was 

selected instead of a GAAP measure. 

Due to these final amendments, 

investors should gain additional 

information and context to help them 

evaluate the reasonableness of the 

projections and make more informed 

investment decisions. For example, the 

final amendments related to historical 

financial results or operational history 

could inform investors about potential 

biases in the financial projections and 

help them more efficiently process the 

underlying assumptions, thereby 

potentially improving their investment 

decisions.1422 Also, the greater 

consistency in the contextual and 

supporting historical information for 

projections should aid comparability 

across registrants, further benefiting 

investors. These benefits could be 

mitigated, however, to the extent that 

registrants are already providing this 

information or including projections of 

future economic performance that do 

not follow some or all of the revised 

guidance. A study of management 

earnings forecasts by public companies 

from 2000 to 2018 found that 

management provided earnings 

forecasts in approximately 31% of the 

firm-year observations comprising the 

sample.1423

In addition, to the extent that 

registrants have not previously applied 

the Commission’s guidance in Item 

10(b) to third-party projections included 

in the registrant’s filings and choose to 

do so as a result of the final 

amendments, investors may benefit 

from improved presentation with 

respect to any third-party projections in 

a registrant’s filing. 

To the extent that registrants follow 

the guidance in the amendments to Item 

10(b), the incremental compliance costs 

are likely to be limited. Registrants 

should already have information about 

historical financial results or 

operational history and GAAP financial 

measures and should be able to easily 

obtain this information in connection 

with any included third-party estimates. 

C. Effects on Efficiency, Competition, 

and Capital Formation 

1. Efficiency 

The final rules and amendments 

should enhance and standardize 

disclosure about specific aspects 

inherent to the SPAC structure at both 

the SPAC IPO stage and the de-SPAC 

transaction stage. Requiring the SPAC 

and the target company to provide such 

disclosure will provide market 

participants more information that is 

likely relevant to voting, redemption, 

and investment decisions. The final 

rules will also improve the 

standardization and comparability of 

disclosures through changes to the 

disclosure formatting and presentation, 

which should make it easier for 

investors to efficiently process 

information about SPACs and for market 

prices to reflect such information. 

Together we expect these changes to 

result in more efficient prices and 

deployment of invested capital. 

The final rules, by adopting new 

definitions of ‘‘blank check company’’ 

under the PSLRA, should incentivize 

blank check companies that are not 

penny stock issuers and underwriters to 

exercise greater care to ensure any 

forward-looking disclosures are 

reasonable, increasing efficiency. The 

final rules regarding shell company 

business combination transactions (e.g., 

Rule 145a) would increase the 

likelihood that the protections of the 

Securities Act consistent with those 

applicable to traditional IPOs are made 

available to investors, such as liability 

under the Securities Act and receipt of 

a Securities Act registration statement. 

Overall, we expect that the effects of the 

new definitions of ‘‘blank check 

company’’ and the requirements 

regarding shell company business 

transactions will provide investors with 

more consistent access to more reliable 

information when making their 

investing decisions, which should lead 

to an increase in price discovery and 

market efficiency. It is possible a SPAC 

or other blank check company that is 

not a penny stock issuer may be 

dissuaded from providing forwardlooking disclosures due to increased 

costs and heightened liability concerns, 

leaving investors with less information, 

offsetting some efficiency gains.1424

2. Competition 

By improving the informational 

environment at the SPAC IPO and the 

de-SPAC transaction stages through 

changes in disclosure requirements, we 

expect the final rules will allow 

investors to make better informed 

investment decisions which should 

encourage greater competition among 

SPAC sponsors, which would further 

benefit SPAC investors. For example, by 

increasing comparability through 

standardization of the disclosures 

provided regarding SPAC IPOs and deSPAC transactions, the final rules 

should lead to improved investor 

awareness, greater transparency, and 

lower search costs. These improvements 

to the information available to investors 

should allow them to better differentiate 

between SPACs based on factors the 

investors deem important (such as costs 

or fees), and in response SPAC sponsors 

may be forced to compete for those 

better informed investors by offering 

better terms such as lower costs.1425


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14296 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

or adjust any forfeiture of their promote used to 

induce investors not to redeem. 

1426Reductions in SPAC formation and de-SPAC 

mergers could result from increased costs to deSPAC transactions due to differential liability and 

disclosure requirements compared to non-SPAC 

acquirers or other methods of accessing public 

markets. For example, the new definitions of ‘‘blank 

check company’’ under the PSLRA may interact 

with existing jurisdictional requirements (such as 

any requirements to provide projections) which 

could impose significant additional liability costs 

on de-SPAC transactions. 

1427See letter from Virtu. 

1428See, e.g., letters from National Venture 

Capital Association (June 13, 2022); Managed Funds 

Association; I-Bankers Securities, Inc. (June 24, 

2022). 

1429To provide a sense of magnitude, see letter 

from Committee on Capital Markets Regulation 

which presents data suggesting that from 2017 to 

2021, there were roughly 3 de-SPAC transactions 

for every 10 traditional IPOs. See also letter from 

Committee on Capital Markets Regulation, 

suggesting differences between SPACs and 

traditional IPOs on dimensions of size and industry 

of firms taken public. To the extent that the SPAC 

and IPO markets appeal to different firms, it is 

possible some firms deterred from going public via 

de-SPAC transaction will not substitute to an 

alternative form of accessing the public market. 

These improvements to the 

informational environment could also 

improve competition between SPACs 

and other investment avenues generally, 

further improving overall capital 

formation. For example, to the extent 

that the final rules lead to shell 

company mergers (including de-SPAC 

transactions) being more attractive to 

investors, other capital raising avenues 

that target companies may consider 

(e.g., traditional IPOs) may experience 

greater competitive pressure. 

A reduction in shell company 

business combinations or activity in the 

SPAC market could reduce competition 

between SPAC sponsors or for 

investment opportunities in target 

companies.1426 Such a reduction could 

result in higher costs for SPAC 

investors, depending on the elasticity of 

those costs. For example, SPAC 

promoters may offer less attractive terms 

to SPAC investors. Fewer SPACs might 

also lower competitiveness in the 

traditional IPO market, as companies 

that wish to go public may see 

diminished alternatives to IPOs. 

3. Capital Formation 

Enhanced disclosure at both the SPAC 

IPO and the de-SPAC stages, combined 

with a stronger incentive to perform 

better due diligence at the de-SPAC 

transaction stage, should improve 

investor protection at both stages, as 

should the rules and amendments for 

shell company mergers. For example, 

Rule 145a will help shareholders of 

reporting shell companies more 

consistently receive the protections of 

the Securities Act in business 

combinations involving reporting shell 

companies, regardless of the transaction 

structure, which should reduce adverse 

selection and improve the availability 

and reliability of information for 

investors, incentivizing more investors 

to invest in reporting shell companies, 

including SPACs, thus enhancing 

capital formation. 

If the final rules and amendments 

create significant costs for shell 

companies, including SPACs, this may 

reduce the number of private companies 

that go public through shell companies, 

including through de-SPAC 

transactions, and may reduce the overall 

number of companies that choose to go 

public. For example, one commenter 

asserted that the proposed rules would 

‘‘overregulate SPACs to such a degree 

that they will no longer be viable 

vehicles for companies to access the 

public markets.’’ 1427 Other commenters, 

expressing similar concerns, noted that 

SPACs have been an important way for 

younger and more ‘‘innovative’’ 

companies to access public capital 

markets.1428 Further, the new 

definitions of ‘‘blank check company’’ 

under the PSLRA may interact with 

existing jurisdictional requirements 

(such as any requirements to provide 

projections) which could impose 

significant additional costs on de-SPAC 

transactions. As a result, SPACs may 

adopt practices they believe will 

minimize their liability or other costs, 

which could result in them providing 

less information to investors, or, in the 

extreme, forgoing de-SPAC transactions 

they otherwise believe would be 

beneficial, which could harm capital 

formation. 

In response to these comments and 

concerns, and as previously discussed, 

the final rules include provisions that 

reduce expected compliance costs 

relative to the proposal. However, given 

the potential increase in the cost of 

going public through a shell company 

merger, such as a de-SPAC transaction, 

compared to the current baseline, it is 

possible that some private companies 

could consider using the traditional IPO 

channel or a merger with a non-shell 

company as a more cost-effective 

alternative. We are not able to estimate 

how many companies would consider 

these alternatives if the cost of the 

overall SPAC transaction structure 

increases. It is possible, however, that a 

significant increase in the cost of shell 

company mergers and de-SPAC 

transactions could deter some private 

companies from going public and, thus, 

potentially reduce overall public 

offering activity and capital 

formation.1429 Any reduction in public 

offering activity, however, could be 

offset by an increase in investor trust in 

capital markets. 

D. Reasonable Alternatives 

1. Disclosure-Related Rules 

i. Require Disclosure of Policies and 

Procedures That Address Conflicts of 

Interest 

As an alternative to Item 1603, we 

considered whether to adopt a 

complementary requirement to describe 

or to file as an exhibit any policies and 

procedures used or to be used by a 

SPAC or by a target company to 

minimize potential or actual conflicts of 

interest related to disclosures provided 

in response to Items 1603(b) or to 

describe any SPAC policies and 

procedures related to duties of SPAC 

officers or directors owed to other 

companies in connection with 

disclosure required under Item 1603(c). 

We considered that such information 

could assist investors in gauging the 

economic significance, or lack thereof, 

of the various conflicts of interest given 

the presence, absence, and likely degree 

of effectiveness of the policies and 

procedures designed to address or 

ameliorate them. We also considered, on 

the other hand, that requiring this 

information would increase compliance 

costs for SPACs and target companies 

and could cause some of these 

companies to adopt policies and 

procedures that would not be efficient 

or cost-effective given their particular 

organizational structure and determined 

not to require this information in part 

for those reasons. Further, our 

determination not to adopt such a 

requirement was also based on our view 

that there are incentives to provide such 

disclosure voluntarily, as these 

disclosures would indicate to investors 

the degree to which conflicts of interest 

may be ameliorated. 

ii. Certain Reports, Opinions, or 

Appraisals 

We are requiring, in connection with 

de-SPAC transactions, the filing of 

certain reports, opinions (other than an 

opinion of counsel), or appraisals 

provided to the SPAC or a SPAC 

sponsor materially relating to any 

determination described in Item 

1606(a), the approval of the de-SPAC 

transaction, the consideration or the 

fairness of the consideration to be 

offered to security holders of the target 

company in the de-SPAC transaction, or 

the fairness of the de-SPAC transaction 

to the SPAC, its security holders or 

SPAC sponsor (Item 1607) as exhibits to 

registration statements and schedules 

(or as part of the schedule if the 


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1430See supra note 665 (income statement items 

such as ‘‘Interest earned on marketable securities 

held in trust account’’ and ‘‘Unrealized gain on 

marketable securities held in trust account’’ are 

generally not revenue for SPACs). 

1431See Jenny Zha Giedt, Modelling Receivables 

and Deferred Revenues to Detect Revenue 

Management, 54 Abacus 181 (2018) (focusing on 

the SEC Accounting and Auditing Enforcement 

Releases, i.e., AAER, from 1982 to 2016, and 

documenting that 47% of all financial 

misstatements are related to revenue). 

1432The Commission’s EDGAR electronic filing 

system generally requires filers to use ASCII or 

HTML for their document submissions, subject to 

certain exceptions. See EDGAR Filer Manual 

(Volume II) version 67 (Sept. 2023), at 5–1; 17 CFR 

232.301 (incorporating EDGAR Filer Manual into 

Regulation S–T). See also 17 CFR 232.101 (setting 

forth the obligation to file electronically on 

EDGAR). 

1433See supra section VIII.B.1.ii.d. 

schedule does not have exhibit filing 

requirements) filed in connection with a 

de-SPAC transaction. We are also 

requiring disclosures summarizing such 

report, opinion, or appraisal or any 

negotiation or report by an unaffiliated 

representative on behalf of unaffiliated 

security holders. We are also requiring 

certain additional disclosures, such as 

for example, information about who 

prepared the report, opinion, or 

appraisal and how they were selected. 

As an alternative, we considered 

requiring disclosure of only a summary 

of the reports, opinions, appraisals, and 

negotiations (without the requirement 

that the reports, opinions, and 

appraisals be filed). We considered that 

this could avoid costs of additional 

compensation third parties may require 

for providing reports that are suitable 

for public disclosure. At the same time, 

this alternative would reduce the 

benefits of the disclosure, as investors 

and market participants would have less 

information available to assess the 

quality and robustness of the analysis 

underlying such report, opinion, or 

appraisal. 

iii. Re-Determine Smaller Reporting 

Company (SRC) Status of a PostBusiness Combination Company 

Without a Public Float Test 

As another alternative, we considered 

whether the re-determination for SRC 

status of the combined company 

following a de-SPAC transaction should 

require only a re-measurement of the 

revenue component of the SRC test and 

not its public float component. 

Generally, SRC status is re-determined 

on an annual basis at the end of the 

second fiscal quarter based on the 

issuer’s public float on the last day of 

the second fiscal quarter, and, if there is 

no public float or there is a public float 

of between $250 million or more and 

$700 million, based as well on a 

determination of whether the annual 

revenues as of the most recently 

completed fiscal year for which audited 

financial statements are available are 

less than $100 million (where greater 

annual revenues than $100 million 

causes loss of SRC status). Revenues of 

the combined company may be more 

relevant to SRC status than public float 

because, generally, the target company 

has generated revenue while the SPAC 

has not done so.1430

Accordingly, the revenue test may be 

the more determinative factor than the 

public float test in determining whether 

the combined company following a deSPAC transaction remains an SRC 

because, based on staff experience, the 

public float of most SPACs and 

subsequent combined companies 

typically is between $250 and $700 

million, which exceeds the public float 

threshold for SRC status, unless the 

company’s revenue is under $100 

million. Also, the public float 

component of this test is measured as of 

the last business day of the issuer’s most 

recently completed second fiscal 

quarter. Given that the public float remeasurement likely would not occur at 

the end of the second fiscal quarter 

when the annual public float 

measurement occurs, under the final 

rule the combined company may have 

to measure its public float more than 

one time during the same fiscal year, 

which may impose additional burdens 

for the company as compared to an 

alternative of using only revenue as the 

basis for determining SRC status 

following the de-SPAC, in which case 

public float would only need to be 

measured once during the annual redetermination period. 

We considered, however, that 

compared to joint determination with 

the public float, revenue, if used as a 

sole basis of the significance test, may 

be subject to a greater degree of 

managerial discretion or 

manipulation.1431 Further, it could 

result in, for example, firms with 

revenue below the threshold but public 

float above the maximum threshold 

qualifying for SRC status and the 

resultant lower disclosure requirements. 

Because companies with greater public 

float have greater potential impacts on 

markets, such an allowance for large 

public float companies to qualify for 

SRC status due solely to their revenues 

being below the threshold value could 

have commensurately large economic 

costs. Thus, we determined it is 

appropriate that these companies 

should take both the public float and 

total revenue into account in redetermining SRC status following the 

consummation of a de-SPAC transaction 

and determined not to adopt this 

alternative. 

iv. Structured Data Requirement 

As another alternative, we considered 

whether to change the scope of the 

Inline XBRL tagging requirements for 

the SPAC disclosures, such as by 

excluding certain subsets of registrants 

or disclosures. For example, the tagging 

requirements could have excluded the 

SPAC IPO disclosures. Under such an 

alternative, SPACs would have 

submitted IPO disclosures in 

unstructured HTML or ASCII and would 

not incur Inline XBRL compliance costs 

until their first periodic filing on Form 

10–Q, 20–F, or 40–F.1432 This would 

have made it incrementally easier for 

SPACs to consummate an IPO. 

However, narrowing the scope of the 

tagging requirements, whether based on 

filing, offering size, or other criteria, 

would have diminished the extent of 

any informational benefits that would 

accrue as a result of the adopted 

disclosure requirements by making the 

excluded disclosures comparatively 

costlier to process and analyze. Thus, 

we believe it is appropriate to require 

Inline XBRL for all SPAC disclosures, 

rather than exclude particular subsets of 

registrants or disclosures. 

We also considered requiring only the 

quantitative SPAC-related disclosures to 

be tagged in Inline XBRL. Excluding 

qualitative disclosures from the tagging 

requirements could have provided some 

incremental cost savings for registrants 

compared to the rule as adopted, 

because incrementally less time would 

have been required to select and review 

the particular tags to apply to 

quantitative disclosures. However, we 

expect these incremental cost savings 

would have been low because SPACs 

are subject to similar Inline XBRL 

requirements, including requirements to 

tag quantitative and qualitative 

disclosures, in other Commission 

filings.1433 The alternative would not 

impact the fixed startup costs associated 

with Inline XBRL tagging and would 

instead only remove the modest variable 

cost associated with applying additional 

tags to text blocks within an already 

tagged filing. 

Moreover, narrowing the scope of 

tagging requirements to exclude 

qualitative information would have 

diminished the extent of informational 

benefits that would accrue to investors 

by inhibiting the efficient extraction and 

searching of narrative SPAC-related 

disclosures (e.g., disclosures regarding 

conflicts of interest, fairness 

determinations, and financial 


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1434To illustrate, without Inline XBRL, using a 

search string such as ‘‘dilution’’ to search through 

the text of all de-SPAC filings, so as to determine 

the extent to which dilutive effects are among the 

material factors being considered by SPACs at 

arriving at fairness determinations, could return 

many narrative disclosures outside of the fairness 

determination disclosure required by Item 1606(b) 

of Regulation S–K, such as disclosures in the risk 

factors section or in the description of stock 

incentive plans. However, when Inline XBRL is 

used, it enables a user to search for the term 

‘‘dilution’’ exclusively within the fairness 

determination disclosure, thereby likely reducing 

the number of irrelevant results. 

1435See letter from XBRL US. 

1436See letters from NASAA; Vinson & Elkins; 

CII; Michael Klasuner, Michael Ohlrogge, and 

Harald Halbhuber. 

1437See Klausner, Ohlrogge & Ruan, supra note 

18. 

1438See Michael Klausner, Michael Ohlrogge & 

Harald Halbhuber, Net Cash Per Share: The Key to 

Disclosing SPAC Dilution, 40 Yale J. on Reg. 18, 28 

(2022). 

1439Letter from Michael Klausner, Michael 

Ohlrogge, and Harald Halbhuber. 

1440See letter from White & Case (‘‘the calculation 

of pro forma net tangible book value per share in 

accordance with U.S. GAAP inevitably produces a 

deficit and remains the same constant figure across 

any assumed redemption thresholds because the 

metric solely takes into account the non-redeemable 

[‘‘founder shares’’], which are classified as 

permanent equity, and none of the public shares, 

which are classified as temporary equity.’’). 1441Letters from Vinson & Elkins, White & Case. 

projections), thus creating the need to 

manually review search results drawn 

from entire documents to find these 

disclosures.1434 Such an alternative 

would have also inhibited the automatic 

comparison of narrative disclosures 

against prior periods. It also may have 

been harder for investors to perform a 

targeted assessment of a filing for 

particular types of narrative SPACrelated disclosures because they would 

have needed to assess the entire filing 

for relevant information. Thus, we 

believe it is appropriate to include 

qualitative disclosures within the scope 

of the tagging requirement. 

With respect to the compliance date 

for tagging requirements, we could have 

added a separate phase-in period for 

SRCs and FPIs, as one commenter 

suggested.1435 However, both SRCs and 

FPIs are subject to Inline XBRL tagging 

requirements for other disclosures, so 

we believe any burden reduction for 

SRCs and FPIs arising from a separate 

phased-in compliance date would 

therefore likely be minimal. Thus, we 

do not believe it is necessary to provide 

a separate phased-in compliance date 

for SRCs and FPIs to comply with the 

tagging requirements. We note, 

however, that both SRCs and FPIs (along 

with other filers) will be subject to a one 

year phased-in compliance date under 

the final rules. 

v. Dilution Disclosure Measurement 

Alternatives 

As an alternative to disclosure of net 

tangible book value, as adjusted, to 

capture dilution incurred by nonredeeming shareholders, various 

commenters suggested a measure based 

on the net cash per share held by the 

SPAC prior to the de-SPAC 

transaction.1436 These comments 

generally reflect the desire for dilution 

disclosures to capture a measure of how 

much liquidity financing (in the form of 

cash) is transferred to the target at the 

de-SPAC transaction.1437 To this end, 

the net cash measure suggested by 

commenters would be calculated as: 1438

total cash (from SPAC public 

shareholders, forward purchase 

agreements (FPA), and PIPE 

investments) less cash expenses, less the 

fair value of outstanding warrants and 

other equity derivatives. This measure 

would be scaled to be a per share value 

by dividing the former quantity by the 

sum of public shares, founder shares, 

PIPE and FPA shares, shares issuable 

under rights according to terms and 

agreements, and any other shares issued 

up to the point of the merger. Notably, 

this measure does not include shares 

issued to target shareholders as part of 

the merger agreement. 

We believe that the net tangible book 

value as adjusted measure that we are 

adopting and the net cash per share 

alternative both generally capture 

expectations of the remaining amount of 

financing to be provided by the SPAC in 

the merger transaction, or, according to 

one commenter, ‘‘of the $10 that I am 

paying per share, how much will 

actually be invested in the post-merger 

company?’’ 1439 The material difference 

between the two measures is in their 

treatment of equity-classified awards 

and shares issuable by rights. While 

some comment letters highlighted that 

prior dilution disclosures (e.g., those 

required by Item 506) omitted certain 

components (such as warrants and other 

derivative securities), we note that the 

dilution measure as adopted accounts 

for them when classified as liabilities, 

and generally to the same extent as the 

suggested alternative measure, although 

we acknowledge that excluding from net 

tangible book value the value of 

warrants classified as equity may result 

in net tangible book value showing less 

cash dilution than a net cash per share 

measure. Further, the net tangible book 

value as adjusted measure that we are 

adopting relies on the specified 

adjustments in Item 1602(c) or 1604(c) 

to derive the value of the firm as if the 

redemptions had occurred, which 

avoids the issue of temporary equity 

being excluded.1440 Therefore, we 

believe that the approach we are 

adopting using the net tangible book 

value as adjusted measure instead of the 

alternative net cash measure sufficiently 

captures the desired idea of cash 

dilution intended by the comments. 

Another alternative to the dilution 

table columns would be to require a 

fixed range of redemption levels, rather 

than the fixed range of feasible 

redemption levels as adopted. Some 

commenters supported such an 

alternative, suggesting the maximum 

redemption column be 100%.1441 The 

advantage of a fixed range, as those 

commenters argued, would be to remove 

the effects of differences in SPAC 

governing documents and agreements, 

because those are liable to change. For 

example, many SPACs put in place a 

maximum redemption limit to maintain 

a minimum net tangible asset reserve, 

but shareholders could vote to waive 

those limits which would change the 

maximum redemption threshold in the 

table as adopted. However, because a 

fixed range would not take into account 

the governing documents and 

agreements specific to that particular 

SPAC, it may omit information that 

could be informative to prospective 

investors from those documents or 

agreements, such as the waiver in this 

example. Further, a fixed range requires 

additional assumptions about future 

outcomes, for example a successful 

proxy vote or breaking non-redemption 

contracts. The threshold in the final rule 

of maximum redemptions rather than 

100% redemptions does not require 

these additional assumptions and does 

include the SPAC specific redemption 

details; thus, it is likely more 

descriptive of possible and expected 

outcomes. To the extent SPAC specific 

features are important to compare across 

SPACs, we expect the tables as adopted 

will provide information that will 

benefit investors more than the 

alternative. 

2. PSLRA Safe Harbor Guidance 

As an alternative to addressing the 

use of forward-looking statements in deSPAC transactions and other business 

combinations involving blank check 

companies that are not penny stock 

issuers by adopting a ‘‘blank check 

company’’ definitions under the PSLRA, 

we could have issued interpretive 

guidance stating that the PSLRA safe 

harbor for forward-looking statements is 

not available because business 

combinations with shell companies that 

are not penny stock issuers are ‘‘initial 

public offerings’’ by target private 

operating companies for purposes of the 

PSLRA. This alternative would avoid 


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1442See 44 U.S.C. 3501 et seq. 

1443See 44 U.S.C. 3507(d), 5 CFR 1320.11. 

1444The paperwork burdens for Regulation S–X, 

Regulation S–K, 17 CFR 230.400 through 230.494 

(Regulation C), 17 CFR 240.12b–1 through 240.12b– 

37 (Regulation 12B), and Regulation S–T are 

imposed through the forms, schedules, and reports 

that are subject to the requirements in these 

regulations and are reflected in the analysis of those 

documents. 

some of the complexity associated with 

defining blank check companies for 

purposes of the PSLRA, but issuing 

guidance rather than a rule may result 

in weaker incentives for SPACs or target 

companies to take greater care in 

preparing forward-looking statements, 

such as projections, in de-SPAC 

transactions and thus result in fewer 

investor protection benefits than the 

rule as adopted. 

3. Expanding Disclosure in Reporting 

Shell Company Business Combinations 

Rule 145a specifies that a sale occurs 

between the shareholders of a reporting 

shell company and the post-transaction 

company in situations where a reporting 

shell company that is not a business 

combination related shell company 

enters into a business combination 

transaction involving another entity that 

is not a shell company. As an 

alternative, instead of deeming all such 

transactions to be a sale that would need 

to be registered under the Securities 

Act, absent an applicable exemption, we 

could expand the disclosure 

requirements applicable to reporting 

shell company business combinations 

such that the disclosure requirements 

would be comparable to that which 

would have been required if the 

transaction was registered under the 

Securities Act. Under this alternative, 

regardless of the document that is filed 

with the Commission (e.g., proxy or 

information statement, Schedule TO, or 

Form 8–K), the set of disclosures 

investors receive would be comparable 

to that which they would receive had a 

registration statement been filed for the 

transaction. This would ensure that the 

reporting shell company’s shareholders 

receive largely the same information 

regardless of how the transaction is 

structured and would reduce regulatory 

arbitrage opportunities stemming from 

different disclosure requirements in 

different documents that may be filed 

with the Commission to report a shell 

company business combination. As a 

registration statement would not 

necessarily be required in all transaction 

structures, the costs of such an 

alternative would also be less than the 

costs of liability associated with the 

purchase and sale of securities and 

potential Securities Act registration of 

shell company business combinations 

under final Rule 145a, to the extent no 

exemption is available for the 

transaction. 

However, merely expanding the set of 

disclosures investors receive regardless 

of transaction structure does not provide 

investors with the same level of 

protection because the liability 

standards differ based on the type of 

filing, if any, that is required. Only by 

specifying that a sale occurs would 

investors necessarily receive all of the 

protections that apply in connection 

with all purchases and sales of 

securities under the Federal securities 

laws, such as the availability of private 

actions under section 10(b) and Rule 

10b–5. In addition, to the extent there is 

not an available exemption for the 

reporting shell company business 

combination, only with Securities Act 

registration do investors receive the full 

panoply of available protections under 

that Act that they would receive in a 

traditional IPO, such as a private right 

of action under section 11. 

4. Enhanced Projections Disclosure 

The amendments to Item 10(b) of 

Regulation S–K present the 

Commission’s updated views on 

projected performance measures and 

include a statement that projections 

based on a non-GAAP financial measure 

should include a clear definition or 

explanation of the non-GAAP measure, 

and a description of the GAAP financial 

measure to which it is most closely 

related. As an alternative to this 

guidance, we could have adopted a rule 

requiring firms, when providing 

projections, to present a reconciliation 

of projections based on a non-GAAP 

measure to those based on the nearest 

GAAP measure. While the 

reconciliation would further help 

investors understand the bases of 

projections involving non-GAAP 

measures, it would likely also increase 

compliance costs and in turn might 

reduce the provision of otherwise useful 

projections. 

IX. Paperwork Reduction Act 

A. Summary of the Collections of 

Information 

Certain provisions of our rules and 

forms that will be affected by the final 

rules contain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995 (‘‘PRA’’).1442 The 

Commission published a notice 

requesting comment on changes to these 

collections of information in the 

Proposing Release and submitted these 

requirements to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with the PRA.1443

The hours and costs associated with 

preparing, filing, and sending the forms 

constitute reporting and cost burdens 

imposed by each collection of 

information.1444 An agency may not 

conduct or sponsor, and a person is not 

required to comply with, a collection of 

information unless it displays a 

currently valid OMB control number. 

Responses to the information collections 

are not kept confidential and there is no 

mandatory retention period for the 

information disclosed. The titles for the 

affected collections of information are: 

• Regulation 14A (Commission Rules 

14a–1 through 14a–21 and Schedule 

14A) (OMB Control No. 3235–0059); 

• Regulation 14C (Commission Rules 

14c–1 through 14c–7 and Schedule 

14C) (OMB Control No. 3235–0057); 

• Schedule TO (OMB Control No. 3235– 

0515); 

• Form S–1 (OMB Control No. 3235– 

0065); 

• Form S–4 (OMB Control No. 3235– 

0324); 

• Form F–1 (OMB Control No. 3235– 

0258); 

• Form F–4 (OMB Control No. 3235– 

0325); 

• Form 8–K (OMB Control No. 3235– 

0060); 

• Form 10–K (OMB Control No. 3235– 

0063); and 

• Form 10–Q (OMB Control No. 3235– 

0070). 

The forms, schedules, and regulations 

listed above were adopted under the 

Securities Act or the Exchange Act. 

These regulations, schedules, and forms 

set forth the disclosure requirements for 

registration statements, annual and 

quarterly reports, proxy and information 

statements, and tender offer statements 

filed by registrants to provide investors 

with information to make informed 

investment and voting decisions. 

Compliance with these information 

collections is mandatory to the extent 

applicable to each registrant. A 

description of the final rules, including 

the need for the information and its use, 

as well as a description of the likely 

respondents, may be found in sections 

II through V above, and a discussion of 

the economic effects of the final rules 

may be found in section VIII above. 

B. Estimates of the Effects of the Final 

Rules on the Collections of Information 

The following PRA Table 1 

summarizes the estimated effects of the 

final rules on the paperwork burdens 

associated with the affected forms and 

schedules. 

BILLING CODE 8011–01–P 


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PRA Table 1. Estimated Paperwork Burden Effects of the Final Rules 

Final Requirement and Effects Affected Forms Estimated Effect Per Affected 

and Schedules Response* 

Item 1602: Registered offerings by SPACs Forms S-1 and • 1 hour increase in compliance 

F-1 burden per Form S-1 or F -1 • Require certain information on the prospectus 

cover page and in the prospectus summary of 

registration statements for offerings by SPACs 

other than de-SP AC transactions. 

• Require enhanced dilution disclosure in these 

registration statements. 
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Final Requirement and Effects Affected Forms Estimated Effect Per Affected 

and Schedules Response* 

Item 1603: SPAC sponsor; conflicts of interest • Forms S-1, F-1, • 2 hour increase in compliance 

• Require certain disclosures regarding a SPAC 

S-4, and F-4 burden per Form S-1, F-1, S-4, 

orF-4 

sponsor, its affiliates, and any promoters of the • Schedules 14A 

SPAC. and 14C • 2 hour increase in compliance 

• Require disclosure regarding conflicts of interest • Schedule TO 

burden per Schedule 14A or 14C 

between: (1) a SPAC sponsor; its affiliates; • 2 hour increase in compliance 

officers, directors, or promoters of a SPAC; or burden per Schedule TO 

target company officers or directors; and (2) 

unaffiliated security holders of the SPAC. 

Item 1604: De-SPAC transactions • Forms S-4 and • 1 hour increase in compliance 

F-4 burden per Form S-4 or F-4 

• Require certain information on the prospectus 

cover page and in the prospectus summary of • Schedules 14A • 1 hour increase in compliance 

registration statements for de-SP AC transactions. and 14C burden per Schedule 14A or 14C 

• Require enhanced dilution disclosure in these • Schedule TO • 1 hour increase in compliance 

registration statements. burden per Schedule TO 

Item 1605: Background of and reasons for the • Forms S-4 and • 1 hour increase in compliance 

de-SP AC transaction; terms of the de-SPAC F-4 burden per Form S-4 or F-4 

transaction; effects 

• Schedules 14A • 1 hour increase in compliance 

• Require disclosure on the background, material and 14C burden per Schedule 14A or 14C 

terms, and effects of the de-SP AC transaction. 

• Schedule TO • 1 hour increase in compliance 

burden per Schedule TO 

Item 1606: Board determination about the de- • Forms S-4 and • 4 hour increase in compliance 

SP AC transaction F-4 burden per Form S-4 or F-4 

• Require disclosure if the law of the jurisdiction in • Schedules 14A • 4 hour increase in compliance 

which the SPAC is organized requires its board of and 14C burden per Schedule 14A or 14C 

directors ( or similar governing body) to 

• Schedule TO • 4 hour increase in compliance determine whether the de-SP AC transaction is 

advisable and in the best interests of the SPAC burden per Schedule TO 

and its security holders or otherwise make any 

comparable determination. 

• Require a discussion of the material factors the 

board of directors ( or similar governing body) 

considered in making the determination. 

• Require certain disclosures as to the approval of 

security holders, the approval of directors, and the 

retention of unaffiliated representatives. 
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Final Requirement and Effects Affected Forms Estimated Effect Per Affected 

and Schedules Response* 

Item 1607: Reports, opinions, appraisals, and • Forms S-4 and • 1 hour increase in compliance 

negotiations F-4 burden per Form S-4 or F-4 

• Require disclosure regarding any report, opinion • Schedules 14A • 1 hour increase in compliance 

( other than an opinion of counsel), or appraisal and 14C burden per Schedule 14A or 14C 

received by a SPAC or a SPAC sponsor from an 

outside party or an unaffiliated representative • Schedule TO • 1 hour increase in compliance 

acting on behalf of unaffiliated security holders burden per Schedule TO 

relating to any determination described in 

response to Item 1606(a), approval of the deSPAC transaction, consideration to be offered in 

the de-SP AC transaction, or fairness of the deSPAC transaction to the SPAC, its security 

holders, or SPAC sponsor. 

• Require disclosure of the qualifications of the 

outside party or unaffiliated representative, 

method of selection, and certain material 

relationships that existed during the past two 

years. 

Item 1608: Tender offer filing obligations • Schedule TO • 3 hour increase in compliance 

• Require additional disclosures in a Schedule TO 

burden per Schedule TO 

filed in connection with a de-SP AC transaction. 

Item 1609: Projections in de-SPAC transactions • Forms S-4 and • 2 hour increase in compliance 

F-4 burden per Form S-4 or F-4 • Require additional disclosures regarding 

projections disclosed in a disclosure document for • Schedules 14A • 2 hour increase in compliance 

a de-SP AC transaction. and 14C burden per Schedule 14A or 14C 

• Schedule TO • 2 hour increase in compliance 

• Form 8-K 

burden per Schedule TO 

• 2 hour increase in compliance 

burden per Form 8-K 

Item 1610: Structured data requirement • Forms S-1, F-1, • 1 hour increase in compliance 

• Require information disclosed pursuant to subpart 

S-4, and F-4 burden per Form S-1, F-1, S-4, 

orF-4 

1600 to be tagged in a structured, machine- • Schedules 14A 

readable data language. and 14C • 1 hour increase in compliance 

• Schedule TO 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 
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Final Requirement and Effects Affected Forms Estimated Effect Per Affected 

and Schedules Response* 

Amendments to Regulation S-X** • Forms S-4 and • 50 hour net decrease in 

F-4 compliance burden per affected 

Amend fmancial statement requirements and the Form S-4 or F-4*** 

forms and schedules filed in connection with • Schedules 14A 

business combination transactions involving shell and 14C • 50 hour net decrease in 

companies ( other than business combination related compliance burden per affected 

shell companies), including de-SPAC transactions, • Schedule TO Schedule 14A or 14C*** 

to align more closely required disclosures about the 

target company with those required in a Form S-1 • 50 hour net decrease in 

or F-1 for an IPO, including: compliance burden per affected 

Schedule TO*** 

• Expanding the circumstances in which target 

companies may report two years, instead of three 

years, of audited fmancial statements (resulting in 

a decrease in burden) (Rule 15-0l(b)); and 

• Further aligning the requirements for audited 

fmancial statements in these transactions with 

those required in a registered IPO (resulting in an 

increase in burden) (Rule 15-0l(c), (d) and (e)). 

Amendments to Align Non-Financial Statement • Forms S-4 and • 8 hour increase in compliance 

Disclosures in De-SP AC Transactions F-4 burden per Form S-4 or F-4 

• Amend the forms and schedules filed in • Schedules 14A • 8 hour increase in compliance 

connection with de-SPAC transactions to align and 14C burden per Schedule 14A or 14C 

more closely required non-fmancial statement 

disclosures about the target company with those • Schedule TO • 8 hour increase in compliance 

required in a Form S-1 or F-1 for an IPO. burden per Schedule TO 

Amendment to Forms S-4 and F-4 • Forms S-4 and • 100 hour increase in compliance 

F-4 burden per Form S-4 or F-4**** • Amend Form S-4 and Form F-4 to require that if 

the securities to be registered on the form will be 

issued by a SPAC or another shell company in 

connection with a de-SP AC transaction, the 

registrants also include the target company. 
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BILLING CODE 8011–01–C 

In addition, we are adopting 

requirements that a post-business 

combination company re-determine 

whether it is an SRC following a deSPAC transaction. Under the final rules, 

a post-business combination company is 

required to reflect this re-determination 

in its filings beginning 45 days after 

consummation of the de-SPAC 

transaction. We estimate that the redetermination of SRC status will result 

in increased burdens in filing Forms 10– 

K, Forms 10–Q, Schedules 14A, 

Schedules 14C, and Forms S–1 for those 

post-business combination companies 

that will lose SRC status, which takes 

into account the increased incremental 

burden in providing disclosures 

pursuant to non-SRC disclosure 

requirements. The following PRA Table 

2 sets forth our estimates regarding the 

increase in compliance burden per filing 

when a post-business combination 

company loses SRC status: 


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Final Requirement and Effects 

Notes: 

Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

* Estimated effect expressed as increase or decrease of burden hours on average and, as applicable, derived 

from Commission staff review of samples of relevant sections of the affected forms. 

** We estimate that there will be a negligible or no change in burden to Form 20-F and Form 8-K as a result of 

the final amendments to Regulation S-X, in that these fmal amendments codify how existing rules are applied 

in practice. 

*** We arrive at an estimate for these amendments to Regulation S-X on the assumption that approximately 

30% of affected responses would require one fewer year of audited fmancial statements under Rule 15-0l(b) 

than under the current rules from registrants that would otherwise have prepared fmancial statements for such 

year. Coupled with an incremental increase in burden for the amendments to Regulation S-X other than 

proposed Rule 15-01 (b ), when this decrease is spread across all affected responses, we arrive at a net burden 

decrease of 50 hours. 

**** The estimated 100 hour increase in burden is based on an estimate of the additional time that a target 

company, as a co-registrant, would spend on preparing disclosures in a Form S-4 or F-4 filed by a SPAC for a 

de-SPAC transaction. 
Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14305 

1445See discussion preceding PRA Table 4 below 

for a brief discussion on the allocation of 

compliance burdens between internal burden hours 

and outside professional costs. 

1446See Proposing Release, section X.C. 

1447We recognize that the costs of retaining 

outside professionals may vary depending on the 

nature of the professional services, but for purposes 

of this PRA analysis, we estimate that such costs 

would be an average of $600 per hour. This is the 

rate we typically estimate for outside legal services 

used in connection with public company reporting. 

1448See Listing Standards for Recovery of 

Erroneously Awarded Compensation, Rel. No. 33– 

11126 (Oct. 26, 2022) [87 FR 73076 (Nov. 28, 2022)]. 

C. Incremental and Aggregate Burden 

and Cost Estimates 

1. Current Inventory Update To Reflect 

$600 per Hour Rather Than $400 per 

Hour Outside Professional Costs Rate 

At the outset, we note that the current 

OMB inventory for the above-referenced 

collections of information reflects an 

average rate of $400 per burden hour 

borne by outside professionals. 

Similarly, in the Proposing Release, the 

Commission used an estimated cost of 

$400 per hour, recognizing that the costs 

of retaining outside professionals may 

vary depending on the nature of the 

professional services.1446 The 

Commission recently determined to 

increase the estimated hourly rate to 

$600 per hour 1447 to adjust the estimate 

for inflation from August 2006.1448 In 

order to more accurately present the 

burden changes as a result of the final 

amendments in the context of the 

current burden inventory, in this section 

IX.C.1 we present updated numbers for 

the current inventory for professional 

cost burden for each of the affected 

collections of information to reflect the 

updated $600 per hour rate where it has 

not yet been reflected in the current 

burden inventory. This update is solely 

derived from the change in the hourly 

rate; it is not a new burden imposed by 

the final amendments. The updated cost 

estimates using the $600 per hour rate 

are set out in PRA Table 3 below. 


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PRA Table 2. Increase in Compliance Burden After Losing SRC Status1445 

Form / Schedule Estimated Increase Estimated Increase in Estimated Increase Estimated 

in Internal Hours Outside Professional in Outside Increase in 

per Filing Hours per Filing Professional Costs Total Hours 

(A) (B) per Filing per Filing 

(C) = (B) x $600 (D) = (A) + (B) 

Form l0-K* 439.00 147.00 $88,200 586.00 

Form l0-Q* 36.57 11.88 $7,128 48.45 

Schedule 14 A** 0.75 0.25 $150 1.00 

Schedule 0.75 0.25 $150 1.00 

14C*** 

Form S-1 * 5.75 17.25 $I0,350 23.00 

Notes: 

* The estimated increases in compliance burdens for Forms l0-K, l0-Q, and S-1 are based on the difference 

between the current estimates for the applicable form for non-SRCs and the estimated burden for SRCs in filing 

the form. We estimate the compliance burden for an SRC in filing these forms using the same methodology as in 

2018 when the Commission amended the "smaller reporting company" definition. See Smaller Reporting 

Company Definition, Release No. 33-l0513 (June 28, 2018) [83 FR 31992 (July IO, 2018)], at section V. 

** In regard to Schedule 14A, we estimate that a company that loses SRC status would experience an increased 

compliance burden of0.75 internal burden hours and a cost of$150 (0.25 professional hours x $600/hour) per 

schedule, based on our estimate of the compliance burden for 17 CFR 229.407(d)(5) and (e)(4) and (5) (Item 

407(d)(5) and (e)(4) and (5) of Regulation S-K), with which SRCs are not required to comply. 

*** Similar to Schedule 14A, we estimate that, in regard to Schedule 14C, a company that loses SRC status 

would experience an increased compliance burden of0.75 burden hours and a cost of$150 (0.25 professional 

hours x $600/hour) per filing, based on our estimate of the compliance burden for Item 407(d)(5) and (e)(4) and 

(5) of Regulation S-K, with which SRCs are not required to comply. 
14306 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1449Throughout this release and as stated earlier, 

we use ‘‘shell company’’ and ‘‘reporting shell 

company’’ in lieu of the phrases ‘‘shell company, 

other than a business combination related shell 

company’’ and ‘‘reporting shell company, other 

than a business combination related shell 

company.’’ 1450We based our estimates, in part, on a review 

of Commission filings over a 10-year period because 

we believe that this longer timeframe would more 

accurately reflect the average number of registration 

statements filed by SPACs and disclosure 

documents for de-SPAC transactions in a given 

year. 

1451Of the estimated 50 Form S–4 filings, we 

expect 30 filings would have been made 

irrespective of Rule 145a and an additional 20 

filings will be made as a result of Rule 145a 

(whereas in the absence of Rule 145a, these latter 

20 filings potentially may have been made on other 

forms, such as Schedule 14A, Schedule 14C, or 

Schedule TO). Similarly, our estimate of eight Form 

F–4 filings is based on four Form F–4 filings that 

we expect would have been made irrespective of 

Rule 145a and four additional filings as a result of 

Rule 145a. 1452Our estimates of proxy statements (4) and 

information statements (2) do not include any 

combined registration/proxy statements or 

combined registration/information statements, 

which are included in the estimates of registration 

statements on Forms S–4 (50) and F–4 (8). 

Additionally, we have changed our estimate of the 

number of proxy statement filings on Schedule 14A 

from the 30 estimated in the Proposing Release to 

four because we expect fewer proxy statements as 

a result of Rule 145a. We have also changed our 

estimate of the number of information statement 

filings on Schedule 14C from four to two because 

we expect fewer information statements as a result 

of Rule 145a. Our estimates of proxy statements and 

information statements are greater than zero 

because, as we discuss in section IV.A, 

notwithstanding Rule 145a, depending on the facts 

and circumstances, an exemption from registration 

could potentially apply, and, because, even where 

a registration statement has been filed, we expect 

some SPACs may still file a stand-alone proxy or 

information statement that is not combined with the 

registration statement. 

1453While the final rules apply Item 1609 to 

projections in a Form 8–K filed pursuant to Item 

1.01, we are unable to estimate the number of such 

filings that may include projections. We are 

estimating as an upward bound that every domestic 

registrant that engages in a de-SPAC transaction 

2. PRA Burden and Cost Estimates 

Resulting From the Final Rules 

Next, we estimate the incremental and 

aggregate increase in paperwork burden 

as a result of the final amendments. 

These estimates represent the average 

burden for all respondents, both large 

and small. In deriving our estimates, we 

recognize that the burdens will likely 

vary among individual respondents 

based on a number of factors, including 

the size and complexity of their 

business. These estimates include the 

time and the cost of preparing and 

reviewing disclosure and filing 

documents. We believe that some 

registrants will experience costs in 

excess of this average and some 

registrants will experience lower than 

the average costs. Our methodologies for 

deriving these estimates are discussed 

below. 

Our estimates represent the burden 

for all SPACs that file registration 

statements with the Commission for 

registered offerings and all registrants 

that file disclosure documents in 

connection with a de-SPAC transaction 

or a business combination involving a 

shell company or a reporting shell 

company.1449 Additionally, our 

estimates take into account an expected 

increase in the number of Securities Act 

registration statements as a result of 

final Rule 145a. Based on a review of 

Commission filings during the period 

2012–2022 and an analysis of the effects 

of the final new rules and 

amendments,1450 the staff estimates 

that: 

• SPACs will file an average of 90 

registration statements each year for 

registered offerings on Form S–1 and 

eight registration statements on Form F– 

1, other than for de-SPAC transactions; 

• Regarding filings made per year in 

connection with de-SPAC transactions, 

we estimate there will be an average of: 

50 registration statements on Form S–4 

and eight registration statements on 

Form F–4; 1451 four definitive proxy 

statements on Schedule 14A; two 

definitive information statements on 

Schedule 14C; 1452 two tender offer 

statements on Schedule TO; and 58 

Current Reports on Form 8–K; 1453 and 


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PRA Table 3: Change in PRA Burden Due to Updated Outside Professional Cost Estimate 

Collection of Current Inventory Updated Professional Increased Burden 

Information Professional Cost Cost Burden(@ Due to Update 

Burden ((tv, $400/hr.) $600/hr.) 

(A) (B) (C) = (B) - (A) 

Schedule 14A $113,410,112 $170,115,168 $56,705,056 

Schedule 14C $8,407,344 $12,611,016 $4,203,672 

Schedule TO $12,333,000 $18,499,500 $6,166,500 

Form S-1 $174,015,643 $261,023,465 $87,007,822 

Form S-4 $675,605,379 $1,013,408,069 $337,802,690 

Form F-1 $32,130,375 $48,195,563 $16,065,188 

Form F-4 $17,013,425 $25,520,138 $8,506,713 

Form 8-K $99,204,430 $148,806,645 $49,602,215 

Form 10-K $1,835,594,519 $2,753,391,779 $917,797,260 

Form 10-Q $410,257,154 $615,385,731 $205,128,577 
Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14307 

may include such disclosure. Accordingly, our 

estimate of 58 Forms 8–K is the sum of the number 

of estimated Form S–4, Schedule 14A, Schedule 

14C, and Schedule TO filings in connection with a 

de-SPAC. We note that, to the extent that a 

registrant prepares responsive disclosure that is 

included in a Form 8–K and is later included in one 

of these filings, the total burden assumed by the 

registrant would be mitigated, which our estimates 

do not reflect. 

1454This estimate represents the upper bound of 

the estimated number of Forms S–4 and F–4 filed 

for these transactions as a result of Rule 145a. See 

supra note 78 (discussing data on non-SPAC reverse 

mergers, including limitations on data for more 

recent years). 

• An average of 20 registration 

statements on Form S–4 and two 

registration statements on Form F–4 will 

be filed each year for business 

combination transactions involving a 

reporting shell company that is not a 

business combination related shell 

company and a non-shell company, 

other than de-SPAC transactions.1454

For purposes of the PRA, the burden 

is allocated between internal burden 

hours and outside professional costs. 

The portion of the burden carried by 

outside professionals is reflected as a 

cost, while the portion of the burden 

carried by the company internally is 

reflected in hours. The following PRA 

Table 4 sets forth the percentage 

estimates we use for the burden 

allocation for each form and schedule, 

consistent with current OMB estimates 

and recent Commission rulemakings. 

We estimate that the average cost of 

retaining outside professionals is $600 

per hour. 

The following PRA Table 5 

summarizes the estimated effects of the 

final new rules and amendments on the 

paperwork burdens associated with the 

affected forms, schedules, and records, 

including those effects related to Rule 

145a, which have been broken out to 

demonstrate the impact of that rule on 

certain forms: 


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PRA Table 4. Standard Estimated Burden Allocation for Specified Collections of 

Information 

Form / Schedule Internal Outside Professionals 

Forms S-1, F-1, S-4, and F-4 25% 75% 

Schedules 14A and 14C 75% 25% 

Schedule TO 50% 50% 

Form 8-K, Form 10-K, and Form 75% 25% 

10-Q 
14308 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

1455This estimate is based, in part, on our 

estimate of the number of de-SPAC transactions in 

which the SPAC is the legal acquirer. 

1456This estimated realization rate is based on the 

same methodology and data set forth in Release No. 

33–10513, section V.D. Though the estimated 

realization rate in Release No. 33–10513 preceded 

the effective date of the amendments to the ‘‘smaller 

reporting company’’ definition in 2018, we expect 

that the current realization rate for eligible 

companies using the scaled SRC disclosure 

provisions to be generally consistent with the 

estimated realization rate in 2018. 

In addition, we estimate that an 

average of 50 fewer post-business 

combination companies following a deSPAC transaction will qualify as SRCs 

than under the current rules until the 

next annual re-determination date.1455

While we cannot predict with certainty 

the number of these post-business 

combination companies, we estimate for 

purposes of our PRA calculations that 

currently all post-business combination 

companies qualify as SRCs following 

de-SPAC transactions in which the 

SPAC is the legal acquirer and that 80% 

of these companies that are eligible to 

use the scaled SRC disclosure 

provisions do so.1456 We estimate that 

these registrants would file, on average, 

one Form 10–K, 1.5 Forms 10–Q, one 

Schedule 14A, 0.1 Schedule 14C, and 

one registration statement on Form S–1 

prior to the next re-determination of 

SRC status. 

The following PRA Table 6 

summarizes the estimated effects of the 

re-determination of SRC status on the 

paperwork burdens associated with the 

affected forms and schedules: 


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PRA Table 5. Calculation of the Incremental Change in Burden Estimates of Current 

Responses Resulting from the Final New Rules and Amendments, Including Certain 

Effects of Rule 145a 

Form/ Number of Estimated Total Estimated Estimated Estimated Increase Total Estimated 

Schedule Estimated Burden Hour Incremental Increase or or (Decrease) in Increase or 

Affected Increase or Increase or (Decrease) in Outside Professional (Decrease) in 

Responses (Decrease) (Decrease) in Internal Burden Hours Outside 

per Affected Burden Hours Hours Professional 

Response Costs 

(A) (B) (C) = (A) x (B) (D) = (C) x (E) = (C) x (F) = (E) x $600 

(Allocation % (Allocation % from 

from PRA Table 4, PRA Table 4, 

Internal) Outside 

Professionals) 

Schedule 4 (30) (120) (90) (30) ($18,000) 

14A 

Schedule 2 (30) (60) (45) (15) ($9,000) 

14C 

Schedule 2 (27) (54) (27) (27) ($16,200) 

TO 

Form S-1 90 4 360 90 270 $162,000 

Form S-4 

(other than 30 70 2,100 525 1,575 $945,000 

145a) 

Form S-4 

(from Rule 40 70 2,800 700 2,100 $1,260,000 

145a) 

Form F-1 8 4 32 8 24 $14,400 

Form F-4 

(other than 4 70 280 70 210 $126,000 

145a) 

Form F-4 6 70 420 105 315 $189,000 

(from Rule 

145a) 

Form 8-K 58 2 116 87 29 $17,400 

Total 244 203 5,874 1,423 4,451 $2,670,600 
Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14309 

The following PRA Table 7 

summarizes the requested paperwork 

burden changes to existing information 

collections, including the estimated total reporting burdens and costs, under 

the final rules. 

BILLING CODE 8011–01–P 


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PRA Table 6. Calculation of the Incremental Change in Burden Estimates of Current 

Responses Resulting from the Re-Determination of SRC Status 

Form/ Number of Estimated Total Estimated Estimated Total 

Schedule Estimated Burden Estimated Increase in Increase in Estimated 

Affected Hour Incremental Internal Outside Increase in 

Responses Increase per Increase in Burden Professional Outside 

* Affected Burden Hours Hours Professional 

Response** Hours Costs 

(A) (B) (C) = (A) X (D) = (C) x (E) = (C) X (F) = (E) x 

(B) (Internal% (Outside $600 

PRA Table Professionals 

4) % PRA Table 

4) 

Schedule 40 1 40 30 10 $6,000 

14A 

Schedule 4 1 4 3 1 $600 

14C 

Form S-1 40 23 920 230 690 $414,000 

Form 10-K 40 586 23,440 17,580 5,860 $3,516,000 

Form 10-Q 60 48.45 2,907 2,180.25 726.75 $436,050 

Total 184 659.45 27,311 20,023.25 7,287.75 $4,372,650 

Notes: 

*Estimated Number of Affected Responses is calculated as: (50 companies) x (.8 usage of scaled disclosure) x 

( applicable incidence of filing relevant form as discussed above, e.g., one for Form 10-K). 

** The figures in Column B (Estimated Burden Hour Increase per Affected Response) are taken from PRA Table 

2, Column D (Estimated Increase in Total Hours per Filing). 
BILLING CODE 8011–01–C 


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PRA Table 7. Requested Paperwork Burden under the Final Rules+ 

Form/ Current Burden, as adjusted* Program Change Request

Schedule Current Current Current Cost Number of Estimated Estimated Increase Annual Bu

Annual Burden Burden, as Estimated Increase or or (Decrease) in Responses 

Responses Hours adjusted* Affected (Decrease) in Outside 

Responses Internal Burden Professional 

** Hours*** Costs**** 

(A) (B) (C) (D) (E) (F) (G) = (A) (H

Schedule 14A 6,369 850,836 $170,115,168 44 (60) ($12,000) 6,369 

Schedule 14C 569 63,048 $12,611,016 6 (42) ($8,400) 569 Schedule TO 1,378 30,834 $18,499,500 2 (27) ($16,200) 1,378 

Form S-1 898 141,978 $261,023,465 130 320 $576,000 898 

Form S-4 588 560,988 $1,013,408,069 70 1,225 $2,205,000 588 

Form F-1 66 26,571 $48,195,563 8 8 $14,400 66 

FormF-4 39 13,999 $25,520,138 10 175 $315,000 39 

Form 8-K 118,387 99,204,430 $148,806,645 58 87 $17,400 118,387 

Form 10-K 8,292 13,988,811 $2,753,391,779 40 17,580 $3,516,000 8,292 

Form 10-Q 22,925 3,098,084 $615,385,731 60 2,180 $436,050 22,925 

Total 159,511 117,979,579 $5,066,957,074 428 21,446 $7,043,250 159,511 

+ Figures in this table have been rounded to the nearest whole number. 

Notes: 

* Current cost burden updated to reflect change in hourly rate of the costs of outside professionals to $600, as reflected in PRA Table 3

** Number of Estimated Affected Responses (Column Din this PRA Table 7) is the sum of affected responses from PRA Tables 5 and 

*** Estimated Increase or (Decrease) in Internal Burden Hours (Column E in this PRA Table 7) is calculated as the sum of the follow

5, Column D (Estimated Increase or (Decrease) in Internal Burden Hours) plus PRA Table 6, Column D (Estimated Increase in Interna

**** Estimated Increase or (Decrease) in Outside Professional Costs (Column Fin this PRA Table 7) is calculated as the sum of the fo

Table 5, Column F (Total Estimated Increase or (Decrease) in Outside Professional Costs) plus PRA Table 6, Column F (Total Estima

Professional Costs). 
Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14311 

1457 5 U.S.C. 601 et seq. 

1458Proposing Release, supra note 7, at 29558– 

29560. 

1459 Item 10(b) sets forth guidelines representing 

the Commission’s views on important factors to be 

considered in formulating and disclosing 

management’s projections of future economic 

performance in Commission filings. 

1460Throughout this release and as stated earlier, 

we use ‘‘shell company’’ and ‘‘reporting shell 

company’’ in lieu of the phrases ‘‘shell company, 

other than a business combination related shell 

company’’ and ‘‘reporting shell company, other 

than a business combination related shell 

company.’’ 

1461See supra section II.I. 

1462See supra sections II through VI. 

1463 5 U.S.C. 601(6). 

1464See discussion of the definition of ‘‘special 

purpose acquisition company’’ in section II.A. 

1465According to data from Dealogic, the vast 

majority of IPOs by SPACs in 2020 and 2021 raised 

more than $50 million and in 2022 all SPAC IPOs 

raised $50 million or more. In 2020, the smallest 

amount raised in a SPAC IPO was $40 million. In 

2021, the smallest amount raised in a SPAC IPO 

was $44 million. In 2022, the smallest amount 

raised in a SPAC IPO was $50 million. 

X. Final Regulatory Flexibility Analysis 

The Regulatory Flexibility Act 

(‘‘RFA’’) 1457 requires the Commission, 

in promulgating rules under section 553 

of the Administrative Procedure Act of 

1946, to consider the impact of those 

rules on small entities. We have 

prepared this Final Regulatory 

Flexibility Analysis (‘‘FRFA’’) in 

accordance with section 604 of the RFA. 

An Initial Regulatory Flexibility 

Analysis (‘‘IRFA’’) was prepared in 

accordance with the RFA and was 

included in the Proposing Release.1458

A. Need for, and Objectives of, the Final 

Rules 

We are adopting new subpart 1600 of 

Regulation S–K and amendments to 

existing forms and schedules to require 

certain disclosures in registered 

offerings by SPACs, including IPOs, and 

in disclosure documents for de-SPAC 

transactions with respect to, among 

other things, compensation paid to 

SPAC sponsors, conflicts of interest, and 

dilution. For de-SPAC transactions, we 

are also adopting final rules that require 

disclosure of a determination of the 

board of directors (or similar governing 

body) of the SPAC whether the de-SPAC 

transaction is advisable and in the best 

interests of the SPAC and its security 

holders if such a determination is 

required by the law of the jurisdiction 

in which the SPAC is organized or 

disclosure of any comparable 

determination that is required under 

such law, additional disclosures about 

the target company, a re-determination 

of SRC status following the completion 

of a de-SPAC transaction, and a 

minimum dissemination period for 

certain disclosure documents in these 

transactions. The final rules apply to, 

depending on the circumstances, 

registration statements on Forms S–1, 

F–1, S–4, and F–4 filed under the 

Securities Act and Schedules 14A, 14C, 

and TO under the Exchange Act. In 

addition, the first filing in which redetermination of SRC status following a 

de-SPAC transaction is reflected may be 

in a Form 10–K or Form 10–Q filing 

under the Exchange Act. The final rules 

also provide that if securities to be 

registered on Form S–4 or F–4 will be 

issued by a SPAC or another shell 

company in connection with a de-SPAC 

transaction, the registrants must also 

include the target company, except that 

in a de-SPAC transaction where the 

target company consists of a business or 

assets, the seller of the business or 

assets is deemed to be a registrant 

instead of the business or assets. 

Further, we are adopting: new 

definitions of ‘‘blank check company’’ 

under the PSLRA such that the safe 

harbor under the PSLRA for forwardlooking information would not be 

available to SPACs and certain other 

blank check companies; updated and 

expanded guidance in Item 10(b) of 

Regulation S–K regarding the use of 

projections in Commission filings; 1459

and requirements to provide additional 

disclosure when projections are 

disclosed in connection with de-SPAC 

transactions. 

In regard to business combination 

transactions involving a reporting shell 

company,1460 we are adopting Securities 

Act Rule 145a that provides, with 

respect to a reporting shell company’s 

shareholders, any direct or indirect 

business combination of a reporting 

shell company involving another entity 

that is not a shell company, is deemed 

to involve an offer, offer to sell, offer for 

sale, or sale within the meaning of 

Securities Act section 2(a)(3). In 

addition, we are adopting amendments 

to the financial statement reporting 

requirements in Regulation S–X for 

transactions involving shell companies. 

The need for and objectives of the 

final rules are discussed in more detail 

in sections II through V above. We 

discuss the economic impact, including 

the estimated costs and burdens, of the 

final rules on all registrants, including 

small entities, in sections VIII and IX 

above. 

B. Significant Issues Raised by Public 

Comments 

In the Proposing Release, we 

requested comment on all aspects of the 

IRFA, including the number of small 

entities that would be affected by the 

proposed rules, the existence or nature 

of the potential impact of the proposals 

on small entities discussed in the 

analysis, how the proposed rules could 

further lower the burden on small 

entities, and how to quantify the impact 

of the proposed rules. While we did not 

receive any comments specifically 

addressing the IRFA, as discussed 

above, one commenter suggested that 

the Commission consider a phased-in 

compliance period for smaller reporting 

companies for the tagging 

requirements.1461 We also received a 

number of comments on the proposed 

rules generally 1462 and have considered 

these comments in developing the 

FRFA. 

C. Small Entities Subject to the Final 

Rules 

The final rules will affect registrants 

that are small entities. The RFA defines 

‘‘small entity’’ to mean ‘‘small 

business,’’ ‘‘small organization,’’ or 

‘‘small governmental jurisdiction.’’ 1463

The regulation at 17 CFR 230.157 

defines an issuer, other than an 

investment company, to be a ‘‘small 

business’’ or ‘‘small organization’’ for 

purposes of the RFA if it had total assets 

of $5 million or less on the last day of 

its most recent fiscal year and is 

engaged or proposing to engage in an 

offering of securities not exceeding $5 

million. The regulation at 17 CFR 

240.0–10(a) defines an issuer, other than 

an investment company, to be a ‘‘small 

business’’ or ‘‘small organization’’ if it 

had total assets of $5 million or less on 

the last day of its most recent fiscal year. 

The final disclosure and other 

requirements applicable to SPACs 

would not apply to issuers that raise 

less than $5 million at the time of their 

IPOs.1464 However, we acknowledge 

that there may be instances where a 

small entity may be affected by the final 

rules, including at the time of a 

subsequent registered offering or at the 

time of a de-SPAC transaction.1465

While the Commission solicited 

comment on the number of SPACs that 

were small entities in such instances, 

we did not receive any feedback on this 

point. We remain unaware of any such 

instances to date. The Commission also 

solicited comment on the number of 

target private operating companies in 

de-SPAC transactions that may be small 

entities, and likewise did not receive 

feedback on this point. As noted in the 

Proposing Release, due to data 

limitations, we are unable to estimate 

the number of potential target private 

operating companies in de-SPAC 

transactions that may be small entities, 


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1466 In this regard, we note that exchange listing 

requirements and provisions in the governing 

instruments of many SPACs, along with how SPACs 

are structured to avoid the application of Rule 419, 

make it less likely that SPACs would merge with 

or acquire a small entity. See supra note 1203 

(regarding exchange requirements that the SPAC 

complete a business combination(s) having an 

aggregate fair market value of at least 80% of the 

value of the net assets in the trust account 

excluding certain costs). 

1467This estimate does not include business 

combination related shell companies. 1468See supra sections II through V. 

1469The final definitions, for purposes of the 

PSLRA, of ‘‘blank check company,’’ final Rule 145a, 

and the final amendments to Regulation S–X are not 

limited to SPACs. See discussion in sections III.E, 

IV.A, and IV.B. 

1470Certain rules we are adopting may provide 

benefits of clarity and simplicity for entities of all 

sizes, as we discuss in sections II through V. 

however, we expect this number to be 

relatively low.1466

In regard to final Rule 145a and the 

final amendments to Regulation S–X, 

we estimate that there are 136 nonSPAC reporting shell companies that are 

small entities.1467 The Commission 

requested comment in the Proposing 

Release regarding the number of private 

operating companies and private shell 

companies that are small entities and 

may engage in a business combination 

transaction but did not receive any 

information on this point. Due to data 

limitations, we remain unable to 

estimate this number. 

D. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements 

We expect that the final disclosure 

and other requirements applicable to 

registrants, including target companies, 

will have an incremental effect on 

reporting, recordkeeping, and other 

compliance burdens for registrants 

(including target companies), including 

small entities. These requirements will 

increase compliance costs for registrants 

(including target companies), and 

compliance with these requirements 

will require the use of professional 

skills, including accounting, legal, and 

technical skills. We generally expect 

that the nature of any benefits and costs 

associated with the final rules to be 

similar for large and small entities. We 

also anticipate that the economic 

benefits and costs likely could vary 

among small entities based on a number 

of factors, such as the nature and 

conduct of their businesses, which 

makes it difficult to project the 

economic impact on small entities with 

precision. The final rules are discussed 

in detail in sections II through V above. 

We discuss the economic effects, 

including the estimated costs and 

burdens, of the final rules on all 

registrants (including target companies), 

including small entities, in sections VIII 

and IX above. 

Final Rule 145a may impose reporting 

or compliance requirements and related 

costs on a small entity to the extent it 

would require such a small entity to 

register the transaction under the 

Securities Act or comply with an 

exemption from registration. 

E. Duplicative, Overlapping or 

Conflicting Federal Rules 

The final disclosure requirements in 

subpart 1600 of Regulation S–K partially 

duplicate and overlap with a number of 

existing disclosure requirements under 

Regulation S–K that are currently 

applicable to SPAC registered offerings 

and in de-SPAC transactions.1468 To the 

extent that the disclosure requirements 

in final subpart 1600 overlap with these 

existing disclosure requirements, a 

registrant would not be required to 

duplicate the resulting disclosure, and 

as such there should not be a 

duplicative or increased burden. As 

discussed in section II.C, if there are 

facts and circumstances that may result 

in required disclosure under a current 

rule being the same as under any of the 

rules we are adopting, then registrants 

could cross-reference rather than repeat 

disclosures. 

Other than these disclosure 

requirements, we believe that the final 

rules and amendments would not 

duplicate, overlap, or conflict with other 

Federal rules. 

F. Agency Action To Minimize Effect on 

Small Entities 

The RFA directs us to consider 

alternatives that would accomplish our 

stated objectives, while minimizing any 

significant adverse impact on small 

entities. Accordingly, we considered 

several alternatives, including the 

following: 

• Establishing different compliance or 

reporting requirements or timetables 

that take into account the resources 

available to small entities; 

• Clarifying, consolidating or 

simplifying compliance and reporting 

requirements under the rules for small 

entities; 

• Using performance rather than 

design standards; and 

• Exempting small entities from all or 

part of the requirements. 

The final rules will enhance and 

clarify information provided to 

investors, including by enabling 

investors to make better informed 

decisions as to whether to purchase 

securities in SPAC registered offerings 

or to purchase or sell SPAC securities in 

secondary trading markets and as to 

voting, investment, redemption, and 

tender decisions in connection with deSPAC transactions. Further, with 

respect to Rule 145a and co-registration 

requirements, as discussed above in 

sections III.C and IV.A, the final rules 

will help ensure that a private operating 

company’s method of becoming a public 

company does not negatively impact the 

protection of investors. Due to the 

nature of SPAC transactions and the 

investor protection concerns discussed 

above, we believe that the final rules are 

equally appropriate for SPACs of all 

sizes that are engaged in a registered 

offering and for SPACs and target 

companies of all sizes that are engaged 

in a de-SPAC transaction because we 

believe investors should receive the 

enhanced protections of the final rules 

regardless of the size of the entity 

engaged in the SPAC transaction. For 

the same reason, we believe that the 

final rules that apply to shell companies 

and/or blank check companies, 

including SPACs, are equally 

appropriate for such shell companies 

and/or blank check companies of all 

sizes.1469 As a result, we do not believe 

that it is appropriate: to adopt different 

compliance or reporting requirements 

for small entities; to clarify, consolidate 

or simplify small entity compliance and 

reporting requirements; 1470 or to 

provide for small entity exemptions. As 

noted above, in our view, a private 

operating company’s method of 

becoming a public company should not 

negatively impact investor protection. 

We believe that exempting certain 

entities based on size from the 

requirements of the final rules would 

mean the benefits discussed above 

would be inappropriately unavailable to 

investors in those registrants. With 

respect to using performance rather than 

design standards, the final rules use 

primarily design standards in order to 

promote uniform compliance 

requirements for all registrants. Further, 

we believe that the requirements would 

be more beneficial to investors if there 

are specific disclosure requirements that 

apply to all registrants, regardless of 

size, for the reasons discussed above. 

As discussed in section IV.A above, 

Rule 145a is designed to ensure that 

shareholders more consistently receive 

the full protections of Securities Act 

disclosure and liability provisions, as 

applicable, and that such investor 

protections will apply more consistently 

regardless of transaction structure. As a 

result, with respect to Rule 145a, we do 

not believe that it is appropriate to 

adopt different compliance or reporting 

requirements for small entities, to 


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clarify, consolidate, or simplify small 

entity compliance and reporting 

requirements, or to provide for small 

entity exemptions. 

The amendments to Regulation S–X 

that we are adopting would generally 

codify existing staff guidance on 

financial statement requirements for 

certain business combinations involving 

shell companies, and, based on staff 

analysis of disclosures in these 

transactions, we believe that most 

companies, including small entities, 

already report consistently with this 

staff guidance. The amendments are not 

expected to have any significant adverse 

effect on small entities (and are 

expected to reduce compliance burdens 

as discussed in sections VIII and IX). 

Accordingly, we do not believe that it is 

necessary: to exempt small entities from 

all or part of the amendments to 

Regulation S–X; to establish different 

compliance or reporting requirements 

for such entities; or to clarify, 

consolidate, or simplify compliance and 

reporting requirements for small 

entities. Furthermore, the final 

amendments to Regulation S–X 

regarding financial statement 

requirements use design standards to a 

greater degree than performance 

standards in order to promote 

consistency in financial reporting which 

benefits investors who use financial 

data in making investment decisions, 

including by comparing financial data 

across companies. 

Statutory Authority 

We are adopting the rule and form 

amendments contained in this 

document under the authority set forth 

in sections 6, 7, 10, 19(a), and 28 of the 

Securities Act; and sections 3, 12, 13, 

14, 15, 23(a), and 36 of the Exchange 

Act. 

List of Subjects 

17 CFR Part 210 

Accountants, Accounting, Banks, 

Banking, Employee benefit plans, 

Holding companies, Insurance 

companies, Investment companies, Oil 

and gas exploration, Reporting and 

recordkeeping requirements, Securities, 

Utilities. 

17 CFR Parts 229, 230, 232, 239, 240, 

and 249 

Administrative practice and 

procedure, Reporting and recordkeeping 

requirements, Securities. 

Text of Rule and Form Amendments 

For the reasons set out in the 

preamble, to the Commission is 

adopting amendments to title 17, 

chapter II of the Code of Federal 

Regulations as follows: 

PART 210—FORM AND CONTENT OF 

AND REQUIREMENTS FOR FINANCIAL 

STATEMENTS, SECURITIES ACT OF 

1933, SECURITIES EXCHANGE ACT 

OF 1934, INVESTMENT COMPANY ACT 

OF 1940, INVESTMENT ADVISERS ACT 

OF 1940, AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975 

■ 1. The authority citation for part 210 

continues to read as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 

77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77nn(25), 77nn(26), 78c, 78j–1, 78l, 78m, 

78n, 78o(d), 78q, 78u–5, 78w, 78ll, 78mm, 

80a–8, 80a–20, 80a–29, 80a–30, 80a–31, 80a– 

37(a), 80b–3, 80b–11, 7202 and 7262, and 

sec. 102(c), Pub. L. 112–106, 126 Stat. 310 

(2012), unless otherwise noted. 

■ 2. Amend § 210.1–02 by revising 

paragraphs (d) and (w)(1) to read as 

follows: 

§ 210.1–02 Definitions of terms used in 

Regulation S–X (17 CFR part 210). 

* * * * * 

(d) Audit (or examination). The term 

audit (or examination), when used in 

regard to financial statements of issuers 

as defined by section 2(a)(7) of the 

Sarbanes-Oxley Act of 2002, means an 

examination of the financial statements 

by an independent accountant in 

accordance with the standards of the 

Public Company Accounting Oversight 

Board (United States) (‘‘PCAOB’’) for the 

purpose of expressing an opinion 

thereon. See § 210.15–01(a) for 

definition of an audit when used in 

regard to financial statements of an 

entity that will combine with an entity 

that is a shell company (other than a 

business combination related shell 

company). When used in regard to 

financial statements of entities that are 

not issuers as defined by section 2(a)(7) 

of the Sarbanes-Oxley Act of 2002, other 

than in transactions where § 210.15– 

01(a) applies, the term means an 

examination of the financial statements 

by an independent accountant in 

accordance with either the standards of 

the PCAOB or U.S. generally accepted 

auditing standards (‘‘U.S. GAAS’’) as 

specified or permitted in this part and 

forms applicable to those entities for the 

purpose of expressing an opinion 

thereon. The standards of the PCAOB 

and U.S. GAAS may be modified or 

supplemented by the Commission. 

* * * * * 

(w) * * * 

(1) The term significant subsidiary 

means a subsidiary, including its 

subsidiaries, which meets any of the 

conditions in paragraph (w)(1)(i), (ii), or 

(iii) of this section; however if the 

registrant is a registered investment 

company or a business development 

company, the tested subsidiary meets 

any of the conditions in paragraph 

(w)(2) of this section instead of any of 

the conditions in this paragraph (w)(1). 

In an acquisition by a predecessor to a 

shell company, use the predecessor’s 

consolidated financial statements 

instead of those of the shell company 

registrant in applying the significance 

tests in paragraphs (w)(1)(i), (ii), and 

(iii) of this section. A registrant that files 

its financial statements in accordance 

with or provides a reconciliation to U.S. 

Generally Accepted Accounting 

Principles (U.S. GAAP) must use 

amounts determined under U.S. GAAP. 

A foreign private issuer that files its 

financial statements in accordance with 

International Financial Reporting 

Standards as issued by the International 

Accounting Standards Board (IFRS– 

IASB) must use amounts determined 

under IFRS–IASB. 

* * * * * 

■ 3. Amend § 210.3–01 by revising 

paragraph (a) to read as follows: 

§ 210.3–01 Consolidated balance sheets. 

(a) There must be filed, for the 

registrant and its subsidiaries 

consolidated and for its predecessors, 

audited balance sheets as of the end of 

each of the two most recent fiscal years. 

If the registrant has been in existence for 

less than one fiscal year, there must be 

filed an audited balance sheet as of a 

date within 135 days of the date of filing 

the registration statement. 

* * * * * 

■ 4. Amend § 210.3–05 by revising 

paragraph (b)(4)(ii) to read as follows: 

§ 210.3–05 Financial statements of 

businesses acquired or to be acquired. 

* * * * * 

(b) * * * 

(4) * * * 

(ii) A registrant, other than a foreign 

private issuer required to file reports on 

Form 6–K (§ 249.306 of this chapter) or 

a shell company (other than a business 

combination related shell company), 

that omits from its initial registration 

statement financial statements of a 

recently consummated business 

acquisition pursuant to paragraph 

(b)(4)(i) of this section must file those 

financial statements and any pro forma 

information specified by §§ 210.11–01 

through 210.11–03 (Article 11) under 

cover of Form 8–K (§ 249.308 of this 

chapter) no later than 75 days after 

consummation of the acquisition. When 

a predecessor to a shell company (other 

than a business combination related 


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14314 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

shell company) acquires a business and 

the financial statements of that recently 

consummated business are omitted from 

a registration statement or proxy 

statement pursuant to paragraph (b)(4)(i) 

of this section, refer to § 210.15– 

01(d)(2). 

* * * * * 

■ 5. Amend § 210.3–14 by revising 

paragraph (b)(3)(ii) to read as follows: 

§ 210.3–14 Special instructions for 

financial statements of real estate 

operations acquired or to be acquired. 

* * * * * 

(b) * * * 

(3) * * * 

(ii) A registrant, other than a foreign 

private issuer required to file reports on 

Form 6–K (§ 249.306 of this chapter) or 

shell company (other than a business 

combination related shell company), 

that omits from its initial registration 

statement financial statements of a 

recently consummated acquisition of a 

real estate operation pursuant to 

paragraph (b)(3)(i) of this section must 

file those financial statements and any 

pro forma information specified by 

§§ 210.11–01 through 210.11–03 (Article 

11) under cover of Form 8–K (§ 249.308 

of this chapter) no later than 75 days 

after consummation of the acquisition. 

When a predecessor to a shell company 

(other than a business combination 

related shell company) acquires a real 

estate operation and the financial 

statements of that recently 

consummated acquisition of a real estate 

operation are omitted from a registration 

statement or proxy statement pursuant 

to paragraph (b)(3)(i) of this section, 

refer to § 210.15–01(d)(2). 

* * * * * 

■ 6. Revise § 210.8–02 to read as 

follows: 

§ 210.8–02 Annual financial statements. 

Smaller reporting companies must file 

an audited balance sheet for the 

registrant and its subsidiaries 

consolidated and for its predecessors as 

of the end of each of the most recent two 

fiscal years, or as of a date within 135 

days if the issuer has existed for a 

period of less than one fiscal year, and 

audited statements of comprehensive 

income, cash flows and changes in 

stockholders’ equity for each of the two 

fiscal years preceding the date of the 

most recent audited balance sheet (or 

such shorter period as the registrant has 

been in business). 

■ 7. Amend § 210.10–01 by revising 

paragraph (a)(1) to read as follows: 

§ 210.10–01 Interim financial statements. 

(a) * * * 

(1) Interim financial statements 

required by this section need only be 

provided as to the registrant and its 

subsidiaries consolidated and its 

predecessors and may be unaudited. 

Separate statements of other entities 

which may otherwise be required by 

this part may be omitted. 

* * * * * 

■ 8. Add an undesignated center 

heading and § 210.15–01 to read as 

follows: 

Acquisitions of Businesses by a Shell 

Company (Other Than a Business 

Combination Related Shell Company) 

§ 210.15–01 Acquisitions of businesses by 

a shell company (other than a business 

combination related shell company). 

(a) Audit requirements. The term 

audit (or examination), when used in 

regard to financial statements of an 

entity that is or will be a predecessor to 

a shell company (other than a business 

combination related shell company), 

means an examination of the financial 

statements by an independent 

accountant in accordance with the 

standards of the Public Company 

Accounting Oversight Board (‘‘PCAOB’’) 

for the purpose of expressing an opinion 

thereon. When used in regard to 

financial statements of an entity that is 

not a predecessor that are included in a 

registration statement or proxy 

statement filed for a combination with 

an issuer that is a shell company (other 

than a business combination related 

shell company), the term means an 

examination of the financial statements 

by an independent accountant in 

accordance with either the standards of 

the PCAOB or U.S. generally accepted 

auditing standards (‘‘U.S. GAAS’’) as 

specified or permitted in this part and 

forms applicable to those entities for the 

purpose of expressing an opinion 

thereon. In transactions involving a 

shell company that is not a SPAC (as 

defined in § 229.1601(b) of this chapter), 

the predecessor must be audited by an 

independent accountant registered with 

the PCAOB. 

(b) Financial statements. When a 

registrant is a shell company (other than 

a business combination related shell 

company) and the financial statements 

of a business that will be combining 

with such registrant are required in a 

registration statement or proxy 

statement, such registrant must file 

financial statements of the business in 

accordance with §§ 210.3–01 through 

210.3–12 and 210.10–01 (Articles 3 and 

10 of Regulation S–X) as if the filing 

were a Securities Act registration 

statement for the initial public offering 

of the business’s equity securities. The 

financial statements of the business may 

be filed pursuant to §§ 210.8–01 through 

210.8–08 (Article 8) when that business 

would qualify to be a smaller reporting 

company based on its annual revenues 

as of the most recently completed fiscal 

year for which audited financial 

statements are available, if it were filing 

a registration statement alone. 

(c) Age of financial statements. The 

financial statements of a business that 

will be acquired by a shell company 

(other than a business combination 

related shell company) must comply 

with the requirements in § 210.3–12 

(§ 210.8–08 when that business would 

qualify to be a smaller reporting 

company based on its annual revenues 

as of the most recently completed fiscal 

year for which audited financial 

statements are available, if it were filing 

a registration statement alone) as if the 

financial statements were included in 

an initial registration statement in 

determining the age of financial 

statements of the business in the 

registration statement or proxy 

statement of the registrant. 

(d) Acquisition of a business or real 

estate operation by a predecessor. 

Registrants must apply § 210.3–05 

(§ 210.8–04 when the predecessor 

would qualify to be a smaller reporting 

company based on its annual revenues 

as of the most recently completed fiscal 

year for which audited financial 

statements are available if it were filing 

a registration statement alone) or 

§ 210.3–14 (§ 210.8–06 when the 

predecessor would qualify to be a 

smaller reporting company based on its 

annual revenues as of the most recently 

completed fiscal year for which audited 

financial statements are available if it 

were filing a registration statement 

alone) to acquisitions of a business or 

real estate operation, respectively, by a 

predecessor. 

(1) See § 210.1–02(w)(1) for rules on 

applying the significance tests to 

acquisitions of a business or real estate 

operation that is not or will not be the 

predecessor. 

(2) When the financial statements of 

a recently acquired business or real 

estate operation that is not or will not 

be the predecessor are omitted from a 

registration statement or proxy 

statement pursuant to § 210.3–05(b)(4)(i) 

(Rule 3–05(b)(4)(i) of Regulation S–X) or 

§ 210.3–14(b)(3)(i) (Rule 3–14(b)(3)(i) of 

Regulation S–X), those financial 

statements must be filed in a Form 8– 

K by the later of the filing of the Form 

8–K filed pursuant to Item 2.01(f) of 

Form 8–K or 75 days after 

consummation of the acquisition. 

(e) Financial statements of shell 

company. After a shell company 


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registrant (other than a business 

combination related shell company) 

acquires a business that is its 

predecessor, the financial statements of 

the shell company for periods prior to 

consummation of the acquisition are not 

required to be included in any filing 

once the financial statements of the 

predecessor have been filed for all 

required periods through the acquisition 

date and the financial statements of the 

registrant include the period in which 

the acquisition was consummated. If a 

registrant is to acquire or has acquired 

a shell company (other than a business 

combination related shell company), the 

financial statements of the shell 

company are required to be included in 

any filing that requires the registrant’s 

financial statements, as if the shell 

company were the registrant for the 

filing, unless the financial statements of 

the registrant include the period in 

which the acquisition of the shell 

company was consummated. 

PART 229—STANDARD 

INSTRUCTIONS FOR FILING FORMS 

UNDER SECURITIES ACT OF 1933, 

SECURITIES EXCHANGE ACT OF 1934 

AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975— 

REGULATION S–K 

■ 9. The authority citation for part 229 

continues to read as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 

77j, 77k, 77s, 77z–2, 77z–3, 77aa(25), 

77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 

77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j–3, 78l, 

78m, 78n, 78n–1, 78o, 78u–5, 78w, 78ll, 

78mm, 80a–8, 80a–9, 80a–20, 80a–29, 80a– 

30, 80a–31(c), 80a–37, 80a–38(a), 80a–39, 

80b–11 and 7201 et seq.; 18 U.S.C. 1350; sec. 

953(b), Pub. L. 111–203, 124 Stat. 1904 

(2010); and sec. 102(c), Pub. L. 112–106, 126 

Stat. 310 (2012). 

■ 10. Amend § 229.10 by: 

■ a. Revising paragraph (b); and 

■ b. Adding paragraph (f)(2)(iv). 

The revision and addition read as 

follows: 

§ 229.10 (Item 10) General. 

* * * * * 

(b) Commission policy on projections. 

The Commission encourages the use in 

documents specified in §§ 230.175 (Rule 

175 under the Securities Act) and 

240.3b–6 (Rule 3b–6 under the 

Exchange Act) of this chapter of 

management’s projections of future 

economic performance that have a 

reasonable basis and are presented in an 

appropriate format. The guidelines set 

forth in this paragraph (b) represent the 

Commission’s views on important 

factors to be considered in formulating 

and disclosing such projections. These 

guidelines also apply to projections of 

future economic performance of persons 

other than the registrant, such as the 

target company in a business 

combination transaction, that are 

included in the registrant’s Commission 

filings. 

(1) Basis for projections. The 

Commission believes that management 

must have the option to present in 

Commission filings its good faith 

assessment of a registrant’s future 

performance. Management, however, 

must have a reasonable basis for such an 

assessment. Although a history of 

operations or experience in projecting 

may be among the factors providing a 

basis for management’s assessment, the 

Commission does not believe that a 

registrant always must have had such a 

history or experience in order to 

formulate projections with a reasonable 

basis. An outside review of 

management’s projections may furnish 

additional support for having a 

reasonable basis for a projection. If 

management decides to include a report 

of such a review in a Commission filing, 

there also should be disclosure of the 

qualifications of the reviewer, the extent 

of the review, the relationship between 

the reviewer and the registrant, and 

other material factors concerning the 

process by which any outside review 

was sought or obtained. Moreover, in 

the case of a registration statement 

under the Securities Act, the reviewer 

would be deemed an expert and an 

appropriate consent must be filed with 

the registration statement. 

(2) Format for projections. (i) In 

determining the appropriate format for 

projections included in Commission 

filings, consideration must be given to, 

among other things, the financial items 

to be projected, the period to be 

covered, and the manner of presentation 

to be used. Although traditionally 

projections have been given for three 

financial items generally considered to 

be of primary importance to investors 

(revenues, net income (loss), and 

earnings (loss) per share), projection 

information need not necessarily be 

limited to these three items. However, 

management should take care to assure 

that the choice of items projected is not 

susceptible of misleading inferences 

through selective projection of only 

favorable items. Revenues, net income 

(loss), and earnings (loss) per share 

usually are presented together in order 

to avoid any misleading inferences that 

may arise when the individual items 

reflect contradictory trends. There may 

be instances, however, when it is 

appropriate to present earnings (loss) 

from continuing operations in addition 

to or in lieu of net income (loss). It 

generally would be misleading to 

present sales or revenue projections 

without one of the foregoing measures 

of income (loss). The period that 

appropriately may be covered by a 

projection depends to a large extent on 

the particular circumstances of the 

company involved. For certain 

companies in certain industries, a 

projection covering a two- or three-year 

period may be entirely reasonable. 

Other companies may not have a 

reasonable basis for projections beyond 

the current year. Accordingly, 

management should select the period 

most appropriate in the circumstances. 

In addition, management, in making a 

projection, should disclose what, in its 

opinion, is the most probable specific 

amount or the most reasonable range for 

each financial item projected based on 

the selected assumptions. Ranges, 

however, should not be so wide as to 

make the disclosures meaningless. 

Moreover, several projections based on 

varying assumptions may be judged by 

management to be more meaningful 

than a single number or range and 

would be permitted. 

(ii) The presentation of projected 

measures that are not based on 

historical financial results or 

operational history should be clearly 

distinguished from projected measures 

that are based on historical financial 

results or operational history. 

(iii) It generally would be misleading 

to present projections that are based on 

historical financial results or 

operational history without presenting 

such historical financial results or 

operational history with equal or greater 

prominence. 

(iv) The presentation of projections 

that include non-GAAP financial 

measures should include a clear 

definition or explanation of those 

financial measures, a description of the 

Generally Accepted Accounting 

Principles (GAAP) financial measure to 

which it is most directly comparable, 

and an explanation why the non-GAAP 

measure was selected instead of a GAAP 

measure. 

* * * * * 

(f) * * * 

(2) * * * 

(iv) Upon the consummation of a deSPAC transaction, as defined in 

§ 229.1601(a) (Item 1601(a) of 

Regulation S–K), an issuer must redetermine its status as a smaller 

reporting company pursuant to the 

thresholds set forth in paragraph (f)(1) of 

this section prior to its first filing, other 

than pursuant to Items 2.01(f), 

5.01(a)(8), and/or 9.01(c) of Form 8–K, 

following the de-SPAC transaction and 

reflect this re-determination in its 


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14316 Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 

filings, beginning 45 days after 

consummation of the de-SPAC 

transaction. 

(A) Public float is measured as of a 

date within four business days after the 

consummation of the de-SPAC 

transaction and is computed by 

multiplying the aggregate worldwide 

number of shares of its voting and nonvoting common equity held by nonaffiliates as of that date by the price at 

which the common equity was last sold, 

or the average of the bid and asked 

prices of common equity, in the 

principal market for the common equity; 

and 

(B) Annual revenues are the annual 

revenues of the target company, as 

defined in § 229.1601(d) (Item 1601(d) 

of Regulation S–K), as of the most 

recently completed fiscal year reported 

in the Form 8–K filed pursuant to Items 

2.01(f), 5.01(a)(8), and/or 9.01(c) of 

Form 8–K. 

* * * * * 

■ 11. Amend § 229.601 by: 

■ a. In the exhibit table in paragraph (a), 

adding entry 98 and footnote 8; 

■ b. Adding paragraph (b)(98); 

■ c. Removing the word ‘‘and’’ at the 

end of paragraph (b)(101)(i)(B); 

■ d. Removing the period at the end of 

paragraph (b)(101)(i)(C)(2) and adding ‘‘; 

and’’ in its place; and 

■ e. Adding paragraph (b)(101)(i)(D). 

The additions read as follows: 

§ 229.601 (Item 601) Exhibits. 

(a) * * * 

EXHIBIT TABLE

Securities act forms Exchange act forms 

S–1 S–3 SF–1 SF–3 S–4 1 S–8 S–11 F–1 F–3 F–4 1 10 8–K2 10–D 10–Q 10–K ABS– 

EE 

*******

(98) Reports, opinions, or appraisals in de-SPAC transactions 8 .................................... X ........ .......... .......... X ........ .......... X ........ X ........ .......... .......... .......... .......... ............

*******

1An exhibit need not be provided about a company if: (1) With respect to such company an election has been made under Form S–4 or F–4 to provide information 

about such company at a level prescribed by Form S–3 or F–3; and (2) the form, the level of which has been elected under Form S–4 or F–4, would not require such 

company to provide such exhibit if it were registering a primary offering. 2A Form 8–K exhibit is required only if relevant to the subject matter reported on the Form 8–K report. For example, if the Form 8–K pertains to the departure of a 

director, only the exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by reference from a previous filing. *******

8 If required pursuant to § 229.1607(c) (Item 1607(c) of Regulation S–K). 

(b) * * * 

(98) Reports, opinions, or appraisals 

in de-SPAC transactions. If the 

securities to be registered on the form 

will be issued in a de-SPAC transaction, 

as defined in § 229.1601(a) (Item 1601(a) 

of Regulation S–K), all reports, 

opinions, or appraisals required to be 

filed or included by § 229.1607(c) (Item 

1607(c) of Regulation S–K). 

* * * * * 

(101) * * * 

(i) * * * 

(D) Is required in any filing that is 

excluded by paragraphs (b)(101)(i)(A), 

(B), or (C) of this section, that contains 

any disclosure required by subpart 

229.1600 of this part but only as to such 

disclosure. 

* * * * * 

■ 12. Add subpart 229.1600 to read as 

follows: 

Subpart 229.1600—Special Purpose 

Acquisition Companies 

Sec. 

229.1601 (Item 1601) Definitions. 

229.1602 (Item 1602) Registered offerings 

by special purpose acquisition 

companies. 

229.1603 (Item 1603) SPAC sponsor; 

conflicts of interest. 

229.1604 (Item 1604) De-SPAC transactions. 

229.1605 (Item 1605) Background of and 

reasons for the de-SPAC transaction; 

terms of the de-SPAC transaction; effects. 

229.1606 (Item 1606) Board determination 

about the de-SPAC transaction. 

229.1607 (Item 1607) Reports, opinions, 

appraisals, and negotiations. 

229.1608 (Item 1608) Tender offer filing 

obligations. 

229.1609 (Item 1609) Projections in deSPAC transactions. 

229.1610 (Item 1610) Structured data 

requirement. 

Subpart 229.1600—Special Purpose 

Acquisition Companies 

§ 229.1601 (Item 1601) Definitions. 

For the purposes of this subpart: 

(a) De-SPAC transaction. The term deSPAC transaction means a business 

combination, such as a merger, 

consolidation, exchange of securities, 

acquisition of assets, reorganization, or 

similar transaction, involving a special 

purpose acquisition company and one 

or more target companies 

(contemporaneously, in the case of more 

than one target company). 

(b) Special purpose acquisition 

company (SPAC). The term special 

purpose acquisition company (SPAC) 

means a company that has: 

(1) Indicated that its business plan is 

to: 

(i) Conduct a primary offering of 

securities that is not subject to the 

requirements of § 230.419 of this 

chapter (Rule 419 under the Securities 

Act); 

(ii) Complete a business combination, 

such as a merger, consolidation, 

exchange of securities, acquisition of 

assets, reorganization, or similar 

transaction, with one or more target 

companies within a specified time 

frame; and 

(iii) Return proceeds from the offering 

and any concurrent offering (if such 

offering or concurrent offering intends 

to raise proceeds) to its security holders 

if the company does not complete a 

business combination, such as a merger, 

consolidation, exchange of securities, 

acquisition of assets, reorganization, or 

similar transaction, with one or more 

target companies within the specified 

time frame; or 

(2) Represented that it pursues or will 

pursue a special purpose acquisition 

company strategy. 

(c) SPAC sponsor. The term SPAC 

sponsor means any entity and/or person 

primarily responsible for organizing, 

directing, or managing the business and 

affairs of a special purpose acquisition 

company, excluding, if an entity is a 

SPAC sponsor, officers and directors of 

the special purpose acquisition 

company who are not affiliates of any 

such entity that is a SPAC sponsor. 

(d) Target company. The term target 

company means an operating company, 

business or assets. 

§ 229.1602 (Item 1602) Registered 

offerings by special purpose acquisition 

companies. 

(a) Forepart of registration statement 

and outside cover page of the 


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prospectus. In addition to the 

information required by § 229.501 (Item 

501 of Regulation S–K), provide the 

following information on the outside 

front cover page of the prospectus in 

plain English as required by 

§ 230.421(d) of this chapter: 

(1) State the time frame for the special 

purpose acquisition company to 

consummate a de-SPAC transaction and 

whether this time frame may be 

extended. 

(2) State whether security holders will 

have the opportunity to redeem the 

securities offered and whether the 

redemptions will be subject to any 

limitations. 

(3) State the amount of the 

compensation received or to be received 

by the SPAC sponsor, its affiliates, and 

promoters, the amount of securities 

issued or to be issued by the SPAC to 

the SPAC sponsor, its affiliates, and 

promoters and the price paid or to be 

paid for such securities, and whether 

this compensation and securities 

issuance may result in a material 

dilution of the purchasers’ equity 

interests. Provide a cross-reference, 

highlighted by prominent type or in 

another manner, to the locations of 

related disclosures in the prospectus. 

(4) Disclose in the tabular format 

specified below at quartile intervals 

based on percentages of the maximum 

redemption threshold: the offering 

price; as of the most recent balance 

sheet date filed, the net tangible book 

value per share, as adjusted, as if the 

offering and assumed redemption levels 

have occurred and to give effect to 

material probable or consummated 

transactions (other than the completion 

of a de-SPAC transaction); and the 

difference between the offering price 

and such net tangible book value per 

share, as adjusted. Provide a crossreference, highlighted by prominent 

type or in another manner, to the 

locations of related disclosures in the 

prospectus: 

TABLE 1 TO PARAGRAPH (a)(4) 

NET TANGIBLE BOOK VALUE PER SHARE, AS ADJUSTED

Offering Price of ll 25% of Maximum 

redemption 

50% of Maximum 

redemption 

75% of Maximum 

redemption Maximum redemption 

Instruction 1 to paragraph (a)(4). If 

the offering includes an over-allotment 

option, include separate rows in the 

tabular disclosure showing the 

information required by this paragraph 

(a)(4) with and without the exercise of 

the over-allotment option. 

(5) State whether there may be actual 

or potential material conflicts of interest 

between the SPAC sponsor, its affiliates, 

or promoters; and purchasers in the 

offering. Provide a cross-reference, 

highlighted by prominent type or in 

another manner, to the locations of 

related disclosures in the prospectus. 

(b) Prospectus summary. The 

information required by § 229.503(a) 

(Item 503(a) of Regulation S–K) must 

include a brief description of the 

following in plain English as required 

by § 230.421(d) of this chapter: 

(1) The manner in which the special 

purpose acquisition company will 

identify and evaluate potential business 

combination candidates and whether it 

will solicit shareholder approval for the 

de-SPAC transaction; 

(2) The material terms of the trust or 

escrow account and the amount or 

percentage of the gross offering proceeds 

that the special purpose acquisition 

company will place in the trust or 

escrow account; 

(3) The material terms of the 

securities being offered, including 

redemption rights, and whether the 

securities are the same class as those 

held by the SPAC sponsor and its 

affiliates; 

(4) The period of time in which the 

special purpose acquisition company 

intends to consummate a de-SPAC 

transaction and its plans in the event 

that it does not consummate a de-SPAC 

transaction within this time period, 

including whether, and if so, how, it 

may extend the time period; any 

limitations on extensions, including the 

number of times; the consequences to 

the SPAC sponsor of not completing an 

extension of this time period; and 

whether security holders will have 

voting or redemption rights with respect 

to such an extension; 

(5) Any plans to seek additional 

financings and how the terms of 

additional financings may impact 

unaffiliated security holders; 

(6) In a tabular format, the nature and 

amount of the compensation received or 

to be received by the SPAC sponsor, its 

affiliates, and promoters, the amount of 

securities issued or to be issued by the 

SPAC to the SPAC sponsor, its affiliates, 

and promoters and the price paid or to 

be paid for such securities, and, outside 

of the table, the extent to which this 

compensation and securities issuance 

may result in a material dilution of the 

purchasers’ equity interests; and 

(7) Any actual or potential material 

conflict of interest between the SPAC 

sponsor, its affiliates, or promoters; and 

purchasers in the offering, including 

those that may arise in determining 

whether to pursue a de-SPAC 

transaction. 

(c) Dilution. Disclose in a tabular 

format for the same quartile intervals as 

in paragraph (a)(4) of this section: the 

offering price; net tangible book value 

per share, as adjusted, determined in the 

same manner as in paragraph (a)(4); and 

the difference between the offering price 

and such net tangible book value per 

share, as adjusted. The tabular 

disclosure must show: the nature and 

amounts of each source of dilution used 

to determine net tangible book value per 

share, as adjusted; the number of shares 

used to determine net tangible book 

value per share, as adjusted; and any 

adjustments to the number of shares 

used to determine the per share 

component of net tangible book value 

per share, as adjusted. Outside of the 

table, describe each material potential 

source of future dilution following the 

registered offering by the special 

purpose acquisition company, including 

sources not included in the table with 

respect to the determination of net 

tangible book value per share, as 

adjusted. Provide a description of the 

model, methods, assumptions, 

estimates, and parameters necessary to 

understand the tabular disclosure. 

§ 229.1603 (Item 1603) SPAC sponsor; 

conflicts of interest. 

(a) SPAC sponsor, its affiliates, and 

promoters. Provide the following 

information about the SPAC sponsor, its 

affiliates, and promoters of the special 

purpose acquisition company: 

(1) State the SPAC sponsor’s name 

and describe the SPAC sponsor’s form 

of organization. 

(2) Describe the general character of 

the SPAC sponsor’s business. 

(3) Describe the experience of the 

SPAC sponsor, its affiliates, and any 

promoters in organizing special purpose 

acquisition companies and the extent to 

which the SPAC sponsor, its affiliates, 


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and the promoters are involved in other 

special purpose acquisition companies. 

(4) Describe the material roles and 

responsibilities of the SPAC sponsor, its 

affiliates, and any promoters in 

directing and managing the special 

purpose acquisition company’s 

activities. 

(5) Describe any agreement, 

arrangement, or understanding between 

the SPAC sponsor and the special 

purpose acquisition company, its 

officers, directors, or affiliates with 

respect to determining whether to 

proceed with a de-SPAC transaction. 

(6) Disclose the nature (e.g., cash, 

shares of stock, warrants and rights) and 

amounts of all compensation that has 

been or will be awarded to, earned by, 

or paid to the SPAC sponsor, its 

affiliates, and any promoters for all 

services rendered or to be rendered in 

all capacities to the special purpose 

acquisition company and its affiliates 

and the amount of securities issued or 

to be issued by the SPAC to the SPAC 

sponsor, its affiliates, and any promoters 

and the price paid or to be paid for such 

securities. Disclose any circumstances 

or arrangements under which the SPAC 

sponsor, its affiliates, and promoters, 

directly or indirectly, have transferred 

or could transfer ownership of securities 

of the SPAC, or that have resulted or 

could result in the surrender or 

cancellation of such securities. In 

addition, disclose the nature and 

amounts of any reimbursements to be 

paid to the SPAC sponsor, its affiliates, 

and any promoters upon the completion 

of a de-SPAC transaction. 

(7) Identify the controlling persons of 

the SPAC sponsor. Disclose, as of the 

most recent practicable date, the 

persons who have direct and indirect 

material interests in the SPAC sponsor, 

as well as the nature and amount of 

their interests. 

(8) Describe any agreement, 

arrangement, or understanding, 

including any payments, between the 

SPAC sponsor and unaffiliated security 

holders of the special purpose 

acquisition company regarding the 

redemption of outstanding securities of 

the special purpose acquisition 

company. 

(9) Disclose, in a tabular format to the 

extent practicable, the material terms of 

any agreement, arrangement, or 

understanding regarding restrictions on 

whether and when the SPAC sponsor 

and its affiliates may sell securities of 

the special purpose acquisition 

company, including the date(s) on 

which the agreement, arrangement, or 

understanding may expire; the natural 

persons and entities subject to such an 

agreement, arrangement, or 

understanding; any exceptions under 

such an agreement, arrangement, or 

understanding; and any terms that 

would result in an earlier expiration of 

such an agreement, arrangement, or 

understanding. 

(b) Conflicts of interest. Describe any 

actual or potential material conflict of 

interest, including any material conflict 

of interest that may arise in determining 

whether to proceed with a de-SPAC 

transaction and any material conflict of 

interest arising from the manner in 

which the special purpose acquisition 

company compensates a SPAC sponsor, 

officers, or directors or the manner in 

which a SPAC sponsor compensates its 

officers and directors, between: 

(1) The SPAC sponsor or its affiliates; 

the special purpose acquisition 

company’s officers, directors, or 

promoters; or the target company’s 

officers or directors; and 

(2) Unaffiliated security holders of the 

SPAC. 

(c) SPAC officer and director fiduciary 

duties. Briefly describe the fiduciary 

duties of each officer and director of the 

special purpose acquisition company to 

other companies to which they have 

fiduciary duties. 

§ 229.1604 (Item 1604) De-SPAC 

transactions. 

(a) Forepart of registration statement 

and outside cover page of the 

prospectus. In addition to the 

information required by § 229.501 (Item 

501 of Regulation S–K), provide the 

following information on the outside 

front cover page of the prospectus in 

plain English as required by 

§ 230.421(d) of this chapter: 

(1) State the determination, if any, of 

the board of directors (or similar 

governing body) of the special purpose 

acquisition company disclosed in 

response to § 229.1606(a) (Item 1606(a) 

of Regulation S–K) and, if applicable, 

that the special purpose acquisition 

company or the SPAC sponsor has 

received a report, opinion, or appraisal 

referred to in § 229.1607(a) (Item 1607(a) 

of Regulation S–K). 

(2) Describe briefly any material 

financing transactions that have 

occurred since the initial public offering 

of the special purpose acquisition 

company or will occur in connection 

with the consummation of the de-SPAC 

transaction. 

(3) State the amount of the 

compensation received or to be received 

by the SPAC sponsor, its affiliates, and 

promoters in connection with the deSPAC transaction or any related 

financing transaction; the amount of 

securities issued or to be issued by the 

SPAC to the SPAC sponsor, its affiliates, 

and promoters and the price paid or to 

be paid for such securities in connection 

with the de-SPAC transaction or any 

related financing transaction; and 

whether this compensation and 

securities issuance may result in a 

material dilution of the equity interests 

of non-redeeming shareholders who 

hold the securities until the 

consummation of the de-SPAC 

transaction. Provide a cross-reference, 

highlighted by prominent type or in 

another manner, to the locations of 

related disclosures in the prospectus. 

(4) State whether, in connection with 

the de-SPAC transaction, there may be 

any actual or potential material conflict 

of interest, including any material 

conflict of interest that may arise in 

determining whether to proceed with a 

de-SPAC transaction and any material 

conflict of interest arising from the 

manner in which the special purpose 

acquisition company compensates a 

SPAC sponsor, officers, and directors or 

the manner in which a SPAC sponsor 

compensates its officers and directors, 

between: on one hand, the SPAC 

sponsors, their affiliates, SPAC officers, 

SPAC directors, or promoters, target 

company officers or target company 

directors; and, on the other hand, 

unaffiliated security holders of the 

SPAC. Provide a cross-reference, 

highlighted by prominent type or in 

another manner, to the locations of 

related disclosures in the prospectus. 

(b) Prospectus summary. The 

information required by § 229.503(a) 

(Item 503(a) of Regulation S–K) must 

include a brief description of the 

following in plain English as required 

by § 230.421(d) of this chapter: 

(1) The background and material 

terms of the de-SPAC transaction; 

(2) The determination, if any, of the 

board of directors (or similar governing 

body) of the special purpose acquisition 

company disclosed in response to 

§ 229.1606(a) (Item 1606(a) of 

Regulation S–K), the material factors 

that the board of directors (or similar 

governing body) of the special purpose 

acquisition company considered in 

making such determination, and any 

report, opinion, or appraisal referred to 

in § 229.1607(a) (Item 1607(a) of 

Regulation S–K); 

(3) In connection with the de-SPAC 

transaction, any actual or potential 

material conflict of interest between: 

(i) The SPAC sponsor, SPAC officers, 

SPAC directors, SPAC affiliates or 

promoters, target company officers, or 

target company directors; and 

(ii) Unaffiliated security holders of the 

SPAC; 

(4) In a tabular format, the terms and 

amount of the compensation received or 


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to be received by the SPAC sponsor, its 

affiliates, and promoters in connection 

with the de-SPAC transaction or any 

related financing transaction, the 

amount of securities issued or to be 

issued by the SPAC to the SPAC 

sponsor, its affiliates, and promoters 

and the price paid or to be paid for such 

securities in connection with the deSPAC transaction or any related 

financing transaction; and, outside of 

the table, the extent to which that 

compensation and securities issuance 

has resulted or may result in a material 

dilution of the equity interests of nonredeeming shareholders of the special 

purpose acquisition company; 

(5) The material terms of any material 

financing transactions that have 

occurred or will occur in connection 

with the consummation of the de-SPAC 

transaction, the anticipated use of 

proceeds from these financing 

transactions and the dilutive impact, if 

any, of these financing transactions on 

non-redeeming shareholders; and 

(6) The rights of security holders to 

redeem the outstanding securities of the 

special purpose acquisition company 

and the potential dilutive impact of 

redemptions on non-redeeming 

shareholders. 

(c) Dilution. Disclose in a tabular 

format that includes intervals 

representing selected potential 

redemption levels that may occur across 

a reasonably likely range of outcomes: 

the offering price disclosed pursuant to 

§ 229.1602(a)(4) (Item 1602(a)(4)) in the 

initial registered offering by the SPAC; 

as of the most recent balance sheet date 

filed, the net tangible book value per 

share, as adjusted, as if the selected 

redemption levels have occurred, and to 

give effect to, while excluding the deSPAC transaction itself, material 

probable or consummated transactions 

and other material effects on the SPAC’s 

net tangible book value per share from 

the de-SPAC transaction; and the 

difference between such offering price 

and such net tangible book value per 

share, as adjusted. The tabular 

disclosure must show: the nature and 

amounts of each source of dilution used 

to determine net tangible book value per 

share, as adjusted; the number of shares 

used to determine net tangible book 

value per share, as adjusted; and any 

adjustments to the number of shares 

used to determine the per share 

component of net tangible book value 

per share, as adjusted. Outside of the 

table, describe each material potential 

source of future dilution that nonredeeming shareholders may experience 

by electing not to tender their shares in 

connection with the de-SPAC 

transaction, including sources not 

included in the table with respect to the 

determination of net tangible book value 

per share, as adjusted. 

(1) With respect to each redemption 

level, state the company valuation at or 

above which the potential dilution 

results in the amount of the nonredeeming shareholders’ interest per 

share being at least the initial public 

offering price per share of common 

stock. 

(2) Provide a description of the model, 

methods, assumptions, estimates, and 

parameters necessary to understand the 

tabular disclosure. 

§ 229.1605 (Item 1605) Background of and 

reasons for the de-SPAC transaction; terms 

of the de-SPAC transaction; effects. 

(a) Provide a summary of the 

background of the de-SPAC transaction. 

Such summary must include a 

description of any contacts, 

negotiations, or transactions that have 

occurred concerning the de-SPAC 

transaction. 

(b) State the material terms of the deSPAC transaction, including but not 

limited to: 

(1) A brief description of the de-SPAC 

transaction; 

(2) A brief description of any related 

financing transaction, including any 

payments from the SPAC sponsor to 

investors in connection with the 

financing transaction; 

(3) A reasonably detailed discussion 

of the reasons of the SPAC and the 

target company for engaging in the deSPAC transaction and reasons of the 

SPAC for the structure and timing of the 

de-SPAC transaction and any related 

financing transaction; 

(4) An explanation of any material 

differences in the rights of SPAC and 

target company security holders as 

compared with security holders of the 

combined company as a result of the deSPAC transaction; 

(5) A brief statement as to the 

accounting treatment of the de-SPAC 

transaction; and 

(6) The Federal income tax 

consequences of the de-SPAC 

transaction to the SPAC, the target 

company, and their respective security 

holders. 

(c) Describe the effects of the de-SPAC 

transaction and any related financing 

transaction on the special purpose 

acquisition company and its affiliates, 

the SPAC sponsor and its affiliates, the 

target company and its affiliates, and 

unaffiliated security holders of the 

special purpose acquisition company. 

The description must include a 

reasonably detailed discussion of both 

the benefits and detriments of the deSPAC transaction and any related 

financing transaction to the special 

purpose acquisition company and its 

affiliates, the SPAC sponsor and its 

affiliates, the target company and its 

affiliates, and unaffiliated security 

holders of the special purpose 

acquisition company. The benefits and 

detriments of the de-SPAC transaction 

and any related financing transaction 

must be quantified to the extent 

practicable. 

(d) Disclose any material interests in 

the de-SPAC transaction or any related 

financing transaction: held by the SPAC 

sponsor or the special purpose 

acquisition company’s officers or 

directors, including fiduciary or 

contractual obligations to other entities 

as well as any interest in, or affiliation 

with, the target company; or held by the 

target company’s officers or directors 

that consist of any interest in, or 

affiliation with, the SPAC sponsor or the 

special purpose acquisition company. 

(e) State whether or not security 

holders are entitled to any redemption 

or appraisal rights. If so, summarize the 

redemption or appraisal rights. If there 

are no redemption or appraisal rights 

available for security holders who object 

to the de-SPAC transaction, briefly 

outline any other rights that may be 

available to security holders. 

§ 229.1606 (Item 1606) Board 

determination about the de-SPAC 

transaction. 

(a) Board determination. If the law of 

the jurisdiction in which the special 

purpose acquisition company is 

organized requires its board of directors 

(or similar governing body) to determine 

whether the de-SPAC transaction is 

advisable and in the best interests of the 

special purpose acquisition company 

and its security holders, or otherwise 

make any comparable determination, 

disclose that determination. 

(b) Factors considered in board 

determination. Discuss the material 

factors the board of directors (or similar 

governing body) of the special purpose 

acquisition company considered in 

making any determination disclosed in 

response to paragraph (a) of this section. 

To the extent considered, such factors 

must include, but need not be limited 

to, the valuation of the target company, 

financial projections relied upon by the 

board of directors (or similar governing 

body), the terms of financing materially 

related to the de-SPAC transaction, any 

report, opinion, or appraisal referred to 

in § 229.1607(a) (Item 1607(a) of 

Regulation S–K), and the dilution 

described in § 229.1604(c) (Item 1604(c) 

of Regulation S–K). 

(c) Approval of security holders. State 

whether or not the de-SPAC transaction 


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is structured so that approval of at least 

a majority of unaffiliated security 

holders of the special purpose 

acquisition company is required. 

(d) Unaffiliated representative. State 

whether or not a majority of the 

directors (or members of similar 

governing body) who are not employees 

of the special purpose acquisition 

company has retained an unaffiliated 

representative to act solely on behalf of 

unaffiliated security holders for 

purposes of negotiating the terms of the 

de-SPAC transaction and/or preparing a 

report concerning the approval of the 

de-SPAC transaction. 

(e) Approval of directors. State 

whether or not the de-SPAC transaction 

was approved by a majority of the 

directors (or members of similar 

governing body) of the special purpose 

acquisition company who are not 

employees of the special purpose 

acquisition company. If any director (or 

member of a similar governing body) of 

the special purpose acquisition 

company voted against, or abstained 

from voting on, approval of the de-SPAC 

transaction, identify such persons, and 

indicate, if known after making 

reasonable inquiry, the reasons for the 

vote against the transaction or 

abstention. 

§ 229.1607 (Item 1607) Reports, opinions, 

appraisals, and negotiations. 

(a) Report, opinion, or appraisal. 

Disclose the information required by 

paragraph (b) of this section if the 

special purpose acquisition company or 

SPAC sponsor has received any report, 

opinion (other than an opinion of 

counsel) or appraisal from an outside 

party or an unaffiliated representative 

referred to in § 229.1606(d) (Item 

1606(d) of Regulation S–K) materially 

relating to: 

(1) Any determination disclosed in 

response to § 229.1606(a) (Item 1606(a) 

of Regulation S–K); 

(2) The approval of the de-SPAC 

transaction; 

(3) The consideration or the fairness 

of the consideration to be offered to 

security holders of the target company 

in the de-SPAC transaction; or 

(4) The fairness of the de-SPAC 

transaction to the special purpose 

acquisition company, its security 

holders, or SPAC sponsor. 

(b) Preparer and summary of the 

report, opinion, appraisal, or 

negotiation. For each report, opinion, or 

appraisal referred to in paragraph (a) of 

this section or any negotiation or report 

described in response to § 229.1606(d) 

(Item 1606(d) of Regulation S–K) 

concerning the terms of the transaction: 

(1) Identify the outside party and/or 

unaffiliated representative; 

(2) Briefly describe the qualifications 

of the outside party and/or unaffiliated 

representative; 

(3) Describe the method of selection of 

the outside party and/or unaffiliated 

representative; 

(4) Describe any material relationship 

that existed during the past two years or 

is mutually understood to be 

contemplated and any compensation 

received or to be received as a result of 

the relationship between: 

(i) The outside party, its affiliates, 

and/or unaffiliated representative; and 

(ii) The special purpose acquisition 

company, the SPAC sponsor and/or 

their respective affiliates; 

(5) If the report, opinion, or appraisal 

relates to the fairness of the 

consideration to be offered to security 

holders of the target company in the deSPAC transaction, state whether the 

special purpose acquisition company or 

SPAC sponsor determined the amount 

of consideration to be paid to the target 

company or its security holders, or the 

valuation of the target company, or 

whether the outside party and/or 

unaffiliated representative 

recommended the amount of 

consideration to be paid or the valuation 

of the target company; and 

(6) Furnish a summary concerning the 

negotiation, report, opinion, or 

appraisal. The summary must include 

but need not be limited to: the 

procedures followed; the findings and 

recommendations; the bases for and 

methods of arriving at such findings and 

recommendations; instructions received 

from the special purpose acquisition 

company or SPAC sponsor; and any 

limitation imposed by the special 

purpose acquisition company or SPAC 

sponsor on the scope of the 

investigation. 

Instruction 1 to paragraph (b): The 

information called for by paragraphs 

(b)(1) through (3) of this section must be 

given with respect to the firm that 

provides the report, opinion, or 

appraisal or participates in the 

negotiation rather than the employees of 

the firm that prepared the report, 

opinion, or appraisal or participated in 

the negotiation. 

(c) Exhibits. All reports, opinions, or 

appraisals referred to in paragraphs (a) 

and (b) of this section must be, as 

applicable, filed as exhibits to the 

registration statement or schedule or 

included in the schedule if the schedule 

does not have exhibit filing 

requirements. 

§ 229.1608 (Item 1608) Tender offer filing 

obligations. 

If the special purpose acquisition 

company files a Schedule TO 

(§ 240.14d–100 of this chapter) pursuant 

to § 240.13e–4(c)(2) of this chapter (Rule 

13e–4(c)(2)) for any redemption of 

securities offered to security holders, 

such Schedule TO must provide the 

information required by General 

Instruction L.2. to Form S–4, General 

Instruction I.2. to Form F–4, and Item 

14(f)(2) of Schedule 14A (§ 240.14a–101 

of this chapter), as applicable, in 

addition to the information otherwise 

required by Schedule TO. Such 

redemption must be conducted in 

compliance with all other provisions of 

§§ 240.13e–4 (Rule 13e–4) and 240.14e– 

1 through 240.14e–8 (Regulation 14E) of 

this chapter. 

§ 229.1609 (Item 1609) Projections in deSPAC transactions. 

(a) With respect to any projections 

disclosed in the filing (or any exhibit 

thereto), disclose the purpose for which 

the projections were prepared and the 

party that prepared the projections. 

(b) Disclose all material bases of the 

disclosed projections and all material 

assumptions underlying the projections, 

and any material factors that may affect 

such assumptions. The disclosure 

referred to in this section should 

include a discussion of any material 

growth or reduction rates or discount 

rates used in preparing the projections, 

and the reasons for selecting such 

growth or reduction rates or discount 

rates. 

(c) If the projections relate to the 

performance of the special purpose 

acquisition company, state whether or 

not the projections reflect the view of 

the special purpose acquisition 

company’s management or board of 

directors (or similar governing body) 

about its future performance as of the 

most recent practicable date prior to the 

date of the disclosure document 

required to be disseminated to security 

holders. If the projections relate to the 

target company, disclose whether or not 

the target company has affirmed to the 

special purpose acquisition company 

that its projections reflect the view of 

the target company’s management or 

board of directors (or similar governing 

body) about its future performance as of 

the most recent practicable date prior to 

the date of the disclosure document 

required to be disseminated to security 

holders. If the projections no longer 

reflect the views of the special purpose 

acquisition company’s or the target 

company’s management or board of 

directors (or similar governing body) 

regarding the future performance of 


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their respective companies as of the 

most recent practicable date prior to the 

date of the disclosure document 

required to be disseminated to security 

holders, state the purpose of disclosing 

the projections and the reasons for any 

continued reliance by the management 

or board of directors (or similar 

governing body) on the projections. 

§ 229.1610 (Item 1610) Structured data 

requirement. 

Provide the disclosure required by 

this subpart in an Interactive Data File 

in accordance with §§ 232.405 (Rule 405 

of Regulation S–T) and 232.301 (the 

EDGAR Filer Manual) of this chapter. 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

■ 13. The general authority citation for 

part 230 continues to read as follows: 

Authority: 15 U.S.C. 77b, 77b note, 77c, 

77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 

78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note, 

78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 

28, 80a–29, 80a–30, and 80a–37, and Pub. L. 

112–106, sec. 201(a), sec. 401, 126 Stat. 313 

(2012), unless otherwise noted. 

* * * * * 

■ 14. Add § 230.145a to read as follows: 

§ 230.145a Business combinations with 

reporting shell companies. 

With respect to a reporting shell 

company’s shareholders, any direct or 

indirect business combination of a 

reporting shell company that is not a 

business combination related shell 

company involving another entity that 

is not a shell company, as those terms 

are defined in § 230.405, is deemed to 

involve an offer, offer to sell, offer for 

sale, or sale within the meaning of 

section 2(a)(3) of the Act. For purposes 

of this section, a reporting shell 

company is a company other than an 

asset-backed issuer as defined in 

§ 229.1101(b) of this chapter (Item 

1101(b) of Regulation AB), that has: 

(a) No or nominal operations; 

(b) Either: 

(1) No or nominal assets; 

(2) Assets consisting solely of cash 

and cash equivalents; or 

(3) Assets consisting of any amount of 

cash and cash equivalents and nominal 

other assets; and 

(c) An obligation to file reports under 

section 13 (15 U.S.C. 78m) or section 

15(d) (15 U.S.C. 78o(d)) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et 

seq.). 

■ 15. Amend § 230.405 by: 

■ a. Adding in alphabetical order the 

definition for ‘‘Blank check company’’; 

and 

■ b. Adding paragraph (3)(iv) to the 

definition for ‘‘Smaller reporting 

company’’. 

The additions read as follows: 

§ 230.405 Definitions of terms. 

* * * * * 

Blank check company. For purposes 

of section 27A of the Securities Act of 

1933 (15 U.S.C. 77z–2), the term blank 

check company means a company that 

has no specific business plan or purpose 

or has indicated that its business plan 

is to engage in a merger or acquisition 

with an unidentified company or 

companies, or other entity or person. 

* * * * * 

Smaller reporting company. * * * 

(3) * * * 

(iv) Upon the consummation of a deSPAC transaction, as defined in 

§ 229.1601(a) of this chapter (Item 

1601(a) of Regulation S–K), an issuer 

must re-determine its status as a smaller 

reporting company pursuant to the 

thresholds set forth in paragraphs (1) 

and (2) of this definition prior to its first 

filing, other than pursuant to Items 

2.01(f), 5.01(a)(8), and/or 9.01(c) of 

Form 8–K, following the de-SPAC 

transaction and reflect this redetermination in its filings beginning 45 

days after consummation of the deSPAC transaction. 

(A) Public float is measured as of a 

date within four business days after the 

consummation of the de-SPAC 

transaction and is computed by 

multiplying the aggregate worldwide 

number of shares of its voting and nonvoting common equity held by nonaffiliates as of that date by the price at 

which the common equity was last sold, 

or the average of the bid and asked 

prices of common equity, in the 

principal market for the common equity; 

and 

(B) Annual revenues are the annual 

revenues of the target company, as 

defined in § 229.1601(d) of this chapter 

(Item 1601(d) of Regulation S–K), as of 

the most recently completed fiscal year 

reported in the Form 8–K filed pursuant 

to Items 2.01(f), 5.01(a)(8), and/or 

9.01(c) of Form 8–K. 

* * * * * 

PART 232—REGULATION S–T— 

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS 

■ 16. The general authority citation for 

part 232 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 

77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 

78n, 78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 

80a–29, 80a–30, 80a–37, 80b–4, 80b–6a, 80b– 

10, 80b–11, 7201 et seq.; and 18 U.S.C. 1350, 

unless otherwise noted. 

* * * * * 

■ 17. Amend § 232.405 by: 

■ a. Revising the introductory text and 

paragraphs (a)(2) and (4); 

■ b. Removing ‘‘; and’’ from the end of 

the paragraph (b)(4)(i) and adding a 

period in its place; 

■ c. Adding paragraph (b)(4)(vi); and 

■ d. Revising note 1 to the section. 

The revisions and addition read as 

follows: 

§ 232.405 Interactive Data File 

submissions. 

This section applies to electronic 

filers that submit Interactive Data Files. 

Section 229.601(b)(101) of this chapter 

(Item 601(b)(101) of Regulation S–K), 

General Instruction F of § 249.311 of 

this chapter (Form 11–K), paragraph 

(101) of Part II—Information Not 

Required to be Delivered to Offerees or 

Purchasers of § 239.40 of this chapter 

(Form F–10), § 240.13a–21 of this 

chapter (Rule 13a–21 under the 

Exchange Act), paragraph 101 of the 

Instructions as to Exhibits of § 249.220f 

of this chapter (Form 20–F), paragraph 

B.(15) of the General Instructions to 

§ 249.240f of this chapter (Form 40–F), 

paragraph C.(6) of the General 

Instructions to § 249.306 of this chapter 

(Form 6–K), § 240.17Ad–27(d) of this 

chapter (Rule 17Ad–27(d) under the 

Exchange Act), Note D.5 of § 240.14a– 

101 of this chapter (Rule 14a–101 under 

the Exchange Act), Item 1 of § 240.14c– 

101 of this chapter (Rule 14c–101 under 

the Exchange Act), General Instruction L 

of § 240.14d–100 of this chapter (Rule 

14d–100 under the Exchange Act), 

General Instruction I of § 249.333 of this 

chapter (Form F–SR), General 

Instruction C.3.(g) of §§ 239.15A and 

274.11A of this chapter (Form N–1A), 

General Instruction I of §§ 239.14 and 

274.11a–1 of this chapter (Form N–2), 

General Instruction C.3.(h) of §§ 239.17a 

and 274.11b of this chapter (Form N–3), 

General Instruction C.3.(h) of §§ 239.17b 

and 274.11c of this chapter (Form N–4), 

General Instruction C.3.(h) of §§ 239.17c 

and 274.11d of this chapter (Form N–6), 

General Instruction 2.(l) of § 274.12 of 

this chapter (Form N–8B–2), General 

Instruction 5 of § 239.16 of this chapter 

(Form S–6), and General Instruction C.4 

of §§ 249.331 and 274.128 of this 

chapter (Form N–CSR) specify when 

electronic filers are required or 

permitted to submit an Interactive Data 

File (§ 232.11), as further described in 

note 1 to this section. This section 

imposes content, format, and 

submission requirements for an 

Interactive Data File, but does not 

change the substantive content 


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requirements for the financial and other 

disclosures in the Related Official Filing 

(§ 232.11). 

(a) * * * 

(2) Be submitted only by an electronic 

filer either required or permitted to 

submit an Interactive Data File as 

specified by § 229.601(b)(101) of this 

chapter (Item 601(b)(101) of Regulation 

S–K), General Instruction F of § 249.311 

(Form 11–K), paragraph (101) of Part 

II—Information Not Required to be 

Delivered to Offerees or Purchasers of 

§ 239.40 of this chapter (Form F–10), 

§ 240.13a–21 of this chapter (Rule 13a– 

21 under the Exchange Act), paragraph 

101 of the Instructions as to Exhibits of 

§ 249.220f of this chapter (Form 20–F), 

paragraph B.(15) of the General 

Instructions to § 249.240f of this chapter 

(Form 40–F), paragraph C.(6) of the 

General Instructions to § 249.306 of this 

chapter (Form 6–K), Rule 17Ad–27(d) 

under the Exchange Act, Note D.5 of 

Rule 14a–101 under the Exchange Act, 

Item 1 of Rule 14c–101 under the 

Exchange Act, General Instruction L of 

§ 240.14d–100 of this chapter (Rule 

14d–100 under the Exchange Act), 

General Instruction I to § 249.333 of this 

chapter (Form F–SR), General 

Instruction C.3.(g) of §§ 239.15A and 

274.11A of this chapter (Form N–1A), 

General Instruction I of §§ 239.14 and 

274.11a-1 of this chapter (Form N–2), 

General Instruction C.3.(h) of §§ 239.17a 

and 274.11b of this chapter (Form N–3), 

General Instruction C.3.(h) of §§ 239.17b 

and 274.11c of this chapter (Form N–4), 

General Instruction C.3.(h) of §§ 239.17c 

and 274.11d of this chapter (Form N–6), 

General Instruction 2.(l) of § 274.12 of 

this chapter (Form N–8B–2), General 

Instruction 5 of § 239.16 of this chapter 

(Form S–6), or General Instruction C.4 

of §§ 249.331 and 274.128 of this 

chapter (Form N–CSR), as applicable; 

* * * * * 

(4) Be submitted in accordance with 

the EDGAR Filer Manual and, as 

applicable, § 229.601(b)(101) of this 

chapter (Item 601(b)(101) of Regulation 

S–K), paragraph (101) of Part II— 

Information Not Required to be 

Delivered to Offerees or Purchasers of 

§ 239.40 of this chapter (Form F–10), 

§ 240.13a–21 of this chapter (Rule 13a– 

21 under the Exchange Act), paragraph 

101 of the Instructions as to Exhibits of 

§ 249.220f of this chapter (Form 20–F), 

paragraph B.(15) of the General 

Instructions to § 249.240f of this chapter 

(Form 40–F), paragraph C.(6) of the 

General Instructions to § 249.306 of this 

chapter (Form 6–K), § 240.17Ad–27(d) 

of this chapter (Rule 17Ad–27(d) under 

the Exchange Act), Note D.5 of 

§ 240.14a–101 of this chapter (Rule 14a– 

101 under the Exchange Act), Item 1 of 

§ 240.14c–101 of this chapter (Rule 14c– 

101 under the Exchange Act), General 

Instruction L of § 240.14d–100 of this 

chapter (Rule 14d–100 under the 

Exchange Act), General Instruction I to 

§ 249.333 of this chapter (Form F–SR), 

General Instruction C.3.(g) of §§ 239.15A 

and 274.11A of this chapter (Form N– 

1A), General Instruction I of §§ 239.14 

and 274.11a–1 of this chapter (Form N– 

2), General Instruction C.3.(h) of 

§§ 239.17a and 274.11b of this chapter 

(Form N–3), General Instruction C.3.(h) 

of §§ 239.17b and 274.11c of this 

chapter (Form N–4), General Instruction 

C.3.(h) of §§ 239.17c and 274.11d of this 

chapter (Form N–6); General Instruction 

2.(l) of § 274.12 of this chapter (Form N– 

8B–2); General Instruction 5 of § 239.16 

of this chapter (Form S–6); or General 

Instruction C.4 of §§ 249.331 and 

274.128 of this chapter (Form N–CSR). 

* * * * * 

(b) * * * 

(4) * * * 

(vi) The information required by 

§§ 229.1601 through 229.1610 of this 

chapter (subpart 1600 of Regulation S– 

K). 

* * * * * 

Note 1 to § 232.405: Section 

229.601(b)(101) of this chapter (Item 

601(b)(101) of Regulation S–K) specifies the 

circumstances under which an Interactive 

Data File must be submitted and the 

circumstances under which it is permitted to 

be submitted, with respect to §§ 239.11 (Form 

S–1), 239.13 (Form S–3), 239.25 (Form S–4), 

239.18 (Form S–11), 239.31 (Form F–1), 

239.33 (Form F–3), 239.34 (Form F–4), 

249.310 (Form 10–K), 249.308a (Form 10–Q), 

and 249.308 (Form 8–K) of this chapter. 

General Instruction F of § 249.311 of this 

chapter (Form 11–K) specifies the 

circumstances under which an Interactive 

Data File must be submitted, and the 

circumstances under which it is permitted to 

be submitted, with respect to Form 11–K. 

Paragraph (101) of Part II—Information not 

Required to be Delivered to Offerees or 

Purchasers of § 239.40 of this chapter (Form 

F–10) specifies the circumstances under 

which an Interactive Data File must be 

submitted and the circumstances under 

which it is permitted to be submitted, with 

respect to Form F–10. Paragraph 101 of the 

Instructions as to Exhibits of § 249.220f of 

this chapter (Form 20–F) specifies the 

circumstances under which an Interactive 

Data File must be submitted and the 

circumstances under which it is permitted to 

be submitted, with respect to Form 20–F. 

Paragraph B.(15) of the General Instructions 

to § 249.240f of this chapter (Form 40–F) and 

Paragraph C.(6) of the General Instructions to 

§ 249.306 of this chapter (Form 6–K) specify 

the circumstances under which an Interactive 

Data File must be submitted and the 

circumstances under which it is permitted to 

be submitted, with respect to §§ 249.240f 

(Form 40–F) and 249.306 (Form 6–K) of this 

chapter. Section 240.17Ad–27(d) of this 

chapter (Rule 17Ad–27(d) under the 

Exchange Act) specifies the circumstances 

under which an Interactive Data File must be 

submitted with respect the reports required 

under Rule 17Ad–27. Note D.5 of § 240.14a– 

101 of this chapter (Schedule 14A) and Item 

1 of § 240.14c–101 of this chapter (Schedule 

14C) specify the circumstances under which 

an Interactive Data File must be submitted 

with respect to Schedules 14A and 14C. 

General Instruction L of § 240.14d–100 of this 

chapter (Schedule TO) specifies the 

circumstances under which an Interactive 

Data File must be submitted with respect to 

Schedule TO. Section 240.13a–21 of this 

chapter (Rule 13a–21 under the Exchange 

Act) and General Instruction I to § 249.333 of 

this chapter (Form F–SR) specify the 

circumstances under which an Interactive 

Data File must be submitted, with respect to 

Form F–SR. §§ 242.829 and 242.831 of this 

chapter (Rules 829 and 831 of Regulation SE) 

and the Registration Instructions to 

§ 249.1701 of this chapter (Form SBSEF), as 

applicable, specify the circumstances under 

which an Interactive Data File must be 

submitted with respect to filings made under 

Regulation SE. Item 601(b)(101) of Regulation 

S–K, paragraph (101) of Part II—Information 

not Required to be Delivered to Offerees or 

Purchasers of Form F–10, paragraph 101 of 

the Instructions as to Exhibits of Form 20– 

F, paragraph B.(15) of the General 

Instructions to Form 40–F, and paragraph 

C.(6) of the General Instructions to Form 6– 

K all prohibit submission of an Interactive 

Data File by an issuer that prepares its 

financial statements in accordance with 

§§ 210.6–01 through 210.6–10 of this chapter 

(Article 6 of Regulation S–X). For an issuer 

that is a management investment company or 

separate account registered under the 

Investment Company Act of 1940 (15 U.S.C. 

80a et seq.) or a business development 

company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 

80a–2(a)(48)), General Instruction C.3.(g) of 

Form N–1A (§§ 239.15A and 274.11A of this 

chapter), General Instruction I of Form N–2 

(§§ 239.14 and 274.11a–1 of this chapter), 

General Instruction C.3.(h) of Form N–3 

(§§ 239.17a and 274.11b of this chapter), 

General Instruction C.3.(h) of Form N–4 

(§§ 239.17b and 274.11c of this chapter), 

General Instruction C.3.(h) of Form N–6 

(§§ 239.17c and 274.11d of this chapter), 

General Instruction 2.(l) of § 274.12 of this 

chapter (Form N–8B–2), General Instruction 

5 of § 239.16 of this chapter (Form S–6), and 

General Instruction C.4 of §§ 249.331 and 

274.128 of this chapter (Form N–CSR) specify 

when electronic filers are required or 

permitted to submit an Interactive Data File 

(§ 232.11), as further described in note 1 to 

this section and General Instruction C.4 of 

Form N–CSR (§§ 249.331 and 274.128 of this 

chapter), as applicable, specifies the 

circumstances under which an Interactive 

Data File must be submitted. 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

■ 18. The authority citation for part 239 

continues to read, in part, as follows: 


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Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 

77s, 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n, 

78o(d), 78o–7 note, 78u–5, 78w(a), 78ll, 

78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a– 

10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30, 

80a–37, and sec. 71003 and sec. 84001, Pub. 

L. 114–94, 129 Stat. 1321, unless otherwise 

noted. 

Sections 239.31, 239.32 and 239.33 are also 

issued under 15 U.S.C. 78l, 78m, 78o, 78w, 

80a–8, 80a–29, 80a–30, 80a–37 and 12 U.S.C. 

241. 

* * * * * 

■ 19. Amend Form S–1 (referenced in 

§ 239.11) by: 

■ a. Adding General Instruction VIII; 

and 

■ b. Revising Item 6. Dilution. 

Note: Form S–1 is attached as appendix A 

to this document. Form S–1 will not appear 

in the Code of Federal Regulations. 

■ 20. Amend Form S–4 (referenced in 

§ 239.25) by: 

■ a. Adding General Instruction L; 

■ b. Revising paragraph (b)(7) 

introductory text of Item 17 and 

Instruction 1 of paragraph (b)(7) of Item 

17; and 

■ c. Revising Instruction 1 to the 

signature block. 

Note: Form S–4 is attached as appendix B 

to this document. Form S–4 will not appear 

in the Code of Federal Regulations. 

■ 21. Amend Form F–1 (referenced in 

§ 239.31) by adding General Instruction 

VII. 

Note: Form F–1 is attached as appendix C 

to this document. Form F–1 will not appear 

in the Code of Federal Regulations. 

■ 22. Amend Form F–4 (referenced in 

§ 239.34) by: 

■ a. Adding General Instruction I; 

■ b. Revising Instruction 1 to paragraph 

(b)(5) of Item 17; 

■ c. Revising the Instructions to 

paragraph (b)(5) and (b)(6) of Item 17; 

and 

■ d. Revising Instruction 1 to the 

signature block. 

Note: Form F–4 is attached as appendix D 

to this document. Form F–4 will not appear 

in the Code of Federal Regulations. 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 23. The authority citation for part 240 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78j–4, 78k, 78k–1, 78l, 

78m, 78n, 78n–1, 78o, 78o-4, 78o-10, 78p, 

78q, 78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll, 

78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 

3, 80b–4, 80b–11, 7201 et seq., and 8302; 7 

U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 

U.S.C. 1350; and Pub. L. 111–203, 939A, 124 

Stat. 1376 (2010); and Pub. L. 112–106, sec. 

503 and 602, 126 Stat. 326 (2012), unless 

otherwise noted. 

* * * * * 

Sections 240.12b–1 to 240.12b–36 also 

issued under secs. 3, 12, 13, 15, 48 Stat. 892, 

as amended, 894, 895, as amended; 15 U.S.C. 

78c, 78l, 78m, 78o; 

* * * * * 

Sections 240.14c–1 to 240.14c–101 also 

issued under sec. 14, 48 Stat. 895; 15 U.S.C. 

78n; 

* * * * * 

■ 24. Amend § 240.12b–2 by: 

■ a. Adding in alphabetical order the 

definition for ‘‘Blank check company’’; 

and 

■ b. Adding paragraph (3)(iv) to the 

definition of ‘‘Smaller reporting 

company’’. 

The additions read as follows: 

§ 240.12b–2 Definitions. 

* * * * * 

Blank check company. For purposes 

of section 21E of the Securities and 

Exchange Act of 1934 (15 U.S.C. 78u– 

5), the term blank check company 

means a company that has no specific 

business plan or purpose or has 

indicated that its business plan is to 

engage in a merger or acquisition with 

an unidentified company or companies, 

or other entity or person. 

* * * * * 

Smaller reporting company. * * * 

(3) * * * 

(iv) Upon the consummation of a deSPAC transaction, as defined in 

§ 229.1601(a) of this chapter (Item 

1601(a) of Regulation S–K), an issuer 

must re-determine its status as a smaller 

reporting company pursuant to the 

thresholds set forth in paragraphs (1) 

and (2) of this definition prior to its first 

filing, other than pursuant to Items 

2.01(f), 5.01(a)(8), and/or 9.01(c) of 

Form 8–K, following the de-SPAC 

transaction and reflect this redetermination in its filings, beginning 

45 days after consummation of the deSPAC transaction. 

(A) Public float is measured as of a 

date within four business days after the 

consummation of the de-SPAC 

transaction and is computed by 

multiplying the aggregate worldwide 

number of shares of its voting and nonvoting common equity held by nonaffiliates as of that date by the price at 

which the common equity was last sold, 

or the average of the bid and asked 

prices of common equity, in the 

principal market for the common equity; 

and 

(B) Annual revenues are the annual 

revenues of the target company, as 

defined in § 229.1601(d) of this chapter 

(Item 1601(d) of Regulation S–K), as of 

the most recently completed fiscal year 

reported in the Form 8–K filed pursuant 

to Items 2.01(f), 5.01(a)(8), and/or 

9.01(c) of Form 8–K. 

* * * * * 

■ 25. Amend § 240.14a–6 by adding 

paragraph (q) to read as follows: 

§ 240.14a–6 Filing requirements. 

* * * * * 

(q) De-SPAC transactions. If a 

transaction is a de-SPAC transaction, as 

defined in § 229.1601(a) of this chapter 

(Item 1601(a) of Regulation S–K), the 

proxy statement of the special purpose 

acquisition company, as defined in 

§ 229.1601(b) of this chapter (Item 

1601(b) of Regulation S–K), must be 

distributed to security holders no later 

than the lesser of 20 calendar days prior 

to the date on which the meeting of 

security holders is to be held or action 

is to be taken in connection with the deSPAC transaction or the maximum 

number of days permitted for 

disseminating the proxy statement 

under the applicable laws of the 

jurisdiction of incorporation or 

organization. 

■ 26. Amend § 240.14a–101 by: 

■ a. Adding paragraph (f) to Item 14; 

and 

■ b. In Item 25: 

■ i. Removing ‘‘and’’ from the end of 

paragraph (a); 

■ ii. Redesignating paragraph (b) as 

paragraph (c); and 

■ iii. Adding new paragraph (b). 

The additions read as follows: 

§ 240.14a–101 Schedule 14A. Information 

required in proxy statement. 

* * * * * 

Item 14. * * * 

* * * * * 

(f) De-SPAC transactions. (1) If the 

transaction is a de-SPAC transaction, as 

defined in § 229.1601(a) (Item 1601(a) of 

Regulation S–K), then the disclosure 

provisions of §§ 229.1603, 

229.1604(b)(1) through (6) and (c), 

229.1605 through 229.1607, and 

229.1609 (Items 1603, 1604(b)(1) 

through (6) and (c), 1605 through 1607, 

and 1609 of Regulation S–K) apply in 

addition to the provisions of this 

schedule and disclosure thereunder 

must be provided in the proxy 

statement, and the structured data 

provisions of § 229.1610 (Item 1610 of 

Regulation S–K) apply to those 

disclosures. The information required 

by § 229.1604(b)(1) through (6) must be 

briefly described in the front of the 

disclosure document. To the extent that 

the applicable disclosure requirements 

of subpart 229.1600 of Regulation S–K 


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are inconsistent with the disclosure 

requirements of this schedule, the 

requirements of subpart 229.1600 are 

controlling. 

(2) Provide the following additional 

information for the target company: 

(i) Information required by § 229.101 

(Item 101 of Regulation S–K, description 

of business); 

(ii) Information required by § 229.102 

(Item 102 of Regulation S–K, description 

of property); 

(iii) Information required by § 229.103 

(Item 103 of Regulation S–K, legal 

proceedings); 

(iv) Information required by § 229.304 

(Item 304 of Regulation S–K, changes in 

and disagreements with accountants on 

accounting and financial disclosure); 

(v) Information required by § 229.403 

(Item 403 of Regulation S–K, security 

ownership of certain beneficial owners 

and management), assuming the 

completion of the de-SPAC transaction 

and any related financing transaction; 

and 

(vi) Information required by § 229.701 

(Item 701 of Regulation S–K, recent 

sales of unregistered securities). 

* * * * * 

Item 25. * * * 

* * * * * 

(b) If the transaction is a de-SPAC 

transaction, as defined in § 229.1601(a) 

(Item 1601(a) of Regulation S–K), all 

reports, opinions, or appraisals required 

to be filed or included by § 229.1607(c) 

(Item 1607(c) of Regulation S–K); and 

* * * * * 

■ 27. Amend § 240.14c–2 by adding 

paragraph (e) to read as follows: 

§ 240.14c–2 Distribution of information 

statement. 

* * * * * 

(e) If a transaction is a de-SPAC 

transaction, as defined in § 229.1601(a) 

of this chapter (Item 1601(a) of 

Regulation S–K), the information 

statement of the special purpose 

acquisition company, as defined in 

§ 229.1601(b) (Item 1601(b) of 

Regulation S–K), must be distributed to 

security holders no later than the lesser 

of 20 calendar days prior to the date on 

which the meeting of security holders is 

to be held or action is to be taken in 

connection with the de-SPAC 

transaction or the maximum number of 

days permitted for disseminating the 

information statement under the 

applicable laws of the jurisdiction of 

incorporation or organization. 

■ 28. Amend § 240.14d–100 by: 

■ a. Redesignating General Instruction K 

as General Instruction M; 

■ b. Adding new General Instructions K 

and L; and 

■ c. In Item 12: 

■ i. Removing ‘‘and’’ from the end of 

paragraph (a); 

■ ii. Redesignating paragraph (b) as 

paragraph (c); and 

■ iii. Adding new paragraph (b). 

The additions read as follows: 

§ 240.14d–100 Schedule TO. Tender offer 

statement under section 14(d)(1) or 13(e)(1) 

of the Securities Exchange Act of 1934. 

* * * * * 

General Instructions: 

* * * * * 

K. If the filing relates to a de-SPAC 

transaction, as defined in § 229.1601(a) 

(Item 1601(a) of Regulation S–K), then 

the provisions of §§ 229.1603, 

229.1604(b)(1) through (6) and (c) and 

229.1605 through 229.1609 (Items 1603, 

1604(b)(1) through (6) and (c) and 1605 

through 1609 of Regulation S–K) apply 

in addition to the provisions of this 

schedule and disclosure thereunder 

must be provided in this schedule, and 

the structured data provisions of 

§ 229.1610 (Item 1610 of Regulation S– 

K) apply to those disclosures. The 

information required by § 229.1604(b)(1) 

through (6) must be briefly described in 

the front of the disclosure document. If 

the filing by a special purpose 

acquisition company, as defined in 

§ 229.1601(b) (Item 1601(b) of 

Regulation S–K), relates to any other 

redemption of securities offered to 

security holders, then the provisions of 

§ 229.1608 (Item 1608 of Regulation S– 

K) apply in addition to the provisions of 

this schedule and disclosure 

thereunder, if applicable, must be 

provided in this schedule and the 

structured data provisions of § 229.1610 

(Item 1610 of Regulation S–K) apply to 

those disclosures. To the extent that the 

applicable disclosure requirements of 

subpart 229.1600 of Regulation S–K are 

inconsistent with the disclosure 

requirements of this filing, the 

requirements of subpart 229.1600 of this 

chapter are controlling. 

L. An Interactive Data File must be 

included in accordance with § 232.405 

(Rule 405 of Regulation S–T) and the 

EDGAR Filer Manual where applicable 

pursuant to General Instruction K and 

§ 232.405(b). 

* * * * * 

Item 12. * * * 

* * * * * 

(b) If the filing relates to a de-SPAC 

transaction, as defined in § 229.1601(a) 

(Item 1601(a) of Regulation S–K), all 

reports, opinions, or appraisals required 

to be filed or included by § 229.1607(c) 

(Item 1607(c) of Regulation S–K); and 

* * * * * 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 29. The authority citation for part 249 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b) Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3) Pub. L. 112–106, 126 Stat. 309 

(2012), Sec. 107 Pub. L. 112–106, 126 Stat. 

313 (2012), Sec. 72001 Pub. L. 114–94, 129 

Stat. 1312 (2015), and secs. 2 and 3 Pub. L. 

116–222, 134 Stat. 1063 (2020), unless 

otherwise noted. 

Section 249.220f is also issued under secs. 

3(a), 202, 208, 302, 306(a), 401(a), 401(b), 406 

and 407, Pub. L. 107–204, 116 Stat. 745, and 

secs. 2 and 3, Pub. L. 116–222, 134 Stat. 

1063. 

* * * * * 

Section 249.308 is also issued under 15 

U.S.C. 80a–29 and 80a–37. 

* * * * * 

■ 30. Amend Form 20–F (referenced in 

§ 249.220f) by adding Instruction 4 to 

Item 8. 

Note: Form 20–F is attached as appendix 

E to this document. Form 20–F will not 

appear in the Code of Federal Regulations. 

■ 31. Amend Form 8–K (referenced in 

§ 249.308) by: 

■ a. Adding General Instruction B.7; and 

■ b. Revising paragraph (f) of Item 2.01. 

Note: Form 8–K is attached as appendix F 

to this document. Form 8–K will not appear 

in the Code of Federal Regulations. 

By the Commission. 

Dated: January 24, 2024. 

J. Matthew DeLesDernier, 

Deputy Secretary. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendix A—Form S–1 

Form S–1 

* * * * * 

General Instructions 

* * * * * 

VIII. Offering by a Special Purpose 

Acquisition Company 

If a registration statement on this Form S– 

1 is being used to register an offering of 

securities of a special purpose acquisition 

company, as defined in Item 1601(b) of 

Regulation S–K (17 CFR 229.1601(b)), other 

than in connection with a de-SPAC 

transaction, as defined in Item 1601(a) of 

Regulation S–K (17 CFR 229.1601(a)), the 

registrant must furnish in the prospectus the 

information required by Items 1602 and 1603 

of Regulation S–K (17 CFR 229.1602 and 

229.1603), in the manner set forth by the 

structured data provision of Item 1610 of 

Regulation S–K (17 CFR 229.1610), in 

addition to the Items that are otherwise 

required by this Form. If the securities to be 

registered on this Form will be issued in a 


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de-SPAC transaction, the requirements of 

Form S–4 applicable to de-SPAC transactions 

apply to this Form, including, but not limited 

to, Item 17 and General Instruction L. 

* * * * * 

Item 6. Dilution 

Provide the information required by Item 

506 of Regulation S–K (§ 229.506 of this 

chapter), unless the registrant is a special 

purpose acquisition company (as defined in 

Item 1601 of Regulation S–K). 

* * * * * 

Signatures 

* * * * * 

Instructions 

1. The registration statement shall be 

signed by the registrant, its principal 

executive officer or officers, its principal 

financial officer, its controller or principal 

accounting officer and by at least a majority 

of the board of directors or persons 

performing similar functions. If the registrant 

is a foreign person, the registration statement 

shall also be signed by its authorized 

representative in the United States. Where 

the registrant is a limited partnership, the 

registration statement shall be signed by a 

majority of the board of directors of any 

corporate general partner signing the 

registration statement. If the securities to be 

registered on this Form will be issued by a 

special purpose acquisition company, as 

such term is defined in Item 1601 of 

Regulation S–K, or another shell company in 

connection with a de-SPAC transaction, as 

such term is defined in Item 1601 of 

Regulation S–K, the term ‘‘registrant’’ for 

purposes of this instruction and the 

Signatures section of this form also includes 

the target company, as such term is defined 

in Item 1601 of Regulation S–K, except that 

in connection with any de-SPAC transaction 

involving the purchase of assets or a 

business, with respect to the purchase of 

assets or a business, the term ‘‘registrant’’ 

also includes the seller of the business or 

assets. 

* * * * * 

Appendix B—Form S–4 

Form S–4 

* * * * * 

General Instructions 

* * * * * 

L. De-SPAC Transactions 

1. If securities to be registered on this Form 

will be issued in a de-SPAC transaction, as 

defined in Item 1601(a) of Regulation S–K (17 

CFR 229.1601(a)), then the disclosure 

provisions of Items 1603 through 1607 and 

1609 of Regulation S–K (17 CFR 229.1603 

through 229.1607 and 229.1609) apply in 

addition to the provisions of this Form and 

disclosure thereunder must be provided in 

the prospectus, and the structured data 

provisions of Item 1610 of Regulation S–K 

(17 CFR 229.1610) apply to those disclosures. 

To the extent that the applicable disclosure 

requirements of Subpart 229.1600 are 

inconsistent with the disclosure 

requirements of this Form, the requirements 

of Subpart 229.1600 are controlling. If the 

securities to be registered on this Form will 

be issued by a special purpose acquisition 

company (as such term is defined in Item 

1601 of Regulation S–K) or another shell 

company in connection with a de-SPAC 

transaction, the registrants also include the 

target company (as such term is defined in 

Item 1601 of Regulation S–K), and it must be 

so designated on the cover page of this Form. 

In such a de-SPAC transaction, where the 

target company consists of a business or 

assets, the seller of the business or assets is 

deemed to be a registrant instead of the 

business or assets and must be so designated 

on the cover page of this Form. Further, in 

such a de-SPAC transaction, the term 

‘‘registrant’’ for purposes of the disclosure 

requirements of this Form means the special 

purpose acquisition company, and the term 

‘‘company being acquired’’ for the purposes 

of the disclosure requirements of this Form 

means the target company. 

2. If the target company, as defined in Item 

1601(d) of Regulation S–K (17 CFR 

229.1601(d)), in a de-SPAC transaction, as 

defined in Item 1601 of Regulation S–K (17 

CFR 229.1601), is not subject to the reporting 

requirements of either Section 13(a) or 15(d) 

of the Exchange Act, provide the following 

additional information with respect to the 

target company: 

a. Item 101 of Regulation S–K (§ 229.101 of 

this chapter, description of business); 

b. Item 102 of Regulation S–K (§ 229.102 of 

this chapter, description of property); 

c. Item 103 of Regulation S–K (§ 229.103 of 

this chapter, legal proceedings); 

d. Item 304 of Regulation S–K (§ 229.304 of 

this chapter, changes in and disagreements 

with accountants on accounting and financial 

disclosure); 

e. Item 403 of Regulation S–K (§ 229.403 of 

this chapter, security ownership of certain 

beneficial owners and management), 

assuming the completion of the de-SPAC 

transaction and any related financing 

transaction; and 

f. Item 701 of Regulation S–K (§ 229.701 of 

this chapter, recent sales of unregistered 

securities). 

If the target company is a foreign private 

issuer, as defined in Rule 405 (§ 230.405 of 

this chapter), information with respect to the 

target company may be provided in 

accordance with Items 4, 6.E, 7.A, 8.A.7, and 

16F of Form 20–F, in lieu of the information 

specified above. 

3. If securities to be registered on this Form 

will be issued in a de-SPAC transaction, as 

defined in Item 1601(a) of Regulation S–K (17 

CFR 229.1601(a)), the prospectus must be 

distributed to security holders no later than 

the lesser of 20 calendar days prior to the 

date on which the meeting of security 

holders is to be held or action is to be taken 

in connection with the de-SPAC transaction 

or the maximum number of days permitted 

for disseminating the prospectus under the 

applicable laws of the jurisdiction of 

incorporation or organization. 

* * * * * 

Item 17. Information With Respect to 

Companies Other Than S–3 Companies 

* * * * * 

(7) Financial statements that would be 

required in an annual report sent to security 

holders under Rules 14a–3(b)(1) and (b)(2) 

(§ 240.14b–3 of this chapter), if an annual 

report was required. In a de-SPAC 

transaction, see § 240.15–01 (Rule 15–01 of 

Regulation S–X). If the registrant’s security 

holders are not voting, the transaction is not 

a roll-up transaction (as described by Item 

901 of Regulation S–K (§ 229.901 of this 

chapter)), and: 

* * * * * 

Instructions 

1. The financial statements required by this 

paragraph for the latest fiscal year need be 

audited only to the extent practicable. The 

financial statements for the fiscal years before 

the latest fiscal year need not be audited if 

they were not previously audited. For a 

company combining with a registrant that is 

a shell company, see § 210.15–01(a). 

* * * * * 

Signatures 

* * * * * 

Instructions 

1. The registration statement must be 

signed by the registrant, its principal 

executive officer or officers, its principal 

financial officer, its controller or principal 

accounting officer, and by at least a majority 

of the board of directors or persons 

performing similar functions. If the registrant 

is a foreign person, the registration statement 

must also be signed by its authorized 

representative in the United States. Where 

the registrant is a limited partnership, the 

registration statement must be signed by a 

majority of the board of directors of any 

corporate general partner signing the 

registration statement. If the securities to be 

registered on this Form will be issued by a 

special purpose acquisition company, as 

such term is defined in Item 1601 of 

Regulation S–K, or another shell company in 

connection with a de-SPAC transaction, as 

such term is defined in Item 1601 of 

Regulation S–K, the term ‘‘registrant’’ for 

purposes of this instruction and the 

Signatures section of this form also includes 

the target company, as such term is defined 

in Item 1601 of Regulation S–K, except that 

in connection with any de-SPAC transaction 

involving the purchase of assets or a 

business, with respect to the purchase of 

assets or a business, the term ‘‘registrant’’ 

also includes the seller of the business or 

assets. 

* * * * * 

Appendix C—Form F–1 

Form F–1 

* * * * * 

General Instructions 

* * * * * 

VII. Offering by a Special Purpose 

Acquisition Company 

If a registration statement on this Form F– 

1 is being used to register an offering of 

securities of a special purpose acquisition 

company, as defined in Item 1601(b) of 


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Regulation S–K (17 CFR 229.1601(b)), other 

than in connection with a de-SPAC 

transaction, as defined in Item 1601(a) of 

Regulation S–K (17 CFR 229.1601(a)), the 

registrant must furnish in the prospectus the 

information required by Items 1602 and 1603 

of Regulation S–K (17 CFR 229.1602 and 

229.1603), in the manner set forth by the 

structured data provision of Item 1610 of 

Regulation S–K (17 CFR 229.1610), in 

addition to the Items that are otherwise 

required by this Form. If the securities to be 

registered on this Form will be issued in a 

de-SPAC transaction the requirements of 

Form F–4 applicable to de-SPAC transactions 

apply to this Form, including, but not limited 

to, Item 17 and General Instruction I. 

* * * * * 

Item 9. The Offer and Listing 

* * * * * 

E. Dilution. The following information 

shall be provided: 

* * * * * 

4. Where the registrant is a special purpose 

acquisition company (as defined in Item 1601 

of Regulation S–K), in lieu of providing the 

information required under Item 9.E.1 and 

Item 9.E.2, provide the disclosure required 

pursuant to Items 1602(a)(4) and 1602(c) of 

Regulation S–K in an offering other than a 

de-SPAC transaction (as defined in Item 1601 

of Regulation S–K) and provide the 

disclosure required under Item 1604(c) of 

Regulation S–K in connection with a deSPAC transaction. 

* * * * * 

Signatures 

* * * * * 

Instructions 

1. The registration statement shall be 

signed by the registrant, its principal 

executive officer or officers, its principal 

financial officer, its controller or principal 

accounting officer, at least a majority of the 

board of directors or persons performing 

similar functions, and its authorized 

representative in the United States. Where 

the registrant is a limited partnership, the 

registration statement shall be signed by a 

majority of the board of directors of any 

corporate general partner signing the 

registration statement. If the securities to be 

registered on this Form will be issued by a 

special purpose acquisition company, as 

such term is defined in Item 1601 of 

Regulation S–K, or another shell company in 

connection with a de-SPAC transaction, as 

such term is defined in Item 1601 of 

Regulation S–K, the term ‘‘registrant’’ for 

purposes of this instruction and the 

Signatures section of this form also includes 

the target company, as such term is defined 

in Item 1601 of Regulation S–K, except that 

in connection with any de-SPAC transaction 

involving the purchase of assets or a 

business, with respect to the purchase of 

assets or a business, the term ‘‘registrant’’ 

also includes the seller of the business or 

assets. 

* * * * * 

Appendix D—Form F–4 

Form F–4 

* * * * * 

General Instructions 

* * * * * 

I. De-SPAC Transactions 

1. If securities to be registered on this Form 

will be issued in a de-SPAC transaction, as 

defined in Item 1601(a) of Regulation S–K (17 

CFR 229.1601(a)), then the disclosure 

provisions of Items 1603 through 1607 and 

1609 of Regulation S–K (17 CFR 229.1603 

through 229.1607 and 1609) apply in 

addition to the provisions of this Form and 

disclosure thereunder must be provided in 

the prospectus, and the structured data 

provisions of Item 1610 of Regulation S–K 

(17 CFR 229.1610) apply to those disclosures. 

To the extent that the applicable disclosure 

requirements of Subpart 229.1600 are 

inconsistent with the disclosure 

requirements of this Form, the requirements 

of Subpart 229.1600 are controlling. If the 

securities to be registered on this Form will 

be issued by a special purpose acquisition 

company (as such term is defined in Item 

1601 of Regulation S–K), or another shell 

company in connection with a de-SPAC 

transaction, the registrants also include the 

target company (as such term is defined in 

Item 1601 of Regulation S–K), and it must be 

so designated on the cover page of this Form. 

In such a de-SPAC transaction, where the 

target company consists of a business or 

assets, the seller of the business or assets is 

deemed to be a registrant instead of the 

business or assets and must be so designated 

on the cover page of this Form. Further, in 

such a de-SPAC transaction, the term 

‘‘registrant’’ for purposes of the disclosure 

requirements of this Form means the special 

purpose acquisition company, and the term 

‘‘company being acquired’’ for the purposes 

of the disclosure requirements of this Form 

means the target company. 

2. If the target company, as defined in Item 

1601(d) of Regulation S–K (17 CFR 

229.1601(d)), in a de-SPAC transaction, as 

such term is defined in Item 1601 of 

Regulation S–K, is not subject to the 

reporting requirements of either Section 13(a) 

or 15(d) of the Exchange Act, provide the 

following additional information with 

respect to the company: 

a. Item 101 of Regulation S–K (§ 229.101 of 

this chapter, description of business); 

b. Item 102 of Regulation S–K (§ 229.102 of 

this chapter, description of property); 

c. Item 103 of Regulation S–K (§ 229.103 of 

this chapter, legal proceedings); 

d. Item 304 of Regulation S–K (§ 229.304 of 

this chapter, changes in and disagreements 

with accountants on accounting and financial 

disclosure); 

e. Item 403 of Regulation S–K (§ 229.403 of 

this chapter, security ownership of certain 

beneficial owners and management), 

assuming the completion of the de-SPAC 

transaction and any related financing 

transaction; and 

f. Item 701 of Regulation S–K (§ 229.701 of 

this chapter, recent sales of unregistered 

securities) 

If the target company is a foreign private 

issuer, as defined in Rule 405 (§ 230.405 of 

this chapter), information with respect to the 

target company may be provided in 

accordance with Items 4, 6.E, 7.A, 8.A.7, and 

16F of Form 20–F, in lieu of the information 

specified above. 

3. If securities to be registered on this Form 

will be issued in a de-SPAC transaction, as 

defined in Item 1601(a) of Regulation S–K (17 

CFR 229.1601(a)), the prospectus must be 

distributed to security holders no later than 

the lesser of 20 calendar days prior to the 

date on which the meeting of security 

holders is to be held or action is to be taken 

in connection with the de-SPAC transaction 

or the maximum number of days permitted 

for disseminating the prospectus under the 

applicable laws of the jurisdiction of 

incorporation or organization. 

* * * * * 

Part I 

* * * * * 

Item 17. Information With Respect to 

Foreign Companies Other Than F–3 

Companies 

* * * * * 

Instructions 

1. The financial statements required by this 

paragraph for the latest fiscal year need be 

audited only to the extent practicable. The 

financial statements for the fiscal years before 

the latest fiscal year need not be audited if 

they were not previously audited. For a 

company combining with a registrant that is 

a shell company, see § 210.15–01(a). 

* * * * * 

Instructions to Paragraph (b)(5) and (b)(6) 

If the financial statements required by 

paragraphs (b)(5) and (b)(6) are prepared on 

the basis of a comprehensive body of 

accounting principles other than U.S. GAAP, 

provide a reconciliation to U.S. GAAP in 

accordance with Item 18 of Form 20–F 

(§ 249.220f of this chapter) if the foreign 

business being acquired will be a predecessor 

to the issuer that is a shell company or, in 

all other circumstances, with Item 17 of Form 

20–F (§ 249.220f of this chapter) unless a 

reconciliation is unavailable or not 

obtainable without unreasonable cost or 

expense. At a minimum, provide a narrative 

description of all material variations in 

accounting principles, practices and methods 

used in preparing the non-U.S. GAAP 

financial statements from those accepted in 

the U.S. when the financial statements are 

prepared on a basis other than U.S. GAAP. 

Signatures 

* * * * * 

Instructions 

1. The registration statement must be 

signed by the registrant, its principal 

executive officer or officers, its principal 

financial officer, its controller or principal 

accounting officer, at least a majority of the 

board of directors or persons performing 

similar functions and its authorized 

representative in the United States. Where 

the registrant is a limited partnership, the 


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Federal Register / Vol. 89, No. 38 / Monday, February 26, 2024 / Rules and Regulations 14327 

registration statement must be signed by a 

majority of the board of directors of any 

corporate general partner signing the 

registration statement. If the securities to be 

registered on this Form will be issued by a 

special purpose acquisition company (as 

such term is defined in Item 1601 of 

Regulation S–K) or another shell company in 

connection with a de-SPAC transaction, as 

such term is defined in Items 1601 of 

Regulation S–K, the term ‘‘registrant’’ for 

purposes of this instruction and the 

Signatures section of this form also includes 

the target company (as such term is defined 

in Item 1601 of Regulation S–K), except that 

in connection with any de-SPAC transaction 

involving the purchase of assets or a 

business, with respect to the purchase of 

assets or a business, the term ‘‘registrant’’ 

also includes the seller of the business or 

assets. 

* * * * * 

Appendix E—Form 20–F 

Form 20–F 

* * * * * 

Item 8. Financial Information 

* * * * * 

Instructions to Item 8 

* * * * * 

4. For filings on Form 20–F filed pursuant 

to General Instruction A.(d) of this form and 

for registration statements, when the issuer is 

a shell company that is combining with a 

business, see § 240.15–01 (Rule 15–01 of 

Regulation S–X). 

* * * * * 

Appendix F—Form 8–K 

Form 8–K 

* * * * * 

B. Events To Be Reported and Time for 

Filing of Reports 

* * * * * 

7. If a registrant’s report or exhibit to such 

report relates to a de-SPAC transaction (as 

defined in Item 1601(a) of Regulation S–K (17 

CFR 229.1601(a)) and includes projections 

that relate to the performance of the special 

purpose acquisition company or the target 

company, the report or exhibit, as applicable, 

must include the information required by 

paragraphs (a) and (b) of Item 1609 of 

Regulation S–K (17 CFR 229.1609(a), (b)). 

* * * * * 

Item 2.01 Completion of Acquisition or 

Disposition of Assets 

* * * * * 

(f) if the registrant was a shell company, 

other than a business combination related 

shell company, as those terms are defined in 

Rule 12b–2 under the Exchange Act (17 CFR 

240.12b–2), immediately before the 

transaction in which the registrant acquired 

a business that is its predecessor, disclose the 

information that would be required if the 

acquired business or real estate operation 

that is its predecessor were filing a general 

form for registration of securities on Form 10 

under the Exchange Act reflecting all classes 

of the registrant’s securities subject to the 

reporting requirements of Section 13 (15 

U.S.C. 78m) or Section 15(d) (15 U.S.C. 

78o(d)) of such Act upon consummation of 

the transaction. However, when, at the time 

of filing, the predecessor meets the 

conditions of an emerging growth company, 

as defined in § 230.405 of this chapter (Rule 

405 of the Securities Act) or § 240.12b–2 of 

this chapter (Rule 12b–2 of the Exchange 

Act), the registrant need not present audited 

financial statements for the predecessor for 

any period prior to the earliest audited 

period presented in its financial statements 

included in a previously filed registration or 

proxy statement for the transaction resulting 

in the loss of shell company status. 

Notwithstanding General Instruction B.3. to 

Form 8–K, if any disclosure required by this 

Item 2.01(f) is previously reported, as that 

term is defined in Rule 12b–2 under the 

Exchange Act (17 CFR 240.12b–2), the 

registrant may identify the filing in which 

that disclosure is included instead of 

including that disclosure in this report. 

* * * * * 

[FR Doc. 2024–01853 Filed 2–23–24; 8:45 am] 

BILLING CODE 8011–01–P 


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