"UNRECOVERABLE: Timeout During Enrichment"

Conformed to Federal Register version 

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 



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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. 



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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 

 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 

 

  



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TABLE OF CONTENTS 

I. INTRODUCTION ................................................................................................................... 8 
II. NEW SUBPART 1600 OF REGULATION S-K .................................................................. 23 

A. Definitions......................................................................................................................... 24 
1. Proposed Definition: “De-SPAC Transaction” .............................................................. 24 

2. Comments: Definition of “De-SPAC Transaction” ....................................................... 24 
3. Final Definition: “De-SPAC Transaction” ..................................................................... 25 
4. Proposed Definition: “Special Purpose Acquisition Company (SPAC)” ...................... 26 
5. Comments: Definition of “Special Purpose Acquisition Company (SPAC)”................ 27 
6. Final Definition: “Special Purpose Acquisition Company (SPAC)” ............................. 28 

7. Proposed Definition: “SPAC Sponsor” .......................................................................... 35 
8. Comments: Definition of “SPAC Sponsor” ................................................................... 35 

9. Final Definition: “SPAC Sponsor” ................................................................................ 36 
10. Proposed Definition: “Target Company” ....................................................................... 39 
11. Comments: Definition of “Target Company” ................................................................ 39 
12. Final Definition: “Target Company”.............................................................................. 40 

B. Sponsors ............................................................................................................................ 40 
1. Proposed Rules ............................................................................................................... 40 

2. Comments....................................................................................................................... 42 
3. Final Rules...................................................................................................................... 47 
C. Conflicts of Interest........................................................................................................... 59 

1. Proposed Rules ............................................................................................................... 59 

2. Comments....................................................................................................................... 61 
3. Final Rules...................................................................................................................... 64 
D. Dilution ............................................................................................................................. 72 

1. Proposed Rules ............................................................................................................... 72 
2. Comments....................................................................................................................... 76 

3. Final Rules...................................................................................................................... 85 
E. Prospectus Cover Page and Prospectus Summary Disclosure ........................................ 117 
1. Proposed Rules ............................................................................................................. 117 

2. Comments..................................................................................................................... 120 
3. Final Rules.................................................................................................................... 121 

F. De-SPAC Transactions: Background, Reasons, Terms, and Effects .............................. 126 
1. Proposed Item 1605 ...................................................................................................... 126 
2. Comments: Item 1605 .................................................................................................. 127 
3. Final Item 1605 ............................................................................................................ 128 

G. Board Determination about the De-SPAC Transaction; Reports, Opinions, Appraisals, 

and Negotiations .................................................................................................................. 132 
1. Proposed Item 1606(a) ................................................................................................. 132 
2. Comments: Item 1606(a) .............................................................................................. 132 
3. Final Item 1606(a) ........................................................................................................ 135 

4. Proposed Item 1606(b) ................................................................................................. 140 
5. Comments: Item 1606(b) ............................................................................................. 141 

6. Final Item 1606(b) ........................................................................................................ 142 
7. Proposed Item 1606(c) through (e) .............................................................................. 145 
8. Comments: Item 1606(c) through (e) ........................................................................... 145 



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9. Final Item 1606(c) through (e) ..................................................................................... 147 
10. Proposed Item 1607 ...................................................................................................... 149 

11. Comments: Item 1607 .................................................................................................. 150 
12. Final Item 1607 ............................................................................................................ 152 
H. Tender Offer Filing Obligations ..................................................................................... 156 
1. Proposed Item 1608 ...................................................................................................... 156 
2. Comments: Item 1608 .................................................................................................. 157 

3. Final Item 1608 ............................................................................................................ 158 
I. Structured Data Requirement .......................................................................................... 161 
1. Proposed Item 1610 ...................................................................................................... 161 
2. Comments..................................................................................................................... 161 

3. Final Item 1610 and Tagging Compliance Date .......................................................... 163 
III. DISCLOSURES AND LIABILITY IN DE-SPAC TRANSACTIONS.............................. 166 

A. Non-Financial Disclosures in De-SPAC Disclosure Documents ................................... 167 
1. Proposed Rules ............................................................................................................. 167 

2. Comments..................................................................................................................... 168 

3. Final Rules.................................................................................................................... 169 
B. Minimum Dissemination Period ..................................................................................... 172 
1. Proposed Rules ............................................................................................................. 172 

2. Comments..................................................................................................................... 173 
3. Final Rules.................................................................................................................... 175 

C. Private Operating Company as Co-Registrant ................................................................ 179 

1. Proposed Rules ............................................................................................................. 179 

2. Comments..................................................................................................................... 180 
3. Final Rules.................................................................................................................... 190 

D. Re-Determination of Smaller Reporting Company (SRC) Status .................................. 211 
1. Proposed Rules ............................................................................................................. 211 
2. Comments..................................................................................................................... 212 

3. Final Rules and Guidance ............................................................................................ 219 
E. PSLRA Safe Harbor ........................................................................................................ 231 

1. Proposed Rules ............................................................................................................. 231 
2. Comments..................................................................................................................... 234 
3. Final Rules.................................................................................................................... 255 

F. Underwriter Status and Liability in Securities Transactions .......................................... 278 
1. Proposed Rule .............................................................................................................. 278 
2. Comments..................................................................................................................... 279 
3. Declining to Adopt Proposed Rule 140a; Commission Guidance on Underwriter Status 

in De-SPAC Transactions ............................................................................................ 282 

IV. BUSINESS COMBINATIONS INVOLVING SHELL COMPANIES .............................. 289 
A. Shell Company Business Combinations and the Securities Act of 1933 ........................ 290 
1. Proposed Rule .............................................................................................................. 290 
2. Comments..................................................................................................................... 290 
3. Final Rule ..................................................................................................................... 293 

B. Financial Statement Requirements in Business Combination Transactions Involving Shell 

Companies ........................................................................................................................... 308 

1. Proposed Rule 15-01(a), Rule 1-02(d), and Form Instructions: Audit Requirements . 309 



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2. Comments: Rule 15-01(a), Rule 1-02(d), and Form Instructions: Audit Requirements

 ...................................................................................................................................... 310 

3. Final Rule 15-01(a), Rule 1-02(d), and Form Instructions: Audit Requirements ........ 311 
4. Proposed Rule 15-01(b): Number of Years of Financial Statements ........................... 314 
5. Comments: Rule 15-01(b): Number of Years of Financial Statements ....................... 315 
6. Final Rule 15-01(b): Number of Years of Financial Statements ................................. 315 
7. Proposed Rule 15-01(c): Age of Financial Statements ................................................ 316 

8. Comments: Rule 15-01(c): Age of Financial Statements............................................. 317 
9. Final Rule 15-01(c): Age of Financial Statements ....................................................... 317 
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 ................................................... 319 

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 ................................................... 323 
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 ................................................... 324 

13. Proposed Rule 15-01(e): Financial Statements of a Shell Company Registrant after the 

Combination with Predecessor..................................................................................... 328 
14. Comments: Rule 15-01(e): Financial Statements of a Shell Company Registrant after 

the Combination with Predecessor ............................................................................... 329 

15. Final Rule 15-01(e): Financial Statements of a Shell Company Registrant after the 

Combination with Predecessor..................................................................................... 330 

16. Proposed Rule 11-01(d) ............................................................................................... 332 

17. Comments: Rule 11-01(d) ............................................................................................ 334 

18. Decline to Adopt Rule 11-01(d) ................................................................................... 336 
19. Proposed Item 2.01(f) of Form 8-K ............................................................................. 338 

20. Comments: Item 2.01(f) of Form 8-K .......................................................................... 338 
21. Final Item 2.01(f) of Form 8-K .................................................................................... 339 
22. Proposed Rules 3-01, 8-02, 10-01(a)(1): Balance Sheets of Predecessors .................. 340 

23. Comments: Rules 3-01, 8-02, 10-01(a)(1): Balance Sheets of Predecessors ............... 340 
24. Final Rules 3-01, 8-02, 10-01(a)(1): Balance Sheets of Predecessors ......................... 340 

25. Other Shell Company Matters ...................................................................................... 341 
V. ENHANCED PROJECTIONS DISCLOSURE .................................................................. 343 

A. Proposed Items 10(b) and 1609 of Regulation S-K ........................................................ 343 

1. Proposed Rules ............................................................................................................. 343 
2. Comments..................................................................................................................... 345 
3. Final Rules.................................................................................................................... 350 

VI. THE STATUS OF SPACS UNDER THE INVESTMENT COMPANY ACT .................. 359 
A. Background ..................................................................................................................... 359 

B. SPAC Activities .............................................................................................................. 364 
1. The Nature of SPAC Assets and Income ..................................................................... 364 
2. Management Activities ................................................................................................ 365 
3. Duration ........................................................................................................................ 367 
4. Holding Out .................................................................................................................. 369 

5. Merging with an Investment Company ........................................................................ 369 

C. Conclusion ...................................................................................................................... 370 

VII. OTHER MATTERS ............................................................................................................ 370 



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VIII. ECONOMIC ANALYSIS............................................................................................ 370 
A. Baseline and Affected Parties ......................................................................................... 376 

1. SPAC Initial Public Offerings ...................................................................................... 376 
2. De-SPAC Transactions ................................................................................................ 384 
3. Blank Check Companies .............................................................................................. 393 
4. Shell Company Business Combinations ...................................................................... 394 
B. Benefits and Costs of the Adopted Rules ....................................................................... 395 

1. Disclosure-Related Rules ............................................................................................. 395 
2. Liability-Related Rules ................................................................................................ 453 
3. Shell Company-Related Rules ..................................................................................... 466 
4. Enhanced Projections Disclosure (Amendments to Item 10(b) of Regulation S-K) .... 478 

C. Effects on Efficiency, Competition, and Capital Formation ........................................... 480 
1. Efficiency ..................................................................................................................... 480 
2. Competition .................................................................................................................. 481 
3. Capital Formation ......................................................................................................... 482 

D. Reasonable Alternatives.................................................................................................. 484 

1. Disclosure-Related Rules ............................................................................................. 484 
2. PSLRA Safe Harbor Guidance ..................................................................................... 492 
3. Expanding Disclosure in Reporting Shell Company Business Combinations ............. 492 

4. Enhanced Projections Disclosure ................................................................................. 494 
IX. PAPERWORK REDUCTION ACT ................................................................................... 494 

A. Summary of the Collections of Information ................................................................... 494 

B. Estimates of the Effects of the Final Rules on the Collections of Information .............. 496 

C. Incremental and Aggregate Burden and Cost Estimates ................................................. 501 
1. Current Inventory Update to Reflect $600 Per Hour Rather than $400 Per Hour Outside 

Professional Costs Rate ................................................................................................ 501 
2. PRA Burden and Cost Estimates Resulting from the Final Rules ............................... 503 

X. FINAL REGULATORY FLEXIBILITY ANALYSIS ....................................................... 511 

A. Need for, and Objectives of, the Final Rules .................................................................. 511 
B. Significant Issues Raised by Public Comments .............................................................. 513 

C. Small Entities Subject to the Final Rules ........................................................................ 513 
D. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................. 515 
E. Duplicative, Overlapping or Conflicting Federal Rules ................................................. 515 

F. Agency Action to Minimize Effect on Small Entities .................................................... 516 
STATUTORY AUTHORITY .................................................................................................... 519 
 

 

 

  



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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 

companies4 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 de-SPAC 

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 

 
1  The 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. 

3  Pub. L. 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. 

4  The 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. 

5  The 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-and-

acquisitions/re-spacs-gain-steam-as-arrival-shares-sink-new-sponsor-steps-up. 

6  We 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. 



9 

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 de-SPAC 

transaction.8  The SPAC sponsor is usually compensated through a “promote” or “founder’s 

 
7  Special 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. 

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



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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 de-SPAC 

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 

 
9  The 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. 

11  The 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. 

12  The 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. 

13  SPAC shareholders typically also have a redemption right in connection with any votes to extend the duration 

of the SPAC. 

14  See definition of “foreign private issuer,” infra note 442. 



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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 opportunity to either: (1) require the SPAC to redeem their shares prior to the 

de-SPAC transaction17 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 

 
15  A 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. 

16  Three 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. 

17  Until 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). 

19  The 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. 



12 

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 company21 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 

 
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. 

22  As 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. 

23  The 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 

 



13 

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 125 below.   

 
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.  

24  Form 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. 

25  Estimates 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.  

https://www.spacanalytics.com/


14 

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 

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 de-

SPAC 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   

 
26  Id. 

27  Id. 



15 

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 de-SPAC transactions (e.g., the SPAC sponsors’ 

compensation being contingent on the completion of the de-SPAC 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   

 
28  For 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. 

29  See 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-deanes-20210524.pdf; see 

also Amrith Ramkumar, SPAC Insiders Can Make Millions Even When the Company They Take Public 

Struggles, Wall St. J. (Apr. 25, 2021). 

30  See, 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-parka-

20210524.pdf. 

31  See 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 

 

https://financialservices.house.gov/events/eventsingle.aspx?EventID=407753
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-deanes-20210524.pdf
https://ssrn.com/abstract=3906196
https://dx.doi.org/10.2139/ssrn.3906196
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-parka-20210524.pdf
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-parka-20210524.pdf


16 

Some commentators have expressed concerns regarding the adequacy of the disclosures 

provided to investors in SPAC IPOs and de-SPAC transactions32 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  

 
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-nasdaq-spac-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-

the-investor-advocate-nyse-spac-listing-standards-042122.pdf. 

32  Throughout this release, when we discuss “SPAC transactions,” we are referencing both SPAC IPOs and de-

SPAC transactions. 

33  See, 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-rodriguesu-20210524.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-08101 (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). 

34  For 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 

 

https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-rodriguesu-20210524.pdf


17 

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 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 de-SPAC 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   

 
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.   

35  Pub. L. 104-67, 109 Stat. 737 (1995). 

36  See, 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. 

37  See 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). 



18 

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     

 
38  See 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. 

40  The Small Business Capital Formation Advisory Committee recommendations on the Proposing Release are 

available at https://www.sec.gov/spotlight/sbcfac/sbcfac-spac-recommendation-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 

 

https://www.sec.gov/comments/s7-13-22/s71322.htm
https://www.sec.gov/spotlight/sbcfac/sbcfac-spac-recommendation-050622.pdf


19 

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 de-SPAC 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 

 
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. 



20 

protections with respect to, the M&A elements of de-SPAC 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 

de-SPAC transactions.  New subpart 1600 contains provisions that, among other things: 

• 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 de-SPAC 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 de-SPAC 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 de-SPAC 

transactions more closely with those in traditional IPOs.  Specifically, we are adopting final rules 

that:21 

• 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 co-registrant 

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 

 
41  Throughout 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. 



22 

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. 

 
42  Some 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. 



23 

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   

 
44  The requirements in new subpart 1600 will codify and standardize some of the disclosures already commonly 

provided by SPACs. 

45  See 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 Schedule 14A; 

General Instruction L to Schedule TO. 



24 

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 de-SPAC 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 de-SPAC transaction to transactions that are permitted under exchange listing 

standards, particularly if the definition of SPAC includes non-listed shell companies.52 

 
47  Proposed Item 1601(a). 

48  Letter 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”). 

49  Letter from ABA. 

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

51  Proposing 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?”). 

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



25 

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 recommendation54 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 

 
53  Item 1601(a) of Regulation S-K. 

54  Letter from ABA. 

55  Letters from ABA, Kirkland & Ellis. 



26 

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 non-listed shell companies.58  A narrower definition may 

inappropriately exclude transactions that should be included, such as those involving over-the-

counter-traded SPACs.  We continue to believe, as indicated in the Proposing Release,59 that the 

definition of de-SPAC 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 

 
56  Letter from ABA. 

57  See also infra note 94 and accompanying text concerning SPAC status after a de-SPAC transaction.   

58  Letter from Vinson & Elkins. 

59  Proposing 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. 

61  Blank 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. 



27 

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 ‘de-SPAC 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 based solely on retaining such cash.”66  Another commenter 

 
62  Proposed Item 1601(b). 

63  Letter 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.”).   

64  Letters from ABA, Vinson & Elkins. 

65  Letter from Vinson & Elkins. 

66  Id. 



28 

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 

 
67  Letter from ABA. 

68  Letter from ABA. 

69  Letter from Vinson & Elkins. 

70  Id. 

71  Id. 

72  Proposing 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?”). 

73  Letter from Vinson & Elkins. 



29 

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 

 
74  Item 1601(b) of Regulation S-K. 

75  Letter from Vinson & Elkins.  See supra note 63 and accompanying text. 

76  Letter from Vinson & Elkins. 

77  See Rule 145a and definitions of “blank check company” in Securities Act Rule 405 and Exchange Act Rule 

12b-2. 



30 

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 

 
78  According 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.   

79  Letter from Vinson & Elkins.  See supra note 63 and accompanying text. 

80  Letters from ABA, Vinson & Elkins.  See supra notes 64, 65, and 66 and accompanying text. 

81  See, 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.”). 



31 

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 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 

 
82  See NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule IM-5101-2 (providing for the 

placement of concurrent offering proceeds in trust). 

83  Proposing Release, supra note 7, at 29466. 

84  Letter from ABA. 

85  See 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. 



32 

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 exchange-traded 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 

 
86  Proposing Release, supra note 7, at 29465. 

87  Letter from Vinson & Elkins. 

88  See, e.g., Table 2 in section VIII (Economic Analysis) (statistics on over-the-counter SPACs for over a three-

decade period). 

89  Prior 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-the-counter market (i.e., that were not listed on an exchange in connection with the IPO). 



33 

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.   

 
90  As 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. 

91  Proposing Release, supra note 7, at 29466 (request for comment number 1). 

92  Proposing Release, supra note 7, at 29490 (request for comment number 102). 



34 

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 de-SPAC 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 de-SPAC transactions. 

 
93  Proposing Release, supra note 7, at 29465. 

94  Letter from Vinson & Elkins. 



35 

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 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  

 
95  See 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). 

96  Proposed Item 1601(c). 

97  Letter from Vinson & Elkins. 

98  Letter from ABA. 



36 

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 

 
99  Letter from ABA. 

100  Item 1601(c) of Regulation S-K. 

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



37 

“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, carve-outs 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 

 
102  See 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.”). 

103  See, 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.”). 

104  Letter from ABA.  See supra note 98 and accompanying text. 

105  Id. 



38 

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 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 

 
106  Letter from ABA.  See supra note 98 and accompanying text. 



39 

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 

 
107  Item 1601(c). 

108  Proposed Item 1601(d). 

109  Letter from Vinson & Elkins. 

110  Letter 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.”). 



40 

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 promoters114 in registration statements and schedules filed in 

 
111  Item 1601(d) of Regulation S-K. 

112  Letters from Freshfields, Vinson & Elkins.  See supra notes 65 and 66 and accompanying text. 

113  See infra section III.C. 

114  The term “promoter” is defined in Securities Act Rule 405 and Exchange Act Rule 12b-2.41 

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 de-SPAC transaction.116 

 
115  See (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. 



42 

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 sponsor ownership interest information that may affect investor ability to 

 
117  Letters 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, Co-Chair, 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”). 

118  Letter from Committee on Capital Markets Regulation. 

119  Letter from CII. 

120  Letter from Consumer Federation. 



43 

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 

 
121  Letter from ICGN. 

122  Letters from ICGN, NASAA. 

123  Letters from ABA, NASAA, Vinson & Elkins. 

124  Letters from Freshfields, Vinson & Elkins. 

125  Letter 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”). 

126  Letter from Vinson & Elkins. 

127  Letters from Better Markets, Charles Pieper, Committee on Capital Markets Regulation, CFA Institute, 

Consumer Federation, Senator Elizabeth Warren, ICGN, NASAA. 

128  Letters 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). 



44 

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 

 
129  Letter 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. 

130  Letter from Vinson & Elkins. 

131  Letter from Vinson & Elkins. 

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



45 

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, 

 
133  Letter from ABA. 

134  Proposing 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?”). 

135  Letter 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. 

137  Letter from Paul Swegle. 



46 

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 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 

 
138  Letter from NASAA. 

139  Letter from ABA. 

140  Letter from Vinson & Elkins. 

141  Letter from Michael Klausner and Michael Ohlrogge. 



47 

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  

 
142  Letter from Vinson & Elkins. 

143  Letter 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”). 

144  Letter 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. 

146  See, 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 

 



48 

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 

 
Checks: The Roles of Reputation and Disclosure in the Face of Limited Information (SSRN Working Paper, 

2021). 

147  Letters from ABA, NASAA, Vinson & Elkins. 

148  The 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). 



49 

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 

 
149  Letters from Freshfields, Vinson & Elkins.  See supra notes 124, 125, and 126 and accompanying text. 

150  Securities 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 de-SPAC transactions.  See, e.g., instructions to Form S-4 and F-4. 

152  See 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)). 



50 

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 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 across-the-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.” 

 
153  Letter 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. 

154  Letters from Loeb & Loeb, Vinson & Elkins.  See supra notes 131 and 132 and accompanying text. 

155  See 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. 



51 

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 

 
156  See, 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 equity-linked 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.”). 

157  Letter from Loeb & Loeb.  See supra note 132 and accompanying text. 

158  Letter from Vinson & Elkins.  See supra note 131 and accompanying text. 



52 

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 

 
159  Letter from ABA.  See supra note 133 and accompanying text. 

160  Letters from Michael Klausner and Michael Ohlrogge, NASAA, Paul Swegle.  See supra notes 135, 136, 137, 

and 138 and accompanying text. 

161  Certain earn-out provisions entered into in connection with a de-SPAC transaction may involve cancellation of 

securities if certain targets are not met. 



53 

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 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 

 
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. 

163  See 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. 

164  Letter from ABA. 



54 

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 interest-holder).  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 interest-holders (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 

 
165  See, 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.).   

166  Letter from Vinson & Elkins. 



55 

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 

 
167  Letter from Michael Klausner and Michael Ohlrogge. 



56 

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 

 
168  See 17 CFR 240.14a-9 (“Rule 14a-9”).  See also 17 CFR 240.14a-6(h). 

169  Letter from Vinson & Elkins.  See supra note 142 and accompanying text. 



57 

agreements in IPOs.  For example, SPAC lock-up agreements often include provisions that 

depend on certain levels of stock price appreciation.170 

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 

 
170  See, 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-the-disappearing-lock-up/; Lock-Up Periods: Regular IPOS V/S 

SPACS IPOS, Legal Scale (Sept. 21, 2022), available at https://www.legalscale.com/lock-up-periods-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-of-ipo-lock-up-agreements-for-technology-companies-

shift-as-direct-listings-and-spacs-gain-traction (out of 80 traditional IPO-companies surveyed, four (i.e., 5%) 

used Price-based lock-up releases). 

171  Letter from Freshfields.  See supra notes 143 and 144 and accompanying text. 

172  See 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.  

173  When 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 lock-up depends on application of a formula involving a 

financial measure. 

https://techcrunch.com/2022/01/04/the-year-of-the-disappearing-lock-up/
https://www.fenwick.com/insights/publications/terms-of-ipo-lock-up-agreements-for-technology-companies-shift-as-direct-listings-and-spacs-gain-traction
https://www.fenwick.com/insights/publications/terms-of-ipo-lock-up-agreements-for-technology-companies-shift-as-direct-listings-and-spacs-gain-traction


58 

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 post-de-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 

 
174  See, 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-going-80315/ (“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.”). 

175  With 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). 

https://www.jdsupra.com/legalnews/blog-10-key-considerations-for-going-80315/
https://doi.org/10.1093/rfs/16.1.0001


59 

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 de-SPAC 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 

 
176  Letter from Freshfields.  See supra note 144 and accompanying text. 

177  See also proposed General Instruction VIII to Form S-1, proposed General Instruction VII to Form F-1. 



60 

summary conflict of interest disclosure requirements in connection with de-SPAC 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 de-SPAC 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 as well as any interest in, or affiliation with, 

the target company.180 

 
178  See 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. 

179  See (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. 

180  See 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.61 

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 

 
181  Letters 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”). 

182  Letters from ABA, NASAA, Vinson & Elkins. 

183  Letters from Better Markets, CFA Institute, CII, Committee on Capital Markets Regulation, Consumer 

Federation, ICGN, NASAA. 

184  Letter from ABA. 



62 

claims the investors have on the SPAC if no de-SPAC 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 

 
185  Letter from ICGN. 

186  Letters from ABA, CII. 

187  Letter from CII. 

188  Letter from ABA. 

189  Letters from ABA, Vinson & Elkins. 

190  Letter from ABA. 



63 

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 non-

redeeming 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 break-even 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 

 
191  Letter from ABA. 

192  Letter from Vinson & Elkins. 

193  Letter from NASAA. 

194  Letter from Jonathan Kornblatt, CMT, Fintech Institutional Advisory (June 12, 2022) (“Jonathan Kornblatt”). 

195  Letter from Jonathan Kornblatt.  

196  Letter from Michael Klausner and Michael Ohlrogge. 



64 

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 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 

 
197  Proposing Release, supra note 7, at 29468 (request for comment number 17). 

198  Letter from Vinson & Elkins. 

199  Letter from ABA. 

200  Proposing Release, supra note 7, at 29468 (request for comment number 18). 

201  Letter from Vinson & Elkins. 



65 

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 de-SPAC 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 de-

SPAC 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 de-SPAC 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 

 
202  See, 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). 



66 

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 

 
203  Letter from ABA.  See supra note 184 and accompanying text. 

204  Similarly, current Item 404 regarding conflicts of interest does not contain such knowledge qualifier. 



67 

SPAC if no de-SPAC transaction takes place; and claims investors have on the SPAC if investors 

exit before the de-SPAC 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 co-registration 

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 de-SPAC transaction is 

in substance an offering by the target company, the conflicts of interest of target company 

 
205  Letter from ICGN.  See supra note 185 and accompanying text. 

206  See, 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).  

207  Letters from ABA, CII. 

208  Letter from CII.  See supra note 187 and accompanying text. 

209  We 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. 

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



68 

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 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 

 
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 de-SPAC 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. 

212  For 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. 

213  Letter from ABA.  See supra note 188 and accompanying text. 



69 

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 “break-even” disclosure.216  With respect to disclosure of a SPAC sponsor’s 

“break-even” 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 

 
214  Letters from ABA, Vinson & Elkins.  See supra notes 189, 190, 191, and 192 and accompanying text. 

215 The Commission adopted a similar approach in rules regarding limited partnership roll-up transactions.  See 17 

CFR 229.900 through 229.915. 

216  Letters from Jonathan Kornblatt, Michael Klausner and Michael Ohlrogge, NASAA.  See supra notes 193, 194, 

195, and 196 and accompanying text. 

217  Letter from Jonathan Kornblatt. 



70 

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 SPAC-specific 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.  

 
218  See 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.”). 



71 

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   

 
219  See 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 

 



72 

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  

 
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 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).” 

221  See 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 

 



73 

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: 

 
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. 

222  See 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.  

223  See proposed General Instruction VIII to Form S-1 and proposed General Instruction VII to Form F-1. 

224  See (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. 



74 

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 over-allotment 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. 

 
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 “over-allotment 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).   



75 

The other dilution provisions proposed by the Commission related to de-SPAC 

transactions.  The Commission proposed Item 1604(a)(3) to require on 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 

non-redeeming 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 non-redeeming 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 de-SPAC 

transaction.  Under Item 1604(c), proposed Item 1604(c)(1) required the provision of a 



76 

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 

 
226  Letters 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).”). 

227  See, 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.”). 

228  Letters 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 

 



77 

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 

 
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. 

229  See, 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.”). 

230  Letter from Vinson & Elkins. 



78 

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 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, 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 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 

 
231  Letter from White & Case. 

232  Id. 

233  Id. 

234  Id. 

235  Letter from White & Case.  

236  Letter 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-review-march-2022/. 



79 

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 

 
237  Letters from Freshfields, Vinson & Elkins, White & Case. 

238  Letter from White & Case. 

239  Letter from White & Case.  

240  Letters 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.”). 

241  Letter 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.”). 

242  Letter from Vinson & Elkins. 

243  Letters 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. 



80 

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 

 
244  Letter from ABA. 

245  Letter from Loeb & Loeb. 

246  Letter from Vinson & Elkins. 

247  Letter from White & Case.81 

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 

 
248  Id. 

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

250  Id.  

251  Letter from PwC. 

252  Letter from Bullet Point Network. 

253  Letter from Vinson & Elkins. 



82 

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 

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 non-redeeming 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 de-SPAC process, investors…need clear information about potential 

consequences to inform their understanding of the true cost of the business combination.”260  

 
254  See 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?”). 

255  Letters from CII; Michael Klausner, Michael Ohlrogge, and Harald Halbhuber; NASAA; Vinson & Elkins. 

256  Letters from Vinson & Elkins. 

257  Letter from NASAA. 

258  Letter from CII. 

259  Id. 

260  Id. 



83 

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 

 
261  Letter 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”). 

262  Letter 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)). 



84 

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 

 
263  Id. 

264  Letter from CII.  

265  Letter from Loeb & Loeb. 

266  Id. 

267  Id. 

268  Letter from Vinson & Elkins. 



85 

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 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 

 
269  Letter 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.”).  

270  Letter from CFA Institute. 

271  Letter from NASAA. 



86 

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 



87 

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: 

Net Tangible Book Value Per Share, as Adjusted 

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 

 
272  See letters from PwC, Ernst & Young, supra notes 249 and 251.  



88 

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 de-SPAC 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 



89 

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 



90 

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). 

 
273  Depending on the facts and circumstances, both qualitative and quantitative information may be required in the 

disclosures made outside of the table.   



91 

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 cross-reference, 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 



92 

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 

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 

 
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). 



93 

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 non-redeeming 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, 

 
275  See letters from PwC, Ernst & Young, supra notes 249 and 251. 



94 

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 

 
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. 



95 

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)).   



96 

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 

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 

 
277  While 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 

de-SPAC transaction warranting such a presentation.  



97 

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 

 
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. 



98 

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 

 
279  See 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)]. 

280  Letters from ABA, Ropes & Gray, Vinson & Elkins, White & Case.  See supra notes 243 and 244 and 

accompanying text. 

281  See, 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. 



99 

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-to-net-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 de-SPAC 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. 



100 

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 de-

SPAC 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, 

 
282  See, 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. 

283  See, 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.”).101 

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 assets285 or by using a value calculated by multiplying a market 

average price-to-net-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.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 

 
284  See, e.g., ibid. (“Ben Graham distilled six decades of experience into ten criteria…[6.] Total debt less than 

tangible book value.”). 

285  See, 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.”). 

286  See, 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….”). 

287  Letter from Loeb & Loeb.  See supra note 245 and accompanying text. 



102 

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 De-SPAC 

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, 

 
288  Letters from Ernst & Young, Vinson & Elkins, White & Case.  See supra notes 246, 247, 248, 249, and 250 and 

accompanying text. 



103 

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 

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 



104 

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, 

 
289  See 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. 



105 

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   

 
290  While 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. 

291  See, 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. 

292  See 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 

 



106 

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 warrants296 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 

 
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). 

293  Letter from Vinson & Elkins.  See supra note 269 and accompanying text. 

294  See Kieso, Weygandt & Warfield (discussing the treasury stock method), supra note 269. 

295  Id. 

296  See, e.g., final Item 1604(c), Item 1602(b)(3), Item 1603(a)(6), and Item 1604(b)(5) and (c). 

297  Letter from Vinson & Elkins. 



107 

proposed provisions related 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 de-SPAC 

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. 

 
298  See Financial Accounting Standards Board Accounting Standards Codification 815-40 and International 

Financial Reporting Standard IAS 32, Financial Instruments: Presentation. 



108 

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 

 
299  Letter 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 

 



109 

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 

 
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).     

302  Letter from Vinson & Elkins.  See supra note 230 and accompanying text. 

303  See Rule 419 (Offerings by blank check companies); Rule 3a51-1 (definition of “penny stock”). 



110 

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 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 SPAC-specific reasonably likely redemption 

levels. 

 
304  Letter from White & Case.  

305  Letter from CII.  See supra note 236 and accompanying text.   



111 

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. 

 
306  Letters from Freshfields, Vinson & Elkins, White & Case.  See supra notes 237, 238, and 240 and 

accompanying text. 

307  Letter from White & Case.  See supra note 238 and accompanying text. 

308  See 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. 



112 

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 

 
310  Letters from CII; Michael Klausner, Michael Ohlrogge, and Harald Halbhuber; NASAA; Vinson & Elkins.  See 

supra notes 254 through 264 and accompanying text. 

311  Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber.  See supra note 261 and 

accompanying text. 

312  Letter 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. 

313  When calculating return on net tangible book value per share, some investors may exclude non-operating 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 

 



113 

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 de-SPAC transaction).  Due to this, these 

disclosures may not be as easily presentable in a straightforward way on the cover page.  Item 

 
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 non-operating tangible assets such as cash among 

others.   

314  The 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).  

315  Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. 

316  As 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. 



114 

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 non-redeeming shareholders who hold the securities until the consummation of the 

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 

 
317  Letter 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.”). 

318  See, 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). 



115 

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.   



116 

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. 

 
319  Letter from Loeb & Loeb.  See supra note 267 and accompanying text. 

320  Letter from CFA Institute. 



117 

g. Lock-Up and Earnout Provisions 

One commenter said that “any lock-up 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 

 
321  Letter from NASAA. 

322  See 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). 



118 

a de-SPAC transaction, (2) redemptions, (3) SPAC sponsor compensation, (4) dilution (including 

simplified tabular disclosure), and (5) conflicts of interest.  

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 de-SPAC 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 



119 

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 



120 

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 

 
323  Letters 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. 

324  Letter from Better Markets. 

325  See, 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). 

326  Letter from Vinson & Elkins.121 

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 de-SPAC 

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 

 
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. 

331  Letter from Better Markets.  See supra note 324 and accompanying text. 



122 

will be 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 

 
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. 

333  See, 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). 



123 

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 non-required 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 

 
334  Letter from Vinson & Elkins.  See supra note 326 and accompanying text. 

335  Staff 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.   

336  Letter from Vinson & Elkins.  See supra notes 328 and 329 and accompanying text. 



124 

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 

 
337  Final 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.”    



125 

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 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-

 
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. 

340  In addition, in final Item 1602(b)(5) we replaced the proposed term “impact” with the term “affect” for clarity. 

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



126 

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 de-SPAC 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; 

 
342  See (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.” 



127 

• Disclosure regarding the accounting treatment and the Federal income tax 

consequences of the de-SPAC transaction, if material; 

• Any material interests in the de-SPAC 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 

 
343  Letter from Committee on Capital Markets Regulation. 

344  Letters 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”). 



128 

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 

 
345  Letter 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”). 

346  Letter 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. 



129 

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 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.  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 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 de-SPAC 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 

 
349  Letter from ABA.  See supra note 345 and accompanying text. 



130 

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-4351 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 

 
350  Letter from Michael Klausner and Michael Ohlrogge.  See supra notes 347 and 348 and accompanying text. 

351  See 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.” 



131 

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 



132 

• 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 De-SPAC 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 

 
353  Letters 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. 

354  Letters 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. 



133 

private rules is inappropriate because the underlying 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 transactions359 

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 

 
355  Letters from Andrew Tuch, Freshfields, Kirkland & Ellis, Loeb & Loeb, Skadden. 

356  Letters from ABA, Cato Institute, CFA Institute, Davis Polk, Freshfields, Kirkland & Ellis, NYC Bar, Ropes & 

Gray, Skadden, White & Case. 

357  Letter from Ropes & Gray. 

358  Id. 

359  Letters from Cato Institute, CFA Institute, Freshfields, Goodwin, Jonathan Kornblatt, White & Case. 

360  Letters from Davis Polk, Goodwin, Job Creators Network, Jonathan Kornblatt, Skadden, White & Case. 



134 

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 advisor365 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 

 
361  Letters from ABA, Goodwin. 

362  Letters from ABA, Goodwin, NYC Bar, White & Case. 

363  Letter from NYC Bar. 

364  Letter from Vinson & Elkins. 

365  Letters from ABA, Andrew Tuch, Cato Institute, Davis Polk, Freshfields, Job Creators Network, Jonathan 

Kornblatt, Paul Swegle. 

366  Letters from ABA, Cato Institute, Davis Polk, Freshfields, Goodwin, Jonathan Kornblatt, Paul Swegle, Ropes & 

Gray, Skadden. 



135 

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 de-SPAC transaction.  Many commenters that supported proposed Item 1606(a) 

 
367  Letter 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). 

368  Letter 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 

self-dealing by SPAC fiduciaries, or perhaps not to apply these particular provisions at all.”). 

369  Letters from ABA, Davis Polk, Freshfields, Goodwin, Ropes & Gray, Skadden, White & Case. 

370  Letters from ABA, Goodwin. 

371  Letter from Davis Polk. 



136 

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 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. 

 
372  Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, 

Holger Spamann, NASAA, Public Citizen.  See supra note 353 and accompanying text. 

373  Letters 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. 

374  Letters from ABA, Andrew Tuch, Cato Institute, Davis Polk, Freshfields, Job Creators Network, Jonathan 

Kornblatt, Paul Swegle.  See supra note 365 and accompanying text. 

375  Letters from ABA, Cato Institute, Davis Polk, Freshfields, Goodwin, Jonathan Kornblatt, Paul Swegle, Ropes & 

Gray, Skadden.  See supra note 366 and accompanying text. 

376  Letters 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. 



137 

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 de-SPAC 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 

 
377  See 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.”). 

378 This 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.  

379  This 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.” 

380  See supra note 377 and accompanying text. 



138 

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 requirement381 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. 

 
381  The 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. 

382  Letters 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. 

383  Because 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. 



139 

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 de-SPAC 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 1607386 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 de-SPAC 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. 

 
384   Letters from Cato Institute, CFA Institute, Freshfields, Goodwin, Jonathan Kornblatt, White & Case.  See supra 

note 359 and accompanying text. 

385  Letters from ABA, Goodwin.  See supra note 361 and accompanying text. 

386  See infra section II.G.10–12. 

387  Letter from Ropes & Gray.  See supra notes 357 and 358 and accompanying text. 

388  Letter from ABA, Goodwin.  See supra note 370 and accompanying text. 



140 

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 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 

 
389  Letter from Cato Institute.  See supra note 367 and accompanying text. 

390  Letters from ABA, Davis Polk, Freshfields, Goodwin, Ropes & Gray, Skadden, White & Case.  See supra notes 

369–371 and accompanying text. 

391  Id.141 

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 generally392 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 

 
392  Letters from Better Markets, CalPERS, Holger Spamann. 

393  Letters from Committee on Capital Markets Regulation, Consumer Federation. 

394  Letters from ABA, Goodwin, White & Case. 

395  Letters from ABA, Goodwin. 

396  Id. 



142 

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 

 
397  Letter from White & Case. 

398  Letters from ABA, Goodwin, Ropes & Gray. 

399  Letter from Skadden. 

400  Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, 

Holger Spamann, NASAA, Public Citizen.  See supra note 393 and accompanying text. 



143 

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 

 
401  Letters from ABA, Goodwin, White & Case.  See supra notes 394–396 and accompanying text. 

402  This 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. 



144 

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 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 de-SPAC transaction in the non-exclusive list of factors to be discussed 

 
403  Letters from ABA, Goodwin, Ropes & Gray.  See supra note 398 and accompanying text. 

404  Letter from Skadden.  See supra note 399 and accompanying text. 



145 

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 de-SPAC 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 

 
405  Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, 

Holger Spamann, NASAA, Public Citizen. 



146 

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 

transaction409 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 

 
406  Letter from Vinson & Elkins. 

407  Letters from Freshfields, Vinson & Elkins. 

408  Letter from Freshfields. 

409  We 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. 

410  Letter from Davis Polk. 

411  Letter from Freshfields. 

412  Id. 



147 

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 de-SPAC 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, 

 
413  Id. 

414  Letter from Vinson & Elkins.  See supra note 406 and accompanying text. 



148 

redemption, and other 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 de-SPAC 

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.  

 
415  Letters from Freshfields, Vinson & Elkins.  See supra notes 407 and 408 and accompanying text. 

416  Letter from Vinson & Elkins.  See supra note 408 and accompanying text. 

417  Letter from Freshfields.  See supra notes 411 and 412 and accompanying text. 



149 

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. 



150 

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 

 
418  Letters 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”). 

419  Letters 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. 

420  Letters from ABA, Goodwin, NYC Bar, White & Case.  See supra note 362 and accompanying text. 

421  Letters from ABA, Goodwin. 

422  Id. 



151 

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 de-SPAC 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 Regulation M-A), for de-SPAC transactions.428 

 
423  Id. 

424  Id. 

425  Letter from Ernst & Young. 

426  Letter from Andrew Tuch. 

427  Letter from Ernst & Young. 

428  Letter from Vinson & Elkins. 



152 

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 de-

SPAC 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) 

 
429  Letters from ABA, Goodwin.  See supra note 424 and accompanying text. 



153 

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 

 
430  Letters from ABA, Goodwin, NYC Bar, White & Case.  See supra note 420 and accompanying text. 

431  Letter 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. 



154 

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 suggested437 because 

 
433  See 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.   

434  Letters from ABA, Goodwin.  See supra note 421 and accompanying text. 

435  Letter from Ernst & Young.  See supra note 427 and accompanying text. 

436  See discussion of Item 1607, infra section VIII.B.1.iii.f. 

437  Letter from Andrew Tuch.  See supra note 426 and accompanying text. 



155 

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 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 

 
438  Letter from Ernst & Young.  See supra note 425 and the accompanying text. 

439 Letters from ABA, Goodwin.  See supra notes 422 and 423 and accompanying text.  



156 

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 

 
440  For 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. 



157 

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   

 
441  See 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. 

443  The 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.” 

444  Letters from ABA, Vinson & Elkins. 



158 

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 de-SPAC 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. 

 
445  Letter from ABA. 

446  Id. 

447  Id. 

448  Id. 

449  Letter from Vinson & Elkins. 

450  Id. 



159 

We decline to revise the final item to 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 de-SPAC 

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 de-SPAC 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 

separately address the requirements for a filing that relates to a redemption of securities offered 

to security holders other than in connection with a de-SPAC 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 de-SPAC transactions or extensions. 

 
451  Letter from ABA.  See supra note 445 and accompanying text. 

452  Letter from ABA.  See supra note 446 and accompanying text. 



160 

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 de-SPAC 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 

 
453  Letter from ABA.  See supra note 447 and accompanying text. 

454  Letter from ABA.  See supra note 448 and accompanying text. 

455  Letter 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161 

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 

 
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. 

458  For 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.  

459  Letters from ABA; Crowe LLP (June 13, 2022) (“Crowe”); ICGN; PwC; Campbell Pryde, President and CEO, 

XBRL US (June 13, 2022) (“XBRL US”). 

460  Letter from ICGN. 

461  Letter from PwC. 



162 

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 

 
462  Letters 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). 

463  Letter from ICGN. 

464  Letter from XBRL US. 

465  Letter from Vinson & Elkins. 

466  Letter from PwC. 

467  Letter from XBRL US. 



163 

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 de-

SPAC transactions.468 

3. Final Item 1610 and Tagging Compliance Date 

After considering the comments received, we are adopting Item 1610 as 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 

 
468  Letter 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).”). 

469  The 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. 

470  Letter from ICGN.  See supra note 460 and accompanying text. 

471  Letter from PwC.  See supra note 461 and accompanying text. 



164 

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 phase-in 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 de-SPAC 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. 

 
472  These 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 machine-readability 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). 

473  Letter from XBRL US.  See supra note 464 and accompanying text. 

474  Furthermore, 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. 

475  Letter from Vinson & Elkins.  See supra note 465 and accompanying text. 



165 

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 beta-testing 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 

 
476  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.  See 17 CFR 229.601(b)(101)(i)(A). 

477  See 17 CFR 229.601(b)(101). 

478  Letter from XBRL US.  See supra note 467 and accompanying text. 



166 

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 de-

SPAC 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 DE-SPAC 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 

 
479  Id. 

480  Letter from Global Legal Entity Identifier Foundation.  See supra note 468 and accompanying text. 

481  See supra note 472 (regarding the Financial Data Transparency Act of 2022).   

482  Proposing Release, supra note 7, at 29477. 



167 

A. Non-Financial Disclosures in De-SPAC 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 schedule483 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 de-SPAC 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 

 
483  See (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. 

485  The 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. 



168 

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 non-financial 

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 

 
486  Proposed General Instruction L.2 to Form S-4; proposed General Instruction I.2 to Form F-4. 

487  See 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.”). 

488  Letters from ABA, CalPERS, Davis Polk, Ernst & Young, ICGN, NASAA, PwC. 

489  See letters from ABA, PwC. 

490  Letters from ABA, PwC. 

491  Letter from ABA. 



169 

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 

 
492  Letter 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.” 

493  Letter from Vinson & Elkins. 

494  Letter from Grant Thornton LLP (June 13, 2022) (“Grant Thornton”). 

495  The 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 cross-references 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.   

496  Under 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. 



170 

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 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. 

 
497  We 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). 

498  Letter from Vinson & Elkins.  See supra notes 492 and 493 and accompanying text. 



171 

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 

 
499  Letter from Grant Thornton.  See supra note 494 and accompanying text. 

500  We 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. 



172 

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 

 
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. 



173 

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 de-SPAC 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 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 

 
502  The 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)].   

503  Letters 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. 

504  Letter from CFA Institute. 

505  Letter from Davis Polk. 



174 

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 de-SPAC 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 

 
506  Letter from Davis Polk. 

507  Letter from Vinson & Elkins. 

508  Letter from Loeb & Loeb. 



175 

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 

 
509  See, 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]”). 

510  See 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.”). 

511  See, 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.” 



176 

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 

 
512  The 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. 

513  Letter from CFA Institute.  See supra note 117 and accompanying text. 

514  A 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 

 



177 

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 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 commenter517 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.   

 
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.  

515  Letter from Davis Polk.  See supra note 506 and accompanying text. 

516  Letter from Vinson & Elkins.  See supra note 507 and accompanying text. 

517  Letter from Davis Polk. 



178 

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 

 
518  Letter from Vinson & Elkins.  See supra note 507 and accompanying text. 

519  Letter from Loeb & Loeb.  See supra note 508 and accompanying text. 

520  As 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.   



179 

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.”  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 Co-Registrant 

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  

 
521  The 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. 

523  Proposing Release, supra note 7, at 29479.   

524  Proposing Release, supra note 7, at 29479.   



180 

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 co-registration proposal would better align liability and disclosure in de-SPAC 

transactions with IPOs.  One stated that “the proposed changes that would treat a target operating 

company as a co-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 

 
525  See section 2(a)(4) of the Securities Act. 

526  See 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 “co-

registrant” 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. 

527  Proposed General Instruction L.1 to Form S-4; proposed General Instruction I.1 to Form F-4. 

528  Letters 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.181 

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 de-SPACs.”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 co-registrant 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 

 
529  Letter from KPMG. 

530  Letter from Andrew Tuch. 

531  Letter from CII. 

532  Letter from Better Markets. 

533  Letter from NASAA. 

534  Letters from ABA, Davis Polk, Freshfields, Job Creators Network, NYC Bar, Skadden, Vinson & Elkins. 

535  Letter from Davis Polk. 

536  Letter from ABA. 



182 

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 co-registrant proposal would create a disparity 

compared to traditional M&A business combination transactions where a target is not a co-

 
537  Letters from ABA (“It is unclear if the Co-Registrant 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. 

538  Letters 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.”). 

539  Letters 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.”). 



183 

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 co-registration 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 co-registration proposal and expressed the view that: “[i]n 

most de­SPAC 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 

 
540  Letters 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.”). 

541  Letter from Bullet Point Network. 

542  Letters from ABA, Freshfields.  See also definitions of “issuer” and “registrant,” supra notes 521 and 526. 



184 

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 co-registration 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 de-SPAC transactions,” because “full Form 10-type information” is already provided 

under current rules about the 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 co-registration 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, non-

redeeming 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   

 
543  Letter from Freshfields.  

544  Letter from ABA. 

545  Id. 

546  Id. 

547  Letter 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.”). 

548  Letter from KPMG (specifically noting that “SPACs may acquire more than one operating company as part of a 

de-SPAC transaction”). 



185 

Several commenters addressed issues related to the scope of section 11 liability that may 

stem from the co-registration 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 de-SPAC 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 

 
549  Letter from Vinson & Elkins. 

550  Letter from Vinson & Elkins.  See also supra note 526 (describing Instruction 3 to the Signatures sections of 

Forms S-4 and F-4).  

551  Letter from Vinson & Elkins. 

552  Letter 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”). 



186 

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 appointed555 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 

 
553  Letter 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 co-registrant”). 

554  Letter from NASAA (“With this in mind, [the commenter] supports the attachment of Section 11 

responsibilities to the managers and directors of target companies.”). 

555  Letter 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.”). 

556  Letter 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.”). 

557  Letter from Vinson & Elkins. 



187 

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 co-registrant in the registration statement for the de-SPAC transaction.”560  If a 

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 

 
558  Letters from ABA (noting that, in the time between effectiveness and closing of the merger, “there is a risk that 

the parties may terminate a De-SPAC 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 

third-party 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. 

559  Letters 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. 

560  Letter from Davis Polk. 



188 

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 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.”563  One commenter stated that co-registration would result in disclosure 

 
561  Letters 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).   

562  Letters 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)). 

563  Letter from ABA. 



189 

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 co-registration 

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 de-SPAC 

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 SPAC-specific 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 SPAC-specific 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 

 
564  Letter from Vinson & Elkins.  

565  Letter from Vinson & Elkins.   

566  Letter from PwC. 

567  Letter from Bullet Point Network. 

568  Id. 

569  Id. 



190 

3. Final Rules 

After considering the comments received, we are adopting the co-registration 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 de-SPAC 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 



191 

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 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   

 
570  Although 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). 

571  See, 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.”).  

572  Letter from ABA. 

573  See infra section IV.A. 



192 

The final rules will ensure that, when a registration statement is filed for a de-SPAC 

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 

 
574  See 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. 



193 

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 

 
576  Letters from ABA, Kirkland & Ellis, NYC Bar, Skadden, Vinson & Elkins, Winston & Strawn.  See supra note 

538. 

577  See supra note 539. 

578  The 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. 



194 

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 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 

 
579  See supra note 570.  

580  Under 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)). 

581  See 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). 



195 

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 de-SPAC 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 co-registrant proposal would create a disparity 

compared to traditional business combination transactions, because the target company is not a 

co-registrant 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 

 
582  Letters from ABA, Skadden.  See supra note 540. 

583  Letter from Bullet Point Network. 



196 

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 co-registrant proposal, the target company could be liable to its existing shareholders for 

information about the target company included in the de-SPAC 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 

 
584  Letter from Freshfields. 

585  See supra section I. 

586  Less commonly, the target company may be a public company or may be a previously public company that 

went private.  



197 

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 co-registration 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 de-SPAC 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 co-registration 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 

 
587  Letter from ABA.  See Rule 140.  



198 

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, non-

redeeming 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 co-registrants 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 target company 

a signer but not a co-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 

 
588  Letter from CFA Institute. 

589  Letter from KPMG (specifically noting that “SPACs may acquire more than one operating company as part of a 

de-SPAC transaction”). 

590  Letter from Vinson & Elkins. 



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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 co-registrant 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 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 



200 

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 de-SPAC 

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 under-inclusive with respect to the target company’s officers and directors.  As 

discussed above, the final rules make clear that the target company is a co-registrant (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 

 
591  See 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?”).201 

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 

 
592  See letters from Freshfields, Vinson & Elkins. 

593  15 U.S.C. 77f(a). 

594  15 U.S.C. 77k(a)(2). 

595  See 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”).  



202 

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 non-continuing 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 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 

 
596  15 U.S.C. 77f(a). 

597  See supra note 557 and accompanying text. 

598  This 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). 



203 

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 co-registrant 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 de-SPAC 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 de-SPAC 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   

 
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. 

601  The 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.   

602  Letters from ABA, KPMG, PwC (also noting this would be the case in de-SPAC transactions involving multiple 

target companies).  See supra note 559. 

603  Letters from ABA, Crowe, Davis Polk, Freshfields, Grant Thornton, KPMG.  See supra note 558. 

604  Letter from Davis Polk. 

605  Letters from Crowe, Grant Thornton.  See supra note 561.  See also KPMG, supra note 561. 



204 

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 predecessor606 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 

 
606  The 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 

de-SPAC transactions involve only one target). 

607  For 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). 

608  See supra note 561. 



205 

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 co-registration 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 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, each company would be required to provide financial statements 

 
609  Letters 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. 



206 

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 PCAOB-registered 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 

 
611  Letter from Vinson & Elkins.  

612  See Item 1601(d) of Regulation S-K, adopted herein.   

613  Pub. L. 107-204, Sec. 404(b) 116 Stat. 745 (2002). 

614  See 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.     



207 

statement and therefore should face Securities Act liability as co-registrants and issuers on the 

de-SPAC registration statement.616 

In order to address the tension identified by the commenter, and to clarify that all target 

companies are co-registrants and issuers but only target companies that are predecessors617 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 non-

predecessors) 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 company619 (e.g., in a de-

SPAC transaction, non-predecessor co-registrant 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 

 
616  Entities 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. 

617  See supra note 606. 

618  See 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). 

620  See 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. 



208 

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 

 
621  See 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. 



209 

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 non-predecessor 

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 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 non-predecessor 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 PCAOB-registered 

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 

 
623  Determination of the predecessor(s) in a de-SPAC transaction, as in any other transaction, is a facts and 

circumstances driven determination made by the registrant(s). 

624  See 15 U.S.C. 7212(a). 



210 

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 de-SPAC 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 

 
625  See 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-professional-

practice-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.   

626  Letters from Crowe, Grant Thornton. 

627  Letter from Bullet Point Network. 

628  See infra section III.E discussion of PSLRA Safe Harbor. 

629  See infra discussion in section III.E proximate to notes 836 and 858. 

https://pcaobus.org/about/rules-rulemaking/rules/section_3/section-3-auditing-and-related-professional-practice-standards-rule-3211-amended
https://pcaobus.org/about/rules-rulemaking/rules/section_3/section-3-auditing-and-related-professional-practice-standards-rule-3211-amended


211 

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 re-determined 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 

 
630  See, 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). 

632  The 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. 

633  See 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. 

634  See 17 CFR 229.10(f)(2)(iii); Securities Act Rule 405; Exchange Act Rule 12b-2. 



212 

The Commission proposed to require a re-determination of SRC status following the 

consummation of a de-SPAC 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 

re-determination 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 re-determination of public float, (3) ramifications of 

 
635  A 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. 

636  Proposed 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. 

637  Proposed 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. 

638  Proposed 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. 



213 

loss of SRC status, and (4) requests for guidance.  In addition, in response to a request for 

comment from 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 re-determination 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 re-determination 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 

 
639  Letters from KPMG, PwC. 

640  Letter from KPMG. 

641  Letter from PwC. 

642  Letters from Ernst & Young, Vinson & Elkins. 

643  Letter from Ernst & Young. 



214 

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 

 
644  Letter from Vinson & Elkins. 

645  Letter from ABA. 

646  Letter from Vinson & Elkins. 

647  Letter from Vinson & Elkins. 

648  Letter from Vinson & Elkins. 



215 

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 de-SPAC 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 

 
649  Letters 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 its 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.”). 

650  Letter from Ernst & Young. 

651  Letter from Ernst & Young. 

652  Letter 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). 



216 

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 view654 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 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 

 
653  Letter from Grant Thornton. 

654  Letter 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. 

655  The 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 de-SPAC transaction.   

656  Letter from Vinson & Elkins. 

https://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm


217 

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-de-SPAC 

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 

 
657  Proposing 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?”). 

658  See 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. 

659  Letters 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 de-

SPAC 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.”). 



218 

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 re-determination 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 

 
660  Letters from 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….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. 

661  Letters from Ernst & Young, KPMG, Vinson & Elkins. 

662  Letter from Ernst & Young. 



219 

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 transaction666 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 de-SPAC transaction.  Under current rules, the 

absence of a re-determination of SRC status upon the completion of these de-SPAC transactions 

 
663  Letter from Vinson & Elkins. 

664  See letter from Freshfields. 

665  Based 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. 

666  See Item 10(f)(2) of Regulation S-K; Securities Act Rule 405; Exchange Act Rule 12b-2. 



220 

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 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 non-affiliates before the offering; and the 

 
667  In the Proposing Release, the Commission said, if a SPAC qualified as an SRC before a de-SPAC 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. 

668  Letter from Vinson & Elkins.  See supra notes 646, 647, and 648 and accompanying text.221 

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 de-SPAC 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 four-business-day window to calculate the public float 

threshold following a de-SPAC 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 re-determination 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 

 
669  See id.  



222 

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 post-business combination company 

following a de-SPAC transaction. 

Under the proposed rule, a post-de-SPAC 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 re-determination, 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 de-SPAC 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 

 
670  Letters from Ernst & Young, Grant Thornton, Vinson & Elkins.  See supra note 649.  

671  See letters from Vinson & Elkins (indicating that the issue is particularly acute “if the post-closing 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”). 



223 

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-de-SPAC 

transaction filings, any financial statements that predate the financial statements presented in the 

Form S-4.673  In our view a registrant that is re-determined to be a non-SRC should not be able to 

avail itself of the scaled-down requirements applicable to SRCs.  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 

 
672  Section 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. 

673  Letter from Grant Thornton.  See supra note 652 and accompanying text. 



224 

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 report676 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 

 
674  We 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. 

675  Letter from Grant Thornton.  See supra note 653. 

676  Letter 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. 



225 

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 de-SPAC transaction, depending on the timing of the SPAC 

IPO and the de-SPAC 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-de-SPAC 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 

 
677  Letter from Vinson & Elkins. 

678  The 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. 

679  See paragraphs (1), (2), and (3) in the definition of “accelerated filer and large accelerated filer” in Rule 12b-2. 

680  See 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. 



226 

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 

 
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. 

682  See 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. 

684  See letters from BDO, Ernst & Young, Fenwick, Vinson & Elkins. 



227 

the fiscal 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 

 
685  See 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, 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.   

686  Section 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.   

687  Pursuant 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). 

https://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm


228 

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-de-SPAC 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 

 
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)]. 

689  With 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 non-affiliates 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). 

690  Paragraph (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. 

691  Paragraphs (2)(i) and (iii) of the definition of “emerging growth company” under Securities Act Rule 405 and 

Exchange Act Rule 12b-2. 

692  Paragraph (2)(iv) of the definition of “emerging growth company” under Securities Act Rule 405 and Exchange 

Act Rule 12b-2. 



229 

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 status695 

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 

 
693  See letters from Ernst & Young, KPMG, PwC, Vinson & Elkins, supra note 660.   

694  Proposing Release, supra note 7, at 29481 (request for comment number 74).  See letters from Ernst & Young, 

KPMG, Vinson & Elkins. 

695  See supra note 442. 

696  Paragraph (2) of the definition of “foreign private issuer” in Securities Act Rule 405. 

697  Paragraph (3) of the definition of “foreign private issuer” in Securities Act Rule 405. 

698  Paragraph (3) of the definition of “foreign private issuer” in Securities Act Rule 405.   

699  See definitions of “foreign issuer” and “foreign private issuer” in Securities Act Rule 405. 



230 

target company would have to be presented in accordance with U.S. GAAP in Form S-4,700 

among other differences that exist 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 de-SPAC 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 de-SPAC 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 re-determination of FPI 

status in connection with a de-SPAC transaction.702 

 
700  As 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.  

701  Item 17 of Form S-4. 

702  Letters from Ernst & Young, Freshfields, KPMG, Vinson & Elkins.  See supra notes 662, 663, and 664 and 

accompanying text. 



231 

We have considered these comments and recognize that, depending on the structure of a 

specific de-SPAC transaction, there may be some fact-specific 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 de-SPAC 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 de-SPAC 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 

 
703  Letters from Freshfields, Vinson & Elkins.  See supra notes 663 and 664 and accompanying text. 



232 

by meaningful cautionary statements.704  Under the PSLRA, the safe harbor is not available, 

however, when a forward-looking 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 de-SPAC 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 

 
704  Section 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. 

705  Section 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.   

706  Proposing Release, supra note 7, at 29482. 

707  Proposing 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, Electric-Vehicle 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). 

708  Proposing 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). 



233 

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 

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 

 
709  Proposing Release, supra note 7, at 29482. 

710  See, 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.”). 

711  The 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. 

712  The 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. 



234 

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 participants716 or companies that issue 

penny stock717 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 

 
713  Proposed 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. 

714  Letters 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. 

715  Letter from CFA Institute. 

716  Letter from NASAA. 

717  Letters from Consumer Federation, NASAA. 

718  Letter from Senator Elizabeth Warren. 



235 

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 de-SPAC 

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 

 
719  Letter from Better Markets. 

720  Letter from Senator Elizabeth Warren. 

721  Letter from Consumer Federation. 

722  Letters from Americans for Financial Reform Education Fund, Better Markets, CFA Institute, CII, Senator 

Elizabeth Warren.   

723  Letter from Americans for Financial Reform Education Fund. 



236 

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 

 
724  Letter from Better Markets. 

725  Letter from CFA Institute. 

726  Letter from CII. 

727  Letter from Senator Elizabeth Warren. 

728  Letters 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….”). 



237 

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 forward-looking 

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 forward-looking 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 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 

 
729  Letter from CII. 

730  Letter from Consumer Federation. 

731  Letter from Senator Elizabeth Warren. 

732  Letters 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. 

733  Letter from Cato Institute. 

734  Letter from SPAC Association. 



238 

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 

 
735  Letter from Goodwin. 

736  Letter from Cowen. 

737  Letters from ABA, Cato Institute, Paul Swegle, Winston & Strawn. 



239 

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-

 
738  Letter from American Securities Association. 

739  Letter from Cato Institute. 

740  Letter from Paul Swegle. 

741  Letter from Winston & Strawn. 



240 

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 [the] reason [that]: it proposes an unreasonable definition of ‘blank check 

company.’  The PSLRA generally provides a safe harbor for forward-looking statements, but the 

 
742  Letter from ABA.  See also letter from Goodwin. 

743  Letters 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.” 

744  Letter from ABA.241 

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 

 
745  Letter 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). 



242 

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 1946750 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 

 
749  Letter from Kirkland & Ellis. 

750  5 U.S.C. 551 et seq. 

751  Letter from American Securities Association. 

752  Letter from Job Creators Network. 

753  Letters 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 forward-looking 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.”). 



243 

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 

 
754  Letters 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.”). 

755  Letter 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”). 



244 

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 

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 

 
756  Letters from Bullet Point Network (recommending that the PSLRA safe harbors “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.”). 

757  Letters 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. 

758  Letter from ABA. 



245 

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 de-SPAC 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 de-SPAC 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 

 
759  Letter from Cato Institute (footnotes omitted). 

760  Letter from Vinson & Elkins. 

761  Letter from NYC Bar. 



246 

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 de-SPAC 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 de-SPAC 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 

 
762  Letter from Cowen. 

763  Letters 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.”). 

764  Letter from American Securities Association. 



247 

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 de-SPAC transaction.  There is no similar requirement in the IPO context.  

We can see no justification for treating a de-SPAC 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 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 

 
765  Letter from CFA Institute. 

766  Letters from Cowen, SPAC Association, Winston & Strawn.  

767  Letter from Winston & Strawn. 

768  Letters from ABA, Amanda Rose, Cato Institute, CFA Institute, Goodwin, Kirkland & Ellis, Managed Funds 

Association, NYC Bar, SPAC 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”). 

769  Letter from ABA. 



248 

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 

 
770  Letter from Cato Institute. 

771  Letter from Kirkland & Ellis. 

772  Letter 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. 

774  Letters 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.”). 

https://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=3995&context=wmlr


249 

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 forward-looking 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 

 
775  Letter from ABA. 

776  Letter from Kirkland & Ellis. 

777  Letter from NYC Bar. 

778  Letters 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….”). 

779  Letter from Andrew Tuch. 



250 

and we do not object to the disapplication of the safe harbor to de-SPAC 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…forward-looking statements accompanied by sufficient cautionary language” are 

rendered “non-actionable under securities laws if such statements are proved incorrect in the 

 
780  Letter from Davis Polk. 

781  Letter from Kirkland & Ellis. 

782  Letters from ABA, Cowen, Winston & Strawn.  

783  Letter from ABA. 

784  Letter 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. 



251 

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 “[t]he Commission’s proposal, in stripping away the protection of the PSLRA safe 

harbor for projections in de-SPAC 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 

 
785  Letter from Winston & Strawn. 

786  Letter from Cowen. 

787  Letter from Winston & Strawn. 

788  Letters 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. 



252 

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 

 
789  Letter from Cato Institute. 

790  Letter from Kirkland & Ellis. 

791  Letter from Paul Swegle. 

792  Letters from Kirkland & Ellis, Winston & Strawn. 

793  Letter from Kirkland & Ellis. 

794  Letter from Kirkland & Ellis. 



253 

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 

 
795  Letter from Winston & Strawn. 

796  Letters 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). 

797  Letter from American Securities Association. 

798  Letter from NASAA. 

799  Letters from Managed Funds Association; Michael Dambra, Omri Even-Tov, and Kimberlyn George. 



254 

commenters said, “Rather than barring forward-looking 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 disclosure-

based 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) 

 
800  Letter from Managed Funds Association. 

801  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George. 

802  Letter from SPAC Association. 

803  Letters from Jonathan Kornblatt, Vinson & Elkins. 

804  Letter from Cowen. 



255 

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”).805 

One commenter said the Commission should “monitor the effects of the safe harbor 

removal for de-SPACs on the availability and quality of forward-looking 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 

 
805  Letter from Charles Pieper. 

806  Letter from CFA Institute. 

807  Letter from Vinson & Elkins (footnotes omitted).  



256 

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 de-SPAC transactions should be 

treated similarly with forward-looking statements made in traditional IPOs, because the de-

 
808  The 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. 



257 

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 companies809 

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. 

 
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 forward-looking 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. 



258 

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 cross-

referencing 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 cross-referencing to those terms.812  The absence in the PSLRA of such 

a 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 

 
811  For example, the definition of “forward-looking 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). 

812  See infra note 818 and accompanying text. 

813  15 U.S.C. 77z-2(b)(1)(C); 15 U.S.C. 78u-5(b)(1)(C). 



259 

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 

 
814  See, e.g., S. Rep. No. 104-98 (1995); H.R. Rep. No. 104-369 (1995) (Conf. Rep.). 

815  Letter 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 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.”  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.”   



260 

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 cross-

referencing 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, 

 
816  Regarding Securities Act section 27A(b)(7), see supra note 710. 

817  See supra note 710.261 

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 419819—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 Penny Stock Reform Act 

 
818  For 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.”).  

819  H.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).  

820  H.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 

 



262 

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 

 
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 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.”).   

821  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. 31–32 (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. 



263 

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   

 
822  Letter from American Securities Association, supra note 751.  See also letter from Job Creators Network, supra 

note 751. 

823  Proposing Release, supra note 7, at 29481–29482. 

824  The 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). 

825  Notwithstanding 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. 



264 

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 

 
826  Letters 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. 

827  Letter from Cato Institute, supra note 759 and accompanying text; letter from NYC Bar, supra note 761 and 

accompanying text. 



265 

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 offering-specific 

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 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  

 
828  Letter 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.”). 



266 

Some commenters expressed concern with the proposal because State law may require 

disclosure of certain projections830 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 summary832 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 

 
830  Letters 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. 

831  Letters from American Securities Association, CFA Institute, Cowen.  See supra note 763. 

832  See supra note 829. 

833  One 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.”). 



267 

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 

 
834  For 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. 

835  Letters 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. 

836  See supra note 834 regarding required disclosures where projections no longer reflect views on future 

performance. 



268 

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 remain potentially applicable, depending upon 

specific facts and circumstances.841  We disagree, however, with the commenters who stated that 

 
837  Letters from SPAC Association, Winston & Strawn.  

838  Letter from Bullet Point Network. 

839  See supra section III.C. 

840  Letters from ABA, Cowen, Winston & Strawn.  See supra notes 782, 783, 784, 785, 786, and 787 and 

accompanying text. 

841  With 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) 

 



269 

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 

 
(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). 

843  Letters 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. 

844  Compare 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 

 



270 

removing any doubt about the applicability of the safe harbor would incentivize parties to take 

care to avoid the use of unreasonable forward-looking 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 de-SPAC 

transaction, the PSLRA safe harbor is already unavailable.  There are, however, a number of de-

SPAC transactions that are not structured in this manner. 

 
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 forward-looking 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.”). 

845  Letters from Kirkland & Ellis, Winston & Strawn. 

846  Letter 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.”). 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3945975


271 

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 law statutory scheme, which provides for 

several private rights of action.850 

 
847  Letter from Kirkland & Ellis. 

848  Proposing 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). 

849  Letter from Winston & Strawn. 

850  See, e.g., Securities Act section 11 (15 U.S.C. 77k); Securities Act section 12 (15 U.S.C. 77l). 



272 

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 

 
851  Letters from Anonymous (Apr. 7, 2022), American Securities Association, Vinson & Elkins. 

852  See also supra note 844 (discussing splits among courts on whether knowingly false or fraudulent forward-

looking statements are protected by the PSLRA safe harbor). 

853  Letters from Managed Funds Association (referring to the proposal as “barring forward-looking 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. 

855  Letters 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. 

856  Letter from NASAA.  See supra note 798 and accompanying text. 

857  See 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. 



273 

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 forward-looking 

statements in de-SPAC transactions and other business combinations involving blank check 

 
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)]. 



274 

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 

 
859  See letters from Americans for Financial Reform Education Fund, Better Markets, CFA Institute, CII, Senator 

Elizabeth Warren, supra notes 722–727 and accompanying text. 

860  For 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 forward-looking statements in de-SPAC 

transactions and other business combinations involving blank check companies discussed above are equally 

prevalent in traditional IPOs. 

861  See Item 1609 of Regulation S-K.  See also letter from Managed Funds Association supra note 800. 

862  Letters from Jonathan Kornblatt, Vinson & Elkins. 



275 

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 de-SPAC 

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 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 

 
863  See letter from Amanda Rose. 

864  Business 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. 

865  Letter from SPAC Association.   



276 

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 forward-looking 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 

 
866  Letter from Cowen. 

867  See, 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. 



277 

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 

 
868  As 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.” 

869  Letter from Charles Pieper. 

870  We 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 three-year 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. 



278 

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 de-SPAC 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 

 
871  Letter from Vinson & Elkins.  See supra note 807. 

872  In particular, see supra section III.C and infra section IV.A. 

873  Proposing Release, supra note 7, at 29461, n.21. 

874  Proposing Release, supra note 7, at 29483. 



279 

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. 

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 

 
875  See Proposing Release, supra note 7, at 29486. 

876  Letters 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. 

877   Letters 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.  

878   Letters 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. 

879   Letters 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. 

880   Letters from Andrew Tuch, ABA, Davis Polk, Ropes & Gray, White & Case. 



280 

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 

 
881  See Small Business Capital Formation Advisory Committee recommendations, supra note 40. 

882   Letters from Davis Polk, Kirkland & Ellis, NYC Bar, SIFMA, Vinson & Elkins. 

883  Letters from ABA, Cleary Gottlieb, Cowen, Davis Polk, Freshfields, Goodwin, SIFMA.  

884   Letters from ABA, Cleary Gottlieb, Cowen, Davis Polk, Freshfields, Goodwin, SIFMA. 

885   Letters from ABA, SIFMA. 

886   Letters 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. 

887   Letter from Cowen.281 

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   

 
888   Letters from Americans for Financial Reform Education Fund, Better Markets, Consumer Federation, ICGN, 

Mohammed Ali Rashid, Managed Funds Association, NASAA. 

889   Letters from ABA, Davis Polk, Freshfields, Goodwin, Kirkland & Ellis, Managed Funds Association, Skadden, 

Vinson & Elkins.  

890   Letters from ABA, Better Markets, Davis Polk, ICGN, Ropes & Gray, Vinson & Elkins, White & Case. 

891   Letter from Cowen.  

892   Letter from NYC Bar. 

893   Letter from Vinson & Elkins. 

894   Letter from Usha Rodrigues and Mike Stegemoller. 

895   Letters from ABA, Committee on Capital Markets Regulation, Davis Polk, Ropes & Gray, SIFMA, Winston & 

Strawn. 



282 

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   

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.  

 
896   New 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). 

898   See 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 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.”). 



283 

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 

 
899   A “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.”).  



284 

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.   

 
900   Proposing Release, supra note 7, at 29485. 

901   Letter from ABA. 

902   See 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). 

903   Such 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&collect

ion=usjournals&set_as_cursor=0&men_tab=srchresults. 

904   For example, shareholders of a SPAC become shareholders of a combined operating company by operation of 

State or local law in a statutory merger. 



285 

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 

 
905  Letter from ABA. 

906  See the discussion regarding the broad definition of “sale” in section 2(a)(3) and the related examples in infra 

section IV.A.3.i.   

907  See infra section IV.A.  As discussed below, Rule 145a applies regardless of the structure the de-SPAC 

transaction may take.  

908  Letter from ABA. 

909  Letter from SIFMA. 

910   See 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.”). 



286 

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 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 

 
911   Rule 144 Adopting Release, supra note 898, at 596. 

912   Letters from Davis Polk, Kirkland & Ellis, NYC Bar, SIFMA, Vinson & Elkins. 

913   Many 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). 



287 

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 de-SPAC 

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 

 
914  Similarly, 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). 

915   See the defenses to section 11 liability in 15 U.S.C. 77k(b). 



288 

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 

 
916   15 U.S.C. 77k(b)(3).  

917   Letters from ABA, Andrew Tuch, Davis Polk, Ropes & Gray, White & Case. 

918   See supra section I and infra section IV.A.3. 



289 

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 companies919 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 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.  

 
919   As 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.” 

920  The 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)]. 



290 

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 

 
921  See Proposing Release, supra note 7, at 29488. 

922  Id. at 29489. 

923  Letters 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 

 



291 

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 occurs929 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 

 
evaluation and approval of the stock of the proposed merged company's stock by the SEC, as if it was a new 

security.”). 

924  Letters from Andrew Tuch, ICGN, Jorge Stolfi, Public Citizen. 

925  Letter from Andrew Tuch. 

926  Letter from IGCN. 

927  Letters from ABA, Freshfields, Kirkland & Ellis, NYC Bar, Vinson & Elkins, Winston & Strawn. 

928  Letters from ABA, Freshfields, Loeb & Loeb, Vinson & Elkins.  See infra section VIII.  

929  Letter from Vinson & Elkins. 

930  Letter from ABA.  

931  Letters from Freshfields, Kirkland & Ellis, NYC Bar, Vinson & Elkins. 



292 

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 de-SPAC 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 

 
932  Letters from ABA, Kirkland & Ellis, SIFMA. 

933  Letter from Kirkland & Ellis. 

934  Letter from Winston & Strawn. 

935  Letter from Vinson & Elkins.  

936  Id. 

937  Letter from ABA. 

938  Letters from Kirkland & Ellis, Vinson & Elkins. 



293 

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 de-SPAC 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 

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 post-transaction 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 

 
939  Letter from Kirkland & Ellis. 

940  Letter from Vinson & Elkins. 

941  Although 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. 

942  As 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. 



294 

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 

 
943  Proposing 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. 

944  By 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 

 



295 

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 occurs945 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 

 
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. 

945  See letter from Vinson & Elkins. 

946  See letter from ABA. 

947  15 U.S.C. 77b(a)(3). 



296 

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 

 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 

 
948  See 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.). 

949  See 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.). 

950  See, 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.”  

951  Letters from ABA, Kirkland & Ellis. 



297 

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 

 
952  Letter from ABA. 

953  Letter from Kirkland & Ellis. 

954  We 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. 

955  As discussed above, Rule 145a is limited to business combinations that involve reporting shell companies.  See 

supra section IV.A.3. 



298 

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, courts957 and the Commission958 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 

 
956  See 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.” 

957  See 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 spin-off 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.”). 

958  See 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. 



299 

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 combination 

transaction.962  In these circumstances, the transaction that Rule 145a construes as a sale is 

 
960  Letter from ICGN. 

961  See 15 U.S.C. 77b(a)(3).  

962  Share 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 

 



300 

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 pre-transaction shareholders and the surviving combined 

company.963  Such transactions would be situations implicating a Rule 145a constructive sale.   

 
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.   

963  This 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.301 

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 

 
964  Letters from Freshfields, Kirkland & Ellis, NYC Bar, Vinson & Elkins. 

965  For 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 transaction-specific 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.   



302 

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 Non-SPAC 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 

 
966  See letter from Loeb & Loeb. 

967  See id. 

968  See Shell Company Adopting Release, supra note 943.  

969  See id. 

970  See letter from Kirkland & Ellis. 



303 

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 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 

 
971  Letter from Winston & Strawn. 

972  Although 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. 

973  See supra section III.C. 



304 

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 de-SPAC 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 transaction975 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 post-transaction 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. 

 
974  Id. 

975  Letter from ABA. 

976  Letter from Winston & Strawn. 

977  See supra section IV.A.3.iii regarding when a shell company must consider registering the sale identified by 

Rule 145a.   



305 

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 

 
978  Letters from Kirkland & Ellis, Vinson & Elkins. 

979  H.R. Rep. No. 152, 73rd Cong. 1st Sess. 25 (1933). 



306 

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 

 
980  The 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.”).  



307 

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 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. 

 
981  Letters from Kirkland & Ellis, Vinson & Elkins. 

982  For example, approval of the business combination, the authorization of additional shares, revisions to the 

articles of incorporation, or a reincorporation to a different jurisdiction. 

983  See, 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.”). 



308 

B. Financial Statement Requirements in Business Combination Transactions Involving 

Shell Companies 

After a business combination involving a shell company, the financial statements of a 

business984 that will be a predecessor985 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 

 
984  We 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.   

985  The 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.   

986  See 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. 

987  Commission staff has provided informal guidance to address practical questions related to financial reporting 

issues for shell company mergers in the FRM.   



309 

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 

 
988  See 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 de-SPAC 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. 

989  See Proposing Release supra note 39, at 29491. 

990  See definition of the term “business combination related shell company” in Securities Act Rule 405 and 

Exchange Act Rule 12b-2. 



310 

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 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 co-registration would result in 

inconsistencies with IPOs where there are multiple target companies. 

 
991  Letters 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. 

992  Letter from ABA. 

993  Letter from Vinson & Elkins.  



311 

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 

 
994  See 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. 



312 

statement or proxy statement995 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 

 
995  For 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). 

996  See 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. 

997  See 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. 

998  See infra section VIII.A.  There were approximately 17 out of 583 de-SPAC transactions between 1990–2022 

that had two or more targets. 



313 

accommodations.999  Also, under current rules, a SPAC that satisfies the MJDS-eligibility 

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 

 
999  See 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). 

1000  See General Instruction B to Form 40-F. 



314 

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 non-

predecessor 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 

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 business1003 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 

 
1001  See 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. 

1002  Only two years of these financial statements may be required in other scenarios, such as when the registrant is 

an SRC. 

1003  The 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.   

1004  See Proposing Release, supra note 39, at 29491. 



315 

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 

 
1005  Letters from Ernst & Young, PwC, RSM. 



316 

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 

 
1006  Financial 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. 

1007  See supra sections III.C and IV.A. (discussing co-registration of target companies and Rule 145a respectively). 



317 

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 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 

 
1008  Letters from ABA, PwC, RSM. 

1009  See 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 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.). 



318 

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 3-121011 (or Rule 8-081012 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 

 
1010  See 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.   

1011  See 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.  

1012  See 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. 



319 

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 

 
1013  See supra sections III.C and IV.A. (discussing co-registration of target companies and Rule 145a respectively). 

1014  See Item 17 of Form S-4 and Form F-4; § 240.14A-3(b); Items 13 and 14 of Schedule 14A. 

1015  See 17 CFR 230.408(a) (“Rule 408(a)” under the Securities Act); 17 CFR 240.12b-20 (“Rule 12b-20” under the 

Exchange Act). 



320 

before the Form S-4 is filed.  The proposed rules and amendments addressed the financial 

reporting required for Company C in this non-exclusive 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 

business1018 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-

 
1016  See 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. 

1017  Rule 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. 

1018  For 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).321 

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 

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 

 
1019  Rule 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. 

1020  See Proposing Release, supra note 7, at 29492. 



322 

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 previously-

filed registration or proxy statement would be required as part of the already-required 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. 

 
1021  See 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%). 

1022  As 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). 



323 

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   

 
1023  Letters 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).  

1024  Letters from ABA, BDO, Freshfields, Goodwin, PwC, Vinson & Elkins, Winston & Strawn. 

1025  Id. 

1026  Rule 3‐05(b)(4)(ii) of Regulation S-X. 

1027  Letters from ABA, Freshfields, Goodwin, Vinson & Elkins, Winston & Strawn. 



324 

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 

de-SPAC 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 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 

 
1028  Letter from PwC. 

1029  Id. 

1030  Letters from ABA, Freshfields, PwC, RSM, Vinson & Elkins. 



325 

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-41032 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’ 

 
1031  See infra section III.C. 

1032  We 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. 



326 

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 

 
1033  Letters from ABA, Freshfields, Vinson & Elkins, Winston & Strawn.  See supra note 1027.   

1034  Letter from PwC. 

1035  Id. 



327 

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 

 
1036  We 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).   



328 

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 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. 



329 

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 de-SPAC 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 

 
1037  Once 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. 

1038  Letters from Ernst & Young, PwC, RSM. 

1039  Letter from RSM. 

1040  Letters 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.” 

1041  Letters 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. 



330 

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 

 
1042  Letter from Vinson & Elkins. 

1043  Proposing Release, supra note 7, at 29493. 



331 

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 registrant1044 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 

 
1044  A 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. 



332 

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 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. 

 
1045  A 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. 

1046  Proposing Release, supra note 7, at 29493. 

1047  Proposing Release, supra note 7, at 29494.   



333 

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 

 
1048  Proposing 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). 

1049  This 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. 

1050  Proposing 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. 

1051  Proposing Release, supra note 7, at 29494. 



334 

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 

 
1052  Letters from Davis Polk, Vinson & Elkins, Ernst & Young. 

1053  Letter from Freshfields. 

1054  Letter from Davis Polk.  

1055  Id.  

1056  Id. 

1057  Letter from Ernst & Young. 



335 

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 de-SPAC 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 

 
1058  Letter 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. 

1060  Letter from Ernst & Young. 



336 

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 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 de-SPAC 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 feedback1062 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 

 
1061  Letter from Freshfields. 

1062  Letter from Ernst & Young. 

1063  See supra section IV.B.15. 



337 

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 de-SPAC 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. 

 
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. 

1065  Proposing Release, supra note 7, at 29493. 



338 

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 type-information so that the financial statements of the acquired business need not be 

 
1066  Proposing Release, supra note 7, at 29294. 

1067  Letter from PwC. 

1068  Letter from Ernst & Young. 

1069  As discussed above, we are adopting Rule 15-01(b) largely as proposed, with certain technical modifications in 

the final rule. 



339 

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 

 
1070  Proposing Release, supra note 7, at 29494 (request for comment number 109). 

1071  Letters from BDO, PwC, Deloitte, RSM, Freshfields, Vinson & Elkins. 

1072  Letter from BDO. 

1073  Letter from Ernst & Young.  See supra note 1068. 

1074  Letters from BDO, PwC, Deloitte, RSM, Freshfields, Vinson & Elkins.  See supra note 1071. 



340 

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. 

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. 

 
1075  Proposing Release, supra note 7, at 29494. 

1076  Letter from PwC.341 

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 

 
1077  See, 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). 

1078  These rules and limitations generally do not apply to shell companies that qualify as “business combination 

related shell companies” as defined in Rule 405. 

1079  See 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)]. 

1080  See General Instruction A.1, Form S-8 (17 CFR 239.16b); Shell Company Adopting Release, supra note 943. 



342 

safe harbor of Rule 163A from section 5(c) of the Securities Act for pre-filing 

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-de-SPAC 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. 

 
1081  See 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)]. 

1082  See 17 CFR 230.137(d)(2); 17 CFR 230.138(a)(4); 17 CFR 230.139(a)(1)(ii). 

1083  See letters from ABA, American Securities Association, Cowen, Ernst & Young, Fenwick, Freshfields, 

Goodwin, Vinson & Elkins, White & Case, Winston & Strawn. 



343 

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 



344 

financial measure to which it is most closely related,1084 and an explanation why the 

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 de-SPAC 

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 

 
1084  The 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. 

1085  The 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)]. 



345 

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 

 
1086  Letters 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. 

1087  Proposing 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?”). 

1088  Letters from ABA; Chris Barnard; Goodwin; Michael Dambra, Omri Even-Tov, and Kimberlyn George. 

1089  Letter 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?”). 



346 

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 

 
1090  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George. 

1091  Letter from ICGN. 

1092  Letter from NASAA. 

1093  Letter from Chris Barnard. 

1094  The 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. 

1095  Letters from ABA, Goodwin. 



347 

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 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 

 
1096  Proposing 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?”). 

1097  Letter from Kirkland & Ellis. 

1098  Letters from ABA, Goodwin. 

1099  Proposing 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?”). 

1100  Letters from ABA, Goodwin, Vinson & Elkins. 

1101  Letter from Chris Barnard. 

1102  Letters from ABA, Goodwin. 



348 

“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 

 
1103  Letters from ABA, Goodwin. 

1104  Letters from ABA, Goodwin. 

1105  Letter from Loeb & Loeb. 

1106  Letters from ABA, Freshfields, Goodwin, Kirkland & Ellis. 

1107  Letters from ABA, Goodwin, Kirkland & Ellis. 

1108  Letters from ABA, Goodwin. 



349 

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 

 
1109  Id. 

1110  Id. 

1111  Id. 

1112  Letter from Freshfields. 

1113  Id. 

1114  Letters from Freshfields, Kirkland & Ellis. 



350 

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. 

 
1115  Letter from Bullet Point Network. 

1116  Id. 

1117  Id. 

1118  Id. 

1119  Some commenters indicated that the updated guidance in Item 10(b) should apply to all filings.  See supra note 

1088 and accompanying text. 



351 

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 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. 

 
1120  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George.  See supra notes 1089–1090 and 

accompanying text. 

1121  Letter from ICGN.  See supra note 1091 and accompanying text. 

1122  Letter from NASAA.  See supra note 1092 and accompanying text. 

1123  See, e.g., Item 1605, Item 1606(b), and Item 1607. 

1124  Letters from ABA, Goodwin.  See supra note 1095 and accompanying text. 



352 

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 non-GAAP 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. 

 
1125  Letter from Kirkland & Ellis.  See supra note 1097 and accompanying text. 

1126  Letters from ABA, Goodwin, Vinson & Elkins.  See supra note 1100 and accompanying text. 



353 

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 

 
1127  Letters from ABA, Goodwin.  See supra notes 1103–1104 and accompanying text. 

1128  Letter from Chris Barnard.  See supra note 1101 and accompanying text. 

1129  Letters from ABA, Goodwin.  See supra note 1104 and accompanying text. 



354 

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 

 
1130  In addition, in final Item 1609(b) we replaced the proposed term “impact” with the term “affect” for clarity. 

1131  Two 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. 

1132  Letters from ABA, Goodwin, Kirkland & Ellis.  See supra note 1107 and accompanying text. 

1133  Letters from ABA, Goodwin, Freshfields, Kirkland & Ellis.  See supra notes 1106–1107 and 1112–1113 and 

accompanying text. 



355 

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 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 

 
1134  Letters from Freshfields, Kirkland & Ellis.  See supra note 1114 and accompanying text. 



356 

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 

 
1135  For 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. 

1136  Letters from ABA, Goodwin.  See supra notes 1108–1111 and accompanying text. 



357 

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 

de-SPAC 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 

 
1137  Section 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 de-SPAC transactions to other 

types of transactions. 



358 

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 long-term 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 de-

SPAC transaction. 

We are amending General Instruction B to Form 8-K to require 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 

 
1138  Letter from Bullet Point Network. 



359 

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 de-SPAC 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) 

 
1139  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George.  See supra notes 1089–1090 and 

accompanying text. 



360 

of the Investment Company Act1140 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 

 
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.  

1141  For 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). 

1142  See, e.g., supra note 25 and accompanying text; see also Proposing Release, supra note 7, at nn.7-8 and 

accompanying text. 

1143  See 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-law-firms-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).  

1144  This 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.  

1145 Section 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 majority-owned 

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.361 

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 companies1150 and should be regulated under the 

Investment Company Act accordingly.1151  

 
1146  To 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 S.E.C. 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). 

1147  See, e.g., letters from ABA, Davis Polk, Goodwin. 

1148  See, e.g., letters from Consumer Federation; Robert J. Jackson, Jr. and Professor John Morley (June 13, 2022) 

(“Robert Jackson and John Morley”).  

1149  See, e.g., letters from Goodwin, Skadden, Vinson & Elkins, White & Case. 

1150  Letters 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-weinstein-recommends-spacs-cds-as-fed-

tightens#xj4y7vzkg (SPACs are misunderstood because they’re “fixed-income products” quoting Weinstein).  

1151  Letters from Consumer Federation; Robert Jackson and John Morley. 

https://www.bloomberg.com/news/articles/2022-01-28/saba-s-weinstein-recommends-spacs-cds-as-fed-tightens?leadSource=uverify%20wall
https://www.bloomberg.com/news/articles/2022-01-28/saba-s-weinstein-recommends-spacs-cds-as-fed-tightens?leadSource=uverify%20wall


362 

Commenters also held varying views about the need for a Commission safe harbor.  

Some commenters believed that a safe harbor would provide clarity.1152  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, 

 
1152  Letters 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 

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.”). 

1153  See, 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. 

1154  Letter 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”). 

1155  Letter from Davis Polk. 

1156  See, e.g., letters from NYC Bar, Ropes & Gray.  See also recommendation of the Small Business Capital 

Formation Advisory Committee, supra note 40. 

1157  See, e.g., letters from ABA, Kirkland & Ellis, Managed Funds Association. 



363 

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 long-standing 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 

 
1158  See, e.g., letters from Consumer Federation; Robert Jackson and John Morley. 

1159  See, e.g., letters from Better Markets; Consumer Federation; Robert Jackson and John Morley.  

1160  Letter 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. 



364 

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, assets1164 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 

 
1162  See 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. 

1163  See supra note 5 and accompanying text. 

1164  Any 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. 

1165  A 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. 



365 

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 funds1168 and cash items prior to the completion of 

the de-SPAC transaction, and that does not 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, 

 
1166  As 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.   

1167  See supra note 1146. 

1168  The 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).  

1169  See supra note 1146.  



366 

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 time1170 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 de-SPAC 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 

 
1170  See 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). 

1172  See Request for Comment on Certain Information Providers Acting as Investment Advisers, Release No. IA-

6050 (June 15, 2022) [87 FR 37254 (June 22, 2022)].  



367 

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  

 
1173  See 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. 

1174  See 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.”). 



368 

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 non-investment 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

  

When considering its status under the Investment Company Act, a SPAC should consider all 

 
1175  See 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. 

1176  Specifically 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.   

1177  See Rules 3a-2 and 419. 



369 

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. 



370 

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, 



371 

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 

 
1178  Section 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. 

1179  See 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. 

1180  The SPAC process begins when a SPAC conducts an IPO and ends when the SPAC combines with a target 

company in a de-SPAC transaction. 

1181  See, e.g., Sris Chatterjee, N.K. Chidambram & Gautam Goswani, Security Design for a Non-Standard IPO: The 

Case of SPACs, 69 J. Int’l Money & Fin. 151 (2016). 

1182  A 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 

 



372 

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 investors1184 and the SPAC,1185 which will enable investors 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 de-SPAC transaction, the rules require 

that the target company sign the registration statement filed in connection with the de-SPAC 

 
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. 

1183  See, 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. 

1184  Throughout 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. 

1185  We 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 

principal-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. 



373 

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 forward-looking statements.1187   

Certain rules we are adopting are intended to align disclosures in de-SPAC 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 

de-SPAC transaction will be required to re-determine 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 

 
1186  See supra section III.C. 

1187  See supra section III.E. 

1188  See supra section III.A. 

1189  See supra section III.D. 



374 

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 

 
1190  See, e.g., infra sections VIII.B.1.iii.c, VIII.B.3. 

1191  See, 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 Brüggemann, 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). 

https://ssrn.com/abstract=2312812
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3126379


375 

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  We discuss these 

comments below in our analysis of the costs and benefits of the final rules.  We also discuss the 

 
1192  See 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-the-future-iii-with-nasdaq-cowen-

gallagher-ve-icr-morrow-sodali-morganfranklin-featuring-gigcapital-hennessy-and-switchback/. 

1193  See letters from Virtu Financial Inc. (June 13, 2022) (“Virtu”), Skadden, Kirkland & Ellis, Committee on 

Capital Markets Regulation. 

1194  See 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, PhD 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 “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). 

https://ssrn.com/abstract=4066641
https://dx.doi.org/10.2139/ssrn.4066641


376 

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 de-SPAC 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 

 
1195  For 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. 



377 

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 newly-organized 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 

Table 2. Number of SPAC IPOsa 

  
1990–

2000 

2001–

2005 

2006–

2010 

2011–

2015 

2016–

2020 
2021 2022 2023 

Total 18 41 128 67 400 613 86 31 

Nasdaq 18 0 3 56 248 433 74 27 

NYSE 0 0 1 0 147 178 10 4 

AMEX/NYSE 

American 
0 6 78 0 5 2 2 0 

OTC 0 35 46 11 0 0 0 0 
a 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.  

 

 
1196  See, 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. 

https://site.warrington.ufl.edu/ritter/ipo-data/


378 

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 

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 

 
1198  See also supra note 665. 

1199  Based on status disclosed by SPACs in the financials filed after the IPO, if available, otherwise from Form S-1 

or Form F-1. 

1200  SPACs 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 of filing and immediate effectiveness of proposed 

rule change to adopt additional criteria for the listing of SPACs). 

1201  NYSE 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). 

1202  NYSE Listed Company Manual Section 102.06; Nasdaq Listing Rule IM-5101-2(a); NYSE American 

Company Guide Section 119(a). 



379 

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 

 
1203  NYSE Listed Company Manual Section 102.06(e); Nasdaq Listing Rule IM-5101-2(b); NYSE American 

Company Guide Section 119(b). 

1204  NYSE Listed Company Manual Section 102.06(d); Nasdaq Listing Rule IM-5101-2(c); NYSE American 

Company Guide Section 119(c). 

1205  NYSE Listed Company Manual Section 102.06(a); Nasdaq Listing Rule IM-5101-2(d); NYSE American 

Company Guide Section 119(d). 

1206  Id. 

1207  NYSE Listed Company Manual Section 102.06(c); Nasdaq Listing Rule IM-5101-2(e); NYSE American 

Company Guide Section 119(e). 



380 

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–

 
1208  See 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.”). 

1209  See SPACInsider, 1H-2021 Report, available at 

https://mcusercontent.com/764dc55fe6da1e37d427265ad/files/b90cf236-0845-f778-e35c-

db7417200d35/1H_2021_SPAC_Report.pdf. 

1210  Based on staff analysis of data from SPACInsider.  SPACs with sponsor type “Sponsor” were counted as 

individually sponsored.381 

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 

 
1211  This 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.  

1213  SPACs 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. 

1214  This 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 non-redeemed share of these proceeds at 

the de-SPAC stage. 

1215  See supra note 1214. 

1216  Id. 



382 

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 

underwriters typically did not defer their fee until completion of the de-SPAC 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-of-the-money warrants.1220  Public warrants, i.e., 

 
1217  See Proposing Release, supra note 7, at 29486.  This practice has not changed since the proposal.  The average 

deferred fee in 2022 through the first two quarters of 2023 was 3.3% of IPO proceeds.  

1218  This 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). 

1219  See, e.g., Gül 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.”). 

1220  Early 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 

 



383 

those issued to non-affiliated 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   

Figure 1. Warrants offered in SPAC IPO Units, 1990–2022a 

 

a 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. 

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 

 
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. 

1221  See Gahng, Ritter & Zhang, supra note 30. 



384 

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 two-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 de-SPAC 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   

 
1222  Early SPACs typically offered one or two in-the-money warrants.  See supra note 1220.  More recent SPAC 

structures offer out-of-the-money fractional warrants.  See supra note 1221. 

1223  See, e.g., Gül Okutan Nilsson, Incentive Structure of Special Purpose Acquisition Companies, 19 Eur. Bus. Org. 

L. Rev. (2018), supra note 1219. 

1224  Staff 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. 

1225  Studies 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 de-SPAC 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). 



385 

Table 3. SPAC Outcomes, Grouped by IPO Year, 1990–2023a 

SPAC IPO Year 
1990–

2000 

2001–

2005 

2006–

2010 

2011–

2015 

2016–

2020 
2021 2022 2023 

Number of IPOs 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 SPAC 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. 

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 de-SPAC 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 

 
1226  Target counts are from Dealogic’s SPAC M&A data.  

1227  See 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). 



386 

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-on-one 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-de-SPAC 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 

 
1228  See 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. 

1231  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.  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. 



387 

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 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 

 
1232  See supra note 1203 which discusses de-SPAC 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. 

1233  Assuming 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-de-spac-debrief.pdf.  

1234  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. 

https://www.freshfields.us/490963/globalassets/noindex/documents/2022-de-spac-debrief.pdf
https://www.freshfields.us/490963/globalassets/noindex/documents/2022-de-spac-debrief.pdf


388 

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 de-SPAC 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 

 
1235  See 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. 

1236  See 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.  

1238  See 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). 

https://ssrn.com/abstract=3920714


389 

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 de-SPAC 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  Third-party 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. 

 
1239  See, e.g., Dambra, Even-Tov & George, supra note 36. 

1240  See 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).  



390 

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 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 de-SPAC 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. 

 
1242  Michael Levitt, Valerie Jacob, Sebastian Fain, Pamela Marcogliese, Paul Tiger, & Andrea Basham, supra note 

1231.  

1243  See supra note 1234. 

1244  See 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 post-merger 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. 



391 

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 de-SPAC 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   

 
1245  See infra note 1364. 



392 

Table 4. Distribution of Combined Company Jurisdiction of Organization by SPAC 

Jurisdiction of Organization, 1990–2022a 

Organization at IPO 
% of IPOs that Later 

de-SPAC 

Organization Post de-

SPAC 

% of Total 

Number of 

Organization 

at IPO 

Delaware 67.0% 

Delaware 82.3% 

Cayman Islands 4.2% 

British Virgin Islands 1.9% 

Bermuda 1.9% 

Israel 1.3% 

Marshall Islands 1.0% 

Luxembourg 1.0% 

United Kingdom 0.7% 

Channel Islands 0.7% 

British Columbia 0.7% 

Island of Guernsey 0.7% 

Netherlands 0.7% 

Utah 0.3% 

Switzerland 0.3% 

India 0.3% 

Virginia 0.3% 

Bahamas 0.3% 

Gibraltar 0.3% 

Australia 0.3% 

New York 0.3% 

Quebec 0.3% 

Nevada 0.3% 

Cayman Islands 28.3% 

Delaware 60.3% 

Cayman Islands 26.0% 

Netherlands 3.8% 

Israel 3.8% 

Luxembourg 2.3% 

Republic of Ireland 0.8% 

Ireland 0.8% 

United Kingdom 0.8% 

Jersey (Bailiwick of Jersey) 0.8% 

Ontario 0.8% 

British Virgin Islands 3.7% 

British Virgin Islands 47.1% 

Delaware 17.7% 

Cayman Islands 11.8% 

Singapore 5.9% 

United Kingdom 5.9% 

Ireland 5.9% 

Mexico 5.9% 

Marshall Islands 0.4% Marshall Islands 100.0% 

Florida 0.2% Delaware 100.0% 

Massachusetts 0.2% Massachusetts 100.0% 

Nevada 0.2% Cayman Islands 100.0% 
a Estimates are based on the subsample of SPAC 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. 



393 

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 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 forward-looking 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 non-SPAC 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 

 
1246  See supra section III.E. 

1247  See supra sections VIII.A.3. 

1248  This 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. 



394 

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. 

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% 
a 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 Intelligize, omitting duplicate reports from 

the same issuer filed on the same day. 

 
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. 

1250  The 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.   



395 

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 non-SPAC 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  

 
1251  This 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. 

1252  As 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. 

1253  This 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). 

1254  See, 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 de-SPAC 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). 



396 

As discussed above, in response to commenters, the Commission is adopting Item 1601 

with 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. 

 
1255  See supra section II.A. 

1256  We acknowledge there may exist heterogeneity in risk preferences among investors, but this does not 

substantially change the incentive misalignment with the SPAC’s incentives. 

1257  See supra sections II.B and II.C. 



397 

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 de-SPAC 

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 

 
1258  See supra section II.E for more information about current disclosure requirements. 



398 

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 

 
1259  See, e.g., George Loewenstein, Cass R. Sunstein & Russell Golman, Disclosure: Psychology Changes 

Everything, 6 Ann. Rev. Econ. 391 (2014). 

1260  Salience 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 over-weight 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). 

1261  Existing 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). 

1262  See, e.g., John Hattie, Visible Learning: A Synthesis of Over 800 Meta-Analysis Related to Achievement (2008). 



399 

better decision-making.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 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 

 
1263  See Izak Benbasat & Albert Dexter, An Investigation of the Effectiveness of Color and Graphical Information 

Presentation Under Varying Time Constraints, 10 MIS Q. 59 (1986). 

1264  See 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. 



400 

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 

 
1265  Letters from ABA, Loeb & Loeb, Ropes & Gray, Vinson & Elkins.  See supra note 325 and accompanying text. 

1266  A 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 non-redeeming public shareholders, unless otherwise specified.401 

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 de-SPAC transaction and have 

their original investment returned plus a pro-rata 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 



402 

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 

Figure 2. Realized Redemptions at de-SPACa 

 

a The redemption realizations are based on the sample of SPACs identified in Table 2. 

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 

 
1268  Based 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). 

1269  See supra section II.D. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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403 

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 

 
1270  Id. 



404 

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 

non-redeeming 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 de-SPAC transaction itself). 

 
1271 We 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. 

1272  See supra section II.D. 

1273  Id. 



405 

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 

 
1274  See supra section II.D for a more detailed description of the disclosure requirements. 

1275  Some 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) 

 



406 

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 

 
(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). 

1276  A similar concern was raised by a commenter.  See letter from White & Case. 



407 

above-mentioned 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 

information1279 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 

 
1277  See 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). 

1278  See Gahng, Ritter & Zhang, supra note 30; Klausner, Ohlrogge, & Ruan, supra note 30. 

1279  See Hattie, supra note 1262; Benbasat & Dexter, supra note 1263. 

1280  See supra note 221. 

1281  Id.  SPAC IPO registration filings currently include dilution disclosures, and these disclosures typically present 

dilution given 100% redemption. 



408 

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 decision-making.1284 

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 

 
1282  See, e.g., letters from Bullet Point Network, CII, Consumer Federation. 

1283  Letter from Consumer Federation. 

1284  See Klausner, Ohlrogge & Ruan, supra note 18. 

1285  Letter from White & Case. 



409 

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. 



410 

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 

 
1286  For 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. 



411 

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 

 
1287  Several 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.”). 

1288  The information acquisition costs mentioned would entail gathering, processing, and incorporating the 

information from the Item 506 dilution disclosure into investors’ existing information and decisions. 

1289  Additionally, 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. 



412 

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 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 

 
1290  See supra section II.B for more information about current disclosure requirements. 

1291  Academic literature provides some evidence that characteristics of a SPAC sponsor, such as 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. 

1292  See, e.g., supra notes 128 and 182. 



413 

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 



414 

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 

 
1293  The 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.  



415 

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 information across a wider sample of SPAC IPOs (due to Items 1602 and 

 
1294  There 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).  

1295  See supra section II.I. 



416 

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, 

 
1296  See, 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 non-insiders, 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. 

1297  See, e.g., Jeff Zeyun, Hyun A. Hong, Jeong-Bon 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, Jeon-Bon 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=p

aper.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 non-regulatory 

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.  

https://www.business.kaist.edu/_prog/seminar/download.php?file=seminar_1_1478854039.pdf&ori_filename=paper.pdf&filedr=kr
https://www.business.kaist.edu/_prog/seminar/download.php?file=seminar_1_1478854039.pdf&ori_filename=paper.pdf&filedr=kr
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3463897


417 

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 

 
1298  See, 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). 

1299  For 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. 

1300  See supra section II.I. 

1301  See 17 CFR 229.601(b)(101)(i)(A). 



418 

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 de-SPAC 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. 

 
1302  An 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/downloadabledocume

nts/xbrl-costs-for-small-companies.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). 

1303  See supra note 31 and accompanying text. 



419 

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 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 de-SPAC 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. 

 
1304  See supra section VIII.B.1.ii. 

1305  Id. 



420 

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 

 
1306  See supra section II.E for more information about the regulatory baseline.  The prospectus is a part of the 

registration statement.421 

(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 non-redeeming 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 

de-SPAC 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 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 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 

 
1307  See discussion in supra section VIII.B.1.ii.b.  Also note that Item 1604(c) is discussed separately in the following 

section. 

1308  See supra notes 1262 and 1263 and accompanying text. 



422 

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 

 
1309  See supra section II.C for more detail on the specifics of the required conflict of interest disclosures. 

1310  See supra note 1265 and accompanying text. 



423 

Item 1604, which based on staff review of existing filings is often the case, or where the SPAC 

has 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 de-SPAC 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 de-SPAC 

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 non-redeeming shareholders of the SPAC.  Item 1604(b)(5) 

requires disclosure of the dilutive impact on non-redeeming shareholders that any financing 

 
1311  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. 



424 

transactions associated with the de-SPAC transaction may have.  Item 1604(b)(6) requires 

disclosure of the potential dilutive impact on non-redeeming 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 de-SPAC 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 non-redeeming shareholders’ interest per share being at least the initial 

public offering price per share of common stock. 

 
1312  At 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 line-item in the calculations in the table. 



425 

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 

 
1314  See supra section VIII.B.ii.b.  

1315  See supra note 221. 

1316  The 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. 

1317  See Hattie, supra note 1262; Benbasat & Dexter, supra note 1263. 



426 

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-SPAC-transaction-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 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 de-SPAC 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. 

 
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. 

1319  See supra section VIII.B.1.ii.b. 



427 

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 de-SPAC transaction, and effects of the de-SPAC 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 de-SPAC 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 

 
1320  See supra section II.F.1 for information about the regulatory baseline. 



428 

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 De-SPAC 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 

 
1321  Redemption decisions by investors can have significant impacts on the dilution faced by non-redeeming 

shareholders.  See supra sections VIII.B.1.ii.b and VIII.B.1.iii.c. 

1322  This is also consistent with comments received.  See supra note 352. 

1323  Again, 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. 



429 

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 de-SPAC 

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 



430 

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 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 

 
1324 Given the data in Table 4, this would apply to most SPACs. 

1325  Letter 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. 



431 

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 de-SPAC 

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-

 
1327  See supra section II.G.12. 

1328  The 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. 



432 

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, 



433 

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 

 
1329  With 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.  



434 

registrants 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 de-SPAC 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 

 
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. 

1331  See, 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.”). 



435 

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 

 
1332  See supra section II.H. 

1333  Id. 

1334  A 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 de-SPAC 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 de-

SPAC 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. 

https://www.freshfields.us/490963/globalassets/noindex/documents/2022-de-spac-debrief.pdf


436 

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 TO1336 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 de-SPAC 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 

 
1335  See 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). 

1336  Additionally, relatively few de-SPAC transactions have historically involved the filing of a Schedule TO alone.  

See supra note 1335 and accompanying text. 



437 

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-K1338 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 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 

 
1337  See letter from ABA. 

1338  See supra section V; infra section VIII.B.4. 

1339  See supra section III.  For additional information about the regulatory baseline for Item 1609, see supra section 

V.A. 



438 

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 forward-looking 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 

 
1340  Blankespoor, 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). 

1341  Michael 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. 



439 

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 

 
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). 

1343  Auditing 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 

 



440 

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 

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 forward-looking information made available to 

 
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. 

1345  For 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 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.441 

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 pre-filing verification of circumstances, data, 

assumptions, etc., that underlie the projections (and updating if so1349); (b) disclosure that the 

 
1346  See supra note 363 and accompanying text. 

1347  Letters from ABA, Freshfields, Goodwin Procter, Kirkland & Ellis. 

1348  See 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. 



442 

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 

 
1350  We 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). 

1351  See Elizabeth Blankespoor, Ed deHaan & Iván 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. 

1352  See supra sections II.I and VIII.B.1.ii.d. 

1353  See supra section VIII.B.1.ii.d. 



443 

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 

 
1354  See supra note 476 and accompanying text. 

1355  See supra note 1302 and accompanying text. 



444 

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 re-determination in its filings, beginning 45 days after consummation of the de-SPAC 

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 post-

combination 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 company 

going public via a traditional IPO might not qualify for SRC status at all.  Under the final rules, 

the post-combination 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 post-combination 

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 de-SPAC 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 

 
1356  See infra section III.D for more information on the regulatory baseline. 



445 

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 re-determination.  To the extent 

that the secondary market might not reflect all the information about the post-combination 

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-

 
1357  See supra note 1191. 

1358  See supra 633 and accompanying text. 

1359  Because SRC status entails lower disclosure and regulatory compliance costs, it is likely that firms would prefer 

to have SRC status than not.   



446 

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 de-SPAC 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-de-SPAC transaction public float (based on observations of historical de-SPAC 

outcomes).1360 

A potential cost of the re-determination 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 re-

determination.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 re-determination rules, this window allows them to continue to reflect SRC status on 

 
1360  Florian Kiesel, Nico Klingelhöfer, Dirk Schiereck & Silvio Vismara, SPAC Merger Announcement Returns and 

Subsequent Performance, 29 Eur. Fin. Mgmt. 399, 399–420 (2023).  

1361  Because 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 post-combination 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. 



447 

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 

 
1362  Specifically, 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. 

1363  The 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). 

1364  For 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 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 

 



448 

not file a Schedule 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 

 
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. 

1365  Because 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. 

1366  There 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. 



449 

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 de-SPAC 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 

 
1367  We 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. 



450 

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 

 
1368  Where the target is an FPI, the amendment includes the option for accordant disclosures.  See supra section 

III.A.1. 

1369  The 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. 



451 

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 

Figure 3. Incorporation by Reference in Form 8-K by Regulation S-K Disclosure Item in 

de-SPAC Transactionsa 

 

a 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-SPAC 

transaction that occurred between Jan. 1, 2006, and Dec. 31, 2022, that incorporated any item by reference. 

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 

 
1371  Because some filers incorporate disclosure by reference from more than one source, the total percentage of 

usage across sources exceeds 100%. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

101 102 103 304 403 701

Regulation S-K Disclosure Item Number



452 

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 

 
1372  While 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%. 



453 

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 non-redeeming 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 de-SPAC 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 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 co-registrant 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. 

 
1373  Letters from ABA, PwC. 



454 

i. Target Company as Co-Registrant 

Currently, a SPAC, the target company, or a holding company may file the registration 

statement for a de-SPAC 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 

 
1374  See supra section III.C. 

1375  See supra section III.C. 

1376  See supra note 22 and accompanying text. 



455 

(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 de-SPAC transactions.1377   

A few commenters compared de-SPAC 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 de-SPAC 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 de-SPAC—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 

 
1377  Adverse 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. 

1378  See letters from ABA, Skadden. 



456 

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 “co-registration” may be associated with additional 

administrative or other costs.  First, in connection with the filing of the registration statement, the 

 
1379  See supra section VIII.A for discussion of SPAC sponsors’ interests in completing the de-SPAC transaction. 

1380  See 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).   



457 

co-registrant 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 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 

 
1381  Letters 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 de-SPAC transaction” 

(citations omitted)). 

1382  These 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 

 



458 

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 

 
liability, and (d) to cover the liability of directors and officers where they are not indemnified by the target 

company. 

1383  See supra note 558 and accompanying text. 

1384  See 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. 



459 

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 co-registration 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 de-SPAC 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 de-SPAC 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 non-

predecessor 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 de-SPAC transaction.  As such, under the 

final rules, the additional costs for target companies, balanced against reduced adverse selection 

 
1385  See supra note 624 and accompanying text. 

1386  Target counts are from Dealogic’s SPAC M&A data.  



460 

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 confidence in 

the forward-looking statements made by such issuers. 

First, the final rules will benefit investors by incentivizing SPACs and other blank check 

companies1388 to take greater care to avoid making forward-looking statements that are 

unreasonable.  There is broad acknowledgement that forward-looking statements can be 

 
1387  See supra section VIII.A.3.  See also supra section III.E for more information about the regulatory baseline. 

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.461 

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 optimistic1391 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 

 
1389  See, 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). 

1390  Letters 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)). 

1391  Blankespoor, 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.  

1392  See supra notes 1240 and 1341. 

1393  See 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 

 



462 

“blank check company” for purposes of the PSLRA, we expect SPACs and other affected blank 

check companies will take greater care to avoid unreasonable forward-looking 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 decision-making 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 forward-looking 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 

 
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.  

1394  While 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. 

1395  Several commenters expressed this view.  See, e.g., letters from Cato Institute, Kirkland & Ellis, Paul Swegle. 



463 

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 non-SPAC 

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 interest1397 may prompt SPACs to improve 

their projections because of the reasons discussed above1398 and/or allow investors to better 

understand and evaluate projections,1399 which could 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 

 
1396  See supra section VIII.A. 

1397  See supra section II.C (discussing rules requiring disclosure of conflicts of interest between public investors and 

SPAC sponsors). 

1398  See supra note 1394. 

1399  For example, Item 1609(b) of Regulation S-K requires disclosure of material assumptions that underlie 

projections.  This additional detail may allow investors to better assess the validity of projections and detect 

over-optimism. 



464 

to any forward-looking 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 

 
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. 

1401  See letter from Amanda Rose. 

1402  See, e.g., letter from Winston & Strawn. 

1403  We 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. 



465 

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 

 
1404  See, e.g., letters from Cato Institute, CFA Institute, Managed Funds Association, NYC Bar, SPAC Association, 

Winston & Strawn.  

1405  See, e.g., letters from Bullet Point Network, SPACInsider, Ropes & Gray, SPAC Association, Vinson & Elkins, 

White & Case. 

1406  See, 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. 

1407  See letter from Cato Institute. 



466 

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 

 
1408  See 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.  



467 

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, 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 

 
1409  See supra section IV.A.2 for more information about the regulatory baseline. 



468 

(or those who are vulnerable to inertia1410) 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 pre-transaction 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 

 
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. 



469 

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. 

 
1413  See generally supra section VIII.B.2 for a discussion of the costs of increased liability. 



470 

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 

 
1414  See 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. 

1415  See supra note 1351. 



471 

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 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 

 
1416  See supra section IV.B for additional regulatory baseline information. 

1417  See 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). 



472 

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 de-SPAC 

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.  

 
1418  See 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). 



473 

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 



474 

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 decision-making. 

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 

 
1419  This 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. 



475 

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 pre-acquisition 

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 

 
1420  See Securities Act Rule 408(a); Exchange Act Rule 12b-20.  



476 

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 decision-making.  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 

 
1421  Letters from Freshfields, Vinson & Elkins. 



477 

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 de-SPAC 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 



478 

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 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 non-GAAP 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 



479 

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 

 
1422  See 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). 

1423  See 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). 



480 

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481 

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 forward-looking 

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 de-SPAC 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  

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. 

 
1424  While, 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. 

1425  For example, SPAC sponsors could set up structures that are more or less dilutive to investors or adjust any 

forfeiture of their promote used to induce investors not to redeem. 



482 

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 

 
1426  Reductions in SPAC formation and de-SPAC mergers could result from increased costs to de-SPAC 

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. 



483 

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 

 
1427  See letter from Virtu. 

1428  See, e.g., letters from National Venture Capital Association (June 13, 2022); Managed Funds Association; I-

Bankers Securities, Inc. (June 24, 2022). 



484 

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 

 
1429  To 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. 



485 

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 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. 



486 

iii. Re-Determine Smaller Reporting Company (SRC) Status of a Post-Business 

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 de-SPAC 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 re-measurement likely would not 

occur at the end of the second fiscal quarter when the annual public float measurement occurs, 

 
1430  See 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). 



487 

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 re-determination 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 re-determining 

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 

 
1431  See 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). 



488 

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 

 
1432  The 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). 

1433  See supra section VIII.B.1.ii.d. 



489 

investors by inhibiting the efficient extraction and searching of narrative SPAC-related 

disclosures (e.g., disclosures regarding conflicts of interest, fairness determinations, and financial 

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 

SPAC-related 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. 

 
1434  To 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. 

1435  See letter from XBRL US. 



490 

v. Dilution Disclosure Measurement Alternatives 

As an alternative to disclosure of net tangible book value, as adjusted, to capture dilution 

incurred by non-redeeming 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 

 
1436  See letters from NASAA; Vinson & Elkins; CII; Michael Klasuner, Michael Ohlrogge, and Harald Halbhuber. 

1437  See Klausner, Ohlrogge & Ruan, supra note 18. 

1438  See Michael Klausner, Michael Ohlrogge & Harald Halbhuber, Net Cash Per Share: The Key to Disclosing 

SPAC Dilution, 40 Yale J. on Reg. 18, 28 (2022). 

1439  Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. 



491 

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 

 
1440  See 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.”). 

1441  Letters from Vinson & Elkins, White & Case. 



492 

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 de-SPAC 

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 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 



493 

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 



494 

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 

 
1442  See 44 U.S.C. 3501 et seq. 



495 

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). 

 
1443  See 44 U.S.C. 3507(d), 5 CFR 1320.11. 

1444  The 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. 



496 

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. 

PRA Table 1.  Estimated Paperwork Burden Effects of the Final Rules  

 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Item 1602: Registered offerings by SPACs 

• Require certain information on the prospectus 

cover page and in the prospectus summary of 

registration statements for offerings by SPACs 

other than de-SPAC transactions. 

• Require enhanced dilution disclosure in these 

registration statements. 

 

Forms S-1 and 

F-1 
• 1 hour increase in compliance 

burden per Form S-1 or F-1 



497 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Item 1603: SPAC sponsor; conflicts of interest 

• Require certain disclosures regarding a SPAC 

sponsor, its affiliates, and any promoters of the 

SPAC. 

• Require disclosure regarding conflicts of interest 

between: (1) a SPAC sponsor; its affiliates; 

officers, directors, or promoters of a SPAC; or 

target company officers or directors; and (2) 

unaffiliated security holders of the SPAC. 

• Forms S-1, F-1, 

S-4, and F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 2 hour increase in compliance 

burden per Form S-1, F-1, S-4, 

or F-4 

• 2 hour increase in compliance 

burden per Schedule 14A or 14C 

• 2 hour increase in compliance 

burden per Schedule TO 

Item 1604: De-SPAC transactions 

• Require certain information on the prospectus 

cover page and in the prospectus summary of 

registration statements for de-SPAC transactions. 

• Require enhanced dilution disclosure in these 

registration statements. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-4 or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 

Item 1605: Background of and reasons for the 

de-SPAC transaction; terms of the de-SPAC 

transaction; effects 

• Require disclosure on the background, material 

terms, and effects of the de-SPAC transaction. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-4 or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 

Item 1606: Board determination about the de-

SPAC transaction 

• Require disclosure 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 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.  

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 4 hour increase in compliance 

burden per Form S-4 or F-4 

• 4 hour increase in compliance 

burden per Schedule 14A or 14C 

• 4 hour increase in compliance 

burden per Schedule TO 



498 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Item 1607: Reports, opinions, appraisals, and 

negotiations 

• Require disclosure regarding any report, opinion 

(other than an opinion of counsel), or appraisal 

received by a SPAC or a SPAC sponsor from an 

outside party or an unaffiliated representative 

acting on behalf of unaffiliated security holders 

relating to any determination described in 

response to Item 1606(a), approval of the de-

SPAC transaction, consideration to be offered in 

the de-SPAC transaction, or fairness of the de-

SPAC 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. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-4 or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 

Item 1608: Tender offer filing obligations 

• Require additional disclosures in a Schedule TO 

filed in connection with a de-SPAC transaction. 

• Schedule TO • 3 hour increase in compliance 

burden per Schedule TO 

Item 1609: Projections in de-SPAC transactions 

• Require additional disclosures regarding 

projections disclosed in a disclosure document for 

a de-SPAC transaction.  

 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• Form 8-K 

• 2 hour increase in compliance 

burden per Form S-4 or F-4 

• 2 hour increase in compliance 

burden per Schedule 14A or 14C 

• 2 hour increase in compliance 

burden per Schedule TO 

• 2 hour increase in compliance 

burden per Form 8-K 

Item 1610: Structured data requirement 

• Require information disclosed pursuant to subpart 

1600 to be tagged in a structured, machine-

readable data language. 

• Forms S-1, F-1, 

S-4, and F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-1, F-1, S-4, 

or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 



499 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Amendments to Regulation S-X** 

Amend financial statement requirements and the 

forms and schedules filed in connection with 

business combination transactions involving shell 

companies (other than business combination related 

shell companies), including de-SPAC transactions, 

to align more closely required disclosures about the 

target company with those required in a Form S-1 

or F-1 for an IPO, including: 

• Expanding the circumstances in which target 

companies may report two years, instead of three 

years, of audited financial statements (resulting in 

a decrease in burden) (Rule 15-01(b)); and 

• Further aligning the requirements for audited 

financial statements in these transactions with 

those required in a registered IPO (resulting in an 

increase in burden) (Rule 15-01(c), (d) and (e)). 

  

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 50 hour net decrease in 

compliance burden per affected 

Form S-4 or F-4*** 

• 50 hour net decrease in 

compliance burden per affected 

Schedule 14A or 14C*** 

• 50 hour net decrease in 

compliance burden per affected 

Schedule TO*** 

Amendments to Align Non-Financial Statement 

Disclosures in De-SPAC Transactions 

• Amend the forms and schedules filed in 

connection with de-SPAC transactions to align 

more closely required non-financial statement 

disclosures about the target company with those 

required in a Form S-1 or F-1 for an IPO. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 8 hour increase in compliance 

burden per Form S-4 or F-4 

• 8 hour increase in compliance 

burden per Schedule 14A or 14C 

• 8 hour increase in compliance 

burden per Schedule TO 

Amendment to Forms S-4 and 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-SPAC transaction, the 

registrants also include the target company. 

• Forms S-4 and 

F-4 

• 100 hour increase in compliance 

burden per Form S-4 or F-4**** 



500 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Notes: 

* 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 final 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 financial statements under Rule 15-01(b) 

than under the current rules from registrants that would otherwise have prepared financial 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. 

In addition, we are adopting requirements that a post-business combination company re-

determine whether it is an SRC following a de-SPAC 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 re-determination 

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:501 

PRA Table 2. Increase in Compliance Burden After Losing SRC Status1445 

Form / Schedule Estimated Increase 

in Internal Hours 

per Filing 

(A) 

Estimated Increase in 

Outside Professional 

Hours per Filing 

(B) 

Estimated Increase 

in Outside 

Professional Costs 

per Filing 

(C) = (B) x $600 

Estimated 

Increase in 

Total Hours 

per Filing 

(D) = (A) + (B) 

Form 10-K* 439.00 147.00 $88,200 586.00 

Form 10-Q* 36.57 11.88 $7,128 48.45 

Schedule 14A** 0.75 0.25 $150 1.00 

Schedule 

14C*** 

0.75 0.25 $150 1.00 

Form S-1* 5.75 17.25 $10,350 23.00 

Notes: 

* The estimated increases in compliance burdens for Forms 10-K, 10-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. 33-10513 (June 28, 2018) [83 FR 31992 (July 10, 2018)], at section V. 

** In regard to Schedule 14A, we estimate that a company that loses SRC status would experience an increased 

compliance burden of 0.75 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 of 0.75 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. 

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 

 
1445  See discussion preceding PRA Table 4 below for a brief discussion on the allocation of compliance burdens 

between internal burden hours and outside professional costs. 



502 

$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 hour1447 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. 

  

 
1446  See Proposing Release, section X.C. 

1447  We 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. 

1448  See Listing Standards for Recovery of Erroneously Awarded Compensation, Rel. No. 33-11126 (Oct. 26, 2022) 

[87 FR 73076 (Nov. 28, 2022)].   



503 

PRA Table 3: Change in PRA Burden Due to Updated Outside Professional Cost Estimate 

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 

Collection of 

Information 

Current Inventory 

Professional Cost 

Burden (@ $400/hr.) 

Updated Professional 

Cost Burden (@ 

$600/hr.) 

Increased Burden 

Due to Update 

(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  



504 

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 

 
1449  Throughout 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.” 

1450  We 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. 

1451  Of 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.   



505 

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 

• 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. 

 
1452  Our 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. 

1453  While 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 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. 

1454  This 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). 



506 

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 

10-Q 

75% 25% 

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: 

  



507 

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 / 

Schedule  

Number of 

Estimated 

Affected 

Responses 

Estimated 

Burden Hour 

Increase or 

(Decrease) 

per Affected 

Response 

Total Estimated 

Incremental 

Increase or 

(Decrease) in 

Burden Hours 

Estimated 

Increase or 

(Decrease) in 

Internal Burden 

Hours 

Estimated Increase 

or (Decrease) in 

Outside Professional 

Hours 

Total Estimated 

Increase or 

(Decrease) in 

Outside 

Professional 

Costs 

 (A) (B) (C) = (A) x (B) (D) = (C) x 

(Allocation % 

from PRA Table 4, 

Internal) 

(E) = (C) x 

(Allocation % from 

PRA Table 4, 

Outside 

Professionals)  

(F) = (E) x $600 

Schedule 

14A 

4 (30) (120) (90) (30) ($18,000)  

Schedule 

14C 

2 (30) (60) (45) (15) ($9,000) 

Schedule 

TO 

2 (27) (54) (27) (27) ($16,200) 

Form S-1 90 4  360  90  270  $162,000  

Form S-4 

(other than 

145a) 

30 70  2,100  525 1,575 $945,000  

Form S-4 

(from Rule 

145a) 

40 70  2,800  700  2,100  $1,260,000  

Form F-1 8 4  32  8  24  $14,400  

Form F-4 

(other than 

145a) 

4 70  280  70  210  $126,000  

Form F-4 

(from Rule 

145a) 

6 70  420 105  315  $189,000  

Form 8-K 58 2  116  87  29  $17,400  

Total 244 203 5,874 1,423 4,451 $2,670,600 

In addition, we estimate that an average of 50 fewer post-business combination 

companies following a de-SPAC 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 

 
1455  This estimate is based, in part, on our estimate of the number of de-SPAC transactions in which the SPAC is the 

legal acquirer. 



508 

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: 

  

 
1456  This 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. 



509 

PRA Table 6. Calculation of the Incremental Change in Burden Estimates of Current 

Responses Resulting from the Re-Determination of SRC Status 

 

Form / 

Schedule  

Number of 

Estimated 

Affected 

Responses

* 

Estimated 

Burden 

Hour 

Increase per 

Affected 

Response** 

Total 

Estimated 

Incremental 

Increase in 

Burden 

Hours 

Estimated 

Increase in 

Internal 

Burden 

Hours 

Estimated 

Increase in 

Outside 

Professional 

Hours 

Total 

Estimated 

Increase in 

Outside 

Professional 

Costs 

 (A) (B) (C) = (A) x 

(B) 

(D) = (C) x 

(Internal % 

PRA Table 

4) 

(E) = (C) x 

(Outside 

Professionals 

% PRA Table 

4) 

(F) = (E) x 

$600 

Schedule 

14A 

40 1 40 30 10 $6,000 

Schedule 

14C 

4 1 4 3 1 $600 

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). 

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. 



PRA Table 7.  Requested Paperwork Burden under the Final Rules+ 
 

 

Form / 

Schedule 

Current Burden, as adjusted* Program Change Requested Change in Burden 

Current 

Annual 

Responses 

Current 

Burden 

Hours 

Current Cost 

Burden, as 

adjusted* 

Number of 

Estimated 

Affected 

Responses

** 

Estimated 

Increase or 

(Decrease) in 

Internal Burden 

Hours*** 

Estimated Increase 

or (Decrease) in 

Outside 

Professional 

Costs**** 

Annual 

Responses 

Burden Hours Cost Burden 

(A) (B) (C) (D) (E) (F) (G) = (A) (H) = (B) + (E) (I) = (C) + (F) 

Schedule 14A 6,369 850,836 $170,115,168  44 (60) ($12,000) 6,369 850,776 $170,103,168  

Schedule 14C 569 63,048 $12,611,016  6 (42) ($8,400) 569 63,006 $12,602,616  

Schedule TO 1,378 30,834 $18,499,500 2 (27) ($16,200) 1,378 30,807 $18,483,300  

Form S-1 898 141,978 $261,023,465  130 320  $576,000  898 142,298 $261,599,465  

Form S-4 588 560,988 $1,013,408,069  70 1,225 $2,205,000  588 562,213 $1,015,613,069  

Form F-1 66 26,571 $48,195,563  8 8  $14,400  66 26,579 $48,209,963  

Form F-4 39 13,999 $25,520,138  10 175  $315,000  39 14,174 $25,835,138  

Form 8-K 118,387 99,204,430 $148,806,645 58 87  $17,400  118,387 99,204,517 $148,824,045  

Form 10-K 8,292 13,988,811 $2,753,391,779  40 17,580  $3,516,000  8,292 14,006,391 $2,756,907,779  

Form 10-Q 22,925 3,098,084 $615,385,731  60 2,180  $436,050  22,925 3,100,264 $615,821,781  

Total 159,511 117,979,579 $5,066,957,074  428 21,446  $7,043,250 159,511 118,001,025 $5,074,000,324  

+ 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 D in this PRA Table 7) is the sum of affected responses from PRA Tables 5 and 6, as applicable. 

*** Estimated Increase or (Decrease) in Internal Burden Hours (Column E in this PRA Table 7) is calculated as the sum of the following, as applicable: PRA Table 

5, Column D (Estimated Increase or (Decrease) in Internal Burden Hours) plus PRA Table 6, Column D (Estimated Increase in Internal Burden Hours). 

**** Estimated Increase or (Decrease) in Outside Professional Costs (Column F in this PRA Table 7) is calculated as the sum of the following, as applicable: PRA 

Table 5, Column F (Total Estimated Increase or (Decrease) in Outside Professional Costs) plus PRA Table 6, Column F (Total Estimated Increase in Outside 

Professional Costs). 



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 

 
1457  5 U.S.C. 601 et seq. 

1458  Proposing Release, supra note 7, at 29558–29560. 



512 

Act.  In addition, the first filing in which re-determination 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 forward-

looking 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.   

 
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. 

1460  Throughout 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.” 



513 

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 generally1462 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 

 
1461  See supra section II.I.  

1462  See supra sections II through VI. 

1463  5 U.S.C. 601(6). 



514 

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, 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 non-SPAC 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 

 
1464  See discussion of the definition of “special purpose acquisition company” in section II.A. 

1465  According 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.   

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). 

1467  This estimate does not include business combination related shell companies. 



515 

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 



516 

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 

 
1468  See supra sections II through V. 



517 

and as to voting, investment, redemption, and tender decisions in connection with de-SPAC 

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 

 
1469  The 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.  

1470  Certain rules we are adopting may provide benefits of clarity and simplicity for entities of all sizes, as we 

discuss in sections II through V. 



518 

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 

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. 



519 

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-



520 

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521 

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) *   *   * 



522 

(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 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 



523 

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: 



524 

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 



525 

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. 



526 

(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 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, 



527 

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 



528 

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 



529 

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) *   *   * 



530 

(iv) Upon the consummation of a de-SPAC transaction, as defined in § 229.1601(a) (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 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 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 non-voting common equity held by non-affiliates 

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: 



531 

§ 229.601 (Item 601) Exhibits. 

(a) *   *   * 

EXHIBIT TABLE 

 
Securities Act Forms Exchange Act Forms 

S-1 S-3 SF-1 SF-3 S-41 S-8 S-11 F-1 F-3 F-41 10 8-K2 10-D 10-Q 10-K 
ABS-

EE 

*   *   *   *   *   *   * 

(98) Reports, opinions, or 

appraisals in de-SPAC 

transactions8  X    X   X  X   

 

  

 

*   *   *   *   *   *   * 
 

1 An 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. 

 
2 A 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) *   *   * 



532 

(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 de-SPAC 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 de-SPAC transaction means a business combination, 

such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or 



533 

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. 



534 

(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 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.  



535 

Provide a cross-reference, 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 _____ 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; 



536 

(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 



537 

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, 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. 



538 

(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 



539 

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). 



540 

(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 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.  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.541 

(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 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; 



542 

(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 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.  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 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. 



543 

(1) With respect to each redemption level, 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. 

(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 de-SPAC 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 de-SPAC 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 

de-SPAC 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. 



544 

(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 de-SPAC 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 



545 

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 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 



546 

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; 



547 

(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 de-SPAC 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 



548 

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 de-SPAC 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. 



549 

(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 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, 



550 

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”. 



551 

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 de-SPAC 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 re-determination in its 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 non-voting common equity held by non-affiliates 

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 



552 

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 



553 

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 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 



554 

(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 



555 

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 



556 

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 



557 

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: 



558 

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: 



559 

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 



560 

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 de-SPAC 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 re-determination in its 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 non-voting common equity held by non-affiliates 

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561 

(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 de-SPAC 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: 



562 

§ 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 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); 



563 

(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: 



564 

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 



565 

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. 

*   *   *   *   * 



566 

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. 

  



567 

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 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 



568 

*   *   *   *   * 

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.  

*   *   *   *   * 

  



569 

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 



570 

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 



571 

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 



572 

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. 

*   *   *   *   * 

 

  



573 

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 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, 



574 

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 de-

SPAC 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. 

*   *   *   *   *  



575 

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 



576 

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 



577 

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. 



578 

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 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.  

*   *   *   *   * 

 

  



579 

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). 

*   *   *   *   * 

 

  



580 

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581 

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. 

*   *   *   *   *

Conformed to Federal Register version 

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 



2 

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. 



3 

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 

 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 

 

  



4 

TABLE OF CONTENTS 

I. INTRODUCTION ................................................................................................................... 8 
II. NEW SUBPART 1600 OF REGULATION S-K .................................................................. 23 

A. Definitions......................................................................................................................... 24 
1. Proposed Definition: “De-SPAC Transaction” .............................................................. 24 

2. Comments: Definition of “De-SPAC Transaction” ....................................................... 24 
3. Final Definition: “De-SPAC Transaction” ..................................................................... 25 
4. Proposed Definition: “Special Purpose Acquisition Company (SPAC)” ...................... 26 
5. Comments: Definition of “Special Purpose Acquisition Company (SPAC)”................ 27 
6. Final Definition: “Special Purpose Acquisition Company (SPAC)” ............................. 28 

7. Proposed Definition: “SPAC Sponsor” .......................................................................... 35 
8. Comments: Definition of “SPAC Sponsor” ................................................................... 35 

9. Final Definition: “SPAC Sponsor” ................................................................................ 36 
10. Proposed Definition: “Target Company” ....................................................................... 39 
11. Comments: Definition of “Target Company” ................................................................ 39 
12. Final Definition: “Target Company”.............................................................................. 40 

B. Sponsors ............................................................................................................................ 40 
1. Proposed Rules ............................................................................................................... 40 

2. Comments....................................................................................................................... 42 
3. Final Rules...................................................................................................................... 47 
C. Conflicts of Interest........................................................................................................... 59 

1. Proposed Rules ............................................................................................................... 59 

2. Comments....................................................................................................................... 61 
3. Final Rules...................................................................................................................... 64 
D. Dilution ............................................................................................................................. 72 

1. Proposed Rules ............................................................................................................... 72 
2. Comments....................................................................................................................... 76 

3. Final Rules...................................................................................................................... 85 
E. Prospectus Cover Page and Prospectus Summary Disclosure ........................................ 117 
1. Proposed Rules ............................................................................................................. 117 

2. Comments..................................................................................................................... 120 
3. Final Rules.................................................................................................................... 121 

F. De-SPAC Transactions: Background, Reasons, Terms, and Effects .............................. 126 
1. Proposed Item 1605 ...................................................................................................... 126 
2. Comments: Item 1605 .................................................................................................. 127 
3. Final Item 1605 ............................................................................................................ 128 

G. Board Determination about the De-SPAC Transaction; Reports, Opinions, Appraisals, 

and Negotiations .................................................................................................................. 132 
1. Proposed Item 1606(a) ................................................................................................. 132 
2. Comments: Item 1606(a) .............................................................................................. 132 
3. Final Item 1606(a) ........................................................................................................ 135 

4. Proposed Item 1606(b) ................................................................................................. 140 
5. Comments: Item 1606(b) ............................................................................................. 141 

6. Final Item 1606(b) ........................................................................................................ 142 
7. Proposed Item 1606(c) through (e) .............................................................................. 145 
8. Comments: Item 1606(c) through (e) ........................................................................... 145 



5 

9. Final Item 1606(c) through (e) ..................................................................................... 147 
10. Proposed Item 1607 ...................................................................................................... 149 

11. Comments: Item 1607 .................................................................................................. 150 
12. Final Item 1607 ............................................................................................................ 152 
H. Tender Offer Filing Obligations ..................................................................................... 156 
1. Proposed Item 1608 ...................................................................................................... 156 
2. Comments: Item 1608 .................................................................................................. 157 

3. Final Item 1608 ............................................................................................................ 158 
I. Structured Data Requirement .......................................................................................... 161 
1. Proposed Item 1610 ...................................................................................................... 161 
2. Comments..................................................................................................................... 161 

3. Final Item 1610 and Tagging Compliance Date .......................................................... 163 
III. DISCLOSURES AND LIABILITY IN DE-SPAC TRANSACTIONS.............................. 166 

A. Non-Financial Disclosures in De-SPAC Disclosure Documents ................................... 167 
1. Proposed Rules ............................................................................................................. 167 

2. Comments..................................................................................................................... 168 

3. Final Rules.................................................................................................................... 169 
B. Minimum Dissemination Period ..................................................................................... 172 
1. Proposed Rules ............................................................................................................. 172 

2. Comments..................................................................................................................... 173 
3. Final Rules.................................................................................................................... 175 

C. Private Operating Company as Co-Registrant ................................................................ 179 

1. Proposed Rules ............................................................................................................. 179 

2. Comments..................................................................................................................... 180 
3. Final Rules.................................................................................................................... 190 

D. Re-Determination of Smaller Reporting Company (SRC) Status .................................. 211 
1. Proposed Rules ............................................................................................................. 211 
2. Comments..................................................................................................................... 212 

3. Final Rules and Guidance ............................................................................................ 219 
E. PSLRA Safe Harbor ........................................................................................................ 231 

1. Proposed Rules ............................................................................................................. 231 
2. Comments..................................................................................................................... 234 
3. Final Rules.................................................................................................................... 255 

F. Underwriter Status and Liability in Securities Transactions .......................................... 278 
1. Proposed Rule .............................................................................................................. 278 
2. Comments..................................................................................................................... 279 
3. Declining to Adopt Proposed Rule 140a; Commission Guidance on Underwriter Status 

in De-SPAC Transactions ............................................................................................ 282 

IV. BUSINESS COMBINATIONS INVOLVING SHELL COMPANIES .............................. 289 
A. Shell Company Business Combinations and the Securities Act of 1933 ........................ 290 
1. Proposed Rule .............................................................................................................. 290 
2. Comments..................................................................................................................... 290 
3. Final Rule ..................................................................................................................... 293 

B. Financial Statement Requirements in Business Combination Transactions Involving Shell 

Companies ........................................................................................................................... 308 

1. Proposed Rule 15-01(a), Rule 1-02(d), and Form Instructions: Audit Requirements . 309 



6 

2. Comments: Rule 15-01(a), Rule 1-02(d), and Form Instructions: Audit Requirements

 ...................................................................................................................................... 310 

3. Final Rule 15-01(a), Rule 1-02(d), and Form Instructions: Audit Requirements ........ 311 
4. Proposed Rule 15-01(b): Number of Years of Financial Statements ........................... 314 
5. Comments: Rule 15-01(b): Number of Years of Financial Statements ....................... 315 
6. Final Rule 15-01(b): Number of Years of Financial Statements ................................. 315 
7. Proposed Rule 15-01(c): Age of Financial Statements ................................................ 316 

8. Comments: Rule 15-01(c): Age of Financial Statements............................................. 317 
9. Final Rule 15-01(c): Age of Financial Statements ....................................................... 317 
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 ................................................... 319 

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 ................................................... 323 
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 ................................................... 324 

13. Proposed Rule 15-01(e): Financial Statements of a Shell Company Registrant after the 

Combination with Predecessor..................................................................................... 328 
14. Comments: Rule 15-01(e): Financial Statements of a Shell Company Registrant after 

the Combination with Predecessor ............................................................................... 329 

15. Final Rule 15-01(e): Financial Statements of a Shell Company Registrant after the 

Combination with Predecessor..................................................................................... 330 

16. Proposed Rule 11-01(d) ............................................................................................... 332 

17. Comments: Rule 11-01(d) ............................................................................................ 334 

18. Decline to Adopt Rule 11-01(d) ................................................................................... 336 
19. Proposed Item 2.01(f) of Form 8-K ............................................................................. 338 

20. Comments: Item 2.01(f) of Form 8-K .......................................................................... 338 
21. Final Item 2.01(f) of Form 8-K .................................................................................... 339 
22. Proposed Rules 3-01, 8-02, 10-01(a)(1): Balance Sheets of Predecessors .................. 340 

23. Comments: Rules 3-01, 8-02, 10-01(a)(1): Balance Sheets of Predecessors ............... 340 
24. Final Rules 3-01, 8-02, 10-01(a)(1): Balance Sheets of Predecessors ......................... 340 

25. Other Shell Company Matters ...................................................................................... 341 
V. ENHANCED PROJECTIONS DISCLOSURE .................................................................. 343 

A. Proposed Items 10(b) and 1609 of Regulation S-K ........................................................ 343 

1. Proposed Rules ............................................................................................................. 343 
2. Comments..................................................................................................................... 345 
3. Final Rules.................................................................................................................... 350 

VI. THE STATUS OF SPACS UNDER THE INVESTMENT COMPANY ACT .................. 359 
A. Background ..................................................................................................................... 359 

B. SPAC Activities .............................................................................................................. 364 
1. The Nature of SPAC Assets and Income ..................................................................... 364 
2. Management Activities ................................................................................................ 365 
3. Duration ........................................................................................................................ 367 
4. Holding Out .................................................................................................................. 369 

5. Merging with an Investment Company ........................................................................ 369 

C. Conclusion ...................................................................................................................... 370 

VII. OTHER MATTERS ............................................................................................................ 370 



7 

VIII. ECONOMIC ANALYSIS............................................................................................ 370 
A. Baseline and Affected Parties ......................................................................................... 376 

1. SPAC Initial Public Offerings ...................................................................................... 376 
2. De-SPAC Transactions ................................................................................................ 384 
3. Blank Check Companies .............................................................................................. 393 
4. Shell Company Business Combinations ...................................................................... 394 
B. Benefits and Costs of the Adopted Rules ....................................................................... 395 

1. Disclosure-Related Rules ............................................................................................. 395 
2. Liability-Related Rules ................................................................................................ 453 
3. Shell Company-Related Rules ..................................................................................... 466 
4. Enhanced Projections Disclosure (Amendments to Item 10(b) of Regulation S-K) .... 478 

C. Effects on Efficiency, Competition, and Capital Formation ........................................... 480 
1. Efficiency ..................................................................................................................... 480 
2. Competition .................................................................................................................. 481 
3. Capital Formation ......................................................................................................... 482 

D. Reasonable Alternatives.................................................................................................. 484 

1. Disclosure-Related Rules ............................................................................................. 484 
2. PSLRA Safe Harbor Guidance ..................................................................................... 492 
3. Expanding Disclosure in Reporting Shell Company Business Combinations ............. 492 

4. Enhanced Projections Disclosure ................................................................................. 494 
IX. PAPERWORK REDUCTION ACT ................................................................................... 494 

A. Summary of the Collections of Information ................................................................... 494 

B. Estimates of the Effects of the Final Rules on the Collections of Information .............. 496 

C. Incremental and Aggregate Burden and Cost Estimates ................................................. 501 
1. Current Inventory Update to Reflect $600 Per Hour Rather than $400 Per Hour Outside 

Professional Costs Rate ................................................................................................ 501 
2. PRA Burden and Cost Estimates Resulting from the Final Rules ............................... 503 

X. FINAL REGULATORY FLEXIBILITY ANALYSIS ....................................................... 511 

A. Need for, and Objectives of, the Final Rules .................................................................. 511 
B. Significant Issues Raised by Public Comments .............................................................. 513 

C. Small Entities Subject to the Final Rules ........................................................................ 513 
D. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................. 515 
E. Duplicative, Overlapping or Conflicting Federal Rules ................................................. 515 

F. Agency Action to Minimize Effect on Small Entities .................................................... 516 
STATUTORY AUTHORITY .................................................................................................... 519 
 

 

 

  



8 

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 

companies4 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 de-SPAC 

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 

 
1  The 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. 

3  Pub. L. 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. 

4  The 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. 

5  The 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-and-

acquisitions/re-spacs-gain-steam-as-arrival-shares-sink-new-sponsor-steps-up. 

6  We 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. 



9 

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 de-SPAC 

transaction.8  The SPAC sponsor is usually compensated through a “promote” or “founder’s 

 
7  Special 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. 

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



10 

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 de-SPAC 

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 

 
9  The 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. 

11  The 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. 

12  The 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. 

13  SPAC shareholders typically also have a redemption right in connection with any votes to extend the duration 

of the SPAC. 

14  See definition of “foreign private issuer,” infra note 442. 



11 

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 opportunity to either: (1) require the SPAC to redeem their shares prior to the 

de-SPAC transaction17 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 

 
15  A 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. 

16  Three 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. 

17  Until 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). 

19  The 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. 



12 

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 company21 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 

 
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. 

22  As 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. 

23  The 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 

 



13 

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 125 below.   

 
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.  

24  Form 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. 

25  Estimates 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.  

https://www.spacanalytics.com/


14 

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 

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 de-

SPAC 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   

 
26  Id. 

27  Id. 



15 

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 de-SPAC transactions (e.g., the SPAC sponsors’ 

compensation being contingent on the completion of the de-SPAC 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   

 
28  For 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. 

29  See 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-deanes-20210524.pdf; see 

also Amrith Ramkumar, SPAC Insiders Can Make Millions Even When the Company They Take Public 

Struggles, Wall St. J. (Apr. 25, 2021). 

30  See, 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-parka-

20210524.pdf. 

31  See 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 

 

https://financialservices.house.gov/events/eventsingle.aspx?EventID=407753
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-deanes-20210524.pdf
https://ssrn.com/abstract=3906196
https://dx.doi.org/10.2139/ssrn.3906196
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-parka-20210524.pdf
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-parka-20210524.pdf


16 

Some commentators have expressed concerns regarding the adequacy of the disclosures 

provided to investors in SPAC IPOs and de-SPAC transactions32 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  

 
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-nasdaq-spac-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-

the-investor-advocate-nyse-spac-listing-standards-042122.pdf. 

32  Throughout this release, when we discuss “SPAC transactions,” we are referencing both SPAC IPOs and de-

SPAC transactions. 

33  See, 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-rodriguesu-20210524.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-08101 (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). 

34  For 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 

 

https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-rodriguesu-20210524.pdf


17 

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 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 de-SPAC 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   

 
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.   

35  Pub. L. 104-67, 109 Stat. 737 (1995). 

36  See, 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. 

37  See 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). 



18 

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     

 
38  See 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. 

40  The Small Business Capital Formation Advisory Committee recommendations on the Proposing Release are 

available at https://www.sec.gov/spotlight/sbcfac/sbcfac-spac-recommendation-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 

 

https://www.sec.gov/comments/s7-13-22/s71322.htm
https://www.sec.gov/spotlight/sbcfac/sbcfac-spac-recommendation-050622.pdf


19 

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 de-SPAC 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 

 
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. 



20 

protections with respect to, the M&A elements of de-SPAC 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 

de-SPAC transactions.  New subpart 1600 contains provisions that, among other things: 

• 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 de-SPAC 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 de-SPAC 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 de-SPAC 

transactions more closely with those in traditional IPOs.  Specifically, we are adopting final rules 

that:21 

• 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 co-registrant 

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 

 
41  Throughout 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. 



22 

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. 

 
42  Some 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. 



23 

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   

 
44  The requirements in new subpart 1600 will codify and standardize some of the disclosures already commonly 

provided by SPACs. 

45  See 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 Schedule 14A; 

General Instruction L to Schedule TO. 



24 

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 de-SPAC 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 de-SPAC transaction to transactions that are permitted under exchange listing 

standards, particularly if the definition of SPAC includes non-listed shell companies.52 

 
47  Proposed Item 1601(a). 

48  Letter 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”). 

49  Letter from ABA. 

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

51  Proposing 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?”). 

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



25 

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 recommendation54 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 

 
53  Item 1601(a) of Regulation S-K. 

54  Letter from ABA. 

55  Letters from ABA, Kirkland & Ellis. 



26 

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 non-listed shell companies.58  A narrower definition may 

inappropriately exclude transactions that should be included, such as those involving over-the-

counter-traded SPACs.  We continue to believe, as indicated in the Proposing Release,59 that the 

definition of de-SPAC 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 

 
56  Letter from ABA. 

57  See also infra note 94 and accompanying text concerning SPAC status after a de-SPAC transaction.   

58  Letter from Vinson & Elkins. 

59  Proposing 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. 

61  Blank 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. 



27 

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 ‘de-SPAC 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 based solely on retaining such cash.”66  Another commenter 

 
62  Proposed Item 1601(b). 

63  Letter 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.”).   

64  Letters from ABA, Vinson & Elkins. 

65  Letter from Vinson & Elkins. 

66  Id. 



28 

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 

 
67  Letter from ABA. 

68  Letter from ABA. 

69  Letter from Vinson & Elkins. 

70  Id. 

71  Id. 

72  Proposing 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?”). 

73  Letter from Vinson & Elkins. 



29 

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 

 
74  Item 1601(b) of Regulation S-K. 

75  Letter from Vinson & Elkins.  See supra note 63 and accompanying text. 

76  Letter from Vinson & Elkins. 

77  See Rule 145a and definitions of “blank check company” in Securities Act Rule 405 and Exchange Act Rule 

12b-2. 



30 

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 

 
78  According 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.   

79  Letter from Vinson & Elkins.  See supra note 63 and accompanying text. 

80  Letters from ABA, Vinson & Elkins.  See supra notes 64, 65, and 66 and accompanying text. 

81  See, 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.”). 



31 

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 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 

 
82  See NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule IM-5101-2 (providing for the 

placement of concurrent offering proceeds in trust). 

83  Proposing Release, supra note 7, at 29466. 

84  Letter from ABA. 

85  See 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. 



32 

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 exchange-traded 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 

 
86  Proposing Release, supra note 7, at 29465. 

87  Letter from Vinson & Elkins. 

88  See, e.g., Table 2 in section VIII (Economic Analysis) (statistics on over-the-counter SPACs for over a three-

decade period). 

89  Prior 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-the-counter market (i.e., that were not listed on an exchange in connection with the IPO). 



33 

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.   

 
90  As 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. 

91  Proposing Release, supra note 7, at 29466 (request for comment number 1). 

92  Proposing Release, supra note 7, at 29490 (request for comment number 102). 



34 

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 de-SPAC 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 de-SPAC transactions. 

 
93  Proposing Release, supra note 7, at 29465. 

94  Letter from Vinson & Elkins. 



35 

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 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  

 
95  See 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). 

96  Proposed Item 1601(c). 

97  Letter from Vinson & Elkins. 

98  Letter from ABA. 



36 

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 

 
99  Letter from ABA. 

100  Item 1601(c) of Regulation S-K. 

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



37 

“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, carve-outs 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 

 
102  See 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.”). 

103  See, 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.”). 

104  Letter from ABA.  See supra note 98 and accompanying text. 

105  Id. 



38 

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 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 

 
106  Letter from ABA.  See supra note 98 and accompanying text. 



39 

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 

 
107  Item 1601(c). 

108  Proposed Item 1601(d). 

109  Letter from Vinson & Elkins. 

110  Letter 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.”). 



40 

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 promoters114 in registration statements and schedules filed in 

 
111  Item 1601(d) of Regulation S-K. 

112  Letters from Freshfields, Vinson & Elkins.  See supra notes 65 and 66 and accompanying text. 

113  See infra section III.C. 

114  The term “promoter” is defined in Securities Act Rule 405 and Exchange Act Rule 12b-2.41 

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 de-SPAC transaction.116 

 
115  See (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. 



42 

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 sponsor ownership interest information that may affect investor ability to 

 
117  Letters 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, Co-Chair, 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”). 

118  Letter from Committee on Capital Markets Regulation. 

119  Letter from CII. 

120  Letter from Consumer Federation. 



43 

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 

 
121  Letter from ICGN. 

122  Letters from ICGN, NASAA. 

123  Letters from ABA, NASAA, Vinson & Elkins. 

124  Letters from Freshfields, Vinson & Elkins. 

125  Letter 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”). 

126  Letter from Vinson & Elkins. 

127  Letters from Better Markets, Charles Pieper, Committee on Capital Markets Regulation, CFA Institute, 

Consumer Federation, Senator Elizabeth Warren, ICGN, NASAA. 

128  Letters 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). 



44 

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 

 
129  Letter 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. 

130  Letter from Vinson & Elkins. 

131  Letter from Vinson & Elkins. 

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



45 

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, 

 
133  Letter from ABA. 

134  Proposing 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?”). 

135  Letter 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. 

137  Letter from Paul Swegle. 



46 

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 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 

 
138  Letter from NASAA. 

139  Letter from ABA. 

140  Letter from Vinson & Elkins. 

141  Letter from Michael Klausner and Michael Ohlrogge. 



47 

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  

 
142  Letter from Vinson & Elkins. 

143  Letter 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”). 

144  Letter 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. 

146  See, 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 

 



48 

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 

 
Checks: The Roles of Reputation and Disclosure in the Face of Limited Information (SSRN Working Paper, 

2021). 

147  Letters from ABA, NASAA, Vinson & Elkins. 

148  The 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). 



49 

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 

 
149  Letters from Freshfields, Vinson & Elkins.  See supra notes 124, 125, and 126 and accompanying text. 

150  Securities 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 de-SPAC transactions.  See, e.g., instructions to Form S-4 and F-4. 

152  See 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)). 



50 

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 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 across-the-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.” 

 
153  Letter 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. 

154  Letters from Loeb & Loeb, Vinson & Elkins.  See supra notes 131 and 132 and accompanying text. 

155  See 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. 



51 

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 

 
156  See, 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 equity-linked 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.”). 

157  Letter from Loeb & Loeb.  See supra note 132 and accompanying text. 

158  Letter from Vinson & Elkins.  See supra note 131 and accompanying text. 



52 

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 

 
159  Letter from ABA.  See supra note 133 and accompanying text. 

160  Letters from Michael Klausner and Michael Ohlrogge, NASAA, Paul Swegle.  See supra notes 135, 136, 137, 

and 138 and accompanying text. 

161  Certain earn-out provisions entered into in connection with a de-SPAC transaction may involve cancellation of 

securities if certain targets are not met. 



53 

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 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 

 
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. 

163  See 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. 

164  Letter from ABA. 



54 

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 interest-holder).  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 interest-holders (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 

 
165  See, 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.).   

166  Letter from Vinson & Elkins. 



55 

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 

 
167  Letter from Michael Klausner and Michael Ohlrogge. 



56 

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 

 
168  See 17 CFR 240.14a-9 (“Rule 14a-9”).  See also 17 CFR 240.14a-6(h). 

169  Letter from Vinson & Elkins.  See supra note 142 and accompanying text. 



57 

agreements in IPOs.  For example, SPAC lock-up agreements often include provisions that 

depend on certain levels of stock price appreciation.170 

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 

 
170  See, 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-the-disappearing-lock-up/; Lock-Up Periods: Regular IPOS V/S 

SPACS IPOS, Legal Scale (Sept. 21, 2022), available at https://www.legalscale.com/lock-up-periods-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-of-ipo-lock-up-agreements-for-technology-companies-

shift-as-direct-listings-and-spacs-gain-traction (out of 80 traditional IPO-companies surveyed, four (i.e., 5%) 

used Price-based lock-up releases). 

171  Letter from Freshfields.  See supra notes 143 and 144 and accompanying text. 

172  See 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.  

173  When 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 lock-up depends on application of a formula involving a 

financial measure. 

https://techcrunch.com/2022/01/04/the-year-of-the-disappearing-lock-up/
https://www.fenwick.com/insights/publications/terms-of-ipo-lock-up-agreements-for-technology-companies-shift-as-direct-listings-and-spacs-gain-traction
https://www.fenwick.com/insights/publications/terms-of-ipo-lock-up-agreements-for-technology-companies-shift-as-direct-listings-and-spacs-gain-traction


58 

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 post-de-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 

 
174  See, 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-going-80315/ (“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.”). 

175  With 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). 

https://www.jdsupra.com/legalnews/blog-10-key-considerations-for-going-80315/
https://doi.org/10.1093/rfs/16.1.0001


59 

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 de-SPAC 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 

 
176  Letter from Freshfields.  See supra note 144 and accompanying text. 

177  See also proposed General Instruction VIII to Form S-1, proposed General Instruction VII to Form F-1. 



60 

summary conflict of interest disclosure requirements in connection with de-SPAC 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 de-SPAC 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 as well as any interest in, or affiliation with, 

the target company.180 

 
178  See 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. 

179  See (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. 

180  See 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.61 

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 

 
181  Letters 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”). 

182  Letters from ABA, NASAA, Vinson & Elkins. 

183  Letters from Better Markets, CFA Institute, CII, Committee on Capital Markets Regulation, Consumer 

Federation, ICGN, NASAA. 

184  Letter from ABA. 



62 

claims the investors have on the SPAC if no de-SPAC 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 

 
185  Letter from ICGN. 

186  Letters from ABA, CII. 

187  Letter from CII. 

188  Letter from ABA. 

189  Letters from ABA, Vinson & Elkins. 

190  Letter from ABA. 



63 

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 non-

redeeming 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 break-even 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 

 
191  Letter from ABA. 

192  Letter from Vinson & Elkins. 

193  Letter from NASAA. 

194  Letter from Jonathan Kornblatt, CMT, Fintech Institutional Advisory (June 12, 2022) (“Jonathan Kornblatt”). 

195  Letter from Jonathan Kornblatt.  

196  Letter from Michael Klausner and Michael Ohlrogge. 



64 

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 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 

 
197  Proposing Release, supra note 7, at 29468 (request for comment number 17). 

198  Letter from Vinson & Elkins. 

199  Letter from ABA. 

200  Proposing Release, supra note 7, at 29468 (request for comment number 18). 

201  Letter from Vinson & Elkins. 



65 

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 de-SPAC 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 de-

SPAC 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 de-SPAC 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 

 
202  See, 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). 



66 

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 

 
203  Letter from ABA.  See supra note 184 and accompanying text. 

204  Similarly, current Item 404 regarding conflicts of interest does not contain such knowledge qualifier. 



67 

SPAC if no de-SPAC transaction takes place; and claims investors have on the SPAC if investors 

exit before the de-SPAC 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 co-registration 

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 de-SPAC transaction is 

in substance an offering by the target company, the conflicts of interest of target company 

 
205  Letter from ICGN.  See supra note 185 and accompanying text. 

206  See, 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).  

207  Letters from ABA, CII. 

208  Letter from CII.  See supra note 187 and accompanying text. 

209  We 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. 

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



68 

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 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 

 
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 de-SPAC 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. 

212  For 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. 

213  Letter from ABA.  See supra note 188 and accompanying text. 



69 

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 “break-even” disclosure.216  With respect to disclosure of a SPAC sponsor’s 

“break-even” 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 

 
214  Letters from ABA, Vinson & Elkins.  See supra notes 189, 190, 191, and 192 and accompanying text. 

215 The Commission adopted a similar approach in rules regarding limited partnership roll-up transactions.  See 17 

CFR 229.900 through 229.915. 

216  Letters from Jonathan Kornblatt, Michael Klausner and Michael Ohlrogge, NASAA.  See supra notes 193, 194, 

195, and 196 and accompanying text. 

217  Letter from Jonathan Kornblatt. 



70 

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 SPAC-specific 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.  

 
218  See 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.”). 



71 

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   

 
219  See 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 

 



72 

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  

 
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 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).” 

221  See 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 

 



73 

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: 

 
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. 

222  See 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.  

223  See proposed General Instruction VIII to Form S-1 and proposed General Instruction VII to Form F-1. 

224  See (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. 



74 

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 over-allotment 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. 

 
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 “over-allotment 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).   



75 

The other dilution provisions proposed by the Commission related to de-SPAC 

transactions.  The Commission proposed Item 1604(a)(3) to require on 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 

non-redeeming 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 non-redeeming 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 de-SPAC 

transaction.  Under Item 1604(c), proposed Item 1604(c)(1) required the provision of a 



76 

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 

 
226  Letters 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).”). 

227  See, 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.”). 

228  Letters 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 

 



77 

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 

 
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. 

229  See, 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.”). 

230  Letter from Vinson & Elkins. 



78 

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 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, 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 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 

 
231  Letter from White & Case. 

232  Id. 

233  Id. 

234  Id. 

235  Letter from White & Case.  

236  Letter 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-review-march-2022/. 



79 

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 

 
237  Letters from Freshfields, Vinson & Elkins, White & Case. 

238  Letter from White & Case. 

239  Letter from White & Case.  

240  Letters 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.”). 

241  Letter 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.”). 

242  Letter from Vinson & Elkins. 

243  Letters 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. 



80 

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 

 
244  Letter from ABA. 

245  Letter from Loeb & Loeb. 

246  Letter from Vinson & Elkins. 

247  Letter from White & Case.81 

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 

 
248  Id. 

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

250  Id.  

251  Letter from PwC. 

252  Letter from Bullet Point Network. 

253  Letter from Vinson & Elkins. 



82 

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 

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 non-redeeming 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 de-SPAC process, investors…need clear information about potential 

consequences to inform their understanding of the true cost of the business combination.”260  

 
254  See 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?”). 

255  Letters from CII; Michael Klausner, Michael Ohlrogge, and Harald Halbhuber; NASAA; Vinson & Elkins. 

256  Letters from Vinson & Elkins. 

257  Letter from NASAA. 

258  Letter from CII. 

259  Id. 

260  Id. 



83 

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 

 
261  Letter 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”). 

262  Letter 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)). 



84 

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 

 
263  Id. 

264  Letter from CII.  

265  Letter from Loeb & Loeb. 

266  Id. 

267  Id. 

268  Letter from Vinson & Elkins. 



85 

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 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 

 
269  Letter 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.”).  

270  Letter from CFA Institute. 

271  Letter from NASAA. 



86 

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 



87 

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: 

Net Tangible Book Value Per Share, as Adjusted 

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 

 
272  See letters from PwC, Ernst & Young, supra notes 249 and 251.  



88 

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 de-SPAC 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 



89 

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 



90 

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). 

 
273  Depending on the facts and circumstances, both qualitative and quantitative information may be required in the 

disclosures made outside of the table.   



91 

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 cross-reference, 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 



92 

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 

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 

 
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). 



93 

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 non-redeeming 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, 

 
275  See letters from PwC, Ernst & Young, supra notes 249 and 251. 



94 

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 

 
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. 



95 

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)).   



96 

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 

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 

 
277  While 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 

de-SPAC transaction warranting such a presentation.  



97 

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 

 
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. 



98 

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 

 
279  See 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)]. 

280  Letters from ABA, Ropes & Gray, Vinson & Elkins, White & Case.  See supra notes 243 and 244 and 

accompanying text. 

281  See, 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. 



99 

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-to-net-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 de-SPAC 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. 



100 

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 de-

SPAC 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, 

 
282  See, 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. 

283  See, 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.”).101 

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 assets285 or by using a value calculated by multiplying a market 

average price-to-net-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.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 

 
284  See, e.g., ibid. (“Ben Graham distilled six decades of experience into ten criteria…[6.] Total debt less than 

tangible book value.”). 

285  See, 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.”). 

286  See, 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….”). 

287  Letter from Loeb & Loeb.  See supra note 245 and accompanying text. 



102 

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 De-SPAC 

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, 

 
288  Letters from Ernst & Young, Vinson & Elkins, White & Case.  See supra notes 246, 247, 248, 249, and 250 and 

accompanying text. 



103 

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 

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 



104 

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, 

 
289  See 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. 



105 

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   

 
290  While 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. 

291  See, 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. 

292  See 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 

 



106 

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 warrants296 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 

 
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). 

293  Letter from Vinson & Elkins.  See supra note 269 and accompanying text. 

294  See Kieso, Weygandt & Warfield (discussing the treasury stock method), supra note 269. 

295  Id. 

296  See, e.g., final Item 1604(c), Item 1602(b)(3), Item 1603(a)(6), and Item 1604(b)(5) and (c). 

297  Letter from Vinson & Elkins. 



107 

proposed provisions related 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 de-SPAC 

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. 

 
298  See Financial Accounting Standards Board Accounting Standards Codification 815-40 and International 

Financial Reporting Standard IAS 32, Financial Instruments: Presentation. 



108 

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 

 
299  Letter 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 

 



109 

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 

 
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).     

302  Letter from Vinson & Elkins.  See supra note 230 and accompanying text. 

303  See Rule 419 (Offerings by blank check companies); Rule 3a51-1 (definition of “penny stock”). 



110 

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 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 SPAC-specific reasonably likely redemption 

levels. 

 
304  Letter from White & Case.  

305  Letter from CII.  See supra note 236 and accompanying text.   



111 

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. 

 
306  Letters from Freshfields, Vinson & Elkins, White & Case.  See supra notes 237, 238, and 240 and 

accompanying text. 

307  Letter from White & Case.  See supra note 238 and accompanying text. 

308  See 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. 



112 

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 

 
310  Letters from CII; Michael Klausner, Michael Ohlrogge, and Harald Halbhuber; NASAA; Vinson & Elkins.  See 

supra notes 254 through 264 and accompanying text. 

311  Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber.  See supra note 261 and 

accompanying text. 

312  Letter 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. 

313  When calculating return on net tangible book value per share, some investors may exclude non-operating 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 

 



113 

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 de-SPAC transaction).  Due to this, these 

disclosures may not be as easily presentable in a straightforward way on the cover page.  Item 

 
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 non-operating tangible assets such as cash among 

others.   

314  The 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).  

315  Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. 

316  As 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. 



114 

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 non-redeeming shareholders who hold the securities until the consummation of the 

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 

 
317  Letter 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.”). 

318  See, 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). 



115 

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.   



116 

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. 

 
319  Letter from Loeb & Loeb.  See supra note 267 and accompanying text. 

320  Letter from CFA Institute. 



117 

g. Lock-Up and Earnout Provisions 

One commenter said that “any lock-up 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 

 
321  Letter from NASAA. 

322  See 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). 



118 

a de-SPAC transaction, (2) redemptions, (3) SPAC sponsor compensation, (4) dilution (including 

simplified tabular disclosure), and (5) conflicts of interest.  

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 de-SPAC 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 



119 

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 



120 

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 

 
323  Letters 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. 

324  Letter from Better Markets. 

325  See, 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). 

326  Letter from Vinson & Elkins.121 

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 de-SPAC 

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 

 
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. 

331  Letter from Better Markets.  See supra note 324 and accompanying text. 



122 

will be 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 

 
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. 

333  See, 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). 



123 

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 non-required 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 

 
334  Letter from Vinson & Elkins.  See supra note 326 and accompanying text. 

335  Staff 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.   

336  Letter from Vinson & Elkins.  See supra notes 328 and 329 and accompanying text. 



124 

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 

 
337  Final 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.”    



125 

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 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-

 
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. 

340  In addition, in final Item 1602(b)(5) we replaced the proposed term “impact” with the term “affect” for clarity. 

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



126 

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 de-SPAC 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; 

 
342  See (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.” 



127 

• Disclosure regarding the accounting treatment and the Federal income tax 

consequences of the de-SPAC transaction, if material; 

• Any material interests in the de-SPAC 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 

 
343  Letter from Committee on Capital Markets Regulation. 

344  Letters 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”). 



128 

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 

 
345  Letter 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”). 

346  Letter 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. 



129 

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 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.  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 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 de-SPAC 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 

 
349  Letter from ABA.  See supra note 345 and accompanying text. 



130 

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-4351 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 

 
350  Letter from Michael Klausner and Michael Ohlrogge.  See supra notes 347 and 348 and accompanying text. 

351  See 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.” 



131 

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 



132 

• 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 De-SPAC 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 

 
353  Letters 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. 

354  Letters 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. 



133 

private rules is inappropriate because the underlying 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 transactions359 

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 

 
355  Letters from Andrew Tuch, Freshfields, Kirkland & Ellis, Loeb & Loeb, Skadden. 

356  Letters from ABA, Cato Institute, CFA Institute, Davis Polk, Freshfields, Kirkland & Ellis, NYC Bar, Ropes & 

Gray, Skadden, White & Case. 

357  Letter from Ropes & Gray. 

358  Id. 

359  Letters from Cato Institute, CFA Institute, Freshfields, Goodwin, Jonathan Kornblatt, White & Case. 

360  Letters from Davis Polk, Goodwin, Job Creators Network, Jonathan Kornblatt, Skadden, White & Case. 



134 

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 advisor365 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 

 
361  Letters from ABA, Goodwin. 

362  Letters from ABA, Goodwin, NYC Bar, White & Case. 

363  Letter from NYC Bar. 

364  Letter from Vinson & Elkins. 

365  Letters from ABA, Andrew Tuch, Cato Institute, Davis Polk, Freshfields, Job Creators Network, Jonathan 

Kornblatt, Paul Swegle. 

366  Letters from ABA, Cato Institute, Davis Polk, Freshfields, Goodwin, Jonathan Kornblatt, Paul Swegle, Ropes & 

Gray, Skadden. 



135 

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 de-SPAC transaction.  Many commenters that supported proposed Item 1606(a) 

 
367  Letter 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). 

368  Letter 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 

self-dealing by SPAC fiduciaries, or perhaps not to apply these particular provisions at all.”). 

369  Letters from ABA, Davis Polk, Freshfields, Goodwin, Ropes & Gray, Skadden, White & Case. 

370  Letters from ABA, Goodwin. 

371  Letter from Davis Polk. 



136 

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 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. 

 
372  Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, 

Holger Spamann, NASAA, Public Citizen.  See supra note 353 and accompanying text. 

373  Letters 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. 

374  Letters from ABA, Andrew Tuch, Cato Institute, Davis Polk, Freshfields, Job Creators Network, Jonathan 

Kornblatt, Paul Swegle.  See supra note 365 and accompanying text. 

375  Letters from ABA, Cato Institute, Davis Polk, Freshfields, Goodwin, Jonathan Kornblatt, Paul Swegle, Ropes & 

Gray, Skadden.  See supra note 366 and accompanying text. 

376  Letters 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. 



137 

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 de-SPAC 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 

 
377  See 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.”). 

378 This 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.  

379  This 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.” 

380  See supra note 377 and accompanying text. 



138 

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 requirement381 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. 

 
381  The 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. 

382  Letters 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. 

383  Because 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. 



139 

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 de-SPAC 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 1607386 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 de-SPAC 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. 

 
384   Letters from Cato Institute, CFA Institute, Freshfields, Goodwin, Jonathan Kornblatt, White & Case.  See supra 

note 359 and accompanying text. 

385  Letters from ABA, Goodwin.  See supra note 361 and accompanying text. 

386  See infra section II.G.10–12. 

387  Letter from Ropes & Gray.  See supra notes 357 and 358 and accompanying text. 

388  Letter from ABA, Goodwin.  See supra note 370 and accompanying text. 



140 

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 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 

 
389  Letter from Cato Institute.  See supra note 367 and accompanying text. 

390  Letters from ABA, Davis Polk, Freshfields, Goodwin, Ropes & Gray, Skadden, White & Case.  See supra notes 

369–371 and accompanying text. 

391  Id.141 

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 generally392 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 

 
392  Letters from Better Markets, CalPERS, Holger Spamann. 

393  Letters from Committee on Capital Markets Regulation, Consumer Federation. 

394  Letters from ABA, Goodwin, White & Case. 

395  Letters from ABA, Goodwin. 

396  Id. 



142 

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 

 
397  Letter from White & Case. 

398  Letters from ABA, Goodwin, Ropes & Gray. 

399  Letter from Skadden. 

400  Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, 

Holger Spamann, NASAA, Public Citizen.  See supra note 393 and accompanying text. 



143 

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 

 
401  Letters from ABA, Goodwin, White & Case.  See supra notes 394–396 and accompanying text. 

402  This 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. 



144 

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 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 de-SPAC transaction in the non-exclusive list of factors to be discussed 

 
403  Letters from ABA, Goodwin, Ropes & Gray.  See supra note 398 and accompanying text. 

404  Letter from Skadden.  See supra note 399 and accompanying text. 



145 

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 de-SPAC 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 

 
405  Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, 

Holger Spamann, NASAA, Public Citizen. 



146 

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 

transaction409 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 

 
406  Letter from Vinson & Elkins. 

407  Letters from Freshfields, Vinson & Elkins. 

408  Letter from Freshfields. 

409  We 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. 

410  Letter from Davis Polk. 

411  Letter from Freshfields. 

412  Id. 



147 

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 de-SPAC 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, 

 
413  Id. 

414  Letter from Vinson & Elkins.  See supra note 406 and accompanying text. 



148 

redemption, and other 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 de-SPAC 

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.  

 
415  Letters from Freshfields, Vinson & Elkins.  See supra notes 407 and 408 and accompanying text. 

416  Letter from Vinson & Elkins.  See supra note 408 and accompanying text. 

417  Letter from Freshfields.  See supra notes 411 and 412 and accompanying text. 



149 

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. 



150 

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 

 
418  Letters 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”). 

419  Letters 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. 

420  Letters from ABA, Goodwin, NYC Bar, White & Case.  See supra note 362 and accompanying text. 

421  Letters from ABA, Goodwin. 

422  Id. 



151 

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 de-SPAC 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 Regulation M-A), for de-SPAC transactions.428 

 
423  Id. 

424  Id. 

425  Letter from Ernst & Young. 

426  Letter from Andrew Tuch. 

427  Letter from Ernst & Young. 

428  Letter from Vinson & Elkins. 



152 

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 de-

SPAC 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) 

 
429  Letters from ABA, Goodwin.  See supra note 424 and accompanying text. 



153 

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 

 
430  Letters from ABA, Goodwin, NYC Bar, White & Case.  See supra note 420 and accompanying text. 

431  Letter 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. 



154 

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 suggested437 because 

 
433  See 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.   

434  Letters from ABA, Goodwin.  See supra note 421 and accompanying text. 

435  Letter from Ernst & Young.  See supra note 427 and accompanying text. 

436  See discussion of Item 1607, infra section VIII.B.1.iii.f. 

437  Letter from Andrew Tuch.  See supra note 426 and accompanying text. 



155 

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 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 

 
438  Letter from Ernst & Young.  See supra note 425 and the accompanying text. 

439 Letters from ABA, Goodwin.  See supra notes 422 and 423 and accompanying text.  



156 

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 

 
440  For 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. 



157 

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   

 
441  See 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. 

443  The 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.” 

444  Letters from ABA, Vinson & Elkins. 



158 

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 de-SPAC 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. 

 
445  Letter from ABA. 

446  Id. 

447  Id. 

448  Id. 

449  Letter from Vinson & Elkins. 

450  Id. 



159 

We decline to revise the final item to 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 de-SPAC 

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 de-SPAC 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 

separately address the requirements for a filing that relates to a redemption of securities offered 

to security holders other than in connection with a de-SPAC 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 de-SPAC transactions or extensions. 

 
451  Letter from ABA.  See supra note 445 and accompanying text. 

452  Letter from ABA.  See supra note 446 and accompanying text. 



160 

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 de-SPAC 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 

 
453  Letter from ABA.  See supra note 447 and accompanying text. 

454  Letter from ABA.  See supra note 448 and accompanying text. 

455  Letter 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161 

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 

 
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. 

458  For 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.  

459  Letters from ABA; Crowe LLP (June 13, 2022) (“Crowe”); ICGN; PwC; Campbell Pryde, President and CEO, 

XBRL US (June 13, 2022) (“XBRL US”). 

460  Letter from ICGN. 

461  Letter from PwC. 



162 

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 

 
462  Letters 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). 

463  Letter from ICGN. 

464  Letter from XBRL US. 

465  Letter from Vinson & Elkins. 

466  Letter from PwC. 

467  Letter from XBRL US. 



163 

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 de-

SPAC transactions.468 

3. Final Item 1610 and Tagging Compliance Date 

After considering the comments received, we are adopting Item 1610 as 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 

 
468  Letter 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).”). 

469  The 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. 

470  Letter from ICGN.  See supra note 460 and accompanying text. 

471  Letter from PwC.  See supra note 461 and accompanying text. 



164 

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 phase-in 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 de-SPAC 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. 

 
472  These 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 machine-readability 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). 

473  Letter from XBRL US.  See supra note 464 and accompanying text. 

474  Furthermore, 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. 

475  Letter from Vinson & Elkins.  See supra note 465 and accompanying text. 



165 

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 beta-testing 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 

 
476  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.  See 17 CFR 229.601(b)(101)(i)(A). 

477  See 17 CFR 229.601(b)(101). 

478  Letter from XBRL US.  See supra note 467 and accompanying text. 



166 

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 de-

SPAC 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 DE-SPAC 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 

 
479  Id. 

480  Letter from Global Legal Entity Identifier Foundation.  See supra note 468 and accompanying text. 

481  See supra note 472 (regarding the Financial Data Transparency Act of 2022).   

482  Proposing Release, supra note 7, at 29477. 



167 

A. Non-Financial Disclosures in De-SPAC 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 schedule483 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 de-SPAC 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 

 
483  See (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. 

485  The 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. 



168 

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 non-financial 

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 

 
486  Proposed General Instruction L.2 to Form S-4; proposed General Instruction I.2 to Form F-4. 

487  See 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.”). 

488  Letters from ABA, CalPERS, Davis Polk, Ernst & Young, ICGN, NASAA, PwC. 

489  See letters from ABA, PwC. 

490  Letters from ABA, PwC. 

491  Letter from ABA. 



169 

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 

 
492  Letter 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.” 

493  Letter from Vinson & Elkins. 

494  Letter from Grant Thornton LLP (June 13, 2022) (“Grant Thornton”). 

495  The 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 cross-references 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.   

496  Under 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. 



170 

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 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. 

 
497  We 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). 

498  Letter from Vinson & Elkins.  See supra notes 492 and 493 and accompanying text. 



171 

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 

 
499  Letter from Grant Thornton.  See supra note 494 and accompanying text. 

500  We 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. 



172 

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 

 
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. 



173 

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 de-SPAC 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 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 

 
502  The 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)].   

503  Letters 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. 

504  Letter from CFA Institute. 

505  Letter from Davis Polk. 



174 

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 de-SPAC 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 

 
506  Letter from Davis Polk. 

507  Letter from Vinson & Elkins. 

508  Letter from Loeb & Loeb. 



175 

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 

 
509  See, 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]”). 

510  See 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.”). 

511  See, 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.” 



176 

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 

 
512  The 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. 

513  Letter from CFA Institute.  See supra note 117 and accompanying text. 

514  A 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 

 



177 

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 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 commenter517 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.   

 
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.  

515  Letter from Davis Polk.  See supra note 506 and accompanying text. 

516  Letter from Vinson & Elkins.  See supra note 507 and accompanying text. 

517  Letter from Davis Polk. 



178 

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 

 
518  Letter from Vinson & Elkins.  See supra note 507 and accompanying text. 

519  Letter from Loeb & Loeb.  See supra note 508 and accompanying text. 

520  As 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.   



179 

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.”  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 Co-Registrant 

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  

 
521  The 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. 

523  Proposing Release, supra note 7, at 29479.   

524  Proposing Release, supra note 7, at 29479.   



180 

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 co-registration proposal would better align liability and disclosure in de-SPAC 

transactions with IPOs.  One stated that “the proposed changes that would treat a target operating 

company as a co-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 

 
525  See section 2(a)(4) of the Securities Act. 

526  See 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 “co-

registrant” 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. 

527  Proposed General Instruction L.1 to Form S-4; proposed General Instruction I.1 to Form F-4. 

528  Letters 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.181 

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 de-SPACs.”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 co-registrant 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 

 
529  Letter from KPMG. 

530  Letter from Andrew Tuch. 

531  Letter from CII. 

532  Letter from Better Markets. 

533  Letter from NASAA. 

534  Letters from ABA, Davis Polk, Freshfields, Job Creators Network, NYC Bar, Skadden, Vinson & Elkins. 

535  Letter from Davis Polk. 

536  Letter from ABA. 



182 

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 co-registrant proposal would create a disparity 

compared to traditional M&A business combination transactions where a target is not a co-

 
537  Letters from ABA (“It is unclear if the Co-Registrant 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. 

538  Letters 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.”). 

539  Letters 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.”). 



183 

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 co-registration 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 co-registration proposal and expressed the view that: “[i]n 

most de­SPAC 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 

 
540  Letters 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.”). 

541  Letter from Bullet Point Network. 

542  Letters from ABA, Freshfields.  See also definitions of “issuer” and “registrant,” supra notes 521 and 526. 



184 

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 co-registration 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 de-SPAC transactions,” because “full Form 10-type information” is already provided 

under current rules about the 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 co-registration 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, non-

redeeming 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   

 
543  Letter from Freshfields.  

544  Letter from ABA. 

545  Id. 

546  Id. 

547  Letter 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.”). 

548  Letter from KPMG (specifically noting that “SPACs may acquire more than one operating company as part of a 

de-SPAC transaction”). 



185 

Several commenters addressed issues related to the scope of section 11 liability that may 

stem from the co-registration 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 de-SPAC 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 

 
549  Letter from Vinson & Elkins. 

550  Letter from Vinson & Elkins.  See also supra note 526 (describing Instruction 3 to the Signatures sections of 

Forms S-4 and F-4).  

551  Letter from Vinson & Elkins. 

552  Letter 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”). 



186 

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 appointed555 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 

 
553  Letter 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 co-registrant”). 

554  Letter from NASAA (“With this in mind, [the commenter] supports the attachment of Section 11 

responsibilities to the managers and directors of target companies.”). 

555  Letter 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.”). 

556  Letter 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.”). 

557  Letter from Vinson & Elkins. 



187 

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 co-registrant in the registration statement for the de-SPAC transaction.”560  If a 

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 

 
558  Letters from ABA (noting that, in the time between effectiveness and closing of the merger, “there is a risk that 

the parties may terminate a De-SPAC 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 

third-party 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. 

559  Letters 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. 

560  Letter from Davis Polk. 



188 

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 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.”563  One commenter stated that co-registration would result in disclosure 

 
561  Letters 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).   

562  Letters 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)). 

563  Letter from ABA. 



189 

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 co-registration 

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 de-SPAC 

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 SPAC-specific 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 SPAC-specific 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 

 
564  Letter from Vinson & Elkins.  

565  Letter from Vinson & Elkins.   

566  Letter from PwC. 

567  Letter from Bullet Point Network. 

568  Id. 

569  Id. 



190 

3. Final Rules 

After considering the comments received, we are adopting the co-registration 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 de-SPAC 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 



191 

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 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   

 
570  Although 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). 

571  See, 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.”).  

572  Letter from ABA. 

573  See infra section IV.A. 



192 

The final rules will ensure that, when a registration statement is filed for a de-SPAC 

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 

 
574  See 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. 



193 

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 

 
576  Letters from ABA, Kirkland & Ellis, NYC Bar, Skadden, Vinson & Elkins, Winston & Strawn.  See supra note 

538. 

577  See supra note 539. 

578  The 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. 



194 

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 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 

 
579  See supra note 570.  

580  Under 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)). 

581  See 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). 



195 

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 de-SPAC 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 co-registrant proposal would create a disparity 

compared to traditional business combination transactions, because the target company is not a 

co-registrant 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 

 
582  Letters from ABA, Skadden.  See supra note 540. 

583  Letter from Bullet Point Network. 



196 

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 co-registrant proposal, the target company could be liable to its existing shareholders for 

information about the target company included in the de-SPAC 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 

 
584  Letter from Freshfields. 

585  See supra section I. 

586  Less commonly, the target company may be a public company or may be a previously public company that 

went private.  



197 

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 co-registration 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 de-SPAC 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 co-registration 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 

 
587  Letter from ABA.  See Rule 140.  



198 

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, non-

redeeming 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 co-registrants 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 target company 

a signer but not a co-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 

 
588  Letter from CFA Institute. 

589  Letter from KPMG (specifically noting that “SPACs may acquire more than one operating company as part of a 

de-SPAC transaction”). 

590  Letter from Vinson & Elkins. 



199 

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 co-registrant 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 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 



200 

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 de-SPAC 

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 under-inclusive with respect to the target company’s officers and directors.  As 

discussed above, the final rules make clear that the target company is a co-registrant (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 

 
591  See 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?”).201 

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 

 
592  See letters from Freshfields, Vinson & Elkins. 

593  15 U.S.C. 77f(a). 

594  15 U.S.C. 77k(a)(2). 

595  See 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”).  



202 

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 non-continuing 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 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 

 
596  15 U.S.C. 77f(a). 

597  See supra note 557 and accompanying text. 

598  This 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). 



203 

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 co-registrant 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 de-SPAC 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 de-SPAC 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   

 
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. 

601  The 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.   

602  Letters from ABA, KPMG, PwC (also noting this would be the case in de-SPAC transactions involving multiple 

target companies).  See supra note 559. 

603  Letters from ABA, Crowe, Davis Polk, Freshfields, Grant Thornton, KPMG.  See supra note 558. 

604  Letter from Davis Polk. 

605  Letters from Crowe, Grant Thornton.  See supra note 561.  See also KPMG, supra note 561. 



204 

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 predecessor606 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 

 
606  The 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 

de-SPAC transactions involve only one target). 

607  For 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). 

608  See supra note 561. 



205 

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 co-registration 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 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, each company would be required to provide financial statements 

 
609  Letters 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. 



206 

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 PCAOB-registered 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 

 
611  Letter from Vinson & Elkins.  

612  See Item 1601(d) of Regulation S-K, adopted herein.   

613  Pub. L. 107-204, Sec. 404(b) 116 Stat. 745 (2002). 

614  See 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.     



207 

statement and therefore should face Securities Act liability as co-registrants and issuers on the 

de-SPAC registration statement.616 

In order to address the tension identified by the commenter, and to clarify that all target 

companies are co-registrants and issuers but only target companies that are predecessors617 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 non-

predecessors) 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 company619 (e.g., in a de-

SPAC transaction, non-predecessor co-registrant 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 

 
616  Entities 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. 

617  See supra note 606. 

618  See 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). 

620  See 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. 



208 

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 

 
621  See 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. 



209 

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 non-predecessor 

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 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 non-predecessor 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 PCAOB-registered 

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 

 
623  Determination of the predecessor(s) in a de-SPAC transaction, as in any other transaction, is a facts and 

circumstances driven determination made by the registrant(s). 

624  See 15 U.S.C. 7212(a). 



210 

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 de-SPAC 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 

 
625  See 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-professional-

practice-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.   

626  Letters from Crowe, Grant Thornton. 

627  Letter from Bullet Point Network. 

628  See infra section III.E discussion of PSLRA Safe Harbor. 

629  See infra discussion in section III.E proximate to notes 836 and 858. 

https://pcaobus.org/about/rules-rulemaking/rules/section_3/section-3-auditing-and-related-professional-practice-standards-rule-3211-amended
https://pcaobus.org/about/rules-rulemaking/rules/section_3/section-3-auditing-and-related-professional-practice-standards-rule-3211-amended


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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 re-determined 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 

 
630  See, 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). 

632  The 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. 

633  See 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. 

634  See 17 CFR 229.10(f)(2)(iii); Securities Act Rule 405; Exchange Act Rule 12b-2. 



212 

The Commission proposed to require a re-determination of SRC status following the 

consummation of a de-SPAC 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 

re-determination 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 re-determination of public float, (3) ramifications of 

 
635  A 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. 

636  Proposed 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. 

637  Proposed 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. 

638  Proposed 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. 



213 

loss of SRC status, and (4) requests for guidance.  In addition, in response to a request for 

comment from 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 re-determination 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 re-determination 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 

 
639  Letters from KPMG, PwC. 

640  Letter from KPMG. 

641  Letter from PwC. 

642  Letters from Ernst & Young, Vinson & Elkins. 

643  Letter from Ernst & Young. 



214 

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 

 
644  Letter from Vinson & Elkins. 

645  Letter from ABA. 

646  Letter from Vinson & Elkins. 

647  Letter from Vinson & Elkins. 

648  Letter from Vinson & Elkins. 



215 

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 de-SPAC 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 

 
649  Letters 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 its 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.”). 

650  Letter from Ernst & Young. 

651  Letter from Ernst & Young. 

652  Letter 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). 



216 

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 view654 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 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 

 
653  Letter from Grant Thornton. 

654  Letter 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. 

655  The 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 de-SPAC transaction.   

656  Letter from Vinson & Elkins. 

https://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm


217 

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-de-SPAC 

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 

 
657  Proposing 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?”). 

658  See 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. 

659  Letters 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 de-

SPAC 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.”). 



218 

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 re-determination 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 

 
660  Letters from 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….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. 

661  Letters from Ernst & Young, KPMG, Vinson & Elkins. 

662  Letter from Ernst & Young. 



219 

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 transaction666 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 de-SPAC transaction.  Under current rules, the 

absence of a re-determination of SRC status upon the completion of these de-SPAC transactions 

 
663  Letter from Vinson & Elkins. 

664  See letter from Freshfields. 

665  Based 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. 

666  See Item 10(f)(2) of Regulation S-K; Securities Act Rule 405; Exchange Act Rule 12b-2. 



220 

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 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 non-affiliates before the offering; and the 

 
667  In the Proposing Release, the Commission said, if a SPAC qualified as an SRC before a de-SPAC 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. 

668  Letter from Vinson & Elkins.  See supra notes 646, 647, and 648 and accompanying text.221 

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 de-SPAC 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 four-business-day window to calculate the public float 

threshold following a de-SPAC 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 re-determination 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 

 
669  See id.  



222 

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 post-business combination company 

following a de-SPAC transaction. 

Under the proposed rule, a post-de-SPAC 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 re-determination, 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 de-SPAC 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 

 
670  Letters from Ernst & Young, Grant Thornton, Vinson & Elkins.  See supra note 649.  

671  See letters from Vinson & Elkins (indicating that the issue is particularly acute “if the post-closing 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”). 



223 

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-de-SPAC 

transaction filings, any financial statements that predate the financial statements presented in the 

Form S-4.673  In our view a registrant that is re-determined to be a non-SRC should not be able to 

avail itself of the scaled-down requirements applicable to SRCs.  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 

 
672  Section 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. 

673  Letter from Grant Thornton.  See supra note 652 and accompanying text. 



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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 report676 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 

 
674  We 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. 

675  Letter from Grant Thornton.  See supra note 653. 

676  Letter 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. 



225 

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 de-SPAC transaction, depending on the timing of the SPAC 

IPO and the de-SPAC 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-de-SPAC 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 

 
677  Letter from Vinson & Elkins. 

678  The 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. 

679  See paragraphs (1), (2), and (3) in the definition of “accelerated filer and large accelerated filer” in Rule 12b-2. 

680  See 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. 



226 

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 

 
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. 

682  See 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. 

684  See letters from BDO, Ernst & Young, Fenwick, Vinson & Elkins. 



227 

the fiscal 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 

 
685  See 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, 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.   

686  Section 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.   

687  Pursuant 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). 

https://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm


228 

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-de-SPAC 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 

 
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)]. 

689  With 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 non-affiliates 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). 

690  Paragraph (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. 

691  Paragraphs (2)(i) and (iii) of the definition of “emerging growth company” under Securities Act Rule 405 and 

Exchange Act Rule 12b-2. 

692  Paragraph (2)(iv) of the definition of “emerging growth company” under Securities Act Rule 405 and Exchange 

Act Rule 12b-2. 



229 

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 status695 

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 

 
693  See letters from Ernst & Young, KPMG, PwC, Vinson & Elkins, supra note 660.   

694  Proposing Release, supra note 7, at 29481 (request for comment number 74).  See letters from Ernst & Young, 

KPMG, Vinson & Elkins. 

695  See supra note 442. 

696  Paragraph (2) of the definition of “foreign private issuer” in Securities Act Rule 405. 

697  Paragraph (3) of the definition of “foreign private issuer” in Securities Act Rule 405. 

698  Paragraph (3) of the definition of “foreign private issuer” in Securities Act Rule 405.   

699  See definitions of “foreign issuer” and “foreign private issuer” in Securities Act Rule 405. 



230 

target company would have to be presented in accordance with U.S. GAAP in Form S-4,700 

among other differences that exist 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 de-SPAC 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 de-SPAC 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 re-determination of FPI 

status in connection with a de-SPAC transaction.702 

 
700  As 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.  

701  Item 17 of Form S-4. 

702  Letters from Ernst & Young, Freshfields, KPMG, Vinson & Elkins.  See supra notes 662, 663, and 664 and 

accompanying text. 



231 

We have considered these comments and recognize that, depending on the structure of a 

specific de-SPAC transaction, there may be some fact-specific 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 de-SPAC 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 de-SPAC 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 

 
703  Letters from Freshfields, Vinson & Elkins.  See supra notes 663 and 664 and accompanying text. 



232 

by meaningful cautionary statements.704  Under the PSLRA, the safe harbor is not available, 

however, when a forward-looking 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 de-SPAC 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 

 
704  Section 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. 

705  Section 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.   

706  Proposing Release, supra note 7, at 29482. 

707  Proposing 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, Electric-Vehicle 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). 

708  Proposing 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). 



233 

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 

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 

 
709  Proposing Release, supra note 7, at 29482. 

710  See, 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.”). 

711  The 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. 

712  The 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. 



234 

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 participants716 or companies that issue 

penny stock717 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 

 
713  Proposed 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. 

714  Letters 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. 

715  Letter from CFA Institute. 

716  Letter from NASAA. 

717  Letters from Consumer Federation, NASAA. 

718  Letter from Senator Elizabeth Warren. 



235 

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 de-SPAC 

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 

 
719  Letter from Better Markets. 

720  Letter from Senator Elizabeth Warren. 

721  Letter from Consumer Federation. 

722  Letters from Americans for Financial Reform Education Fund, Better Markets, CFA Institute, CII, Senator 

Elizabeth Warren.   

723  Letter from Americans for Financial Reform Education Fund. 



236 

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 

 
724  Letter from Better Markets. 

725  Letter from CFA Institute. 

726  Letter from CII. 

727  Letter from Senator Elizabeth Warren. 

728  Letters 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….”). 



237 

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 forward-looking 

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 forward-looking 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 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 

 
729  Letter from CII. 

730  Letter from Consumer Federation. 

731  Letter from Senator Elizabeth Warren. 

732  Letters 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. 

733  Letter from Cato Institute. 

734  Letter from SPAC Association. 



238 

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 

 
735  Letter from Goodwin. 

736  Letter from Cowen. 

737  Letters from ABA, Cato Institute, Paul Swegle, Winston & Strawn. 



239 

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-

 
738  Letter from American Securities Association. 

739  Letter from Cato Institute. 

740  Letter from Paul Swegle. 

741  Letter from Winston & Strawn. 



240 

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 [the] reason [that]: it proposes an unreasonable definition of ‘blank check 

company.’  The PSLRA generally provides a safe harbor for forward-looking statements, but the 

 
742  Letter from ABA.  See also letter from Goodwin. 

743  Letters 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.” 

744  Letter from ABA.241 

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 

 
745  Letter 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). 



242 

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 1946750 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 

 
749  Letter from Kirkland & Ellis. 

750  5 U.S.C. 551 et seq. 

751  Letter from American Securities Association. 

752  Letter from Job Creators Network. 

753  Letters 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 forward-looking 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.”). 



243 

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 

 
754  Letters 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.”). 

755  Letter 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”). 



244 

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 

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 

 
756  Letters from Bullet Point Network (recommending that the PSLRA safe harbors “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.”). 

757  Letters 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. 

758  Letter from ABA. 



245 

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 de-SPAC 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 de-SPAC 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 

 
759  Letter from Cato Institute (footnotes omitted). 

760  Letter from Vinson & Elkins. 

761  Letter from NYC Bar. 



246 

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 de-SPAC 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 de-SPAC 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 

 
762  Letter from Cowen. 

763  Letters 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.”). 

764  Letter from American Securities Association. 



247 

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 de-SPAC transaction.  There is no similar requirement in the IPO context.  

We can see no justification for treating a de-SPAC 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 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 

 
765  Letter from CFA Institute. 

766  Letters from Cowen, SPAC Association, Winston & Strawn.  

767  Letter from Winston & Strawn. 

768  Letters from ABA, Amanda Rose, Cato Institute, CFA Institute, Goodwin, Kirkland & Ellis, Managed Funds 

Association, NYC Bar, SPAC 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”). 

769  Letter from ABA. 



248 

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 

 
770  Letter from Cato Institute. 

771  Letter from Kirkland & Ellis. 

772  Letter 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. 

774  Letters 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.”). 

https://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=3995&context=wmlr


249 

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 forward-looking 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 

 
775  Letter from ABA. 

776  Letter from Kirkland & Ellis. 

777  Letter from NYC Bar. 

778  Letters 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….”). 

779  Letter from Andrew Tuch. 



250 

and we do not object to the disapplication of the safe harbor to de-SPAC 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…forward-looking statements accompanied by sufficient cautionary language” are 

rendered “non-actionable under securities laws if such statements are proved incorrect in the 

 
780  Letter from Davis Polk. 

781  Letter from Kirkland & Ellis. 

782  Letters from ABA, Cowen, Winston & Strawn.  

783  Letter from ABA. 

784  Letter 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. 



251 

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 “[t]he Commission’s proposal, in stripping away the protection of the PSLRA safe 

harbor for projections in de-SPAC 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 

 
785  Letter from Winston & Strawn. 

786  Letter from Cowen. 

787  Letter from Winston & Strawn. 

788  Letters 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. 



252 

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 

 
789  Letter from Cato Institute. 

790  Letter from Kirkland & Ellis. 

791  Letter from Paul Swegle. 

792  Letters from Kirkland & Ellis, Winston & Strawn. 

793  Letter from Kirkland & Ellis. 

794  Letter from Kirkland & Ellis. 



253 

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 

 
795  Letter from Winston & Strawn. 

796  Letters 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). 

797  Letter from American Securities Association. 

798  Letter from NASAA. 

799  Letters from Managed Funds Association; Michael Dambra, Omri Even-Tov, and Kimberlyn George. 



254 

commenters said, “Rather than barring forward-looking 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 disclosure-

based 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) 

 
800  Letter from Managed Funds Association. 

801  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George. 

802  Letter from SPAC Association. 

803  Letters from Jonathan Kornblatt, Vinson & Elkins. 

804  Letter from Cowen. 



255 

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”).805 

One commenter said the Commission should “monitor the effects of the safe harbor 

removal for de-SPACs on the availability and quality of forward-looking 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 

 
805  Letter from Charles Pieper. 

806  Letter from CFA Institute. 

807  Letter from Vinson & Elkins (footnotes omitted).  



256 

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 de-SPAC transactions should be 

treated similarly with forward-looking statements made in traditional IPOs, because the de-

 
808  The 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. 



257 

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 companies809 

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. 

 
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 forward-looking 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. 



258 

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 cross-

referencing 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 cross-referencing to those terms.812  The absence in the PSLRA of such 

a 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 

 
811  For example, the definition of “forward-looking 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). 

812  See infra note 818 and accompanying text. 

813  15 U.S.C. 77z-2(b)(1)(C); 15 U.S.C. 78u-5(b)(1)(C). 



259 

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 

 
814  See, e.g., S. Rep. No. 104-98 (1995); H.R. Rep. No. 104-369 (1995) (Conf. Rep.). 

815  Letter 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 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.”  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.”   



260 

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 cross-

referencing 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, 

 
816  Regarding Securities Act section 27A(b)(7), see supra note 710. 

817  See supra note 710.261 

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 419819—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 Penny Stock Reform Act 

 
818  For 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.”).  

819  H.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).  

820  H.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 

 



262 

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 

 
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 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.”).   

821  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. 31–32 (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. 



263 

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   

 
822  Letter from American Securities Association, supra note 751.  See also letter from Job Creators Network, supra 

note 751. 

823  Proposing Release, supra note 7, at 29481–29482. 

824  The 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). 

825  Notwithstanding 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. 



264 

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 

 
826  Letters 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. 

827  Letter from Cato Institute, supra note 759 and accompanying text; letter from NYC Bar, supra note 761 and 

accompanying text. 



265 

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 offering-specific 

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 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  

 
828  Letter 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.”). 



266 

Some commenters expressed concern with the proposal because State law may require 

disclosure of certain projections830 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 summary832 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 

 
830  Letters 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. 

831  Letters from American Securities Association, CFA Institute, Cowen.  See supra note 763. 

832  See supra note 829. 

833  One 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.”). 



267 

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 

 
834  For 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. 

835  Letters 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. 

836  See supra note 834 regarding required disclosures where projections no longer reflect views on future 

performance. 



268 

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 remain potentially applicable, depending upon 

specific facts and circumstances.841  We disagree, however, with the commenters who stated that 

 
837  Letters from SPAC Association, Winston & Strawn.  

838  Letter from Bullet Point Network. 

839  See supra section III.C. 

840  Letters from ABA, Cowen, Winston & Strawn.  See supra notes 782, 783, 784, 785, 786, and 787 and 

accompanying text. 

841  With 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) 

 



269 

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 

 
(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). 

843  Letters 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. 

844  Compare 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 

 



270 

removing any doubt about the applicability of the safe harbor would incentivize parties to take 

care to avoid the use of unreasonable forward-looking 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 de-SPAC 

transaction, the PSLRA safe harbor is already unavailable.  There are, however, a number of de-

SPAC transactions that are not structured in this manner. 

 
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 forward-looking 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.”). 

845  Letters from Kirkland & Ellis, Winston & Strawn. 

846  Letter 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.”). 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3945975


271 

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 law statutory scheme, which provides for 

several private rights of action.850 

 
847  Letter from Kirkland & Ellis. 

848  Proposing 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). 

849  Letter from Winston & Strawn. 

850  See, e.g., Securities Act section 11 (15 U.S.C. 77k); Securities Act section 12 (15 U.S.C. 77l). 



272 

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 

 
851  Letters from Anonymous (Apr. 7, 2022), American Securities Association, Vinson & Elkins. 

852  See also supra note 844 (discussing splits among courts on whether knowingly false or fraudulent forward-

looking statements are protected by the PSLRA safe harbor). 

853  Letters from Managed Funds Association (referring to the proposal as “barring forward-looking 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. 

855  Letters 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. 

856  Letter from NASAA.  See supra note 798 and accompanying text. 

857  See 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. 



273 

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 forward-looking 

statements in de-SPAC transactions and other business combinations involving blank check 

 
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)]. 



274 

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 

 
859  See letters from Americans for Financial Reform Education Fund, Better Markets, CFA Institute, CII, Senator 

Elizabeth Warren, supra notes 722–727 and accompanying text. 

860  For 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 forward-looking statements in de-SPAC 

transactions and other business combinations involving blank check companies discussed above are equally 

prevalent in traditional IPOs. 

861  See Item 1609 of Regulation S-K.  See also letter from Managed Funds Association supra note 800. 

862  Letters from Jonathan Kornblatt, Vinson & Elkins. 



275 

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 de-SPAC 

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 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 

 
863  See letter from Amanda Rose. 

864  Business 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. 

865  Letter from SPAC Association.   



276 

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 forward-looking 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 

 
866  Letter from Cowen. 

867  See, 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. 



277 

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 

 
868  As 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.” 

869  Letter from Charles Pieper. 

870  We 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 three-year 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. 



278 

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 de-SPAC 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 

 
871  Letter from Vinson & Elkins.  See supra note 807. 

872  In particular, see supra section III.C and infra section IV.A. 

873  Proposing Release, supra note 7, at 29461, n.21. 

874  Proposing Release, supra note 7, at 29483. 



279 

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. 

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 

 
875  See Proposing Release, supra note 7, at 29486. 

876  Letters 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. 

877   Letters 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.  

878   Letters 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. 

879   Letters 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. 

880   Letters from Andrew Tuch, ABA, Davis Polk, Ropes & Gray, White & Case. 



280 

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 

 
881  See Small Business Capital Formation Advisory Committee recommendations, supra note 40. 

882   Letters from Davis Polk, Kirkland & Ellis, NYC Bar, SIFMA, Vinson & Elkins. 

883  Letters from ABA, Cleary Gottlieb, Cowen, Davis Polk, Freshfields, Goodwin, SIFMA.  

884   Letters from ABA, Cleary Gottlieb, Cowen, Davis Polk, Freshfields, Goodwin, SIFMA. 

885   Letters from ABA, SIFMA. 

886   Letters 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. 

887   Letter from Cowen.281 

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   

 
888   Letters from Americans for Financial Reform Education Fund, Better Markets, Consumer Federation, ICGN, 

Mohammed Ali Rashid, Managed Funds Association, NASAA. 

889   Letters from ABA, Davis Polk, Freshfields, Goodwin, Kirkland & Ellis, Managed Funds Association, Skadden, 

Vinson & Elkins.  

890   Letters from ABA, Better Markets, Davis Polk, ICGN, Ropes & Gray, Vinson & Elkins, White & Case. 

891   Letter from Cowen.  

892   Letter from NYC Bar. 

893   Letter from Vinson & Elkins. 

894   Letter from Usha Rodrigues and Mike Stegemoller. 

895   Letters from ABA, Committee on Capital Markets Regulation, Davis Polk, Ropes & Gray, SIFMA, Winston & 

Strawn. 



282 

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   

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.  

 
896   New 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). 

898   See 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 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.”). 



283 

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 

 
899   A “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.”).  



284 

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.   

 
900   Proposing Release, supra note 7, at 29485. 

901   Letter from ABA. 

902   See 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). 

903   Such 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&collect

ion=usjournals&set_as_cursor=0&men_tab=srchresults. 

904   For example, shareholders of a SPAC become shareholders of a combined operating company by operation of 

State or local law in a statutory merger. 



285 

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 

 
905  Letter from ABA. 

906  See the discussion regarding the broad definition of “sale” in section 2(a)(3) and the related examples in infra 

section IV.A.3.i.   

907  See infra section IV.A.  As discussed below, Rule 145a applies regardless of the structure the de-SPAC 

transaction may take.  

908  Letter from ABA. 

909  Letter from SIFMA. 

910   See 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.”). 



286 

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 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 

 
911   Rule 144 Adopting Release, supra note 898, at 596. 

912   Letters from Davis Polk, Kirkland & Ellis, NYC Bar, SIFMA, Vinson & Elkins. 

913   Many 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). 



287 

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 de-SPAC 

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 

 
914  Similarly, 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). 

915   See the defenses to section 11 liability in 15 U.S.C. 77k(b). 



288 

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 

 
916   15 U.S.C. 77k(b)(3).  

917   Letters from ABA, Andrew Tuch, Davis Polk, Ropes & Gray, White & Case. 

918   See supra section I and infra section IV.A.3. 



289 

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 companies919 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 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.  

 
919   As 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.” 

920  The 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)]. 



290 

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 

 
921  See Proposing Release, supra note 7, at 29488. 

922  Id. at 29489. 

923  Letters 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 

 



291 

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 occurs929 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 

 
evaluation and approval of the stock of the proposed merged company's stock by the SEC, as if it was a new 

security.”). 

924  Letters from Andrew Tuch, ICGN, Jorge Stolfi, Public Citizen. 

925  Letter from Andrew Tuch. 

926  Letter from IGCN. 

927  Letters from ABA, Freshfields, Kirkland & Ellis, NYC Bar, Vinson & Elkins, Winston & Strawn. 

928  Letters from ABA, Freshfields, Loeb & Loeb, Vinson & Elkins.  See infra section VIII.  

929  Letter from Vinson & Elkins. 

930  Letter from ABA.  

931  Letters from Freshfields, Kirkland & Ellis, NYC Bar, Vinson & Elkins. 



292 

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 de-SPAC 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 

 
932  Letters from ABA, Kirkland & Ellis, SIFMA. 

933  Letter from Kirkland & Ellis. 

934  Letter from Winston & Strawn. 

935  Letter from Vinson & Elkins.  

936  Id. 

937  Letter from ABA. 

938  Letters from Kirkland & Ellis, Vinson & Elkins. 



293 

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 de-SPAC 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 

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 post-transaction 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 

 
939  Letter from Kirkland & Ellis. 

940  Letter from Vinson & Elkins. 

941  Although 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. 

942  As 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. 



294 

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 

 
943  Proposing 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. 

944  By 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 

 



295 

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 occurs945 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 

 
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. 

945  See letter from Vinson & Elkins. 

946  See letter from ABA. 

947  15 U.S.C. 77b(a)(3). 



296 

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 

 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 

 
948  See 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.). 

949  See 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.). 

950  See, 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.”  

951  Letters from ABA, Kirkland & Ellis. 



297 

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 

 
952  Letter from ABA. 

953  Letter from Kirkland & Ellis. 

954  We 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. 

955  As discussed above, Rule 145a is limited to business combinations that involve reporting shell companies.  See 

supra section IV.A.3. 



298 

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, courts957 and the Commission958 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 

 
956  See 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.” 

957  See 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 spin-off 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.”). 

958  See 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. 



299 

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 combination 

transaction.962  In these circumstances, the transaction that Rule 145a construes as a sale is 

 
960  Letter from ICGN. 

961  See 15 U.S.C. 77b(a)(3).  

962  Share 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 

 



300 

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 pre-transaction shareholders and the surviving combined 

company.963  Such transactions would be situations implicating a Rule 145a constructive sale.   

 
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.   

963  This 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.301 

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 

 
964  Letters from Freshfields, Kirkland & Ellis, NYC Bar, Vinson & Elkins. 

965  For 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 transaction-specific 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.   



302 

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 Non-SPAC 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 

 
966  See letter from Loeb & Loeb. 

967  See id. 

968  See Shell Company Adopting Release, supra note 943.  

969  See id. 

970  See letter from Kirkland & Ellis. 



303 

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 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 

 
971  Letter from Winston & Strawn. 

972  Although 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. 

973  See supra section III.C. 



304 

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 de-SPAC 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 transaction975 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 post-transaction 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. 

 
974  Id. 

975  Letter from ABA. 

976  Letter from Winston & Strawn. 

977  See supra section IV.A.3.iii regarding when a shell company must consider registering the sale identified by 

Rule 145a.   



305 

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 

 
978  Letters from Kirkland & Ellis, Vinson & Elkins. 

979  H.R. Rep. No. 152, 73rd Cong. 1st Sess. 25 (1933). 



306 

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 

 
980  The 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.”).  



307 

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 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. 

 
981  Letters from Kirkland & Ellis, Vinson & Elkins. 

982  For example, approval of the business combination, the authorization of additional shares, revisions to the 

articles of incorporation, or a reincorporation to a different jurisdiction. 

983  See, 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.”). 



308 

B. Financial Statement Requirements in Business Combination Transactions Involving 

Shell Companies 

After a business combination involving a shell company, the financial statements of a 

business984 that will be a predecessor985 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 

 
984  We 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.   

985  The 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.   

986  See 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. 

987  Commission staff has provided informal guidance to address practical questions related to financial reporting 

issues for shell company mergers in the FRM.   



309 

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 

 
988  See 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 de-SPAC 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. 

989  See Proposing Release supra note 39, at 29491. 

990  See definition of the term “business combination related shell company” in Securities Act Rule 405 and 

Exchange Act Rule 12b-2. 



310 

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 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 co-registration would result in 

inconsistencies with IPOs where there are multiple target companies. 

 
991  Letters 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. 

992  Letter from ABA. 

993  Letter from Vinson & Elkins.  



311 

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 

 
994  See 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. 



312 

statement or proxy statement995 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 

 
995  For 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). 

996  See 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. 

997  See 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. 

998  See infra section VIII.A.  There were approximately 17 out of 583 de-SPAC transactions between 1990–2022 

that had two or more targets. 



313 

accommodations.999  Also, under current rules, a SPAC that satisfies the MJDS-eligibility 

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 

 
999  See 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). 

1000  See General Instruction B to Form 40-F. 



314 

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 non-

predecessor 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 

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 business1003 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 

 
1001  See 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. 

1002  Only two years of these financial statements may be required in other scenarios, such as when the registrant is 

an SRC. 

1003  The 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.   

1004  See Proposing Release, supra note 39, at 29491. 



315 

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 

 
1005  Letters from Ernst & Young, PwC, RSM. 



316 

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 

 
1006  Financial 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. 

1007  See supra sections III.C and IV.A. (discussing co-registration of target companies and Rule 145a respectively). 



317 

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 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 

 
1008  Letters from ABA, PwC, RSM. 

1009  See 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 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.). 



318 

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 3-121011 (or Rule 8-081012 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 

 
1010  See 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.   

1011  See 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.  

1012  See 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. 



319 

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 

 
1013  See supra sections III.C and IV.A. (discussing co-registration of target companies and Rule 145a respectively). 

1014  See Item 17 of Form S-4 and Form F-4; § 240.14A-3(b); Items 13 and 14 of Schedule 14A. 

1015  See 17 CFR 230.408(a) (“Rule 408(a)” under the Securities Act); 17 CFR 240.12b-20 (“Rule 12b-20” under the 

Exchange Act). 



320 

before the Form S-4 is filed.  The proposed rules and amendments addressed the financial 

reporting required for Company C in this non-exclusive 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 

business1018 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-

 
1016  See 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. 

1017  Rule 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. 

1018  For 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).321 

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 

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 

 
1019  Rule 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. 

1020  See Proposing Release, supra note 7, at 29492. 



322 

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 previously-

filed registration or proxy statement would be required as part of the already-required 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. 

 
1021  See 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%). 

1022  As 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). 



323 

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   

 
1023  Letters 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).  

1024  Letters from ABA, BDO, Freshfields, Goodwin, PwC, Vinson & Elkins, Winston & Strawn. 

1025  Id. 

1026  Rule 3‐05(b)(4)(ii) of Regulation S-X. 

1027  Letters from ABA, Freshfields, Goodwin, Vinson & Elkins, Winston & Strawn. 



324 

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 

de-SPAC 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 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 

 
1028  Letter from PwC. 

1029  Id. 

1030  Letters from ABA, Freshfields, PwC, RSM, Vinson & Elkins. 



325 

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-41032 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’ 

 
1031  See infra section III.C. 

1032  We 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. 



326 

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 

 
1033  Letters from ABA, Freshfields, Vinson & Elkins, Winston & Strawn.  See supra note 1027.   

1034  Letter from PwC. 

1035  Id. 



327 

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 

 
1036  We 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).   



328 

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 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. 



329 

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 de-SPAC 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 

 
1037  Once 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. 

1038  Letters from Ernst & Young, PwC, RSM. 

1039  Letter from RSM. 

1040  Letters 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.” 

1041  Letters 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. 



330 

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 

 
1042  Letter from Vinson & Elkins. 

1043  Proposing Release, supra note 7, at 29493. 



331 

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 registrant1044 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 

 
1044  A 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. 



332 

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 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. 

 
1045  A 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. 

1046  Proposing Release, supra note 7, at 29493. 

1047  Proposing Release, supra note 7, at 29494.   



333 

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 

 
1048  Proposing 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). 

1049  This 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. 

1050  Proposing 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. 

1051  Proposing Release, supra note 7, at 29494. 



334 

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 

 
1052  Letters from Davis Polk, Vinson & Elkins, Ernst & Young. 

1053  Letter from Freshfields. 

1054  Letter from Davis Polk.  

1055  Id.  

1056  Id. 

1057  Letter from Ernst & Young. 



335 

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 de-SPAC 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 

 
1058  Letter 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. 

1060  Letter from Ernst & Young. 



336 

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 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 de-SPAC 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 feedback1062 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 

 
1061  Letter from Freshfields. 

1062  Letter from Ernst & Young. 

1063  See supra section IV.B.15. 



337 

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 de-SPAC 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. 

 
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. 

1065  Proposing Release, supra note 7, at 29493. 



338 

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 type-information so that the financial statements of the acquired business need not be 

 
1066  Proposing Release, supra note 7, at 29294. 

1067  Letter from PwC. 

1068  Letter from Ernst & Young. 

1069  As discussed above, we are adopting Rule 15-01(b) largely as proposed, with certain technical modifications in 

the final rule. 



339 

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 

 
1070  Proposing Release, supra note 7, at 29494 (request for comment number 109). 

1071  Letters from BDO, PwC, Deloitte, RSM, Freshfields, Vinson & Elkins. 

1072  Letter from BDO. 

1073  Letter from Ernst & Young.  See supra note 1068. 

1074  Letters from BDO, PwC, Deloitte, RSM, Freshfields, Vinson & Elkins.  See supra note 1071. 



340 

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. 

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. 

 
1075  Proposing Release, supra note 7, at 29494. 

1076  Letter from PwC.341 

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 

 
1077  See, 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). 

1078  These rules and limitations generally do not apply to shell companies that qualify as “business combination 

related shell companies” as defined in Rule 405. 

1079  See 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)]. 

1080  See General Instruction A.1, Form S-8 (17 CFR 239.16b); Shell Company Adopting Release, supra note 943. 



342 

safe harbor of Rule 163A from section 5(c) of the Securities Act for pre-filing 

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-de-SPAC 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. 

 
1081  See 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)]. 

1082  See 17 CFR 230.137(d)(2); 17 CFR 230.138(a)(4); 17 CFR 230.139(a)(1)(ii). 

1083  See letters from ABA, American Securities Association, Cowen, Ernst & Young, Fenwick, Freshfields, 

Goodwin, Vinson & Elkins, White & Case, Winston & Strawn. 



343 

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 



344 

financial measure to which it is most closely related,1084 and an explanation why the 

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 de-SPAC 

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 

 
1084  The 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. 

1085  The 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)]. 



345 

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 

 
1086  Letters 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. 

1087  Proposing 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?”). 

1088  Letters from ABA; Chris Barnard; Goodwin; Michael Dambra, Omri Even-Tov, and Kimberlyn George. 

1089  Letter 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?”). 



346 

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 

 
1090  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George. 

1091  Letter from ICGN. 

1092  Letter from NASAA. 

1093  Letter from Chris Barnard. 

1094  The 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. 

1095  Letters from ABA, Goodwin. 



347 

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 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 

 
1096  Proposing 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?”). 

1097  Letter from Kirkland & Ellis. 

1098  Letters from ABA, Goodwin. 

1099  Proposing 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?”). 

1100  Letters from ABA, Goodwin, Vinson & Elkins. 

1101  Letter from Chris Barnard. 

1102  Letters from ABA, Goodwin. 



348 

“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 

 
1103  Letters from ABA, Goodwin. 

1104  Letters from ABA, Goodwin. 

1105  Letter from Loeb & Loeb. 

1106  Letters from ABA, Freshfields, Goodwin, Kirkland & Ellis. 

1107  Letters from ABA, Goodwin, Kirkland & Ellis. 

1108  Letters from ABA, Goodwin. 



349 

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 

 
1109  Id. 

1110  Id. 

1111  Id. 

1112  Letter from Freshfields. 

1113  Id. 

1114  Letters from Freshfields, Kirkland & Ellis. 



350 

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. 

 
1115  Letter from Bullet Point Network. 

1116  Id. 

1117  Id. 

1118  Id. 

1119  Some commenters indicated that the updated guidance in Item 10(b) should apply to all filings.  See supra note 

1088 and accompanying text. 



351 

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 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. 

 
1120  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George.  See supra notes 1089–1090 and 

accompanying text. 

1121  Letter from ICGN.  See supra note 1091 and accompanying text. 

1122  Letter from NASAA.  See supra note 1092 and accompanying text. 

1123  See, e.g., Item 1605, Item 1606(b), and Item 1607. 

1124  Letters from ABA, Goodwin.  See supra note 1095 and accompanying text. 



352 

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 non-GAAP 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. 

 
1125  Letter from Kirkland & Ellis.  See supra note 1097 and accompanying text. 

1126  Letters from ABA, Goodwin, Vinson & Elkins.  See supra note 1100 and accompanying text. 



353 

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 

 
1127  Letters from ABA, Goodwin.  See supra notes 1103–1104 and accompanying text. 

1128  Letter from Chris Barnard.  See supra note 1101 and accompanying text. 

1129  Letters from ABA, Goodwin.  See supra note 1104 and accompanying text. 



354 

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 

 
1130  In addition, in final Item 1609(b) we replaced the proposed term “impact” with the term “affect” for clarity. 

1131  Two 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. 

1132  Letters from ABA, Goodwin, Kirkland & Ellis.  See supra note 1107 and accompanying text. 

1133  Letters from ABA, Goodwin, Freshfields, Kirkland & Ellis.  See supra notes 1106–1107 and 1112–1113 and 

accompanying text. 



355 

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 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 

 
1134  Letters from Freshfields, Kirkland & Ellis.  See supra note 1114 and accompanying text. 



356 

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 

 
1135  For 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. 

1136  Letters from ABA, Goodwin.  See supra notes 1108–1111 and accompanying text. 



357 

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 

de-SPAC 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 

 
1137  Section 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 de-SPAC transactions to other 

types of transactions. 



358 

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 long-term 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 de-

SPAC transaction. 

We are amending General Instruction B to Form 8-K to require 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 

 
1138  Letter from Bullet Point Network. 



359 

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 de-SPAC 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) 

 
1139  Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George.  See supra notes 1089–1090 and 

accompanying text. 



360 

of the Investment Company Act1140 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 

 
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.  

1141  For 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). 

1142  See, e.g., supra note 25 and accompanying text; see also Proposing Release, supra note 7, at nn.7-8 and 

accompanying text. 

1143  See 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-law-firms-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).  

1144  This 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.  

1145 Section 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 majority-owned 

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.361 

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 companies1150 and should be regulated under the 

Investment Company Act accordingly.1151  

 
1146  To 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 S.E.C. 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). 

1147  See, e.g., letters from ABA, Davis Polk, Goodwin. 

1148  See, e.g., letters from Consumer Federation; Robert J. Jackson, Jr. and Professor John Morley (June 13, 2022) 

(“Robert Jackson and John Morley”).  

1149  See, e.g., letters from Goodwin, Skadden, Vinson & Elkins, White & Case. 

1150  Letters 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-weinstein-recommends-spacs-cds-as-fed-

tightens#xj4y7vzkg (SPACs are misunderstood because they’re “fixed-income products” quoting Weinstein).  

1151  Letters from Consumer Federation; Robert Jackson and John Morley. 

https://www.bloomberg.com/news/articles/2022-01-28/saba-s-weinstein-recommends-spacs-cds-as-fed-tightens?leadSource=uverify%20wall
https://www.bloomberg.com/news/articles/2022-01-28/saba-s-weinstein-recommends-spacs-cds-as-fed-tightens?leadSource=uverify%20wall


362 

Commenters also held varying views about the need for a Commission safe harbor.  

Some commenters believed that a safe harbor would provide clarity.1152  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, 

 
1152  Letters 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 

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.”). 

1153  See, 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. 

1154  Letter 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”). 

1155  Letter from Davis Polk. 

1156  See, e.g., letters from NYC Bar, Ropes & Gray.  See also recommendation of the Small Business Capital 

Formation Advisory Committee, supra note 40. 

1157  See, e.g., letters from ABA, Kirkland & Ellis, Managed Funds Association. 



363 

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 long-standing 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 

 
1158  See, e.g., letters from Consumer Federation; Robert Jackson and John Morley. 

1159  See, e.g., letters from Better Markets; Consumer Federation; Robert Jackson and John Morley.  

1160  Letter 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. 



364 

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, assets1164 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 

 
1162  See 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. 

1163  See supra note 5 and accompanying text. 

1164  Any 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. 

1165  A 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. 



365 

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 funds1168 and cash items prior to the completion of 

the de-SPAC transaction, and that does not 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, 

 
1166  As 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.   

1167  See supra note 1146. 

1168  The 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).  

1169  See supra note 1146.  



366 

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 time1170 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 de-SPAC 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 

 
1170  See 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). 

1172  See Request for Comment on Certain Information Providers Acting as Investment Advisers, Release No. IA-

6050 (June 15, 2022) [87 FR 37254 (June 22, 2022)].  



367 

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  

 
1173  See 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. 

1174  See 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.”). 



368 

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 non-investment 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

  

When considering its status under the Investment Company Act, a SPAC should consider all 

 
1175  See 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. 

1176  Specifically 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.   

1177  See Rules 3a-2 and 419. 



369 

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. 



370 

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, 



371 

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 

 
1178  Section 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. 

1179  See 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. 

1180  The SPAC process begins when a SPAC conducts an IPO and ends when the SPAC combines with a target 

company in a de-SPAC transaction. 

1181  See, e.g., Sris Chatterjee, N.K. Chidambram & Gautam Goswani, Security Design for a Non-Standard IPO: The 

Case of SPACs, 69 J. Int’l Money & Fin. 151 (2016). 

1182  A 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 

 



372 

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 investors1184 and the SPAC,1185 which will enable investors 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 de-SPAC transaction, the rules require 

that the target company sign the registration statement filed in connection with the de-SPAC 

 
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. 

1183  See, 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. 

1184  Throughout 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. 

1185  We 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 

principal-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. 



373 

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 forward-looking statements.1187   

Certain rules we are adopting are intended to align disclosures in de-SPAC 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 

de-SPAC transaction will be required to re-determine 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 

 
1186  See supra section III.C. 

1187  See supra section III.E. 

1188  See supra section III.A. 

1189  See supra section III.D. 



374 

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 

 
1190  See, e.g., infra sections VIII.B.1.iii.c, VIII.B.3. 

1191  See, 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 Brüggemann, 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). 

https://ssrn.com/abstract=2312812
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3126379


375 

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  We discuss these 

comments below in our analysis of the costs and benefits of the final rules.  We also discuss the 

 
1192  See 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-the-future-iii-with-nasdaq-cowen-

gallagher-ve-icr-morrow-sodali-morganfranklin-featuring-gigcapital-hennessy-and-switchback/. 

1193  See letters from Virtu Financial Inc. (June 13, 2022) (“Virtu”), Skadden, Kirkland & Ellis, Committee on 

Capital Markets Regulation. 

1194  See 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, PhD 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 “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). 

https://ssrn.com/abstract=4066641
https://dx.doi.org/10.2139/ssrn.4066641


376 

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 de-SPAC 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 

 
1195  For 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. 



377 

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 newly-organized 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 

Table 2. Number of SPAC IPOsa 

  
1990–

2000 

2001–

2005 

2006–

2010 

2011–

2015 

2016–

2020 
2021 2022 2023 

Total 18 41 128 67 400 613 86 31 

Nasdaq 18 0 3 56 248 433 74 27 

NYSE 0 0 1 0 147 178 10 4 

AMEX/NYSE 

American 
0 6 78 0 5 2 2 0 

OTC 0 35 46 11 0 0 0 0 
a 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.  

 

 
1196  See, 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. 

https://site.warrington.ufl.edu/ritter/ipo-data/


378 

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 

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 

 
1198  See also supra note 665. 

1199  Based on status disclosed by SPACs in the financials filed after the IPO, if available, otherwise from Form S-1 

or Form F-1. 

1200  SPACs 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 of filing and immediate effectiveness of proposed 

rule change to adopt additional criteria for the listing of SPACs). 

1201  NYSE 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). 

1202  NYSE Listed Company Manual Section 102.06; Nasdaq Listing Rule IM-5101-2(a); NYSE American 

Company Guide Section 119(a). 



379 

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 

 
1203  NYSE Listed Company Manual Section 102.06(e); Nasdaq Listing Rule IM-5101-2(b); NYSE American 

Company Guide Section 119(b). 

1204  NYSE Listed Company Manual Section 102.06(d); Nasdaq Listing Rule IM-5101-2(c); NYSE American 

Company Guide Section 119(c). 

1205  NYSE Listed Company Manual Section 102.06(a); Nasdaq Listing Rule IM-5101-2(d); NYSE American 

Company Guide Section 119(d). 

1206  Id. 

1207  NYSE Listed Company Manual Section 102.06(c); Nasdaq Listing Rule IM-5101-2(e); NYSE American 

Company Guide Section 119(e). 



380 

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–

 
1208  See 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.”). 

1209  See SPACInsider, 1H-2021 Report, available at 

https://mcusercontent.com/764dc55fe6da1e37d427265ad/files/b90cf236-0845-f778-e35c-

db7417200d35/1H_2021_SPAC_Report.pdf. 

1210  Based on staff analysis of data from SPACInsider.  SPACs with sponsor type “Sponsor” were counted as 

individually sponsored.381 

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 

 
1211  This 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.  

1213  SPACs 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. 

1214  This 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 non-redeemed share of these proceeds at 

the de-SPAC stage. 

1215  See supra note 1214. 

1216  Id. 



382 

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 

underwriters typically did not defer their fee until completion of the de-SPAC 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-of-the-money warrants.1220  Public warrants, i.e., 

 
1217  See Proposing Release, supra note 7, at 29486.  This practice has not changed since the proposal.  The average 

deferred fee in 2022 through the first two quarters of 2023 was 3.3% of IPO proceeds.  

1218  This 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). 

1219  See, e.g., Gül 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.”). 

1220  Early 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 

 



383 

those issued to non-affiliated 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   

Figure 1. Warrants offered in SPAC IPO Units, 1990–2022a 

 

a 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. 

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 

 
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. 

1221  See Gahng, Ritter & Zhang, supra note 30. 



384 

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 two-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 de-SPAC 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   

 
1222  Early SPACs typically offered one or two in-the-money warrants.  See supra note 1220.  More recent SPAC 

structures offer out-of-the-money fractional warrants.  See supra note 1221. 

1223  See, e.g., Gül Okutan Nilsson, Incentive Structure of Special Purpose Acquisition Companies, 19 Eur. Bus. Org. 

L. Rev. (2018), supra note 1219. 

1224  Staff 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. 

1225  Studies 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 de-SPAC 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). 



385 

Table 3. SPAC Outcomes, Grouped by IPO Year, 1990–2023a 

SPAC IPO Year 
1990–

2000 

2001–

2005 

2006–

2010 

2011–

2015 

2016–

2020 
2021 2022 2023 

Number of IPOs 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 SPAC 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. 

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 de-SPAC 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 

 
1226  Target counts are from Dealogic’s SPAC M&A data.  

1227  See 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). 



386 

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-on-one 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-de-SPAC 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 

 
1228  See 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. 

1231  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.  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. 



387 

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 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 

 
1232  See supra note 1203 which discusses de-SPAC 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. 

1233  Assuming 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-de-spac-debrief.pdf.  

1234  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. 

https://www.freshfields.us/490963/globalassets/noindex/documents/2022-de-spac-debrief.pdf
https://www.freshfields.us/490963/globalassets/noindex/documents/2022-de-spac-debrief.pdf


388 

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 de-SPAC 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 

 
1235  See 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. 

1236  See 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.  

1238  See 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). 

https://ssrn.com/abstract=3920714


389 

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 de-SPAC 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  Third-party 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. 

 
1239  See, e.g., Dambra, Even-Tov & George, supra note 36. 

1240  See 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).  



390 

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 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 de-SPAC 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. 

 
1242  Michael Levitt, Valerie Jacob, Sebastian Fain, Pamela Marcogliese, Paul Tiger, & Andrea Basham, supra note 

1231.  

1243  See supra note 1234. 

1244  See 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 post-merger 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. 



391 

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 de-SPAC 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   

 
1245  See infra note 1364. 



392 

Table 4. Distribution of Combined Company Jurisdiction of Organization by SPAC 

Jurisdiction of Organization, 1990–2022a 

Organization at IPO 
% of IPOs that Later 

de-SPAC 

Organization Post de-

SPAC 

% of Total 

Number of 

Organization 

at IPO 

Delaware 67.0% 

Delaware 82.3% 

Cayman Islands 4.2% 

British Virgin Islands 1.9% 

Bermuda 1.9% 

Israel 1.3% 

Marshall Islands 1.0% 

Luxembourg 1.0% 

United Kingdom 0.7% 

Channel Islands 0.7% 

British Columbia 0.7% 

Island of Guernsey 0.7% 

Netherlands 0.7% 

Utah 0.3% 

Switzerland 0.3% 

India 0.3% 

Virginia 0.3% 

Bahamas 0.3% 

Gibraltar 0.3% 

Australia 0.3% 

New York 0.3% 

Quebec 0.3% 

Nevada 0.3% 

Cayman Islands 28.3% 

Delaware 60.3% 

Cayman Islands 26.0% 

Netherlands 3.8% 

Israel 3.8% 

Luxembourg 2.3% 

Republic of Ireland 0.8% 

Ireland 0.8% 

United Kingdom 0.8% 

Jersey (Bailiwick of Jersey) 0.8% 

Ontario 0.8% 

British Virgin Islands 3.7% 

British Virgin Islands 47.1% 

Delaware 17.7% 

Cayman Islands 11.8% 

Singapore 5.9% 

United Kingdom 5.9% 

Ireland 5.9% 

Mexico 5.9% 

Marshall Islands 0.4% Marshall Islands 100.0% 

Florida 0.2% Delaware 100.0% 

Massachusetts 0.2% Massachusetts 100.0% 

Nevada 0.2% Cayman Islands 100.0% 
a Estimates are based on the subsample of SPAC 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. 



393 

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 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 forward-looking 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 non-SPAC 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 

 
1246  See supra section III.E. 

1247  See supra sections VIII.A.3. 

1248  This 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. 



394 

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. 

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% 
a 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 Intelligize, omitting duplicate reports from 

the same issuer filed on the same day. 

 
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. 

1250  The 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.   



395 

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 non-SPAC 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  

 
1251  This 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. 

1252  As 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. 

1253  This 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). 

1254  See, 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 de-SPAC 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). 



396 

As discussed above, in response to commenters, the Commission is adopting Item 1601 

with 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. 

 
1255  See supra section II.A. 

1256  We acknowledge there may exist heterogeneity in risk preferences among investors, but this does not 

substantially change the incentive misalignment with the SPAC’s incentives. 

1257  See supra sections II.B and II.C. 



397 

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 de-SPAC 

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 

 
1258  See supra section II.E for more information about current disclosure requirements. 



398 

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 

 
1259  See, e.g., George Loewenstein, Cass R. Sunstein & Russell Golman, Disclosure: Psychology Changes 

Everything, 6 Ann. Rev. Econ. 391 (2014). 

1260  Salience 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 over-weight 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). 

1261  Existing 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). 

1262  See, e.g., John Hattie, Visible Learning: A Synthesis of Over 800 Meta-Analysis Related to Achievement (2008). 



399 

better decision-making.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 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 

 
1263  See Izak Benbasat & Albert Dexter, An Investigation of the Effectiveness of Color and Graphical Information 

Presentation Under Varying Time Constraints, 10 MIS Q. 59 (1986). 

1264  See 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. 



400 

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 

 
1265  Letters from ABA, Loeb & Loeb, Ropes & Gray, Vinson & Elkins.  See supra note 325 and accompanying text. 

1266  A 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 non-redeeming public shareholders, unless otherwise specified.401 

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 de-SPAC transaction and have 

their original investment returned plus a pro-rata 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 



402 

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 

Figure 2. Realized Redemptions at de-SPACa 

 

a The redemption realizations are based on the sample of SPACs identified in Table 2. 

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 

 
1268  Based 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). 

1269  See supra section II.D. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

%
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ab

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 S

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Average Realized Redemption



403 

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 

 
1270  Id. 



404 

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 

non-redeeming 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 de-SPAC transaction itself). 

 
1271 We 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. 

1272  See supra section II.D. 

1273  Id. 



405 

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 

 
1274  See supra section II.D for a more detailed description of the disclosure requirements. 

1275  Some 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) 

 



406 

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 

 
(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). 

1276  A similar concern was raised by a commenter.  See letter from White & Case. 



407 

above-mentioned 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 

information1279 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 

 
1277  See 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). 

1278  See Gahng, Ritter & Zhang, supra note 30; Klausner, Ohlrogge, & Ruan, supra note 30. 

1279  See Hattie, supra note 1262; Benbasat & Dexter, supra note 1263. 

1280  See supra note 221. 

1281  Id.  SPAC IPO registration filings currently include dilution disclosures, and these disclosures typically present 

dilution given 100% redemption. 



408 

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 decision-making.1284 

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 

 
1282  See, e.g., letters from Bullet Point Network, CII, Consumer Federation. 

1283  Letter from Consumer Federation. 

1284  See Klausner, Ohlrogge & Ruan, supra note 18. 

1285  Letter from White & Case. 



409 

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. 



410 

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 

 
1286  For 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. 



411 

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 

 
1287  Several 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.”). 

1288  The information acquisition costs mentioned would entail gathering, processing, and incorporating the 

information from the Item 506 dilution disclosure into investors’ existing information and decisions. 

1289  Additionally, 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. 



412 

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 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 

 
1290  See supra section II.B for more information about current disclosure requirements. 

1291  Academic literature provides some evidence that characteristics of a SPAC sponsor, such as 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. 

1292  See, e.g., supra notes 128 and 182. 



413 

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 



414 

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 

 
1293  The 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.  



415 

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 information across a wider sample of SPAC IPOs (due to Items 1602 and 

 
1294  There 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).  

1295  See supra section II.I. 



416 

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, 

 
1296  See, 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 non-insiders, 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. 

1297  See, e.g., Jeff Zeyun, Hyun A. Hong, Jeong-Bon 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, Jeon-Bon 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=p

aper.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 non-regulatory 

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.  

https://www.business.kaist.edu/_prog/seminar/download.php?file=seminar_1_1478854039.pdf&ori_filename=paper.pdf&filedr=kr
https://www.business.kaist.edu/_prog/seminar/download.php?file=seminar_1_1478854039.pdf&ori_filename=paper.pdf&filedr=kr
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3463897


417 

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 

 
1298  See, 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). 

1299  For 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. 

1300  See supra section II.I. 

1301  See 17 CFR 229.601(b)(101)(i)(A). 



418 

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 de-SPAC 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. 

 
1302  An 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/downloadabledocume

nts/xbrl-costs-for-small-companies.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). 

1303  See supra note 31 and accompanying text. 



419 

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 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 de-SPAC 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. 

 
1304  See supra section VIII.B.1.ii. 

1305  Id. 



420 

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 

 
1306  See supra section II.E for more information about the regulatory baseline.  The prospectus is a part of the 

registration statement.421 

(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 non-redeeming 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 

de-SPAC 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 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 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 

 
1307  See discussion in supra section VIII.B.1.ii.b.  Also note that Item 1604(c) is discussed separately in the following 

section. 

1308  See supra notes 1262 and 1263 and accompanying text. 



422 

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 

 
1309  See supra section II.C for more detail on the specifics of the required conflict of interest disclosures. 

1310  See supra note 1265 and accompanying text. 



423 

Item 1604, which based on staff review of existing filings is often the case, or where the SPAC 

has 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 de-SPAC 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 de-SPAC 

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 non-redeeming shareholders of the SPAC.  Item 1604(b)(5) 

requires disclosure of the dilutive impact on non-redeeming shareholders that any financing 

 
1311  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. 



424 

transactions associated with the de-SPAC transaction may have.  Item 1604(b)(6) requires 

disclosure of the potential dilutive impact on non-redeeming 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 de-SPAC 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 non-redeeming shareholders’ interest per share being at least the initial 

public offering price per share of common stock. 

 
1312  At 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 line-item in the calculations in the table. 



425 

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 

 
1314  See supra section VIII.B.ii.b.  

1315  See supra note 221. 

1316  The 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. 

1317  See Hattie, supra note 1262; Benbasat & Dexter, supra note 1263. 



426 

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-SPAC-transaction-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 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 de-SPAC 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. 

 
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. 

1319  See supra section VIII.B.1.ii.b. 



427 

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 de-SPAC transaction, and effects of the de-SPAC 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 de-SPAC 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 

 
1320  See supra section II.F.1 for information about the regulatory baseline. 



428 

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 De-SPAC 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 

 
1321  Redemption decisions by investors can have significant impacts on the dilution faced by non-redeeming 

shareholders.  See supra sections VIII.B.1.ii.b and VIII.B.1.iii.c. 

1322  This is also consistent with comments received.  See supra note 352. 

1323  Again, 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. 



429 

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 de-SPAC 

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 



430 

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 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 

 
1324 Given the data in Table 4, this would apply to most SPACs. 

1325  Letter 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. 



431 

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 de-SPAC 

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-

 
1327  See supra section II.G.12. 

1328  The 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. 



432 

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, 



433 

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 

 
1329  With 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.  



434 

registrants 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 de-SPAC 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 

 
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. 

1331  See, 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.”). 



435 

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 

 
1332  See supra section II.H. 

1333  Id. 

1334  A 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 de-SPAC 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 de-

SPAC 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. 

https://www.freshfields.us/490963/globalassets/noindex/documents/2022-de-spac-debrief.pdf


436 

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 TO1336 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 de-SPAC 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 

 
1335  See 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). 

1336  Additionally, relatively few de-SPAC transactions have historically involved the filing of a Schedule TO alone.  

See supra note 1335 and accompanying text. 



437 

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-K1338 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 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 

 
1337  See letter from ABA. 

1338  See supra section V; infra section VIII.B.4. 

1339  See supra section III.  For additional information about the regulatory baseline for Item 1609, see supra section 

V.A. 



438 

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 forward-looking 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 

 
1340  Blankespoor, 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). 

1341  Michael 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. 



439 

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 

 
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). 

1343  Auditing 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 

 



440 

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 

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 forward-looking information made available to 

 
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. 

1345  For 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 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.441 

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 pre-filing verification of circumstances, data, 

assumptions, etc., that underlie the projections (and updating if so1349); (b) disclosure that the 

 
1346  See supra note 363 and accompanying text. 

1347  Letters from ABA, Freshfields, Goodwin Procter, Kirkland & Ellis. 

1348  See 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. 



442 

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 

 
1350  We 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). 

1351  See Elizabeth Blankespoor, Ed deHaan & Iván 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. 

1352  See supra sections II.I and VIII.B.1.ii.d. 

1353  See supra section VIII.B.1.ii.d. 



443 

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 

 
1354  See supra note 476 and accompanying text. 

1355  See supra note 1302 and accompanying text. 



444 

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 re-determination in its filings, beginning 45 days after consummation of the de-SPAC 

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 post-

combination 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 company 

going public via a traditional IPO might not qualify for SRC status at all.  Under the final rules, 

the post-combination 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 post-combination 

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 de-SPAC 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 

 
1356  See infra section III.D for more information on the regulatory baseline. 



445 

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 re-determination.  To the extent 

that the secondary market might not reflect all the information about the post-combination 

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-

 
1357  See supra note 1191. 

1358  See supra 633 and accompanying text. 

1359  Because SRC status entails lower disclosure and regulatory compliance costs, it is likely that firms would prefer 

to have SRC status than not.   



446 

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 de-SPAC 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-de-SPAC transaction public float (based on observations of historical de-SPAC 

outcomes).1360 

A potential cost of the re-determination 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 re-

determination.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 re-determination rules, this window allows them to continue to reflect SRC status on 

 
1360  Florian Kiesel, Nico Klingelhöfer, Dirk Schiereck & Silvio Vismara, SPAC Merger Announcement Returns and 

Subsequent Performance, 29 Eur. Fin. Mgmt. 399, 399–420 (2023).  

1361  Because 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 post-combination 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. 



447 

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 

 
1362  Specifically, 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. 

1363  The 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). 

1364  For 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 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 

 



448 

not file a Schedule 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 

 
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. 

1365  Because 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. 

1366  There 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. 



449 

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 de-SPAC 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 

 
1367  We 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. 



450 

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 

 
1368  Where the target is an FPI, the amendment includes the option for accordant disclosures.  See supra section 

III.A.1. 

1369  The 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. 



451 

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 

Figure 3. Incorporation by Reference in Form 8-K by Regulation S-K Disclosure Item in 

de-SPAC Transactionsa 

 

a 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-SPAC 

transaction that occurred between Jan. 1, 2006, and Dec. 31, 2022, that incorporated any item by reference. 

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 

 
1371  Because some filers incorporate disclosure by reference from more than one source, the total percentage of 

usage across sources exceeds 100%. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

101 102 103 304 403 701

Regulation S-K Disclosure Item Number



452 

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 

 
1372  While 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%. 



453 

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 non-redeeming 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 de-SPAC 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 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 co-registrant 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. 

 
1373  Letters from ABA, PwC. 



454 

i. Target Company as Co-Registrant 

Currently, a SPAC, the target company, or a holding company may file the registration 

statement for a de-SPAC 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 

 
1374  See supra section III.C. 

1375  See supra section III.C. 

1376  See supra note 22 and accompanying text. 



455 

(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 de-SPAC transactions.1377   

A few commenters compared de-SPAC 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 de-SPAC 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 de-SPAC—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 

 
1377  Adverse 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. 

1378  See letters from ABA, Skadden. 



456 

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 “co-registration” may be associated with additional 

administrative or other costs.  First, in connection with the filing of the registration statement, the 

 
1379  See supra section VIII.A for discussion of SPAC sponsors’ interests in completing the de-SPAC transaction. 

1380  See 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).   



457 

co-registrant 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 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 

 
1381  Letters 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 de-SPAC transaction” 

(citations omitted)). 

1382  These 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 

 



458 

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 

 
liability, and (d) to cover the liability of directors and officers where they are not indemnified by the target 

company. 

1383  See supra note 558 and accompanying text. 

1384  See 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. 



459 

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 co-registration 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 de-SPAC 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 de-SPAC 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 non-

predecessor 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 de-SPAC transaction.  As such, under the 

final rules, the additional costs for target companies, balanced against reduced adverse selection 

 
1385  See supra note 624 and accompanying text. 

1386  Target counts are from Dealogic’s SPAC M&A data.  



460 

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 confidence in 

the forward-looking statements made by such issuers. 

First, the final rules will benefit investors by incentivizing SPACs and other blank check 

companies1388 to take greater care to avoid making forward-looking statements that are 

unreasonable.  There is broad acknowledgement that forward-looking statements can be 

 
1387  See supra section VIII.A.3.  See also supra section III.E for more information about the regulatory baseline. 

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.461 

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 optimistic1391 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 

 
1389  See, 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). 

1390  Letters 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)). 

1391  Blankespoor, 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.  

1392  See supra notes 1240 and 1341. 

1393  See 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 

 



462 

“blank check company” for purposes of the PSLRA, we expect SPACs and other affected blank 

check companies will take greater care to avoid unreasonable forward-looking 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 decision-making 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 forward-looking 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 

 
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.  

1394  While 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. 

1395  Several commenters expressed this view.  See, e.g., letters from Cato Institute, Kirkland & Ellis, Paul Swegle. 



463 

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 non-SPAC 

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 interest1397 may prompt SPACs to improve 

their projections because of the reasons discussed above1398 and/or allow investors to better 

understand and evaluate projections,1399 which could 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 

 
1396  See supra section VIII.A. 

1397  See supra section II.C (discussing rules requiring disclosure of conflicts of interest between public investors and 

SPAC sponsors). 

1398  See supra note 1394. 

1399  For example, Item 1609(b) of Regulation S-K requires disclosure of material assumptions that underlie 

projections.  This additional detail may allow investors to better assess the validity of projections and detect 

over-optimism. 



464 

to any forward-looking 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 

 
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. 

1401  See letter from Amanda Rose. 

1402  See, e.g., letter from Winston & Strawn. 

1403  We 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. 



465 

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 

 
1404  See, e.g., letters from Cato Institute, CFA Institute, Managed Funds Association, NYC Bar, SPAC Association, 

Winston & Strawn.  

1405  See, e.g., letters from Bullet Point Network, SPACInsider, Ropes & Gray, SPAC Association, Vinson & Elkins, 

White & Case. 

1406  See, 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. 

1407  See letter from Cato Institute. 



466 

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 

 
1408  See 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.  



467 

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, 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 

 
1409  See supra section IV.A.2 for more information about the regulatory baseline. 



468 

(or those who are vulnerable to inertia1410) 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 pre-transaction 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 

 
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. 



469 

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. 

 
1413  See generally supra section VIII.B.2 for a discussion of the costs of increased liability. 



470 

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 

 
1414  See 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. 

1415  See supra note 1351. 



471 

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 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 

 
1416  See supra section IV.B for additional regulatory baseline information. 

1417  See 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). 



472 

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 de-SPAC 

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.  

 
1418  See 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). 



473 

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 



474 

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 decision-making. 

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 

 
1419  This 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. 



475 

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 pre-acquisition 

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 

 
1420  See Securities Act Rule 408(a); Exchange Act Rule 12b-20.  



476 

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 decision-making.  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 

 
1421  Letters from Freshfields, Vinson & Elkins. 



477 

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 de-SPAC 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 



478 

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 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 non-GAAP 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 



479 

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 

 
1422  See 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). 

1423  See 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). 



480 

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481 

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 forward-looking 

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 de-SPAC 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  

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. 

 
1424  While, 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. 

1425  For example, SPAC sponsors could set up structures that are more or less dilutive to investors or adjust any 

forfeiture of their promote used to induce investors not to redeem. 



482 

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 

 
1426  Reductions in SPAC formation and de-SPAC mergers could result from increased costs to de-SPAC 

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. 



483 

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 

 
1427  See letter from Virtu. 

1428  See, e.g., letters from National Venture Capital Association (June 13, 2022); Managed Funds Association; I-

Bankers Securities, Inc. (June 24, 2022). 



484 

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 

 
1429  To 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. 



485 

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 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. 



486 

iii. Re-Determine Smaller Reporting Company (SRC) Status of a Post-Business 

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 de-SPAC 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 re-measurement likely would not 

occur at the end of the second fiscal quarter when the annual public float measurement occurs, 

 
1430  See 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). 



487 

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 re-determination 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 re-determining 

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 

 
1431  See 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). 



488 

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 

 
1432  The 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). 

1433  See supra section VIII.B.1.ii.d. 



489 

investors by inhibiting the efficient extraction and searching of narrative SPAC-related 

disclosures (e.g., disclosures regarding conflicts of interest, fairness determinations, and financial 

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 

SPAC-related 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. 

 
1434  To 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. 

1435  See letter from XBRL US. 



490 

v. Dilution Disclosure Measurement Alternatives 

As an alternative to disclosure of net tangible book value, as adjusted, to capture dilution 

incurred by non-redeeming 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 

 
1436  See letters from NASAA; Vinson & Elkins; CII; Michael Klasuner, Michael Ohlrogge, and Harald Halbhuber. 

1437  See Klausner, Ohlrogge & Ruan, supra note 18. 

1438  See Michael Klausner, Michael Ohlrogge & Harald Halbhuber, Net Cash Per Share: The Key to Disclosing 

SPAC Dilution, 40 Yale J. on Reg. 18, 28 (2022). 

1439  Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. 



491 

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 

 
1440  See 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.”). 

1441  Letters from Vinson & Elkins, White & Case. 



492 

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 de-SPAC 

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 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 



493 

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 



494 

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 

 
1442  See 44 U.S.C. 3501 et seq. 



495 

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). 

 
1443  See 44 U.S.C. 3507(d), 5 CFR 1320.11. 

1444  The 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. 



496 

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. 

PRA Table 1.  Estimated Paperwork Burden Effects of the Final Rules  

 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Item 1602: Registered offerings by SPACs 

• Require certain information on the prospectus 

cover page and in the prospectus summary of 

registration statements for offerings by SPACs 

other than de-SPAC transactions. 

• Require enhanced dilution disclosure in these 

registration statements. 

 

Forms S-1 and 

F-1 
• 1 hour increase in compliance 

burden per Form S-1 or F-1 



497 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Item 1603: SPAC sponsor; conflicts of interest 

• Require certain disclosures regarding a SPAC 

sponsor, its affiliates, and any promoters of the 

SPAC. 

• Require disclosure regarding conflicts of interest 

between: (1) a SPAC sponsor; its affiliates; 

officers, directors, or promoters of a SPAC; or 

target company officers or directors; and (2) 

unaffiliated security holders of the SPAC. 

• Forms S-1, F-1, 

S-4, and F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 2 hour increase in compliance 

burden per Form S-1, F-1, S-4, 

or F-4 

• 2 hour increase in compliance 

burden per Schedule 14A or 14C 

• 2 hour increase in compliance 

burden per Schedule TO 

Item 1604: De-SPAC transactions 

• Require certain information on the prospectus 

cover page and in the prospectus summary of 

registration statements for de-SPAC transactions. 

• Require enhanced dilution disclosure in these 

registration statements. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-4 or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 

Item 1605: Background of and reasons for the 

de-SPAC transaction; terms of the de-SPAC 

transaction; effects 

• Require disclosure on the background, material 

terms, and effects of the de-SPAC transaction. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-4 or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 

Item 1606: Board determination about the de-

SPAC transaction 

• Require disclosure 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 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.  

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 4 hour increase in compliance 

burden per Form S-4 or F-4 

• 4 hour increase in compliance 

burden per Schedule 14A or 14C 

• 4 hour increase in compliance 

burden per Schedule TO 



498 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Item 1607: Reports, opinions, appraisals, and 

negotiations 

• Require disclosure regarding any report, opinion 

(other than an opinion of counsel), or appraisal 

received by a SPAC or a SPAC sponsor from an 

outside party or an unaffiliated representative 

acting on behalf of unaffiliated security holders 

relating to any determination described in 

response to Item 1606(a), approval of the de-

SPAC transaction, consideration to be offered in 

the de-SPAC transaction, or fairness of the de-

SPAC 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. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-4 or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 

Item 1608: Tender offer filing obligations 

• Require additional disclosures in a Schedule TO 

filed in connection with a de-SPAC transaction. 

• Schedule TO • 3 hour increase in compliance 

burden per Schedule TO 

Item 1609: Projections in de-SPAC transactions 

• Require additional disclosures regarding 

projections disclosed in a disclosure document for 

a de-SPAC transaction.  

 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• Form 8-K 

• 2 hour increase in compliance 

burden per Form S-4 or F-4 

• 2 hour increase in compliance 

burden per Schedule 14A or 14C 

• 2 hour increase in compliance 

burden per Schedule TO 

• 2 hour increase in compliance 

burden per Form 8-K 

Item 1610: Structured data requirement 

• Require information disclosed pursuant to subpart 

1600 to be tagged in a structured, machine-

readable data language. 

• Forms S-1, F-1, 

S-4, and F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 1 hour increase in compliance 

burden per Form S-1, F-1, S-4, 

or F-4 

• 1 hour increase in compliance 

burden per Schedule 14A or 14C 

• 1 hour increase in compliance 

burden per Schedule TO 



499 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Amendments to Regulation S-X** 

Amend financial statement requirements and the 

forms and schedules filed in connection with 

business combination transactions involving shell 

companies (other than business combination related 

shell companies), including de-SPAC transactions, 

to align more closely required disclosures about the 

target company with those required in a Form S-1 

or F-1 for an IPO, including: 

• Expanding the circumstances in which target 

companies may report two years, instead of three 

years, of audited financial statements (resulting in 

a decrease in burden) (Rule 15-01(b)); and 

• Further aligning the requirements for audited 

financial statements in these transactions with 

those required in a registered IPO (resulting in an 

increase in burden) (Rule 15-01(c), (d) and (e)). 

  

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 50 hour net decrease in 

compliance burden per affected 

Form S-4 or F-4*** 

• 50 hour net decrease in 

compliance burden per affected 

Schedule 14A or 14C*** 

• 50 hour net decrease in 

compliance burden per affected 

Schedule TO*** 

Amendments to Align Non-Financial Statement 

Disclosures in De-SPAC Transactions 

• Amend the forms and schedules filed in 

connection with de-SPAC transactions to align 

more closely required non-financial statement 

disclosures about the target company with those 

required in a Form S-1 or F-1 for an IPO. 

• Forms S-4 and 

F-4 

• Schedules 14A 

and 14C 

• Schedule TO 

• 8 hour increase in compliance 

burden per Form S-4 or F-4 

• 8 hour increase in compliance 

burden per Schedule 14A or 14C 

• 8 hour increase in compliance 

burden per Schedule TO 

Amendment to Forms S-4 and 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-SPAC transaction, the 

registrants also include the target company. 

• Forms S-4 and 

F-4 

• 100 hour increase in compliance 

burden per Form S-4 or F-4**** 



500 

Final Requirement and Effects 
Affected Forms 

and Schedules 

Estimated Effect Per Affected 

Response* 

Notes: 

* 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 final 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 financial statements under Rule 15-01(b) 

than under the current rules from registrants that would otherwise have prepared financial 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. 

In addition, we are adopting requirements that a post-business combination company re-

determine whether it is an SRC following a de-SPAC 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 re-determination 

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:501 

PRA Table 2. Increase in Compliance Burden After Losing SRC Status1445 

Form / Schedule Estimated Increase 

in Internal Hours 

per Filing 

(A) 

Estimated Increase in 

Outside Professional 

Hours per Filing 

(B) 

Estimated Increase 

in Outside 

Professional Costs 

per Filing 

(C) = (B) x $600 

Estimated 

Increase in 

Total Hours 

per Filing 

(D) = (A) + (B) 

Form 10-K* 439.00 147.00 $88,200 586.00 

Form 10-Q* 36.57 11.88 $7,128 48.45 

Schedule 14A** 0.75 0.25 $150 1.00 

Schedule 

14C*** 

0.75 0.25 $150 1.00 

Form S-1* 5.75 17.25 $10,350 23.00 

Notes: 

* The estimated increases in compliance burdens for Forms 10-K, 10-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. 33-10513 (June 28, 2018) [83 FR 31992 (July 10, 2018)], at section V. 

** In regard to Schedule 14A, we estimate that a company that loses SRC status would experience an increased 

compliance burden of 0.75 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 of 0.75 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. 

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 

 
1445  See discussion preceding PRA Table 4 below for a brief discussion on the allocation of compliance burdens 

between internal burden hours and outside professional costs. 



502 

$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 hour1447 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. 

  

 
1446  See Proposing Release, section X.C. 

1447  We 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. 

1448  See Listing Standards for Recovery of Erroneously Awarded Compensation, Rel. No. 33-11126 (Oct. 26, 2022) 

[87 FR 73076 (Nov. 28, 2022)].   



503 

PRA Table 3: Change in PRA Burden Due to Updated Outside Professional Cost Estimate 

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 

Collection of 

Information 

Current Inventory 

Professional Cost 

Burden (@ $400/hr.) 

Updated Professional 

Cost Burden (@ 

$600/hr.) 

Increased Burden 

Due to Update 

(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  



504 

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 

 
1449  Throughout 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.” 

1450  We 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. 

1451  Of 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.   



505 

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 

• 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. 

 
1452  Our 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. 

1453  While 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 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. 

1454  This 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). 



506 

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 

10-Q 

75% 25% 

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: 

  



507 

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 / 

Schedule  

Number of 

Estimated 

Affected 

Responses 

Estimated 

Burden Hour 

Increase or 

(Decrease) 

per Affected 

Response 

Total Estimated 

Incremental 

Increase or 

(Decrease) in 

Burden Hours 

Estimated 

Increase or 

(Decrease) in 

Internal Burden 

Hours 

Estimated Increase 

or (Decrease) in 

Outside Professional 

Hours 

Total Estimated 

Increase or 

(Decrease) in 

Outside 

Professional 

Costs 

 (A) (B) (C) = (A) x (B) (D) = (C) x 

(Allocation % 

from PRA Table 4, 

Internal) 

(E) = (C) x 

(Allocation % from 

PRA Table 4, 

Outside 

Professionals)  

(F) = (E) x $600 

Schedule 

14A 

4 (30) (120) (90) (30) ($18,000)  

Schedule 

14C 

2 (30) (60) (45) (15) ($9,000) 

Schedule 

TO 

2 (27) (54) (27) (27) ($16,200) 

Form S-1 90 4  360  90  270  $162,000  

Form S-4 

(other than 

145a) 

30 70  2,100  525 1,575 $945,000  

Form S-4 

(from Rule 

145a) 

40 70  2,800  700  2,100  $1,260,000  

Form F-1 8 4  32  8  24  $14,400  

Form F-4 

(other than 

145a) 

4 70  280  70  210  $126,000  

Form F-4 

(from Rule 

145a) 

6 70  420 105  315  $189,000  

Form 8-K 58 2  116  87  29  $17,400  

Total 244 203 5,874 1,423 4,451 $2,670,600 

In addition, we estimate that an average of 50 fewer post-business combination 

companies following a de-SPAC 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 

 
1455  This estimate is based, in part, on our estimate of the number of de-SPAC transactions in which the SPAC is the 

legal acquirer. 



508 

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: 

  

 
1456  This 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. 



509 

PRA Table 6. Calculation of the Incremental Change in Burden Estimates of Current 

Responses Resulting from the Re-Determination of SRC Status 

 

Form / 

Schedule  

Number of 

Estimated 

Affected 

Responses

* 

Estimated 

Burden 

Hour 

Increase per 

Affected 

Response** 

Total 

Estimated 

Incremental 

Increase in 

Burden 

Hours 

Estimated 

Increase in 

Internal 

Burden 

Hours 

Estimated 

Increase in 

Outside 

Professional 

Hours 

Total 

Estimated 

Increase in 

Outside 

Professional 

Costs 

 (A) (B) (C) = (A) x 

(B) 

(D) = (C) x 

(Internal % 

PRA Table 

4) 

(E) = (C) x 

(Outside 

Professionals 

% PRA Table 

4) 

(F) = (E) x 

$600 

Schedule 

14A 

40 1 40 30 10 $6,000 

Schedule 

14C 

4 1 4 3 1 $600 

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). 

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. 



PRA Table 7.  Requested Paperwork Burden under the Final Rules+ 
 

 

Form / 

Schedule 

Current Burden, as adjusted* Program Change Requested Change in Burden 

Current 

Annual 

Responses 

Current 

Burden 

Hours 

Current Cost 

Burden, as 

adjusted* 

Number of 

Estimated 

Affected 

Responses

** 

Estimated 

Increase or 

(Decrease) in 

Internal Burden 

Hours*** 

Estimated Increase 

or (Decrease) in 

Outside 

Professional 

Costs**** 

Annual 

Responses 

Burden Hours Cost Burden 

(A) (B) (C) (D) (E) (F) (G) = (A) (H) = (B) + (E) (I) = (C) + (F) 

Schedule 14A 6,369 850,836 $170,115,168  44 (60) ($12,000) 6,369 850,776 $170,103,168  

Schedule 14C 569 63,048 $12,611,016  6 (42) ($8,400) 569 63,006 $12,602,616  

Schedule TO 1,378 30,834 $18,499,500 2 (27) ($16,200) 1,378 30,807 $18,483,300  

Form S-1 898 141,978 $261,023,465  130 320  $576,000  898 142,298 $261,599,465  

Form S-4 588 560,988 $1,013,408,069  70 1,225 $2,205,000  588 562,213 $1,015,613,069  

Form F-1 66 26,571 $48,195,563  8 8  $14,400  66 26,579 $48,209,963  

Form F-4 39 13,999 $25,520,138  10 175  $315,000  39 14,174 $25,835,138  

Form 8-K 118,387 99,204,430 $148,806,645 58 87  $17,400  118,387 99,204,517 $148,824,045  

Form 10-K 8,292 13,988,811 $2,753,391,779  40 17,580  $3,516,000  8,292 14,006,391 $2,756,907,779  

Form 10-Q 22,925 3,098,084 $615,385,731  60 2,180  $436,050  22,925 3,100,264 $615,821,781  

Total 159,511 117,979,579 $5,066,957,074  428 21,446  $7,043,250 159,511 118,001,025 $5,074,000,324  

+ 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 D in this PRA Table 7) is the sum of affected responses from PRA Tables 5 and 6, as applicable. 

*** Estimated Increase or (Decrease) in Internal Burden Hours (Column E in this PRA Table 7) is calculated as the sum of the following, as applicable: PRA Table 

5, Column D (Estimated Increase or (Decrease) in Internal Burden Hours) plus PRA Table 6, Column D (Estimated Increase in Internal Burden Hours). 

**** Estimated Increase or (Decrease) in Outside Professional Costs (Column F in this PRA Table 7) is calculated as the sum of the following, as applicable: PRA 

Table 5, Column F (Total Estimated Increase or (Decrease) in Outside Professional Costs) plus PRA Table 6, Column F (Total Estimated Increase in Outside 

Professional Costs). 



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 

 
1457  5 U.S.C. 601 et seq. 

1458  Proposing Release, supra note 7, at 29558–29560. 



512 

Act.  In addition, the first filing in which re-determination 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 forward-

looking 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.   

 
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. 

1460  Throughout 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.” 



513 

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 generally1462 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 

 
1461  See supra section II.I.  

1462  See supra sections II through VI. 

1463  5 U.S.C. 601(6). 



514 

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, 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 non-SPAC 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 

 
1464  See discussion of the definition of “special purpose acquisition company” in section II.A. 

1465  According 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.   

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). 

1467  This estimate does not include business combination related shell companies. 



515 

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 



516 

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 

 
1468  See supra sections II through V. 



517 

and as to voting, investment, redemption, and tender decisions in connection with de-SPAC 

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 

 
1469  The 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.  

1470  Certain rules we are adopting may provide benefits of clarity and simplicity for entities of all sizes, as we 

discuss in sections II through V. 



518 

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 

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. 



519 

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-



520 

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521 

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) *   *   * 



522 

(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 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 



523 

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: 



524 

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 



525 

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. 



526 

(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 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, 



527 

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 



528 

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 



529 

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) *   *   * 



530 

(iv) Upon the consummation of a de-SPAC transaction, as defined in § 229.1601(a) (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 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 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 non-voting common equity held by non-affiliates 

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: 



531 

§ 229.601 (Item 601) Exhibits. 

(a) *   *   * 

EXHIBIT TABLE 

 
Securities Act Forms Exchange Act Forms 

S-1 S-3 SF-1 SF-3 S-41 S-8 S-11 F-1 F-3 F-41 10 8-K2 10-D 10-Q 10-K 
ABS-

EE 

*   *   *   *   *   *   * 

(98) Reports, opinions, or 

appraisals in de-SPAC 

transactions8  X    X   X  X   

 

  

 

*   *   *   *   *   *   * 
 

1 An 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. 

 
2 A 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) *   *   * 



532 

(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 de-SPAC 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 de-SPAC transaction means a business combination, 

such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or 



533 

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. 



534 

(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 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.  



535 

Provide a cross-reference, 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 _____ 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; 



536 

(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 



537 

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, 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. 



538 

(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 



539 

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). 



540 

(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 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.  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.541 

(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 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; 



542 

(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 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.  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 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. 



543 

(1) With respect to each redemption level, 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. 

(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 de-SPAC 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 de-SPAC 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 

de-SPAC 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. 



544 

(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 de-SPAC 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 



545 

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 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 



546 

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; 



547 

(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 de-SPAC 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 



548 

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 de-SPAC 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. 



549 

(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 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, 



550 

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”. 



551 

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 de-SPAC 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 re-determination in its 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 non-voting common equity held by non-affiliates 

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 



552 

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 



553 

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 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 



554 

(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 



555 

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 



556 

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 



557 

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: 



558 

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: 



559 

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 



560 

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 de-SPAC 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 re-determination in its 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 non-voting common equity held by non-affiliates 

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561 

(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 de-SPAC 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: 



562 

§ 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 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); 



563 

(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: 



564 

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 



565 

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. 

*   *   *   *   * 



566 

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. 

  



567 

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 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 



568 

*   *   *   *   * 

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.  

*   *   *   *   * 

  



569 

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 



570 

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 



571 

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 



572 

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. 

*   *   *   *   * 

 

  



573 

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 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, 



574 

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 de-

SPAC 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. 

*   *   *   *   *  



575 

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 



576 

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 



577 

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. 



578 

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 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.  

*   *   *   *   * 

 

  



579 

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). 

*   *   *   *   * 

 

  



580 

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581 

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. 

*   *   *   *   *