Special Purpose Acquisition Companies, Shell Companies, and Projections

Conformed to Federal Register version 
SECURITIES AND EXCHANGE COMMISSION 
17 CFR Parts 210, 229, 230, 232, 239, 240, 249, and 270 
[Release Nos. 33-11048; 34-94546; IC-34549; File No. S7-13-22] 
RIN 3235-AM90 
Special Purpose Acquisition Companies, Shell Companies, and Projections 
AGENCY: Securities and Exchange Commission. 
ACTION: Proposed rules. 
SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing rules 
intended to enhance investor protections in initial public offerings by special purpose acquisition 
companies ( “SPACs”) and in subsequent business combination transactions between SPACs and 
private operating companies.  Specifically, we are proposing specialized disclosure requirements 
with respect to, among other things, compensation paid to sponsors, conflicts of interest, dilution, 
and the fairness of these business combination transactions.  The proposed new rules and 
amendments to certain rules and forms under the Securities Act of 1933 and the Securities 
Exchange Act of 1934 would address the application of disclosure, underwriter liability, and 
other provisions in the context of, and specifically address concerns associated with, business 
combination transactions involving SPACs as well as the scope of the Private Securities 
Litigation Reform Act of 1995.  Further, we are proposing a rule that would deem any business 
combination transaction involving a reporting shell company, including a SPAC, to involve a 
sale of securities to the reporting shell company’s shareholders and are proposing to amend a 
number of financial statement requirements applicable to transactions involving shell companies.  
In addition, we are proposing to update our guidance regarding the use of projections in 
Commission filings as well as to require additional disclosure regarding projections when used in 

2 
 
connection with business combination transactions involving SPACs.  Finally, we are proposing 
a new safe harbor under the Investment Company Act of 1940 that would provide that a SPAC 
that satisfies the conditions of the proposed rule would not be an investment company and 
therefore would not be subject to regulation under that Act. 
DATES: Comments should be received on or before June 13, 2022. 
ADDRESSES: Comments may be submitted by any of the following methods: 
Electronic comments: 
• Use the Commission’s internet comment form 
(https://www.sec.gov/rules/submitcomments.htm
); or 
• Send an email to [email protected].  Please include File Number S7-13-22 on the 
subject line; or. 
Paper comments: 
• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090. 
All submissions should refer to File Number S7-13-22.  This file number should be 
included on the subject line if email is used.  To help the Commission process and review your 
comments more efficiently, please use only one method.  The Commission will post all 
comments on the Commission’s website (http://www.sec.gov/rules/proposed.shtml
).  Comments 
are also available for website viewing and printing in the Commission’s Public Reference Room, 
100 F Street NE, Washington, DC 20549 on official business days between the hours of 10 a.m. 
and 3 p.m.  Operating conditions may limit access to the Commission’s Public Reference Room.  
All comments received will be posted without change.  Persons submitting comments are 

3 
 
cautioned that we do not redact or edit personal identifying information from comment 
submissions.  You should submit only information that you wish to make available publicly. 
Studies, memoranda, or other substantive items may be added by the Commission or staff 
to the comment file during this rulemaking.  A notification of the inclusion in the comment file 
of any such materials will be made available on our website.  To ensure direct electronic receipt 
of such notifications, sign up through the “Stay Connected” option at www.sec.gov to receive 
notifications by email. 
FOR FURTHER INFORMATION CONTACT: Charles Kwon, Office of Rulemaking, 
Division of Corporation Finance, at (202) 551-3430; or with respect to proposed Rules 140a and 
145a under the Securities Act, Adam Turk, Office of Chief Counsel, Division of Corporation 
Finance, at (202) 551-3500; with respect to proposed Rule 15-01 of Regulation S-X, Ryan 
Milne, Office of Chief Accountant, Division of Corporation Finance, at (202) 551-3400; with 
respect to the proposed 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 proposed Rule 3a-10 under the Investment Company Act,  
Rochelle Kauffman Plesset, Seth Davis, or Taylor Evenson, Senior Counsels; Lisa Reid Ragen, 
Branch Chief; or Thoreau Bartmann, Assistant Director, Chief Counsel’s Office, Division of 
Investment Management, at (202) 551-6825; U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549. 
SUPPLEMENTARY INFORMATION: The Commission is proposing for public comment 
new 17 CFR 210.15-01 (Rule 15-01 of Regulation S-X), new 17 CFR 229.1601 through 
229.1610 (Subpart 1600 of Regulation S-K), new 17 CFR 230.140a ( Securities Act Rule 140a), 

4 
 
new 17 CFR 230.145a ( Securities Act Rule 145a), and new 17 CFR 270.3a-10 (Investment 
Company Act Rule 3a-10).  We are also proposing for public comment amendments to: 
Commission Reference 
CFR Citation 
(17 CFR) 
Securities Act of 1933 
(“Securities Act”)
1
 
Rule 137 § 230.137 
 Rule 138 § 230.138 
 Rule 139 § 230.139 
 Rule 163A § 230.163A 
 Rule 164 § 230.164 
 Rule 174 § 230.174 
 Rule 405 § 230.405 
 Rule 419 § 230.419 
 Rule 430B § 230.430B 
 Rule 437a § 230.437a 
 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 
(“Exchange Act”)
2
 
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 
(17 CFR 229.10 through 229.1406) 
Item 10 § 229.10 
 Item 601 § 229.601 
Regulation S-T 
(17 CFR 232.10 through 232.903) 
Rule 405 § 232.405 
                                                 
1
  15 U.S.C. 77a et seq. 
2
  15 U.S.C. 78a et seq. 

5 
 
Commission Reference 
CFR Citation 
(17 CFR) 
Regulation S-X 
(17 CFR 210.1-01 through 210.13-02) 
Rule 1-02 § 210.1-02 
 Rule 3-01 § 210.3-01 
 Rule 3-02 § 210.3-02 
 Rule 3-05 § 210.3-05 
 Rule 3-14 § 210.3-14 
 Rule 8-02 § 210.8-02 
 Rule 10-01 § 210.10-01 
 Rule 11-01 § 210.11-01 
 
 
TABLE OF CONTENTS 
I.
 INTRODUCTION ................................................................................................................... 8 
II. PROPOSED NEW SUBPART 1600 OF REGULATION S-K ............................................ 22 
A. Definitions......................................................................................................................... 24 
B. Sponsors ............................................................................................................................ 28 
C. Conflicts of Interest........................................................................................................... 32 
D. Dilution ............................................................................................................................. 36 
E. Prospectus Cover Page and Prospectus Summary Disclosure .......................................... 41 
1. Prospectus Cover Page ................................................................................................... 42 
2. Prospectus Summary ...................................................................................................... 42 
F. Disclosure and Procedural Requirements in De-SPAC Transactions............................... 46 
1. Background of and Reasons for the De-SPAC Transaction; Terms and Effects ........... 46 
2. Fairness of the De-SPAC Transaction ........................................................................... 52 
3. Reports, Opinions, and Appraisals ................................................................................. 55 
4. Proposed Item 1608 of Regulation S-K ......................................................................... 58 
G. Structured Data Requirement ............................................................................................ 61 
III. ALIGNING DE-SPAC TRANSACTIONS WITH INITIAL PUBLIC OFFERINGS ......... 64 
A. Aligning Non-Financial Disclosures in De-SPAC Disclosure Documents ...................... 67 
B. Minimum Dissemination Period ....................................................................................... 70 
C. Private Operating Company as Co-Registrant to Form S-4 and Form F-4....................... 74 
D. Re-Determination of Smaller Reporting Company Status ............................................... 78 
E. PSLRA Safe Harbor .......................................................................................................... 82 
F. Underwriter Status and Liability in Securities Transactions ............................................ 87 
1. Participants in a Distribution as “Underwriters” ............................................................ 92 
2. The De-SPAC Transaction as a “Distribution” of the Combined Company’s Securities
 ........................................................................................................................................ 94 
3. Proposed Rule: SPAC IPO Underwriters are Underwriters in Registered De-SPAC 
Transactions ................................................................................................................... 96 

6 
 
IV. BUSINESS COMBINATIONS INVOLVING SHELL COMPANIES .............................. 101 
A. Shell Company Business Combinations and the Securities Act of 1933 ........................ 101 
1. Shell Company Business Combinations ...................................................................... 101 
2. Proposed Rule 145a ...................................................................................................... 104 
3. Excluded Transactions ................................................................................................. 108 
B. Financial Statement Requirements in Business Combination Transactions Involving Shell 
Companies ........................................................................................................................... 112
 
1. Number of Years of Financial Statements ................................................................... 113 
2. Audit Requirements of Predecessor ............................................................................. 116 
3. Age of Financial Statements of the Predecessor .......................................................... 117 
4. Acquisitions of Businesses by a Shell Company Registrant or Its Predecessor That Are 
Not or Will Not Be the Predecessor ............................................................................. 118
 
5. Financial Statements of a Shell Company Registrant After the Combination with 
Predecessor................................................................................................................... 122
 
6. Other Amendments ...................................................................................................... 124 
V. ENHANCED PROJECTIONS DISCLOSURE .................................................................. 127 
A. Background ..................................................................................................................... 127 
B. Rule Proposals ................................................................................................................ 129 
1. Item 10(b) of Regulation S-K....................................................................................... 130 
2. Item 1609 of Regulation S-K ....................................................................................... 132 
VI. PROPOSED SAFE HARBOR UNDER THE INVESTMENT COMPANY ACT ............ 135 
A. Background ..................................................................................................................... 135 
1. Potential Status as an Investment Company ................................................................ 136 
2. Rationale for the Safe Harbor....................................................................................... 137 
3. Boundaries of the Safe Harbor ..................................................................................... 138 
B. Conditions ....................................................................................................................... 141 
1. Nature and Management of SPAC Assets ................................................................... 142 
2. SPAC Activities ........................................................................................................... 145 
3. Duration Limitations .................................................................................................... 152 
VII. ADDITIONAL REQUESTS FOR COMMENT ................................................................. 160 
VIII. GENERAL REQUEST FOR COMMENTS................................................................ 164 
IX. ECONOMIC ANALYSIS ................................................................................................... 165 
A. Broad Economic Considerations..................................................................................... 168 
B. Baseline and Affected Parties ......................................................................................... 177 
1. SPAC Initial Public Offerings ...................................................................................... 177 
2. De-SPAC Transactions ................................................................................................ 186 
3. Blank Check Companies .............................................................................................. 198 
4. Shell-Company Business Combinations ...................................................................... 199 
5.  Projections Under Item 10(b) of Regulation S-K......................................................... 202 
6. Investment Company Act Safe Harbor ........................................................................ 202 
C.  Benefits and Costs of the Proposed Rules .................................................................. 209 
1.  Disclosure-Related Proposals ....................................................................................... 209 
2. Liability-Related Proposals .......................................................................................... 243 
3. Shell-Company Related Proposals ............................................................................... 252 
4. Enhanced Projections Disclosure (Amendments to Item 10(b) of Regulation S-K) .... 262 
5. Investment Company Act Safe Harbor ........................................................................ 264 

7 
 
D. Effects on Efficiency, Competition, and Capital Formation ........................................... 274 
1. Efficiency ..................................................................................................................... 274 
2. Competition .................................................................................................................. 275 
3. Capital Formation ......................................................................................................... 276 
E. Reasonable Alternatives.................................................................................................. 277 
1. Disclosure-Related Proposals ....................................................................................... 277 
2. Liability-Related Proposals .......................................................................................... 281 
3. Expanding Disclosure in Reporting Shell Company Business Combinations ............. 282 
4. Enhanced Projections Disclosures ............................................................................... 284 
5. Investment Company Act Safe Harbor ........................................................................ 284 
F.  Requests for Comment .................................................................................................... 286 
X. PAPERWORK REDUCTION ACT ................................................................................... 291 
A. Summary of the Collections of Information ................................................................... 291 
B. Estimates of the Effects of the Proposed New Rules and Amendments on the Collections 
of Information ...................................................................................................................... 294 
C. Incremental and Aggregate Burden and Cost Estimates ................................................. 298 
D. Request for Comment ..................................................................................................... 304 
XI. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT .................... 306 
XII. INITIAL REGULATORY FLEXIBILITY ANALYSIS AND CERTIFICATION ........... 306 
A. Reasons for, and Objectives of, the Proposed Action ..................................................... 307 
B. Legal Basis ...................................................................................................................... 308 
C. Regulatory Flexibility Act Certification ......................................................................... 309 
D. Small Entities Subject to the Proposed Rules and Amendments .................................... 309 
E. Reporting, Recordkeeping, and Other Compliance Requirements ................................. 311 
F. Duplicative, Overlapping or Conflicting Federal Rules ................................................. 312 
G. Significant Alternatives .................................................................................................. 312 
STATUTORY AUTHORITY AND TEXT OF PROPOSED RULE AND FORM 
AMENDMENTS ........................................................................................................................ 315
 
 
 
 
  

8 
 
I. INTRODUCTION 
Special purpose acquisition companies first began to emerge in the 1990s as an 
alternative to blank check companies regulated pursuant to Rule 419 under the Securities Act.
3
  
In response to widespread fraud and abuse in blank check offerings, Congress passed the 
Securities Enforcement Remedies and Penny Stock Reform Act of 1990,
4
 which required the 
Commission to adopt rules governing registration statements filed by blank check companies 
offering penny stock.
5
  In response, the Commission adopted comprehensive disclosure and 
other requirements for blank check offerings in Rule 419.
6
  Following the adoption of Rule 419, 
securities offerings by SPACs, which are not subject to the rule’s requirements but have many 
similar features, began to appear, with the number of these offerings fluctuating over the years.
7
  
In the past two years, however, the U.S. securities markets have experienced an unprecedented 
surge in the number of initial public offerings by SPACs, with SPACs raising more than $83 
billion in such offerings in 2020 and more than $160 billion in such offerings in 2021.
8
  In 2020 
and 2021, more than half of all initial public offerings were conducted by SPACs. 
                                                 
3
  The term “blank check company” is defined in 17 CFR 230.419(a)(2) 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 
(Exchange Act Rule 3a51-1). 
4
  Pub. L. 101-429, 104 Stat. 931 (Oct. 15, 1990). 
5
  Id. at sec. 508; Section 7(b) of the Securities Act. 
6
  Blank Check Offerings, Release No. 33-6932 (Apr. 13, 1992) [57 FR 18037 (Apr. 28, 1992)].  Rule 419 requires a 
blank check company to meet certain disclosure and investor protection requirements in registered offerings of 
securities. 
7
  Between 2011 and 2021, the average number of initial public offerings by SPACs registered under the Securities 
Act per year was 98, with the highest number of such offerings (613) in 2021 and the lowest number of such 
offerings (9) in 2012.  In 2008, both the New York Stock Exchange and Nasdaq adopted rules to permit the listing of 
SPACs on these exchanges for the first time.  See, e.g., Release No. 34-57785 (May 6, 2008) [73 FR 27597 (May 
13, 2008)] and Release No. 34-58228 (July 25, 2008) [73 FR 44794 (July 31, 2008)]. 
8
  By comparison, SPACs raised a total of $13.6 billion in initial public offerings in 2019 and a total of $10.8 billion 
in initial public offerings in 2018.  As used in this release, “initial public offering” refers to a securities offering 

9 
 
A SPAC is typically a shell company
9
 that is organized for the purpose of merging with 
or acquiring one or more unidentified private operating companies (a “de-SPAC transaction”) 
within a certain time frame (often two years) and that conducts a firm commitment underwritten 
initial public offering of $5 million or more in units consisting of redeemable shares and 
warrants.
10
  A SPAC is organized and managed by its sponsor, which is usually compensated 
through an amount equal to a percentage (often 25 percent) of the SPAC’s initial public offering 
proceeds (in the form of discounted shares and warrants) to be received upon the completion of a 
de-SPAC transaction.
11
  Although SPACs are not subject to the requirements of Rule 419,
12
 they 
                                                 
registered under the Securities Act by an issuer that was not subject to the reporting requirements of Section 13 or 
15(d) of the Exchange Act immediately prior to the registration. 
9
  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. 
10
  The descriptions included in this release of common features currently seen in SPACs and SPAC transaction 
structures are based, in part, on reviews by the Commission staff of SPAC filings with the Commission.  The terms 
“private operating company” and “target company” are used interchangeably in this release, unless otherwise 
indicated.  We are proposing to define the term “target company” for purposes of the requirements applicable to 
SPACs.  See infra Section II.A. 
11
  This sponsor compensation is often referred to as the sponsor’s “promote” or “founder shares,” which usually 
amounts to around 20% of the total shares of a SPAC after its initial public offering.  The underwriting fees in a 
SPAC’s initial public offering are typically between 5% and 5.5% of the offering proceeds, of which 3.5% is also 
usually conditioned on the completion of the de-SPAC transaction. 
12
  Issuers that raise more than $5 million in a firm commitment underwritten initial public offering are excluded 
from the definition of “blank check company” in Rule 419, and thus are not subject to the requirements of the rule, 
because they are not selling “penny stock,” as defined in Exchange Act Rule 3a51-1.  The definition of “penny 
stock” in Exchange Act Section 3(a)(51) and Rule 3a51-1 encompasses any equity security except those excluded 
under the rule, such as an NMS stock, as defined in 17 CFR 242.600(b)(55), that meets certain criteria; securities 
issued by a registered investment company; and securities of an issuer that has net tangible assets in excess of $2 
million, or $5 million if the issuer has been in continuous operation for less than three years, or average revenue of 
at least $6 million for the last three years.  In 1993, the Commission issued guidance stating that issuers may 
aggregate the proceeds of a firm commitment underwritten initial public offering in order to exceed the $5 million 
net tangible assets test in Rule 3a51-1(g)(1).  See Penny Stock Definition for Purposes of Blank Check Rule, Release 
No. 33-7024 (Oct. 25, 1993) [58 FR 58099 (Oct. 29, 1993)].  SPACs often have provisions in their governing 
instruments that prohibit them from being “penny stock” issuers.  As used in this release, the term “SPAC” excludes 
those issuers that are subject to Rule 419.  In Dec.  2020, the Commission received a rulemaking petition 
(“Rulemaking Petition”) requesting that the Commission adopt rule amendments to permit SPACs to conduct initial 
public offerings on a best-efforts basis without being subject to Rule 419.  See Rulemaking Petition from Loeb & 
Loeb LLP, File No. 4-768 (Dec. 21, 2020), available at: https://www.sec.gov/rules/petitions/2020/petn4-768.pdf
.  
As of the date of this release, we have not received any comment letters in response to the Rulemaking Petition. 

10 
 
are typically structured to operate under similar, though usually less stringent, conditions in order 
to attract investors and to comply with exchange listing requirements.
13
 
Following its initial public offering, a SPAC generally places all or substantially all of the 
offering proceeds into a trust or escrow account,
14
 and the SPAC’s shares and warrants are 
typically registered under Section 12(b) of the Exchange Act and then begin trading on a national 
securities exchange.
15
  If a SPAC does not complete a de-SPAC transaction within the time 
frame specified in its governing instruments, the SPAC may seek an extension of the time frame 
from its shareholders or may dissolve and liquidate, with the sponsor not earning the “promote” 
and the assets held in the trust or escrow account returned on a pro rata basis to its 
shareholders.
16
 
If, on the other hand, a SPAC identifies a candidate for a business combination 
transaction, the shareholders of the SPAC have the opportunity to either: (1) redeem their shares 
prior to the business combination and receive a pro rata amount of the initial public offering 
                                                 
13
  These conditions are generally market driven, and are typically set forth in their governing instruments and/or 
contractual arrangements, or are pursuant to the laws of the state or country of organization or the listing standards 
of national securities exchanges.  See, e.g., NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule 
IM-5101-2.  For example, Section 102.06 of the NYSE Listed Company Manual requires, among other things, that 
at least 90% of the initial public offering proceeds, together with the proceeds of any other concurrent sales of equity 
securities, be held in a trust account controlled by an independent custodian until the consummation of a business 
combination with a fair market value equal to at least 80% of the net assets held in the trust, with the time period to 
consummate the de-SPAC transaction not to exceed three years.  In contrast, under Rule 419, a blank check 
company must, among other things, complete a merger or acquisition within 18 months after the effective date of its 
registration statement and must place the offering proceeds and the securities sold in the offering in an escrow or 
trust account until the completion of the merger or acquisition, which precludes trading in the blank check 
company’s securities until after the merger or acquisition is completed. 
14
  The assets in the trust or escrow account are typically invested in U.S. government securities and money market 
funds that invest in U.S. government securities.  See infra Section VI. 
15
  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 one 
year after the SPAC’s initial public offering or upon the completion of a de-SPAC transaction. 
16
  Exchange rules require a listed SPAC to complete a de-SPAC transaction within a specified timeframe not to 
exceed 36 months after its initial public offering.  See, e.g., NYSE Listed Company Manual Section 102.06.and 
Nasdaq Listing Rule IM-5101-2. 

11 
 
proceeds held in the trust or escrow account, or (2) remain a shareholder of the company after the 
business combination.
17
  To offset shareholder redemptions and 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.
18
  De-SPAC transactions often 
result in the former SPAC’s shareholders owning a minority interest in the post-business 
combination company, with the former private operating company’s shareholders and PIPE 
investors owning a majority interest in the post-business combination company following these 
transactions.
19
 
Shareholder approval is often required in de-SPAC transactions, and, in such cases, a 
SPAC provides its shareholders with a proxy statement on Schedule 14A, or an information 
statement on Schedule 14C if it is not soliciting proxies from its shareholders.
20
  If a SPAC or 
the target company is registering an offering of its securities (or the securities of a new holding 
company) to be issued in the de-SPAC transaction, then a registration statement on Form S-4 or 
                                                 
17
  According to a study of SPAC initial public offerings between 2010 and 2018, an average of 54.4% and a median 
of 57.1% of shares issued in an initial public offering by a SPAC during this period were redeemed prior to the 
completion of a de-SPAC transaction.  Usha R. Rodrigues and Michael Stegemoller, SPACs: Insider IPOs (SSRN 
Working Paper, 2021).  Another analysis found that, between July 1, 2021 and Dec. 1, 2021, mean and median 
SPAC redemption rates were 55% and 66%, respectively.  Michael Klausner, Michael Ohlrogge, and Emily Ruan, A 
Sober Look at SPACs, 39 Y
ALE J. ON REGUL. 228 (2022).  See infra Section IX.C.1.a.4. for a discussion of 
shareholder redemptions based on analysis by the Division of Economic and Risk Analysis (DERA) of available 
data. 
18
  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. 
19
  According to one study, of the 47 SPAC mergers that occurred between Jan. 2019 and June 2020, SPAC 
shareholders, including the sponsor, held a median of 35% of the merged company after a de-SPAC transaction (of 
which the sponsor held a median of 12% of the merged company), with the remaining 65% of the merged company 
held by other parties including the target company’s shareholders and PIPE investors.  Klausner, Ohlrogge, and 
Ruan, supra note 17. 
20
  17 CFR 240.14a-2 (Exchange Act Rule 14a-2) and 17 CFR 240.14c-2 (Exchange Act Rule 14c-2). 

12 
 
F-4 would be filed for the securities offering.    If no registration statement or proxy or 
information statement is required, then the SPAC disseminates a tender offer statement 
(Schedule TO) for the redemption offer to its security holders with information about the target 
company.
21
  Regardless of how the de-SPAC transaction is structured, the operations of the 
private company are conducted by the post-business combination company following the 
consummation of a de-SPAC transaction, with the shareholders of the private company now 
owning shares in a publicly listed company. 
De-SPAC transactions can be viewed as a way for private operating companies to 
become public reporting companies under the Exchange Act and obtain a listing on a national 
securities exchange while avoiding certain of the safeguards for investors and conventions of the 
typical initial public offering process.
22
  From the perspective of the shareholders and 
management of a private operating company, some of the purported advantages of combining 
with a SPAC compared to conducting an underwritten initial public offering could include: 
greater pricing certainty in merger negotiations; a relatively shorter time frame in becoming a 
                                                 
21
  The Commission has promulgated rules under the Exchange Act setting forth filing, disclosure, and 
dissemination requirements in connection with tender offers.  See, e.g., Regulations 14D and 14E and Exchange Act 
Rule 13e-4.  When an issuer conducts a tender offer, the issuer may be required to file and disseminate a 
Schedule TO pursuant to Rule 13e-4.  The redemption rights in a SPAC context generally have indicia of being a 
tender offer, such as a limited period of time for the SPAC security holders to request redemption of their securities.  
The Commission staff, however, has not insisted that SPACs comply with the tender offer rules when a SPAC files a 
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 Regulation 14A or 14C, 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 when a SPAC does not file a Schedule 14A or 
14C in connection with the de-SPAC transaction or an extension.  SPACs that do not file a Schedule 14A or 14C, 
such as SPACs that are foreign private issuers, have generally filed and disseminated Schedules TO for the 
redemptions of their securities and complied with the procedural requirements of the tender offer rules.  In these 
circumstances, 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.F.4 for a 
discussion of proposed Item 1608 of Regulation S-K and Section IV.A. for a discussion of proposed Rule 145a 
under the Securities Act, which would affect when a SPAC may be required to file a Form S-4 or F-4 in connection 
with a de-SPAC transaction. 
22
  See infra note 119. 

13 
 
public company; and the perceived freedom to use projections in connection with de-SPAC 
transactions, with reduced liability exposure.
23
  De-SPAC transactions also offer private 
operating companies an infusion of capital from the SPAC,
24
 as well as potentially greater share 
liquidity for the post-business combination company based on the existing trading market for the 
SPAC’s securities.
25
 
Although the basic structure of SPACs has existed since the 1990s, the recent surge in 
SPAC offerings and the increasing use of de-SPAC transactions as a mechanism for private 
operating companies to access the U.S. public securities markets have caused some market 
observers to express concerns about various aspects of the SPAC structure.
26
  For example, some 
commentators have raised concerns regarding the amount of sponsor compensation and other 
costs and their dilutive effects on a SPAC’s shareholders.
27
  A number of commentators have 
also pointed to the nature of the sponsor compensation (i.e., dependent on the completion of a 
de-SPAC transaction) as a potential conflict of interest in the SPAC structure that could lead 
sponsors to enter into de-SPAC transactions that are unfavorable to unaffiliated shareholders of 
                                                 
23
  See, e.g., Klausner, Ohlrogge,  and Ruan, supra note 17; Rodrigues and Stegemoller, supra note 17; Minmo 
Gahng, Jay R. Ritter,  and Donghang Zhang, SPACs (SSRN Working Paper, 2021). 
24
  Typically, much of this cash comes from PIPE investors around the time of the de-SPAC transaction and not 
from investors in the SPAC’s initial public offering.  See, e.g., Klausner, Ohlrogge,  and Ruan, supra note 17. 
25
  However, one study found evidence of illiquidity in SPAC shares, with relatively thin trading volume particularly 
during the period before the announcement of a proposed de-SPAC transaction.  Rodrigues and Stegemoller, supra 
note 17. 
26
  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
. 
27
  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, The Wall 
Street Journal, Apr. 25, 2021. 

14 
 
the SPACs without performing robust due diligence in connection with these transactions, when 
the alternative is to liquidate the SPACs and return the initial public offering proceeds to the 
shareholders.
28
  Other commentators have criticized stock exchange listing rules under which 
SPAC shareholders have voted in favor of proposed de-SPAC transactions   while still redeeming 
their shares prior to the closing of the transactions.
29
  A number of studies have found that 
returns are relatively poor for investors in companies following a de-SPAC transaction.
30
 
In addition, some commentators have expressed concerns regarding the adequacy of the 
disclosures provided to investors in these transactions in terms of explaining the potential 
benefits, risks and effects for investors, as well as the potential benefits for the sponsor and other 
affiliates of the SPAC.
31
  One of these commentators also expressed the view that the disclosure 
                                                 
28
  See, e.g., Klausner, Ohlrogge,  and Ruan, supra note 17; Rodrigues and Stegemoller, supra note 17; Gahng, 
Ritter,  and Zhang, supra note 23; 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
. 
29
  See Mira Ganor, The Case for Non-Binary, Contingent, Shareholder Action, 23 U. PA. J. BUS. L.   390 (2021); 
Rodrigues and Stegemoller, supra note 17.  We n ote that exchange listing rules only explicitly require that, when a 
shareholder vote on a business combination is held, the public shareholders voting against a business combination 
have a right to redeem shares.  See, e.g., Nasdaq Listing Rule IM-5101-2 (stating, in part, that “public Shareholders 
voting against a business combination must have the right to convert their shares of common stock into a pro rata 
share of the aggregate amount then in the deposit account (net of taxes payable and amounts distributed to 
management for working capital purposes) if the business combination is approved and consummated”). 
30
  See, e.g., Lora Dimitrova, Perverse Incentives of Special Purpose Acquisition Companies, the “Poor Man’s 
Private Equity Funds,” J
OURNAL OF ACCOUNTING AND ECONOMICS (2017); Johannes Kolb and Tereza Tykvová, 
Going Public via Special Purpose Acquisition Companies: Frogs Do Not Turn Into Princes, J
OURNAL OF 
CORPORATE FINANCE (2016); Klausner, Ohlrogge,  and Ruan, supra note 17; Gahng, Ritter,  and Zhang, supra note 
23; Chen Lin, Fangzhou Lu, Roni Michaely, and Shihua Qin, SPAC IPOs and Sponsor Network Centrality (SSRN 
Working Paper, 2021).  See also Testimony of Scott Kupor, Andreessen Horowitz, before the Investor Protection, 
Entrepreneurship, and Capital Markets Subcommittee of the U.S. House Committee on Financial Services, May 24, 
2021, https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-kupors-20210524.pdf
; Alexander 
Osipovich and Dave Michaels, Investors Flock to SPACs, Where Risks Lurk and Track Records Are Poor, The Wall 
Street Journal, Nov. 13, 2020. 
31
  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 SEC actions have highlighted disclosures about the 
private operating company that are allegedly incomplete, inaccurate, and materially misleading.  See, e.g., In the 

15 
 
about the private operating company provided through the de-SPAC transaction process may be 
less complete and less reliable than that provided by an issuer in a traditional initial public 
offering.
32
  Other 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,
33
 as well as the lack of a named underwriter in these transactions 
that would typically perform traditional gatekeeping functions, such as due diligence, and would 
be subject to liability under Section 11 of the Securities Act for untrue statements of material 
facts or omissions of material facts.
34
  In response to a number of these and other issues, the 
Commission staff has provided guidance relating to SPACs on five occasions since December 
2020.
35
 
                                                 
Matter of Momentus, Inc., Stable Road Acquisition Corp., SRC-NI Holdings, LLC, and Brian Kabot, Release No. 
33-10955, 34-92391 (July 13, 2021); In the Matter of Nikola Corp., Release No. 33-11018, 34-93838 (Dec. 21, 
2021); 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). 
32
  See AFR Letter. 
33
  See, e.g., Michael Dambra, Omri Even-Tov, and Kimberlyn George, Should SPAC Forecasts be Sacked? (SSRN 
Working Paper, 2022); AFR Letter; Park Testimony; Rodrigues and Stegemoller, supra note 17.  See also Heather 
Somerville and Eliot Brown, SPAC Startups Made Lofty Promises.  They Aren’t Working Out., The Wall Street 
Journal, Feb. 25, 2022. 
34
  See AFR Letter; Deane Testimony; Rodrigues Testimony.  See also John C. Coffee Jr., Gatekeeper Failure and 
Reform: The Challenge of Fashioning Relevant Reforms, 84 B.
 U. L. REV. 301 (2004) and John C. Coffee, Jr., 
Gatekeepers: The Professions and Corporate Governance (2006). 
35
  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); and 
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).  This 
guidance and other staff statements (including those cited herein) 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 
content of these documents and, like all staff 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. 

16 
 
In September 2021, the Commission’s Investor Advisory Committee
36
 issued preliminary 
recommendations regarding SPACs and expressed concerns about whether sponsors and target 
companies have engaged in regulatory arbitrage by using de-SPAC transactions as a path to the 
public markets.  In addition, the Investor Advisory Committee expressed concerns about 
potential conflicts of interest between sponsors and retail investors, and the effectiveness of the 
disclosures provided in these transactions.
37
  Among other things, the Investor Advisory 
Committee recommended that the Commission “regulate SPACs more intensely” through an 
enhanced focus on and stricter enforcement of existing disclosure rules in areas such the 
sponsor’s role in a SPAC, the process and risks in identifying and assessing target companies, 
PIPE financing terms, and de-SPAC transaction due diligence, as well as application of the Plain 
English disclosure rules.
38
  The Investor Advisory Committee also recommended that the 
Commission prepare and publish a report analyzing the parties involved in SPAC transactions at 
various stages and the compensation and incentives of these parties. 
                                                 
36
  The Investor Advisory Committee was established by Section 911 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (“Dodd-Frank Act”), Pub. L. 111-203, 124 Stat. 1376 (2010), to advise and consult with 
the Commission on regulatory priorities, issues, and initiatives. 
37
  See Recommendations of the Investor Advisory Committee Regarding Special Purpose Acquisition Companies 
(Sept. 9, 2021) (“IAC Recommendations”), available at: 
https://www.sec.gov/spotlight/investor-advisory-
committee-2012/20210909-spac-recommendation.pdf.  The Dodd-Frank Act authorizes the Investor Advisory 
Committee to submit findings and recommendations for review and consideration by the Commission.  The 
Commission then issues a public statement assessing the finding or recommendation and disclosing the 
Commission’s intended action, if any, in regard to the finding or recommendation.  See Section 911(g) of the Dodd-
Frank Act. 
38
  17 CFR 230.421(d) (Securities Act Rule 421(d))  requires registrants to write the prospectus cover page, 
prospectus summary, and risk factors sections of prospectuses using plain English principles, including the use of 
short sentences; definite, concrete, everyday language; active voice; tabular presentation of complex information 
whenever possible; no legal or business jargon; and no multiple negatives.  Plain English Disclosure, Release No. 
33-7497 (Jan. 28, 1998) [63 FR 6370 (Feb. 6, 1998)]. 

17 
 
Also in September 2021, the Commission’s Small Business Capital Formation Advisory 
Committee
39
 held a panel discussion on initial public offerings, direct listings, and SPACs.
40
  
The panelists expressed their views on a range of topics related to SPACs, including the factors 
behind the significant growth of the SPAC market over the past two years, the potential benefits 
of SPACs to the public markets, the potential benefits of enhanced disclosure requirements 
applicable to SPACs, and perceived issues surrounding the use of projections in de-SPAC 
transactions.  The panel discussion also addressed the costs embedded in the SPAC structure and 
the dilutive effects of these costs on non-redeeming shareholders, as well as the poor market-
adjusted returns of companies, on average, following de-SPAC transactions.
41
 
Having considered these and other perspectives on the SPAC market, we are of the view 
that greater transparency and more robust investor protections could assist investors in evaluating 
and making investment, voting, and redemption decisions with respect to these transactions.  
Accordingly, we are proposing new rules and rule amendments to enhance existing disclosure 
requirements and investor protections in initial public offerings by SPACs and in de-SPAC 
transactions.  A number of the rules and amendments we are proposing are intended to improve 
the usefulness and clarity of the information provided to investors so that they can make better 
informed decisions as to whether to purchase securities in SPAC initial public offerings, to 
purchase or sell SPAC securities in secondary trading markets, and in voting, investment and 
redemption decisions in connection with de-SPAC transactions.   
                                                 
39
  The Small Business Capital Formation Advisory Committee was established by Section 2 of the SEC Small 
Business Advocate Act of 2016, Pub. L. 114-284, 130 Stat. 1447 (2016), to provide advice to the Commission on 
the Commission’s rules, regulations, and policies relating to (1) capital raising by emerging, privately held small 
businesses and public companies with less than $250 million in public market capitalization; (2) trading in their 
securities; and (3) public reporting and corporate governance requirements applicable to these companies. 
40
  The panelists were Isabelle Freidheim, Michael Klausner, David Ni, and Phyllis Newhouse. 
41
  See Transcript of SEC Small Business Capital Formation Advisory Committee (Sept. 27, 2021), available at: 
https://www.sec.gov/info/smallbus/acsec/sbcfac-transcript-092721.pdf
. 

18 
 
The proposed rules and amendments, if adopted, could help the SPAC market function 
more efficiently by improving the relevance, completeness, clarity, and comparability of the 
disclosures provided by SPACs at the initial public offering and de-SPAC transaction stages,  and 
by providing important investor protections to strengthen investor confidence in this market.  In 
developing these proposals, we have considered the recommendations and views discussed 
above, as well as the Commission staff’s experience in reviewing disclosures in SPAC initial 
public offerings and de-SPAC transactions. 
Specifically, we are proposing to add new Subpart 1600 of Regulation S-K that would set 
forth specialized disclosure requirements in connection with initial public offerings by SPACs 
and in connection with de-SPAC transactions.  In new Subpart 1600, we are proposing to, among 
other things: 
• Require additional disclosures about the sponsor of the SPAC, potential conflicts of 
interest, and dilution; 
• Require additional disclosures on de-SPAC transactions, including a requirement that 
the SPAC state (1) whether it reasonably believes that the de-SPAC transaction and 
any related financing transaction are fair or unfair to investors, and (2) whether it has 
received any outside report, opinion, or appraisal relating to the fairness of the 
transaction; and 
• Require certain disclosures on the prospectus cover page and in the prospectus 
summary of registration statements filed in connection with SPAC initial public 
offerings and de-SPAC transactions. 
In addition, in view of the increasing number of private companies using de-SPAC 
transactions to become publicly-traded reporting companies, we are proposing amendments to 

19 
 
provide procedural protections and to align the disclosures provided, as well as the legal 
obligations of companies, in de-SPAC transactions more closely with those in traditional initial 
public offerings.  Specifically, we are proposing to: 
• Amend the registration statement forms and schedules filed in connection with de-
SPAC transactions to require additional disclosures about the private operating 
company; 
• Require that disclosure documents in de-SPAC transactions be disseminated to 
investors at least 20 calendar days in advance of a shareholder meeting or the earliest 
date of action by consent, or the maximum period for disseminating such disclosure 
documents permitted under the laws of the jurisdiction of incorporation or 
organization if such period is less than 20 calendar days; 
• Deem a private operating company in a de-SPAC transaction to be a co-registrant of a 
registration statement on Form S-4 or Form F-4 when a SPAC files such a registration 
statement for a de-SPAC transaction, such that the private operating company and its 
signing persons would be subject to liability under Section 11 of the Securities Act as 
signatories to the registration statement; 
• Amend the definition of smaller reporting company to require a re-determination of 
smaller reporting company status following the consummation of a de-SPAC 
transaction; and 
• Define “blank check company” to encompass SPACs and certain other blank check 
companies for purposes of the Private Securities Litigation Reform Act of 1995 
(PSLRA)
42
 such that the safe harbor for forward-looking statements under the 
                                                 
42
  Pub. L. No. 104-67, 109 Stat. 737 (1995). 

20 
 
PSLRA would not be available to SPACs, including with respect to projections of 
target companies seeking to access the public markets through a de-SPAC 
transaction. 
Underwriters play a critical role in the securities offering process as gatekeepers to the 
public markets.    In light of this important role, we are proposing a new rule, Securities Act 
Rule 140a, that would deem anyone who has acted as an underwriter of the securities of a SPAC 
and 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 a 
distribution and to be an underwriter in the de-SPAC transaction.  By affirming the underwriter 
status of SPAC IPO underwriters in connection with de-SPAC transactions, the proposed rule 
should better motivate SPAC underwriters to exercise the care necessary to ensure the accuracy 
of the disclosure in these transactions by affirming that they are subject to Section 11 liability for 
that information. 
In addition, private companies have historically used shell companies with Exchange Act 
reporting obligations in various forms of transactions, including SPACs, to become a public 
company without undergoing a traditional initial public offering.  In many cases, such shell 
company shareholders may not receive a Securities Act registration statement containing 
disclosures about the private company that is entering the public market for the first time.  Due to 
the significant increase in the use of reporting shell company business combination transactions 
as a means to enter the U.S. capital markets, and in an effort to provide reporting shell company 
shareholders with more consistent Securities Act protections regardless of transaction structure, 
we are proposing to add new Rule 145a that would deem any business combination of a 

21 
 
reporting shell company, involving another entity that is not a shell company, to involve a sale of 
securities to the reporting shell company’s shareholders.
43
 
Further, we are proposing new Article 15 of Regulation S-X, as well as related 
amendments, to more closely align the financial statement reporting requirements in business 
combinations involving a  shell company and a private operating company with those in 
traditional initial public offerings.  This is consistent with our view that the manner in which a 
company goes public should not generally result in substantially different financial statement 
disclosures being provided to investors. 
We are also proposing amendments intended to enhance the reliability of projections 
disclosure in Commission filings, as well as additional requirements when projections are 
disclosed in connection with de-SPAC transactions.  The proposed amendments to Item 10(b) of 
Regulation S-K would address broader concerns regarding the use of projections generally, while 
proposed Item 1609 of Regulation S-K would address concerns specific to de-SPAC 
transactions. 
 Finally, as the SPAC market has grown dramatically in recent years, some SPACs have 
sought to operate in novel ways that suggest a need for SPACs and their sponsors to increase 
                                                 
43
  Throughout this release, 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 as a shell company that is: “(1) Formed by an entity that is 
not a shell company solely for the purpose of changing the corporate domicile of that entity solely within the United 
States; or (2) Formed by an entity that is not a shell company solely for the purpose of completing a business 
combination transaction (as defined in 17 CFR 230.165(f)) among one or more entities other than the shell company, 
none of which is a shell company.”  For purposes of proposed Rule 145a (see infra Section IV.A.), the term 
“reporting shell company” is defined as a company, other than an asset-backed issuer as defined in Item 1101(b) of 
Regulation AB, that has: (1) no or nominal operations; (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; and (3) an obligation to file reports under Section 13 or Section 15(d) of the Exchange Act.  
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 
 
their focus on evaluating when a SPAC could be an investment company and thus subject to the 
requirements under the Investment Company Act of 1940 (“Investment Company Act”).
44
  We 
are concerned that SPACs may fail to recognize when their activities raise the investor protection 
concerns addressed by the Investment Company Act.  To assist SPACs in focusing on, and 
appreciating, when they may be subject to investment company regulation, we are proposing a 
new safe harbor under the Investment Company Act.  The proposed rule would provide a safe 
harbor from the definition of “investment company” under Section 3(a)(1)(A) of the Investment 
Company Act for SPACs that satisfy certain conditions that limit a SPAC’s duration, asset 
composition, business purpose and activities.
45
   
 We welcome feedback and encourage interested parties to submit comments on any or all 
aspects of the proposed new rules and amendments.  When commenting, it would be most 
helpful if you include the reasoning behind your position or recommendation. 
II. PROPOSED NEW SUBPART 1600 OF REGULATION S-K 
We are proposing to add new Subpart 1600 to Regulation S-K to set forth specialized 
disclosure requirements applicable to SPACs regarding the sponsor, potential conflicts of 
interest, and dilution, and to require certain disclosures on the prospectus cover page and in the 
prospectus summary.
46
  Proposed Subpart 1600 would also require enhanced disclosure for de-
SPAC transactions, including a fairness determination requirement.  We are proposing to amend 
a number of forms and schedules used by SPACs for initial public offerings and de-SPAC 
                                                 
44
  15 U.S.C. 80a-1 et seq. 
45
  See infra Section VI for a discussion of proposed Rule 3a-10. 
46
  The proposed requirements in new Subpart 1600 would, to an extent, codify and standardize some of the 
disclosures already commonly provided by SPACs. 

23 
 
transactions to require the information set forth in proposed Subpart 1600.
47
  To the extent that 
the disclosure requirements in proposed Subpart 1600 address the same subject matter as the 
existing disclosure requirements of the forms or schedules, the requirements of proposed Subpart 
1600 would be controlling.
48
  The following table summarizes the proposed items in Subpart 
1600, as described more fully below:
49
 
Item Summary Description Principal Objective(s) 
Applicable forms 
and schedules 
Item 1601, 
Definitions 
Definitions for the terms “special 
purpose acquisition company,”  
“de-SPAC transaction,” “target 
company,” and “SPAC sponsor.” 
Establish the scope of the issuers 
and transactions subject to the 
requirements of Subpart 1600. 
Forms S-1, F-1, S-4, 
and F-4; Schedules 
14A, 14C, and TO 
Item 1602, Registered 
offerings by special 
purpose acquisition 
companies 
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. 
Enhance the clarity and 
readability of prospectuses in 
SPAC initial public offerings and 
the disclosures relating to dilution 
in these prospectuses. 
Forms S-1 and F-1  
Item 1603, SPAC 
sponsor; conflicts of 
interest 
Require certain disclosure regarding 
the sponsor and its affiliates and any 
promoters of SPACs and disclosure 
regarding conflicts of interest 
between the sponsor or its affiliates 
or promoters and unaffiliated 
security holders. 
Provide investors with a more 
complete understanding of the 
role of sponsors and their 
conflicts of interest. 
Forms S-1, F-1, S-4, 
and F-4; Schedules 
14A, 14C and 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. 
Enhance the clarity and 
readability of prospectuses in  
de-SPAC transactions and 
disclosures relating to dilution in 
these prospectuses. 
Forms S-4 and F-4; 
Schedules 14A, 14C, 
and TO 
                                                 
47
  See the proposed amendments to Forms S-1, F-1, S-4, and F-4, and Schedules 14A and TO.  While we are not 
proposing amendments to Schedule 14C, the disclosure contemplated by proposed Subpart 1600 would 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, but would be authorized to be registered on Form S-4 or F-4, the proposed requirements of 
Form S-4 or F-4, as applicable, in regard to de-SPAC transactions would apply in that context. 
48
  Proposed General Instruction L.1. to Form S-4; Proposed General Instruction I.1. to Form F-4; Proposed Item 
14(f)(1) to Schedule 14A; Proposed General Instruction K to Schedule TO.  We are also proposing to re-designate 
existing General Instruction K to Schedule TO as General Instruction L to the schedule. 
49
  The information in this table is not comprehensive and is intended only to summarize the proposed items of 
Subpart 1600.  This table should be read together with the complete text of this release. 

24 
 
Item Summary Description Principal Objective(s) 
Applicable forms 
and schedules 
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 a proposed de-SPAC 
transaction. 
Provide investors with a more 
complete understanding of the 
background of and motivations 
behind a proposed de-SPAC 
transaction. 
Forms S-4 and F-4; 
Schedules 14A, 14C, 
and TO 
Item 1606, Fairness 
of the de-SPAC 
transaction and any 
related financing 
transaction 
Require disclosure on whether a 
SPAC reasonably believes that a de-
SPAC transaction and any related 
financing transactions are fair or 
unfair to investors, as well as a 
discussion of the bases for this 
reasonable belief. 
Provide investors with additional 
information regarding a proposed 
de-SPAC transaction and address 
concerns regarding potential 
conflicts of interest and 
misaligned incentives. 
Forms S-4 and F-4; 
Schedules 14A, 14C, 
and TO 
Item 1607, Reports, 
opinions, appraisals 
and negotiations 
Require disclosure on whether a 
SPAC or its sponsor has received a 
report, opinion or appraisal from an 
outside party regarding the fairness 
of a de-SPAC transaction or any 
related financing transaction. 
Provide investors with additional 
information underlying a fairness 
determination by a SPAC. 
Forms S-4 and F-4; 
Schedules 14A, 14C, 
and TO 
Item 1608, Tender 
offer filing 
obligations in de-
SPAC transactions
*
 
Require additional disclosures in a 
Schedule TO filed in connection 
with a de-SPAC transaction. 
Align the information provided in 
such a Schedule TO with the 
information provided in other 
filings in connection with a de-
SPAC transaction. 
Schedule TO 
Item 1609, Financial 
projections in de-
SPAC transactions
**
 
Require additional disclosures 
regarding financial projections 
disclosed in a disclosure document 
for a de-SPAC transaction. 
Provide investors with additional 
information regarding the use of 
projections in connection with a 
de-SPAC transaction. 
Forms S-4 and F-4; 
Schedules 14A, 14C, 
and TO 
Item 1610, Structured 
data requirement
***
 
Require information disclosed 
pursuant to Subpart 1600 to be 
tagged in a structured, machine-
readable data language. 
Provide investors and other 
market participants with 
information that is more readily 
available and more easily 
accessible for aggregation, 
comparison, filtering, and other 
analysis 
Forms S-1, F-1, S-4, 
and F-4; Schedules 
14A, 14C, and TO 
Notes: 
*
 Proposed Item 1608 is discussed in Section II.F.4. 
**
 Proposed Item 1609 is discussed in Section V.B.2. 
***
 Proposed Item 1610 is discussed in Section II.G. 
 
A. Definitions 
For purposes of proposed new Subpart 1600, we are proposing Item 1601 to define the 
term “special purpose acquisition company” 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 

25 
 
requirements of Rule 419;
50
 (2) complete a de-SPAC transaction within a specified time frame; 
and (3) return all remaining proceeds from the registered offering and any concurrent offerings to 
its shareholders if the company does not complete a de-SPAC transaction within the specified 
time frame.
51
  While the proposed definition does not include certain features common to 
SPACs, such as the listing of the SPAC’s securities on a national securities exchange
52
 or the 
issuance of redeemable securities, the proposed definition incorporates the key defining features 
of the issuers that in our view should be subject to the disclosure and procedural requirements of 
Subpart 1600, while remaining sufficiently broad to take into account potential variations in the 
SPAC structure and the possibility that SPACs may continue to evolve.    In particular, the 
proposed definition would encompass issuers that would otherwise be subject to Rule 419’s 
investor protection requirements but for the fact that the issuer is not issuing “penny stock.”
53
  At 
the same time, the proposed definition does not include criteria such as listing on a national 
securities exchange, certain requirements that are applicable to exchange-traded SPACs,
54
 or the 
issuance of redeemable securities, as these criteria would 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. 
The term “de-SPAC transaction” would be defined as a business combination such as a 
merger, consolidation, exchange of securities, acquisition of assets, or similar transaction 
                                                 
50
  Blank check companies subject to Rule 419 must comply with a comprehensive set of disclosure and investor 
protection requirements under the rule and would not be subject to the requirements applicable to SPACs under the 
proposed rules.  See supra notes 6 and 13. 
51
  Proposed Item 1601(b). 
52
  In this regard, we note that the securities of SPACs were not listed on national securities exchanges until the 
2000s. 
53
  See supra note 12. 
54
  See infra note 57. 

26 
 
involving a SPAC and one or more target companies (contemporaneously, in the case of more 
than one target company).
55
  The term “target company” would be defined as an operating 
company, business, or assets.
56
  As proposed, these definitions are intentionally broad and, taken 
together, would encompass more typical transactions such as the acquisition of one or more 
private operating companies by a SPAC, as well as less common transactions that may or may 
not be permitted under exchange listing rules but for which the proposed enhanced disclosure 
and procedural requirements described below may be appropriate because they raise the same 
investor protection concerns.
57
 
The term “SPAC sponsor” would be defined 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.
58
  Although a sponsor of a 
SPAC may perform a variety of functions within the SPAC’s structure, the proposed definition 
encompasses activities that, based on the staff’s experience reviewing SPAC filings and public 
                                                 
55
  Proposed Item 1601(a). 
56
  Proposed Item 1601(d). 
57
  The proposed definitions would apply to both exchange-traded SPACs and SPACs traded in the over-the-counter 
market.  Some transactions encompassed by the proposed definitions may not be permitted under exchange listing 
rules for SPACs, and nothing in this release is intended to indicate that such transactions are or should be permitted 
under the exchanges’ SPACs listing rules or that exchange listing requirements should not, at a minimum, apply to 
SPACs seeking an exchange listing.  The Commission has consistently recognized the importance of national 
securities exchange listing standards.  Among other things, such listing standards help ensure that exchange-listed 
companies will have sufficient public float, investor base, and trading interest to provide the depth and liquidity 
necessary to promote fair and orderly markets.  Furthermore, Section 6(b)(5) of the Exchange Act requires exchange 
listing rules be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable 
principles of trade, and protect investors and the public interest.  The Commission has also stated that listing 
standards are of significant importance to investors that may rely on the status an exchange listing ascribes to a 
security.  See, e.g., Release No. 34-57785 (May 6, 2008) [73 FR 27597, 27599 (May 13, 2008)] (SR-NYSE-2008-
17) (order approving initial and continued listing standards for NYSE exchange-listed SPACs). 
58
  Proposed Item 1601(c).  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.  See infra Section 
II.B. for a discussion of the activities of a sponsor. 

27 
 
commentary, are commonly associated with sponsors of SPACs.  We are proposing to define this 
term broadly so that the appropriate entities or persons are subject to the proposed enhanced 
disclosure requirements applicable to the sponsors of a SPAC.
59
 
Request for Comment 
1. Should we define the term “special purpose acquisition company” as proposed?  Does the 
proposed definition provide a workable approach to determining which issuers would be 
subject to the requirements of proposed Subpart 1600?  Should we define this term 
differently?  If so, how?  For example, are there certain other common characteristics of 
SPACs that should be included in the definition, such as redemption rights, exchange 
listing, the placing of initial public offering proceeds in a trust or escrow account, and/or 
that the de-SPAC transaction must meet a minimum fair market value (e.g., at least 80%) 
of the value of the proceeds in the trust or escrow account?  Should we include a 
reference to “shell company” in the definition? 
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?
60
 
3. Should we define the term “SPAC sponsor” as proposed?  Does the proposed definition 
reflect those activities commonly associated with a SPAC’s sponsor?  Would the 
proposed definition encompass persons or entities that are not commonly considered to 
be sponsors of a SPAC?  If so, how should we revise the definition to avoid scoping in 
such persons or entities?  In regard to natural persons, should we exclude from the scope 
                                                 
59
  Proposed Item 1603. 
60
  See supra notes 13 and 16. 

28 
 
of the definition the activities performed by natural persons in their capacities as directors 
and/or officers of the SPAC, as proposed? 
4. Should we define the term “target company” as proposed?  Is this definition sufficiently 
clear?  Would this definition, in combination with the other proposed definitions, be 
overly broad and encompass transactions that should not be treated as de-SPAC 
transactions? 
5. Are there other terms that we should define in proposed Subpart 1600?  If so, which 
terms and how should we define them? 
6. With respect to the proposed definition of “special purpose acquisition company,” is it 
clear what “has indicated that its business plan” is intended to convey?  Should we 
require registrants to affirmatively state in filings whether they are a special purpose 
acquisition company?  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?  
Should we also amend Schedule 14A, Schedule 14C and Schedule TO to include this 
check box on the cover pages of these schedules? 
B. Sponsors 
 The sponsor’s role is critical to the success of a SPAC.  At the earliest stage, t he sponsor 
typically organizes and manages the SPAC, including appointing the initial directors and officers 
of the SPAC, and provides the initial capital for the SPAC’s operations prior to its initial public 
offering.
61
  In subsequent stages, among other things, the sponsor may work with one or more 
                                                 
61
  See proposed Item 1601(c) for the proposed definition for “SPAC sponsor.”  There is often an identity of interest 
between the sponsor and the SPAC’s officers and directors, in that the same persons may work for both the sponsor 
and the SPAC in different capacities.  In many instances, SPACs will not hold a public election for directors until 

29 
 
investment banks in preparing for the SPAC’s initial public offering and may place the proceeds 
from the offering into a trust or escrow account.  Following the initial public offering, the 
sponsor typically identifies potential candidates for a business combination transaction, 
negotiates the transaction to acquire the target private operating company and promotes the 
transaction to the SPAC’s shareholders.  As discussed above, the value of the sponsor’s 
compensation is usually contingent on the completion of a de-SPAC transaction.
62
 
 In view of the central role of the sponsor in a SPAC’s activities, we are proposing 
Item 1603(a) to require additional disclosure about the sponsor, its affiliates and any promoters
63
 
of the SPAC in registration statements and schedules filed in connection with SPAC registered 
offerings and de-SPAC transactions, including disclosure on the following: 
• The experience, material roles, and responsibilities of these parties, as well as any 
agreement, arrangement or understanding (1) between the sponsor and the SPAC, its 
executive officers, directors or affiliates, in determining whether to proceed with a de-
SPAC transaction and (2) regarding the redemption of outstanding securities; 
• The controlling persons of the sponsor and any persons who have direct and indirect 
material interests in the sponsor, as well as an organizational chart that shows the 
relationship between the SPAC, the sponsor, and the sponsor’s affiliates;  
• Tabular disclosure of the material terms of any lock-up agreements with the sponsor and 
its affiliates; a  nd 
                                                 
the de-SPAC transaction or thereafter.  Some SPACs provide that only the founder shares may vote in director 
elections until the de-SPAC transaction. 
62
  See text accompanying supra notes 14-16. 
63
  The term “promoter” is defined in Securities Act Rule 405 and Exchange Act Rule 12b-2. 

30 
 
• The nature and amounts of all compensation that has or will be awarded to, earned by, or 
paid to the 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 sponsor, its affiliates and any promoters upon the 
completion of a de-SPAC transaction.
64
 
Proposed Item 1603(a)’s disclosure requirements are intended to provide a SPAC’s 
prospective investors and existing shareholders with detailed information relating to the sponsor 
that could be important in understanding and analyzing a SPAC, including how the rights and 
interests of the sponsor, its affiliates, and any promoters may differ from,  and may conflict with, 
those of public shareholders.
65
  Given that a SPAC does not conduct an operating business, 
information about the background and experience of the sponsor is often important in assessing a 
SPAC’s prospects for success and may be a relevant factor in the market value of a SPAC’s 
securities.
66
  To the extent that a sponsor’s activities and arrangements with a SPAC are carried 
out through, or in conjunction with, the sponsor’s affiliates and any promoters of the SPAC, we 
are proposing to require corresponding disclosure with respect to these affiliates and promoters.  
In addition, enhanced disclosure on the sponsor’s compensation and the 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 i n 
                                                 
64
  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. 
65
  Proposed Item 1603(a) would operate in addition to existing disclosure requirements that may be applicable to a 
SPAC’s arrangements with its sponsor such as Item 701 of Regulation S-K, which requires disclosure about, among 
other things, the terms of any private securities transactions between a SPAC and its sponsor within the past three 
years, and Item 404 of Regulation S-K, which requires disclosure about certain related party transactions. 
66
  See, e.g., Lin, Lu, Michaely, and Qin, supra note 30; Andrea Pawliczek, A. Nicole Skinner, and Sarah L.C. 
Zechman, Signing Blank Checks: The Roles of Reputation and Disclosure in the Face of Limited Information (SSRN 
Working Paper, 2021). 

31 
 
evaluating the potential risks and merits of a proposed de-SPAC transaction because it could 
highlight additional motivations for completing a de-SPAC transaction. 
While proposed Item 1603 calls for detailed disclosure about the sponsor, its experience 
and its rights and interests, we note that some of this information is already being provided, to an 
extent, by SPACs.  Codifying and amplifying these existing disclosure practices would help 
ensure that issuers provide consistent and comprehensive information across transactions, so that 
investors can make more informed investment, voting and redemption decisions. 
Request for Comment 
7. Should we require additional information regarding sponsors of SPACs pursuant to 
Item 1603(a), as proposed?  If so, should we also require disclosure regarding the 
sponsor’s affiliates and any promoters of the SPAC, as proposed? 
8. Should we require disclosure about the experience and material roles and responsibilities 
of the sponsor, its affiliates and any promoters of the SPAC in directing and managing 
the SPAC’s activities, as proposed?  How would investors use this information? 
9. Should we require more or less information about the sponsor’s compensation and 
reimbursements?  Should we require this disclosure only when the amounts exceed a de 
minimis threshold?  If so, what should the de minimis threshold be? 
10. Should we require additional disclosure about the sponsor’s agreements, arrangements, or 
understandings in determining whether to proceed with a de-SPAC transaction and 
regarding the redemption of outstanding securities of the SPAC, as proposed? 
11. Should we require disclosure about the controlling persons of the sponsor and any 
persons who have direct and indirect material interests in the sponsor, as proposed?  
Should we take a different approach than requiring disclosure on persons with “material 

32 
 
interests” in the sponsor?  Should we consider requiring additional disclosure on the 
controlling persons of entities that own or control the sponsor?  Should we require an 
organizational chart that shows the relationship among the SPAC, the sponsor, and the 
sponsor’s affiliates, as proposed?  Would both narrative disclosure and an organizational 
chart be helpful to investors? 
12. Should we require disclosure of the material terms of any lock-up agreements with the 
sponsor and its affiliates as proposed?  Would the proposed requirement to provide this 
disclosure in a tabular format be helpful to investors?  Should we instead require this 
disclosure in a non-tabular format? 
13. Is there additional information regarding sponsors that should be disclosed?  Should we 
require more or less information about the sponsor depending on the size or other 
characteristics of a SPAC? 
14. Should additional disclosure be required regarding affiliated entities involved in the 
SPAC’s operations? 
C. Conflicts of Interest 
Within a SPAC’s structure, there may be a number of potential or actual conflicts of 
interest between the sponsor and public investors that could influence the actions of the SPAC.  
A notable example is the potential conflict of interest stemming from the contingent nature of the 
sponsor’s compensation, whereby the sponsor and its affiliates have significant financial 
incentives to pursue a business combination transaction even though the transaction could result 
in lower returns for public shareholders than liquidation of the SPAC or an alternative 

33 
 
transaction.
67
  Other conflicts of interest may arise when a sponsor is a sponsor of multiple 
SPACs and manages several different SPACs at the same time; when a sponsor and/or its 
affiliates hold financial interests in, or have contractual obligations to, other entities; or when a 
SPAC enters into a business combination with a private operating company affiliated with the 
sponsor, the SPAC, or the SPAC’s founders, officers, or directors.  Further, a SPAC’s officers 
often do not work full-time at the SPAC, may work for both the sponsor and the SPAC, and/or 
may have responsibilities at other companies, which may impact such officers’ ability to devote 
adequate time and attention to the activities of the SPAC and may influence their decision to 
proceed with a particular de-SPAC transaction.  These potential conflicts of interest could be 
particularly relevant for investors to the extent that they arise when a SPAC and its sponsor are 
evaluating and deciding whether to recommend a business combination transaction to 
shareholders, especially as the SPAC nears the end of the period to complete such a transaction 
under, e.g., its governing instruments or the proposed safe harbor under the Investment Company 
Act,
68
 if adopted, and the sponsor may be under pressure to find a target and complete the de-
SPAC transaction on less favorable terms or face losing the value of its securities in the SPAC. 
We are proposing Item 1603(b) to require disclosure of any actual or potential material 
conflict of interest between (1) the sponsor or its affiliates or the SPAC’s officers, directors, or 
promoters, and (2) unaffiliated security holders.  This would include any conflict of interest in 
determining whether to proceed with a de-SPAC transaction and any conflict of interest arising 
from the manner in which a SPAC compensates the sponsor or the SPAC’s executive officers 
and directors, or the manner in which the sponsor compensates its own executive officers and 
                                                 
67
  See, e.g., Usha Rodrigues and Mike Stegemoller, Exit, Voice, and Reputation: The Evolution of SPACs, 37 DEL. 
J. CORP. L.   849 (2013). 
68
  See infra Section VI. 

34 
 
directors.   In addition, we are proposing Item 1603(c) to require disclosure regarding the 
fiduciary duties each officer and director of a SPAC owes to other companies.  Such disclosure 
could allow investors to assess whether and to what extent officers or directors may have to 
navigate a conflict of interest consistent with their obligations under the laws of the jurisdiction 
of incorporation or organization, may be compelled to act in the interest of another company or 
companies that compete with the SPAC for business combination opportunities, or may have 
their attention divided such that it may affect their decision-making with respect to the SPAC. 
The proposed disclosure requirements would provide a SPAC’s shareholders and 
prospective investors with a more complete understanding of any actual or potential material 
conflicts of interest associated with the SPAC and the benefits that may be realized by the 
sponsor and its affiliates and any promoters arising from these conflicts of interest.  Such 
disclosure could allow investors to more accurately assess the potential risk associated with the 
conflicts of interest in a SPAC.  Further, disclosure about the fiduciary duties a SPAC’s officers 
and directors owe to other companies could allow the SPAC’s shareholders and prospective 
investors to better assess the actions of these officers and directors in managing the SPAC’s 
activities and in determining to proceed with a proposed de-SPAC transaction. 
Request for Comment 
15. Should we require disclosure with respect to material conflicts of interest that may arise 
in connection with de-SPAC transactions, as proposed?  Should we include a materiality 
threshold, as proposed?  Is it clear what would constitute an actual or potential material 
conflict of interest, or is further guidance or specification needed?  For example, are there 
other specific conflicts of interest that we should identify in the rule? 

35 
 
16. Would the proposed disclosure requirements adequately inform investors as to potential 
material conflicts of interest?  Are there approaches that could minimize potential 
boilerplate or duplicative disclosure?  Should we require that this disclosure be presented 
in a tabular format? 
17. Is there any additional information that we should require regarding conflicts of interest?  
For example, should we also require a description of any policies and procedures used or 
to be used to minimize potential or actual conflicts of interest?  Should we require 
disclosure of how the board of directors assesses and manages such conflicts, in 
particular where directors themselves have conflicts of interest? 
18. Should SPACs be required to provide additional disclosure regarding material conflicts 
of interest in Exchange Act reports following their initial public offerings?  For example, 
should periodic reports require that any changes in previously disclosed conflicts of 
interest be reported?  Should we require disclosure about material conflicts of interest 
relating to both the SPAC and the identified target company in the Form 8-K that is 
required to be filed in connection with the announcement of a de-SPAC transaction? 
19. Should we require disclosure about any fiduciary duties each officer and director of a 
SPAC owes to other companies, as proposed?  How would investors use this 
information?  Should we require additional or different disclosure regarding these 
fiduciary duties?  Would this requirement potentially result in the disclosure of 
information that is not relevant to SPAC investors?  Should this disclosure requirement 
be focused instead on material conflicts of interests arising from these fiduciary duties to 
other companies?  Should we require that this disclosure be provided in a tabular format?  
Should we consider other approaches to this disclosure? 

36 
 
D. Dilution 
We are proposing Items 1602(a)(4), 1602(c) and 1604(c) to require additional disclosure 
about the potential for dilution in (1) registration statements filed by SPACs, including those for 
initial public offerings,  and (2) de-SPAC transactions.  Proposed Item 1602(c) would be 
applicable to all registered offerings by a SPAC other than a de-SPAC transaction, while 
proposed Item 1604(c) would be applicable to all de-SPAC transactions.  We are also proposing 
Item 1602(a)(4) to require simplified tabular dilution disclosure on the prospectus cover page in 
registered offerings by a SPAC on Form S-1 or F-1 other than for de-SPAC transactions. 
There are a number of potential sources of dilution in a SPAC’s structure, including 
dilution resulting from shareholder redemptions, sponsor compensation, underwriting fees, 
outstanding warrants and convertible securities, and PIPE financings.  This dilution may be 
particularly pronounced for the shareholders of a SPAC who do not redeem their shares prior to 
the consummation of the de-SPAC transaction and who may not realize or appreciate that these 
costs are disproportionately borne by the non-redeeming shareholders.
69
  According to one study, 
the median dilutive impact of sponsor compensation, underwriting fees, warrants, and rights 
equaled 50.4% of the cash raised in a SPAC initial public offering.
70
  Further, several 
commentators have asserted that the complexity of the disclosures in these transactions makes it 
difficult for investors to understand the dilutive impact of sponsor compensation on the SPAC’s 
non-redeeming shareholders.
71
 
                                                 
69
  For example, the dilutive impact of underwriting fees deferred until the completion of a de-SPAC transaction and 
the number of shares received by the sponsor is not required to be disclosed in a manner that takes into account the 
additional dilution caused by redemptions. 
70
  Klausner, Ohlrogge, and Ruan, supra note 17. 
71
  See, e.g., AFR Letter; Klausner, Ohlrogge, and Ruan, supra note 17; Michael Klausner, Michael Ohlrogge, and 
Harald Halbhuber, SPAC Disclosure of Net Cash Per Share (SSRN Working Paper, 2022). 

37 
 
In light of the potential for significant dilution embedded within the typical SPAC 
structure, enhanced disclosure regarding dilution could enable investors in a SPAC initial public 
offering 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.
72
  We are 
therefore proposing to require dilution disclosure in registration statements filed by SPACs other 
than for de-SPAC transactions that would require a description of material potential sources of 
future dilution following a SPAC’s initial public offering, as well as tabular disclosure of the 
amount of potential future dilution from the public offering price that will be absorbed by non-
redeeming SPAC shareholders, to the extent quantifiable.
73
  This proposed disclosure would be 
in addition to the disclosure already required under Item 506 of Regulation S-K.
74
 
In addition, we are proposing to require simplified tabular dilution disclosure 
incorporating a range of potential redemption levels on the prospectus cover page of SPAC 
registration statements on Forms S-1 and F-1.
75
  In providing disclosure pursuant to Item 506, 
SPACs currently provide prospective investors with estimates of dilution as a function of the 
                                                 
72
  In this regard, we note that the initial purchasers in SPAC initial public offerings often resell or redeem their 
shares prior to the completion of the de-SPAC transaction.  See, e.g., Benjamin Mullin and Amrith Ramkumar, 
BuzzFeed Suffers Wave of SPAC Investor Withdrawals Before Going Public, The Wall Street Journal, Dec. 2, 2021.  
See also supra note 17. 
73
  Proposed Item 1602(c). 
74
  Under Item 506, a company is required to provide disclosure regarding dilution when (1) the company is not 
subject to the reporting requirements of the Exchange Act and is registering an offering of common equity securities 
where there is substantial disparity between the public offering price and the effective cash cost to officers, directors, 
promoters, and affiliated persons of common equity acquired by them in transactions during the past five years, or 
which they have the right to acquire; or (2) the company is registering an offering of common equity securities and 
the company has had losses in each of its last three fiscal years and there is a material dilution of the purchasers' 
equity interest.  In the first instance, a company must provide a comparison of the public contribution under the 
proposed public offering and the effective cash contribution of such persons.  In both instances, Item 506 requires 
disclosure of the net tangible book value per share before and after the distribution; the amount of the increase in 
such net tangible book value per share attributable to the cash payments made by purchasers of the shares being 
offered; and the amount of the immediate dilution from the public offering price which will be absorbed by such 
purchasers. 
75
  Proposed Item 1602(a)(4). 

38 
 
difference between the initial public offering price and the pro forma net tangible book value per 
share after the offering.    These estimates often include a n assumption that the maximum 
allowable number of shares eligible will be redeemed prior to the de-SPAC transaction.
76
  While 
this information can be useful, investors may benefit from a more detailed and prominent tabular 
presentation of this dilution disclosure that shows various potential levels of redemption, not just 
the upper bound on dilution attributable to redemptions.  We are therefore proposing to require 
that registration statements on Form S-1 or Form F-1 filed by SPACs, including for an initial 
public offering, include on the prospectus cover page a simplified dilution table, in the following 
format, which would present the reader with an estimate of the remaining pro forma net tangible 
book value per share at quartile intervals up to the maximum redemption threshold: 
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 
     
 
The proposed Item 1602(a)(4) dilution disclosure would be calculated in a manner 
consistent with the methodologies and assumptions more fully articulated in the disclosures 
provided pursuant to Item 506 elsewhere in the prospectus.  If the initial public offering includes 
an overallotment option, the table would need to include separate rows showing remaining pro 
forma net tangible book value per share with the exercise and without the exercise of the over-
allotment option.  We are also proposing to require that SPACs provide a cross-reference to the 
more detailed dilution disclosure later in the prospectus when providing this tabular disclosure 
on the prospectus cover page. 
                                                 
76
  In practice, redemption rates rarely reach this level. 

39 
 
In regard to de-SPAC transactions, investors could benefit from clearer dilution 
disclosure that takes into account the unique characteristics of the SPAC structure, including any 
terms negotiated with the target private operating company, as well as the potential for additional 
financing from PIPE investors.  At the time of a de-SPAC transaction, investors are making a 
decision as to whether to remain a shareholder of the post-business combination company going 
forward.  Apart from the operating success of the post-business combination company, dilution 
is likely to have a significant impact on the value of a shareholder’s continued investment in the 
company.  We are therefore proposing Item 1604(c) to require disclosure of each material 
potential source of additional dilution that non-redeeming shareholders may experience at 
different phases of the SPAC lifecycle by electing not to redeem their shares in connection with 
the de-SPAC transaction.
77
 
For example, to the extent material, this disclosure would need to explain that, when a 
SPAC’s shareholders retain their warrants after redeeming their shares prior to the de-SPAC 
transaction, the non-redeeming shareholders and the post-business combination company may 
face potential additional dilution.  Proposed Item 1604(c)(1) would also require a sensitivity 
analysis in a  tabular format that shows the amount of potential dilution under a range of 
reasonably likely redemption levels and quantifies the increasing impact of dilution on non-
redeeming shareholders as redemptions increase.  We are also proposing to require disclosure of 
a description of the model, methods, assumptions, estimates, and parameters necessary to 
understand the sensitivity analysis disclosure. 
                                                 
77
  Depending on the circumstances, material potential sources of additional disclosure may include dilution from 
sponsor compensation, underwriting fees, outstanding warrants and convertible securities, and financing transactions 
(including PIPE transactions). 

40 
 
Request for Comment 
20. Should we require disclosure of material potential sources of future dilution in 
registration statements filed by SPACs for initial public offerings and in disclosure 
documents for de-SPAC transactions, as proposed?  How would investors benefit from 
this additional disclosure?  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?  Should we provide additional 
explanation on how to calculate the amount of dilution for purposes of these disclosure 
requirements?  Should we provide further guidance about disclosures that SPACs should 
consider making to help non-affiliated shareholders understand the potential for dilution 
and the consequences of dilution for non-affiliated shareholders? 
21. Should we also consider requiring enhanced dilution disclosure in other Commission 
filings?  If so, what additional information should we require in this context?  How would 
investors use this additional dilution disclosure? 
22. Should we require simplified tabular disclosure regarding dilution on the prospectus 
cover page of a Form S-1 or Form F-1, as proposed?  Should we require additional or less 
information, or alternative information, in the tabular disclosure?  For example, would a 
tabular presentation of cash remaining per non-redeemed share in lieu of a tabular 
presentation of remaining pro forma net tangible book value per share be useful to 
investors?  Should we consider adding a similar requirement to provide simplified tabular 
disclosure (1) in the prospectus summary of a Form S-1 or F-1 or (2) on the prospectus 

41 
 
cover page and/or in the prospectus summary of a Form S-4 or Form F-4 for a de-SPAC 
transaction?  If so, what information should be included in such tabular disclosure?  Are 
there other ways to present the potential for dilution to investors in a more accessible 
format? 
23. Should we require, in disclosure documents for de-SPAC transactions, a  sensitivity 
analysis in a  tabular format, as proposed?  Should we consider additional or alternative 
approaches to this disclosure requirement? 
24. Are there any significant challenges in providing the proposed enhanced dilution 
disclosure at the initial public offering stage or at the de-SPAC transaction stage? 
25. Should we consider additional amendments that would highlight or simplify dilution 
disclosure so that it is more clear and accessible for investors? 
E. Prospectus Cover Page and Prospectus Summary Disclosure 
In response to concerns raised about the complexity of disclosures in Securities Act 
registration statements filed by SPACs for initial public offerings and for de-SPAC 
transactions,
78
 we are proposing Item 1602 to require that certain information be included on the 
prospectus cover page and in the prospectus summary using plain English principles.
79
  Given 
the unique nature of SPAC offerings and the potential risks they present to investors, investors 
could benefit from requiring the issuer to highlight certain disclosures on the cover page and in 
the prospectus summary,  in a form that can be more easily read and understood. 
                                                 
78
  See, e.g., IAC Recommendations, supra note 37 (expressing concerns “relating to the effectiveness of disclosure 
about the risks, economics and mechanics of SPACs as a result of the complexity of these transactions and the 
staggered nature of the disclosure process”); Rodrigues Testimony; Klausner, Ohlrogge, and Ruan, supra note 17. 
79
  See Securities Act Rule 421(d).  See supra note 38. 

42 
 
1. Prospectus Cover Page 
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.  In regard to registered offerings (including 
initial public offerings) by SPACs other than de-SPAC transactions, we are proposing 
Item 1602(a) to require information on the prospectus cover page in plain English about, among 
other things, the time frame for the SPAC to consummate a de-SPAC transaction, redemptions, 
sponsor compensation, dilution (including simplified tabular disclosure), and conflicts of 
interest.  In regard to de-SPAC transactions, we are proposing Item 1604(a) to require that 
SPACs include information on the prospectus cover page in plain English about, among other 
things, the fairness of the de-SPAC transaction, material financing transactions, sponsor 
compensation and dilution, and conflicts of interest. 
Investors should benefit from having these significant aspects of SPAC offerings and de-
SPAC transactions disclosed prominently on the prospectus cover page in plain English,
80
 in 
addition to the information otherwise required under Item 501 of Regulation S-K.  Although 
most SPACs already provide much of the proposed information on prospectus cover pages, the 
proposed rules would standardize this information across all registration statements filed by 
SPACs for initial public offerings and for de-SPAC transactions. 
2. Prospectus Summary 
 Item 503 of Regulation S-K requires a brief summary of the information in the prospectus 
where the length or complexity of the prospectus makes a summary useful.  While the 
information that should be included in a prospectus summary will depend on the particular 
                                                 
80
  Id. 

43 
 
offering and issuer, a prospectus summary should provide disclosure in clear language of the 
most significant aspects of the transaction being registered.
81
  In light of the often complex 
disclosure in registration statements filed by SPACs, a requirement that SPACs present certain 
information in the prospectus summary in plain English should help investors more easily to 
identify and assess those aspects of the transaction that are likely to be important in their 
investment, voting, and redemption decisions.
82
 
In regard to registered offerings other than de-SPAC transactions, we are proposing 
Item 1602(b) to require that SPACs include the following information in the prospectus 
summary in plain English: 
• The process by which a potential business combination candidate will be identified and 
evaluated; 
• Whether shareholder approval is required for the de-SPAC transaction;  
• The material terms of the trust or escrow account, including the amount of gross offering 
proceeds that will be placed in the trust; 
• The material terms of the securities being offered, including redemption rights; 
• Whether the securities being offered are the same class as those held by the sponsor and 
its affiliates; 
• The length of the time period during which the SPAC intends to consummate a de-SPAC 
transaction, and its plans if it does not do so, including, whether and how the time period 
may be extended, the consequences to the sponsor of not completing an extension of this 
                                                 
81
  See Instruction to Item 503(a) and 17 CFR 230.421(b) (Securities Act Rule 421(b)). 
82
  In the context of asset-backed offerings, the Commission previously specified that certain information be 
included on the prospectus cover page and in the prospectus summary.  See Items 1102 and 1103 of Regulation S-K.  
Asset-Backed Securities, Release No. 33-8518 (Dec. 22, 2004) [70 FR 1506 (Jan. 7, 2005)].  See also Item 3 of Form 
S-4 and Item 3 of Form F-4 (specifying that certain information be included in the prospectus summary). 

44 
 
time period, and whether shareholders will have voting or redemption rights with respect 
to an extension of time to consummate a de-SPAC transaction; 
• Any plans to seek additional financing and how such additional financing might impact 
shareholders;  
• Tabular disclosure of sponsor compensation and the extent to which material dilution 
may result from such compensation; and 
• Material conflicts of interest. 
Based on the Commission staff’s experience in reviewing registration statements filed by 
SPACs, we believe these topics are among those that investors are likely to find most important 
when considering an investment in the SPAC prior to the identification of a potential business 
combination candidate. 
In regard to registered de-SPAC transactions, we are proposing Item 1604(b) to require 
that registrants include the following information in the prospectus summary in plain English: 
• The background and material terms of the de-SPAC transaction; 
• The fairness of the de-SPAC transaction; 
• Material conflicts of interest; 
• Tabular disclosure on sponsor compensation and dilution; 
• Financing transactions in connection with de-SPAC transactions; and 
• Redemption rights. 
Based on the Commission staff’s experience in reviewing registration statements for de-SPAC 
transactions, we believe investors would find this information, in particular those topics that 
illuminate potential conflicts of interest and the overall fairness of the proposed transaction, 
important when making an investment decision at the de-SPAC transaction stage. 

45 
 
Request for Comment 
26. Would requiring certain information in regard to SPAC offerings on the prospectus cover 
page and in the prospectus summary make it easier for investors to review and understand 
the disclosures in these registration statements?  Are there other ways we could make 
these registration statements easier for investors to understand? 
27. Should we require the proposed cover page disclosures for SPAC initial public offerings 
and de-SPAC transactions?  Is there other information that we should require to be 
included on the cover page, either in addition to, or in lieu of, the information proposed to 
be required?  Conversely, are there any proposed additional cover page disclosures that 
we should not adopt? 
28. Should we require the inclusion of the proposed specified information in the prospectus 
summary?  Is there other information that we should require to be included   in the 
prospectus summary? 
29. Is the subset of the disclosure under proposed Item 1605 that we are proposing to require 
to be more prominently presented on the prospectus cover page and in the prospectus 
summary via proposed Items 1604(a) and (b) the most informative or otherwise important 
information for purposes of the prospectus cover page and the prospectus summary?  
Should any additional disclosure provided pursuant to proposed Item 1605 be added to or 
replace an existing element of the information proposed to be required on the prospectus 
cover page or in the prospectus summary? 
30. Are there other changes we should consider in regard to the prospectus cover page and 
prospectus summary?  For example, should we impose any additional formatting 
requirements, such as the use of tables or bullet points, for certain information in the 

46 
 
prospectus summary?  Would such formatting requirements improve the clarity of this 
disclosure? 
F. Disclosure and Procedural Requirements in D e-SPAC Transactions 
We are proposing specialized disclosure and procedural requirements in de-SPAC 
transactions so that investors can better understand and evaluate the merits of a prospective de-
SPAC transaction.
83
  The proposed rules would require: (1) additional disclosures on the 
background of and reasons for the transaction; (2) a statement from the SPAC as to whether it 
reasonably believes that the de-SPAC transaction and any related financing transaction are fair or 
unfair to unaffiliated security holders; (3) disclosure on any outside report, opinion, or appraisal 
relating to the fairness of the transaction; and (4) additional information in a Schedule TO filed 
in connection with a de-SPAC transaction, as well as clarify the need to comply with the 
procedural requirements of the tender offer rules when filing such a Schedule TO.
84
 
1. Background of and Reasons for the De-SPAC Transaction; Terms and 
Effects 
 
In order to provide investors with a more complete understanding of the de-SPAC 
transaction, we are proposing Item 1605 of Regulation S-K which would require disclosure of 
the background, material terms, and effects of the de-SPAC transaction, including: 
                                                 
83
  As discussed above, a SPAC is required to provide its shareholders with a proxy statement on Schedule 14A if 
shareholder approval is required in a de-SPAC transaction.  If a SPAC is registering an offering of its shares to be 
issued in the de-SPAC transaction, the SPAC generally files a registration statement on Form S-4 or F-4.  
Alternatively, if shareholder approval is required but the SPAC is not soliciting proxies from its shareholders, the 
SPAC is required to provide an information statement on Schedule 14C.  Otherwise, if no registration statement, 
proxy statement or information statement is required, the SPAC must disseminate a Schedule TO (tender offer 
statement) to its shareholders.  See Section IV.A. for a discussion of proposed Rule 145a, which would affect when a 
SPAC may be required to file a Form S-4 or F-4 in connection with a de-SPAC transaction. 
84
  In addition, we are proposing new rules applicable to business combinations involving shell companies more 
generally, which would include de-SPAC transactions.  See infra Section IV. 

47 
 
• 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;
85
 
• A brief description of any related financing transaction, including any payments from the 
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;
86
 and 
• Disclosure regarding the accounting treatment and the federal income tax consequences 
of the de-SPAC transaction, if material.
87
 
These disclosure requirements are modeled, in part, on Item 1004(a)(2) and Item 1013(b) 
of Regulation M-A
88
 and are intended to provide investors with, among other things, an 
                                                 
85
  For example, this disclosure could encompass whether any portion of the underwriting fees in connection with a 
SPAC’s initial public offering is contingent upon the SPAC’s completion of a de-SPAC transaction and whether the 
underwriter in the SPAC’s initial public offering has provided additional services to the SPAC following the initial 
public offering, such as locating potential target companies, providing financial advisory services, acting as a 
placement agent for PIPE transactions, and/or arranging debt financing.  For a discussion of the role of the 
underwriter in connection with a de-SPAC transaction, see infra Section III.F. 
86
  This proposed disclosure requirement is intended to address situations where the shares of a SPAC are being 
exchanged for shares of a new holding company or the target company in a de-SPAC transaction. 
87
  Proposed Items 1605(a) and (b).  This disclosure would be required in any Form S-4 or F-4 or Schedule 14A, 
14C, or TO filed in connection with a de-SPAC transaction.  We note that registrants are already subject to similar 
disclosure requirements in Schedules 14A and 14C and in Forms S-4 and F-4.  These proposed disclosure 
requirements are intended to complement these existing requirements by setting forth specialized disclosure 
requirements that are specific to de-SPAC transactions. 
88
  17 CFR 229.1000 through 229.1016.  Regulation M-A is a subpart (the 1000 series) of Regulation S-K.  
Item 1004(a)(2) sets forth disclosure requirements regarding the material terms of mergers or similar transactions, 
and Item 1013(b) requires disclosure of alternative means considered by the subject company or affiliate in the 
context of a going-private transaction.  In our view, these rules are appropriate models for the proposed specialized 
disclosure requirements for de-SPAC transactions, in that Item 1004(a)(2) sets forth disclosure requirements for 
mergers generally and the same potential for self-interested transactions exists in de-SPAC transactions as in going-
private transactions. 

48 
 
enhanced basis upon which to evaluate a SPAC’s reasons for proposing a de-SPAC transaction 
and for choosing a particular structure and financing for the transaction, through a specialized 
disclosure rule tailored to SPACs that would address disclosure issues more specific to de-SPAC 
transactions.  These proposed requirements would also help promote consistent disclosure, which 
would allow for greater comparability of these disclosures across de-SPAC transactions.  As 
proposed, Item 1605(b) would require a reasonably detailed discussion of the reasons for, and the 
structure and timing of, a proposed de-SPAC transaction, which could include a discussion of the 
key events and activities in identifying the target private operating company and in negotiating 
the terms of the merger or acquisition, as well as the material factors considered by a SPAC’s 
board of directors in approving the terms of the proposed de-SPAC transaction and in 
recommending shareholder approval of the transaction. 
In addition, we are proposing Item 1605(c) to require disclosure of the effects of the de-
SPAC transaction and any related financing transaction on the SPAC and its affiliates, the 
sponsor and its affiliates, the private operating company and its affiliates, and unaffiliated 
security holders of the SPAC.  Such disclosure could allow investors to better assess whether the 
transactions have been structured in a manner that would benefit one of these parties in particular 
or that would be to the detriment of other parties.   As proposed, the disclosure must provide a 
reasonably detailed discussion of both the benefits and detriments to non-redeeming shareholders 
of the de-SPAC transaction and any related financing transaction, with such benefits and 
detriments quantified to the extent practicable.
89
  For example, if the sponsor’s interests and 
returns may differ from those of public investors in regard to a prospective de-SPAC transaction, 
the disclosure should describe and quantify, to the extent practicable, dollar amounts or 
                                                 
89
  Proposed Item 1605(c). 

49 
 
prospective returns the sponsor and its affiliates stand to gain or lose that are dependent on the 
completion of the transaction. 
We are also proposing Item 1605(d) to require disclosure of the SPAC’s sponsors’, 
officers’ and directors’ material interests in the de-SPAC transaction or any related financing 
transaction, including any fiduciary or contractual obligations to other entities and any interest 
in, or affiliation with, the private operating company that is the target of the de-SPAC 
transaction.  This proposed disclosure requirement i s intended to address, among other things, 
the concern that a sponsor may be proposing a de-SPAC transaction that will produce benefits or 
detriments that are not fully disclosed to investors.
90
 
Under Item 403 of Regulation S-K, SPACs currently provide tabular disclosure regarding 
the beneficial ownership of its equity or voting securities, as applicable, by management and 
beneficial owners of more than 5% of a class of voting securities.
91
  The proposed disclosure 
requirement in Item 1605(d) would be broader than Item 403, and would require disclosure of 
any material interests that the sponsor and the SPAC’s officers and directors have in a de-SPAC 
transaction or any related financing transaction, including fiduciary or contractual obligations to 
other entities as well as any interest in, or affiliation with, the target company.  The proposed 
disclosure requirement would also encompass material interests that are non-pecuniary in nature 
that may nevertheless affect the decision to proceed with a prospective de-SPAC transaction or 
related financing transaction.  In the context of a de-SPAC transaction, this disclosure could help 
investors, when making an investment, voting or redemption decision with respect to the de-
                                                 
90
  See, e.g., IAC Recommendations, supra note 37 (stating that “there may be financial arrangements that constitute 
conflicts of interest that are not fully disclosed or understood by investors”); Rodrigues and Stegemoller, supra note 
17; Klausner, Ohlrogge, and Ruan, supra note 17; Deane Testimony. 
91
  Under Item 403, beneficial ownership is determined in accordance with 17 CFR 240.13d-3(d)(1) (Exchange Act 
Rule 13d-3(d)(1)), pursuant to which a person is generally deemed to be the beneficial owner of securities that the 
person has the right to acquire within 60 days. 

50 
 
SPAC transaction, to assess whether, on balance, the benefits of the de-SPAC transaction justify 
the detriments, and particularly whether the sponsor is motivated to complete a de-SPAC 
transaction by interests not held by all investors.   
Proposed Item 1605(e) would require disclosure of whether or not security holders are 
entitled to any redemption or appraisal rights, and if so, a summary of the redemption or 
appraisal rights.
92
  Under the proposed rules, SPACs would be required to disclose, among other 
things, whether shareholders may redeem their shares regardless of whether they vote in favor of 
or against a proposed de-SPAC transaction, or abstain from voting, and whether shareholders 
have the right to redeem their securities at the time of any extension of the time period to 
complete a de-SPAC transaction.  If there are no redemption or appraisal rights available for 
security holders who object to the de-SPAC transaction, the proposed rules would require 
disclosure of any other rights that may be available to security holders under the law of the 
jurisdiction of organization.  These disclosures would help investors better assess the impact of 
any redemption or appraisal rights on a proposed de-SPAC transaction, including whether the 
existence of such rights might lead some investors to redeem their securities after voting in favor 
of a de-SPAC transaction.
93
 
                                                 
92
  This proposed disclosure requirement would build upon, and be in addition to, the existing disclosure requirement 
in Item 202 of Regulation S-K (Description of registrant’s securities).  Under Item 202, SPACs are currently 
required to disclose the redemption provisions of their capital stock being registered, such as whether redemptions 
would be required under certain circumstances at the SPAC’s option, e.g., whether a SPAC may require the 
redemption of warrants held by public shareholders for nominal consideration if the underlying shares trade above a 
certain threshold price. 
93
  One commentator has observed that SPAC shareholders may vote in favor of a proposed de-SPAC transaction 
while redeeming their shares prior to the closing of the transaction, such that the vote is decoupled from any 
economic interest in the post-business combination company.  Rodrigues and Stegemoller, supra note 17.  See also 
supra note 29. 

51 
 
Request for Comment 
31. Would the proposed disclosure requirements provide investors with important 
information regarding the background of and reasons for a de-SPAC transaction?  Is there 
any additional information about the background of and reasons for the de-SPAC 
transaction that we should require to be disclosed?  Are there any additional or alternative 
requirements that we should consider to further improve the disclosures about de-SPAC 
transactions? 
32. Should we adopt the proposed disclosure requirements with respect to the effects of the 
de-SPAC transaction and any related financing transaction, as proposed?  Should we 
require additional or alternative disclosure regarding the effects of the de-SPAC 
transaction and any related financing transaction? 
33. Should we require disclosure 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?  Should we require additional or alternative 
disclosure regarding the interests of these parties in the de-SPAC transaction? 
34. Should we require disclosure regarding whether or not security holders are entitled to any 
redemption or appraisal rights and a summary of any such rights, as proposed?  Is there 
additional or alternative disclosure about redemption or appraisal rights that we should 
require? 
35. Would the disclosure requirements in proposed Item 1605 result in duplicative 
disclosures?  If so, are there alternative approaches that we should consider to avoid this 
result? 

52 
 
2. Fairness of the De-SPAC Transaction 
To address concerns regarding potential conflicts of interest and misaligned incentives in 
connection with the decision to proceed with a de-SPAC transaction and to assist investors in 
assessing the fairness of a particular de-SPAC transaction to unaffiliated investors,
94
 we are 
proposing 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 transaction are fair or unfair to the 
SPAC’s unaffiliated security holders, as well as a discussion of the bases for this statement.
95
  
We are proposing to require that this statement encompass both the de-SPAC transaction and any 
related financing transaction so that the fairness determination would require consideration of the 
combined effects of both transactions, which are often dependent on each other, on unaffiliated 
security holders.  As proposed, a SPAC would be required to include this statement in any Forms 
S-4 and F-4 or Schedules 14A, 14C, and TO filed in connection with a de-SPAC transaction.
96
  
Proposed Item 1606(a) would also require disclosure on whether any director voted against, or 
abstained from voting on, approval of the de-SPAC transaction or any related financing 
                                                 
94
  See supra note 28.  See also Michael Klausner and Michael Ohlrogge, SPAC Governance: In Need of Judicial 
Review (SSRN Working Paper, 2021). 
95
  In this regard, we are proposing an instruction to Item 1606 that a “statement that the special purpose acquisition 
company has no reasonable belief as to the fairness or unfairness of the de-SPAC transaction or any related 
financing transaction to unaffiliated security holders will not be considered sufficient disclosure in response to [Item 
1606(a)].”  As proposed, a SPAC would not be required to disclose that a de-SPAC transaction and any related 
financing transaction are fair but rather would be required to state its reasonable belief as to the fairness or 
unfairness of the transaction as well as the bases for this statement. 
96
  We have modeled certain of the proposed requirements in Item 1606 and Item 1607 (see infra Section II.F.3.), on 
the disclosures required in going-private transactions subject to 17 CFR 240.13e-3 (Exchange Act Rule 13e-3).  See 
Items 1014 and 1015 of Regulation M-A.  In our view, the disclosure requirements in Rule 13e-3 provide an 
appropriate model for the proposed requirements with respect to de-SPAC transactions, in that the conflicts of 
interests and misaligned incentives inherent in going-private transactions are similar to those often present in de-
SPAC transactions. 

53 
 
transaction, and if so, identification of the director and, if known after making a reasonable 
inquiry, the reasons for the vote against the transaction or abstention. 
Under proposed Item 1606(b), a SPAC would be required to discuss in reasonable detail 
the material factors upon which a 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.  These factors would include but not be limited to: the valuation 
of the private operating company; the consideration of any financial projections; any report, 
opinion, or appraisal obtained from a third party; and the dilutive effects of the de-SPAC 
transaction and any related financing transaction on non-redeeming shareholders.  Together, 
these proposed disclosures are intended to help investors assess the reasonableness of the 
SPAC’s stated belief about the fairness of the transaction. 
To provide additional context for understanding the process by which a SPAC 
determined to proceed with a de-SPAC transaction, we are proposing Items 1606(c), (d), and (e), 
which would require disclosure on whether: 
• The de-SPAC transaction or any related financing transaction is structured so that 
approval of at least a majority of unaffiliated security holders is required; 
• A majority of directors who are not employees of the SPAC 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 or any related financing transaction 
and/or preparing a report concerning the fairness of the de-SPAC transaction or any 
related financing transaction; and 
• The de-SPAC transaction or any related financing transaction was approved by a majority 
of the directors of the SPAC who are not employees of the SPAC. 

54 
 
Request for Comment 
36. Should we adopt Item 1606 as proposed? 
37. Should we require a statement from the SPAC as to whether it reasonably believes that 
the de-SPAC transaction and any related financing transaction are fair or unfair to 
unaffiliated security holders, as proposed?  Should the scope of the fairness determination 
include both the de-SPAC transaction and any related financing transaction, as proposed?  
Should the fairness determination be as to the SPAC’s security holders as a whole, rather 
than to the SPAC’s unaffiliated security holders?  The factors enumerated in proposed 
Item 1606(b) in determining fairness include, but are not limited to, the valuation of the 
target company, the consideration of any financial projections, any report, opinion, or 
appraisal described in Item 1607 of Regulation S-K, and the dilutive effects described in 
Item 1604(c) of Regulation S-K.  Is there any additional or alternative information that 
should be disclosed in connection with the SPAC’s fairness determination? 
38. Should we include an instruction to Item 1606 that a statement that the SPAC has no 
reasonable belief as to the fairness or unfairness of the de-SPAC transaction or any 
related financing transaction to unaffiliated security holders will not be considered 
sufficient disclosure in response to Item 1606(a), as proposed? 
39. What are the potential benefits and costs of the statement that would be required by 
proposed Item 1606(a)?  Would the costs of complying with this disclosure requirement 
discourage SPAC initial public offerings or discourage private operating companies from 
pursuing business combinations with SPACs? 
40. Should we require registrants to disclose whether any director voted against, or abstained 
from voting on, the approval of a de-SPAC transaction or any related financing 

55 
 
transaction, as well as the reasons for such vote or abstention, as proposed?  Are there 
additional or alternative disclosures that we should require in this regard? 
41. Should we require registrants to discuss in reasonable detail the material factors and, to 
the extent practicable, the weight assigned to each factor underlying the fairness 
determination, as proposed?  Are there additional or alternative factors that should be 
specified in the proposed rule to enhance an investor’s understanding of the fairness 
determination? 
42. How would investors use disclosure about whether the approval of at least a majority of 
unaffiliated security holders is required and whether the de-SPAC transaction or any 
related financing transaction was approved by a majority of non-employee directors of 
the SPAC?  How would investors use disclosure about whether a representative has been 
retained to represent the investors in the negotiations of the de-SPAC transaction? 
3. Reports, Opinions, and Appraisals 
In addition, we are proposing Item 1607 to require disclosure about certain reports, 
opinions, or appraisals from outside parties.
97
  Proposed Item 1607(a) would require disclosure 
about whether or not the SPAC or its sponsor has received any report, opinion, or appraisal 
obtained 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, the sponsor or security holders who are not affiliates.
98
  This 
requirement would provide additional transparency about whether a SPAC’s board of directors 
                                                 
97
  As noted above, we have modeled the proposed requirements in Item 1607 on the disclosures required in going-
private transactions subject to Exchange Act Rule 13e-3.  See Item 1015 of Regulation M-A. 
98
  Though currently not a routine practice in de-SPAC transactions, SPACs often obtain fairness opinions in 
connection with de-SPAC transactions involving an affiliated private operating company. 

56 
 
and/or its sponsor have access to information underlying a fairness determination that 
shareholders could find useful in making voting, investment, and redemption decisions in 
connection with the de-SPAC transaction.
99
 
To assist investors in considering the usefulness and reliability of any outside party 
report, opinion or appraisal described in response to proposed Item 1607(a), as well as any 
negotiation or report by an unaffiliated representative acting solely on behalf of unaffiliated 
security holders described in response to proposed Item 1606(d), proposed Item 1607(b) would 
require disclosure of: 
• The identity, qualifications, and method of selection of the outside party and/or 
unaffiliated representative; 
• Any material relationship between (1) the outside party, its affiliates, and/or unaffiliated 
representative, and (2) the SPAC, its sponsor and/or their affiliates, 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;
100
 
• Whether the SPAC or the sponsor determined the amount of consideration to be paid to 
the private operating company or its security holders, or the valuation of the private 
operating company, or whether the outside party recommended the amount of 
consideration to be paid or the valuation of the private operating company; and 
                                                 
99
  For example, the proposed rule would require a SPAC to disclose whether or not the SPAC or its sponsor has 
received a fairness opinion or valuation report from a financial advisor. 
100
  For example, this disclosure could include whether the compensation for a financial advisor’s fairness opinion is 
conditioned on the completion of the de-SPAC transaction or whether the amount of compensation due the financial 
advisor may include a bonus or may be increased depending on the ultimate financial terms of the de-SPAC 
transaction. 

57 
 
• A summary concerning the negotiation, report, opinion or appraisal, which would be 
required to include a description of the procedures followed; the findings and 
recommendations; the bases for and methods of arriving at such findings and 
recommendations; instructions received from the SPAC or its sponsor; and any limitation 
imposed by the SPAC or its sponsor on the scope of the investigation. 
Finally, proposed Item 1607(c) would 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, as applicable. 
Request for Comment 
43. Should we require disclosure regarding reports, opinions, or appraisals from an outside 
party, as proposed?  Is there any additional or alternative information that we should 
require with respect to these reports, opinions, or appraisals?  Is there any proposed 
information that should not be required?   
44. Should we require that the reports, opinions or appraisals be filed as exhibits to the 
Form S -4, Form F -4, or Schedule TO for the de-SPAC transaction or included in the 
Schedule 14A or Schedule 14C for the transaction, as proposed?  Should we require 
instead that such reports, opinions, or appraisals be made available for inspection and 
copying upon written request?  Should we require the filing of board books and other 
written materials presented to the board in connection with the reports, opinions, or 
appraisals, as is the case with going-private transactions?  Are there other means by 
which investors should be able to access such report, opinion, or appraisal, such as 
posting on a website? 

58 
 
45. As proposed, filers would be required to include a summary of the report, opinion, or 
appraisal and file such report, opinion, or appraisal as an exhibit to the filing.  Would 
investors benefit from having both the summary and the actual report, opinion, or 
appraisal disclosed, or would one or the other item of disclosure be sufficient? 
4. Proposed Item 1608 of Regulation S-K 
We are proposing Item 1608 of Regulation S-K to codify a staff position that a 
Schedule TO filed in connection with a de-SPAC transaction should contain substantially the 
same information about a target private operating company that is required under the proxy rules 
and that a SPAC must comply with the procedural requirements of the tender offer rules when 
conducting the transaction for which the Schedule TO is filed, such as a redemption of the SPAC 
securities.  Redemption rights offered by a SPAC to its security holders in connection with the 
de-SPAC transaction or an extension of the timeframe to complete a de-SPAC transaction 
generally have indicia of being a tender offer, but the Commission staff has not objected if a 
SPAC does not comply with the tender offer rules when the SPAC files a Schedule 14A or 14C 
in connection with a de-SPAC transaction or an extension and complies with Regulation 14A or 
14C, because the federal proxy rules would generally mandate substantially similar disclosures 
and applicable procedural protections as required by the tender offer rules.
101
  Proposed Item 
1608, if adopted, would not affect the availability of this staff position for those SPACs that file 
Schedule 14A or 14C for their de-SPAC transactions or extensions.  SPACs that are unable to 
avail themselves of this position and file a Schedule TO (such as foreign private issuers
102
), 
                                                 
101
  See supra note 21. 
102
  “Foreign private issuer” is defined in Securities Act Rule 405 and Exchange Act Rule 3b-4(c).  A foreign private 
issuer is any foreign issuer other than a foreign government, except for an issuer that (1) has more than 50% of its 
outstanding voting securities held of record by U.S. residents and (2) any of the following: (i) a majority of its 
officers and directors are citizens or residents of the United States, (ii) more than 50 percent of its assets are located 
in the United States, or (iii) its business is principally administered in the United States. 

59 
 
however, would be subject to the requirements of proposed Item 1608 of Regulation S-K, which 
would codify the staff’s view regarding the information required to be included in a Schedule TO 
filed for a SPAC redemption and clarify the need to comply with the procedural requirements of 
the tender offer rules.
103
 
Proposed Item 1608 would require a SPAC that files a Schedule TO pursuant to 
Exchange Act Rule 13e-4(c)(2) for any redemption of securities offered in connection with a de-
SPAC transaction to include disclosures required by specified provisions of Forms S-4 and F-4, 
and Schedule 14A, as applicable.  Proposed Item 1608 would specify and standardize the 
information required in a Schedule TO that is filed in connection with a de-SPAC transaction so 
that it is consistent with the information required by the proposed amendments to Forms S-4 and 
F-4 and Schedule 14A.  As a result, SPAC shareholders who are not solicited for their votes to 
approve a de-SPAC transaction (in a solicitation subject to Regulation 14A) would nevertheless 
receive the same information about the target private operating company that could be material 
to their redemption decisions.
104
  Proposed Item 1608 would clarify that SPACs that file a 
Schedule TO for a redemption also must comply with the procedural requirements of Rule 13e-4 
and Regulation 14E (such as the requirement to keep the redemption period open for at least 20 
business days).  This proposed codification would eliminate any potential ambiguity as to the 
                                                 
103
  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 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.” 
104
  Proposed Item 1608 would also be consistent with exchange listing rules regarding the use of Schedule TO in 
de-SPAC transactions.  See, e.g., Nasdaq Listing Rule IM-5101-2(e) and NYSE Listed Company Manual Section 
102.06(c). 

60 
 
SPAC’s obligation to provide the tender offer rules’ procedural protections to the SPAC security 
holders who are considering whether to redeem their securities. 
Request for Comment 
46. Should we adopt Item 1608 as proposed? 
47. Is there any additional or alternative information that we should require in proposed 
Item 1608 when a Schedule TO is filed in connection with a de-SPAC transaction? 
48. Are there any requirements of Rule 13e-4 and Regulation 14E that should not apply to 
SPACs that file a Schedule TO for the redemption of the SPAC securities?   
49. Are there any other provisions of Rule 13e-4 or Regulation 14E that should be amended 
to ensure that SPAC security holders are provided with the information material to their 
decision on whether to redeem their SPAC securities or to address other issues arising 
from the SPAC redemption process?  For example, should we amend Exchange Act Rule 
14e-5, which generally prohibits a bidder or its affiliates from making purchases outside 
of a tender offer, to permit a sponsor’s purchases of SPAC securities outside of the 
redemption offer as long as certain conditions are satisfied (such as requiring disclosures 
of the sponsor’s purchases and limiting the purchase price to no more than the price 
offered through the redemption offer), e.g., in a manner consistent with the Division of 
Corporation Finance’s Tender Offers and Schedules Compliance and Disclosure 
Interpretation 166.01 (Mar. 22, 2022)?
105
   
50. As noted above, the staff has taken the position that a SPAC filing a Schedule 14A or 
14C in connection with a de-SPAC transaction or an extension of the time frame to 
complete a de-SPAC transaction would not need to file a Schedule TO or otherwise 
                                                 
105
  This staff interpretation is available at: https://www.sec.gov/divisions/corpfin/guidance/cdi-tender-offers-and-
schedules.htm. 

61 
 
comply with the tender offer rules, including the procedural requirements of the tender 
offer rules, such as the all-holders requirement.  Should we codify this position?  Should 
we reconsider this position? 
G. Structured Data Requirement 
We are proposing to require SPACs to tag all information disclosed pursuant to Subpart 
1600 of Regulation S-K in a structured, machine-readable data language.  Specifically, we are 
proposing to require SPACs to tag the disclosures required under Subpart 1600 in Inline XBRL 
in accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual.
106
  The proposed 
requirements would include detail tagging of the quantitative disclosures and block text tagging 
of the narrative disclosures that would be required under Subpart 1600. 
In 2009, the Commission adopted rules requiring operating companies to submit the 
information from the financial statements (including footnotes and schedules thereto) included in 
certain registration statements and periodic and current reports in a structured, machine-readable 
data language using eXtensible Business Reporting Language (“XBRL”).
107
  In 2018, the 
Commission adopted modifications to these requirements by requiring issuers to use Inline 
XBRL, which is both machine-readable and human-  readable, to reduce the time and effort 
                                                 
106
  This tagging requirement would be implemented by including a cross-reference to Rule 405 of Regulation S-T in 
Subpart 1600 of Regulation S-K, and by revising 17 CFR 232.405(b) of Regulation S-T to include the proposed 
SPAC-related disclosures.  A corresponding Note and Instruction would also be added to Schedules 14A and TO, 
respectively.  Pursuant to Rule 301 of Regulation S-T, the EDGAR Filer Manual is incorporated by reference into 
the Commission’s rules.  In conjunction with the EDGAR Filer Manual, Regulation S-T governs the electronic 
submission of documents filed with the Commission.  Rule 405 of Regulation S-T specifically governs the scope 
and manner of disclosure tagging requirements for operating companies and investment companies, including the 
requirement in 17 CFR 232.405(a)(3) to use Inline XBRL as the specific structured data language to use for tagging 
the disclosures. 
107
  Interactive Data to Improve Financial Reporting, Release No. 33-9002 (Jan. 30, 2009) [74 FR 6776 (Feb. 10, 
2009)] (“2009 Financial Statement Information Adopting Release”) (requiring submission of an Interactive Data 
File to the Commission in exhibits to such reports).  See also Interactive Data to Improve Financial Reporting, 
Release No. 33-9002A (Apr. 1, 2009) [74 FR 15666 (Apr. 7, 2009)]. 

62 
 
associated with preparing XBRL filings and improve the quality and usability of XBRL data for 
investors.
108
 
Requiring Inline XBRL tagging of the Subpart 1600 disclosures would benefit investors 
by making SPAC disclosures more readily available and easily accessible to investors and other 
market participants for aggregation, comparison, filtering, and other analysis, as compared to 
requiring a non-machine readable data language such as ASCII or HTML.  This would enable 
automated extraction and analysis of granular SPAC disclosures, allowing investors and other 
market participants to more efficiently perform large-scale analysis and comparison of SPAC 
disclosures across SPAC transactions and time periods, including information on sponsor 
compensation and material conflicts of interest.  At the same time, we do not expect the 
incremental compliance burden associated with tagging the additional information to be unduly 
burdensome, because SPACs subject to the proposed tagging requirements would be subject to 
similar Inline XBRL requirements in other Commission filings.
109
  However, because issuers 
(including SPACs) are not required to tag any filings until after they have filed a periodic report 
on Form 10-Q, 20-F, or 40-F, the proposed tagging requirement for disclosures in SPAC IPO 
registration statements would accelerate the tagging obligations (and related compliance 
burdens) of SPACs compared to those of other filers.
110
  Enhancing the usability of the SPAC 
initial public offering disclosures through a tagging requirement is of particular importance given 
the unique nature of SPAC offerings and the potential risks they present to investors. 
                                                 
108
  Inline XBRL Filing of Tagged Data, Release No. 33-10514 (June 28, 2018) [83 FR 40846, 40847 (Aug. 16, 
2018)].  Inline XBRL allows filers to embed XBRL data directly into an HTML document, eliminating the need to 
tag a copy of the information in a separate XBRL exhibit.  Id. at 40851. 
109
  I  d. 
110
  See 17 CFR 229.601(b)(101)(i)(A). 

63 
 
Request for Comment 
51. Should we require SPACs to tag the disclosures required by Subpart 1600 of Regulation 
S-K, as proposed?  Are there any changes we should make to ensure accurate and 
consistent tagging?  If so, what changes should we make?   
52. Should we modify the scope of the Subpart 1600 disclosures required to be tagged?  For 
example, should we require tagging of quantitative disclosures only?  Should we limit the 
tagging requirement to only those disclosures required in de-SPAC transactions? 
53. Where an item in Subpart 1600 requests that a registrant provide a tabular presentation 
without specifying a particular format for the table, or data points to include in the table, 
such as the proposed disclosure related to SPAC sponsor compensation, dilution of 
unaffiliated shareholders, and the related sensitivity analysis, should we instead require 
specific elements in the tabular presentation?  If we do not propose a specific tabular 
presentation or required elements, would detail tagging provide useful data for investors 
and other market participants? 
54. Should we require SPACs to use a different structured data language to tag the Subpart 
1600 disclosures?  If so, what structured data language should we require, and why? 
55. We have not proposed exemptions or different requirements from the proposed structured 
data requirement for foreign private issuers, smaller reporting companies,
111
 or emerging 
growth companies.
112
  Should we exempt or provide different requirements from some or 
all of the proposed structured data requirements for these or other classes of registrants? 
                                                 
111
  See infra Section III.D. 
112
  Section 101(a) of the JOBS Act amended Section 2(a) of the Securities Act [15 U.S.C. 77b(a)] and Section 3(a) 
of the Exchange Act [15 U.S.C. 78c(a)] to define an “emerging growth company” as an issuer with less than $1 
billion in total annual gross revenues during its most recently completed fiscal year, as such amount is indexed for 
inflation every five years by the Commission.  If an issuer qualifies as an EGC on the first day of its fiscal year, it 

64 
 
III. ALIGNING DE-SPAC TRANSACTIONS WITH INITIAL PUBLIC OFFERINGS 
As discussed above, private operating companies have increasingly turned to de-SPAC 
transactions as a means of accessing public securities markets and becoming public reporting 
companies.  As the SPACs that were part of the unprecedented growth in the SPAC market in 
2020 and 2021 continue to identify target private operating companies and c onsummate de-
SPAC transactions, it is likely that a significant proportion of companies in the coming years that 
enter the U.S. public securities markets will do so through de-SPAC transactions. 
A private operating company’s path to the public markets through a de-SPAC transaction 
usually commences when a SPAC begins considering it as a potential business combination 
candidate.  After agreeing to the terms of the business combination, the SPAC typically files a 
Form 8-K announcing the transaction that includes limited information on the material terms of 
the business combination agreement.
113
  This announcement is usually followed by a disclosure 
document (a Securities Act registration statement, proxy statement, or information statement) 
filed by the SPAC that includes more extensive information about the private operating 
company.
114
  SPACs 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 
                                                 
maintains that status until the earliest of (1) the last day of the fiscal year of the issuer during which it has total 
annual gross revenues of $1.07 billion or more; (2) 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; (3) the date on which the 
issuer has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; or (4) the date 
on which the issuer is deemed to be a “large accelerated filer” (as defined in Exchange Act Rule 12b-2).  See Section 
2(a)(19) of the Securities Act [15 U.S.C. 77b(a)(19)]; Section 3(a)(80) of the Exchange Act [15 U.S.C. 78c(a)(80)]; 
and Inflation Adjustments and Other Technical Amendments under Titles I and II of the JOBS Act, Release No. 33- 
10332 (Mar. 31, 2017) [82 FR 17545 (Apr. 12, 2017)]. 
113
  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. 
114
  The disclosure document may be a Form S-4 or F-4, Schedule 14A or Schedule TO, depending on, among other 
things, whether shareholder approval is required and whether the SPAC is registering an offering of shares to be 
issued in the transaction. 

65 
 
required for the transaction,
115
 (2) which entity will have a continuing Exchange Act reporting 
obligation following the transaction,
116
 and (3) the disclosures provided in connection with the 
transaction.
117
 
After the completion of the de-SPAC transaction, the post-business combination 
company is required to file a Form 8-K within four business days that includes even more 
information about the private operating company that is equivalent to the information that a new 
reporting company would be required to provide when filing a Form 10 under the Exchange 
Act.
118
  The result is that investors may receive disclosures about the future public company that 
                                                 
115
  SPACs may use cash, securities, or a combination of both to acquire a target company in a de-SPAC transaction, 
and the form of consideration is a factor in determining whether a registration statement, proxy or information 
statement, or tender offer statement is required to be filed in connection with a de-SPAC transaction.  Additionally, 
the SPAC, the target company or a new holding company may issue securities in a de-SPAC transaction, which may 
necessitate the filing of a registration statement on Form S-4 or F-4 for the transaction. 
116
  For example, when a holding company is formed to acquire both the private operating company and the SPAC, 
and the holding company files a registration statement for the de-SPAC transaction, generally the holding company 
would continue as the registrant with the Exchange Act reporting obligation following the transaction.  In these 
situations, the private operating company would be the holding company’s predecessor, as the term is used in 
Regulation S-X, with respect to the financial statements and possibly the accounting acquirer under generally 
accepted accounting principles as used in the United States (“U.S. GAAP”), with the equity ownership percentage in 
the combined company held by the former owners of the private operating company and the degree to which former 
management of the private operating company continues with the combined company among the factors that could 
impact the accounting acquirer determination under U.S. GAAP.  Under the proposed amendments to Regulation S-
X, the SPAC would be an acquired business.  See infra Section IV.B. 
117
  The disclosures required in connection with a de-SPAC transaction are determined by the applicable disclosure 
form (Form S-4 or F-4, Schedule 14A or 14C, or Schedule TO) and which entity is filing the form.  Under the 
proposed amendments, companies would not be subject to the same disclosure requirements in every de-SPAC 
transaction structure.  For example, if the SPAC is a domestic registrant and a new holding company is a foreign 
issuer, and the private operating company meets the criteria to be a foreign private issuer, the holding company (the 
company filing the de-SPAC transaction filing) would also qualify as a foreign private issuer.  Foreign private issuer 
status would permit the foreign holding company to file a Form F-4 for the de-SPAC transaction and apply the 
foreign private issuer disclosure regime.  In contrast, if a de-SPAC transaction is structured so that (1) a domestic 
SPAC is the company issuing securities as the acquiring entity of the foreign private operating company, (2) there is 
no foreign holding company, and (3) the SPAC makes the de-SPAC transaction filing, the registrant would continue 
to be a domestic issuer and follow domestic reporting rules until the next determination date for foreign private 
issuer status. 
118
  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.  By the time the Form 8-K with Form 10 
information is filed, the securities of the post-business combination company have often already begun trading on a 
national securities exchange with a new ticker symbol, in that the securities of the SPAC generally trade on an 
exchange until the consummation of the de-SPAC transaction, after which the securities of the post-business 
combination company generally commence trading on the following business day. 

66 
 
differ from, or are not provided in the same manner as, the information disclosed in a Form S-1 
or F-1 filed in connection with a traditional initial public offering.  Additionally, some of the 
investor protections afforded in a traditional initial public offering are not available or are more 
attenuated when a private operating company becomes a public company through a de-SPAC 
transaction.
119
 
In light of the increasingly common reliance on de-SPAC transactions as a vehicle for 
private operating companies to access the U.S. public securities markets, we are proposing a 
number of new rules and amendments to existing rules to align more closely the treatment of 
private operating companies entering the public markets through de-SPAC transactions with that 
of companies conducting traditional initial public offerings.  In our view, a private operating 
company’s method of becoming a public company should not negatively impact investor 
protection.  Accordingly, the   proposed new rules and amendments are intended to provide 
investors with disclosures and liability protections comparable to those that would be present if 
the private operating company were to conduct a traditional firm commitment initial public 
offering. 
These proposed new rules and amendments would (1) more closely align the non-
financial statement disclosure requirements with respect to the private operating company in 
disclosure documents for a de-SPAC transaction with the disclosure required in a Form S-1 or F-
                                                 
119
  For example, a private company engaged in a traditional initial public offering is generally more limited in its 
ability to make communications about its offering prior to the filing of a Securities Act registrations statement on 
Form S-1 than companies engaged in a business combination transaction that will be registered on Form S-4 or F-4.  
De-SPAC transactions also often lack named underwriters that perform due diligence and other traditional 
gatekeeping functions, and it may be more difficult for investors to trace their purchases to the registered de-SPAC 
transaction for purposes of establishing a Section 11 claim for material misstatements or omissions in de-SPAC 
disclosure documents. 

67 
 
1 for an initial public offering;
120
 (2) require a minimum dissemination period for disclosure 
documents in de-SPAC transactions; (  3)   treat the private operating company as a co-registrant of 
the Form S-4 or Form F-4 for a de-SPAC transaction when a SPAC is filing the registration 
statement; (  4)   require a re-determination of smaller reporting company status following the 
consummation of a de-SPAC transaction; (5)   amend the definition of “blank check company” for 
PSLRA purposes such that the safe harbor for forward-looking information would not apply to 
projections in filings by SPACs and certain other blank check companies that are not penny 
stock issuers; and (6)   provide, in a Commission rule, that underwriters in a SPAC initial public 
offering are deemed to be underwriters in a subsequent de-SPAC transaction under certain 
circumstances. 
A. Aligning Non-Financial Disclosures in De-SPAC Disclosure Documents 
 
In regard to non-financial statement disclosures, we are proposing 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 such company pursuant to the following 
items in Regulation S-K would be required in the registration statement or schedule filed in 
connection with the de-SPAC transaction: (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-
                                                 
120
  We are also proposing to more closely align the financial statement disclosure requirements with respect to the 
private operating company in any business combination involving a shell company with the disclosure required in a 
Form S-1 for an initial public offering, which would encompass de-SPAC transactions.  See infra Section IV.B. 

68 
 
SPAC transaction and any related financing transaction);
121
 and (6) Item 701 (recent sales of 
unregistered securities).
122
  If the private operating company is a foreign private issuer,
123
 the 
proposed rules would include the option of providing disclosure relating to the private operating 
company in accordance with Items 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E of Form 20-F, consistent with 
disclosure that could be provided by these entities in an initial public offering.
124
 
The proposed additional information is already required to be included in a Form 8-K due 
within four business days of the completion of the de-SPAC transaction, such that registrants 
currently should already be preparing this information in anticipation of this Form 8-K filing in 
connection with a de-SPAC transaction.
125
  Aligning the disclosure requirements in de-SPAC 
transactions in this manner with those in initial public offerings would mandate that this 
additional information about the private operating company be provided to shareholders before 
they make voting, investment, or redemption decisions in connection with the proposed 
                                                 
121
  We note that 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. 
122
  Proposed General Instruction L.2. to Form S-4; Proposed General Instruction I.2. to Form F-4; Proposed Item 
14(f) of Schedule 14A; Proposed General Instruction K to Schedule TO.  We note that disclosure pursuant to Item 
303 (management's discussion and analysis of financial condition and results of operations) of Regulation S-K is 
already required with respect to a non-reporting target company in Forms S-4 and F-4 and in Schedules 14A and 
14C for a de-SPAC transaction.  As proposed, disclosure pursuant to Item 701 of Regulation S-K would 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. 
123
  See supra note 102. 
124
  Disclosure requirements for foreign private issuers differ from domestic registrants, including the absence of 
quarterly reporting requirements, the use of different forms with different disclosure provisions, and an ability to 
present financial statements in accordance with IFRS instead of U.S. GAAP.  In addition, foreign private issuers are 
not required to file current reports on Form 8-K using the Form 8-K disclosure criteria; rather, they can furnish 
current reports on Form 6-K applying the disclosure requirements of that Form.  See Foreign Issuer Reporting 
Enhancements, Release 33-8959 (Sep. 23, 2008) [73 FR 58300 (Oct. 6, 2008)]. 
125
  This Form 8-K is required to include the same information that would be required for a newly reporting 
company when filing a Form 10 under the Exchange Act.  See Items 2.01(f), 5.01(a)(8), and 9.01(c) of Form 8-K.  
In this regard, we note that these items of Form 8-K each provide that if any disclosure required by these items has 
been previously reported, the registrant may identify the filing in which that disclosure is included instead of 
including that disclosure in the Form 8-K. 

69 
 
transactions.
126
  As proposed, this information would also 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 being required in a Form 8-K due within four business days of 
the completion of the de-SPAC transaction.  Further, if this disclosure is included in a Form S-4 
or Form F-4, 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 initial public offering. 
Request for Comment 
56. Should we require additional information regarding the private operating company in 
disclosure documents filed in connection with a de-SPAC transaction, as proposed?  
Would these additional disclosures provide investors with a better understanding of the 
private operating company’s operations and related risks?  Should we require more or 
less disclosure regarding the private operating company in the registration statements or 
schedules filed in connection with de-SPAC transactions? 
57. What are the benefits of providing this information earlier to investors when they are 
making voting, investment, and redemption decisions in connection with a de-SPAC 
transaction or at or before the commencement of trading in the post-business combination 
company’s securities on a securities exchange?  Would it be unduly burdensome to 
provide this additional information regarding the private operating company at this earlier 
point in time? 
                                                 
126
  In this regard, we note that many, but not all, Forms S-4 and F-4 and Schedules 14A and 14C that are filed in 
connection with de-SPAC transactions contain information about the target company as proposed.  The proposed 
amendments, if adopted, would require that this information be provided in all de-SPAC transactions subject to the 
specialized disclosure requirements in Subpart 1600. 

70 
 
58. Should a private operating company that would qualify as a foreign private issuer have 
the option of providing disclosure in accordance with certain items of Form 20-F, as 
proposed? 
59. Should we require additional or less information in proposed Item 1608 and Schedule TO 
when a SPAC files a Schedule TO in connection with a de-SPAC transaction?  For 
example, should we require disclosure regarding management's discussion and analysis 
of financial condition and results of operations (Item 303 of Regulation S-K) pursuant to 
Item 1608 or Schedule TO? 
60. Should the proposed disclosure requirements with respect to the private operating 
company be scaled to take into account the size, nature, or certain characteristics of the 
company? 
B. Minimum Dissemination Period 
In addition to the need for enhanced disclosure in de-SPAC transactions, we recognize 
the importance of ensuring that SPAC shareholders have adequate time to analyze the 
information presented in these transactions.  There is currently no federally mandated period in 
business combination transactions to provide security holders with a minimum amount of time to 
consider proxy statement or other disclosures.
127
  In view of the unique circumstances 
surrounding de-SPAC transactions, we are proposing to amend Exchange Act Rules 14a-6 and 
14c-2, as well as to add instructions to Forms S-4 and F-4,
128
 to require that prospectuses and 
proxy and information statements filed in connection with de-SPAC transactions be distributed 
                                                 
127
  In Form S-4 and Form F-4, however, there is a minimum 20-business day period requirement in sending a 
prospectus to security holders prior to a security holder meeting 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. 
128
  Proposed General Instruction L.3. to Form S-4; Proposed General Instruction I.3. to Form F-4. 

71 
 
to shareholders at least 20 calendar days in advance of a shareholder meeting or the earliest date 
of action by consent, or the maximum period for disseminating such disclosure documents 
permitted under the applicable laws of the SPAC’s jurisdiction of incorporation or organization 
if such period is less than 20 calendar days.
129
  As stated above, SPACs are organized for the 
purpose of completing a de-SPAC transaction within a certain time frame, and as a SPAC 
approaches the end of this period, there is less time available for a SPAC to find a candidate for a 
business combination transaction, prepare and file the appropriate de-SPAC disclosure 
documents with the Commission, disseminate such documents to its shareholders, receive the 
requisite shareholder approval when applicable, and consummate the de-SPAC transaction.  
Although the laws of a SPAC’s jurisdiction of incorporation or organization may require the 
SPAC to send a notice to its shareholders at least a specified number of days before the 
shareholder meeting to approve a proposed business combination transaction, such notices are 
generally limited to information regarding the time, place, and purpose of the meeting, along 
with a copy or summary of the business combination agreement.
130
  They do not generally 
require a minimum period of time for dissemination of any other information about the 
transaction (including any proxy statements or other materials required by the federal securities 
laws) to shareholders.
131
  Similarly, such requirements do not exist in exchange listing 
                                                 
129
  The proposed amendments would be applicable to Forms S-4 and F-4 and Schedules 14A and 14C.  We are not 
proposing to amend the 20 business day period when a Schedule TO is filed in connection with a de-SPAC 
transaction.  See supra Section II.F.4. 
130
  See, e.g., DEL. CODE ANN. tit. 8, sec. 251(c) (2022) (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]”). 
131
  See R. Franklin Balotti, et al., Delaware Law of Corporations and Business Organizations, § 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 

72 
 
standards.
132
  Without a minimum period for dissemination of prospectuses, proxy statements, 
and other materials before a shareholder meeting (or action by consent), a SPAC and its sponsor 
may have incentives to provide prospectuses or proxy or information statements for a de-SPAC 
transaction to the SPAC’s security holders within an abbreviated time frame, leaving the security 
holders with relatively little time to review what are often complex disclosure documents for 
these transactions. 
We are proposing a minimum 20-calendar day dissemination period for prospectuses and 
proxy and information statements that, in our view, would provide an important investor 
protection.
133
  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 and that relying on the safe harbor we are proposing under the Investment Company Act 
would also limit the time frame in which to announce and complete a de-SPAC transaction.
134
  
Nevertheless, given 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, the proposed 
20-calendar day period would establish a minimum time period for shareholders to review 
                                                 
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.”).
 
132
  Although both the NYSE and Nasdaq generally require that listed companies solicit proxies and provide proxy 
statements for all shareholder meetings, neither requires a minimum number of days between when proxy materials 
are provided to shareholders and when the meeting is held.  Instead, for example, NYSE Listed Company Manual 
Section 402.03 simply “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.” 
133
  The proposed 20-calendar day period is the same length of time as the 20-day advance disclosure period in 17 
CFR 13e-3(f)(1) (Exchange Act Rule 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)]. 
134
  See infra Section VI.B.3. 

73 
 
prospectuses and proxy and information statements in de-SPAC transactions (subject to the 
carve-out discussed below),
135
 so that they have sufficient time to consider the disclosures and to 
make more informed voting, investment and redemption decisions.
136
  In the event that the laws 
of a SPAC’s jurisdiction of incorporation or organization have a provision applicable to the 
dissemination of prospectuses and proxy and information statements required under the federal 
securities laws, we are proposing to include a provision 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.
137
 
Request for Comment 
61. Should we require a minimum dissemination period for prospectuses and proxy or 
information statements in de-SPAC transactions as proposed?  Is a 20–day period 
necessary or appropriate to enable shareholders to review and consider these disclosure 
documents relating to a de-SPAC transaction?  Should this 20 calendar day period be 
                                                 
135
  When a registrant incorporates by reference information about the registrant or the company being acquired in 
the Form S-4 or F-4 for a de-SPAC transaction, the 20-business day period in Form S-4 and Form F-4, which we are 
not proposing to amend, would continue to be applicable.  General Instruction A.2 of Form S-4 and General 
Instruction A.2 of Form F-4. 
136
  The proposed minimum dissemination period is intended to apply to the dissemination of certain Commission 
filings in connection with de-SPAC transactions and is not intended to impact any requirements of the jurisdiction of 
incorporation or organization regarding the notice of an annual or special meeting, such as Section 251(c) of the 
Delaware General Corporation Law.   
137
  For example, if the jurisdiction has no minimum dissemination period and does not have a maximum 
dissemination period, the minimum 20-day period, as proposed, would apply.  If the jurisdiction has a minimum 
dissemination period of less than 20 days (e.g., 10 days) and does not have a maximum dissemination period, the 
minimum 20-day period, as proposed, would apply.  If the jurisdiction has a minimum dissemination period of less 
than 20 days (e.g., 10 days) and a maximum dissemination period of less than 20 days (e.g., 15 days), the maximum 
dissemination period under the jurisdiction would apply.  If the jurisdiction has no minimum dissemination period 
and a maximum dissemination period of less than 20 days (e.g., 15 days), the maximum dissemination period under 
the jurisdiction would apply. 

74 
 
longer or shorter?  Should the minimum dissemination period be based on business days 
(e.g., 20 business days) instead of calendar days as proposed? 
62. Would there be timing concerns on the part of SPACs in meeting the proposed minimum 
20-day dissemination period?  Should we include an exception for the applicable laws of 
the SPAC’s jurisdiction of incorporation or organization, as proposed?  Should we 
include other exceptions to the proposed minimum 20-day dissemination period? 
63. Would additional guidance be helpful in determining how to apply this proposed 
requirement? 
64. Are there additional or alternative requirements we should adopt in connection with the 
dissemination of disclosure documents in a de-SPAC transaction? 
C. Private Operating Company as Co-Registrant to Form S-4 and Form F-4 
Under Section 6(a) of the Securities Act, each “issuer” must sign a Securities Act 
registration statement.
138
  The Securities Act broadly defines the term “issuer” to include every 
person who issues or proposes to issue any securities.
139
  Currently, when a SPAC offers and 
sells its securities in a registered de-SPAC transaction, only the SPAC, 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 transaction.  In these situations, the private operating 
company, for which the de-SPAC transaction effectively serves as its initial public offering, and 
                                                 
138
  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. 
139
  Section 2(a)(4) of the Securities Act. 

75 
 
its officers and directors do not sign the registration statement that contains disclosure about the 
private operating company’s business and financial results and thereby may avoid liability as 
signatories to the registration statement under Section 11 of the Securities Act, unlike if the 
private operating company had conducted a traditional initial public offering registered on Form 
S-1 or Form F-1.
140
 
We are proposing to amend Form S-4 and Form F-4 to require that the SPAC and the 
target company be treated as co-registrants when these registration statements are filed by the 
SPAC in connection with a de-SPAC transaction.
141
  In view of the protections that the 
Securities Act provides to investors in a traditional initial public offering, it is appropriate in our 
view to interpret Section 6(a) to encompass the target company, in addition to the SPAC, as an 
issuer for purposes of Section 6(a) and the signature requirements of Form S-4 or Form F-4.   
A de-SPAC transaction marks the introduction of the 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.
142
  Accordingly, it is 
the private operating company that, in substance, issues or proposes to issue its securities, as 
                                                 
140
  Even when not liable under Section 11, the private operating company and its affiliates, however, may be subject 
to enforcement actions by the Commission, including those under Securities Act Section 17(a) and Exchange Act 
Section 10(b) and Rule 10b-5, as well as potential liability under 17 CFR 240.10b-5 (Exchange Act Rule 10b-5) in 
private rights of action.  See, e.g., In the Matter of Momentus, Inc., et al., Release No. 34-92391 (July 13, 2021) 
(settled proceeding charging privately held company with violations of Section 17(a) of the Securities Act and 
Section 10(b) of the Exchange Act and Rule 10b-5 for, among other things, allegedly materially false statements and 
omissions in the registration statement/proxy statement filed in connection with a business combination with a 
publicly traded SPAC). 
141
  Proposed General Instruction L.4. to Form S-4; Proposed General Instruction I.4. to Form F-4.  Section 6(a) of 
the Securities Act uses the term “issuer,” but Securities Act registration statement forms use the term “registrant.”  
The term “registrant” is defined in Rule 405 as “the issuer of the securities for which the registration statement is 
filed.”  As a co-registrant of the Form S-4 or Form F-4, the private operating company would have an Exchange Act 
reporting obligation pursuant to Section 15(d) of the Exchange Act following the effectiveness of the registration 
statement. 
142
  That is, the operations of the private company constitute the business and the basis for the financial and other 
disclosures of the newly combined public company following a de-SPAC transaction. 

76 
 
securities of the newly combined public company.
143
  While similar policy considerations can 
arise in other business combination contexts, given the substantial increase in the number of 
SPAC transactions in recent years, the number of shareholders typically impacted by such 
transactions, and concerns that are unique to the SPAC structure, we are concerned that a narrow 
approach to registrant status in de-SPAC transactions could undermine the statutory liability 
scheme that Congress applied to initial public offerings of securities. 
We are proposing to amend the signature instructions to Form S-4 and F-4 to state that, if 
a SPAC is offering its securities in a de-SPAC transaction that is registered on the form, the term 
“registrant” for purposes of the signature requirements of the form would mean the SPAC and 
the target company.
144
  This requirement would make the additional signatories to the form, 
including the principal executive officer, principal financial officer, controller/principal 
accounting officer, and a majority of the board of directors or persons performing similar 
functions of the target company, liable (subject to a due diligence defense for all parties other 
than the SPAC and the target company), for any material misstatements or omissions in the 
                                                 
143
  The legislative history of the broad definition of the term “issuer” in the Securities Act 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 Act, the person(s) that have access to the information relevant to investors 
are responsible as an “issuer” for providing such information.  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.”).  
144
  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 (“If the securities to be offered are those of a corporation not yet in 
existence at the time the registration statement is filed which will be a party to a consolidation involving two or 
more existing corporations, then each such existing corporation shall be deemed a registrant and shall be so 
designated on the cover page of this Form, and the registration statement shall be signed by each such existing 
corporation and by the officers and directors of each such existing corporation as if each such existing corporation 
were the registrant.”). 

77 
 
Form S -4 or Form F-4 and would thereby mitigate the risk that the target company’s directors 
and management would not be held accountable to investors for the accuracy of the disclosures 
in the registration statement due to the absence of the deterrent threat of liability under 
Section 11.
145
  Moreover, this proposed requirement could improve the reliability of the 
disclosure provided to investors in connection with de-SPAC transactions by creating strong 
incentives for such additional signing persons to review more closely the disclosure about the 
target company in these registration statements and to conduct more searching due diligence in 
connection with de-SPAC transactions and related registration statements. 
Request for Comment 
65. Should we amend Form S-4 and Form F-4, as proposed, to require that the SPAC and the 
private operating company be treated as co-registrants when the registration statement is 
filed by the SPAC in connection with a de-SPAC transaction? 
66. Would amending Form S-4 and Form F-4 in this manner improve the disclosure provided 
in connection with de-SPAC transactions that are registered on these forms? 
67. Should the proposed amendment to Form S-4 and Form F-4 be extended to apply to all 
business combination transactions where a shell company, other than a business 
combination related shell company, is the acquirer? 
68. Should the sponsor of a SPAC also be required to sign a Form S-4 or Form F-4 filed in 
connection with a de-SPAC transaction, as well as a Form S-1 or Form F-1 filed for a 
SPAC’s initial public offering, in view of, among other things, the sponsor’s control over 
the SPAC and the sponsor’s role in preparing these registration statements?  Would such 
                                                 
145
  In this regard, we note that the target company’s directors and executive officers are the parties most similarly 
situated to the directors and officers of a private company conducting a traditional initial public offering, in terms of 
their knowledge of, and background in, the company going public through a de-SPAC transaction. 

78 
 
a requirement be consistent with the Commission’s approach in requiring a majority of 
the board of directors of any corporate general partner to sign a registration statement 
when the registrant is a limited partnership? 
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? 
D. Re-Determination of Smaller Reporting Company Status 
 Smaller reporting companies are 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.
146
  For example, smaller reporting companies are not 
required to provide quantitative and qualitative information about market risk pursuant to 
Item 305 of Regulation S-K.
147
  In general, a smaller reporting company is a company that is not 
an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent that is 
not a smaller reporting company, and had (1) 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.
148
  Smaller reporting company 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.  Once a company determines that it is not a 
                                                 
146
  See, e.g., 17 CFR 229.10(f) (Item 10(f) of Regulation S-K); Rules 8-01, 8-02, 8-03, 8-07, and 8-08 of Regulation 
S-X; Item 1A of Form 10 and Form 10-K; Item 3.02 of Form 8-K.  A foreign private issuer is not eligible to use the 
scaled disclosure requirements for smaller reporting companies 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); Instruction 2 to definition of “smaller reporting company” in Securities Act Rule 405 and Exchange Act Rule 
12b-2. 
147
  Item 305(e) of Regulation S-K. 
148
  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. 

79 
 
smaller reporting company, it will retain this 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.
149
 
Currently, most SPACs qualify as smaller reporting companies,
150
 and a post-business 
combination company after a de-SPAC transaction is permitted by rule
151
 to retain this status 
until the next annual determination date when a SPAC is the legal acquirer of the private 
operating company in a de-SPAC transaction.  The absence of a re-determination of smaller 
reporting company status upon the completion of these de-SPAC transactions permits certain 
post-business combination companies to avail themselves of scaled disclosure and other 
accommodations when they otherwise would not have qualified as a smaller reporting company 
had they become public companies through a traditional initial public offering. 
In view of the informational asymmetries that result when a private operating company 
chooses to go public through such a de-SPAC transaction and the increasing prevalence of these 
transactions as a vehicle for private operating companies to become reporting companies under 
the Exchange Act, we are proposing to require a re-determination of smaller reporting company 
status following the consummation of a de-SPAC transaction.  As proposed, this re-
determination of smaller reporting company status would occur prior to the time the post-
business combination company makes its first Commission filing, other than the Form 8-K with 
Form 10 information,
152
 with the public float threshold measured as of a date within four 
business days after the consummation of the de-SPAC transaction and the revenue threshold 
                                                 
149
  See Item 10(f)(2)(iii) of Regulation S-K; Securities Act Rule 405; Exchange Act Rule 12b-2. 
150
  See infra Section IX.B.2.f. 
151
  See Item 10(f)(2) of Regulation S-K; Securities Act Rule 405; Exchange Act Rule 12b-2. 
152
  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. 

80 
 
determined by using the annual revenues of the private operating company as of the most 
recently completed fiscal year for which audited financial statements are available.
153
  The 
applicable thresholds in the current definition would remain unchanged. 
The proposed four-business day window to calculate the public float threshold following 
a de-SPAC transaction would end on the due date for the Form 8-K with Form 10 information 
that a post-business combination company is required to file after the completion of a de-SPAC 
transaction.  The proposed four-business day period would provide some flexibility for issuers to 
measure public float, compared to the annual re-determination of smaller reporting company 
status,
154
 and would allow for a more accurate reflection of a post-business combination 
company’s public float, in view of the limited trading history of the common equity securities of 
the post-business combination company following a de-SPAC transaction. 
We are proposing to require a post-business combination company to reflect this 
re-determination of smaller reporting company status in its first periodic report (Form 10-K or 
Form 10-Q) following a de-SPAC transaction, which would provide the post-business 
combination company with time to prepare for any loss of the scaled disclosure and other 
accommodations available to smaller reporting companies.
155
  As proposed, a post-business 
                                                 
153
  Proposed Item 10(f)(2)(iv) and the proposed amendments to the definition of “smaller reporting company” in 
Securities Act Rule 405 and Exchange Act Rule 12b-2.  The float determination would be required to precede the 
first Commission filing after the Form 8-K with Form 10 information. 
154
  In re-determining smaller reporting company 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. 
155
  For example, as proposed, a post-business combination company would be required to re-determine whether it 
qualifies as a smaller reporting company, using the initial qualification thresholds in the definition, prior to the time 
the company makes its first Commission filing (e.g., a Form 8-K, registration statement or periodic report) after the 
filing of a Form 8-K with Form 10 information, with its public float measured as of a date within four business days 
after the completion of the de-SPAC transaction.  The company would not be required to reflect this re-
determination of smaller reporting company status in any Commission filing until it files its first periodic report 
(Form 10-K or Form 10-Q) following the de-SPAC transaction.  Thus, if a SPAC qualified as a smaller reporting 
company 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 smaller 

81 
 
combination company that fails to qualify for smaller reporting company status after a de-SPAC 
transaction would remain unqualified until its next annual re-determination of this status. 
Request for Comment 
70. As proposed, the re-determination of smaller reporting company status must be based on 
public float measured as of a date within four business days after the consummation of 
the de-SPAC transaction and the annual revenues of the private operating company as of 
the most recently completed fiscal year for which audited financial statements are 
available.  Should we require the re-determination of smaller reporting company status 
upon the completion of a de-SPAC transaction, as proposed?  Should public float be 
determined within a different time frame (e.g., 30 days) or through a different method 
(e.g., as the average over a certain period)?  Should the annual revenues of the private 
operating company be used in determining whether the revenue threshold has been met, 
as proposed? 
71. Should we require a post-business combination company following a de-SPAC 
transaction to reflect the re-determination of smaller reporting company status in its next 
periodic report, as proposed?  Alternatively, should we require a post-business 
combination company to reflect the re-determination of smaller reporting company status 
at an earlier or later point in time after the completion of a de-SPAC transaction, such as 
in the first periodic report that covers the period in which the de-SPAC transaction 
occurred (e.g., when a de-SPAC transaction is completed after the end of a fiscal year but 
prior to the due date of the Form 10-K for that fiscal year)?  Should we provide an 
                                                 
reporting companies when filing a registration statement between the re-determination date and the post-business 
combination company’s first periodic report. 

82 
 
accommodation if a de-SPAC transaction is completed close in time to the due date for 
the registrant’s first periodic report? 
72. To the extent that a post-business combination company no longer qualifies for smaller 
reporting company status as a result of the proposed re-determination of this status 
following a de-SPAC transaction, would the proposed re-determination make it more 
difficult for such a company to file a registration statement after the filing of its first 
periodic report that complies with the disclosure requirements applicable to non-smaller 
reporting companies?  If so, should we provide any accommodations for this scenario? 
73. Should we make any additional changes with respect to re-determining smaller reporting 
company status after the completion of a de-SPAC transaction?  For example, should we 
replace the public float test with a revenue test for this purpose?  Should we provide any 
guidance with respect to how to apply this proposal? 
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? 
E. PSLRA Safe Harbor 
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 things, the forward-looking statement is identified as such and is accompanied by 
meaningful cautionary statements.
156
  The safe harbor is  not available, however, when a forward-
                                                 
156
  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. 

83 
 
looking statement is made in connection with an offering by a blank check company or an initial 
public offering.
157
 
For purposes of the safe harbor, the term “blank check company” and certain other 
terms
158
 “have the meanings given those terms by rule or regulation of the Commission.”
159
  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.
160
  
This definition, which has not been amended since it was adopted by the Commission in 1992, 
predates the enactment of the PSLRA in 1995.  SPACs that raise more than $5 million in a firm 
commitment underwritten initial public offering are excluded from this definition of “blank 
check company” because they are not selling “penny stock.”
161
 
Projections of the private operating company’s performance are typically prepared and 
disclosed in connection with a de-SPAC transaction.  Some market participants are of the view 
that the PSLRA safe harbor for forward-looking statements is available in de-SPAC transactions 
when a SPAC is not a blank check company under Rule 419 and thus may not exercise the same 
level of care in preparing forward-looking statements, such as projections, as in a traditional 
                                                 
157
  Section 27A(b) of the Securities Act and Section 21E(b) of the Exchange Act.  In addition, the safe harbor is not 
available for an offering by a penny stock issuer, a roll-up transaction, a going private transaction, an offering by a 
partnership or a limited liability company, a tender offer, or an offering by an issuer convicted of specified securities 
law violations or subject to certain injunctive or cease and desist actions. 
158
  These other terms are “rollup transaction,” “partnership,” “limited liability company,” “executive officer of an 
entity,” and “direct participation investment program.” 
159
  Section 27A(i)(7) of the Securities Act and Section 21E(i)(5) of the Exchange Act. 
160
  See supra notes 3 and 13.  The statutory definition of “blank check company” appears in Section 7(b)(3) of the 
Securities Act. 
161
  See supra note 12. 

84 
 
initial public offering.
162
  As noted above, a number of commentators have raised concerns about 
the use of projections that they believe to be unreasonable in de-SPAC transactions.
163
 
To address concerns about the use of forward-looking statements, such as projections, in 
connection with de-SPAC transactions, and pursuant to the statutory authority under the PSLRA 
to define “blank check company” by Commission rule or regulation, we are proposing to amend 
the definition of “blank check company” for purposes of the PSLRA to remove the “penny 
stock” condition and to 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.”
164
  As discussed above, private 
companies are increasingly using de-SPAC transactions as a mechanism to become public 
companies.  For purposes of the PSLRA, we see no reason to treat forward-looking statements 
made in connection with de-SPAC transactions differently than forward-looking statements 
made in traditional initial public offerings, in that both instances involve private issuers entering 
the public U.S. securities markets for the first time and similar informational asymmetries that 
exist between these issuers (and their insiders and early investors) and public investors.  
Moreover, we see no reason to treat blank check companies differently for purposes of the 
PSLRA safe harbor depending on whether they raise more than $5 million in a firm commitment 
underwritten initial public offering and thus are not selling penny stock. 
                                                 
162
  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, The Wall Street Journal, Mar. 15, 2021; Public 
Statement on SPACs, IPOs and Liability Risk under the Securities Laws (Division of Corporation Finance, Apr. 8, 
2021). 
163
  See supra note 33. 
164
  We are also proposing to amend the definition to remove the reference to “development stage company” because 
the reference would be unnecessary for purposes of the proposed definition. 

85 
 
Amending the definition of “blank check company” in this manner would clarify that the 
statutory safe harbor in the PSLRA is not available for forward-looking statements, such as 
projections, made in connection with de-SPAC transactions involving an offering of securities by 
a SPAC or other issuer that meets the definition of “blank check company” as amended, such 
that forward-looking statements by SPACs, such as statements regarding the projections of target 
private operating companies in these transactions, would not fall under the safe harbor.
165
  The 
proposed amendment would also eliminate the current overlap in the safe harbor in regard to the 
exclusion for offerings by blank check companies and the exclusion for penny stock issuers.
166
  
To avoid multiple definitions for the term “blank check company,” we are proposing to amend 
Rule 419 in a manner that would otherwise retain the current scope of the rule.  We are also 
proposing to amend the references to “blank check company” in various Securities Act rules to 
“blank check company issuing penny stock,” as such term would be defined in Securities Act 
Rule 405, to maintain the current scope of these rules.
167
 
Request for Comment 
75. Should we define “blank check company” in Rule 405, as proposed?  Should we include 
a reference in the definition to “development stage company” or the issuance of “penny 
stock”?  Should we consider other changes to the proposed definition? 
                                                 
165
  Forward-looking statements made by target private operating companies do not fall under the safe harbor, 
because the safe harbor is not available to companies that are not subject to the reporting requirements of Section 
13(a) or 15(d) of the Exchange Act at the time that the statement is made.  Further, the safe harbor would not be 
available to the subset of shell companies that meet the amended definition of “blank check company” (i.e., 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).   
166
  The exclusion in the safe harbor for offerings by “blank check companies” is subsumed by the exclusion for 
penny stock issuers, in that the term “blank check company,” as currently defined in Rule 419, is “a development 
stage company that ... is issuing ‘penny stock.’” 
167
  See proposed amendments to Rules 137, 138, 139, 163A, 164, 174, 430B, and 437a.  As proposed, the term 
“blank check company issuing penny stock” would be defined as a company that is subject to Rule 419.  Due to 
current Federal Register formatting requirements, we are also proposing technical changes to Rule 163A and 
Rule 164 to move the Preliminary Note(s) in these rules to introductory paragraphs of the respective rules. 

86 
 
76. Would the proposed amendments improve the quality of projections in connection with 
de-SPAC transactions by clarifying that the safe harbor under the PSLRA is unavailable?  
Would the proposed amendment discourage some SPACs from disclosing projections in 
connection with these transactions or affect the ability of SPACs or target companies to 
comply with their obligations under the laws of their jurisdiction of incorporation or 
organization to disclose projections used by the board of directors or the companies’ 
fairness opinion advisers? 
77. As an alternative approach, should we issue an interpretation addressing whether a de-
SPAC transaction is an “initial public offering” for purposes of the PSLRA? 
78. Would including the proposed Rule 405 definition of “blank check company” in 
Rule 419 create confusion for registrants and investors?  Should we consider retaining a 
separate definition of “blank check company” for purposes of Rule 419?  If so, why? 
79. Should we amend the references to “blank check company” in Securities Act Rules 137, 
138, 139, 163A, 164, 174, 430B and 437a to refer to “blank check company issuing 
penny stock,” as proposed? 
80. Should we amend Rule 419 so that some or all of its conditions are applicable to SPACs 
that raise more than $5 million in a firm commitment underwritten initial public offering?  
If so, which conditions?  What would be the advantages and drawbacks of such an 
approach?  Should we amend the definition of “penny stock” to bring more SPACs 
within the scope of Rule 419? 
81. Are there other rule amendments we should consider in connection with the PSLRA? 

87 
 
F. Underwriter Status and Liability in Securities Transactions 
Underwriters form an essential link in the distribution of securities from an issuer to 
investors.  The term “underwriter” is broadly defined in Section 2(a)(11) of the Securities Act to 
mean “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.”
168
  The determination of whether a particular 
person is an “underwriter” does not depend on the person’s business but rather on that person’s 
relationship to a particular securities offering.  Any person whose activities with respect to any 
given offering fall within one of the prongs of the Section 2(a)(11) definition is deemed to meet 
the statutory definition of underwriter—commonly known as a “statutory underwriter.”
169
  
Congress enacted a broad definition of “underwriter” in order to “include as underwriters all 
persons who might operate as conduits for securities being placed into the hands of the investing 
public.”
170
  Correspondingly, the Commission’s longstanding view is that, depending on facts 
and circumstances, any person, including an individual investor who is not a professional in the 
securities business, can be an “underwriter” within the meaning of the Securities Act if that 
                                                 
168
  15 U.S.C. 77b(a)(11).  Section 2(a)(11) states that the term “issuer” shall include, in addition to an issuer, any 
person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common 
control with the issuer.  Therefore, any person who purchased securities from an affiliate of an issuer is an 
underwriter under Section 2(a)(11) if that person purchased with a view to the distribution of the securities. 
169
  See 2 Louis Loss (late), Joel Seligman, and 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.”).  
170
  Thomas Lee Hazen, The Law of Securities Regulation, section 4:98. 

88 
 
person acts as a link in a chain of transactions through which securities are distributed from an 
issuer or its control persons to the public.
171
 
As intermediaries between an issuer and the investing public, underwriters play a critical 
role as “gatekeepers” to the public markets.
172
  Historically, in initial public offerings, where the 
investing public might be unfamiliar with a particular issuer, financial firms that act as 
underwriters would lend their well-known name to support that issuer’s offering.  Where public 
investors may not have been inclined to invest with the company seeking to conduct a public 
offering, they could take comfort in the fact that a large, well-known financial institution, acting 
as underwriter, was including its name on the first page of the issuer’s prospectus.
173
  In 
exchange, in a firm commitment underwritten offering, the underwriters earn the “gross spread” 
                                                 
171
  17 CFR 230.144, Preliminary Note; Notice of Adoption of Rule 144 Relating to the Definition of the Terms 
“Underwriter” in Sections 4(1) and 2(11) and “Brokers Transactions” in Section 4(4) of the Securities Act of 1933, 
Adoption of Form 144, and Rescission of Rules 154 and 155 Under That Act, Release No. 33-5223 (Jan. 11, 1972) 
[37 FR 591 (Jan. 13, 1972)].   
172
  See, e.g., Ronald J. Gilson & Reinier Kraakman, The Mechanisms of Market Efficiency, 70 VA. L. REV. 549, 620 
(1984); Coffee, supra note 34, at 302 n. 1, 308 nn.13-14; John C. Coffee, Jr., Brave New World?: The Impact(s) of 
the Internet on Modern Securities Regulation, 52 B
US. LAW. 1195, 1210-13, 1232-33 (1999) (each discussing the 
role of underwriters as “gatekeepers” or “reputational intermediaries”).  See also Securities Act Concepts and Their 
Effects of Capital Formation, Release No. 33-7314 (July 25, 1996) [61 FR 40044 (July 31, 1996)] (discussing the 
role of gatekeepers in maintaining the quality of disclosure); Michael P. Dooley, The Effects of Civil Liability on 
Investment Banking and the New Issues Market, 58 V
A. L. REV. 776 (1972) (“The most important function 
performed during origination is the selection of candidates for public investment.  The decision to underwrite a 
particular issue is normally made only after careful investigation of the issuer and evaluation of its prospects.  Not 
all corporations are able to win sponsorship of proposed flotations, and prestigious underwriters reject many more 
candidates than they accept.  After initially deciding to sponsor a flotation, the managing underwriter must conduct 
another, more intensive investigation into the issuer’s affairs in order to satisfy the duty to conduct a ‘reasonable 
investigation’ imposed on underwriters by section 11 of the 1933 Act... [t]he screening and investigative processes 
employed in origination should weed out those prospective issuers least likely to make productive use of publicly 
invested funds and should identify elements of risk in those issues which are selected and presented to the public.  
The successful performance of these functions is important to the protection of investors and to the optimum 
allocation of economic resources.”). 
173
  See, e.g., Harold S. Bloomenthal & Samuel Wolff, Due diligence defenses—Underwriter’s responsibilities and 
liabilities, 3B Sec. & Fed. Corp. Law § 12:42 (2d ed.) (“The managing or initiating underwriter plays a critical role 
in determining access to capital markets.  The decision of a particular investment banking firm to put together an 
underwriting syndicate in order to float an issue of securities or to refrain from doing so for a particular issuer 
obviously has significance beyond investors since it determines to a degree the shape of our economy.  However, it 
has specific and immediate significance to members of the investing public in that in large part reliance is being 
placed on such underwriters to screen the multitude of issuers seeking access to the capital markets.”).  

89 
 
between the price stated on the cover of the prospectus (the price at which the underwriters will 
sell the issuer’s shares to the public for the first time) and the price at which the underwriters are 
able to negotiate with the issuer for the initial purchase of the issuer’s shares.
174
 
An underwriter’s participation in an issuer’s offering also exposes the underwriter to 
potential liability under the Securities Act.  The civil liability provisions of the Securities Act 
reflect the unique position underwriters occupy in the chain of distribution of securities and 
provide strong incentives for underwriters to take steps to help ensure the accuracy of disclosure 
in a registration statement.  Section 11 of the Securities Act imposes on underwriters, among 
other parties identified in Section 11(a), civil liability for any part of the registration statement, at 
effectiveness, which contained an untrue statement of a material fact or omitted to state a 
material fact required to be stated therein or necessary to make the statements therein not 
misleading, to any person acquiring such security.
175
  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.
176
  These provisions provide significant investor protections to those who 
acquire securities sold pursuant to a registration statement by providing tools to hold companies, 
underwriters, and other parties accountable for misstatements and omissions in connection with 
                                                 
174
  SPACs initially engage in firm commitment underwritten offerings in order to first sell their securities to the 
public.  See supra Section I.  However, as we further discuss below, the compensation structure for SPAC initial 
public offerings is generally different than that in traditional firm commitment offerings because a significant 
portion of the compensation is deferred.   
175
  15 U.S.C. 77k.  
176
  15 U.S.C. 77l(a)(2).   

90 
 
public offerings of securities.
177
  As a result, anyone who might be named as a potential 
defendant in these suits has strong incentives to take the necessary steps to avoid such liability. 
One defense available to an underwriter in a distribution is the “due diligence” defense, 
which shields an underwriter from liability if it can establish that, after reasonable investigation, 
the underwriter had reasonable ground to believe and did believe, at the time the registration 
statement became effective, that the statements therein were true and that there was no omission 
to state a material fact required to be stated therein or necessary to make the statements therein 
not misleading.
178
  To establish its “due diligence” defense, an underwriter must establish that it 
exercised reasonable care in verifying the statements in the registration statement.  Underwriters 
in a traditional initial public offering are therefore motivated to take the investigative steps 
necessary to establish the “due diligence” defense.
179
  The statutory provision of a due diligence 
defense appears to reflect an intent to improve the standards of conduct to which persons 
associated with the distribution of securities are to be held by imposing upon them standards of 
“honesty, care, and competence.”
180
  It was believed that the imposition of civil liability under 
                                                 
177
  See William O. Douglas & George E. Bates, The Federal Securities Act of 1933, 43 YALE L.J.171 (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.”). 
178
  See Section 11(b)(3) of the Securities Act. [15 U.S.C. 77k(b)(3).]. 
179
  Similarly, Section 12(a)(2) of the Securities Act provides a defense for defendants who, in the exercise of 
“reasonable care,” could not have known of the alleged misstatement or omission (15 U.S.C. 77l(a)(2)).  Courts 
generally have construed these two defenses similarly.  See, e.g., In re WorldCom Inc. Sec. Litig., 346 F. Supp. 2d 
628, 663-64 (S.D.N.Y. 2004). 
180
  H.R. No. 85, 73d Cong., 1st Sess. (1933) (From the Introductory Statement to the Report submitted by Mr. 
Rayburn, Committee on Interstate and Foreign Commerce: “Honesty, care, and competence are the demands of 
trusteeship.  These demands are made by the bill on the directors of the issues, its experts, and the underwriters who 
sponsor the issue.  If it be said that the imposition of such responsibilities upon these persons will be to alter 
corporate organization and corporate practice in this country, such a result is only what your committee expects.”). 

91 
 
the Securities Act upon participants in a distribution would cause them to exercise the care 
necessary to assure the accuracy of the statements in the registration statement.
181
 
Consistent with this intent, the Commission has stated that the due diligence efforts 
performed by underwriters are central to the integrity of our disclosure system.
182
  The investing 
public relies on underwriters to “screen the multitude of issuers seeking access to the capital 
markets” and expects them to verify the accuracy of the information in the registration 
statement.
183
  Moreover, although the Securities Act does not expressly require an underwriter to 
conduct a due diligence investigation, the Commission has long expressed the view that 
underwriters nonetheless have an affirmative obligation to conduct reasonable due diligence.
184
  
The Commission has stated that “an underwriter [in a securities offering] impliedly represents 
that he has made such an investigation [of the accuracy of the information in the registration 
statement] in accordance with professional standards” and “[i]nvestors properly rely on this 
                                                 
181
  Id. (“The duty of care to discover varies in its demands upon participants in security distribution with the 
importance of their place in the scheme of distribution and with the degree of protection that the public has a right to 
expect.”).  See also New High Risk Ventures, Release No. 33-5275 (July 27, 1972) [37 FR 16011 (Aug. 9, 1972)] 
(discussing the Commission’s views that Section 11 was designed by Congress to incentivize persons associated 
with the distribution of securities to “exercise the ‘honesty, care and competence’ necessary to assure the accuracy 
of the [s]tatements in the registration statement”). 
182
  See, e.g., Circumstances Affecting the Determination of What Constitutes Reasonable Investigation & 
Reasonable Grounds for Belief Under Section 11 of the Sec. Act Treatment of Info. Inc. by Reference into 
Registration Statements, Release No. 33-6335 (Aug. 6, 1981) [46 FR 42015 (Aug. 18, 1981)] (“In sum, the 
Commission strongly affirms the need for due diligence and its attendant vigilance and verification.”). 
183
  See Bloomenthal, supra note 173.  See also Release No. 33-5275, supra note 181. 
184
  See, e.g., In re Charles E. Bailey & Co., 35 S.E.C. 33, at 41 (Mar. 25, 1953) (“[An underwriter] owe[s] a duty to 
the investing public to exercise a degree of care reasonable under the circumstances of th[e] offering to assure the 
substantial accuracy of representations made in the prospectus and other sales literature.”); In re Brown, Barton & 
Engel, 41 SEC 59, at 64 (June 8, 1962) (“[I]n undertaking a distribution . . . [the underwriter] had a responsibility to 
make a reasonable investigation to assure [itself] that there was a basis for the representations they made and that a 
fair picture, including adverse as well as favorable factors, was presented to investors.”); In the Matter of the 
Richmond Corp., infra note 185 (“It is a well established practice, and a standard of the business, for underwriters to 
exercise diligence and care in examining into an issuer’s business and the accuracy and adequacy of the information 
contained in the registration statement....  The underwriter who does not make a reasonable investigation is derelict 
in his responsibilities to deal fairly with the investing public.”). 

92 
 
added protection which has a direct bearing on their appraisal of the reliability of the 
representations in the prospectus.”
185
 
1. Participants in a Distribution as “Underwriters” 
Common interpretations of the underwriter definition in Section 2(a)(11) traditionally 
have focused on the words “with a view to” in the phrase “purchased from an issuer with a view 
to ... distribution.”  Thus, an investment banking firm that arranges with an issuer for the public 
sale of its securities is clearly an “underwriter.”  However, as noted above, the statutory 
definition of underwriter is much broader.  Both federal courts and the Commission previously 
have found that other parties involved in securities offerings can be deemed “statutory 
underwriters” under the underwriter definition, such as by selling “for an issuer;”
186
 and/or 
                                                 
185
  In the Matter of the Richmond Corp., Release No. 33-4584 (Feb. 27, 1963).  See also In re WorldCom, Inc. Sec. 
Litig., 346 F. Supp. 2d 628, 684 (S.D.N.Y. 2004) (“Underwriters ... have special access to information about an 
issuer at a critical time in the issuer’s corporate life, at a time it is seeking to raise capital.  The public relies on the 
underwriter to obtain and verify relevant information and then make sure that essential facts are disclosed.”); 
Sanders v. John Nuveen & Co., Inc., 524 F.2d 1064, 1069–70 (7th Cir. 1975) (“An underwriter’s relationship with 
the issuer gives the underwriter access to facts that are not equally available to members of the public who must rely 
on published information.  And the relationship between the underwriter and its customers implicitly involves a 
favorable recommendation of the issued security.  Because the public relies on the integrity, independence and 
expertise of the underwriter, the underwriter’s participation significantly enhances the marketability of the security.  
And since the underwriter is unquestionably aware of the public’s reliance on his participation in the sale of the 
issue, the mere fact that he has underwritten it is an implied representation that he has met the standards of his 
profession in his investigation of the issuer.”); Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341, 
370 (2d Cir. 1973) (“No greater reliance in our self-regulatory system is placed on any single participant in the 
issuance of securities than upon the underwriter.  He is most heavily relied upon to verify published materials 
because of his expertise in appraising the securities issue and the issuer, and because of his incentive to do so.  He is 
familiar with the process of investigating the business condition of a company and possesses extensive resources for 
doing so....  Prospective investors look to the underwriter ... to pass on the soundness of the security and the 
correctness of the registration statement and prospectus.”); Escott v. BarChris Const. Corp., 283 F. Supp. 643, 697 
(S.D.N.Y. 1968) (“The purpose of Section 11 is to protect investors.  To that end the underwriters are made 
responsible for the truth of the prospectus.”). 
186
  See SEC v. Chinese Consolidated Benevolent Association, 120 F.2d 738 (2d Cir. 1941) (charitable association 
deemed a statutory underwriter in promoting the sale of war bonds, collecting funds and distributing the securities to 
its members notwithstanding the charitable association’s lack of a relationship with the issuer of the bonds); SEC v. 
Kern, 425 F.3d 143 (2d Cir. 2005).  See also Release No. 33-5223, supra note 171 (stating that any persons may be 
underwriters within the meaning of Section 2(a)(11) “if they act as links in a chain of transactions through which 
securities move from an issuer to the public.... the Commission hereby emphasizes and draws attention to the fact 
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 

93 
 
directly or indirectly “participating” in a distribution by engaging in activities “necessary to the 
distribution”
187
 or in “distribution-related activities.”
188
  Such parties can attain underwriter 
status even if they do not receive compensation for their services,
189
 do not sell securities directly 
to the public,
190
 and do not have privity of contract with the issuer.
191
  Similarly, courts have 
interpreted the underwriter definition broadly to include promoters, officers, and control persons 
who have arranged for public trading of an unregistered security or have stimulated investor 
interest in such security through advertisements, research reports, or other promotional efforts.
192
  
Moreover, the Commission has stated that “there is nothing in Section 2[(a)](11) which places a 
                                                 
distribution of the securities and that the person does not participate or have a participation in any such undertaking, 
and does not participate or have a participation in the underwriting of any such undertaking.”). 
187
  See, e.g., Harden v. Raffensperger, Hughes & Co., 65 F.3d 1392 (7th Cir. 1995) (third party retained as a 
“qualified independent underwriter” to perform due diligence and recommend a minimum yield for a bond offering 
deemed a statutory underwriter).  The defendant argued that it was not an underwriter because it had neither 
purchased nor sold any of the distributed securities.  The court held that the defendant’s activities fell within the 
“participates” and “has a participation” language of Section 2(a)(11), reasoning that Section 2(a)(11) is broad 
enough to encompass all persons who engage in the steps necessary to the distribution of securities. 
188
  See, e.g., Geiger v. SEC, 363 F.3d 481, 487 (D.C. Cir. 2004) (defendant “participated” in a distribution as a 
statutory underwriter through its actions in finding a buyer, negotiating the terms of the transaction, and facilitating 
the resale of securities). 
189
  See, e.g., Chinese Consolidated Benevolent Association, supra note 186, at 740 (“The solicitation of offers to 
buy the unregistered bonds, either with or without compensation, brought defendant’s activities literally within the 
prohibition of the statute.”); see also J. William Hicks, 7A Exempted Trans. Under Securities Act 1933 § 9:39 
(citing the Brief for the Securities and Exchange Commission in Chinese Consolidated Benevolent Association: 
“The legislative history of Section 2[(a)](11) makes it apparent that Congress did not intend to require the elements 
of compensation or a contract with the issuer in order to make a distributor of securities an underwriter.  In an earlier 
draft of the Securities Act, which was considered by the House Committee on Interstate and Foreign Commerce, the 
definition of underwriter ... would have made the underwriting relationship depend upon the receipt of 
compensation.  In abandoning that definition and adopting the definition which is included in the bill as enacted, 
Congress showed a clear intention of extending the term to include all persons who sell for an issuer, whether or not 
they do so for profit.”). 
190
  See, e.g., Raffensperger, supra note 187. 
191
  See, e.g., Chinese Consolidated Benevolent Association, supra note 186, at 740 (Hand, J. explaining, “Whether 
the Chinese government as issuer authorized the solicitation, or merely availed itself of gratuitous and even 
unknown acts on the part of the defendant whereby written offers to buy, and the funds collected for payment, were 
transmitted to the Chinese banks does not affect the meaning of the statutory provisions which are quite explicit.  In 
either case, the solicitation was equally for the benefit of the Chinese government and broadly speaking was for the 
issuer in connection with the distribution of the bonds.”). 
192
  See, e.g., SEC v. Allison, No. C-81-19 RPA, 1982 WL 1322 (N.D. Cal. 1982). 

94 
 
time limit on a person’s status as an underwriter” because the “public has the same need for 
protection afforded by registration whether the securities are distributed shortly after their 
purchase or after a considerable length of time.”
193
 
2. The De-SPAC Transaction as a “Distribution” of the Combined 
Company’s Securities 
Underwriter status depends upon a person’s activities occurring “in connection with” a 
“distribution” of any security.  The Commission has explained that underwriter status under the 
“participation” prong of the underwriter definition depends on the putative underwriter “enjoying 
substantial relationships with the issuer or underwriter, or engaging in the performance of any 
substantial functions in the organization or management of the distribution.”
194
  The Securities 
Act does not define the term “distribution;” however, the federal courts and the Commission 
have interpreted the term as synonymous with a “public offering” within the meaning of Section 
4(a)(2) of the Act.
195
  Moreover, a distribution has been said to comprise “the entire process by 
which in the course of a public offer [a] block of securities is dispersed and ultimately comes to 
rest in the hands of the investing public.”
196
 
                                                 
193
  Release No. 33-5223, supra note 171, at 4.  See also Gilligan, Will & Co. v. SEC, 267 F.2d 461 (2d Cir. 1959) 
(holding that a distribution exists if there are sales to those who cannot “fend for themselves” and citing Ralston 
Purina Co., 346 U.S. 119 (1953)). 
194
  See Opinion of General Counsel relating to Rule 142, Release No. 33-1862 (Dec. 14, 1938). 
195
  See J. William Hicks, 7A Exempted Trans. Under Securities Act 1933 § 9:18.  Courts have equated the term 
“distribution” with a public offering of securities.  See, e.g., Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195, 215 
(3d Cir. 2006) (“We agree with the rationale of those courts and similarly hold that the term “distribution” in § 
2(a)(11) is synonymous with ‘public offering.’”); see also Gilligan, Will & Co., supra note 193, at   466 (“a 
‘distribution’ requires a ‘public offering”’ (citation omitted)). 
196
  J. William Hicks, 7A Exempted Trans. Under Securities Act 1933 § 9:18 (citing Geiger v. SEC, 363 F.3d 481, 
484, 487 (D.C. Cir. 2004), where the court agreed with the SEC that the petitioners, Charles F. Kirby and Gene 
Geiger (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 an ongoing distribution and related manipulation had occurred where a broker-
dealer sold securities on a “delayed delivery” basis and there was a real possibility at the time of purchase that the 
purchaser would cancel the order and quoting Lewisohn Copper Corp., 38 S.E.C. 226, 234 (1958)); accord In the 

95 
 
The purpose of a SPAC initial public offering is to raise a pool of cash in order to 
subsequently merge with a private operating company in a de-SPAC transaction that will convert 
the private operating company into a public company.  Although the timing of a SPAC initial 
public offering and a de-SPAC transaction is bifurcated because a private operating company is 
not identified at the SPAC initial public offering stage, the result of a de-SPAC transaction, 
however structured, is consistent with that of a traditional initial public offering.  The substance 
of a de-SPAC transaction is, in many ways, analogous to the distribution that occurs in a 
traditional IPO—i.e., a SPAC’s assets consist primarily of highly liquid assets, such as cash and 
government securities, and the combined company effectively distributes its securities to public 
holders of SPAC shares in exchange for the contribution of the SPAC’s assets to the combined 
company.  The de-SPAC transaction marks the introduction of the private operating company to 
the public capital markets
197
 and is effectively how the private operating company’s securities 
“come to rest” —in other words, are distributed—to public investors as shareholders of the 
combined company.
198
  Accordingly, as in a traditional underwritten initial public offering, 
                                                 
Matter of Oklahoma-Texas Tr., 2 S.E.C. 764, 769, 1937 WL 32951 (Sept. 23, 1937), aff'd, 100 F.2d 888 (10th Cir. 
1939) (finding an ongoing distribution where portions of a registered offering continued to be held by securities 
dealers).  
197
  Such a transaction may take a variety of forms and involve a multitude of issuers.  However, the rule we are 
proposing would apply to all de-SPAC transactions involving a registered offer of securities.   
198
  A court has addressed in dicta whether a somewhat analogous situation involving the introduction of private 
companies to the public markets through an existing shareholder base was a distribution.  See SEC v. Datronics 
Engineers, Inc., 490 F.2d 250, 254 (4th Cir. 1973), cert denied, 416 U.S. 937 (1974) wherein Datronics, a public 
corporation, acquired a number of privately-held, target companies in merger transactions.  A subsidiary of the 
defendant would merge with the target company, with the subsidiary surviving the merger.  Both the shareholder-
principals of the target and Datronics received stock in the surviving subsidiary.  After the merger, Datronics 
distributed some of its shares to its shareholders as a dividend.  In this way, formerly privately-held companies 
became publicly owned without going through a registered public offering.  The court stated in dicta, “we think that 
Datronics was an underwriter within the meaning of the 1933 Act.  Hence its transactions were covered by the 
prohibitions, and were not within the exemptions, of the Act.  §§ 3(a)(1) and 4(1) of the 1933 Act, 15 U.S.C. §§ 77c, 
77d.  By definition, the term underwriter ‘means 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....’  § 2(11) of the 1933 Act, 15 U.S.C. § 77b(11). ...  By this 
underwriter distribution Datronics violated [Section] 5 of the 1933 Act—sale of unregistered securities.” 

96 
 
public investors—who were unfamiliar with the formerly private company—would benefit from 
the additional care and diligence exercised by SPAC underwriters in connection with the de-
SPAC transaction.
199
 
3. Proposed Rule: SPAC IPO Underwriters are Underwriters in Registered 
De-SPAC Transactions 
Proposed Rule 140a would clarify that a person who has acted as an underwriter in a 
SPAC initial public offering (“SPAC IPO underwriter”) and participates in the distribution by 
taking steps to facilitate the de-SPAC transaction, or any related financing transaction,
200
 or 
otherwise participates (directly or indirectly) in the de-SPAC transaction will be deemed 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.  Clarifying the 
underwriter status of SPAC IPO underwriters in connection with de-SPAC transactions should 
motivate them to exercise the care necessary to help ensure the accuracy of the disclosures in 
these transactions by affirming that they are subject to Section 11 liability for registered de-
SPAC transactions.
201
  In this way, proposed Rule 140a underscores and reinforces that the 
liability protections in de-SPAC transactions involving registered offerings have the same effect 
as those in underwritten initial public offerings.   
                                                 
199
  See Gilligan, Will & Co., supra note 193. 
200
  Most SPAC deals contain an available cash condition that represents a minimum amount of proceeds below 
which the target will not be obligated to consummate the transaction.  The cash condition represents a number the 
sponsor group believes it can reasonably achieve given their banking syndicate, network, access to capital, and the 
target company itself.  Since cash in trust is subject to redemption, one mechanism to ensure the cash condition will 
be satisfied is to secure commitments for a PIPE investment.  See SPAC Research Weekly Newsletter (Oct. 19, 
2020), available at https://www.spacresearch.com/newsletter?date=2020-10-19
.  In addition the staff has observed 
that for the vast majority of PIPEs associated with de-SPAC transactions, the closing of the PIPE financing is cross-
conditioned on the closing of the de-SPAC transaction. 
201
  Under Section 11, “any person acquiring such security” has a right of recovery.  The Commission’s longstanding 
view for traditional firm commitment registered offerings is that standing to sue under this provision extends to all 
purchasers of securities, whether the purchase occurred in the offering or subsequently in the secondary market.  See 
Brief of the SEC in DeMaria v. Andersen, 318 F.3d 170 (2d Cir. 2003). 

97 
 
As described above, the purpose of a SPAC’s initial public offering is to facilitate a 
subsequent de-SPAC transaction, and for target companies merging with a SPAC, the de-SPAC 
transaction is the means chosen, out of the several avenues available under the securities laws, 
for a private operating company to go public.  It is the method by which the target company’s 
securities, as securities of the combined company, are distributed into the hands of public 
investors.  Although SPAC IPO underwriters typically are not retained to act as firm 
commitment underwriters in the de-SPAC transaction, they nevertheless typically participate in 
activities that are necessary to that distribution.
202
  For instance, it is common for a SPAC IPO 
underwriter (or its affiliates) to participate in the de-SPAC transaction as a financial advisor to 
the SPAC, and engage in activities necessary to the completion of the de-SPAC distribution such 
as assisting in identifying potential target companies, negotiating merger terms, or finding 
investors for and negotiating PIPE investments.  Furthermore, receipt of compensation in 
connection with the de-SPAC transaction could constitute direct or indirect participation in the 
de-SPAC transaction.  While SPAC IPO underwriting fees—those fees the SPAC IPO 
underwriters earn for their efforts in connection with the initial offering of SPAC shares to the 
public—generally range between 5% and 5.5% of IPO proceeds, a significant portion (typically 
3.5% of IPO proceeds) is deferred until, and conditioned upon, the completion of the de-SPAC 
transaction.
203
  A SPAC IPO underwriter therefore typically has a strong financial interest in 
taking steps to ensure the consummation of the de-SPAC transaction.
204
  For these reasons, 
                                                 
202
  See generally Chinese Consolidated Benevolent Association, supra note 186 and accompanying text.   
203
  See Klausner, Ohlrogge, and Ruan, supra note 17.  It is not necessary, however, for a SPAC IPO underwriter to 
derive a pecuniary benefit from the distribution in order for Section 2(a)(11) to apply.  See Brief for the SEC at 19, 
Chinese Consolidated Benevolent Association, supra note 186 (“The legislative history of Section 2[(a)](11) makes 
it apparent that Congress did not intend to require the elements of compensation or a contract with the issuer in order 
to make a distributor of securities an underwriter.”) 
204
  See Robert J. Haft, Peter M. Fass, Michele Haft Hudson, and Arthur F. Haft, Tax-Advantaged Securities, 
Overview of SPACs § 6:134.60. 

98 
 
proposed Rule 140a would clarify that the SPAC IPO underwriter is an underwriter with respect 
to the distribution that occurs in the de-SPAC transaction, when it takes steps to facilitate the de-
SPAC transaction, or any related financing transaction, or otherwise participates (directly or 
indirectly) in the de-SPAC transaction. 
We note that proposed Rule 140a addresses the underwriter status of only the SPAC IPO 
underwriter in the context of a de-SPAC transaction.  In addition, we have discussed above some 
of the activities that are sufficient to establish that the SPAC IPO underwriter is participating in 
the distribution of target company securities.  This discussion, however, is not intended to 
provide an exhaustive assessment of underwriter status in the SPAC context, and neither is it 
intended to limit the definition of underwriter for purposes of Section 2(a)(11) of the Securities 
Act.  Federal courts and the Commission may find that other parties involved in securities 
distributions, including other parties that perform activities necessary to the successful 
completion of de-SPAC transactions, are “statutory underwriters” within the definition of 
underwriter in Section 2(a)(11).   For example, financial advisors, PIPE investors, or other 
advisors, depending on the circumstances, may be deemed statutory underwriters in connection 
with a de-SPAC transaction if they are purchasing from an issuer “with a view to” distribution, 
are selling “for an issuer,” and/or are “participating” in a distribution.  
Request for Comment 
82. Should we adopt a definition of distribution in Rule 140a, as proposed? 
83. Does the current regulatory regime provide sufficient incentives for participants in a de-
SPAC transaction to conduct appropriate due diligence on the target private operating 
company and the disclosures provided to public investors in connection with the de-
SPAC transaction?  Would proposed Rule 140a likely result in improved diligence of 

99 
 
private company targets in de-SPAC transactions and related disclosure?  Would the 
other measures we are proposing in this release mitigate the need for proposed Rule 
140a? 
84. Does the SPAC IPO underwriter have the means and access necessary (via contract or 
otherwise) to perform due diligence at the de-SPAC transaction stage, particularly where 
the SPAC IPO underwriter is not retained as an advisor in the de-SPAC transaction or the 
target is the registrant for the de-SPAC transaction?  Could such access be reasonably 
obtained in the course of the negotiation of the underwriting agreement for the SPAC 
initial public offering or otherwise? 
85. Will shareholders after the de-SPAC transaction have difficulty recovering against SPAC 
IPO underwriters liable under Securities Act Section 11 due to potential challenges in 
tracing the shares they hold to an effective registration statement for the de-SPAC 
transaction?  Are there steps we should take to address the challenges shareholders might 
face in tracing their shares to such a registration statement?  For example, should we 
consider rulemaking to define “any person acquiring such security” under Securities Act 
Section 11 in the context of de-SPAC transactions and, if so, how should it be defined? 
86. Should we limit the application of proposed Rule 140a to situations in which the SPAC 
IPO underwriter takes steps to facilitate the de-SPAC transaction, or any related 
financing transaction, or otherwise participates (directly or indirectly) in the de-SPAC 
transaction, as proposed? 
87. Would a determination that SPAC IPO underwriters are engaged in a distribution of the 
private operating company’s securities, as proposed, raise additional issues we should 
address?  For example, does it raise questions about when the SPAC IPO underwriters’ 

100 
 
participation in the SPAC initial public offering distribution is completed for purposes of 
calculating the restricted period under Regulation M? 
88. As noted above, there may be additional parties that are involved in a de-SPAC 
transaction that may fall within the statutory definition of underwriter because they are 
“participating in the distribution” of the target private operating company’s securities to 
the public.  Should proposed Rule 140a be expanded to expressly include such other 
parties?  If so, which parties?  Should the rule instead deem any party playing a 
significant role at the de-SPAC transaction stage to be an underwriter?  Should the 
Commission provide additional guidance as to which additional parties may be 
underwriters and what activities or other considerations would be relevant to determining 
whether a party falls within the statutory definition of underwriter in a de-SPAC 
transaction? 
89. Is it clear what parties would be considered a SPAC IPO underwriter for purposes of 
proposed Rule 140a?  Should we limit underwriter status as clarified by Rule 140a to the 
entities acting as traditional underwriter in a SPAC IPO?  Are there other parties that 
should be specifically excluded from the application of the rule? 
90. Are there alternative approaches we should consider that would enhance the incentives of 
participants in a de-SPAC transaction to assure the accuracy of the disclosures provided 
to public investors in connection with the de-SPAC transaction and/or align liability 
protections for investors across the various avenues for private operating companies to go 
public? 

101 
 
IV. BUSINESS COMBINATIONS INVOLVING SHELL COMPANIES 
 In response to concerns regarding the use of shell companies
205
 as a means of accessing 
the U.S . capital markets,  and as discussed more fully below, we are proposing new rules that 
would apply to business combination transactions involving shell companies, which include de-
SPAC transactions.  First, we are proposing 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.  Second, we are proposing 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 initial public offering.
206
  The issues we are addressing with these rule 
proposals are common to these shell company transactions, regardless of whether the shell 
company is a SPAC. 
A. Shell Company Business Combinations and the Securities Act of 1933 
1. Shell Company Business Combinations 
SPAC initial public offerings and business combinations occurred with increased 
frequency in 2020 and 2021,
207
 but a business combination with a reporting shell company
208
 is 
                                                 
205
  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 43 for the definition of “reporting shell 
company.” 
206
  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 19001 (May 6, 1985)]. 
207
  See supra notes 7 and 8 regarding the 2020-2021 increase in popularity of SPACs as a means for private 
companies to access the public markets.   
208
  See supra note 9. 

102 
 
not a new means for a private company to become a U .S . public company with an Exchange Act 
reporting obligation.
209
  Historically, private companies have utilized shell companies in various 
forms of transactions,
210
 such as spin-offs, reverse mergers, and de-SPAC transactions to become 
U.S. public companies,
211
 in many cases without filing a Securities Act registration statement.
212
  
Due to abuses involving shell company transactions, over the years the Commission has adopted 
various rules and limitations intended to address the misuse of shell companies.
213
  For example: 
                                                 
209
  See generally, Ronald M. Shapiro and Laurence M. Katz, The “Going Public through the Back Door” 
Phenomenon—An Assessment, 29 M
D. L. REV. 320 (1969); Leib Orlanski, Going Public through the Backdoor and 
the Shell Game, 58 V
A. L. REV. 1451 (1972) (both describing various ways of combining with a public shell 
company as a method to bring private corporations public). 
210
  Shell company business combinations can take many forms.  They can be as simple in structure as a statutory 
merger, with a private operating company merging with and into a shell company that has previously filed a Form 
10 with the Commission, or as complex as a de-SPAC transaction involving multiple merging entities, tax blockers, 
and/or a new holding company.  Among de-SPAC transactions, the Commission staff has observed a number of 
variations, only some of which are consistently registered transactions.  For example, in de-SPAC transactions 
structured as share exchanges, securities can be offered and sold to the public holders of SPAC securities from the 
target, a new holding company, or they can retain their interests in the reporting SPAC. 
211
  These transactions generally can take the form of either a “reverse merger” in which the private business merges 
into the shell company, with the shell company surviving and the former shareholders of the private business 
controlling the surviving entity or, in another common type of transaction, a “back door registration,” the shell 
company merges into the formerly private company, with the formerly private company surviving and the 
shareholders of the shell company becoming shareholders of the surviving entity.  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 (July 21, 2005)] (“Shell 
Company Adopting Release”).  Both alternatives transform a private company into a public company by combining 
directly or indirectly with a public company (whether through a merger, exchange offer, or otherwise). 
212
  For example, unregistered transactions can involve a direct or indirect offer and sale of the public shell’s 
securities to holders of the target entity’s securities in consideration for their interests in the target entity.  The public 
shell is then the entity that survives the business combination.  In the context of SPACs, where there is no 
registration statement, transactions are typically disclosed to the SPAC’s public shareholders in a proxy or 
information statement if there is a vote or consents being solicited, or otherwise in a Schedule TO.  In shell company 
mergers where there is no vote, the shell company’s shareholders may only learn about the transaction when the 
shell company files an Item 5.06 Form 8-K to report a change in shell company status.  With respect to de-SPAC 
transactions, the Commission staff has observed that in 2020 (Sept. 30, 2019 to Oct. 1, 2020), 21 de-SPAC 
transactions were registered on Form S-4 or F-4 and 16 were disclosed on proxy or information statements soliciting 
shareholder votes or consents, respectively.  Over the same months in 2021, 212 de-SPAC transactions were 
registered on Form S-4 or F-4 and 48 were disclosed on proxy or information statements. 
213
  We note that these rules and limitations generally do not apply to shell companies that qualify as “business 
combination related shell companies” as defined in Rule 405.  See infra Section IV.A.3. 

103 
 
• Rule 144 is not available for the resale of securities initially issued by either reporting 
or non-reporting shell companies;
214
 
• Shell companies are not permitted to use Form S-8;
215
 
• Shell companies are considered ineligible issuers that cannot use free writing 
prospectuses for communications during a registered offering;
216
 and 
• Broker-dealers are able to rely on the “piggyback” exception to publish quotations for 
shell companies for only 18 months following the initial priced quotation on OTC 
Markets.
217
 
Although many of these rules address concerns related to market manipulation and penny stock 
fraud, the Commission also has previously expressed concerns about the use of a shell company 
to distribute securities to the public without the protections afforded by the Securities Act 
including, where required, a registration statement.
218
  The lack of a registration statement could 
deprive investors of the critical disclosures and protections that come with Securities Act 
registration.
219
  The use of shell companies to complete business combinations can thus also 
provide companies with opportunities to avoid the disclosure, liability, and other provisions 
                                                 
214
  See 17 CFR 230.144(i), 17 CFR 230.145(c) and (d), and Revisions to Rules 144 and 145, Release No. 33-8869 
(Dec. 6, 2007) [72 FR 71546 (Dec. 17, 2007)]. 
215
  See Form S-8 [17 CFR 239.16b], General Instruction A.1, Rule as to Use of Form S-8; Shell Company Adopting 
Release, supra note 211. 
216
  See 17 CFR 230.165(e)(2)(ii) and Securities Offering Reform, Release No. 33-8591 (July 19, 2005) [70 FR 
44722 (Aug. 3, 2005)]. 
217
  See 17 CFR 240.15c2-11(f)(3)(i)(B)(2) and Publication or Submission of Quotations Without Specified 
Information, Release No. 33-10842 (Sept. 16, 2020) [85 FR 68124 (Oct. 27, 2020)]. 
218
  See generally Spin Offs and Shell Corporations, Release No. 33-4982 (July 2, 1969) [34 FR 11581 (July 15, 
1969)] (stating the Commission’s concern over the use of shell companies to effect unregistered distributions of 
securities in spin-offs and in other contexts). 
219
  Id.  See also Notice of Adoption of Rules 145 and 153A, Prospective Rescission of Rule 133, Amendment of 
Form S-14 Under the Securities Act of 1933, and Amendment of Rule 14a-2, 14a-6 and 14c-5 Under the Securities 
Exchange Act of 1934, Release No. 33-5316 (Oct. 6, 1972) [37 FR 23631 (Nov. 7, 1972)] (“Rule 145 Adopting 
Release”). 

104 
 
applicable in traditional registered offerings.
220
  These concerns are still present when shell 
companies are used in business combinations to provide private companies with access to the 
public markets.
 
 
2. Proposed Rule 145a 
The substantive reality of a reporting shell company
221
 business combination with a 
company that is not a shell company is that reporting shell company investors have effectively 
exchanged their security representing an interest in the reporting shell company for a new 
security representing an interest in the combined operating company.  As noted above, however, 
unlike investors in transaction structures in which the Securities Act applies and a registration 
statement would be filed (absent an exemption), investors in reporting shell companies may not 
always receive the disclosures and other protections afforded by the Securities Act at the time the 
change in the nature of their investment occurs due to the business combination involving 
another entity that is not a shell company. 
Under the Securities Act, a ll offers and sales of securities must either be registered or be 
exempt from registration, and any offer or sale that is not registered or exempt violates 
Section 5.
222
  Section 2(a)(3) of the Securities Act defines a “sale” as, among other things, 
                                                 
220
  For example, in SEC v. M & A W., Inc., 538 F.3d 1043, 1053 (9th Cir. 2008), the court considered a civil 
enforcement action against an individual engaged in the business of assisting private corporations to become 
publicly-traded companies through reverse merger transactions with reporting shell companies, alleging the sale of 
unregistered securities.  The court noted: “[W]e are informed by the purpose of registration, which is ‘to protect 
investors by promoting full disclosure of information thought necessary to informed investment decisions.’  The 
express purpose of the reverse mergers at issue in this case was to transform a private corporation into a corporation 
selling stock shares to the public, without making the extensive public disclosures required in an initial offering.  
Thus, the investing public had relatively little information about the former private corporation.  In such 
transactions, the investor protections provided by registration requirements are especially important.”). 
221
  See supra note 43 for a definition of this term. 
222
  15 U.S.C. 77e. 

105 
 
“every contract of sale or disposition of a security or interest in a security, for value.”
223
  In view 
of the remedial purpose of the Securities Act, courts and the Commission have broadly 
interpreted this term, particularly with respect to the creation of a public market in shares of a 
private company.
224
  Moreover, the Commission has concluded that certain business 
combination and other transactions involve a sale of securities within the meaning of Section 
2(a)(3).
225
 
Due to the significant increase in reporting shell company business combination 
transactions as a means to enter the U.S. capital markets, including through the use of a SPAC, 
and in an effort to provide reporting shell company shareholders with more consistent Securities 
Act protections regardless of transaction structure, we are proposing new Rule 145a
226
 that 
would deem any business combination of a reporting shell company
227
 involving another entity 
that is not a shell company to involve a sale of securities to the reporting shell company’s 
                                                 
223
  15 U.S.C. 77b(3). 
224
  In this regard, the Supreme Court has stated that securities legislation, enacted for the purpose of avoiding 
frauds, is to be construed “not technically and restrictively, but flexibly to effectuate its remedial purposes.”  SEC v. 
Cap. Gains Rsch. Bureau, Inc., 375 U.S. 180, 195, 84 S. Ct. 275, 284–85 (1963).  See also SEC v. Harwyn Indus. 
Corp., 326 F. Supp. 943, 954 (S.D.N.Y. 1971) (construing “value” in Section 2(a)(3) to include the creation of a 
public market in the shares with its resulting benefits to the defendants, the court stated, “...[W]e must look to its 
overall purpose, which is to provide adequate disclosure to members of the investing public, rather than engage in 
strangulating literalism.”); SEC v. Datronics Engineers, Inc., 490 F.2d 250, 254 (4th Cir. 1973), cert denied, 416 
U.S. 937 (1974); In the Matter of UniversalScience.com, Inc., Release No. 33-7879 (Aug. 8, 2000) (distribution of 
securities as purported “free stock” constituted a sale because it was a disposition for value, the “value” arising “by 
virtue of the creation of a public market for the issuer’s securities.”); and Thomas Lee Hazen, The Law of Securities 
Regulation § 12:22 (“Concepts of purchase and sale are to be construed flexibly in order to accomplish the purpose 
of the securities laws.  The courts will consider the economic reality of the transaction and whether it lends itself to 
fraud in the making of an investment decision.”). 
225
  See 17 CFR 230.145(a) and (b) (Securities Act Rules 145(a) and (b)) and Rule 145 Adopting Release, supra note 
219 (Rule 145 deems the submission to a vote of stockholders of a proposal for certain mergers, consolidations, or 
reclassifications of securities or transfers of assets to involve a “sale,” “offer,” “offer to sell,” or “offer for sale” of 
the securities of the new or surviving corporation to the security holders of the disappearing corporation). 
226
  See proposed 17 CFR 230.145a. 
227
  See supra note 43 for a definition of this term. 

106 
 
shareholders.
228
  It is our preliminary view that such a transaction would be “ a disposition of a 
security or interest in a security... for value,”
229
 regardless of the form or structure deployed, and 
regardless of whether a shareholder vote or consent is solicited.
230
  By deeming such transactions 
to be a “sale” for the purposes of the Securities Act, the proposed rule is intended to address 
potential disparities in the disclosure and liability protections available to reporting shell 
company shareholders depending on the transaction structure deployed in a reporting shell 
company business combination. 
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 in the 
business combination.
231
  However, our current view is that Section 3(a)(9) of the Securities 
Act,
232
 which exempts any securities exchange by an issuer with its existing security holders 
exclusively where no commission or other remuneration is paid or given directly or indirectly for 
soliciting such exchange, generally would not be available for the sales covered by proposed 
Rule 145a.  In these circumstances, we believe that the deemed exchange by the reporting shell 
company’s existing shareholders for the combined company’s securities should be viewed as part 
                                                 
228
  This expresses our views as to the substance of these transactions for the purposes of the Securities Act.  Neither 
proposed Rule 145a nor the description in this section is intended to express a view with respect to the treatment of 
these transactions under other laws including, but not limited to, state corporate law and the Internal Revenue Code. 
229
  Although no securities may actually be changing hands, in substance, shareholders in a reporting shell company 
merger are effectively exchanging their interests in the shell company for interests in a non-shell company; these 
shareholders can be viewed as having surrendered “value” for the purposes of Section 2(a)(3). 
230
  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. 
231
  We note that even if an exemption applies, if Rule 145a is adopted, investors would have the protections of the 
anti-fraud provisions in Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 thereunder of the 
Exchange Act. [15 U.S.C. 77q; 15 U.S.C. 78j; and 17 CFR 240.10b-5, respectively]. 
232
  15 U.S.C. 77c(a)(9). 

107 
 
of the same offering as the exchange of the private company’s securities for their interests in the 
combined company.
233
  As a result, because the exchange would not be exclusively with the 
reporting shell company’s existing security holders, Section 3(a)(9) would not be available to 
exempt the deemed sale to reporting shell company shareholders in proposed Rule 145a, if 
adopted.  In addition, we note that Section 3(a)(9) would not be available where a  commission or 
other remuneration is paid or given directly or indirectly for soliciting of participation in the 
deemed exchange.  This would occur, for example, if a proxy solicitor is compensated to solicit 
the approval of the reporting shell company’s shareholders for the business combination. 
Given the substance of the transactions that would be covered by new Rule 145a, we are 
proposing the rule so that shareholders more consistently receive the full protections of the 
Securities Act disclosure and liability provisions in business combinations involving reporting 
shell companies, regardless of the transaction structure.  Not only would registration in this 
context result in enhanced liabilities for signatories to any registration statement and potential 
underwriter liability as described elsewhere in this release,
234
 it would also include liability under 
Securities Act Section 11(a)(4) for experts, which include every accountant, engineer, or 
appraiser, or any person whose profession gives authority to a statement made by him, who has 
with his consent been named as having prepared or certified any part of the registration statement 
or as having prepared or certified any report or valuation which is used in connection with the 
registration statement.
235
  In addition, if the transaction is registered, Rule 145a would, in some 
                                                 
233
  We note that none of the non-exclusive safe harbors in 17 CFR 230.152(b) would be likely to apply.  In 
particular, the closing of the business combination with the reporting shell company would be simultaneous with the 
deemed exchange of reporting shell company securities with its own holders and would therefore not meet the 30-
day safe harbor in 17 CFR 230.152(b)(1). 
234
  See supra Sections III.C and III.F, respectively.   
235
  See 15 U.S.C. 77k(a)(4).  This would include auditors who opine on the financial statements associated with the 
business combination.  Depending on the transaction and whether services are provided by other parties, this could 

108 
 
cases, provide reporting shell company investors with additional pre-sale disclosure about a 
transaction that would significantly alter the nature of their investment.
236
  In this way, proposed 
Rule 145a is consistent with the intent of other rules intended to “inhibit the creation of public 
markets in securities of issuers about which adequate current information is not available to the 
public.”
237
  The proposed rule should also eliminate potential regulatory arbitrage opportunities 
to avoid disclosure requirements or liability through the use of alternative transaction structures 
when combining with a reporting shell company.
238
 
3. Excluded Transactions 
We wish to emphasize that proposed Rule 145a would have no impact on business 
combinations between two bona fide non-shell entities.  However, we note that any reporting 
shell company that is made to appear to have, or has cloaked itself as having, more than 
“nominal” assets or operations would still be subject to Rule 145a in a business combination 
transaction.
239
 
The Commission has historically recognized the usefulness of shell companies formed 
solely to change an entity’s domicile or to effect a business combination transaction.
240
  As a 
                                                 
also include, for example, valuation consultants, outside reviewers of management projections, or anyone who 
provides a fairness opinion about the transaction. 
236
  Some public shell company business combinations are not disclosed to investors until after the transaction has 
closed.  See supra note 212. 
237
  See Rule 145 Adopting Release, supra note 219. 
238
  See infra Sections III.F for a discussion of the sources of liability in registered de-SPAC transactions. 
239
  We reiterate the Commission’s previous position on structuring transactions to avoid shell company status in 
adopting the 2005 shell company limitations.  See Shell Company Adopting Release, supra note 211, at n.32. 
240
  See the Supplementary Information to the Shell Company Adopting Release, supra note 211 (“We recognize that 
companies and their professional advisors often use shell companies for many legitimate corporate structuring 
purposes.  Similarly, our definition and use of the term ’shell company’ is not intended to imply that shell companies 
are inherently fraudulent.  Rather, these rules target regulatory problems that we have identified where shell 
companies have been used as vehicles to commit fraud and abuse our regulatory processes.”). 

109 
 
result, the Commission has excluded such so-called business combination related shell 
companies
241
 from many of the shell company requirements and prohibitions that have been put 
in place to ensure the protection of investors in such companies.
242
  Consistent with this, the 
proposed rule would not apply to reporting shell companies that are business combination related 
shell companies as this term is defined in Securities Act Rule 405.
243
 
 In addition, we are proposing to exclude the business combination of one shell company 
into another shell company from the scope of Rule 145a.  Such a business combination would 
not amount to a fundamental change in the nature of the reporting shell company shareholder’s 
investment unlike a business combination with an entity that is not a shell company.
244
 
Request for Comment 
91. Should we adopt Rule 145a as proposed? 
92. Should we be seeking to align the required disclosures and liabilities associated with shell 
company business combinations among the various available transaction structures in 
order to provide reporting shell company investors consistent disclosures and protections 
across transaction structures?  Are there alternative approaches that would accomplish 
this goal? 
                                                 
241
  See supra note 43 for the definition of “business combination related shell company.” 
242
  See Shell Company Adopting Release, supra note 211. 
243
  Neither a SPAC nor any such entity formed to facilitate a merger with a SPAC meets the definition of a business 
combination related shell company because neither of these entities is 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. 
244
  However, such a business combination may continue to fall within Securities Act Rule 145 because there is a 
shareholder vote and the transaction is one to which Rule 145 would apply (e.g.,   a statutory merger or consolidation 
or similar plan or acquisition where the sole purpose of the transaction is not to change an issuer’s domicile solely 
within the United States). 

110 
 
93. How would the proposed rule affect business combinations involving both SPACs and 
non-SPAC reporting shell companies?  Would these entities be more likely to register 
such transactions? 
94. If the deemed sale to reporting shell company shareholders is required to be registered 
under the Securities Act pursuant to the proposed amendments, should we provide 
guidance with respect to the timing of the effectiveness of such registration statement in 
relation to the business combination? 
95. Are there other transactions that have purposes or results similar to reporting shell 
company business combinations that we should deem to constitute sales?  Conversely, 
does the proposed rule deem too broad of a set of reporting shell company business 
combinations to be sales?  For example, should the rule be limited to SPACs? 
96. Should proposed Rule 145a be limited to deeming shell company business combinations 
“sales” with respect to only reporting shell company shareholders?  Are there other 
parties whose interest in a shell company would be such that a shell company business 
combination should be deemed a sale?  For example, holders of securities other than 
common shares? 
97. Should reporting shell companies be prohibited from relying on the exemption in 
Securities Act Section 3(a)(9) in a transaction deemed a sale under proposed Rule 145a?  
Should we provide additional guidance on the potential availability or lack of availability 
of other exemptions from registration for the proposed Rule 145a sale?  If so, what 
exemptions should we address? 
98. Should we exclude business combination related shell companies from the scope of 
proposed Rule 145a, as proposed? 

111 
 
99. Should Rule 145a exclude the business combination of one shell company into another 
shell company, as proposed?  How frequently do such mergers occur in absence of the 
proposed Rule 145a?  In such a situation, would either or both companies’ shareholders 
benefit from registration under the Securities Act? 
100. Securities Act Rule 145(a) deems sales within the meaning of Section 2(a)(3) of the 
Securities Act for certain transactions submitted for the vote or consent of security 
holders.  Securities Act Rules 145(c) and (d) include provisions that have the effect of 
limiting resales with respect to parties to transactions described in Rule 145(a) and their 
affiliates that involve shell companies.  Although proposed Rule 145a would apply to all 
reporting shell company business combinations, not all of these business combinations 
would also fall within Rule 145(a).  Should we consider resale limitations for Rule 145a?  
Should any such resale limitations be similar to those in existing Rule 145? 
101. Should we consider guidance or additional rule amendments for transactions where the 
provisions of existing Rule 145 and Rule 145a could overlap?  For example, are there any 
rules that currently reference Rule 145 that should be amended to apply (or not apply) to 
transactions covered by proposed Rule 145a (e.g., Rule 500 of Regulation D, which states 
the availability of the exemptions for Rule 145(a) transactions; Securities Act Rule 135, 
which allows notice of a registered offering, including for a Rule 145(a) transaction; or 
Rule 172, which prohibits the use of access equals delivery in Rule 145(a) transactions)?  
What, if any, issues should the Commission address through guidance? 
102. Are there other potential opportunities for regulatory arbitrage in shell company or SPAC 
transactions that the Commission should consider addressing? 

112 
 
B. Financial Statement Requirements in Business Combination Transactions 
Involving Shell Companies 
 
After a business combination involving a shell company, the financial statements of the 
private operating company become those of the registrant for financial reporting purposes.  In 
other words, the private operating company becomes the predecessor.
245
  How the private 
operating company 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/F-1 and 
the requirements of Form S-4/F-4.  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. 
We are proposing amendments to our forms, schedules, and rules 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 initial public offerings.  The 
financial statements that would be required under the proposed amendments are based, in part, 
on current staff guidance for transactions involving shell companies.
246
  Codifying this guidance 
should reduce any asymmetries between financial statement disclosures in business combination 
transactions involving shell companies and traditional initial public offerings.  Accordingly, we 
are proposing new Article 15 of Regulation S-X and related amendments to address certain 
inconsistencies in the reporting of financial information that can arise when applying existing 
                                                 
245
  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. 
246
  Commission staff has provided informal guidance to address practical questions related to financial reporting 
issues for shell company mergers in the Division of Corporation Finance’s Financial Reporting Manual (“FRM”).  
The FRM is not a rule, regulation or statement of the Commission, and the Commission has neither approved nor 
disapproved its content.   

113 
 
requirements to business combination transactions involving shell companies compared to the 
financial statement requirements for a Securities Act registration statement. 
1. Number of Years of Financial Statements 
A registration statement on Form S-4 and F-4 and a proxy or information statement 
require financial statements of the target company for the same number of years of financial 
statements as would be required by the target in an annual report and any subsequent interim 
periods.
247
  Three years of statements of comprehensive income, changes in stockholders’ equity, 
and cash flows are required, except in the following scenarios when two years are permitted: 
• The target company would qualify as a smaller reporting company;
248
 
• The target company would be an emerging growth company (“EGC”)
249
 if it were 
conducting an initial public offering of common equity securities and the registrant is an 
EGC that has not yet filed or been required to file its first annual report, even if the target 
would not be a smaller reporting company;
250
 or 
• The transaction is registered on a Form F-4 and either (1) the target company is a first 
time adopter of International Financial Reporting Standards (“IFRS”) as issued by the 
International Accounting Standards Board (“IASB”), or (2) the Form F-4 is the initial 
registration statement of the private company and it provides U.S. GAAP financial 
statements.
251
 
                                                 
247
  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. 
248
  See supra Section III.D. 
249
  See supra note 112. 
250
  An EGC is permitted to include two years of statements of comprehensive income in its Securities Act 
registration statement for an initial public offering of its common equity securities.  EGCs that are not smaller 
reporting companies are still required to include three years of statements of comprehensive income in their annual 
reports.  See Rule 3-02 of Regulation S-X. 
251
  Item 17(b)(5) of Form F-4; General Instruction G of Form 20-F; and Instruction 3 to Item 8.A.2 of Form 20-F. 

114 
 
Our proposed amendments would expand the circumstances in which target companies may 
report two years of financial statements under the second bullet above by removing whether or 
not the shell company has filed its first annual report as a factor in determining the number of 
years required.  Because the scenarios described in the first and third bullets above are already 
aligned with the financial statements required in a traditional initial public offering, we have not 
proposed any changes related to them.  In addition, the proposed amendments would not affect 
the number of years of statements of comprehensive income that are required for the private 
operating company when it exceeds both the smaller reporting company and EGC revenue 
thresholds (that is, three years would continue to be required).
252
  However, to align the reporting 
with a traditional initial public offering, the proposed amendments would potentially reduce the 
number of years required when the target company would be an EGC if it were conducting an 
initial public offering of common equity securities and the registrant is an EGC that has filed or 
been required to file its first annual report. 
In a traditional initial public offering under the Securities Act, the registrant may provide 
two years of statements of comprehensive income, changes in stockholders’ equity, and cash 
flows when its most recently completed fiscal year revenue is below the smaller reporting 
company or EGC revenue thresholds (and all the other EGC qualifications are met), or as noted 
in the third scenario above for a foreign private issuer.  We are proposing to align the number of 
                                                 
252
  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.  In addition to providing three years of financial statements due to the 
private operating company not qualifying as an EGC, the private operating company would not be able to take 
advantage of the delayed adoption dates for new or revised accounting standards permitted by EGCs in its financial 
statements.  In the staff’s view, the private operating company’s revenue, as predecessor, should be used to 
determine whether the registrant qualifies as an EGC after the transaction.  See FAQ 47 of the Division of 
Corporation Finance’s Jumpstart Our Business Startups Act Frequently Asked Questions, available at 
https://www.sec.gov/divisions/corpfin/guidance/cfjjobsactfaq-title-i-  general.htm
 (last revised Dec. 21, 2015).   The 
FAQ does not represent a rule, regulation or statement of the Commission,  and the Commission has neither 
approved nor disapproved its content. 

115 
 
fiscal years required to be included in the financial statements for a private company that will be 
the predecessor(s) in a shell company combination with the financial statements required to be 
included in a Securities Act registration statement for an initial public offering of equity 
securities in proposed Rule 15-01(b) of Regulation S-X. 
Proposed Rule 15-01(b) would provide that when the registrant is a shell company,  and 
the financial statements of a business
253
 that will be a predecessor to the registrant are required in 
a registration statement or proxy statement, the registrant must file financial statements of the 
business that will be a predecessor to the registrant in accordance with § 210.3-01 to 3-12 and 
§ 210.10-01 (Articles 3 and 10 of Regulation S-X) or § 210.8-01 to 8-08 (Article 8), if 
applicable, as if the filing were a Securities Act registration statement for the initial public 
offering of that business’s equity securities.  As a result, a shell company registrant would be 
permitted to include in its Form S-4/F-4/proxy or information statement two years of statements 
of comprehensive income, changes in stockholders’ equity, and cash flows for the private 
operating company for all transactions involving an EGC shell company and a private operating 
company that 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 or not.  The 
proposed amendments would not affect the number of years of statements of comprehensive 
income that are required for the private operating company when it exceeds both the smaller 
                                                 
253
  We use the term “business” in this context, rather than “private operating company,” 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.  In a 
business combination transaction involving a shell company, the private operating company would meet the 
definition of a business. 

116 
 
reporting company and EGC revenue thresholds (that is, three years would continue to be 
required).
254
 
2. Audit Requirements of Predecessor 
Proposed Rule 15-01(a) would align the level of audit assurance required for the target 
private operating company in business combination transactions involving a shell company with 
the audit requirements for an initial public offering.
255
  Specifically, we are proposing that the 
term audit (or examination), when used in regard to financial statements of a business that is or 
will be a predecessor to a shell company, 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.  As a result, a target private operating company would be 
required to comply with Article 2 of Regulation S-X as if it were filing an initial public offering 
for its audited financial statements.  Forms S-4 and F-4
256
 currently provide that, for an 
acquisition by a registrant that is not a shell company, (i) the target operating company financial 
statements may be audited in accordance with U.S. Generally Accepted Auditing Standards,
257
 
(ii) the financial statements of the most recent fiscal year are required to be audited only to the 
extent practicable,
258
 and (iii) financial statements before the latest fiscal year need not be 
audited if they were not previously audited.
259
  The staff, however, has advised registrants that it 
                                                 
254
  The private operating company would also not be able to take advantage of the delayed adoption dates for new 
or revised accounting standards as that transition is only available to EGC companies.  As described in FAQ 47 of 
the Division of Corporation Finance’s Jumpstart Our Business Startups Act Frequently Asked Questions, the staff 
takes the view that the private operating company’s revenue, as predecessor, will determine the post-transaction 
EGC status.  See Securities Act Section 7(a)(2)(B). 
255
  See proposed Rule 15-01(a) of Regulation S-X and Instruction 1 to Item 17(b) of Form S-4. 
256
  See Instruction 1 to Item 17(b)(5) of Form F-4 and General Instruction E(c)(2) of Form 20-F. 
257
  See 17 CFR 210.1-02(d) (Rule 1-02(d) of Regulation S-X). 
258
  See Instruction 1 to Item 17(b)(7) of Form S-4. 
259
  Id. 

117 
 
expects the financial statements of the business, i.e., target private operating company, in a 
transaction involving a shell company to be audited to the same extent as a registrant in an initial 
public offering, because at consummation the financial statements of the target private operating 
company become that of the registrant.
260
  The proposed amendments would codify this existing 
staff guidance. 
3. Age of Financial Statements of the Predecessor 
Proposed Rule 15-01(c) would provide that the age of financial statements for a private 
operating company that would be the predecessor to a shell company in a registration statement 
or proxy statement would be based on whether the private operating company would qualify as 
smaller reporting company if filing its own initial registration statement.  Absent this 
amendment, our rules require filing financial statements of the private operating company that 
would be required in an annual report, which do not have the same age requirements as those in 
the context of an initial registration statement.
261
  Similar to the other proposed amendments to 
Regulation S-X, this amendment would further align the financial statement requirements for a 
private operating company involved in a business combination with a shell company with those 
required in a Securities Act registration statement for an initial public offering.  If the private 
operating company would qualify to be a smaller reporting company, it would apply Rule 8-08 
of Regulation S-X for the age of financial statements.
262
  Otherwise, the private operating 
                                                 
260
  See FRM at Section 4110.5 for a chart that outlines the staff’s application of certain PCAOB requirements in 
various filings with the SEC, which includes transactions involving a shell company. 
261
  For example, in an annual report, a domestic company with net losses in its recently completed fiscal year would 
have up to 90 days after its most recently completed fiscal year-end to update its third quarter financial statements.  
In contrast, in an initial registration statement, it would have up to only 45 days.  See General Instruction A. to Form 
10-K and 17 CFR 210.3-12 (Rule 3-12 of Regulation S-X). 
262
  See 17 CFR 210.8-08 (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 

118 
 
company would apply the age of financial statement requirements in Rules 3-01(c) and 3-12 of 
Regulation S-X.  Based on the staff’s experience reviewing these transactions, we believe this 
proposed amendment to be consistent with existing practice. 
We are not proposing amendments to the age requirements for the financial statements of 
the shell company registrant because we continue to believe that the age requirements in Articles 
3 and 8 of Regulation S-X that apply to existing registrants are appropriate.  Thus, the existing 
provisions in Articles 3 and 8 of Regulation S-X for reporting companies required to file under 
Exchange Act Section 13(a) or 15(d) would continue to apply to shell companies.
263
 
4. Acquisitions of Businesses by a Shell Company Registrant or Its 
Predecessor That Are Not or Will Not Be the Predecessor 
 
The financial statements of a target private operating company 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.
264
  The financial statements of any other 
businesses, besides the predecessor, that have been, or are probable to be, acquired may also be 
required.
265
  For example, “Shell Company A” and “Target Private Operating Company B” are 
part of a business combination and a Form S-4 registration statement is filed.  Target Private 
Operating Company B acquired “Company C” before the Form S-4 was filed.  The proposed 
amendments in this section would address the reporting required for Company C in this non-
exclusive example. 
                                                 
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. 
263
  See Rule 3-01(c) of Regulation S-X (Rule 8-08 for smaller reporting companies), which applies to reporting 
companies required to file under Exchange Act Section 13(a) or 15(d). 
264
  See Item 17 of Form S-4 or Form F-4, § 240.14A-3(b), and Items 13 and 14 of Schedule 14A. 
265
  See 17 CFR 230.408(a) (Securities Act Rule 408(a)) and 17 CFR 240.12b-20 (Exchange Act Rule 12b-20). 

119 
 
Under existing rules,
266
 financial statements of a business acquired or probable of being 
acquired by the target private operating company (e.g., “Company C” in the above example) are 
required to be filed in a registration statement or proxy/information statement only when 
omission of those financial statements would render the target company’s financial statements 
substantially incomplete or misleading.  In order to specify when such financial statements are 
required, we are proposing new Rule 15-01(d) of Regulation S-X to require application of Rules 
3-  05 or 8-04 (or Rule 3-14 as it relates to a real estate operation), the Regulation S-X provisions 
related to financial statements of an acquired business, to acquisitions of businesses by a shell 
company registrant, or its predecessor, that are not or will not be the predecessor to the 
registrant.
267
  This proposal would further align the financial reporting for a shell company 
business combination contained in Forms S -4 or F-4 and a proxy or information statement with 
what would be required to be included in a Securities Act registration statement for an initial 
public offering of the target private operating company.  Based on staff’s experience reviewing 
these transactions, we understand this proposed amendment to be consistent with the current 
market practice of applying Rule 3-05 (or Rule 8-04) to acquisitions by the target private 
operating company in the context of a business combination involving a shell company. 
In connection with this proposed amendment in Rule 15-01(d), we also considered and 
are proposing amendments related to the significance tests in Rule 1-02(w) of Regulation S-X 
that determine when acquired business financial statements are required.  The existing tests as 
applied to acquisitions involving shell companies appear inconsistent with the reasons 
                                                 
266
  Id. 
267
  17 CFR 210.8-04 (Rule 8-04) applies when the registrant or, depending on the context, its predecessor would 
qualify to be a smaller reporting company based on its annual revenues as of the most recently completed fiscal year 
if it were filing a registration statement itself. 

120 
 
underlying the sliding scale approach adopted in Rule 3-05.
268
  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 and does not address the scenario when there is 
both a shell company registrant and target private operating company that is or will be its 
predecessor.  Because a shell company has nominal activity, the application of such tests results 
in limited to no sliding scale for business acquisitions, including those made by the private 
operating company that will be the predecessor to the shell company, because every acquisition 
would be significant and thus require financial statements.
269
  Such application may limit the 
ability to recognize which acquisitions have a greater impact on the predecessor than others.
270
 
We are proposing to amend Rule 1-02(w) of Regulation S-X to require that significance 
of the acquired business be calculated using the private operating company’s financial 
information as the denominator instead of that of the shell company registrant.  Using the private 
operating company’s financial statements for the denominator should produce results more 
                                                 
268
  Instructions for the Presentation and Preparation of Pro Forma Financial Information and Requirements for 
Financial Statements of Businesses Acquired or To Be Acquired, Release No. 33-6413 (June 24, 1982) [47 FR 
29832 (July 9, 1982)] (“Rule 3-05 Adopting Release”).  The requirements are based on the significant subsidiary 
tests using a sliding scale so that the requirements for filing such financial statements, as well as the periods covered 
by such financial statements, will vary with the percentage impact of the acquisition on the registrant.  In adopting 
the sliding scale approach, the Commission stated its belief that the selected percentages “meet the objectives of 
providing adequate financial information to investors, shareholders and other users while at the same time reducing 
the reporting burdens of registrants involved in acquisitions.” 
269
  For example, financial statements of a business that the private operating company has acquired and represents 
less than 5% of its total assets, revenue and net income could be required in the Form S-4 because the acquired 
business would be compared to the shell company’s financial statements. 
270
  The 2020 amendments to Rules 1-02(w) and 3-05 did not affect the financial statements related to the acquisition 
of a business that is the subject of a proxy statement or registration statement on Form S-4 or Form F-4.  See 
Amendments to Financial Disclosures about Acquired and Disposed Businesses, Release 33-10786, (May 21, 2020) 
[85 FR 54002 (Aug. 31, 2020)], n.20. 

121 
 
consistent with the sliding scale approach in Rule 3-05 and recognizes that certain acquisitions 
have a greater impact than others.
271
 
Related to the application of the significance tests, we considered the impact of the 
application of 17 CFR 210.11-01(b)(3)(i)(B) (“Rule 11-01(b)(3)(i)(B) of Regulation S-X”).  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.
272
  While we are not proposing amendments to this paragraph in Rule 
11-01, based on the proposed amendment to 17 CFR 210.11-01(d) (“Rule 11-01(d)”) described 
below, we highlight that application of this rule may change and result in a future acquired 
business being compared to the pro forma amounts related to the shell company and target 
private operating company business combination transaction in filings made after the 
consummation of the business combination transaction.
273
  The impact of such application would 
be that the SPAC’s financial statements, including its cash, would be part of the pro forma 
financial information and will likely increase the denominator in the significance tests compared 
to measuring an acquisition solely on the target private operating company. 
We are proposing new 17 CFR 210.15-01(d)(2) (“Rule 15-01(d)(2)”) to specify when the 
financial statements of a recently acquired business (or real estate operation) that is not the 
private operating company that will be the predecessor, which are omitted from a shell company 
                                                 
271
  Ibid. 
272
  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 or Rule 3-14 and the pro forma information required by Rule 11-01 
through 11-02 of Regulation S-X. 
273
  Pursuant to the proposed amendment to Rule 11-01d) that would stipulate that the SPAC is a business, an 
acquisition of the SPAC is considered to be an acquisition of a business, and the conditions to use pro forma 
financial statements depicting the acquisition as the denominator in the significance tests may be met. 

122 
 
registration, proxy, or information statement under Regulation S-X, would be required to be 
filed.  Rule 3-05(b)(4)(ii) of Regulation S-X provides that financial statements of a probable of 
being acquired or recently acquired business may be omitted from a registration, proxy, or 
information statement when their significance is measured at 50% or less (or Rule 3-14(b)(3)(ii) 
as it relates to a real estate operation).  The rule further provides that financial statements of a 
recently acquired business, when omitted from the registration statement or proxy or information 
statement, must be filed under cover of Form 8-K within 75 days after consummation of the 
acquisition.  Because the significance of the acquisition is greater than 20% but less than 50%, 
the recently acquired business’s financial statements, which are omitted from the registration, 
proxy, or information statement, must be filed.
274
  However, it is unclear how those financial 
statements are to be filed when the private operating company is not yet subject to Exchange Act 
reporting requirements and thus may not be able to file a Form 8-K.  Rather than requiring a 
post-effective amendment, we are proposing in Rule 15-01(d)(2) that the financial statements of 
the acquired business omitted from the previously-filed registration, proxy, or information 
statement would be required in an Item 2.01(f) Form 8-K filed with Form 10 information. 
5. Financial Statements of a Shell Company Registrant After the 
Combination with Predecessor 
 
In recent years, the staff has received questions on whether the historical financial 
statements of the shell company are required in filings made after the business combination.  Due 
to the lack of clarity regarding the application of the financial statement requirements in Articles 
3 and 8 of Regulation S-X, we are proposing new Rule 15-01(e), which would allow a registrant 
to exclude the financial statements of a shell company, including a SPAC, for periods prior to the 
                                                 
274
  Rule 3-05 generally requires financial statements of an acquired business when the conditions in Rule 1-02(w) 
related to significant subsidiary exceed 20%. 

123 
 
acquisition once the following conditions have been met: (1) the financial statements of the shell 
company have been filed for all required periods through the acquisition date, and (2) the 
financial statements of the registrant include the period in which the acquisition was 
consummated. 
In the example of a de-SPAC transaction, 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.
275
  The proposed rule would apply regardless 
of whether the de-SPAC transaction is accounted for as a forward acquisition of the target 
private operating company by the SPAC or a reverse recapitalization of the target private 
operating company.  The financial statements of the SPAC would be required in all filings 
(including registration statements and the Form 8-K with Form 10 information filed following 
the de-SPAC transaction) prior to the filing of the first periodic report that includes those post-
business combination financial statements.  The proposed amendments should not result in a 
significant change from current practice as it relates to periodic reports because the staff in the 
last several years has not objected to the registrant excluding the historical financial statements 
of the SPAC from periodic reports once the financial statements for the registrant include the 
period in which the acquisition or recapitalization was consummated. 
Further, the proposed amendments would not change the requirement that a registrant 
must provide all material information as may be necessary to make required statements, in light 
                                                 
275
  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. 

124 
 
of the circumstances under which they were made, not misleading,
276
 so if there is information 
included in or about the historical SPAC financial statements that would be material to an 
investor, a registrant would still be required to provide such information. 
6. Other Amendments 
In addition, we are proposing a number of other related amendments as follows: 
• We are proposing 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 under the rule.  Nonetheless, given the significant equity transactions generally 
undertaken by a SPAC, we believe the financial statements of the SPAC could be 
material to an investor, particularly when they underpin adjustments to pro forma 
financial information in a transaction when an operating company is the legal acquirer of 
a SPAC.  As a result of the proposed rule, an issuer that is not a SPAC may be required to 
file financial statements of the SPAC in a resale registration statement on Form S-1. 
• 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.  We are proposing 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 and for periods prior to 
consummation of the acquisition and not the shell company registrant. 
                                                 
276
  See Exchange Act Rule 12b-20, Securities Act Rule 408(a). 

125 
 
• Rule 3-02 of Regulation S-X requires that statements of comprehensive income be filed 
for the registrant and its predecessors.  However, as it relates to balance sheets, certain 
provisions in Regulation S-X specify that they be filed for the registrant and do not 
specifically refer to balance sheets of predecessors.  We do not believe the intent of these 
rules is to provide the predecessor’s statements of comprehensive income without the 
balance sheets as that would not be considered a complete set of financial statements and 
would be inconsistent with Article 3 of Regulation S-X that requires both.  We are 
proposing amendments to Rules 3-01, 8-02, and 10-01(a)(1) of Regulation S-X to 
specifically refer to financial statements of predecessors consistent with the provision 
regarding income statements.
  
These amendments codify existing financial reporting 
practices, and we do not expect them to result in any changes in disclosures. 
Request for Comment 
103. Should we adopt the amendments and new rules related to aligning financial statement 
disclosures, including Rule 15-01 of Regulation S-X, as proposed? 
104. Should Rule 15-01 provide that the term audit (or examination), when used in regard to 
financial statements of a business that is or will be a predecessor to a shell company, 
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, as proposed? 
105. Should Article 15 of Regulation S-X address financial statement requirements for the 
acquisition by a shell company of a business that will be its predecessor, as proposed, or 
should we limit the requirements to apply only to a de-SPAC transaction, and if so, why? 

126 
 
106. Should the significance tests that determine whether the financial statements of 
businesses that are not or will not be the predecessor are required to be filed employ the 
denominator of the private operating company in lieu of that of the shell company 
registrant, as proposed?  Should the pro forma financial information that gives effect to 
the shell company transaction be allowed to be used as the denominator in measuring the 
significance of other acquisitions not involving a predecessor?  Should there be 
restrictions on when such pro forma financial information is used to measure 
significance, such as only for acquisitions that occur subsequent to consummation of the 
transaction and not for acquisitions that are done in tandem with the shell company 
transaction? 
107. Should the financial statements of a shell company not be required in filings once the 
financial statements of the registrant include the period in which the acquisition was 
consummated, as proposed?  Are there situations in which investors would continue to 
rely upon the information in the shell company financial statements after the acquisition 
was consummated and reflected in the financial statements of the registrant, or other 
factors we should consider in determining when the shell company financial statements 
should not be required in filings after the acquisition is complete?  Should the accounting 
for the transaction as a forward acquisition or reverse recapitalization determine whether 
the financial statements are required in filings made after the acquisition was 
consummated? 
108. Should Rule 11-01(d) of Regulation S-X be amended to state that a SPAC is a business 
for purposes of the rule, as proposed?  Would it change the existing application of Rule 
11-01(b)(3)(i)(B) of Regulation S-X as it relates to de-SPAC transactions?  Should 

127 
 
eliciting the financial statements of the SPAC in a resale registration statement of an 
issuer that is not a SPAC be accomplished through a rule that specifically requires the 
SPAC financial statements to be filed (subject to the provisions of proposed Rule 15-
01(e))? 
109. The Form 8-K filed pursuant to Item 2.01(f) may require a third fiscal year of certain 
financial statements for an acquired business that is the predecessor to a shell company 
and an emerging growth company, while Rule 15-01(b), as proposed, would only require 
two.  Should we amend the Form 8-K requirement to provide an exception to the required 
Form 10-type information so the financial statements of the acquired business need not 
be presented for any period prior to the earliest audited period previously presented in 
connection with a registration, proxy, or information statement of the registrant? 
V. ENHANCED PROJECTIONS DISCLOSURE 
A. Background 
Disclosure of financial projections is not expressly required by the federal securities laws; 
however, there are various reasons why registrants produce and disclose such information.  For 
example, projections may be disclosed to comply with state or foreign corporate law regarding 
the board’s decision to approve a business combination transaction or the basis underlying a 
fairness opinion issued by a financial advisor.
277
  Companies engaged in business combination 
transactions may use projections to negotiate the offered consideration, terms, and conditions and 
to allocate risks in those transactions.  Companies may also disclose projections to avoid claims 
                                                 
277
  See, e.g., In re Netsmart Techs., Inc., 924 A.2d 171 (Del. Ch. 2007), and the disclosure of the substantive work 
performed by the financial advisor, see, e.g., In re Pure Res., Inc., 808 A.2d 421 (Del. Ch. 2002).   

128 
 
that the omission of such information violates federal anti-fraud provisions or to satisfy certain 
requirements under Regulation M-A.
278
 
Recent events have raised renewed concerns about the use of projections, particularly 
with respect to de-SPAC transactions in which private operating companies disclose projections 
that may lack a reasonable basis.
279
  For example, some companies have presented projections of 
significant increases in revenue or market share even though they do not have any operations at 
the time such projections were prepared.
280
  Other companies have allegedly used materially 
misleading assumptions, failed to take into account foreseeable future events in developing 
                                                 
278
  See Exchange Act Rules 10b-5, 12b-20, 13e-3(b)(1)(ii), and 17 CFR 240.14a-9 (Exchange Act Rule 14a-9), 
Securities Act Rule 408(a), and Exchange Act Section 14(e).  See also Item 1004(b)(2)(iii) and 1011(c) of 
Regulation M-A.  Omission of projections used by the board or the fairness opinion advisers, in particular, have 
been the subject of various lawsuits filed in federal courts alleging violation of Rule 14a-9.  See, e.g., Smith v. 
Robbins & Myers, Inc., 969 F.Supp.2d 850 (2013), Azar v. Blount Intern., Inc., No. 3:16-cv-483-SI, 2017 WL 
1055966, 2017 U.S. Dist. LEXIS 39493 (D. Or. Mar. 20, 2017), and NECA-IBEW Pension Trust Fund v. Precision 
Castparts Corp., No. 3:16-cv-01756-YY, 2017 WL 4453561, 2017 U.S. Dist. LEXIS 165139 (D. Or. Oct. 3, 2017), 
adopted by 2018 WL 533912, 2018 U.S. Dist. LEXIS 11463 (D. Or. Jan. 24, 2018) (relating to disclosed projections 
that management knew were not reflective of management’s plans for the registrant). 
279
   The Commission recently has brought enforcement actions alleging the use of baseless or unsupported 
projections about future revenues and the use of materially misleading underlying financial projections.  These cases 
involve both SPACs and other reporting companies.  See the following matters related to SPACs: In the Matter of 
Momentus, Inc., et. al., Exch. Act Rel. 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, Exch. Act Rel. No. 34-86164 (June 
20, 2019); and, SEC vs. Milton, Case No. 1:21-cv-6445 (S.D.N.Y., filed July 29, 2021).  See the following non-
SPAC cases: SEC vs. CanaFarma Hemp Products Corp, et al., Case No. 1:21-cv-08211 (S.D.N.Y., filed Oct.  5, 
2021); SEC v. Thomas, et al., Civil Action No. 19-cv-1132 (D. Nev., filed June 28, 2019); In the Matter of Ribbon 
Communications Inc., et. al., Exch. Act Rel. No. 34-83791 (Aug.  7, 2018); SEC v. Enviro Board Corporation, et al., 
[Civil Action No. 2:16-cv-06427 (C.D. Cal., filed Aug.  26, 2016)]; and SEC v. Roberts, et. al., Civil Action No. 
8:15-cv-2093-T-17-MAP (M.D. Fla., filed Sept.  9, 2015).  See also Dave Michaels, Regulators Hit Space SPAC 
Over Disclosures, The Wall Street Journal, July 26, 2021. 
280
  Some news reports have also suggested that many post-business combination companies, particularly those with 
less revenue or that are early stage companies, do not meet revenue or earnings targets that they provided to 
investors at the time of the de-  SPAC transaction.  An analysis performed by The Wall Street Journal indicates that, 
of the 63 companies that became public companies through a de-SPAC transaction in 2021 and had less than $10 
million in sales at the time of the transaction, at least 30 did not meet their projections.  The article reported that the 
companies in the analysis expected to miss their 2021 revenue projections fell short by an average of 53% and that 
companies falling short of their earnings projections have estimated losses that are approximately 40% greater, on 
average, than they projected at the time of the de-SPAC transaction.  See Heather Somerville, SPACs Fall Short of 
Lofty Goals, The Wall Street Journal, Feb. 26, 2022. 

129 
 
projections, or used projections unsupported by a target’s experience.
281
  Similar potentially 
misleading projections have been used in non-SPAC filings, including with respect to future 
revenues, prospects and profitability.
282
  Although the Commission has previously acknowledged 
that projections and other forward-looking information can provide useful information for 
investors when making voting and investment decisions,
283
 it has also recognized that the use of 
such forward-looking information could raise investor protection concerns.
284
  Accordingly, the 
Commission adopted Item 10(b) of Regulation S-K to set forth its views on important factors to 
be considered in formulating and disclosing such projections in certain Commission filings.
285
  
Item 10(b) states that management has the option to present in Commission filings its good faith 
assessment of a registrant’s future performance, but it also states that management must have a 
reasonable basis for such an assessment.  Item 10(b) further expresses the Commission’s views 
on the need for disclosure of the assumptions underlying the projections, the limitations of such 
projections, and the format of the projections. 
B. Rule Proposals 
We are proposing to amend Item 10(b) of Regulation S-K to expand and update the 
Commission’s views on the use of projections.  Among other things, the proposed amendments 
would address the presentation of projections by companies with no history of operations and 
                                                 
281
  See supra note 275. 
282
  Id. 
283
  Disclosure of Projections of Future Economic Performance,  Release No. 33-5362 (Feb. 2, 1973) [38 FR 7220 
(Mar. 19, 1973)] and Guides for Disclosure of Projections of Future Economic Performance,  Release No. 33-5992 
(Nov. 7, 1978) [43 FR 53246 (Nov. 15, 1978)]. 
284
  See Release No. 33-5362, supra note 283. 
285
  See Adoption of Integrated Disclosure System,  Release 33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)].  
In connection with the adoption of the integrated reporting system, the Commission rescinded several staff guides 
relating to the preparation of registration statements and reports and relocated the substance of some of them into 
Item 10(b) of Regulation S-K.  See Rescission of Guides and Redesignation of Industry Guides,  Release No. 33-
6384 (Mar. 16, 1982) [47 FR 11476 (Mar. 16, 1982)]. 

130 
 
provide that the guidance in the item also applies to projections of future economic performance 
of persons other than the registrant, such as the target company in a business combination.  
Further, given the widespread use of projections in de-SPAC transactions and the resulting 
heightened concerns, we are also proposing new Item 1609 of Regulation S-K that would be 
applicable to financial projections used in de-SPAC transactions and would set forth additional 
disclosure requirements relating to financial projections. 
The proposed revisions to Item 10(b) of Regulation S-K and proposed Item 1609 of 
Regulation S-K are intended to help address concerns about the use of projections in de-SPAC 
transactions and similar circumstances.  By providing additional guidance for registrants and 
mandating specific disclosures in de-SPAC transactions, these proposed rules could enhance the 
attention and level of care companies bring to the preparation of financial projections, both in de-
SPAC transaction filings and in other filings made with the Commission. 
1. Item 10(b) of Regulation S-K 
We are proposing to amend Item 10(b) to present the Commission’s updated views on 
projected financial information.  The proposed amendments to Item 10(b) would continue to 
state the Commission’s view that projected financial information included in filings subject to 
Item 10(b) must have a reasonable basis.  To address specific concerns that some companies may 
present projections more prominently than actual historical results (or the fact that they have no 
operations at all) or use non-GAAP financial measures in the projections without a clear 
explanation or definition of such a measure, we propose to amend 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;  

131 
 
• It generally would be misleading to present projections that are based on historical 
financial results or operational history without presenting such historical measure or 
operational history with equal or greater prominence; and 
• The presentation of projections that include a non-GAAP financial measure should 
include a clear definition or explanation of the measure, a description of the GAAP 
financial measure to which it is most closely related,
286
 and an explanation why the non-
GAAP financial measure was used instead of a GAAP measure.
287
 
These proposed changes, if adopted, should assist registrants in presenting their 
projections in an appropriate format and with the appropriate context, which in turn should 
facilitate investors’ evaluation of the projections, assessment of the reasonableness of the bases 
for these projections (particularly when compared to historical performance and results), and 
determinations about the appropriate reliance to place on the projections when making an 
investment or voting decision. 
Finally, Item 10(b) currently refers to projections regarding the future performance of a 
“registrant.”  In business combination transactions, it is common for projections of the target 
company to be included in the Securities Act registration statement or proxy statement filed by 
the acquiring company.  In such a case, it may be unclear if the guidance in Item 10(b) applies to 
the target company’s projections because the target company is not the registrant for that filing.  
In our view, Item 10(b) should apply to such projections because they are nevertheless being 
presented to investors through the registration statement or proxy statement filed by the 
                                                 
286
   The reference to the nearest GAAP measure called for by amended 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. 
287
  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)]. 

132 
 
acquiring company.  Accordingly, we are proposing to amend Item 10(b) to state that the 
guidance therein applies to any 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. 
Request for Comment 
110. Should we amend Item 10(b) of Regulation S-K, as proposed?  Is there additional or 
different guidance we should provide? 
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? 
112. Are the proposed amendments to Item 10(b)  necessary in light of proposed Item 1609 of 
Regulation S-K, which is limited to de-SPAC transactions? 
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? 
2. Item 1609 of Regulation S-K 
We are also proposing new Item 1609 of Regulation S-K that would apply only to de-
SPAC transactions.
288
  The nature of the SPAC structure and de-SPAC transactions raise 
heightened concerns about the use of projections in such transactions.  As noted above, a 
sponsor’s compensation may depend to a large extent on the completion of the de-SPAC 
                                                 
288
  The disclosure would be required in the forms or schedules filed for de-SPAC transactions. 

133 
 
transaction, and thus the SPAC and its sponsor may have an incentive to use a private operating 
company’s financial projections in seeking support for the de-SPAC transaction.
289
  In particular, 
such projections could be used to value the private operating company and may influence how 
investors evaluate a proposed de-SPAC transaction.
290
  Similarly, as a consequence of the 
SPAC’s expected valuation of the private operating company on the basis of this type of 
financial projections, controlling shareholders and management of the private operating company 
may have an incentive to be overly aggressive in their development of projections as a means of 
justifying a higher price for their company.
291
  Aggressive projections may also be used by the 
SPAC or the private operating company to justify the target’s valuation in order to help meet any 
exchange listing requirement that the target has a fair market value equal to at least 80% of the 
balance of funds in the SPAC’s trust account.
292
 
For these reasons, we are proposing additional disclosures intended to assist investors in 
assessing the bases of projections used in de-SPAC transactions and determining to what extent 
they should rely on such projections.  Proposed Item 1609 would require a registrant to provide 
the following disclosures: 
• With respect to any projections disclosed by the registrant, the purpose for which the 
projections were prepared and the party that prepared the projections; 
                                                 
289
  There is evidence that, in a majority of de-SPAC transactions announced in the twelve months ending in the first 
quarter of 2021, the private operating companies were pre-revenue, thus making financial projections an important 
basis for SPACs and private operating companies to find additional investments and to receive support for de-SPAC 
transactions.  See “Why Have SPAC Valuations Skyrocketed?,” Stuart Gleichenhaus and Bill Stotzer, FTI 
Consulting, Aug. 6, 2021. 
290
  In this regard, we note that there also is evidence of the different uses   of, and greater reliance on, financial 
projections by retail investors than by institutional investors.  See Dambra, Even-Tov, and George, supra note 33. 
291
  See Kimball Chapman, Richard M. Frankel, and Xiumin Martin, SPACs and Forward-Looking Disclosure: Hype 
or Information? (SSRN Working Paper, 2021). 
292
  See, e.g., NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule IM-5101-2. 

134 
 
• All material bases of the disclosed projections and all material assumptions 
underlying the projections, and any factors that may materially impact such 
assumptions (including a discussion of any factors that may cause the assumptions to 
be no longer reasonable, 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 still reflect view of the board or management of the 
SPAC or target company, as applicable, as of the date of the filing; if not, then 
discussion of the purpose of disclosing the projections and the reasons for any 
continued reliance by the management or board on the projections. 
These proposed disclosures would inform investors about why the projections were prepared, 
and by whom, which could allow them to better understand the motivations underlying such 
projections.  In addition, the proposed disclosures could help investors assess the continued 
reliability of the projections both independently and through the views of the board or 
management. 
Request for Comment 
114. Should we adopt Item 1609 as proposed?  Are there additional disclosures that we should 
require in de-SPAC transaction filings related to financial projections? 
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? 
116. Should we prohibit the disclosure of any specific financial measures or metrics? If so, 
which measures or metrics? 

135 
 
117. Will proposed Item 1609 discourage the use of financial projections in de-SPAC 
transactions?  What impact would this have on investors?  Would our proposal have any 
impact on the ability to comply with state or foreign law obligations regarding 
disclosures of projections used in business combination transactions? 
118. Both the proposed amendments relating to the PSLRA safe harbor and proposed Item 
1609 may result in market participants using financial projections in de-SPAC 
transactions in a different manner than they do currently.  Would adoption of only one of 
the proposals strike a better balance in terms of the costs and benefits with respect to the 
use of projections?  If so, which proposal? 
VI. PROPOSED SAFE HARBOR UNDER THE INVESTMENT COMPANY ACT 
 A. Background 
While the number of SPACs has grown dramatically in recent years,
293
 some SPACs 
have sought to operate in novel ways that suggest that SPACs and their sponsors should increase 
their focus on evaluating when a SPAC could be an investment company.
294
  We are concerned 
that SPACs may fail to recognize when their activities raise the investor protection concerns 
addressed by the Investment Company Act.
295
  To assist SPACs in focusing on, and appreciating 
                                                 
293
  See supra notes 7-  8 and accompanying text. 
294
  The growth of the SPAC industry, among other things, has also sparked debate about the status of SPACs as 
investment companies.  See, e.g., Kristi Marvin, 49 Law Firms Unite and Push Back on Recent SPAC Litigation, 
SPAC Insider (Aug. 27, 2021), available at 
https://spacinsider.com/2021/08/27/49-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). 
295
  The Investment Company Act regulates the organization of investment companies that engage primarily in 
investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public.  The 
Act is designed to minimize conflicts of interest that arise in these complex operations protecting investors by 
preventing insiders from managing the companies to their benefit and to the detriment of public investors; 
preventing the issuance of securities having inequitable or discriminatory provisions; preventing the management of 
investment companies by irresponsible persons; preventing the use of unsound or misleading methods of computing 
earnings and asset value; preventing changes in the character of investment companies without the consent of 
investors; preventing investment companies from engaging in excessive leveraging; and ensuring the disclosure of 

136 
 
when, they may be subject to investment company regulation, we are proposing Rule 3a-10, 
which would provide a safe harbor from the definition of “investment company” under Section 
3(a)(1)(A)
296
 of the Investment Company Act for SPACs that meet the conditions discussed 
below.
297
  We believe that certain SPAC structures and practices may raise serious questions as 
to their status as investment companies.  While a SPAC would not be required to rely on the safe 
harbor, we have designed the proposed conditions of the safe harbor to align with the structures 
and practices that we preliminarily believe would distinguish a SPAC that is likely to raise these 
questions from one that would not.  
1. Potential Status as an Investment Company 
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 engage primarily, in the business of investing, 
reinvesting, or trading in securities.  Depending on the facts and circumstances, SPACs could 
meet the definition of “investment company” in Section 3(a)(1)(A).  To assess a SPAC’s status 
as an investment company under that definition, we generally look to the SPAC’s assets, the 
sources of its income, its historical development, its public representations of policy, and the 
activities of its officers and directors (known as the “Tonopah factors”).
298
  
                                                 
full and accurate information about the companies and their sponsors.  See Section 1(b) of the Investment Company 
Act [15 U.S.C. 80a-1(b)]. 
 
296
  15 U.S.C. 80a-3(a)(1)(A). 
297
  Proposed 17 CFR 270.3a-10.  SPACs that meet the proposed rule’s conditions would not need to register under 
the Investment Company Act. 
298
  See In the Matter of Tonopah Mining Co., 26 S.E.C. 426 (July 21, 1947).  See generally SEC v. National Presto 
Industries, Inc., 486 F.3d 305 (7
th
 Cir. May 15, 2007), rev’g. SEC v. National Presto Industries Inc., Case No. 02 C 
5057 (N.D. Ill, Oct. 31, 2005).  The Tonopah factors were first used by the Commission to determine an issuer’s 
primary engagement under Section 3(b)(2), but have been applied in part or in totality to determine an issuer’s 
primary engagement in other contexts under the Investment Company Act, including Section 3(a)(1)(A) of the Act.  
Certain Prima Facie Investment Companies, Release No. IC-10937 (Nov. 13, 1979) [44 FR 66608 (Nov. 20, 1979)] 
at n.24 (“Proposing Release to Rule 3a-1”) (“Although [Tonopah] was decided under [S]ection 3(b)(2) of the Act, 
the “primary engagement” standard set forth in that case also appears to be applicable to the identical standard of 
Section 3(a)(1)[A] and [S]ection 3(b)(1).”).   The Commission has also considered the activities of the company’s 

137 
 
SPACs are generally formed to identify, acquire and operate a target company through a 
business combination and not with a stated purpose of being an investment company.
299
  We 
understand that SPACs typically view their public representations, historical development and 
efforts of officers and directors as consistent with those of issuers that are not investment 
companies.  At the same time, most SPACs ordinarily invest substantially all their assets in 
securities, often for a period of a year or more, meaning that investors hold interests for an 
extended period in a pool of securities.  Moreover, whatever income a SPAC generates during 
this period is generally attributable to its securities holdings.  The asset composition and sources 
of income for most SPACs may therefore raise questions about their status as investment 
companies under Section 3(a)(1)(A) of the Investment Company Act and, in assessing this status, 
these factors would need to be weighed together with the other Tonopah factors. 
2. Rationale for the Safe Harbor 
The safe harbor we are proposing focuses on conditions that limit a SPAC’s duration, 
asset composition, business purpose and activities as a means of enhancing investor 
protection.
300
  The proposed rule is designed so that, if a SPAC satisfies the rule’s conditions, 
                                                 
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). 
299
  See generally supra Section I. 
300
  We understand that SPACs typically place most of their assets in a trust or escrow accounts.   Although the 
Commission has never addressed the status of SPACs under the Investment Company Act, the Commission has 
addressed the status of escrow or trust accounts established by blank check companies that comply with Rule 419 
under the Securities Act (“Rule 419 Accounts”).  The Commission took the position that “although a Rule 419 
Account 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, 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 6 
(“Rule 419 Adopting Release”), at text accompanying n.32.  SPACs have evolved since the Commission adopted 
Rule 419, and as noted above, SPACs are not subject to the requirements of Rule 419.  See supra notes 12 and 13 
and accompanying text. 

138 
 
together with the disclosure requirements being proposed in this release, such SPAC’s operations 
would be limited and differ sufficiently from those of investment companies so as to generally 
not raise the types of investor protection concerns that the Investment Company Act is intended 
to address.  In addition, the proposed rule may also promote investor protection by highlighting 
for SPACs and their sponsors the Investment Company Act concerns that certain SPAC activities 
may raise. 
The proposed rule may also have the effect of providing more certainty to SPACs 
regarding their status under the Investment Company Act.  This in turn, could facilitate capital 
formation because SPACs that operate within the boundaries of the safe harbor would be assured 
that they would not qualify as investment companies.  The rule may also promote efficiency by 
providing a clear framework for SPACs to determine their status under the Investment Company 
Act.
301
 
3. Boundaries of the Safe Harbor 
While a SPAC would not be required to rely on the safe harbor, we have designed the 
proposed conditions of the safe harbor to align with the structures and practices that we 
preliminarily believe would distinguish a SPAC that is likely to raise serious questions as to its 
status as an investment company under the Investment Company Act from one that would not.  
Activities that would raise these concerns include, solely by way of example and without 
limitation, if a SPAC were to invest in securities not permitted by the proposed safe harbor, 
actively manage its portfolio, or hold itself out in a manner that suggests investors should invest 
to gain exposure to the portfolio it holds prior to the de-SPAC transaction. 
                                                 
301
  For these reasons, we believe the safe harbor, subject to the proposed conditions, would be necessary or 
appropriate in the public interest, and consistent with the protection of investors and the purposes fairly intended by 
the policy and provisions of the Act.  See Section 6(c) of the Investment Company Act [15 U.S.C.80a-6(c)].  See 
also Section 38(a) of the Investment Company Act [15 U.S.C.80a-37(a)]. 

139 
 
A SPAC would raise similar concerns if it were to invest its assets in securities, including 
those permitted by the safe harbor, for a lengthier period of time without identifying a target 
company.  As discussed below, we are concerned that, the longer the SPAC operates with its 
assets invested in securities and its income derived from securities, the more likely investors will 
come to view the SPAC as a fund-like investment and the more likely the SPAC will appear to 
be deviating from its stated business purpose.
302
  Similarly, if a SPAC did not seek to engage in a 
business combination but instead sought to acquire a minority interest in a target company with 
the intention of being a passive investor, it is more likely that it will appear to be an investment 
company.  Investors in SPACs that engage in the activities discussed above may be at a 
significantly greater risk of acquiring SPAC shares expecting a fund-like investment.
303
 
The safe harbor we are proposing only addresses investment company status under 
Section 3(a)(1)(A) of the Investment Company Act, commonly known as the “subjective test.”  
Section 3(a)(1)(C) of the Investment Company Act provides an alternate “objective test” that 
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,
304
 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.  If a SPAC owns or proposes to acquire 40% or more of investment securities, it would 
                                                 
302
  See infra Section VI.B.2.b. 
303
  In considering the investment company status of SPACs that do not comply with the safe harbor, we would use 
the traditional framework for evaluating the status of a potential investment company discussed above. 
304
  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. 15 U.S.C. 80a-3(a)(2). 

140 
 
likely need to register and be regulated as an investment company under the Investment 
Company Act. 
The safe harbor we are proposing is intended to address the status of a qualifying SPAC 
from the time of the SPAC’s initial public offering until it completes its de-SPAC transaction.
305
  
For purposes of the proposed rule, the definitions of SPAC, de-SPAC transaction, and target 
company would be the same as those set forth in proposed Item 1601 of Regulation S-K.
306
   
Request for Comment 
119. Instead of a safe harbor, should we provide an interpretation concerning when SPACs 
would meet the definition of “investment company”?  Alternatively, should we exempt 
SPACs that meet the definition of “investment company” from any provisions of the 
Investment Company Act, and if so, which provisions?  Are there any changes we should 
make to the proposed approach that would better achieve the objectives of the proposed 
rule?  Are there conditions we should include in addition to those set forth below?  
120. We request comment on whether the safe harbor should include an exemption from 
Section 3(a)(1)(C), in addition to Section 3(a)(1)(A).  If such an expansion is needed, 
please explain the circumstances in which a SPAC could meet the definition of 
“investment company” in Section 3(a)(1)(C) while still complying with the conditions in 
the proposed safe harbor. 
121. Should the proposed rule incorporate the definitions of de-SPAC transaction, special 
purpose acquisition company and target company as proposed in Item 1601?  Should any 
                                                 
305
  The remaining company (or companies) after the de-SPAC transaction may also raise separate questions of 
Investment Company Act status.  If a remaining company meets the definition of “investment company” following 
the de-SPAC transaction, that company would need to register as an investment company or rely on an appropriate 
exclusion or exemption under the Investment Company Act. 
306
  See supra Section II.A. 

141 
 
of these definitions be different under proposed Rule 3a-10?  If so, please identify the 
definition, how the definition should be changed, and why. 
122. We understand that SPACs typically place most of their assets in a trust or escrow 
account as required by the listing standards.  In the event that these accounts may also be 
“issuers” under the Investment Company Act,
307
 does the safe harbor need to address 
these accounts under that Act?  Alternatively, should the rule text specify that assets and 
activities of the SPAC (as discussed below) include those of the trust? 
123. As proposed, an existing SPAC that has not completed a de-SPAC transaction prior to the 
effective date of the rule would not be prohibited from relying on the safe harbor if it 
satisfies the conditions.  Should we permit an existing SPAC to rely on the safe harbor if 
it does not have a board resolution but has other contemporary evidence of its intent and 
otherwise meets the conditions of the safe harbor?  Alternatively, should we limit reliance 
on the safe harbor to SPACs formed after the effective date of the rule?  If proposed Rule 
3a-10 is adopted, should the rule’s effective date reflect the possibility that some SPAC’s 
may need to alter their operations or more quickly complete a de-SPAC transaction in 
order to meet the conditions of the rule?  If so, should we provide an extended or delayed 
effective date? Should we provide a compliance or transition period, and if so, why? 
B. Conditions 
The conditions to the safe harbor focus on certain defining characteristics of SPACs
308
 
and are designed to ensure that SPACs wishing to rely on the safe harbor do not operate, or hold 
themselves out, as investment companies. 
                                                 
307
  See supra note 300. 
308
  The conditions are also consistent with our approach with respect to Rule 419 Accounts.  Id. 

142 
 
The conditions are discussed in more detail below. 
1. Nature and Management of SPAC Assets 
In order to rely on the proposed safe harbor, a SPAC’s assets
309
 must consist solely of 
Government securities,
310
 Government money market funds
311
 and cash items
312
 prior to the 
completion of the de-SPAC transaction.
313
 Thus, all proceeds obtained by the SPAC, including 
those from any SPAC offering, cash infusion from the sponsor, or any interest, dividend, 
distribution or other such return derived from the SPAC’s underlying assets would need to be 
held in these assets.  We understand that SPACs typically acquire these assets in part because 
they may be easily liquidated to fund any acquisition or other expenses related to the de-SPAC 
transaction and investor redemptions and, unlike the investments of registered investment 
companies, are not primarily made to achieve an investment purpose.
314
  This condition reflects 
the SPAC’s intended business purpose to acquire assets to fund a de-SPAC transaction and also 
generally limits the SPAC’s assets to those that may be consistent with cash management 
practices rather than primarily investment purposes.
315
  
                                                 
309
  For purposes of the rule, any references to the SPAC’s assets refer to both the assets held in the trust or escrow 
account and any assets held by the SPAC directly. 
310
  The term “Government security” has the same meaning as defined in Section 2(a)(16) of the Investment 
Company Act.  15 U.S.C. 80a-2(a)(16). 
311
  The term “Government money market fund” has the same meaning as defined in paragraph (a)(14) of Rule 2a-7 
under the Investment Company Act.  17 CFR 270.2a-7.  
312
  The Commission has previously included the following as cash items for purposes of Rule 3a-1: cash, coins, 
paper currency, demand deposits with banks, timely checks of others, cashier checks, certified checks, bank drafts, 
money orders, travelers’ checks, and letters of credit.  See Proposing Release to Rule 3a-1, supra note 298, at text 
accompanying n.11.  We take the same view here with respect to the proposed rule. 
313
  Proposed Rule 3a-10(a)(1). 
314
  If a SPAC were to significantly change its asset composition contrary to its original representations, it would 
raise questions whether the initial representations were false and misleading. 
315
  This limited asset composition would not, on its own, distinguish a SPAC from an investment company.  This 
provision is designed to operate together with the other conditions to the safe harbor, and nothing in this provision is 
meant to address the status under Section 3(a)(1)(A) of a company that is not relying on this safe harbor,  including 
those primarily engaged in the business of investing in government securities and/or government money market 

143 
 
Under the proposed rule, a SPAC seeking to rely on the safe harbor may not acquire any 
other type of asset, including interests in an operating company, prior to the completion of a de-
SPAC transaction.  Acquiring other types of assets and then transferring such assets to another 
entity or to SPAC shareholders would suggest that the SPAC’s primary business is that of 
investing in securities.  Nothing in this provision, however, is intended to preclude the SPAC 
from using SPAC assets to pay expenses related to the operation of the SPAC. 
Under the proposed rule, the assets set forth in paragraph (a)(1) may not at any time be 
acquired or disposed of for the primary purpose of recognizing gains or decreasing losses 
resulting from market value changes.
316
  Unlike management investment companies, SPACs 
typically do not actively manage their portfolios, often holding their Government securities to 
maturity.  The proposed provision is therefore intended to allow SPACs the flexibility to hold 
their assets consistent with cash management practices yet ensure that SPACs relying on the safe 
harbor do not engage in activities that would necessitate the investor protections of the 
Investment Company Act, like portfolio management practices resembling those that 
management investment companies employ.
 
Request for Comment 
124. Should we allow SPACs seeking to rely on the safe harbor to invest in Government 
securities?  Alternatively, should we limit these SPACs to only certain types of 
Government securities, such as U.S. Treasury securities? 
                                                 
funds.  For example, an issuer that holds these types of 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). 
316
  Proposed Rule 3a-10(a)(2).  This provision is similar to that found in paragraph (a)(3)(iii) in 17 CFR 270.3a-7 
(Rule 3a-7), and we propose to apply this provision in the same manner in the proposed rule. 

144 
 
125. Should we allow SPACs to invest in government money market funds, as defined in Rule 
2a-7?  Should we instead limit the type of money market funds that a SPAC may invest 
in to money market funds that only hold U.S. Treasury securities?  Conversely, should 
the provision be expanded to permit SPACs to invest in all types of money market funds 
provided that they rely on Rule 2a-7?
317
 
126. In addition to the questions raised above, as a general matter, is paragraph (a)(1) too 
narrow?  For example, should the safe harbor be expanded to include SPACs that acquire 
investment securities or other assets (e.g., assets that are not for investment purposes 
relevant to the operation of the SPAC)?  If yes, please explain which investment 
securities and/or assets and why such an expansion of the safe harbor would be 
appropriate. 
127. Does paragraph (a)(2) provide enough flexibility with respect to a SPAC’s holdings but 
yet prevent SPACs from engaging in activities similar to management investment 
companies?  
128. As noted, we understand that SPACs typically place most of their assets in trust or 
escrow accounts.  Should the rule text address the manner in which a SPAC holds its 
assets?  For example, should the rule require SPAC assets to be held in trust or escrow 
accounts?  If yes, should the safe harbor be conditioned on complying with the terms of 
the custody rules under the Investment Company Act as if they applied to these accounts? 
                                                 
317
  The Commission has taken the position that money market funds relying on Rule 2a-7 may be treated as cash 
equivalents for purposes of Rule 2a-7 for GAAP purposes.  See Money Market Fund Reform; Amendments to Form 
PF, Release No. IC-31166 (July 23, 2014) [79 FR 47736 (Aug. 14, 2014)]. 

145 
 
2. SPAC Activities 
a. De-SPAC Transactions 
The proposed rule would provide a safe harbor only to those SPACs that seek to 
complete a single de-SPAC transaction as a result of which the surviving public entity (the 
“surviving company”),
318
 either directly or through a primarily controlled company,
319
 will be 
primarily engaged in the business of the target company or companies, which is not that of an 
investment company.  Thus, to rely on the rule, the SPAC must have a business purpose aimed at 
providing its shareholders with the opportunity to own interests in a public entity that, in contrast 
to an investment company, will either be an operating company, or will, through a primarily 
controlled company, operate such operating company.
320
  In addition, the SPAC would need to 
seek to complete a de-SPAC transaction as a result of which the surviving company would have 
at least one class of securities listed for trading on a national securities exchange.
321
 
                                                 
318
  The proposed rule defines the term “surviving company” to mean the public company issuer that survives a de-
SPAC transaction and in which the shareholders of the SPAC immediately prior to the de-SPAC transaction will 
own equity interests immediately following the de-SPAC transaction.  Proposed Rule 3a-10(b)(3). 
319
  The proposed rule defines   the term “primarily controlled company" to mean an issuer that (i) is controlled within 
the meaning of Section 2(a)(9) of the Investment Company Act by the surviving company following a de-SPAC 
transaction with a degree of control that is greater than that of any other person and (ii) is not an investment 
company.  Proposed Rule 3a-10(b)(2). 
320
  As drafted, the proposed rule would permit a SPAC relying on the safe harbor to seek to engage in a de-SPAC 
transaction with any company other than an investment company.  Thus,  a SPAC may seek to engage in a de-SPAC 
transaction with a target company that is not considered an investment company under Section 3(a) or that is 
excepted or exempted from the definition of investment company by order under Section 3(b) [15 U.S.C. 80a-3(b)] 
or by rules or regulations under Section 3(a). 
321
  Proposed Rule 3a-10(a)(3)(i).  The post-business combination surviving company would have to qualify for 
listing on a national securities exchange by meeting initial listing standards just as any company seeking an 
exchange listing would have to do.  If the surviving company did not qualify for listing, it could not be listed for 
trading on a national securities exchange and delisting procedures would commence. 

146 
 
A SPAC would be able to engage in only one de-SPAC transaction while relying on the 
safe harbor, but such transaction may involve the combination of multiple target companies,
322
 
provided that the SPAC treats them for all purposes as part of a single de-SPAC transaction.  
Such intentions would be evidenced by the description in any disclosure or reporting documents, 
and that the closing with respect to all target companies occurs contemporaneously and within 
the required time frames.
323
  We are imposing this limitation because we are concerned that a 
SPAC that makes multiple acquisitions could be engaging in the types of activities that raise the 
investor protection concerns addressed by the Investment Company Act.  A SPAC that purchases 
multiple companies as part of a single transaction (and complies with the other conditions of the 
safe harbor) would not raise these concerns as it would still appear to be seeking to be primarily 
engaged in the business of an operating company or companies after the de-SPAC transaction, 
and not to be engaged in investment management activities.  
While recognizing that de-SPAC transactions may have various structures and may 
involve intermediary entities, the proposed safe harbor is intended to ensure that the SPAC must 
be seeking a business combination in which the surviving entity, directly or through a primarily 
controlled company,
324
 is primarily engaged in the business of the target company or companies 
and not merely seeking an investment opportunity.  “Primary control” within the definition of 
“primarily controlled company” means that the surviving company must have “control”
325
 of 
                                                 
322
  The proposed definitions of “special purpose acquisition company” and “de-SPAC transaction” anticipate that a 
SPAC may engage in a de-SPAC transaction with more than one target company contemporaneously.  See supra 
Section II.A. 
323
  See infra Section VI.B.3.  
324
  See supra note 319. 
325
  See Section 2(a)(9) of the Investment Company Act for the definition of “control”[15 U.S.C. 80a-2(9)]. 

147 
 
such company and the degree of that control must be greater than that of any other person.
326
  
The “primarily control” standard, which is similar to that found in other status rules under the 
Investment Company Act,
327
 is designed to distinguish a holding company structure for an 
operating company from an investment in securities of an operating company.
328
  As we 
previously expressed in a similar context, this level of control is more consistent with an active 
role in managing the affairs of a company than if the issuer owns a lesser controlling interest in 
such company.
329
  We believe that a lesser degree of control, or lack of control, would in these 
circumstances more closely resemble the activities of an investment company.
330
 
In order to rely on the safe harbor, the surviving company must also have at least one 
class of securities listed for trading on a national securities exchange.
331
  This condition 
recognizes that a SPAC’s business plan is to engage in a de-SPAC transaction, the result of 
which is that SPAC shareholders receive the publicly traded shares of the surviving company.
332
  
Similar to the other parts of this condition, this provision helps to ensure that the SPAC has a 
business purpose that is different from engaging primarily in the business of investing, 
reinvesting or trading in securities. 
                                                 
326
  See, e.g., paragraph (b)(2) of 17 CFR 270.3a-8 (Rule 3a-8 under the Investment Company Act). 
327
  See, e.g., Rule 3a-8 under the Investment Company Act; 17 CFR 270.3a-1 (Rule 3a-1 under the Investment 
Company Act). 
328
  See, e.g., Certain Research and Development Companies, Release No. IC-25835 (Nov. 26, 2002) [67 FR 71915 
(Dec. 3, 2002)] (“Proposing Release to Rule 3a-8”) at nn.57-58 and accompanying text. 
329
  See Proposing Release to Rule 3a-1, supra note 287,  at n.32.  See also Proposing Release to Rule 3a-8 , supra 
note 328, at text before n.58 (“The Commission traditionally has viewed the fact that an issuer’s degree of control 
over a company is greater than that of any other person as strong evidence that the issuer is engaged in a business 
through the other company.”). 
330
  Id. 
331
  Proposed Rule 3a-10(a)(3)(i)(B).  As noted in supra note 321, the surviving company would have to apply for 
and be approved for listing by meeting the initial listing standards of a national securities exchange.  Otherwise, it 
could not be listed and traded on an exchange. 
332
  See supra Section I. 

148 
 
b. Evidence of Primary Engagement 
The proposed rule would require a SPAC wishing to rely on the safe harbor to be 
primarily engaged in the business of seeking to complete a de-SPAC transaction in the manner 
and within the time frame set forth in the rule.  Such engagement must be evidenced by the 
activities of its officers, directors and employees, its public representations of policies, and its 
historical development.
333
  For example, the officers, directors and employees of a SPAC 
wishing to rely on this safe harbor would need to be primarily focused on activities related to 
seeking a target company to operate and not on activities related to the management of its 
securities portfolio.  These conditions incorporate three of the Tonopah factors and are intended, 
together with the other conditions to the safe harbor, to ensure that a SPAC may only rely on the 
safe harbor if it is primarily engaged in a business other than that of investing, reinvesting or 
trading in securities.  These factors are also similar to those used to determine the primary 
engagement of a business in different contexts under the Investment Company Act.
334
   
To rely on the safe harbor, the SPAC’s board of directors would also need to adopt an 
appropriate resolution evidencing that the company is primarily engaged in the business of 
seeking to complete a single de-SPAC transaction as described by the rule, and which is recorded 
contemporaneously in its minute books or comparable documents.
335
  This condition is similar to 
other exclusionary rules under the Investment Company Act in which the issuer may only rely on 
                                                 
333
  Proposed Rule 3a-10(a)(5)(i) through (iii).  Such evidence may also include its articles of incorporation or other 
formation documents. 
334
  See, e.g., Rule 3a-8 under the Investment Company Act.  As discussed previously, in addition to these factors, 
the Tonopah factors also focus on the company’s assets and sources of income.  See supra Section VI.A.1.  While 
proposed paragraph (a)(1) addresses the asset composition of SPACs wishing to rely on the safe harbor, the 
proposed safe harbor does not include a separate condition specifically addressing a SPAC’s source of income 
because the sources of income are addressed in the proposed rule’s limitations regarding the SPACs’ activities and 
the types of assets it may acquire. 
335
  Proposed Rule 3a-10(a)(5)(iv). 

149 
 
the safe harbor provided by the rule if the issuer’s board of directors adopts an appropriate 
resolution evidencing that the company is primarily engaged in a non-investment business.
336
  
Such action serves to publicly document the intent of management and helps to establish a 
shared understanding of shareholders concerning the business purpose of this issuer. 
A SPAC relying on the proposed rule also may not hold itself out as being primarily 
engaged in the business of investing, reinvesting or trading in securities.  Given that SPACs 
invest in the same types of securities as certain investment companies, such as money market 
funds, a SPAC relying on the rule may not hold itself out, or otherwise suggest, that the SPAC 
operates in a manner similar to these types of investment companies.  For example, a SPAC 
could not market itself as a means for gaining exposure to U.S. Treasury securities.  
Request for Comment 
129. Do SPACs engage in other activities that should be expressly permitted or prohibited by 
the safe harbor?  If yes, please explain these business activities and why they should be 
permitted or prohibited. 
130. As proposed, should the SPAC be required to seek a de-SPAC transaction in which the 
surviving company is required either to directly or through a primarily controlled 
company be primarily engaged in the business of the target company?  Are the proposed 
definitions of “surviving company” and “primarily controlled company” appropriate?  
Should the proposed definitions be revised, and if so, how? 
131. Should the safe harbor be limited to SPACs that seek de-SPAC transactions that result in 
the surviving company having at least a majority interest in the target company?  
                                                 
336
  See 17 CFR 270.3a-2 (Rule 3a-2 under the Investment Company Act);  Rule 3a-8 under the Investment Company 
Act. 

150 
 
Conversely, should the safe harbor permit the SPAC to seek a de-SPAC transaction in 
which the surviving company is only required to control the target company?  Are there 
other approaches, such as requiring the de-SPAC transaction to result in a consolidation 
of the SPAC and the target company? 
132. As proposed, should we require that the surviving company be primarily engaged in the 
business of operating the target company or companies?  Is the use of the term “primarily 
engaged” consistent with current business practices in this context?  Should we instead 
require that the surviving company be “solely” in the business of the target company or 
companies?  If so, how should “solely” be defined?  Alternatively, should we require that 
the surviving company be engaged in the business of the target company (and in activities 
related or incidental thereto)?
337
 
133. As proposed, should the SPAC be limited to only one de-SPAC transaction while relying 
on the safe harbor?  Why or why not?  Similarly, should a SPAC, as proposed, be limited 
to engaging in a combination with multiple target companies only if the combination 
occurs as part of a single de-SPAC transaction with a single closing?  Why or why not?  
Should there be a limit on how many target companies may be part of a single de-SPAC 
transaction?  If so, what should that limit be and why?  For example, would limiting the 
safe harbor to two target companies strike an appropriate balance of the relevant 
regulatory considerations? 
134. As proposed, should we require a SPAC to be “primarily engaged” in the business of 
seeking to complete a single de-SPAC transaction?  Should we instead require that the 
SPAC should be “solely” in the business of seeking to complete a single de-SPAC 
                                                 
337
  See generally Rule 3a-7 under the Investment Company Act. 

151 
 
transaction?  Why or why not?  Alternatively, should we require that the SPAC be 
engaged in the business of seeking to complete a single de-SPAC transaction (and in 
activities related or incidental thereto)?
338
 
135. As drafted, the proposed rule would permit a SPAC relying on the safe harbor to seek to 
engage in a de-SPAC transaction with any company other than an investment company.  
Should the safe harbor further limit the types of companies in which a SPAC may seek a 
de-SPAC transaction?  For example, should a SPAC be precluded from seeking to engage 
in a de-SPAC transaction with issuers relying on Section 3(c)(1) or Section 3(c)(7)?  
Should a SPAC be precluded from seeking to engage in a de-SPAC transaction with 
issuers relying on other exclusions under Section 3(c)?  Should a SPAC be precluded 
from seeking to engage in a de-SPAC transaction with issuers otherwise relying on an 
exclusion or exemption by order from the definition of “investment company” by Section 
3(b) or the rules or regulations under Section 3(a)?  If so please identify which issuers 
and why? 
136. Should the rule include as evidence of the SPAC’s business purpose the SPAC’s 
historical development given the SPAC’s short duration?  Should the rule include, as 
evidence of the SPAC’s business purpose, the SPAC’s public representation of policies 
and the activities of its officers, directors and employees?  Similarly, is it appropriate to 
require the board of directors to adopt a resolution stating that the SPAC is primarily 
engaged in the business of seeking to complete a de-SPAC transaction as described by 
the rule?  Should we require that the SPAC’s activities also, or instead, be evidenced by 
its articles of incorporation, other formation documents or by-laws?  If so, which 
                                                 
338
  Id. 

152 
 
documents should be required?  If a SPAC’s business purpose is evidenced in its 
formation documents or by-laws, should we condition the proposed rule on those 
provisions being subject to change only with the approval of shareholders?  Should the 
rule include a separate condition that addresses the SPAC’s sources of income?  For 
example, should a SPAC’s income be limited to that derived from assets in proposed 
Rule 3a-10(a)(1)?  Are any other conditions necessary to ensure that SPACs do not 
convey to investors that they have attributes similar to investment companies?  Given the 
nature of a SPAC’s activities and the proposed conditions of the safe harbor, should the 
proposed rule also include a condition providing that a SPAC must not be a special 
situation investment company?
339
 
137. Should we include a condition to the safe harbor that SPACs must disclose their intention 
to rely on the safe harbor?  Would such a condition be redundant to the disclosure 
requirements under the Securities Act or under the Exchange Act?  Should the safe 
harbor include a condition that the SPAC’s board of directors must adopt a resolution 
indicating that the SPAC intends to rely on the safe harbor? 
3. Duration Limitations 
To rely on the safe harbor, a SPAC would have a limited time period to announce and 
complete a de-SPAC transaction.  Specifically, the proposed rule would require a SPAC to file a 
report on Form 8-K with the Commission announcing that it has entered into an agreement with 
the target company (or companies) to engage in a de-SPAC transaction no later than 18 months 
after the effective date of the SPAC’s registration statement for its initial public offering.  The 
                                                 
339
  See Proposing Release to Rule 3a-1, supra note 298, at n.19 and accompanying text.  See also In the Matter of 
United Stores Corp., 10 S.E.C. 1145 (Feb. 12, 1942). 

153 
 
SPAC must then complete the de-SPAC transaction no later than 24 months after the effective 
date of its registration statement for its initial public offering.
340
  Following the completion of the 
de-SPAC transaction, any assets that are not used in connection with the de-SPAC transaction 
would need to be distributed in cash to investors as soon as reasonably practicable thereafter. 
The SPAC would also be required to distribute its assets in cash to investors as soon as 
reasonably practicable if it does not meet either the 18-month deadline or the 24-month 
deadline.
341
  Given that the time needed for such distribution in either case may be dependent on 
facts and circumstances, we are not defining the term “reasonably practicable.”  What is 
reasonably practicable generally would depend on, among other things, any logistical or legal 
limitations on an orderly, immediate return of funds to investors. 
We are proposing these duration conditions mindful of the framework of the Investment 
Company Act, the rules thereunder, and past Commission positions.  The Investment Company 
Act provides that any issuer that meets the definition of “investment company” must register and 
be regulated under that Act unless the issuer can rely on an exclusion or exemption.  The 
Investment Company Act requires that an issuer will register and be subject to the Act’s 
regulatory requirements once the issuer meets the definition.
342
  The Commission, however, has 
in the past provided conditional, temporary relief to certain issuers that meet the definition of 
“investment company” for only a short period of time.  For example, Rule 3a-2 provides a one-
year safe harbor to so-called “transient investment companies,” which are issuers that, as a result 
                                                 
340
  Proposed Rule 3a-10(a)(3)(ii) and (iii).  As we discuss below, the average time between the announcement by a 
SPAC of its intended de-SPAC transaction and the completion of that transaction is approximately 5 months.  See 
infra Section IX.B.6. 
341
  Proposed Rule 3a-10(a)(4). 
342
  See generally Sections 7(a) and 8(a) of the Investment Company Act [15 U.S.C. 80a-7(a); 15 U.S.C. 80a-8(a)] 

154 
 
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.
343
  In 
addition, as discussed previously, the Commission took the position that Rule 419 Accounts need 
not be required to register as an investment company nor regulated as an investment company 
under the Investment Company Act in part because the rule limits the duration of such accounts 
to 18 months.
344
 The Commission has also at times granted short-term, conditional exemptive 
relief under Section 6(c) of the Investment Company Act
345
 to certain issuers that needed 
additional time to restructure their businesses beyond that afforded by Rule 3a-2.
346
 
Accordingly, the proposed rule would require a SPAC wishing to rely on the safe harbor 
to enter into an agreement with a target company no later than 18 months after its initial public 
offering, as evidenced by its filing a report on Form 8-K.
347
  A SPAC may enter into agreements 
                                                 
343
  See Transient Investment Companies, Release No. IC-11552 (Jan. 14, 1981) [46 FR 6882 (Jan. 22, 1981)] 
(“Adopting Release to Rule 3a-2”).  See Transient Investment Companies, Release No. IC-10943 (Nov. 16, 1979) 
[44 FR 67152 (Nov. 23, 1979)], at text accompany nn.5-  6 (“Proposing Release to Rule 3a-2”) (“Examples of 
unusual business occurrences include: (1) a ‘start-up’ company’s investing its offering proceeds in securities while 
arranging to purchase operating assets; (2) a company’s selling a large operating division and investing the proceeds 
in securities pending acquisition of additional operating assets; and (3) a company making a tender offer to 
stockholders of a non-investment company and failing to obtain a majority of the target company’s stock.”).   
344
  See 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.]”).  . 
345
  Section 6(c) gives the Commission the broad power to exempt conditionally or unconditionally any person, 
security, or transaction from any provisions of the Act or any rule thereunder, provided that the exemption is 
“necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of [the Act].”  An applicant requesting such relief must explain in its 
application that, given its particular facts and circumstances, the requested relief would meet the section’s standards.  
See generally Amendments to Procedures With Respect to Applications Under the Investment Company Act of 1940, 
Release No. IC-33921 (July 6, 2020) [85 FR 57089 (Sept. 15, 2020)]. 
346
  See, e.g., General Electric Company and GE Capital International Holdings Ltd., Release No. IC-32477 (Feb. 
13, 2017) [82 FR 11079 (Feb. 17, 2017)] (notice), Release No. IC-32532 (Mar. 13, 2017) (order).   
347
  See infra Section IX.B.6. (discussing baseline data regarding average duration).  One press report suggests that 
the average period of time between a SPAC’s initial public offering and the signing of its business combination 
agreement may be decreasing, with the average such period of time being approximately 7.5 months for de-SPAC 
transactions that closed in 2021.  See “De-SPACs Still Popular But Becoming Harder To Close,” available at: 
https://www.law360.com/mergersacquisitions/articles/1464716/de-spacs-still-popular-but-becoming-harder-to-close
. 

155 
 
with additional target companies
348
 after the 18-month period provided that the business 
combination contemplated by such later agreements are part of the de-SPAC transaction and all 
of the transactions close contemporaneously within the 24-month period.  The condition that the 
de-SPAC transaction close within 24 months is designed to allow SPACs to complete their stated 
business purpose while balancing the risk that investors may come to view a SPAC holding 
securities for a prolonged period as a fund-like investment, thereby necessitating the regulatory 
protections of the Investment Company Act. 
This timeframe is longer than the one-year timeframe of Rule 3a-2.  We are proposing a 
longer time frame under Rule 3a-10 because we understand that the search for a de-SPAC target 
frequently takes more than one year and an issuer relying on Rule 3a-10 would be more 
restricted in its business purpose and activities throughout the period of reliance than an issuer 
relying on Rule 3a-2.
349
  This proposed timeframe reflects a consideration of the Tonopah 
factors, including the factor that focuses on an issuer’s historical development as well as our 
position with respect to Rule 419.  While an issuer relying on Rule 3a-10 may have certain 
characteristics resembling those of an investment company for a longer period than an issuer 
relying on Rule 3a-2, its assets, income and purpose, and the activities of its officers and 
directors, would be further restricted under the other conditions of Rule 3a-10.  Accordingly, the 
conditions are designed to work together to reduce the likelihood that investors will come to 
view the SPAC as a fund-like investment.  Nevertheless, we stress that the inability of a SPAC to 
                                                 
348
  These additional agreements would need to be evidenced by the filing of a Form 8-K. 
349
  We stress that, for an issuer satisfying the safeguards tailored for transient investment companies under Rule 3a-
2, a company’s inability to become engaged primarily in a noninvestment company business within that rule’s one 
year period would continue to raise serious questions concerning the applicability of the Investment Company Act to 
that company.  See Adopting Release to Rule 3a-2, supra note 343, at text following n.5.  See also infra note 358 
and accompanying text (quoting from Proposing Release to Rule 3a-2, supra note 343).
 

156 
 
identify a target and complete a de-SPAC transaction within the proposed timeframe would raise 
serious questions concerning the applicability of the Investment Company Act to that SPAC. 
While we understand most SPACs commit to closing a de-SPAC transaction within 24 
months, we also acknowledge that the duration limits we are proposing are shorter than the 
actual timeline of some SPACs that recently completed their de-SPAC transactions.
350
  We 
understand that SPACs that choose to rely on the proposed safe harbor may need to seek to 
identify and complete de-SPAC transactions on an accelerated timeline.  Nonetheless, we are 
concerned that, the longer a SPAC operates with its assets invested in securities and its income 
derived from securities, the more likely investors will come to view the SPAC as a fund-like 
investment and the more likely the SPAC appears to be deviating from its stated business 
purpose.
351
  We have sought to strike a balance between providing flexibility for the SPAC to 
pursue its stated purpose and recognizing that, beyond some horizon, the SPAC’s historical 
development would become difficult to distinguish from that of an investment company.  While 
exchange listing rules contemplate potentially longer SPAC lifespans, those rules were adopted 
for a different regulatory purpose. 
The proposed rule would also require that any assets that are not used in connection with 
the de-SPAC transaction be distributed in cash to SPAC shareholders as soon as reasonably 
practicable after the completion of the de-SPAC transaction.
352
  Thus, in the event that the de-
SPAC transaction requires fewer assets than are owned by the SPAC, the SPAC would be unable 
to seek another de-SPAC transaction with its remaining assets, or otherwise continue to operate 
                                                 
350
  See infra Section IX.B.6. 
351
  We also note that some SPACs in the past have sought an extension to their lifespan by obtaining approval of 
their shareholders.  The proposed rule does not provide for any extensions. 
352
  Proposed Rule 3a-10(a)(4)(i). 

157 
 
as a SPAC, even if the de-SPAC transaction met the duration conditions.  As discussed 
previously, a SPAC that is relying on the safe harbor would already be precluded from engaging 
in more than one de-SPAC transaction pursuant to proposed Rule 3a-10(a)(3)(i).  This separate 
condition supplements that provision and is designed to ensure that a SPAC may not continue to 
operate after its single de-SPAC transaction and still qualify for the safe harbor. 
A SPAC seeking to rely on the safe harbor would also be required to distribute the 
SPAC’s assets in cash to investors in the event that the SPAC fails to meet either the 18-month 
or the 24-month deadline.
353
  As proposed, a SPAC would be required to distribute its assets in 
cash to investors if the SPAC fails to enter into an agreement with a target company within 18 
months even if it believes that it would complete a transaction within 24 months.  This condition 
would result in a SPAC that fails to meet these timing requirements either distributing its assets 
as soon as reasonably practicable or registering as an investment company.  In any event, such a 
SPAC would not be permitted to continue to rely on the safe harbor.
354
 
A SPAC would not be able to rely on Rule 3a-2 subsequent to its reliance on proposed 
Rule 3a-10 in the event that it fails to meet either proposed Rule 3a-10’s 18-month or 24-month 
time frame.
355
  A failure to meet either timeframe would not constitute an unusual business 
occurrence under that rule.
356
  In addition, Rule 3a-2 specifically states that the 12-month safe 
harbor provided under that rule begins once the issuer acquires specified amounts of 
securities.
357
  Generally, the commencement date for reliance on Rule 3a-2 (and the 12 month 
                                                 
353
  Proposed Rule 3a-10(a)(4)(ii). 
354
  Once a SPAC has distributed its assets, the SPAC must cease to operate as a SPAC, and it may not rely on the 
safe harbor again. 
355
  The proposed rule would also preclude a SPAC from relying on proposed Rule 3a-10 after Rule 3a-2, because 
the time period in the proposed rule begins on the effective date of its initial registration statement.  
356
  See supra note 343 and accompanying text. 
357
  Rule 3a-2(b). 

158 
 
safe harbor provided under that rule) would have passed in the event a SPAC wished later to rely 
on that rule subsequent to its reliance on proposed Rule 3a-10.  Finally, both Rule 3a-2 and 
proposed Rule 3a-10 are safe harbors that provide or would provide temporary relief to certain 
issuers that may be investment companies, provided that, among other conditions, they transition 
to a non-investment company business in a short period of time.  When it was considering Rule 
3a-2, the Commission was concerned that issuers could circumvent the Investment Company Act 
by repeatedly relying on the Rule 3a-2 safe harbor, explaining that  “where an issuer’s activities 
would bring it within the definition of investment company more frequently than would be 
permitted by the rule, the investor protection concerns of the Act would be relevant, the need for 
shareholder protections would not be met, and there would be no persuasive public interest from 
the standpoint of investors in permitting a non-transient investment company to avoid complying 
with the prohibitions and regulatory provisions of the Act.”
358
  This concern would also arise if 
SPACs were to rely on the Rule 3a-2 safe harbor following reliance on proposed Rule 3a-10. 
Request for Comment 
138. Should we require, as proposed, that the SPAC reach an agreement with at least one 
target company within 18 months?  Should we require that the SPAC reach an agreement 
with at least one target company within 12 months, which would be more consistent with 
the time period in Rule 3a-2?  Should the time period be even shorter than 12 months 
(e.g., 6 months)?  Should the time period be longer (e.g., 20 months, 24 months, 36 
months)?  If the time period should be longer, please explain why such a longer period is 
necessary and how any such longer period would be consistent with the framework of the 
Investment Company Act, the rules thereunder, and prior Commission positions. 
                                                 
358
  See Proposing Release to Rule 3a-2, supra note 343. 

159 
 
139. Is there an alternative way to limit the duration of the SPAC?  Should we require that 
such an agreement be evidenced by the filing of the Form 8-K?  Should a SPAC be 
permitted, as proposed, to enter into agreements with other target companies after the 18-
month period provided that all transactions close within 24 months? 
140. Should we include an option for SPACs that have not identified a target within 18 
months, or completed the de-SPAC transaction within 24 months to extend these 
deadlines?  If so, what would that be and what conditions should be included?  For 
example, should we provide that a SPAC can obtain an extra 2, 4 or 6 months and stay 
within the safe harbor if it obtains approval from its shareholders?  Please explain how 
any extensions of these deadlines would be consistent with the framework of the 
Investment Company Act, the rules thereunder, and prior Commission positions. 
141. Should we require, as proposed, that the SPAC complete the de-SPAC transaction within 
a 24-month period?  Should the time period be 18 months, as in Rule 419 or 12 months, 
as in Rule 3a-2?  Should the period be longer (e.g., 30 months)?  If so, how would that 
longer period be consistent with the framework of the Investment Company Act, the rules 
thereunder, and past Commission positions? 
142. The rule proposal requires that any assets of the SPAC that are not used in connection 
with the de-SPAC transaction, or in the event of the SPAC’s failure to  meet the timelines 
required for identification or completion of a de-SPAC transaction, be distributed in cash 
to investors as soon as reasonably practicable.  Should we allow distributions “in-kind”?  
Are there any other distributions made by the SPAC that should be covered by the rule?  
Should the rule text define the term “reasonably practicable”?  If yes, how should the 
term be defined?  If the term “reasonably practicable” is not defined, could that 

160 
 
potentially result in unnecessarily extended periods of time before investor assets are 
returned?  Instead of defining the term “reasonably practicable,” should we specifically 
require that such assets be distributed within a defined time period such as 30 days?  15 
days?  7 days?  Should we require the SPAC to provide notification to the Commission, 
its investors and/or the SPAC’s board of directors if the distribution of cash takes longer 
than a certain period of time, e.g., 30 days? 
143. The proposed rule would require, following completion of a de-SPAC transaction, or in 
the event that the SPAC failed to identify or complete a de-SPAC transaction, the SPAC 
to distribute all remaining assets and cease operating as a SPAC.  The proposed rule, 
however, does not specifically mandate that the SPAC dissolve.  Should we include this 
requirement as a condition to the safe harbor?  Why or why not? 
144. In adopting Rule 3a-2, the Commission identified examples of companies that may be 
able to rely on that safe harbor.  These examples did not specifically include SPACs or 
blank check companies.  Are SPACs currently relying on Rule 3a-2 and, if so, what is the 
basis for their reliance?  Should the Commission provide guidance concerning, or amend 
Rule 3a-2 to address, the ability of SPACs to rely on that safe harbor? 
VII. ADDITIONAL REQUESTS FOR COMMENT 
As discussed above, we believe that the proposed new rules and amendments would 
enhance the disclosure requirements applicable to SPACs in initial public offerings and in de-
SPAC transactions and provide important investor protections in connection with de-SPAC 
transactions.  In considering the SPAC market as a whole, we are requesting comment on a 
number of additional matters relating to the disclosures provided by SPACs, investor protection 
measures, and the treatment of companies following a de-SPAC transaction. 

161 
 
145. Are there disclosure requirements that we have not proposed that would be helpful for 
investors in SPACs at the initial public offering stage or at the de-SPAC transaction 
stage? 
146. Should the disclosure requirements and filer status determinations in a de-SPAC 
transaction be the same no matter the de-SPAC structure?  Do our proposals accomplish 
this, or are there other disclosure requirements and filer status determinations impacted 
by transaction structure that we should address? 
147. What are the reasons, other than possible reporting outcomes, why a de-SPAC transaction 
is structured so that an entity other than the SPAC is the acquirer and filing the 
registration statement or proxy or information statement for the de-SPAC transaction?  
Are there tax or other reasons that we should consider in relation to the proposed 
amendments in this release and whether the disclosure requirements should be further 
aligned across all de-SPAC transaction structures? 
148. Should we consider amendments to other registration statement forms under the 
Securities Act to require enhanced disclosures for offerings by SPACs that are similar to 
those proposed above with respect to Forms S -1 and F-1?    Should we consider similar 
amendments to Regulation A and Form 1-A? 
149. The periodic reports filed by SPACs under the Exchange Act generally contain limited 
information due to the absence of an operating business.  Should some of the disclosure 
requirements we are proposing also be required in the periodic reports filed by a SPAC 
following its initial public offering?  If so, which disclosures?  Are there other disclosures 
that we should require in the Exchange Act reports filed by a SPAC? 

162 
 
150. 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.
359
  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? 
151. Currently, the post-business combination company is required to file a Form 8-K with 
Form 10 information within four business days after the completion of a de-SPAC 
transaction.  Should we require the filing of this Form 8-K within a shorter time frame in 
order to reduce the gap in timing between the completion of the transaction and the 
public availability of this information in the Form 8-K? 
152. Are there other rule changes the Commission should consider to enhance investor 
protections in initial public offerings by SPACs and in de-SPAC transactions? 
                                                 
359
  According to one study, institutional investors typically purchase the vast majority of the securities in a SPAC’s 
initial public offering and are far more likely to redeem their shares instead of reselling the shares, resulting in 
limited secondary market trading of SPAC shares.  Klausner, Ohlrogge, and Ruan, supra note 17. 

163 
 
• We have not proposed requirements for SPAC offerings comparable to those 
applicable to blank check companies under Rule 419.  Should we consider requiring 
SPACs to comply with conditions similar to those in Rule 419?  If so, which 
conditions? 
• The shareholders of a SPAC are permitted to vote in favor of a proposed de-SPAC 
transaction while redeeming their shares prior to the closing of the transaction and 
retaining their warrants, such that the vote is decoupled from any continuing share 
ownership in the post-business combination company (unless and until the warrants 
are exercised).
360
  Should the Commission adopt rule changes or other approaches to 
address this situation?  For example, should the Commission condition the continued 
availability of an exclusion from the requirements of Rule 419 on whether 
shareholders voting to approve a de-SPAC transaction retain an economic interest in 
the combined company?  Should we address this issue through the Commission’s 
authority under Section 19(c) of the Exchange Act to adopt rules applicable to 
national securities exchanges? 
153. A post-business combination company following a de-SPAC transaction is subject to 
different treatment under various rules based on its status as a former shell company.  For 
example, a post-business combination company following a de-SPAC transaction is an 
“ineligible issuer,” based on its status as a former shell company, which prevents the 
company from using free writing prospectuses pursuant to Securities Act Rules 164 and 
433 for a three-year period.
361
  As a former shell company, the post-business combination 
                                                 
360
  See Rodrigues and Stegemoller, supra note 17. 
361
  See Securities Act Rule 164(e)(1). 

164 
 
company is also ineligible to file a registration statement on Form S-8 for a 60-day period 
following the de-SPAC transaction,
362
 and the safe harbor in Rule 139 for broker-dealer 
research reports is not available for research reports on the post-business combination 
company for a three-year period.
363
  In this regard, we note that the treatment of former 
shell companies under these rules is based on heightened concerns regarding fraud and 
other abuses surrounding many shell company transactions.  To better align de-SPAC 
transactions with initial public offerings, should we consider amending these and other 
rules relating to former shell companies to treat companies that have become public 
companies through a de-SPAC transaction in the same or similar manner as those that 
have completed traditional initial public offerings?  Should we differentiate SPACs from 
other shell companies in applying these rules?  If so, on what basis? 
154. Are there areas relating to SPACs where additional Commission guidance would be 
helpful?  For example, would it be useful if the Commission reiterated or expanded upon 
the Commission staff’s guidance in 2020 and 2021 regarding SPACs?
364
 
VIII. GENERAL REQUEST FOR COMMENTS 
We request and encourage any interested person to submit comments on any aspect of 
our proposals, other matters that might have an impact on the proposed amendments, and any 
suggestions for additional changes.  With respect to any comments, we note that they are of 
greatest assistance if accompanied by supporting data and analysis of the issues addressed in 
those comments and by alternatives to our proposals where appropriate. 
                                                 
362
  See General Instruction A.1 to Form S-8. 
363
  See Securities Act Rule 139(a)(1)(ii)(B). 
364
  See supra note 35. 

165 
 
IX. ECONOMIC ANALYSIS 
We are mindful of the costs and benefits of these proposed new rules and amendments.  
The discussion below addresses the potential economic effects of the proposed new rules and 
amendments, including the likely benefits and costs, as well as the potential effects on efficiency, 
competition, and capital formation.
365
  We have analyzed the expected economic effects of the 
proposed 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 by type. 
As discussed above, we are proposing new rules and amendments to existing rules that 
are intended to enhance investor protections in SPAC registered offerings, including initial 
public offerings, and in de-SPAC transactions.  The proposed new rules and amendments would 
require disclosures with respect to, among other things, compensation paid to sponsors, conflicts 
of interest, dilution, and the fairness of de-SPAC transactions.  The proposed new rules and 
amendments would also revise certain rules and forms under the Securities Act and the Exchange 
Act to specify t heir application in the context of de-SPAC transactions, including, among other 
things, a proposed rule that a SPAC and a target company be treated as co-registrants when a 
SPAC files a registration statement for a de-SPAC transaction and a proposed rule that addresses 
the underwriter status of SPAC IPO underwriters in any subsequently registered de-SPAC 
transaction.   
                                                 
365
  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)], 
and Section 2(c) of the Investment Company Act [15 U.S.C. 80a-2(c)] require the Commission, when engaging in 
rulemaking where it is required to consider or determine whether an action is necessary or appropriate in (or, with 
respect to the Investment Company Act, consistent with) the public interest, 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. 

166 
 
Additional proposed rules are intended to align de-SPAC transactions more closely with 
initial public offerings.  One would require certain non-financial disclosures regarding the target 
private operating company that are typically filed on Form 8-K within 4 days after the 
completion of a de-SPAC transaction to be included in the disclosures that are filed in 
connection with an anticipated de-SPAC transaction (Form S-4 or F-4, a proxy or information 
statement, or a Schedule TO).  The other would require the surviving entity following a de-
SPAC transaction to re-determine its eligibility for smaller reporting company status within four 
business days of the completion of the transaction. 
We are also proposing new rules and amendments that would apply to shell companies 
more broadly.  Proposed Rule 145a would deem any business combination involving a reporting 
shell company that is not a business combination related shell company, and another entity that is 
not a shell company, to involve a sale of securities to the reporting shell company’s shareholders.  
In addition, the proposed amendments to Regulation S-X are intended to more closely align the 
financial statement requirements in business combinations between a shell company (other than a 
business combination related shell company) and a non-shell company with those required on 
Forms S-1 or F-1 for an initial public offering.    
Furthermore, we are proposing to: (i) amend Item 10(b) of Regulation S-K to expand and 
update our views with respect to projections used in Commission filings; (ii) require additional 
disclosures regarding projections when disclosed in connection with de-SPAC transactions;  and 
(iii) amend the definition of “blank check company” for purposes of the PSLRA safe harbor for 
forward-looking statements, such that the safe harbor would not be available for projections by 
blank check companies that are not penny stock issuers, which would include SPACs and target 
companies in de-SPAC transactions.  Finally, we are proposing to create a safe harbor from the 

167 
 
definition of “investment company” under the Investment Company Act for SPACs that meet 
certain conditions. 
Overall, we expect the proposed new rules and amendments relating to SPAC 
transactions, in particular, and in some cases to shell company business combinations more 
broadly, to provide investors
366
 with improved and, in some instances, potentially earlier
367
 
access to more consistent, comprehensive, and readily comparable information and to enhance 
their ability to make more informed investment decisions, which can lead to more efficient 
pricing of securities.
368
  Both public reporting companies seeking to make an acquisition (SPACs 
or other shell or blank check companies, in some cases) and target private operating companies 
may incur costs related to the production and public disclosure of the proposed required 
information; however, these costs may be mitigated to the extent that either party may already 
voluntarily produce or provide such information in response to evolving market demands.
369
  We 
further anticipate that addressing the liability of various parties in de-SPAC transactions or other 
shell company business combinations could encourage those parties to exercise greater care in 
either the selection of an intended target company or the preparation and review of the required 
disclosures.  This could result in more reliable information for investors regarding a private 
                                                 
366
  Throughout this section, “investor” can refer to any current or a potential shareholder of a company, though it is 
generally understood costs and benefits may accrue to such investors heterogeneously based on size, sophistication, 
and affiliation. 
367
  See infra Sections IX.C.1.b.7 & IX.C.1.b.8. 
368
  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 A
CCOUNTING REV. 
1269 (2014) (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, 31(3) REV. FIN. STUD. 898, 898-942 (2018) (increased disclosure regimes lead to increased liquidity 
and lower crash risk). 
369
  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/. 

168 
 
company target at the time of a transaction, and would further align the protections afforded to 
investors with those of an initial public offering.   
To the extent that the proposed rules would also provide better, more readily accessible 
information about SPACs, they may result in less adverse selection than might otherwise occur 
at the de-SPAC transaction.  Overall, we expect the proposals may enhance the protection of 
investors, as well as promote market efficiency.  We are mindful that some aspects of this 
rulemaking may deter some forms of communications or some transactions that might otherwise 
be efficient or to the economic benefit of issuers and investors.  They also may deter some 
business combinations that otherwise would have created value.  We discuss these considerations 
in more detail below. 
In many cases, we are unable to quantify the relative magnitudes of various economic 
effects because we lack information to quantify such effects with a reasonable degree of 
accuracy.  Where we are unable to quantify the economic effects of the proposed new rules and 
amendments, we have provided a qualitative assessment of the potential effects and encourage 
commenters to provide data, studies, reports and other information that would help quantify the 
benefits, costs, and potential impacts on efficiency, competition, and capital formation.
370
 
A. Broad Economic Considerations 
Although a significant level of information asymmetry exists when a private company 
“goes public,” the traditional initial public offering process (IPO) has developed mechanisms 
                                                 
370
  For our estimates of the paperwork burdens associated with the proposed rules and amendments for purposes of 
the Paperwork Reduction Act of 1995 (“PRA”), please see Section X below.  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 and maintain records.  As a result, these estimates do not reflect the full economic 
effects or full scope of economic costs of the proposed rules and amendments that are discussed in this analysis.  

169 
 
that can alleviate adverse selection problems.
371
  Those mechanisms include mandated public 
disclosures, staff review of registration statements,
372
 and the effects of Section 11 liability, 
which, among other things, motivates due diligence performed by underwriters, accountants, and 
other offering participants.  These mechanisms generally lead to lower levels of information 
asymmetry, which can improve the security’s pricing and placement efficiency and encourages 
investor participation in the IPO market.  The traditional IPO process, however, is associated 
with costs, which could be significant for certain firms.  Those costs can be direct, in the form of 
fees, or indirect in the form of underpricing, as has long been recognized in the academic 
literature.
373
 
Alternative ways
374
 of going public have emerged that may allow companies to avoid 
some of the costs of the traditional initial public offering process, though this also might involve 
                                                 
371
  Adverse selection is sometimes described as the ‘lemons’ problem:  when buyers have less information than 
sellers, their bids will be lower to reflect this uncertainty.  In response, the sellers of high quality products may exit 
the market, causing further decline in buyers’ willingness to pay, which could cause a market failure.  See, e.g., 
George Akerlof, The Market for “Lemons”: Quality Uncertainty and the Market Mechanism, 84 Q
TR. J. ECON. 488 
(1970). 
372
  This review includes benefits such as, for example, the production of additional valuable information in response 
to comments issued by the Commission staff during the filing reviews.  See, e.g., Michelle Lowry, Roni Michaely, 
& Ekaterina Volkova, Information Revealed Through the Regulatory Process: Interactions Between the SEC and 
Companies Ahead of Their IPO, 33 R
EV. FIN. STUD. 5510 (2020). 
373
  See Alexander Ljungqvist, Chapter 7 - IPO Underpricing, in 1 HANDBOOK OF EMPIRICAL CORPORATE FINANCE 
375 (B. Espen Eckbo ed., 2007); Kevin Rock, Why New Issues are Underpriced, 15 J.
 FIN. ECON. 187 (1986); Tim 
Loughran & Jay Ritter, Why Has IPO Underpricing Changed Over Time?, 33 F
IN. MGMT. 5 (2004). 
374
  While equity in a private company might also become publicly traded by participation in a roll-up, because such 
transactions typically involve multiple companies and the surviving entity thus may resemble each of the rolled-up 
entities less specifically, individually, we do not consider this a comparable way of going public for the purposes of 
our discussion.  Additionally, a handful of companies have listed their shares directly on a national securities 
exchange without the use of a traditional underwriter and without raising capital.  As with participation in a roll-up, 
this method of accessing the public markets is not frequently used.  From 2018 through 2021, only twelve 
companies went public using this approach.  (This Commission estimate includes 9 direct listings on NYSE and 3 
direct listings on Nasdaq that occurred on or before Dec. 31, 2021.)  In December 2020, the Commission issued an 
order approving a proposed rule change submitted by New York Stock Exchange LLC (NYSE) that would allow 
private companies to list on the NYSE via a direct listing and raise capital at the same time.  See Release No. 34-
90768 (Dec. 22, 2020) [85 FR 85807 (Dec. 29, 2020)] (SR-NYSE-2019-67).  In May 2021, the Commission 
approved a similar proposed rule change submitted by The Nasdaq Stock Market LLC.  See Release No. 34-91947 
(May 19, 2021) [86 FR 28169 (May 25, 2021)] (SR-NASDAQ-2020-057).  While, it is possible that the number of 
companies that would seek to offer securities via direct listing will increase following these recent regulatory 

170 
 
forgoing some of the benefits typically considered desirable by market participants (e.g., 
potentially better pricing due to underwriter help with the placement of securities as well as more 
robust due diligence and disclosure).
375
  While pursuit of these alternatives suggest private 
operating companies are interested in accessing the benefits of being publicly traded, it is not 
clear that these alternatives represent net improvements in the mechanism design of the 
traditional IPO process.   
One way a private company may become a public reporting company is  via merger with 
a shell company that has already obtained exchange listing, quotation, or otherwise registered a 
class of securities under the Exchange Act.  In recent years, a significant number of private 
companies have opted to become a public reporting company via a merger with a particular kind 
of shell company, a SPAC.  SPACs have been in existence since the 1990s, and though their use 
by private companies as an alternative mechanism for becoming a public reporting company has 
varied over time, it has increased dramatically in the past three years.  We estimate that in the 
past year alone, approximately 200 companies have become listed on an exchange via a de-
SPAC transaction, which is slightly more than a sevenfold increase since 2019 and a twentyfold 
increase since 2015.
376
 
As with a traditional IPO, becoming a public reporting company through a de-SPAC 
transaction might also be subject to adverse selection given that this type of transaction is 
associated with significant information asymmetries between public investors in the SPAC and 
                                                 
changes, it is unclear that future use would become comparable in purpose or scope to mergers with shell companies 
as an alternative means to access the public market.  See Release No. 34-94311 (Feb. 24, 2022) [87 FR 11780 (Mar. 
2, 2022)] (SR-NASDAQ-2021-045) (order disapproving proposed rule change to modify certain price limitations in 
a direct listing with a capital raise). 
375
  See, e.g., James Brau & Stanley Fawcett, Initial Public Offerings: An Analysis of Theory and Practice, 61 J. FIN. 
399 (2006). 
376
  Staff review of Form 8-K filings identified 28 private operating companies acquired in calendar year 2019 and 
10 in calendar year 2015 that could be confirmed in the Dealogic M&A module as a de-SPAC transaction.  

171 
 
the private company that the SPAC intends to acquire.  Public SPAC investors could rely on 
various mechanisms to overcome the adverse selection problem in the SPAC context: the 
contingent nature of sponsor compensation; the right to vote to approve a de-SPAC transaction 
or redeem shares; projections regarding anticipated future performance, to the extent they 
improve price formation; potential liability; and any additional unregistered investments by 
investors at the de-SPAC transaction stage.
377
  While in some cases, a private company might 
prefer these alternative mechanisms to a traditional IPO, their general efficacy in resolving the 
problems or costs of information asymmetry might, in practice, be limited.
378
 
Some economic theorists have argued that the structure of SPAC sponsor compensation 
may efficiently incentivize transactions that benefit investors,
379
 but the effects in practice may 
be more ambiguous.  On one hand, because almost all of the SPAC sponsor’s compensation is 
contingent on the completion of a de-SPAC transaction, the sponsors may therefore have an 
incentive to select target companies that would maximize their own, as well as investors’, returns 
at exit.  As noted above, however, there is also a potential conflict of interest for sponsors 
precisely because their compensation (e.g., 20% promote) is dependent on the completion of a 
de-SPAC transaction.
380
  This could create an incentive to enter into unfavorable, or less 
favorable, de-SPAC transactions than would otherwise be optimal for the SPAC’s unaffiliated 
shareholders because the sponsor’s alternative to a de-SPAC transaction is to liquidate the 
                                                 
379  
For a detailed description of the SPAC process, see Section I. 
378
  In addition to the potentially problematic incentives embedded in the SPAC structure as described in the 
following sections, we further acknowledge that in some cases management and other insiders in target companies 
may find that a de-SPAC transaction is a more attractive option for becoming a public reporting company than a 
traditional initial public offering for reasons that conflict more directly with adequate investor protections.  These 
reasons may include the lack of a named underwriter or actionable liability.   
379
  See, e.g., Sris Chatterjee, N.K. Chidambaran, Gautam Goswami, Security design for a non-standard IPO: The 
case of SPACs, 69 J.
 INT’L MONEY & FIN. 151 (2016). 
380
  See supra note 12. 

172 
 
SPAC, and return the initial public offering proceeds, forfeiting their potential promote.  While 
reputational concerns may be a mitigating source of discipline, s  ponsors may also be more likely 
to prioritize private benefits when these concerns are less pressing; for example, in periods when 
the market is broadly less risk-averse or if the sponsor does not intend to pursue serial SPAC 
activities. 
In addition, voting rights and redemption rights may protect SPAC investors, because 
SPAC investors have the right to vote against a de-SPAC transaction and may redeem their 
shares if they believe holding shares in the combined company is not in their best interest.
381
 
However, these rights can also create potential conflicts of interest between non-redeeming 
shareholders and shareholders who choose to redeem shares but continue to hold warrants.  
When SPAC investors redeem the shares but retain and later exercise the warrants of the initial 
IPO unit, the equity shares of the non-redeeming shareholders are diluted relative to what they 
would be absent such exercise.  A further conflict may arise because the value of the warrants is 
enhanced by greater volatility of the underlying security.  Thus, warrant-holders may incur 
greater financial benefits from high-risk mergers in a manner that may not be aligned with the 
interests of the non-redeeming SPAC investors.  Additionally, in cases where the SPAC is 
structured so that the shareholders are able to vote in favor of a merger but also redeem their 
shares, this could present a moral hazard problem, in economic terms, because these redeeming 
shareholders would not bear the full cost of a less than optimal choice of target.    
The use of projections regarding the future earnings and performance of the target 
company in the de-SPAC transaction may be another mechanism that helps SPAC investors 
                                                 
381
  For listed SPACs, existing exchange listing standards, if a shareholder vote is held, require public shareholders 
voting against a de-SPAC transaction to have the right to redeem their shares if the de-SPAC transaction is approved 
and consummated.  See infra Section IX.B.1.a.  SPACs have often extended this redemption right to shareholders 
voting in favor of the de-SPAC transaction as well. 

173 
 
overcome adverse selection, insofar as they provide information that could improve price 
formation.  However, there may also be conflicts of interest associated with those projections 
given some features of the SPAC structure.  The need to secure shareholder approval and meet 
the respective exchange listing’s valuation requirement
382
 to complete the de-SPAC transaction 
may imply that it is in the target company’s interest to present the most favorable projections of 
its future performance.  SPAC sponsors’ interests in completing the de-SPAC transaction in 
order to receive their compensation could also affect the degree to which they would be 
motivated to scrutinize or question a  target company’s projections.
383
  Additionally, the basis, 
source, and support for any projections may not be adequately disclosed to shareholders, thereby 
limiting their value.  For example, there may be confusion among some practitioners as to 
whether Item 10(b) of Regulation S-K, which states the Commission’s views regarding the 
reasonableness of projections, applies to projections regarding the target company’s future 
performance that may be included in the SPAC’s filings.   
Applicable liability provisions may also provide some protections for SPAC investors.  
For example, SPACs are liable for material misstatements or omissions in their proxy 
solicitations under Section 14(a) and Rule 14a-9 of the Exchange Act.  However, such liability 
generally requires proof of negligence.  Similarly, SPAC investors may be protected by the 
application of Section 11 and Section 12(a)(2) of the Securities Act for material misstatements or 
omissions made in connection with SPAC transactions involving the filing of a registration 
                                                 
382
  See infra Section IX.B.1.a. 
383
  See supra note 67 and accompanying text.   

174 
 
statement.  However, as discussed above, there are potential gaps or inconsistencies in these 
protections that the proposed amendments are intended to address.
384
   
Another mechanism that could help investors overcome the adverse selection problem is 
the potential signal of deal quality implied by the presence of PIPE investors.
385
  These investors, 
who are generally institutional investors, are often afforded an opportunity to gain considerable 
insight into the details of a de-SPAC transaction and the future financial prospects of the target 
company (subject to confidentiality agreements) for purposes of evaluating whether to 
participate in a PIPE that often occurs close in time to a de-SPAC transaction.  Public SPAC 
investors could benefit from the participation of PIPE investors in a de-SPAC transaction in a 
number of ways.  At present, some PIPE investments in connection with de-SPAC transactions 
function as a backstop to offset high levels of redemption, thereby ensuring a de-SPAC 
transaction does not fail to meet the minimum cash requirement necessary to complete its 
intended business combination.  In other cases, PIPE investments enable the SPAC to acquire a 
larger target, or one with a higher valuation, giving SPAC IPO investors access to a different 
type of target company than they might otherwise be able to acquire.
386
  On the other hand, the 
presence of PIPE investors in a de-SPAC transaction may not benefit public SPAC investors 
because they typically invest at a discount.  When a de-SPAC redemption rate is high, the PIPE 
discount can exacerbate the dilution of the equity position of the SPAC’s non-redeeming 
                                                 
384
  See supra Sections III.C & III.F. 
385
  See, e.g., Mike Hopkins & Donald G. Ross, Key Drivers of Private Equity Firm Certification at Initial Public 
Offering, 16 J.
 PRIVATE EQUITY, 69 (2013). 
386
  This role of PIPEs has been more common, historically, see, e.g., Vijay M. Jog & Chengye Sun, Blank Check 
IPOs: A Home Run for Management (SSRN Working Paper, 2007) (“the median value of the transaction in relation 
to gross proceeds is approximately 178 percent, meaning that the size of the acquisition is higher than the proceeds 
raised through the IPO since many [blank check companies] raised additional debt to finance the acquisitions”), and 
could be a contributing factor to the differences we continue to observe between average capital raised via SPAC 
IPO (see infra Section IX.B.6.a) and PIPE financing (see infra  Section IX.B.2.c) and the average consideration paid 
per SPAC target (see infra Section IX.B.2.c).   

175 
 
shareholders.  Additionally, because PIPEs may, in some cases, involve the purchase of only 
warrants, similar misalignments of incentives with respect to a de-SPAC transaction may occur 
with this category of warrant-only holders as those previously discussed in that they may have 
incentives to pursue riskier targets than would be optimal for a non-redeeming SPAC 
shareholder.   As such, the PIPE’s financial participation in a de-SPAC transaction may not be a 
reliable indication that the transaction would benefit unaffiliated SPAC investors. 
Therefore, while a number of the mechanisms associated with a SPAC transaction 
structure could mitigate adverse selection concerns for investors and could, theoretically, 
improve the process by which private companies may become publicly traded, many of their 
potential benefits over the traditional IPO process may be mitigated by countervailing conflicts 
of interest.  As a result of the complexity inherent in the SPAC structure, investors may lack or 
otherwise be unable to readily decipher critical information regarding certain financial incentives 
(such as contingent sponsor or IPO underwriter compensation or the potential dilutive effects of 
PIPE financing) of the SPAC, the target company, their respective affiliates, or other parties in a 
manner necessary to properly assess the value of an investment position. 
There is also a question of whether investors, particularly retail investors, fully 
understand the costs involved in de-SPAC transactions and how these costs may affect investors’ 
post-de-SPAC transaction returns on their original investments.  Specifically, investors may not 
fully anticipate the dilutive effects of sponsor compensation (the “promote”), PIPE financing, 
and outstanding warrants following de-SPAC transactions.  In a similar vein, the potential 
uncertainty regarding the availability of the PSLRA safe harbor and the applicability of the 
guidance of Item 10(b) of Regulation S-K to projections of a target company in a de-SPAC 
transaction may result in the use of unreasonable or aspirational projections in connection with 

176 
 
de-SPAC transactions that may misrepresent the benefits and risks involved in such transactions.  
Furthermore, while the SPAC vehicle may allow a private company to go public without using 
the traditional IPO process, the disclosure regarding the private company provided in connection 
with a de-SPAC transaction may be less complete or less reliable than that provided in a 
traditional IPO for reasons discussed in the release, including, among other reasons, the lack of 
due diligence by traditional gatekeepers, such as underwriters.
387
  By strengthening investor 
protection, the proposed rules could increase investors’ confidence in SPAC transactions, while 
keeping this alternative route of going public attractive for private companies.  
In addition to the SPAC-specific items that are of central concern to this proposal, we are 
also proposing amendments to address further areas of incongruity in requirements that guide the 
disclosures and liabilities in the broader context of shell-company mergers and the use of 
projections.  For example, proposed Rule 145a would help investors in reporting shell companies 
more consistently receive the full protections of the Securities Act disclosure and liability 
provisions in business combinations involving shell companies, regardless of the transaction 
structure.  Reporting shell companies would have to register offerings subject to proposed Rule 
145a by filing a Securities Act registration statement unless there is an applicable exemption.  
Additionally, we are proposing new Article 15 of Regulation S-X and amendments to our forms, 
schedules, and rules 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 initial public offerings.  For example, we are proposing to align the number of fiscal 
years required to be included in the financial statements for a private company that will be the 
                                                 
387
  Although as discussed above, a court could find that many parties to a de-SPAC transaction may meet the 
definition of “underwriter,” all of these issues may be compounded by the lack of a designated underwriter in de-
SPAC transactions that could perform due diligence and would be subject to liability under Section 11 of the 
Securities Act. 

177 
 
predecessor(s) in a shell company combination with the financial statements required to be 
included in a Securities Act registration statement for an initial public offering of equity 
securities in proposed Regulation S-X Rule 15-01(b).  Other proposed amendments would codify 
certain current staff guidance for transactions involving shell companies.  
In our analysis below, we first discuss the proposed provisions that pertain to specialized 
disclosure requirements for SPACs in registered offerings and for de-SPAC transactions and then 
address the proposals concerning liability related to de-SPAC transactions and the PSLRA safe 
harbor.  We then analyze the impact of the proposed new rules and amendments that would 
apply to shell companies and to the use of projections in Commission filings.  Finally, we discuss 
the proposed safe harbor for SPACs from being deemed an investment company under the 
Investment Company Act.  Where appropriate, we discuss the interactions between the proposed 
new rules and amendments. 
B. Baseline and Affected Parties 
To assess the economic impact of the proposed rules, the Commission uses as its baseline 
the current regulatory framework and existing market practices, including Commission staff 
guidance and other staff positions.  We discuss in this section those parties likely to be affected 
by the proposed rules and some of the relevant regulatory and market baselines.  The remainder 
of the discussion of the regulatory and market baselines is integrated into our analysis of the 
benefits and costs of the proposed rules to aid comprehension and minimize repetition.
388
  
1. SPAC Initial Public Offerings 
The parties most likely to be directly affected by the proposed rules regarding specialized 
disclosure requirements for SPACs in initial public offerings and other registered offerings are 
                                                 
388
  See also supra Sections I-IV for further discussion of existing regulatory framework and market practices. 

178 
 
existing or potential sponsors intending to organize a new SPAC, SPACs, prospective investors 
in such offerings, and any other market participants whose service or activities involve analysis 
of the information, data, and disclosures related to SPACs and their sponsors in these offerings.  
In 2021, there were approximately 620 SPAC initial public offerings.   
In addition, these proposed amendments would necessarily have secondary impacts on 
the prospects or opportunities of private companies that would be potential targets of such newly 
organized SPACs if, as a result of their adoption, a different number or type of SPAC sponsors 
and their affiliates participate in the market.  Similarly, given that proposed Rule 140a clarifies 
the underwriter status of SPAC IPO underwriters at the de-SPAC transaction stage, this proposed 
rule may affect the number and type of potential targets that might be selected for acquisition by 
potentially reducing the number of SPAC IPOs underwriters are willing to support or by 
potentially deterring SPAC IPO underwriters from directly or indirectly participating in the de-
SPAC transaction or any related financing transaction.
389
 Other potentially affected parties 
include those parties who provide advisory or other services to sponsors of SPACs in connection 
with these registered offerings. 
a. SPAC Initial Public Offerings and Exchange Listing 
SPACs initial public offerings on national securities exchanges have greatly increased in 
recent years.  Moreover, SPAC listings have migrated from the over-the-counter market to three 
national securities exchanges: first NYSE American (formerly AMEX), then Nasdaq and NYSE 
(see Table 1).
390
   
                                                 
389
  See Jessica Bai, Angela Ma, and Miles Zheng, Reaching for Yield in the Going-Public Market: Evidence from 
SPACs (SSRN Working Paper, 2021). 
390
  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 proposal to adopt 
listing standards to permit the listing of SPACs on July 25, 2008.  See Release No. 34-57785 (May 6, 2008) [73 FR 

179 
 
Table 1. Number of SPAC IPOs, 1990-2021
a
 
  
1990-
2000 
2001-
2005 
2006-
2010 
2011-
2015 
2016-
2020 2021 
Total  18 41 128 66 400 620 
NASDAQ 18 0 3 56 248 434 
NYSE - - 1 0 147 183 
AMEX - 6 78 0 5 3 
OTC  -  35 46 10  -  -  
a
 Estimates are based on all SPACs identified by Dealogic, SPAC Insider, Audit Analytics, and staff manual review, 
that conducted an initial public offering with a confirmed pricing date as of December 30,2021. 
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 de-SPAC transaction.
391
  
Among other things, 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.
392
  These exchanges further require that within three years, for 
NYSE, or 36 months, for Nasdaq and NYSE American, of the effectiveness of its IPO 
registration statement (or such shorter period specified in the registration statement under Nasdaq 
and NYSE American rules or its constitutive documents or by contract under NYSE rules), the 
                                                 
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).  
391
  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 describe in this section.  See CBOE BZX Rule 14.2(b). 
392
  NYSE Listed Company Manual Section 102.06; Nasdaq Listing Rule IM-5101-2(a); NYSE American Company 
Guide Section 119(a). 

180 
 
SPAC complete one or more business combinations having an aggregate fair market value of at 
least 80% of the value of the net assets in the account excluding certain costs.
393
  NYSE, Nasdaq, 
and NYSE American require that a de-SPAC transaction meeting the 80% requirement be 
approved by a majority of the SPAC’s independent directors,
394
 and all three exchanges require, 
if a shareholder vote is held, that a majority of the shares voted at the shareholder meeting 
approve the de-SPAC transaction meeting the 80% requirement.
395
  In addition, if a de-SPAC 
transaction meeting the 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 taxes and working capital 
disbursements.
396
  If a shareholder vote on a de-SPAC 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.
397
 
b. SPAC Sponsors 
Historically, it has been suggested that one reason a SPAC vehicle might provide a more 
attractive route to the public markets was the benefit of the leadership and professional advice by 
                                                 
393
  NYSE Listed Company Manual Section 102.06(e); Nasdaq Listing Rule IM-5101-2(b); NYSE American 
Company Guide Section 119(b). 
394
  NYSE Listed Company Manual Section 102.06(d); Nasdaq Listing Rule IM-5101-2(c); NYSE American 
Company Guide Section 119(c). 
395
  NYSE Listed Company Manual Section 102.06(a); Nasdaq Listing Rule IM-5101-2(d); NYSE American 
Company Guide Section 119 (d). 
396
  NYSE Listed Company Manual Section 102.06(b); Nasdaq Listing Rule IM-5101-2(d); NYSE American 
Company Guide Section 119(d). 
397
  NYSE Listed Company Manual Section 102.06(c); Nasdaq Listing Rule IM-5101-2(e); NYSE American 
Company Guide Section 119(e). 

181 
 
one or more individuals comprising the SPAC sponsor, including in some cases beyond the de-
SPAC and into the life of the target as public operating company.
398
  Although the majority of 
sponsors are financial institutions, a sizable fraction (47%) of SPACs are sponsored by 
individuals. 
Figure 1. Distribution of SPACs by Sponsor Type, 2019-2021
a
 
 
a
 Data presents the average composition of SPAC offerings by sponsor type as categorized by SPAC Insider.  See 
SPAC Insider, 1H 2021 SPAC Report (2021).  Note, sponsor composition data for 2021 SPAC sponsorship reflects 
only data through end second quarter.
 
c. SPAC IPO Underwriters 
During the period 1990-2021, the average number of underwriters participating in a 
SPAC IPO was 2.5.
399
  Approximately 99% of these SPAC IPOs were done via a firm 
                                                 
398
  See Robert Berger, SPACs: An Alternative Way to Access the Public Markets, 20 J. APPLIED CORPORATE 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.”). 
399
 This estimate is based on staff analysis of data as described in Table 1, note a.   
47%
20%
9%
8%
7%
6%
3%
Individuals
Private Equity
Venture Capital
Asset Managers
Banks
Hedge Funds
Other

182 
 
commitment offering.
400
  The average fee charged by SPAC IPO underwriters during this time 
was approximately 5.6%.
401
  This reflects a decline from the underwriting fees associated with 
the earliest SPACs (approximately 7-7.5%),
402
 when underwriters typically received their full 
compensation at the time of the SPAC IPO.
403
  As mentioned above, a portion of this fee is 
typically deferred until, and conditioned upon, the completion of the de-SPAC transaction.
404
  In 
a typical SPAC underwriting, this deferred fee is placed in the SPAC trust or escrow account.  
During the period 1990-2021, we estimate that the average size of the deferred underwriter fee 
was 3.4%.
405
  We do not observe significant differences in the structure or level of underwriter 
fees and deferred fees, as disclosed at the IPO stage, between SPACs that have completed a de-
SPAC transaction and those that have not.  We observe that among SPACs that have completed a 
de-SPAC transaction the average number of underwriters was 3.1, which is slightly higher than 
the average number of underwriters per SPAC IPO.
406
  SPAC underwriters may provide other 
services to the SPAC or its eventual target after the IPO as well.  For example, the SPAC 
underwriter may help the SPAC identify potential targets, provide financial advisory services to 
the SPAC or the target, or act as a PIPE placement agent. 
                                                 
400
  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 12. 
401
  This estimate is based on staff analysis of data as described in Table 1, note a. 
402
  See, e.g., Lola Miranda Hale, SPAC: A Financing Tool with Something for Everyone, 18 J. CORP. ACCT. & FIN. 
67 (2007) (“The underwriting discounts are typically around 7-7.5 percent of the public offering price”). 
403
  See Yochanan Shachmurove & Milos Vulanovic, Specified Purpose Acquisition Company IPOs, in THE OXFORD 
HANDBOOK OF IPOS (Douglas Cumming ed., 2018). 
404
  See supra Section III.E.3. 
405
  This estimate is based on staff analysis of data as described in Table 1, note a, and may be positively skewed 
because the data features a greater proportion of deals occurring between 2019 and 2021. 
406
 Based on staff analysis of data as described in Table 1, note a.  We note that timing differences in where a SPAC 
might currently be, relative to its dissolution date, might result in overestimation of this difference.  

183 
 
d. Warrants 
 
 SPAC IPOs most often register the offering of a unit composed of a common share, 
warrants, or fractions thereof, and—in some cases—rights.
407
  In their earliest form, SPAC units 
usually included two in-the-money warrants exercisable for full shares at the later of completion 
of the de-SPAC transaction or one year after the effective date of the IPO registration 
statement.
408
  These warrants could thus become highly dilutive to the equity shareholders given 
that warrants may begin trading separately from the unit common share once a Form 8-K 
containing the balance sheet of IPO proceeds has been filed.
409
  Shareholders could experience 
equity dilution if redeeming shareholders retain and later exercise their warrants.  
  
                                                 
407
  See, e.g. Gül Okutan Nilsson, Incentive Structure of Special Purpose Acquisition Companies, 19 EUR BUS ORG 
Law Review (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.”). 
408
  See, e.g., Hale, supra note 402 (“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 8 (2008) (“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.”). 
409
  Historically, this typically occurred around 90 days after the initial public offering.  Over the past decade, the 
usual number of days has decreased to approximately 60.  See, e.g., Anh L. Tran, Blank Check Acquisitions (SSRN 
Working Paper, 2010);James S. Murray, The Regulation and Pricing of Special Purpose Acquisition Corporation 
IPOs (SSRN Working Paper, 2014); James S. Murray, Innovation, Imitation and Regulation in Finance: The 
Evolution of Special Purpose Acquisition Corporations, 6 R
EV. INTEGRATIVE BUS. & ECON. 1 (2017). 

184 
 
Figure 2. Warrants offered in SPAC IPO Units, 1990 – 2021
a
 
 
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 filed in connection with all SPACs identified by Dealogic, SPAC Insider, 
Audit Analytics, and staff manual review, that conducted an initial public offering with a confirmed pricing date as 
of December 30,2021. 
As SPAC offerings have evolved, however, the highly dilutive aspects of the warrant 
component of a SPAC offering unit appear to have somewhat attenuated.  As indicated in Figure 
2, many SPACs offer units with smaller warrant components.  The majority of SPACs that have 
conducted an IPO in the past three years offered units with fractional warrants or units where 
warrants represented only fractional shares.  The dilutive capacity of these warrants is further 
tempered by the fact that in current practice, warrants (or fractions thereof) are only offered at 
exercise prices higher than the SPAC IPO offering price.  However, the reduced dilution 
attributable to warrants as a component of SPAC IPO units does not imply that current SPAC 
IPOs offer a security that is inherently less exposed to potential dilution or that warrants 
purchased separately from units, such as in sponsor compensation or PIPE financing 
transactions, are not still a significant source of dilution.  Furthermore, while warrant features 
have in some respects become less dilutive, maximum allowable redemptions have generally 
increased, creating the possibility for non-redeeming shareholders to experience greater dilution 
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
00.10.110.1250.16670.20.250.330.50.751210

185 
 
albeit from a different source.  The emergent size and significance of PIPE financing in de-SPAC 
transactions
410
 has presented yet another potential source of dilution. 
e. Time to Complete a De-SPAC Transaction 
Because SPACs are not blank check companies issuing penny stock, they have not been 
subject to Rule 419’s requirements, including the requirement that an acquisition occur by a date 
18 months after the effective date of the blank check company’s initial registration statement.
411
 
Nevertheless, SPACs use, as a matter of practice, features of Rule 419 that would appear to 
enhance protections for investors, including a pre-specified intended lifespan before dissolution 
that is communicated to investors at the time of the initial public offering.   Table 2 documents 
the average proposed lifespans (in months) that SPACs in each period disclosed in their initial 
public offering registration materials as well as the average actual number of months used by 
those SPACs that successfully completed a de-SPAC transaction, by cohort.  We note that since 
2006, the typical SPAC generally pre-commits to a lifespan at least two months, on average, 
longer than the 18-month limit in Rule 419 and approximately 13 months shorter than the 
exchange listing 36-month limit.
412
 
  
                                                 
410
  See infra Section IX.B.2.c. 
411
  See supra note 12.  See also Rule 419(e)(2)(iv) under the Securities Act (“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.]”). 
412
  See supra Sections VI.B.3 & IX.B.1.a. 

186 
 
Table 2. Average Proposed Acquisition Periods in SPAC IPOs (months), 1990-2021
a
 
  
1990-
2000 
2001-
2005 
2006-
2010 
2011-
2015 
2016-
2020 
2021 
Proposed Acquisition Period - 17.25 20.84 20.58 21.98 20.45 
Proposed Extension - 6.30 6.50 5.11 6.00 5.34 
Proposed Period with Extension - 23.55 24.40 23.40 22.90 21.71 
Realized Average Acquisition 
Period
b
 
19.25 20.11 19.83 22.15 15.32 8.58 
a
 Averages reported here are estimated over the subsample of SPAC IPOs (see supra Table 1 note a) after offerings withdrawn 
after the IPO pricing date have been removed.  Proposed acquisition periods and proposed extension data is drawn from 
information as provided by the SPAC in its initial registration materials including prospectuses and Form S-1 or Form F-1.  
SPACs that disclose they would hold a shareholder vote to approve an extension period but did not pre-commit to specified 
extension period are treated as having such data missing for purposes of computing averages. 
b
 Data on realized average acquisition period for IPO cohorts 2016-2020 and 2021 reflect a downward bias due to the 
outstanding proportion of SPACs that conducted an IPO between 2019 and 2021 that have not yet completed their proposed 
acquisition period or approved extensions.  See infra note 457. 
 
2. De-SPAC Transactions 
The primary parties affected by the proposed disclosure requirements at the de-SPAC 
transaction stage include SPACs, sponsors of SPACs, investors, potential PIPE investors, and 
target private operating companies.  Additionally, the proposed rules to amend or otherwise 
clarify the existing liability framework would affect SPACs, target companies, investors in 
SPACs, and the underwriters that SPACs use at the SPAC IPO and the de-SPAC stages.
413
  
We are mindful that parties may be differentially affected for a number of reasons.  For 
example, to the extent that regulatory changes we are proposing, if adopted, would become 
effective while some current SPACs are in the process of completing a de-SPAC transaction, 
                                                 
413
  See, e.g., Luisa Beltran, SPACs Are Scrambling to Find Mergers.  What That Means for Investors, BARRONS, 
Feb. 24, 2022. 

187 
 
these SPACs may incur greater unanticipated transaction costs to comply with the full set of new 
requirements.  Other SPACs that have not yet found a target may find themselves ex-post to have 
inefficiently entered the market as compared to a SPAC that completes an IPO with knowledge 
of the costs associated with the proposed amendments.  However, the fact that some of the 
proposed amendments may reduce costs or simply codify existing best practices may offset some 
of the potentially more costly elements of other amendments, thus the differential impact of the 
proposed amendments affecting parties at the de-SPAC transaction stage is expected to vary. 
Based on staff analysis of SPACs that registered a distribution of securities between 1990 
and 2021, it appears that approximately half of all SPACs following their initial public offerings 
have announced a subsequent de-SPAC transaction, and about one third have completed their de-
SPAC transaction.  It is possible that SPACs currently searching for targets may still identify 
targets, complete de-SPAC transactions, and thereby increase the fractions of SPACs with 
announcements and completed transactions.  However, the overall success rate of approximately 
one-third is generally consistent with previous research findings over more limited historical 
subsamples,
414
 suggesting that the number or proportion of SPACs and related parties that would 
directly incur the costs, or experience the benefits, of our de-SPAC-related proposals may be 
smaller than the population of parties affected by our proposed amendments pertaining to a 
SPAC’s initial registration and public offering. 
Of the SPAC initial public offerings in 2020 and 2021, a majority have not yet filed a 
Form 8-K announcing that the SPAC has found a target company, or else have not filed a Form 
                                                 
414
  Studies performed in 2016 or later reviewing the 2003–2013 cohort of SPACs find that approximately 51.5% of 
SPACs that had an initial public offering during the decade successfully complete 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 
M
ANAGERIAL FIN. 679, 679-699 (2017); Kamal Ghosh Ray & Sangita Ghosh Ray, Can SPACs Ensure M&A 
Success?, 16 A
DVANCES IN MERGERS & ACQUISITIONS 83, 83-97 (2017). 

188 
 
8-  K that would follow within 4 days of a completed a de-SPAC transaction.  As of December 31, 
2021, approximately 77 of 248 SPAC IPOs in 2020 (31%) and an additional 495 of 613 SPAC 
IPOs in 2021 (81%) had not yet announced a target or have withdrawn an announced business 
combination and resumed searching.  Some market participants have opined that, of recently 
listed SPACs that have not yet secured a target, a greater proportion are likely to liquidate 
without completing an acquisition.
415
  This may be due to factors such as changing market 
conditions (increased volatility, increasing interest or inflation rates, etc.) and an increasingly 
limited number of viable target private companies (particularly companies with valuations in the 
range that would match the 80% requirement of most SPACs).
 
 
Table 3. SPAC Outcomes, 1990-2021
a
 
Filed IPO Priced Merger Announced Merger Completed Liquidated 
1672 1273 653 475 96 
a
 Estimates reported here are based on the respective subsamples of SPAC IPOs (see supra Table 1 note a) 
that reflect all confirmed, completed activity as of December 31, 2021. 
 
a. Filings in Connection with a De-SPAC Transaction 
Like any merger or acquisition activity pursued by other public reporting companies, the 
timing and types of filings that accompany a de-SPAC transaction are usually a function of the 
way the business combination is structured and the form of consideration employed.  Such 
transactions may require providing existing shareholders information in advance of a vote.  
Others may simply require providing shareholders with information and a specified period of 
time in which to redeem shares, if desired.  Similarly, such transactions may include an offer of 
                                                 
415
  See, e.g., Jemima McEvoy, Take Back The SPAC: More And More Companies Are Canceling High-Profile 
Deals To Go Public, F
ORBES, Dec. 22, 2021. 

189 
 
securities as a part of the merger or exchange offer, and if so, may require the filing of a 
registration statement.  The cumulative effects of our proposals would vary in impact on 
individual de-SPAC transactions based on their unique deal structure and the disclosures they 
would thus already be obligated or otherwise incentivized to provide.  
A recent review of 462 de-SPAC transactions completed in 2020 and 2021 found that 
approximately 99% of transactions were accompanied by proxy disclosures and 81.0% involved 
a related filing of a registration statement on either Form S-4 or Form F-4.
416
  Of the 81.0% 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.
417
 
b. Target Form 10 Information in Connection with De-SPAC 
Transactions 
If a shell company that has Exchange Act reporting obligations, including a SPAC, 
acquires a target that is not subject to the reporting requirements of Section 13(a) or 15(d) of the 
Exchange Act, after the business combination, it must file a Form 8-K that includes the same 
disclosures about the target company that would have been provided if the target had instead 
registered a class of securities under Section 12 of the Exchange Act on Form 10.
418
  This Form 
10 information in a Form 8-K must be filed within four business days after the completion of a 
                                                 
416
  See Michael Levitt, Valerie Jacob, Sebastian Fain, Pamela Marcogliese, Paul Tiger, & Andrea Basham, 2021 
De-SPAC Debrief, F
RESHFIELDS (Jan. 24, 2022), available at https://blog.freshfields.us/post/102hgzy/2021-de-spac-
debrief.  We note that the scope of this study is limited to 2020 and 2021.  
417
  Id. 
418
  See supra Section III A. 

190 
 
de-SPAC transaction.
419
  Because we are proposing to require these disclosures to instead be 
included filings related to the de-SPAC transaction that occur prior to the consummation of the 
proposed business combination, whether in a proxy, information, or registration statement or 
Schedule TO, any SPAC that would otherwise file Form 10 information about its target in a 
Form 8-K following a de-SPAC transaction would be affected. 
Figure 3. Number of Business Days to File Form 8-K After De-SPAC Transaction
a
 
 
a 
Data represents the percent of filed Forms 8-K that could be identified, based on staff review, as filed in connection 
with a de-SPAC transaction that occurred between January 1, 2006 and December 31, 2021, and does not include 
de-SPAC transactions unaccompanied by an 8-K filing.  Staff noted that de-SPAC transactions unaccompanied by a 
Form 8-K containing Form 10 information were otherwise accompanied by a Form 20-F and/or Form 6-K when the 
combined company was a foreign private issuer (FPI) and, in the remaining cases where the combined company was 
not an FPI, the de-SPAC transaction was accompanied by either a long form (Form 10-12B) or a short form (Form 
8-A12B) registration.
 
As illustrated in Figure 3, staff review of Forms 8-K filed in connection with 
approximately 300 de-SPAC transactions completed between January 1, 2006 and December 31, 
2021 found that approximately 47% of combined companies filed the Form 8-K on the fourth 
business day after the de-SPAC transaction and approximately 88% of combined companies filed 
                                                 
419
 See Shell Company Adopting Release, supra note 211, at 15-17, 21 (adopting amendments requiring the entity 
surviving a merger with a shell company to file its report on Form 8-K within four business days after completion of 
the merger and limiting the use of Form S-8 to register offerings of securities). 
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
12345>5

191 
 
the Form 8-K within the 4-business day time limit.  However, as discussed below in Section 
C.1.b.8, some registrants currently may voluntarily disclose Form 10 information before filing 
the Form 8-K given the staff’s observations regarding incorporation by reference of this 
information into the Form 8-K from filings made in connection with the de-SPAC transaction. 
c. PIPES in Connection with De-SPAC Transactions 
PIPEs have supported de-SPAC transactions since their general increased market 
presence began in 2005.
420
  However, in some recent SPACs, PIPEs have played a larger role 
than they have historically pl  ayed, and this has given rise to concern about the potential dilutive 
effects of PIPEs and how well those 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, approximately 65% of the cash delivered in these 
merger transactions was contributed by public investors, and the amount typically contributed by 
third-party PIPE investors was approximately 25%, with the remaining funding provided by the 
sponsor.
421
  In such cases, while the equity position of the PIPE investors in the combined 
company following a de-SPAC transaction was dilutive, it did not eclipse the ownership stake of 
the SPAC IPO shareholders.  Because PIPE investors may receive confidential information with 
which to make an investment decision (including one-on-one conversations with the target’s 
management, which may convey soft information) and may also engage in extended and detailed 
due diligence,
422
 their participation has at times been considered a benefit to SPAC IPO 
                                                 
420
  See Meghan Leerskov, Shell Mergers and SPACs: A Statistical Overview of Alternative Public Offering 
Methods, in T
HE ISSUER’S GUIDE TO PIPES: NEW MARKETS, DEAL STRUCTURES, AND GLOBAL OPPORTUNITIES FOR 
PRIVATE INVESTMENTS IN PUBLIC EQUITY 281 (Steven Dresner ed., 2015). 
421
  See Klausner, Ohlrogge, & Ruan, supra note 17.  The authors analyzed data for the 47 SEC-registered SPACs 
that merged, and thereby brought companies public, between Jan. 2019 and June 2020.  
422
  Id. 

192 
 
investors, providing a meaningful indicator of the expected future financial performance of a 
proposed de-SPAC transaction.  
As the SPAC market has evolved, so too have the role and the structure 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 and 
median amounts raised in PIPE financings (respectively approximately $300 million and $200 
million) were similar to the average size of the SPAC trust account at the time of the IPO.
423
  
This may reflect that in more recent SPACs, in addition to enabling larger deals, some PIPEs 
may provide capital to enhance deal certainty.
424
 In this alternative role, the financing raised via 
PIPE investment may ensure that a deal that otherwise may fail due to a high redemption rate can 
proceed to completion.  In these cases,
425
 the ownership stake of the PIPE investors in the 
combined company may exceed that of the non-redeeming SPAC investors.
426
    
PIPE investors may, therefore, come to have a larger stake in the combined company than 
SPAC IPO investors may have anticipated when making an initial investment.  As a result, 
SPAC IPO investors may thus find that they hold a smaller stake in the combined company than 
                                                 
423
  See Levitt et al., supra note 416.  The difference between average and median PIPEs in this sample reflect that 
the data is positively skewed, implying that while some deals may involve low or no additional financing via PIPEs, 
other deals feature large investments outside the SPAC IPO process. 
424
  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 billions) suggests 
that many PIPE offerings in connections with a de-SPAC transaction still appear to facilitate larger acquisitions 
rather than replace SPAC share redemptions.  See Levitt et al., supra note 416. 
425
  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. 
426
  I  n 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 at the consummation of the de-SPAC transaction. 

193 
 
they would find optimal.  Further, they may not be able to purchase an ownership claim in the 
combined company at the same price as a PIPE investor when PIPEs are offered at a discount to 
the open market price.  Although PIPE discounts may offset differences in the securities’ 
liquidity, discounts to PIPE investors contribute to the dilution of SPAC investors.   
Staff review of PIPEs in connection with de-SPAC transactions that occurred between 
January 2018 and June 2021 found the average and median discount to PIPE investors were 
respectively 1.8% and 2.4% when estimated over all PIPEs and slightly higher (respectively 
4.4% and 2.4%) for PIPE offerings without warrants.
427
  These results appear generally 
consistent with a recent study that was more narrowly scoped to the height of the SPAC boom 
that found, between 2019 and June 2020, that the median discount received by PIPE investors 
was 5.5% relative to the market value of the publicly traded securities, and, in 37% of SPACs 
with PIPE deals, the PIPE was at a 10% discount or more.
428
 This level of discount appears to be 
more broadly consistent with estimated discounts associated with PIPE financing outside the 
SPAC context as, by comparison, a recent study indicates that the average discount for PIPE 
investors is 11.2%, and for the subsample of PIPES that do not include warrants, the average 
discount is 5.7%.
429
  While PIPE discounts may, on average, be smaller in the context of SPACs 
than in other PIPE financing, it is nevertheless a concern that the dilution they may cause may 
not be adequately anticipated by SPAC IPO investors.          
                                                 
427
 These estimates are based on staff analysis of data as described in Table 1, note a, and additional data from 
PrivateRaise. 
428
 See Klausner, Ohlrogge, and Ruan, supra note 17. 
429
 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 3001 PIPE transactions by U.S. firms listed on NYSE or 
NASDAQ between 2001 and 2015. 

194 
 
d.  Use of Projections in Connection with De-SPAC Transactions 
Proposed Item 1609 of Regulation S-K would apply to projections used in de-SPAC 
transactions.  Hence, proposed Item 1609 would potentially affect preparers and users of 
financial projections related to de-SPAC transactions, including SPACs, their sponsors, target 
companies, their 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 
420 SPACs with IPO dates from 2015 to 2020.
430
  They found that 249 (59.29%) de-SPAC 
transactions were accompanied by at least one forecast.  Dambra, Even-Tov, and George (2022) 
focus on de-SPAC transactions between January 1, 2010, and December 31, 2020.  They restrict 
their sample to de-SPAC acquisitions with a single target and exclude SPACs that either delisted 
before the merger effective date, that traded on the OTC market, or focused on the biotech 
industry, yielding a sample of 142 observations.
431
  They identify 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.  They removed firms 
“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 studies suggest that the use of projections is fairly common 
in the de-SPAC transactions and may have become increasingly common over time.  
                                                 
430
  See Chapman, Frankel, and Martin, supra note 291. 
431
  See Dambra, supra note 33. 

195 
 
e. Use of Fairness Opinions 
According to one source, in 2021, only 15% of de-SPAC transactions disclosed that they 
were supported by fairness opinions.
432
  In contrast, a study of mergers and acquisitions more 
broadly found that 85% of bidders obtain fairness opinions.
433
  The results indicate that deals in 
which bidders obtain fairness opinions may be associated with higher stock price reactions to the 
deal announcement and also better post-merger operating performance.
434
  This study suggests 
that, for mergers and acquisitions in which a proxy vote is required, a fairness opinion obtained 
by the bidder can mitigate information risks and enhance communications between bidder boards 
of directors and their shareholders.
435
 
f. SPAC Filer Status 
Figure 4 below shows the proportion of SPACs that claimed smaller reporting company 
or EGC status, or both, in their first annual report after the initial public offering.  Since 2016, 
almost all SPACs in their initial public offerings have claimed either smaller reporting company 
or EGC status, with the majority claiming both.  For example, in 2021, 399 SPACs in their initial 
public offerings claimed both smaller reporting company and EGC status, while 48 only claimed 
EGC status. 
                                                 
432
  See Levitt, Jacob, Fain, Marcogliese, Tiger, & Basham, supra note 416. 
433
  This finding is based on deals that occurred between 1995 and 2015, involving a publicly traded bidder that 
seeks 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 the use of fairness opinions is disclosed only if bidders are required to 
file proxy statements to solicit a shareholder vote.  They note that listing rules of the NYSE, Amex, 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, if the bidder issues less than 20% equity or uses cash to finance the deal, the bidder would not be 
required to disclose the fairness opinion even if the firm had obtained one.  See Tingting Liu, The Wealth Effects of 
Fairness Opinions in Takeovers, 53 F
IN. REV. 533 (2018) (finding positive wealth effects from fairness opinions 
after the SEC approved Rule 2290 in Oct. 2007 which regulates the identification and disclosure of conflicts of 
interest of investment banks rendering fairness opinions.) 
434
  Id. 
435
  Id. 

196 
 
Figure 4. Annual SPAC Cohorts by Smaller Reporting and Emerging Growth Company 
Statuses Reported at Original Registration Stage
a
 
 
a
 Data presented here reflects the self-reported status disclosed by SPACs as of the Form S-1, Form F-1, or an 
amendment to either that was filed most proximate in time to the date of the initial public offering.
 
g. Changes in Jurisdiction of the Combined Company 
As we consider the potential economic effects of the proposed new rules and 
amendments, we take into consideration elements of the both the economic and the regulatory 
baseline, which would include accounting for variations between the applicable legal 
frameworks in the jurisdictions in which SPACs are incorporated or organized.  Table 4 presents 
information on the jurisdiction of incorporation or organization for each SPAC that conducted its 
initial public offering after 1990 and completed a de-SPAC transaction before 2022.  The first 
two columns state the percentage of SPACs that were originally incorporated or organized in 
each of six listed jurisdictions.  The second two columns state—for each originating 
jurisdiction—the percentage of combined companies that were incorporated or organized in the 
listed jurisdictions following a de-SPAC transaction.  
0
50
100
150
200
250
300
350
400
450
200120022003200420052006200720082009201020112012201320142015201620172018201920202021
EGC_OnlyEGC_SRCSRC_OnlyNeither

197 
 
While the majority of SPACs that subsequently consummate a de-SPAC transaction 
remain incorporated in the same location, Table 4 indicates that the jurisdiction of incorporation 
or organization of the combined company may change 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 incorporation or organization.  To the extent that different jurisdictions 
have different disclosure requirements and provide differing levels of investor protections, the 
baseline regulatory regime will vary across SPACs and may change upon the de-SPAC 
transaction. 
Table 4 Distribution of Combined Company Jurisdiction of Incorporation or Organization 
by SPAC Jurisdiction of Incorporation or Organization, 1990-2021
a
 
 
At IPO Post de-SPAC transaction 
Incorporation % of de-SPACs Incorporation % of IPOs 
Delaware 71.88% 
Delaware 84.68% 
Cayman Islands 4.03% 
Bermuda 2.02% 
Israel 1.61% 
New York 0.81% 
Utah 0.81% 
Luxembourg 0.81% 
Bahamas 0.40% 
British Columbia 0.40% 
British Virgin Islands 0.40% 
Illinois 0.40% 
India 0.40% 
Jersey 0.40% 
Marshall Islands 0.40% 
Maryland 0.40% 
Nevada 0.40% 
Ohio 0.40% 
Ontario 0.40% 
Quebec 0.40% 
Virginia 0.40% 

198 
 
Cayman 
Islands 
23.48% 
Delaware 54.32% 
Cayman Islands 33.33% 
Netherlands 3.70% 
Israel 2.47% 
Luxembourg 2.47% 
British Virgin Islands 1.23% 
New York 1.23% 
Ontario 1.23% 
British Virgin 
Islands 
3.77% 
British Virgin Islands 
46.15% 
Delaware 15.38% 
Cayman Islands 7.69% 
Ireland 7.69% 
Mexico 7.69% 
Singapore 7.69% 
United Kingdom 7.69% 
Massachusetts 0.29% 
Massachusetts 100.00% 
Nevada 0.29% 
Cayman Islands 100.00% 
Marshall 
Islands 
0.29% 
Nevada 100.00% 
a
 Estimates reported here are based on the subsample of SPAC IPOs (see supra Table 1   note a) after 
offerings withdrawn after the IPO pricing date and SPACs with a missing merger completion date 
have been removed.  State of incorporation data 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 December 31, 2021.  
 
3. Blank Check Companies 
We are also proposing an amendment to the definition of “blank check company” for 
purposes of the PSLRA safe harbor provisions.
436
  The proposed amendment would affect 
SPACs and certain other blank check companies that may not already be excluded from the 
PSLRA safe harbor, as well as investors and other market participants whose access to the 
informational content of forward-looking statements, or potential remedies in the case of 
material omissions or misstatements, would otherwise differ.
437
  We estimate that in addition to 
                                                 
436
  See supra Section III.D. 
437
  Although the PSLRA safe harbor may currently affect private litigation against some SPAC and blank check 
companies, those companies are subject to state and federal enforcement actions. 

199 
 
potentially affected SPACs, as previously discussed,
438
 approximately 30 non-SPAC entities that 
self-identified as blank check companies but did not self-identify as penny stock issuers may also 
be affected by the proposed amendment.
439
  Because such non-SPAC blank check companies 
may not be subject to the same limitations on duration as SPACs, the number of filings or 
disclosures they might make under the presumed protections of the safe harbor may be greater.  
However, due to the nature of a blank check company as a development stage company with no 
specific plan or purpose other than to merge with or acquire an unidentified company or 
companies, or other entity, or person,
440
 it is unlikely that the nature of the forward-looking 
statements such a registrant might produce would differ in substance from the informational 
content provided by SPACs and therefore should not have a differential impact on investors or 
other market participants. 
4. Shell-Company Business Combinations 
Proposed Securities Act Rule 145a and proposed Article 15 of Regulation S-X would 
affect SPACs and other shell companies (other than business combination related shell 
                                                 
438
  See supra Sections IX.B.1.a & IX.B.2. 
439
  This estimate is based on staff review of all registrants, by unique CIK, that filed at least one periodic or current 
report between 2019 and 2021 and, as of its most recent filing, identifies its SIC code as 6770.  We exclude CIKs 
that have already been identified as SPACs and those associated with filings that self-identify as penny stock issuers 
under Rule 419.  We note that this estimate may represent an upper bound on the number of additional affected 
parties because it is based on registrants’ self-reported SIC and penny stock issuer status.  Studies have reported that 
self-reported SIC codes may contain errors that could cause a higher number of issuers to be counted as affected 
parties than in effect would be.  See, e.g., Murat Aydogdu, Chander Shekar, & Violet Torbey, Shell Companies as 
IPO Alternatives: An Analysis of Trading Activity Around Reverse Mergers, 17 A
PPLIED 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 versus when the registrant is 
mistaken in its belief that it is a blank check company when it may not be.  In the latter case, even if mistaken about 
its blank check company status as a registrant, the party would still be affected by the proposed amendment because 
they may currently make, or believe they are able to make, forward looking statements under the PSLRA safe 
harbor, and would not if the proposed amendment is adopted. 
440
  See the definition of “blank check company” in Rule 419(a)(2)(i) of the Securities Act. 

200 
 
companies) involved in business combination transactions.  Proposed Rule 145a would impact 
the disclosures reporting shell company investors may receive and potential sources of liability.  
Proposed Article 15 of Regulation S-X would impact the financial statements associated with 
business combinations involving shell companies and, thus, would also affect parties that are 
typically associated with the preparation, review, and dissemination of financial statements and 
the information they contain.
441
  Table 5 below illustrates that the proportion of SPAC to non-
SPAC reporting shell-company business combinations has shifted due to the increasing number 
of SPACs entering the market.  It also shows that,  in 2021, more than one-third of all targets 
acquired by a reporting shell company appear to merge with a non-SPAC entity. 
Table 5. Distribution by Year of Shell-Mergers Reported on Form 8-K
a
 
  2016 2017 2018 2019 2020 2021 
SPAC 9.5% 8.8% 17.8% 30.2% 42.2% 65.2% 
Non-SPAC 90.5% 91.2% 82.2% 69.8% 57.8% 34.8% 
a
 Based on Form 8-Ks by calendar year of filing that contain Item 5.06 (Change in Shell 
Company Status) disclosures, excluding filings by asset-backed securities issuers. 
 
 
We estimate that in addition to existing SPACs that have yet to complete a de-SPAC 
transaction, approximately 160 additional existing reporting shell companies may be affected by 
                                                 
441
  We acknowledge the possibility of a situation in which a previously non-public shell company files an initial 
registrant statement. The financial statements included in the registration statement would be required to comply 
with Regulation S-X, including the proposed amendments in Rule 15-01.  As we currently lack the data necessary to 
estimate the number of shell companies that are private, at present, that could be impacted by proposed Article 15, 
they are not included in the estimates discussed in this analysis.  However, the extent to which this may impact our 
conclusions is limited because, based on staff observation and experience with common transaction structures, we 
believe it is unlikely proposed Article 15 will impact many such shell companies. 

201 
 
the proposed amendments.
442
  Almost all of these non-SPAC reporting shell companies trade on 
the OTC market
443
 and tend to be smaller than SPACs in terms of market capitalization and total 
assets.
444
 We further estimate that approximately 11.0% (18) of these shells would also be 
affected by the proposed amendment to redefine the term “blank check company” for purposes 
of the PSLRA.
445
  
Our estimate of approximately 160 shell companies represents an upper bound on the 
number of potentially affected shell companies because some of these shell companies could 
engage in transactions pursuant to an exemption from registration, or otherwise may engage in 
transactions that would not require registration.  For example, if a shell company were to acquire 
another shell company, the acquiring shell would not be affected by proposed Rule 145a or 
proposed Article 15.  Similarly, a shell company that obtains a fairness determination from a 
court or authorized governmental entity might also be exempt.
446 
 Given that a more precise 
estimate would require us to make assumptions about what proportion of future shell company 
mergers may be exempt or not require registration, we request additional data or comments that 
would help inform our expectations about how many shell companies that are not SPACs would 
also be involved in transactions that would be affected by the proposed rules.  
                                                 
442
  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 (Forms 10-K, 20-F, or 40-F) or an amendment thereto filed in calendar year 2021 
by unique CIKs of entities that are not already identified as SPACs. 
443
  Based on staff review of periodic filings,  approximately 72.7% of these shells trade OTC, 26.1% do not trade, 
and 0.6% each appear to have traded on Nasdaq Global Market and NYSE Market, respectively. 
444
  As of yearend 2021, the average market capitalization of non-SPACs shell companies was $154,731,262.50 
while the average market capitalization of SPACs was $306,204,218.60.  Based on the most recent periodic 
disclosure filed per registrant before Dec. 31, 2021, the average total asset position of a non-SPAC shell was 
$33,666,553.41 while the average of SPAC total assets was $309,570,778.30. 
445
  This estimate is based on a cross-tabulation, by unique CIK, of potentially affected parties identified as blank 
check companies (see supra note 439)  and as shell companies (see supra note 442). 
446
  See Section 3(a)(10) of the Securities Act; Staff Legal Bulletin No. 3A (CF) (June 18, 2008), available at 
https://www.sec.gov/corpfin/staff-legal-bulletin-3a
.  

202 
 
5.  Projections Under Item 10(b) of Regulation S-K 
The proposed amendments to Item 10(b) would update the Commission’s view on factors 
to be considered in formulating and disclosing financial projections and would specify the 
application of Item 10(b) to financial projections prepared by parties other than management.  To 
the extent that parties elect to follow the updated guidance set forth in the proposed amendments, 
it would affect registrants and other entities providing financial projections in Commission 
filings, such as a target firm involved in a business combination with a reporting registrant.  A 
recent study examined management earnings forecasts by focusing on public companies from 
2000 to 2018.
447
  Drawing management earnings forecast data from IBES Guidance, they find 
that management provides earnings forecasts in 15,295 (30.8%) out of 49,595 firm-years.  The 
proposed amendments to Item 10(b) would also affect investors and other users of the financial 
projections included in Commission filings, to the extent that parties elect to follow the updated 
guidance.  
6. Investment Company Act Safe Harbor 
The proposed safe harbor would affect all current and future SPACs, sponsors, investors, 
and potential target companies.  For statistics on these affected parties in the SPAC market, see 
                                                 
447
  See Claude Francoeur, Yuntian Li, Zvi Singer, & Jing Zhang. Earnings Forecasts of Female CEOs: Quality and 
Consequences, REV. ACCT. STUD.  (2022).  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, e.g., Zahn Bozanic, Darren T. Roulstone, and 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.)   

203 
 
our discussion above.
448
  For a description of Section 3(a)(1)(A) of the Investment Company Act 
under the Securities Act, see our discussion above.
449
 
a. Nature and Management of SPAC Assets 
Most SPACs hold a majority of their assets in a trust (or escrow) account, which is also 
required by current listing standards.
450
  For example, Table 6 shows that, on average, 
approximately 90% of the initial offering proceeds raised in a SPAC IPO in 2021 were deposited 
in trust accounts.  
Table 6. Average SPAC IPO Capital Raised and Amounts in Trust, 2001-2021
a
 
  
2001-
2005 
2006-2010 2011-2015 2016-2020 2021 
IPO Initial Offering
b
 45.82 134.08 121.63 272.93 265.22 
IPO Offering w Overallotment
c
 56.87 212.95 160.40 337.54 330.75 
Trust/Initial Offering 88.53% 97.38% 94.66% 91.46% 89.55% 
a
 Averages reported here are estimated over the subsample of SPAC IPOs (see supra Table 1 note a) after offerings 
withdrawn after the IPO pricing date have been removed. 
b
 In millions of dollars. 
c
 In millions of dollars, includes exercise of overallotment as reported in Dealogic. 
 
It is also our understanding that SPAC assets, particularly those held in the trust account, 
are largely invested in Government securities or Government money market funds.
451
  We also 
understand that SPACs generally disclose in their IPO prospectuses that any income earned on 
assets in the trust account will be used toward the de-SPAC transaction, after possible deductions 
for tax payments.  Some SPACs also disclose that a portion of the interest income could be used 
toward any potential dissolution expenses. 
                                                 
448
  See supra Sections IX.B.1 and IX.B.2  
449
  See supra Section VI.A.1. 
450
  See supra note 392 and accompanying text. 
451
  See, e.g., Rodrigues & Stegemoller, supra note 17. 

204 
 
b. SPAC Activities 
Currently, the typical SPAC discloses in its IPO prospectuses that it is formed as a blank 
check company for the purpose of effecting a business combination with one or more businesses.  
In addition, SPACs usually provide disclosures in their IPO prospectuses indicating that they 
believe they do not meet the investment company definition under Section 3(a).  They further 
typically disclose to prospective investors that if they are determined to be an investment 
company in the future, the costs and logistics of compliance with the Investment Company Act 
would be prohibitive.   
Current exchange listing standards and SPACs’ own disclosures in their initial public 
offering registration statements generally require that SPACs must combine with a target that is 
unidentified at the time of their initial public offerings.
452
  As a result of exchange rules and their 
own disclosed commitments to investors, SPACs generally have a limited period to find a target 
and negotiate the terms of a de-SPAC transaction agreement.
453
  Because of the incentives 
provided to sponsors by the SPAC structure to complete a de-SPAC transaction, the limited 
period provided for a SPAC to search for a target and complete a transaction deal may cause 
some SPACs to pursue comparatively less attractive targets as they get closer to their de-SPAC 
transaction deadlines.
454
  In addition, the limited period to search for a target and complete a de-
                                                 
452
  See Nasdaq Listing Rule IM-5101-2 (listing standards for companies with a business plan to “engage in a merger 
or acquisition with one or more unidentified companies”); NYSE American Company Guide Section 119 (similar). 
453
  This limited period may go beyond the pre-committed lifespan SPACs disclose in their IPO registration 
statements.  As we discuss in infra Section IX.B.6.c, SPACs currently may pre-commit to hold a vote on a pre-
specified extension period, if needed, to complete a de-SPAC transaction.  SPACs may also ask shareholders ex-post 
to vote for an extension of the lifespan of the SPAC, even if they did not pre-commit to such a vote.  Based on the 
sample of SPACs analyzed in infra Section IX.B.6.c, the vast majority of SPACs conclude a de-SPAC transaction or 
liquidate the SPAC within 36 months of their IPO date.   
454
  There is some evidence consistent with such incentives.  See, e.g., Dimitrova, supra note 30 (finding that four-
year post-IPO buy-and-hold abnormal return is on average 8.8% lower if the acquisition is announced at the end of 
the (self-imposed) two-year deadline instead of at the estimated earlier optimal time).  

205 
 
SPAC transaction may increase the bargaining power of target companies in negotiations with 
SPACs compared to other potential buyers that do not face such regulatory or self-imposed time 
constraints.  
Most SPACs tend to pursue only one target company for a de-SPAC transaction.  Of the 
483 de-SPAC transactions that occurred over the 1990 – 2021 period involving SEC registered 
SPACs, 3.3% (16/483) of transactions had 2 or more targets (14 transactions had 2 targets, 2 had 
3 targets).
455
 
c. Duration Statistics: Announcement and Completion of De-SPAC 
Transactions 
 
To rely on the proposed safe harbor from Investment Company status, a SPAC would be 
required to announce a de-SPAC transaction no later than 18 months after the effective date of 
the registration statement for the SPAC’s initial public offering, and complete the transaction no 
later than 24 months after the date of the initial public offering.  For the sake of comparison to 
other current requirements, this is a shorter period than the 36 months a SPAC can remain listed 
under current exchange rules as discussed above.
456
 
Below we provide statistics on the timing of announcements and completion of de-SPAC 
transactions for a sample of SPACs with effective IPO dates between January 1, 2016 and 
December 31 2019.  We chose December 31, 2019, as the end date to ensure that at there is at 
least a 24-month history available for each SPAC included in the sample in order to reduce 
potential reverse survivorship bias in the estimates.
457
  
                                                 
455
  Based on data from Dealogic M&A module as of Jan. 2022.  
456
  See supra note 393 and accompanying text. 
457
  Note that the number of SPAC IPOs increased significantly in the 2020-2021 period.  To the extent this increase 
has increased competition for target companies, it may affect the time it takes for more recent SPACs to announce or 
complete a de-SPAC transaction, or their ability to complete a de-SPAC transaction at all.  As of Dec. 31, 2021, 
approximately 77 of 248 SPAC IPOs in 2020 (31%) and an additional 495 of 613 SPAC IPOs in 2021 (81%) had 

206 
 
We have data on 152 SPAC initial public offerings between January 1, 2016 and 
December 31, 2019.
458
  Among these SPACs, all disclosed in their IPO prospectus that they 
would be limited to a 24 month lifespan or less, where almost 59% (89 of 152) disclosed that 
they would be limited to a 24-month period, and the rest to a shorter time period, in some cases 
as short as 12 months (18, or 12%, of cases).  In around 14% of the SPACs (22 of 152), there 
was disclosure in their IPO prospectus about a pre-commitment to hold a vote on an optional 
extension period ranging from three to 24 months.  There were five cases in which the 
combination of the initial lifespan and pre-committed extension period exceeded a 24-month 
potential total lifespan for the SPAC.  However, we recognize that SPACs may, and some 
currently do, ask shareholders to vote for an extension of the lifespan of the SPAC even if they 
did not pre-commit to such a vote or a specified extension period in the event of a vote. 
As of December 31, 2021, approximately 96% (146 of 152) of the SPACs in the sample 
had announced an agreement to enter into a de-SPAC transaction, and approximately 91% had 
completed a de-SPAC transaction.  Among the 13 cases (9%) in the sample where SPACs had 
not completed a de-SPAC transaction at this time, seven SPACs had been formally liquidated,
459
 
whereas six SPACs were still active (four of which had announced a de-SPAC transaction).  As 
of December 31, 2021, the lifespan of the six still active SPACs ranged between 25 to 37 months 
since the IPO date. 
Overall, approximately 59% (89 of 152) of the SPACs in the sample announced an 
agreement to enter into a de-SPAC transaction no later than 18-months after the date of the initial 
                                                 
not yet announced a target or have withdrawn an announced business combination and resumed searching (see supra 
Section IX.B.2).  See also supra note 413 and accompanying text.  
458
  Based on data from Dealogic M&A module as of Jan. 2022. 
459
  In two of these cases, a de-SPAC transaction was announced but later withdrawn. 

207 
 
public offering, and 88% (134 of 152) announced a transaction agreement no later than 24 
months after the IPO date.  Figure 5 shows the distribution of the timing of announcements for 
de-SPAC transaction agreements expressed in event-time relative to the IPO effective date for 
the 146 sample SPACs that had made such an announcement by December 31, 2021.  The 
longest time to an announcement was 39 months, and the shortest was four months. 
 
Figure 5: Distribution of De-SPAC Transaction Agreement Announcements (In SPAC IPO 
Event Time). 
 
 
Approximately 65% (99 of 152) of the SPACs in the sample had completed a de-SPAC 
transaction no later than 24 months after the IPO date, whereas only 31% (47 of 152) of the 
SPACs in the sample had completed a de-SPAC transaction no later than 18 months after the 

208 
 
IPO date.  Figure 6 shows the distribution of the timing of de-SPAC transactions expressed in 
event-time relative to the IPO effective date for the 139 SPACs in the sample that completed de-
SPAC transactions by December 31, 2021.  The longest time to completion was 43 months, and 
the shortest was eight months. 
 
Figure 6: Distribution of Completed De-SPAC Transactions (In SPAC IPO Event Time). 
  
Among the 139 SPACs in the sample that completed a de-SPAC transaction by 
December 31, 2021, the average and median times between the announcement and the 
completion of the transaction were respectively 150 days (approximately 5 months) and 142 days 
(approximately 4.7 months).  The time between announcement and completion of the merger 
was less than 6 months in 78% of the cases, and the shortest time observed in the sample was 

209 
 
less than two months (50 days).  For the subsample of 99 SPACs that completed the de-SPAC 
transactions in no more than 24 months since the IPO date, the average and median times 
between the announcement and the completion of the transaction were respectively 142 days 
(approximately 4.7 months) and 125 days ( approximately 4.1 months).  For this subsample, 
approximately 79% of the de-SPAC transactions occurred less than 6 months after the 
announcement, and there were 12 cases in which the announcement of the transaction agreement 
was made more than 18 months after the IPO date. 
C.  Benefits and Costs of the Proposed Rules 
1.  Disclosure-Related Proposals 
a. SPAC Initial Public Offerings and Other Registered Offerings 
1. Definitions (Item 1601)  
 
We are proposing Item 1601 to identify certain parties and transactions to which the 
requirements of the subpart, as well as other parts of this proposal, would apply.  Defining the 
terms “special purpose acquisition company,” “de-SPAC transaction,” “SPAC sponsor,” and 
“target company” as proposed would establish the scope of the issuers and transactions subject to 
the requirements of Subpart 1600, and thereby provide both registrants and investors with notice 
of the associated obligations.  The definitions may impose costs if the new definitions are not 
consistent with current understanding and consequently cause confusion for registrants, investors 
and market participants.  Both the costs and benefits would be small to the extent that the new 
definitions are consistent with widely accepted views.  
2. Prospectus Cover Page and Prospectus Summary Disclosures 
(Item 1602) 
 
Proposed Item 1602 would require a prospectus filed in connection with a SPAC’s initial 
public offering to disclose information on certain features unique to SPAC offerings and the 

210 
 
potential associated risks, in addition to the information currently required by Item 501 and Item 
503 of Regulation S-K, on the prospectus cover page and in the prospectus summary, 
respectively, as discussed above.
460
  The proposed additional disclosures may reduce SPAC 
investors’ information processing costs and improve their investment decisions.  Investors in 
SPACs vary in financial sophistication and ability to process the information provided in SPAC 
IPO prospectuses.  We expect that the potential benefits may especially accrue to investors that 
are less financially sophisticated. 
Specifically, because investors are likely to allocate their attention selectively,
461
 
requiring disclosure regarding important features and associated risks of SPAC investments on 
the prospectus cover page (including cross-references to the locations of the more detailed 
related disclosures) and prospectus summary may increase the likelihood that investors pay 
attention to the information by making it more salient.
462
  In addition, the proposed additional 
disclosures in the prospectus summary may further reduce information processing costs, 
particularly for less financially sophisticated investors, by providing information in plain English 
about important SPAC features in a concise format.
463
  
                                                 
460
  See supra Section II.E for more information about current disclosure requirements. 
461
  See, e.g., George Loewenstein, Cass R. Sunstein, & Russell Golman, Disclosure: Psychology Changes 
Everything, 6 A
NN. REV. ECON. 391 (2014). 
462
  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, T
HINKING, 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 R
EV. OF FIN. STUD. 
990 (2014). 
463
  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).  Thus, summary disclosure may provide 
benefits by focusing investors’ attention and reducing information processing costs. 

211 
 
Proposed Item  1602(b)(6)  would  require  tabular  disclosure  in  the  prospectus  summary 
regarding  the  nature  and  amount  of  the  compensation  received  or  to  be  received  by  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.  There is empirical evidence that visualization 
improves  individual  perception  of  information.
464
    For  example,  one  experimental  study  shows  
that tabular reports can lead to better decision making.
465
  Because sponsors’ compensation may 
be a material cost to SPAC investors, the tabular format of these required disclosures may help 
investors (especially those that are less financially sophisticated) more easily process the financial 
implications of compensation of the SPAC sponsor, its affiliates and promoters, thereby potentially 
incrementally improving their investment decisions.
466
 
Additionally, the proposed rules and amendments would standardize this disclosure across 
all registration statements filed for SPAC initial public offerings, which may make it easier and 
less costly for investors to compare terms across offerings and thereby promote better investment 
decisions.  
Finally, to the extent the proposed additional disclosures on the cover page and in the 
prospectus summary would increase investors’ awareness of sponsors’ incentives and potential 
conflicts of interest, it may have an incremental disciplining effect on sponsors’ behavior.  For 
example, to the extent sponsors would face potentially greater scrutiny by more attentive 
                                                 
464
  See John Hattie, VISIBLE LEARNING: A SYNTHESIS OF OVER 800 META-ANALYSES RELATING TO ACHIEVEMENT 
(2008). 
465
  See Izak Benbasat & Albert Dexter, An Investigation of the Effectiveness of Color and Graphical Information 
Presentation Under Varying Time Constraints, 10-1 MIS Q. 59 (1986).  
466
  See infra Section IX.C.1.a.4 for the discussion of proposed Item 1602(a)(4), which would require that the 
prospectus cover page include a simplified dilution table depicting the estimated remaining pro forma net tangible 
book value per share that would be realized at quartile intervals up to the maximum redemption threshold.  

212 
 
investors, they may take some additional care in finding and negotiating terms with target 
companies, or take steps to mitigate the extent of any disclosed conflict of interests. 
The proposed additional disclosures that would be required to be included on the 
prospectus cover page and in the prospectus summary may increase compliance costs for SPACs 
to the extent that they would need to provide additional information in their IPO prospectuses 
than they currently provide.  We believe that SPACs should have this information readily 
available and in some cases may already be disclosing it, such as the time frame for the SPAC to 
consummate a de-SPAC transaction.  Thus, we expect that any compliance costs resulting from 
these proposed items would not be significant. 
There could also be some potential costs for investors.    In particular, there is a risk that, 
by requiring more items to be added to the cover page and the prospectus summary, the salience 
of the current required disclosures may be reduced because they will have to compete with the 
new required disclosures for investors’ attention compared to the baseline.  In addition, because 
Item 501(b) of Regulation S-K limits the information on the outside cover page to one page, 
there is a risk that the amount of information required to be included could generally impair the 
readability of the cover page.  As a result, some investors may pay less attention to the cover 
page as a whole. 
3. Sponsors and Conflicts of Interest (Item 1603) 
Proposed Item 1603(a) would require disclosure of certain information regarding a 
SPAC’s sponsor, its affiliates and any promoters, both at the SPAC initial public offering stage 
and at the de-SPAC transaction stage.  To the extent that such disclosures are not already 
provided or are partially provided, this proposed disclosure requirement would provide investors 
with information related to the experience and incentives (due to characteristics of the 

213 
 
compensation structure, for example) of the sponsor.
467
   Investors may benefit from such 
disclosure, as it could allow them to better evaluate the circumstances that may impact their 
investment decision in a specific SPAC.  The proposed disclosure is likely to be beneficial to 
investors who may consider investing in a SPAC at a point in time that precedes the existence 
and disclosure of information about an acquisition target, or to investors seeking to evaluate a 
proposed de-SPAC transaction.
468
  
Proposed Item 1603(b) would require disclosure of conflicts of interest at both the SPAC 
initial public offering stage and at the de-SPAC transaction stage.  This disclosure would also be 
required in any Schedules TO filed in connection with a redemption.  We believe that this 
proposed disclosure requirement would benefit investors by enabling them to better assess any 
actual or potential material conflicts of interest held by sponsors, its affiliates, officers and 
directors of the SPAC, and/or promoters.  Such disclosure could allow investors to more 
accurately assess the potential risk associated with the conflicts of interest in a SPAC and thus 
make better investment decisions.   
Further, disclosure under proposed Item 1603(c) would provide investors information 
about the fiduciary duties that a SPAC’s officers and directors owe to other companies.  We 
expect that this disclosure w ould allow the SPAC’s shareholders and prospective 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 compete 
with the SPAC.  In addition, to the extent that a SPAC’s officers and directors owe fiduciary 
duties to other companies, these obligations may limit the attention that they are able to provide 
                                                 
467
  See supra Section II.B for more information about current disclosure requirements. 
468
  Academic literature provides some evidence that characteristics of the SPAC sponsor, such as experience or 
network may be indicative of its ability to select and execute quality transactions.  See, e.g., Lin, supra note 30.   

214 
 
to the SPAC.  We expect that these disclosures would benefit investors by allowing them to 
better assess the actions of the officers and directors in managing the SPACs activities, including 
a proposed de-SPAC transaction.  
Proposed Item 1603(a) may increase compliance costs for SPACs, mainly in the form of 
collecting, preparing, and filing the required information for disclosure on sponsors, their 
affiliates and any promoters.  We do not expect, however, such costs to be substantial because 
most of this information should be readily available, and some of it is currently being provided 
by SPACs. 
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 conflicts of interest; (ii) developing and maintaining methods for tracking any such 
conflicts of interest; and (iii) seeking legal or other advice.  While the direct costs associated 
with Item 1603(b) disclosure requirements would depend on the extent to which a SPAC already 
provides this disclosure under current practices, we expect these costs to generally be low.  As a 
baseline matter, 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.
469
  
Therefore, it would appear that most SPACs are generally aware of these actual or potential 
conflicts and would therefore only bear costs insofar as our proposed requirements would 
involve providing greater detail or specificity in the disclosures of conflicts of interest. 
Similarly, we do not expect the disclosures of a SPAC officer or director’s fiduciary 
duties to other companies, as would be required by proposed Item 1603(c) to be very costly to 
prepare.  Given the significance of a fiduciary relationship, it is unlikely that a director or officer 
                                                 
469
  For examples of such disclosures, see Jog & Sun, supra note 386. 

215 
 
– and, by extension, the SPAC – would not already know what relationships would require 
disclosure.  The incremental costs to produce, track, or review records also should be low 
because signed, written documents typically accompany the entrance into a relationship that 
engenders a fiduciary duty. 
4. Dilution (Items 1602(a)(4) and 1602(c)) 
As discussed above,
470
 SPAC shares may experience dilution from various transactions 
by a number of parties or combinations of parties at various stages of a SPAC’s lifecycle.  For 
example, sponsors typically obtain their “promote” at a nominal value (e.g., $25,000) with most 
of their compensation typically contingent on the completion of a de-SPAC transaction.  When 
sponsors receive compensation at the de-SPAC transaction stage, their compensation comes out 
of the stakes of SPAC investors who do not redeem their shares, leading to an interactive effect 
between redemptions and the promote that magnifies the dilution.  PIPE investments, due to their 
typical discount to the IPO offering price and potential interactive effects with redemptions, can 
further dilute non-redeeming SPAC investors.  Finally, investors that redeem their shares 
typically get to keep their warrants.  Future exercises of these warrants further dilutes non-
redeeming SPAC shareholders’ equity.  Because most of these potentially dilutive transactions 
may occur after the SPAC’s initial public offering and both the direct and indirect dilutive effects 
can be unique to the specific SPAC’s structure, they may be difficult for prospective investors 
and other interested market participants to identify, anticipate, or adequately assess.    In the 
absence of a more complete appreciation of these dilutive effects, the decision to invest, vote, or 
redeem, or the price at which one might be willing to enter or exit a position, may lack relevant 
                                                 
470
  See supra Section II.D for more information about existing disclosure requirements under Item 506 of 
Regulation S-K. 

216 
 
information and, as a consequence, be suboptimal.  SPAC investors who remain investors in the 
combined company absorb the above-mentioned dilution effects.  To the extent that investors 
may not understand the extent of the dilution, or may exhibit inertia regarding the decision to 
redeem, the dilution may not be reflected in market prices at the time of the target acquisition.
471
 
Proposed Item 1602(c) would require that registration statements filed by SPACs, other 
than for de-SPAC transactions, describe all material potential sources of future dilution 
following the SPAC’s initial public offering and include tabular disclosure of the amount of 
potential future dilution from the public offering price that will be absorbed by non-redeeming 
SPAC shareholders, to the extent known and quantifiable.  The proposed rule would benefit 
investors by providing them with more detailed information on the potential impact of dilution 
on the value of their SPAC shares, thus enabling them to better understand the effects of dilution 
on their investments and ultimately make better investment decisions.   
We are further proposing to require that registration statements on Form S-1 or Form F-1 
filed by SPACs, including for an initial public offering, include a simplified dilution table 
depicting the estimated remaining pro forma net tangible book value per share that would be 
realized at quartile intervals up to the maximum redemption threshold.  Given the empirical 
evidence that visualization improves individual perception of information and that dilution that 
may occur due to redemption may be a significant cost to investors,
472
 we expect that the tabular 
format of this disclosure will help investors (especially those that are less financially 
sophisticated) more easily process the financial implications of dilution and potentially improve 
their investment decisions.  Moreover, the tabular presentation may provide investors with this 
                                                 
471
  See Gahng, Ritter, & Zhang, supra note 23; Klausner, Ohlrogge, & Ruan, supra note 17.   
472
  See Hattie, supra note 464, and Benbasat & Dexter, supra note 465.  

217 
 
information in a format that might more accurately represent the dilution that they might 
experience if they choose to invest in the SPAC, as compared to current disclosures.
473
  For 
example, Figure 7 shows the average maximum allowable number of shares eligible to be 
redeemed prior to the de-SPAC transaction disclosed by SPACs in their registration statements.  
As shown, the maximum potential dilution is fairly stable over time, on average about 90% of 
net tangible book value per share.  Figure 7 also presents the average realized redemptions in de-
SPAC transactions, which appear to vary considerably over time.  Thus, despite the fact that 
SPACs are currently disclosing the maximum potential dilution that may occur as a function of 
redemptions, this information may not be as useful for investors as a presentation of the same 
information in a scenario table at quartile intervals of redemption, given that actual redemptions 
in connection with a de-SPAC transaction rarely reach the maximum allowable amount.  The 
proposed amendments would provide investors with more granular information about potential 
dilution, which could allow them to better anticipate the effects of such dilution on future 
returns.
474
  Additionally, the tabular format of the disclosure would standardize the dilution 
information, allowing investors to more easily analyze it and compare it across SPACs. 
  
                                                 
473
  See supra note 74. 
474
  See Klausner, supra note 71. 

218 
 
Figure 7. Dilution Disclosures in IPO Registration Statements vs. Realized Redemptions at 
de-SPAC 
 
 
We expect the incremental costs of these proposed disclosure requirements to be, in most 
cases, low.   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.  Second, 
while the proposed rules would require registrants to account for potential future sources of 
dilution and analyze several levels of redemption, which may require the services or input of 
quantitative specialists (analysts, forecasters, or other consultants), the material sources and the 
levels of dilution are generally common across SPAC offerings (thus a standard approach based 
on best practices may emerge, reducing costs over time) and are known and quantifiable.  For 
example, sources of dilution may include shareholder redemptions, sponsor compensation, 
underwriting fees, outstanding warrants and convertible securities, and PIPE financings.  For 
proposed Item 1602(a)(4), registrants will be required to analyze only four levels of redemption 
(i.e., 25%, 50%, 75%, and maximum redemption).  Third, many initial registration statements 
filed by SPACs already include disclosures regarding dilution.  Thus, the additional burden of 
these disclosures becoming a formal requirement may be relatively modest.  We therefore expect 
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Average Realized RedemptionAverage Disclosed Maximum

219 
 
that the proposed disclosure requirements should benefit the market broadly and investors in 
particular, insofar as the enhanced information on potential sources of dilution improves price 
formation. 
5.   Structured Data Requirement (Item 1610) 
Proposed Item 1610 would require all disclosures in proposed Items 1601-1609 of 
Regulation S-K to be tagged in Inline XBRL.
475
  We expect that this requirement would augment 
the informational benefits of the proposed new disclosure requirements by making them more 
easily retrievable and usable for aggregation, comparison, filtering, and other analysis.  XBRL 
requirements for public operating company financial statement disclosures have been observed 
to mitigate information asymmetry by reducing information processing costs, thereby making the 
disclosures easier to access and analyze.
476
  This reduction in information processing cost has 
been observed to facilitate the monitoring of companies by external parties, and, as a result, to 
influence behavior of companies, including their disclosure choices.
477
 
                                                 
475
  See supra Section II.G. 
476
  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, 127-53 (2012) (finding evidence that 
“mandatory XBRL disclosure decreases information risk and information asymmetry in both general and uncertain 
information environments”); Yuyun Huang, Jerry T. Parwada, Yuan George Shan, & Joey Wenling Yang, Insider 
Profitability and Public Information: Evidence From the XBRL Mandate ( SSRN Working Paper, 2020) (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”). 
477
  See, e.g., Jeff Zeyun Chen, 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, Jeong-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 ( 2014 Am. Acct. 
Assoc. Annual Meeting Aug. 6, 2014) (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) (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”). 

220 
 
While these observations are specific to operating company financial statement 
disclosures and not to disclosures outside the financial statements, such as the proposed 
specialized disclosure requirements applicable to SPACs, they indicate that the proposed Inline 
XBRL requirements could directly or indirectly (i.e., through information intermediaries, such as 
financial media, data aggregators, and academic researchers) provide investors with increased 
insight into the proposed specialized SPAC disclosures at specific SPACs, and allow them to 
compare it to information provided by other SPACs at the time of their initial public offerings, 
perhaps through filtering by criteria, such as offering size or the name of the sponsor.
478
  Also, 
like Inline XBRL financial statements (including footnotes), the proposed SPAC specialized 
disclosures would include tagged narrative disclosures in addition to tagged quantitative 
disclosures.
479
  Tagging narrative disclosures can facilitate analytical benefits, such as automatic 
comparison/redlining of these disclosures against that provided by other SPACs in their initial 
public offerings and the performance of targeted assessments of specific SPAC specialized 
disclosures.
480
 
We expect the proposed requirement to tag SPAC specialized disclosures in Inline XBRL 
would 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 footnotes) 
                                                 
478
  See, e.g., Nina Trentmann, Companies Adjust Earnings for Covid-19 Costs, but Are They Still a One-Time 
Expense?, W
ALL 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 A
CCT. REV. 259, 259-287 (2018). 
479
  For example, proposed Item 1603 would consist largely of narrative disclosure regarding the SPAC sponsor, but 
would also include quantitative disclosure regarding the compensation paid (or to be paid) to the SPAC sponsor, its 
affiliates, and any promoters for all services rendered in all capacities to the SPAC and its affiliates. 
480
  To illustrate, using the search term “warrant” to search through the text of all SPAC registration statements for 
initial public offerings to determine how many such initial public offerings disclosed the inclusion of warrants 
within SPAC sponsor compensation could return many narrative disclosures outside of the discussion (e.g., 
disclosures related to warrants offered to investors as part of the initial public offering). 

221 
 
and cover page information in certain registration statements and periodic reports in Inline 
XBRL.  However, SPACs are 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.  Various preparation solutions 
have been developed and used by operating companies to fulfill XBRL requirements, and some 
evidence suggests that, for smaller companies, XBRL compliance costs have decreased over 
time.
481
  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 typically operate as shell companies with no or nominal operations, 
it may be more likely that SPACs outsource their tagging obligations to a third-party service 
provider, and thus avoid the aforementioned software licensing and training costs.  They would, 
however, incur the costs of retaining such third party services. 
b. De-SPAC Transactions
482
 
1.   Prospectus Cover Page, Summary, and Disclosure of Dilution 
(Item 1604) 
 
In connection with a de-SPAC transaction, many SPACs currently register an offering of 
securities using a Form S-4 or F-4.  We expect most de-SPAC transactions to include a 
                                                 
481
   An AICPA survey of 1,032 reporting companies with $75 million or less in market capitalization in 2018 found 
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 for 
fully outsourced XBRL creation and filing, representing a 45% decline in average cost and a 69% decline in median 
cost since 2014.  See Michael Cohn, AICPA Sees 45% Drop in XBRL Costs for Small Companies, A
CCT. TODAY 
(Aug. 15, 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 in XBRL costs per quarter), available at 
https://www.accountingtoday.com/news/aicpa-sees-45-drop-in-xbrl-costs-for-small-reporting-companies
 (retrieved 
from Factiva database); 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)].  
482
  The benefits of proposed Item 1603 in connection with disclosures regarding sponsors and conflicts of interest in 
connection with a de-SPAC transaction on a proxy, information, or registration statement or Schedule TO are 
expected to be largely the same as the effects of those disclosures made in connection with a SPAC IPO, though 

222 
 
Securities Act registration statement going forward.  Proposed Items 1604(a) and 1604(b) would 
require any prospectus accompanying a registration statement at the de-SPAC transaction stage 
to include certain information unique to the de-SPAC transaction on the cover page and in the 
summary, in a style and substance comparable to the additional disclosures that proposed Item 
1602 would require at the initial public offering stage.
483
  In addition, proposed Item 1604(c) 
would require disclosure in the prospectus of each material potential source of additional dilution 
that non-redeeming shareholders may experience by electing not to redeem their shares in 
connection with the de-SPAC transaction, a sensitivity analysis in tabular format that expresses 
the amount of potential dilution under a range of reasonably likely redemption levels, and a 
description of the model, methods, assumptions, estimates, and parameters necessary to 
understand the sensitivity analysis disclosure.
484
  
We expect the proposed Items 1604(a) and 1604(b) would have similar potential direct 
benefits to investors as those we discussed for proposed Item 1602 above.
485
  That is, we expect 
that including 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.  Additionally, the proposed additions to the 
de-SPAC transaction prospectus summary may reduce information-processing costs of investors, 
particularly less financially sophisticated investors, by providing certain SPAC-specific 
                                                 
they may be incrementally higher in so far 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.  See supra Section IX.C.1.a.3.  
We would similarly expect the costs of compliance with Item 1603 to be comparable at the de-SPAC transaction 
stage as in connection with a SPAC IPO.  However, to the extent that Item 1603 would require SPACs to disclose 
certain information in connection with their IPOs, the costs of making those same disclosures at the de-SPAC 
transaction stage should be lower because the materials necessary would have largely already been prepared.  
483
  See supra Section II.E for more information about the regulatory baseline. 
484
 See supra Section II.D for more information about the regulatory baseline. 
485
  See discussion in supra Section IX.C.1.a.2.  

223 
 
disclosures concisely and in plain English.  Moreover, like for proposed Item 1602(b)(6), 
proposed Item 1604(b)(4) would require tabular disclosure in the prospectus summary regarding 
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 SPAC.  Presenting this information in tabular format may 
further help reduce information-processing costs for some investors.
486
  Additionally, proposed 
Items 1604(a) and 1604(b) would standardize the required information across all registration 
statements filed for de-SPAC transactions, making it potentially easier and less costly for 
investors to compare terms across transactions.  Overall, because of the aforementioned potential 
effects on investors’ attention and information processing costs, the proposed additional 
disclosures on the prospectus cover page and in prospectus summary may help improve 
investors’ investment decisions. 
Certain items that proposed Items 1604(a) and 1604(b) would require SPACs to include 
on the prospectus cover page and in the summary may potentially 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.  
In turn, this may have an ex ante disciplining effect on sponsors that would mitigate the potential 
costs to investors of conflicts of interests.  In addition, the SPAC would be required to state 
whether it 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 SPAC sponsor received any 
report, opinion, or appraisal from an outside party regarding the fairness of the de-SPAC 
                                                 
486
  See supra notes 464 and 465 and accompanying text.  

224 
 
transaction.  Prominent disclosure of these items may increase investor attention to the fairness 
or unfairness of the transaction, which may incentivize sponsors to avoid transactions that could 
potentially be viewed as unfair.
487
 
As with proposed Item 1602, the additional items that proposed Items 1604(a) and 
1604(b) would require to be included on the de-SPAC transaction prospectus cover page and in 
the prospectus summary may increase compliance costs for SPACs to the extent that they would 
need to provide additional information compared to what they currently provide.  To the extent 
that SPACs already disclose some of this information or have most of this information readily 
available, these costs would be mitigated.   
There could also be some potential costs to investors from proposed Items 1604(a) and 
1604(b).  In particular, as with proposed Item 1602, there is a risk that, by requiring more items 
to be added to the cover page and the summary, the salience of the current required disclosures 
may be reduced because they will have to compete with the new required disclosures for 
investors’ attention compared to the baseline.  In addition, because Item 501(b) of Regulation S-
K limits the information on the outside cover page to one page, there is a risk that the amount of 
information required to be included could generally impair the readability of the cover page.    As 
a result, some investors may pay less attention to the cover page as a whole. 
We expect proposed Item 1604(c) would benefit investors by providing them with 
detailed information on the potential impact of dilution on the value of their SPAC shares in 
connection with the de-SPAC transaction, thus enabling them to better understand the effects of 
dilution on their investments and ultimately make better investment decisions.  Besides requiring 
                                                 
487
  Here we are considering the potential incremental benefits of the placement of this information on the cover 
page and in the summary.  For a discussion of the incremental informational value of these disclosures, see infra 
Section IX.C.1.b.3.  

225 
 
disclosure of each material potential source of future dilution that non-redeeming shareholders 
may experience, proposed Item 1604(c) also would require sensitivity analysis disclosure in 
tabular format that expresses the amount of potential dilution under a range of reasonably likely 
redemption levels.  This sensitivity analysis may provide investors with information that could 
more accurately represent the dilution that they might experience if they choose not to redeem 
their shares as compared to current disclosures.
488
  Such more granular information about 
potential dilution may allow i nvestors to better anticipate the effects of the dilution on future 
returns.   In addition, as discussed above,
489
 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.   
We expect some incremental compliance costs of proposed Item 1604(c) to the extent 
registrants are not already providing disclosures similar in nature to what is required by the 
proposed amendment.  In particular, the proposed rules would require registrants to engage in a 
sensitivity analysis to account for potential future sources of dilution and analyze several levels 
of redemption, which may require the services or input of quantitative specialists (analysts, 
forecasters, or other consultants).  However, we expect the compliance costs of providing this 
disclosure would be mitigated by several factors.  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.  Second, material sources and the levels of dilution are 
generally common across SPAC offerings (thus a standard approach based on best practices may 
emerge, reducing costs over time), and are known and quantifiable.  For example, sources of 
                                                 
488
  See supra note 74. 
489
  See supra notes 464 and 465, and accompanying text.    

226 
 
dilution may include shareholder redemptions, sponsor compensation, underwriting fees, 
outstanding warrants and convertible securities, and PIPE financings.  Third, although proposed 
Item 1604(c) does not specify the number of redemption levels to be analyzed, the fact that this 
disclosure could be calculated in a manner consistent with the methodologies and assumptions 
used in the disclosures provided pursuant to Item 506 elsewhere in the prospectus may reduce 
incremental costs.  Thus, depending on how significant these mitigating factors are, the 
additional burden to registrants of this disclosure may be limited. 
2.  Background, Material Terms, and Effects of the De-SPAC 
Transaction (Item 1605)
 
 
Proposed Items 1605(a), (b) and (c) of Regulation S-K would require disclosure of the 
background (e.g., description of any contacts, negotiations, or transactions concerning the 
transaction), material terms, and effects of the de-SPAC transaction and any related financing 
transaction.    In addition, proposed Item 1605(d) would require disclosure of any material 
interests of a SPAC’s sponsor, officers, and directors in a de-SPAC transaction or any related 
financing transaction, including fiduciary or contractual obligations to other entities and any 
interest in, or affiliation with, the target company.
490
  Such disclosure would benefit investors by 
providing them with more detailed information about significant aspects of de-SPAC 
transactions, thereby enabling them to make more informed decisions.  For example, some of the 
proposed disclosures may enable investors to better assess whether the de-SPAC transaction or 
any related financing transaction has been structured in a manner that would benefit, for 
example, the SPAC’s sponsor to the detriment of unaffiliated security holders of the SPAC. 
                                                 
490
 See supra Section II.F.1 for information about the regulatory baseline.  

227 
 
Proposed Item 1605(e) would require disclosure as to whether or not security holders are 
entitled to any redemption or appraisal rights, and if so, a summary of the redemption or 
appraisal rights.  These disclosures would help investors to better assess the impact of any 
redemption or appraisal rights on a proposed de-SPAC transaction, including whether the 
existence of such rights might lead some investors to redeem their securities after voting in favor 
of a de-SPAC transaction.   
The proposed disclosures could increase the compliance costs for de-SPAC transactions.  
The magnitude of these costs would depend on the amount of information that SPACs and target 
companies are already disclosing in connection with de-SPAC transactions.  To the extent that 
registrants already disclose some of this information or have most of this information readily 
available, these costs would be mitigated.   
3. Fairness of the De-SPAC Transaction and Reports, Opinions, 
Appraisals and Negotiations (Items 1606 and 1607) 
Proposed Item 1606(a) would require a statement from a SPAC as to whether it 
reasonably believes that the de-SPAC transaction and any related financing transaction 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.  In addition, proposed Item 1606(b) would require a discussion of 
the material factors upon which the statement as to the fairness or unfairness of the transaction is 
based.  Proposed Items 1606(c) through 1606(e) would 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 shareholders, and whether the 
transaction(s) were approved by a majority of directors of the SPAC who are not employees of 

228 
 
the SPAC.  These proposed rules could allow investors to better evaluate potential conflicts of 
interest and misaligned incentives in connection with the decision to proceed with a de-SPAC 
transaction, which in turn would assist them in assessing the fairness of a particular de-SPAC 
transaction and any related financing transaction to unaffiliated security holders.
491
 
As discussed in the baseline, SPACs rarely report the use of a fairness opinion when 
evaluations of prospective target are disclosed in de-SPAC-related filings.
492
  A recent review of 
de-SPAC transactions in 2021 reported that approximately 85% did not disclose that a fairness 
opinion was obtained in connection with a de-SPAC transaction.
493
  To the extent that the 
proposed required disclosures with respect to the fairness or unfairness of the proposed business 
combination would increase the use of fairness opinions, the cost of obtaining such services 
would present a new cost to the transaction that would likely be passed along to shareholders.  
The average costs for fairness opinions obtained by SPAC acquirers where such information was 
presented in an itemized format in SEC filings was approximately $270,000.00.
494
 
Thus, SPACs may incur additional costs associated with proposed Item 1606(a) to the 
extent that, in response to this proposed item, SPACs newly seek to obtain fairness opinions.  In 
addition, there is some potential for indirect costs to SPACs if they respond by providing for 
approval by unaffiliated security holders or directors, or retain an unaffiliated representative to 
act on behalf of unaffiliated security holders for purposes of negotiating the terms of a de-SPAC 
transaction of any related financing transaction.  However, some costs to collecting or producing 
                                                 
491
 See supra Sections II.F.2 and II.F.3 for additional information about the regulatory baseline. 
492
  See supra Section IX.B.2.e. 
493
  See Levitt, Jacob, Fain, Marcogliese, Tiger, & Basham, supra note 416. 
494
  As calculated over the observations in the baseline sample (reference first table in de-SPAC baseline (or its 
footnotes)) where data is available in the Dealogic M&A module or SDC Platinum database. 

229 
 
the newly required disclosures may be mitigated by other components of the regulatory baseline, 
which in this case includes the requirements imposed by self-regulatory organizations such a 
listing standards and FINRA rules.
495
 
In particular, if the SPAC obtained its fairness opinion from a FINRA member, some of 
the disclosures responsive to proposed Item 1606(a) may already be prepared and provided to the 
SPAC because of existing FINRA requirements.  Specifically, FINRA Rule 5150 requires its 
members (i.e., broker-dealers or underwriters) to provide specified disclosures in a fairness 
opinion if it knows, or has reason to know, that the opinion will be provided to shareholders.
496
  
Some of the information that is required to be disclosed includes the following: (1) whether the 
FINRA member will receive any additional significant payment or compensation contingent on 
the completion of the merger transaction;
497
 (2) if the FINRA member independently verified 
information provided by the company requesting the opinion, a description of the information 
that was verified;
498
 and (3) whether or not the fairness opinion addresses the fairness of the 
compensation to be received by the company’s officers, directors  or employees relative to the 
compensation to the public shareholders of the company.
499
  
Proposed Item 1607(a) would require disclosure about whether or not the SPAC or its 
sponsor has received any report, opinion, or appraisal obtained 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, the 
                                                 
495
  For example, see existing FINRA Rule 5150 requirements for disclosures required of a broker-dealer when 
providing a fairness opinion in the role of financial advisor. 
496
  Id. 
497
  FINRA Rule 5150(a)(2). 
498
  FINRA Rule 5150(a)(4). 
499
  FINRA Rule 5150(a)(6). 

230 
 
sponsor or security holders who are not affiliates.  Proposed Item 1607(c) would require any 
such report, opinion, or appraisal to be filed as an exhibit 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, as applicable.  In addition, under proposed Item 1607(b), investors would receive 
information regarding, among other things, the outside party, including its qualifications and 
certain material relationships with the SPAC, its sponsors and their affiliates.  We expect that 
these disclosures would benefit investors by providing relevant information about the fairness of 
a de-SPAC transaction and any related financing transaction.    In addition, by providing more 
information to investors, these disclosures may lead to improved market participation, liquidity, 
and price efficiency.  We expect that these disclosures would increase the costs associated with 
the de-SPAC transaction.  However, those costs should be mitigated because the disclosure 
requirement does not require preparation of additional reports, appraisals and opinions, rather, it 
requires disclosure of documents that were obtained by management.  
4. Proposed Item 1608 of Regulation S-K 
We are proposing Item 1608 of Regulation S-K 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 
clarify that a SPAC must comply with the procedural requirements of the tender offer rules when 
conducting the transaction for which the Schedule TO is filed.
500
  For example, proposed Item 
1608 would clarify 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 requirement to keep the 
redemption period open for at least 20 business days.  
                                                 
500
  See supra Section II.F.4 

231 
 
We expect that both the benefits and costs associated with this proposal to present modest 
changes from current practice, if any, because, historically, relatively few de-SPAC transactions 
have involved the filing of a Schedule TO alone and because, due to the staff position, most of 
the proposed disclosures are currently already provided.  Between 2000 and 2021, of the 
approximately 575 registrants that filed a proxy statement on Schedule 14A, an information 
statement on Schedule 14C, a Schedule TO, or a registration statement on Form S-4 or F-4 that 
could relate to a de-SPAC transaction, a small portion of those registrants (approximately 7.1% 
or 41) filed a Schedule TO.
501
  A smaller portion of these Schedule TO filings (approximately 
20% or 8) occurred alone (i.e., without the concurrent filing of a proxy statement, information 
statement, or registration statement that would provide additional disclosures regarding the de-
SPAC transaction) (see Figure 8).  However, given that the staff has historically expressed the 
view that a Schedule TO 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 
                                                 
501
  Staff review of SPACs that conducted an IPO between 2000 and 2021 and subsequently filed any type of 
potential de-SPAC transaction related filing (SC TO, SC13E4F, PRE 14A, PRE 14C, DEFA14A, DEFA14C, 
DEFM14A, DEFM 14C, DEF 14A, DEF 14C, S-4, or F-4) found that only approximately 7.1% of such SPACs, by 
unique CIK, filed a Schedule TO.  It appears that 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 420 (“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, Yochana 
Shachmrove, & 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); Rodrigues, supra note 67 
(20.0% to 74.4% from 2003-2011); Vulanovic, supra note 414 (20% to 81.52% from 2003-2013).  As such, historic 
use may be a poor predictor for estimates of future usage. 

232 
 
and Item 1011(c) of Regulation M-A and the importance of this information in making a 
redemption decision, the proposed rule is unlikely to result in a meaningful difference in the 
nature or amount of information provided by registrants.
502
  
Figure 8. De-SPAC Transactions Involving Schedule TO, 2000-2021 
 
Finally, of the registrants that filed only a Schedule TO, 75% were foreign private issuers 
that originally registered an offering of shares via a Form F-1, while the remaining 25% were 
registrants incorporated or organized in a foreign jurisdiction that originally registered an 
offering of shares using a Form S-1.  It is possible that, holding all else constant, any benefits or 
costs accruing as the result of proposed Item 1608 would do so to SPACs that are similar to these 
entities that may either not hold a shareholder vote or else hold a vote that is not subject to 
federal proxy rules.  However, it is unclear what proportion of future SPACs would be of this 
                                                 
502
  See supra note 103. 
SC TO Only, 20%
SC TO and Proxy or 
Information 
Statement, 39%
SC TO and S-4 or 
F-4, 7%
SC TO, Proxy or 
Information 
Statement, and S-4 
or F-4, 34%

233 
 
type, since in the event proposed Rule 145a is also adopted, the number of SPACs may be less 
likely to file Schedules TO.   
5. Enhanced Projections Disclosure Requirements (Item 1609) 
Proposed Item 1609 complements the proposed amendments to Item 10(b) of Regulation 
S-K,
503
 and pertains to projections made in connection with an anticipated de-SPAC 
transaction.
504
  Proposed Item 1609 would require a registrant to disclose who prepared the 
projections and the purposes for which the projections were prepared.  It would also require a 
discussion of all material bases of the disclosed projections and all material assumptions 
underlying projections, and any factors that may impact such assumptions.  Furthermore, the 
proposed rule would require the board or management of the SPAC or target company to 
confirm at the date of the filing whether the projections reflect their current view, and if not, the 
purpose of disclosing the projections and the reasons for any continued reliance by management 
or the board on the projections. 
In general, we expect that proposed Item 1609 would allow investors to better evaluate 
and use projections in connection with de-SPAC transactions.  The required disclosure of 
preparers’ identity and purposes for which the projections were prepared would help reveal 
potential conflicts of interest and the qualifications of the preparers’ projection ability.  The 
requirement to discuss material assumptions and underlying rationales would also inform 
investors about the verifiability of the projections.  The proposed requirement to disclose 
whether the projections still reflect the views of management or the board should provide 
investors with further insight into the reliability and utility of those projections.  Overall, the 
                                                 
503
  See supra Section V.B.1; infra Section IX.C.4. 
504
  See supra Section III.D & Section VI.  For additional information about the regulatory baseline for Item 1609, 
see supra Section V.B.2. 

234 
 
proposed disclosure under Item 1609 should benefit investors by helping them assess whether 
and to what extent they should rely on projections used in a de-SPAC transaction in making 
voting, redemption, and investment decisions.
505
 
Proposed Item 1609, by requiring projection providers to identify themselves and related 
parties to confirm their reliance on the projections, would likely also increase the preparers’ 
sense of accountability, and potentially increase their incentives to make reliable projections.
506
  
In turn, investors could benefit from potentially improved projections in their investment 
decisions.  The enhanced disclosure transparency about projections and the plausible improved 
projection accuracy would, in turn, facilitate more efficient allocation of capital.
507
 
We do not expect the direct compliance costs to be substantial since companies should 
have the required information (e.g., the party that provides the projections and the assumptions 
of growth rates or discount multiples) readily available at their disposal.  To the extent that 
proposed Item 1609 increases contextual information related to SPAC projections, investors 
                                                 
505
  D. Eric Hirst, Lisa Koonce, & Shankar Venkatram, How Disaggregation Enhances the Credibility of 
Management Earnings Forecasts, 45 J.
 ACCT. RESEARCH 811 (2007), experimentally show 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.  Furthermore, 
Zahn Bozanic, Darren T. Roulston, & Andrew Van Buskirk, Management Earnings Forecasts and Other Forward-
looking Statements, 65 J.
 ACCT. & ECON. 1 (2018), demonstrate that non-earnings-forecast forward-looking 
statements can generate significant responses from both investors and analysts.  Their findings indicate that the 
forward-looking statements, even statements unrelated to earnings, can provide value-relevant information to the 
capital market participants.  
506
  Auditing literature provides evidence that audit quality increases and misreporting decreases when engaging 
partners are required to sign the audit report or when their identities are disclosed.  Joseph V. Carcello & Chan Li  , 
Costs and Benefits of Requiring an Engagement Partner Signature: Recent Experience in the United Kingdom, 88 
A
CCT. REV. 1511 (2013), document evidence that audit quality and audit fees increase in the first year when 
engaging 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 demonstrate that PCAOB’s requirement 
of disclosing engaging partners’ identity can reduce misreporting. 
507
  See Amy P. Hutton, Gregory S. Miller, & Gregory S. Skinner, The Role of Supplementary Statements with 
Management Earnings Forecasts, 41 J.
 ACCT. RESEARCH 867,867-890 (2003).  They find that good news earnings 
forecasts are positively associated with investor reaction (i.e., have information content) only when the forecasts are 
accompanied by verifiable supplementary forward-looking disclosures.  

235 
 
would incur incremental costs in processing the added information.
508
  Potentially heightened 
accountability under proposed Item 1609 may also dampen the willingness of the managements 
and boards of SPACs and target companies to provide projections, which may decrease the 
amount of forward-looking information made available to investors and thus increases valuation 
uncertainty.  To the extent that proposed Item 1609 dampens the willingness to provide 
projections, it would likely reduce projections without reasonable bases more than those with 
reasonable bases.  Thus, the incremental costs of proposed Item 1609 would likely be justified by 
the incremental benefit of increased investor protection against materially misleading or 
speculative projections in connection with de-SPAC transactions. 
6. Structured Data Requirement 
As with the proposed specialized disclosure requirements applicable to SPACs at the IPO 
stage as discussed above, proposed Item 1610 would also require that the proposed disclosures 
prepared in compliance with respective sections of Regulation S-K Subpart 1600 applicable to 
de-SPAC transactions be tagged in Inline XBRL.
509
  For the same reasons discussed above, we 
expect that the tagging requirement for de-SPAC transaction disclosures would augment the 
informational benefits to investors resulting from the proposed new disclosure requirements.
510
  
For example, tagging the disclosure of terms and amounts of the compensation received or to be 
received by a SPAC’s 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 
                                                 
508
  See Elizabeth Blankespoor, Ed deHaan, & Iván Marinovic, Disclosure Processing Costs, Investors’ Information 
Choice, and Equity Market Outcomes: A review, 70 J.
 ACCT. & ECON. 1, 1-46 (2020).  They 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.  
509
  See supra Section II.G. 
510
  See supra Section IX.C.1.a.5. 

236 
 
quantitative and qualitative comparisons to similar disclosure in other de-SPAC transactions or 
make it easier to compare these disclosures – including numeric values – to those presented at 
the SPAC’s IPO stage.
511
 
Unlike the proposed Inline XBRL tagging requirement for SPAC specialized disclosures 
which would apply to registration statements for initial public offerings, the proposed tagging 
requirement for de-SPAC transaction disclosures would not impose a tagging obligation on 
registrants that were not previously subject to tagging obligations, because SPACs are already 
subject to Inline XBRL tagging obligations as of their first periodic report on Form 10-Q, Form 
20-F, or Form 40-F.
512
  As such, the Inline XBRL tagging requirement for de-SPAC transaction 
disclosures would 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.  As previously noted, there is some 
indication that these costs have trended downward in the years since the initial adoption of 
XBRL requirements for SEC filings.
513
 
7. Minimum Dissemination Period  
The proposed minimum dissemination period for prospectuses and proxy and information 
statements filed in connection with de-SPAC transactions is designed to ensure that SPAC 
shareholders have adequate time to review the information disclosed therein before making 
voting, investment and redemption decisions.  To the extent that this would provide investors 
with more time than they would otherwise have because the SPAC’s jurisdiction of incorporation 
or organization does not provide for a minimum dissemination period before a shareholder 
meeting or action by consent, or has a minimum dissemination period of fewer than 20 calendar 
                                                 
511
  See proposed Item 1604(a)(3) of Regulation S-K. 
512
  See supra note 110 and accompanying text. 
513
  See supra note 481 and accompanying text. 

237 
 
days, this may allow them to make more informed choices.  Relative to the current baseline, this 
proposal is likely to provide its greatest potential benefits to SPAC shareholders in de-SPAC 
transactions involving SPACs that do not incorporate by reference any information about the 
SPAC or the target, and are not incorporated in Delaware, or do not file a Schedule TO.
514
  
While Delaware General Corporation Law only requires that due notice of an upcoming meeting 
be provided 20 days prior to the event, and does not mandate a minimum period for 
dissemination of proxy statements or joint prospectus/proxy statements required by the federal 
securities laws,
515
 we believe, based on staff experience reviewing filings, that the notices of the 
meeting mandated by Delaware 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 notice requirement.
516
   
While we recognize that the additional time we propose to provide to shareholders for 
review of de-SPAC transaction related disclosures may in effect shorten the time a SPAC may 
otherwise have to pursue a business combination within its limited time before dissolution, the 
incremental costs of formalizing a minimum review period should in most cases be low based on 
the existing requirements and practices discussed above and market-specific incentives.  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 
                                                 
514
  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 proposed 20 calendar day minimum dissemination period would 
not have an incremental effect.  Similarly, there would be no incremental effect on the dissemination of Forms S-4 
or F-4 in connection with a de-SPAC transaction if the registration incorporates any information about the registrant 
or its target by reference because a similar 20 business day requirement applies.  See supra note 127.  Further, in the 
event that proposed Rule 145a is adopted, we anticipate the majority of de-SPAC transactions would be 
accompanied by an S-4 or F-4 in which incorporation by reference is highly likely to occur. 
515
  See supra Section II.F.5 
516
  See supra Section III.B for more information about the regulatory baseline.  

238 
 
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. 
Notwithstanding this, we acknowledge that any costs associated with this proposal would 
likely increase as the dissolution date approaches, because, under such conditions, unique 
logistical costs like expedited printing and delivery would accrue.  It is plausible that a de-SPAC 
transaction would not be able to proceed due to these proposed timing requirements, which could 
result in negative consequences (e.g., forgone returns) for sponsors and SPAC shareholders.  
Given the significance of a de-SPAC transaction to SPACs and targets, however, we think it is 
more likely that SPACs and targets will account for the proposed dissemination period in 
establishing a timeline for their business combination.  Another potential cost of the minimum 
dissemination period is that it 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.  However, given 
the state of current market practices as discussed above, we expect the incremental costs on this 
aspect of deal-formation uniquely attributable to the proposed minimum dissemination period are 
minimal. 
8. Aligning Non-Financial Disclosures in De-SPAC Disclosure 
Documents  
We are proposing 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, the registration 
statement or schedule filed in connection with the de-SPAC must include disclosures relating to 
the target company that would be provided in a Form S-1 or F-1 for an initial public offering.
517
  
Currently, this information is required to be included in a Form 8-K with Form 10 information 
                                                 
517
  See supra Section III A. 

239 
 
that must be filed within 4 business days after the completion of a de-SPAC transaction.  In 
contrast, the proposed disclosure requirements would require that target company information be 
provided to shareholders before they make voting, investment, or redemption decisions in 
connection with the de-SPAC transaction.  This 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.  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. 
We expect that a SPAC or its sponsors would absorb the related costs if the proposed 
additional information necessitates earlier or increased information production and 
dissemination, although a portion of these costs may accrue to non-redeeming shareholders if 
costs are paid from the trust or escrow account of the SPAC.  Generally, we expect that such 
costs will be low to the extent that SPACs disclose this information about the target company 
prior to the completion of the de-SPAC transaction; however, we recognize that some items may 
be more costly to disclose earlier than others. 
The costs and benefits of these proposed disclosures 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.  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 

240 
 
least one of the required Form 10 items by reference.
518
  Most of the Form 8-K filings that 
incorporated items by reference referred to disclosures previously filed in a proxy or information 
statement (88% of filers), and 46% of these filings incorporated disclosures from a registration 
statement filed in connection with the de-SPAC transaction.
519
   
Figure 9. Incorporation by Reference in Form 8-K by Regulation S-K Disclosure Item
a
 
 
a
 Data here represents the frequency of incorporation by reference per item that would be affected by the proposed 
amendment as a percent of Forms 8-K filed in connection with a de-SPAC transaction (described in Figure 3 note a) 
that incorporated any item by reference. 
 
Figure 9 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 Items 101 (description of business), Item 102 (description of property), 
and Item 103 (legal proceedings) of Regulation S-K are most commonly incorporated by 
                                                 
518
  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. 
519
  Because some filers incorporate disclosure by reference from more than one source, the total percentage of usage 
across sources exceeds 100%. 
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
101102103304403701

241 
 
reference.  Less frequently incorporated by reference are disclosures pursuant to Item 304 
(changes in and disagreements with accountants on accounting and financial disclosure), Item 
403 (security ownership of certain beneficial owners and management, assuming the completion 
of the de-SPAC transaction and any related financing transaction), and Item 701 (recent sales of 
unregistered securities) of Regulation S-K.
520
  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 this proposed rule may be mitigated. 
As a result of this proposed rule, investors may obtain disclosure required by Item 403 of 
Regulation S-K regarding the target company’s beneficial ownership structure before making a 
voting, redemption, or investment decision in connection with the de-SPAC transaction, which 
could, in some cases, represent a meaningful change to the informational environment in 
advance of the completion of a de-SPAC transaction, particularly when this information may be 
critical to an investor’s ability to evaluate potential conflicts of interest.  In addition, the 
disclosures may allow investors to identify potential misalignments of interests between non-
redeeming shareholders and other parties to the de-SPAC transaction.  This proposed 
requirement therefore may provide increased investor protections and generally improve the 
information environment for investors to make a voting, redemption, or investment decision in 
connection with the de-SPAC transaction.   
                                                 
520
  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 and disagreements with accountants 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%. 

242 
 
Because a SPAC and its intended target should have access to this information in advance 
of a de-SPAC transaction, we do not anticipate significant costs to preparing such information 
and incorporating it into disclosures disseminated at an earlier stage in the de-SPAC transaction 
process.   
 We believe that the proposed additional information is unlikely to impose significant 
changes to the information that a SPAC would otherwise disclose or the costs for incremental 
changes relative to current market practice.  To the extent that these requirements may lead to the 
production and dissemination of information that would not be disclosed until after the 
completion of the de-SPAC transaction, the availability of this information in the registration 
statement or schedule filed in connection with the de-SPAC transaction may improve investor 
decision-making. 
9. Re-Determination of Smaller Reporting Company Status 
The main benefit from the proposed amendment to re-determine smaller reporting 
company status of a post-business combination company following a de-SPAC transaction 
would be to reduce regulatory arbitrage by requiring a target company going public through a de-
SPAC transaction to provide similar information to investors as a comparable company 
conducting a traditional initial public offering.
521
  For larger target companies, this would require 
providing more comprehensive and more detailed disclosure to investors soon after the de-SPAC 
transaction.  Overall, we expect this amendment to increase investor protection by allowing 
investors to assess the combined company more thoroughly and sooner.   Large target companies 
may also reap the benefit of reduced cost of capital insofar as providing additional historical 
                                                 
521
 See infra Section III.C for more information on the regulatory baseline. 

243 
 
periods of financial statement data might further reduce information asymmetries or otherwise 
improve price formation.
522
  
The proposed amendment would increase compliance costs compared to the current 
baseline for large target companies that, after combining with the SPAC, do not meet the smaller 
reporting company definition as of the proposed new re-determination date.  Those companies 
may need to provide more detailed disclosure to investors soon after the de-SPAC transaction.  
We note, however, that some of these companies that meet the definition of e merging growth 
company could avail themselves of the accommodations associated with EGC reporting 
requirements, which could mitigate some of the disclosure costs required by the proposed 
amendment.  We do not expect the proposed amendment to impose any costs on post-business 
combination companies when, at the time of the de-SPAC transaction, neither the SPAC nor the 
target company  meet the smaller reporting company definition. 
2. Liability-Related Proposals 
In addition to the proposals discussed above pertaining to disclosures, we are proposing 
to clarify and amend the existing liability framework in an effort to resolve certain ambiguities 
and protect investors.  In this section, we discuss the potential costs and benefits of the proposed 
amendment to Form S-4 and Form F-4 to require that the SPAC and the target company be 
treated as co-registrants when these registration statements are filed by the SPAC in connection 
with a de-SPAC transaction.  In addition, we discuss the proposed amendment to the definition 
of “blank check company” for purposes of the PSLRA to remove the “penny stock” condition, 
and proposed Rule 140a that would clarify the underwriter status of SPAC IPO underwriters in 
registered de-SPAC transactions. 
                                                 
522
  See supra note 368. 

244 
 
a. Private Operating Company as Co-Registrant to Form S-4 and 
Form F-4 
 
When a de-SPAC transaction is registered on a  Form S -4 or F-4, the party that files a 
registration statement currently depends on the structure of the merger or acquisition.  While the 
result of any de-SPAC transaction involving a registered offering would be that the target 
company becomes a public reporting company, the liability it and its officers and directors face 
for disclosures in the registration statement that inform investors’ decisions regarding the de-
SPAC transaction is largely a function of how the transaction is structured.  For example, when 
the de-SPAC transaction is structured such that the SPAC registers the offering of its shares to 
target shareholders and the target merges into the SPAC, the SPAC would typically sign the 
registration statement as the registrant and the SPAC and certain officers and directors of the 
SPAC that sign the registration statement would incur liability for disclosures in the registration 
statement.  Alternatively, a de-SPAC transaction can be structured so that the target registers the 
offering of its shares to SPAC shareholders, such that the target would typically be the registrant, 
and the target and certain officers and directors of the target would sign the registration statement 
and incur liability for disclosures in the registration statement.
523
   
We are proposing to amend Form S-4 and Form F-4 to require that the SPAC and the 
target company be treated as co-registrants when a registration statement is filed by the SPAC in 
connection with a de-SPAC transaction.  As a result, both the SPAC and the target, and certain 
officers and directors of the SPAC and target, would be required to sign the registration 
statement and incur potential liability for statements and omissions therein.  Treating the target 
as a co-registrant in this situation is intended to provide similar investor protections as if the 
                                                 
523
 See supra Section III.C for more information about the regulatory baseline.  

245 
 
target had entered the public market through a traditional IPO (or a de-SPAC transaction 
structure in which a Securities Act registration statement is filed by the target, rather than the 
SPAC). 
The liability associated with being a co-registrant could incentivize the target company’s 
directors and management to exercise greater care in the preparation and presentation of material 
information about the company, its financial condition, and its future prospects; perform more 
robust due diligence with respect to materials it obtains from third-party sources in connection 
with the de-SPAC transaction; and more closely monitor disclosures in the registration 
statement.  Thus, the proposed requirement could improve the reliability of the disclosure 
provided to investors about the target company, reduce the instances of misstatements and 
omissions, and generally improve investors’ decision making with regard to these transactions. 
The proposed co-registrant requirement would increase compliance costs for targets 
compared to the baseline in cases where the target would not already have been the registrant at 
the time of the de-SPAC transaction.  Under the proposed rule, a target and its signing officers 
and directors would be liable to investors for the accuracy of the disclosures in such a 
registration statement.  This increase in potential liability from the current baseline for targets 
and their signing officers and directors could impact the decision of a private company to go 
public via a de-SPAC transaction.  It is possible that, due to some of the ways the proposed rules 
would alter differences, actual or perceived, between the disclosure requirements and liabilities 
associated with becoming a public reporting company via a traditional IPO versus being acquired 
by a SPAC, some targets could reconsider a traditional initial public offering instead.   It is also 
possible that other potential targets may determine that the liability costs (including, but not 
limited to, increased litigation risk and the potential need for new insurance coverage or higher 

246 
 
premiums for existing coverage) associated with being a co-registrant would be too high and 
elect not to go public.  Given the multifaceted benefits of being a public company, however, it is 
unclear that the costs of being a co-registrant would be the determining factor that would 
discourage a target from going public through a de-SPAC transaction or o utweigh other factors 
that typically drive the going public decision such as liquidity for company insiders and the 
lower cost of capital. 
b. PSLRA Safe Harbor 
 
Defining the term “blank check company” for purposes of the PSLRA as proposed, 
would make the PSLRA safe harbor unavailable for forward-looking statements made in 
connection with an offering by a blank check company that is not issuing “penny stock” as 
defined in Exchange Act Rule 3a51-1, including an offering of securities by a SPAC in 
connection with a de-SPAC transaction.
524
  As noted above, many commentators have raised 
concerns about the use of forward-looking statements that they believe to be unreasonable in de-
SPAC transactions.
525
  By providing greater clarity regarding the availability of the PSLRA safe 
harbor, the proposed amendment should strengthen the incentives for a blank check company 
that is not issuing penny stock, including a SPAC, to avoid potentially unreasonable and 
potentially misleading forward-looking statements, and to expend more effort or care in the 
preparation and review of forward-looking statements.
526
  For example, if less time and effort is 
required to produce meaningful cautionary statements than to produce careful and robust 
forward-looking statements, absent the proposed changes, market participants may have an 
incentive to underinvest in the production of reliable forward-looking statements.  By increasing 
                                                 
524
  See supra Section IX.B.3.  See also supra Section III.E for more information about the regulatory baseline.  
525
  See supra note 33. 
526
 See supra note 279. 

247 
 
the potential costs to companies of making forward-looking statements, the proposed changes are 
expected to increase the incentives for blank check companies that are not issuing penny stock to 
exercise more care in making any such statements.  Similar investor protection benefits may 
apply to registered securities offerings of non-SPAC registrants that would meet the current 
definition of a “blank check company” but for the “penny stock” condition.   
The net economic effect of this proposed amendment, however, would depend on, among 
other things: (1) the extent to which practitioners currently are willing to advise their clients that 
the PSLRA safe harbor is available for forward-looking statements made by blank check 
companies that are not issuing penny stock that otherwise meet the conditions of the safe harbor; 
(2) the extent to which the market does not already discount the informational value of forward-
looking statements; and (3) the costs associated with valuable information that may no longer be 
provided due to any perceived increase in the risk of potential litigation.     
While amending the definition of “blank check company” in this manner would clarify 
that the statutory safe harbor in the PSLRA is not available for forward-looking statements made 
in connection with offerings by SPACs or other blank check companies that are not penny stock 
issuers, it c ould impose costs on any such companies that currently attempt to rely upon the safe 
harbor to communicate value-relevant information to investors through forward-looking 
statements.  For such companies, this proposed amendment could increase the perceived risk of 
litigation and dissuade them from including such forward-looking information.  This information 
could be valuable in offerings involving business combinations with private operating companies 
given that less historical information regarding private companies is likely otherwise 

248 
 
available.
527
  In addition, we note that, while there is no prohibition on the use of forward-
looking statements in connection with an initial public offering, the fact that the express terms of 
the PSLRA provide that the safe harbor is unavailable for such statements, and the concomitant 
heightened litigation risks associated with providing forward-looking statements, may have 
created a chilling effect given that, in staff experience, projections are almost never provided to 
the public in connection with an IPO.  The proposed amendments similarly may lead to fewer 
forward-looking statements in connection with offerings by SPACs or other blank check 
companies that are not penny stock issuers.  This effect would likely be stronger for blank check 
companies affected by the proposal that are considering whether to include forward-looking 
statements about younger target companies with fewer observable periods of profit historically, 
as most of their value typically comes in the form of future growth options.  Such blank check 
companies that are not penny stock issuers might otherwise be the most likely to use forward-
looking statements to communicate the potential for future value creation to investors at the time 
of a business combination. 
Additionally, if the proposed amendment reduces the amount of potentially relevant 
information presented to investors in connection with a de-SPAC transaction or other business 
combination involving a blank check company that is not a penny stock issuer due to perceived 
litigation risk, this may negatively affect investors’ ability to accurately value these companies 
and allocate their investments accordingly.  For blank check companies that are SPACs, such 
costs could be mitigated if some of the other amendments that we are concurrently proposing are 
                                                 
527
  See Vijay Jog & Bruce J. McConomy, 30 J. BUS. FIN. & ADVER. 125 (2003) (finding that the voluntary provision 
of earnings forecasts in connection with Canadian IPOs (subject to a two-year horizon maximum and accompanied 
by a statement of opinion by a public accountant) had incremental value beyond other methods of signaling firm 
quality such as the use of a highly reputable underwriter or auditor, including “a favorable and noticeable impact on 
the degree of underpricing and the post-issue return performance” and that benefits are most pronounced for “small 
firms and those making conservative forecasts.”). 

249 
 
adopted and improve the flow of relevant information to investors at the de-SPAC transaction 
stage.  Similar costs may also be mitigated for investors in non-SPAC blank check companies 
not issuing penny stock that would be subject to proposed Rule 145a as reporting shell-
companies.
528
  Because reporting shell company shareholders may, under proposed Rule 145a, 
receive registration statement disclosures in connection with a reporting shell company’s merger 
activity, the proposed rule could result in incremental information about the target company 
being provided to reporting shell company shareholders, to the extent that those investors would 
not otherwise receive such information. 
c. Underwriter Status and Liability in Securities Transactions 
 
Proposed Rule 140a would clarify that a person who has acted as an underwriter in a 
SPAC IPO and participates in the distribution by taking steps to facilitate the de-SPAC 
transaction, or any related financing transaction, or otherwise participates (directly or indirectly) 
in the de-SPAC transaction will be deemed 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.  The statutory definition of an “underwriter” under the Securities Act is broad 
and does not include an element of intent; as a result, a person could perform functions that 
would cause the person to meet the statutory definition of an “underwriter” within the meaning 
of Section 2(a)(11) of the Securities Act without appreciating that they are doing so.  This may in 
turn lead to both deal-specific and market-wide economic inefficiencies such as underinvestment 
in diligence or screening.  For example, an investment banker, or financial advisor providing 
services in connection with a de-SPAC transaction may not adequately fulfill their role as a 
                                                 
528
  See supra Section IX.B.4 and note 445.  

250 
 
gatekeeper for disclosures in a de-SPAC transaction registration statement if they are unaware 
that they are an underwriter and face potential liability as such.
529
    
A key benefit from proposed Rule 140a would be the incentives that it would create for 
SPAC IPO underwriters that may be subject to Section 11 liability for registered de-SPAC 
transactions to perform due diligence to ensure the accuracy of the disclosures in these 
transactions.  Improved due diligence would enhance investor protection by allowing investors to 
better evaluate the target company and, in turn, potentially make better investment decisions.  
We expect that clarifying the application of underwriter liability, combined with the disclosures 
of proposed Subpart 1600 of Regulation S-K, c  ould significantly improve the ability of SPAC 
shareholders to evaluate the target company.  This may allow these investors to better price the 
securities of the combined company and decrease the likelihood that they overvalue the target 
company under consideration.  Additionally, more clearly defined Section 11 liability may 
enhance shareholders’ ability to pursue a remedy, if needed. 
Potential Section 11 liability may deter a SPAC IPO underwriter from participating in the 
de-SPAC transaction or any related financing transactions by increasing their costs.  The extent 
to which proposed Rule 140a would impose new costs on SPAC IPO underwriters would depend 
heavily on the extent to which they do not already perform due diligence that would be sufficient 
to perfect such a defense in connection with the de-SPAC transaction or a related financing 
transaction.  If SPAC IPO underwriters decide not to provide services in connection with the de-
SPAC transaction or a related financing transaction due to proposed Rule 140a, the SPAC may 
incur greater monetary and non-monetary costs related to identifying, negotiating with, and 
hiring financial advisors.  Also, because a significant portion of SPAC IPO underwriting fees 
                                                 
529
  See supra Section III.E.3 for more regulatory baseline information.  

251 
 
(typically 3.5% of IPO proceeds) is usually deferred until, and conditioned upon, the completion 
of the de-SPAC transaction, SPAC IPO underwriters that decide not to participate in the de-
SPAC transaction as a result of this proposal may revise their compensation agreements so that 
they would be paid only at the time of the SPAC initial public offering.  Such a change in the 
timing of compensation may increase the up-front transaction costs of the initial public offering 
for SPAC investors and sponsors.  It is possible, however, that underwriter compensation may 
decrease if underwriters would not be expected to provide any services in connection with the 
de-SPAC transaction or any related financing transaction. 
Alternatively, proposed Rule 140a may cause SPAC IPO underwriters to demand higher 
compensation for their participation in the de-SPAC transaction or any related financing 
transaction given the potential exposure to Section 11 liability.  The fees that SPAC IPO 
underwriters currently charge for their efforts in connection with a SPAC initial public offering 
generally range between 5% and 5.5% of the initial public offering proceeds, with potentially 
additional merger advising fees charged at the de-SPAC transaction stage.  It is difficult to 
predict whether these fees would increase to incentivize SPAC underwriters to participate in de-
SPAC transactions or the amount of any such increase.    For comparison, the underwriter fees in 
the traditional initial public offering process, where underwriters have Section 11 liability, are, 
on average, 7% of the IPO proceeds.
530
  It is possible, however, that SPAC IPO underwriters 
could demand higher fees for potentially bearing Section 11 liability in connection with the de-
SPAC transaction or any related financing transaction.  Any increase in the compensation of 
SPAC IPO underwriters would increase the transaction costs to investors and sponsors, 
potentially lowering their returns on their investment.   
                                                 
530
  See, e.g., Hsuan-Chi Chen & Jay Ritter, The Seven Percent Solution, 55 J. FIN. 1105 (2000). 

252 
 
Finally, to the extent that SPAC IPO underwriters decide not to participate in the de-
SPAC transaction or any related financing transaction due to potential Section 11 liability, 
investors would not have the protection of any due diligence that SPAC IPO underwriters may 
have performed in connection with such transactions.  However, if SPAC IPO underwriters are 
able and willing to absorb some of the costs associated with potential Section 11 liability (e.g., 
because of other benefits, such as revenues from future repeat business with sponsors), the 
potential cost increase for SPAC shareholders and sponsors may be small. 
3. Shell-Company Related Proposals 
a. Proposed Rule 145a 
Proposed Rule 145a would deem 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.  Proposed Rule 145a is intended to address concerns regarding the use of reporting 
shell companies generally as a means by which private unregistered companies access the U.S. 
capital markets.  One reason for these concerns is that reporting shell company shareholders may 
not receive the Securities Act protections ( including disclosure and liability) they receive in a 
traditional IPO because of transaction structure.  Under the proposed rule, SPACs and other 
reporting shell companies would have to register these deemed sales by filing a Securities Act 
registration statement unless there is an applicable exemption.
531
 
Proposed Rule 145a would potentially provide shareholders in a reporting 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.  
                                                 
531
  See supra Section IV.A.2 for more information about the regulatory baseline.   

253 
 
Currently, if a reporting shell company buys a target by issuing its shares as consideration for the 
interests of the target shareholders, and the reporting shell company is the surviving entity, 
reporting shell company investors are unlikely to receive a 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.   
Proposed Rule 145a is intended to address potential disparities in the types of disclosure 
and liability protections available to reporting shell company shareholders depending on the 
transaction structure used in a reporting shell company business combination, and thus, is 
expected to bolster investor protection for reporting shell company shareholders.  This could be 
of particular benefit to shareholders in reporting shell companies that may not otherwise receive 
information about the intended target, or potentially even notification that a specific business 
combination will be entered into, until after the transaction has occurred.  Additionally, receipt of 
registration materials may provide a beneficial nudge to reporting shell company shareholders 
who might otherwise be vulnerable to inertia by calling attention to the nature in which their 
investment would be transformed should they continue to hold their securities.
532
  However, 
these informational benefits to affected reporting shell company shareholders may be mitigated 
to the extent that the reporting shell company is able to rely on an exemption from registration 
and shareholders do not receive offering materials in connection with the deemed sale.  Because 
it is unclear the extent to which reporting shell company shareholders may be able to anticipate 
which disclosure and liability protections will be available to them at the time of a business 
                                                 
532
  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”). 

254 
 
combination (as a function of whether an exemption would be available), the extent to which 
proposed Rule 145a might improve price or capital formation is also unclear. 
As a result of proposed Rule 145a, reporting shell companies, including SPACs, would 
be required to register the deemed sale of their securities to their shareholders at the time of 
certain business combinations, unless there is an available exemption.  Costs would increase to 
the extent that a business combination is not already structured in a manner that otherwise would 
have been considered a sale to the reporting shell company shareholders under the securities 
laws.  This would include all costs associated with conducting a registered offering of securities, 
such as preparing a Securities Act registration statement, if no exemption is available.  The 
proposed 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, such as through the use of cash, rather than stock, as 
consideration.  Because proposed Rule 145a would deem such a transaction to involve a sale to 
reporting shell company shareholders that would need to be registered unless there is an 
applicable exemption, affected parties may opt not to pursue such a transaction rather than incur 
the new transaction costs involved.  There may also be financial-exclusion related costs if 
reporting shell companies are increasingly incentivized to pursue exemptions from registration 
and as a consequence pre-emptively seek to place their securities with only certain types of 
investors such as accredited investors or non-accredited sophisticated investors.   
To the extent that this proposal would apply the strict liability standard of Section 11 to 
transaction-related disclosures to which it would not otherwise apply, we expect there to be extra 
costs associated with greater care in preparation and review of any reporting shell company 

255 
 
registration statement.
533
  Also, there could be some costs associated with timing issues 
generated by SEC staff review of any registration statement.  Some of these costs may be 
mitigated to the extent that the reporting shell company or target is already preparing disclosure 
documents, particularly Securities Act registration statements, in connection with a business 
combination that would be covered by proposed 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 or F-4.  Reporting shell companies and SPACs also typically prepare Forms 
8-  K containing Form 10 disclosures that are filed shortly after the business combination.  
b. Financial Statement Requirements in Business Combination 
Transactions Involving Shell Companies 
 
Proposed Article 15 of Regulation S-X and related amendments aim to align more closely 
the financial statement reporting requirements in business combinations involving a shell 
company and a private operating company with those in traditional initial public offerings.  
These amendments may reduce the potential for regulatory arbitrage by private companies that 
go public through a business combination with a shell company rather than a traditional initial 
public offering.  Furthermore, the proposed disclosure and audit requirements (e.g., proposed 
Rule 15-01(a)) may reduce information asymmetry surrounding shell company business 
combinations, including de-SPAC transactions, which may in turn benefit private operating 
companies going public by reducing the cost of capital.
534
  The proposed rules and amendments 
                                                 
533
  See generally supra Section IX.C.2 discussion on costs of increased liability. 
534
  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 A
UDITING 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.  

256 
 
that clarify applicable definitions and streamline compliance processes (e.g., Rule 15-01(b), (c), 
(d), (e)), are expected to reduce ambiguity and facilitate compliance.   
The proposed rules and amendments may allow investors to more readily locate and 
process relevant information, reduce processing costs, and increase their confidence in the 
reporting provided by entities involved in these business combinations.
535
  In turn, the proposed 
rules and amendments may help investors to more efficiently make voting, redemption, and 
investment decisions.  In addition, many of the proposed rules and amendments would codify 
existing staff guidance or financial reporting practices.  Thus, to the extent that registrants are 
already preparing statements and reports consistent with the proposed rules and amendments, the 
incremental benefits and costs would be limited.  Below, we discuss the potential benefits and 
costs of each individual item under proposed Rule 15-01 of Regulation S-X and the other 
amendments.
536
 
1. Rule 15-01(a) Audit Requirements of Predecessor 
Proposed Rule 15-01(a) would align the level of audit assurance required for the target 
private operating company in merger transactions involving a shell company with the audit 
requirements for an initial public offering of equity securities.  The proposed rule would codify 
existing staff guidance that financial statements of the business, i.e., target private operating 
company, in a transaction involving a shell company should be audited to the same extent as a 
registrant in an initial public offering; that is, 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.   
                                                 
535
  See supra note 508. 
536
  See supra Section IV.B for additional regulatory baseline information. 

257 
 
Proposed Rule 15-01(a) should benefit investors by requiring assurance over financial 
statements consistent with a traditional IPO.
537
  To the extent that audited financial statements 
may have more predictive power of future cash flows, the proposed rule also may benefit shell 
companies and target private operating companies by lowering their cost of capital.
538
  The 
proposed amendment may, however, increase the compliance costs (e.g., audit costs) of the 
business combination.  To the extent that target private operating companies are, in practice, 
already including financial statements audited under PCAOB standards, the above incremental 
benefits and costs likely would be limited.   
2. Rule 15-01(b) Number of Years of Financial Statements 
Under proposed Rule 15-01(b), a shell company registrant would be permitted to include 
in its Form S-4/F-4/proxy or information statement two years of statements of comprehensive 
income, changes in stockholders’ equity, and cash flows for the private operating company for 
all transactions involving an EGC shell company and a private operating company that 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 or not.    
For such transactions, registrants may benefit from reduced cost of producing audited 
financial statements because this rule would potentially reduce the number of years of financial 
statements required from three years to two years.  For those transactions, this proposed rule 
would cause some information loss for investors.  However, at least two years’ of statements of 
                                                 
537
  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).  The author documented 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.  
538
  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). 

258 
 
comprehensive income, changes in stockholders’ equity, and cash flows for the private operating 
company would be provided, the same amount that would be required for an initial public 
offering.  
3. Rule 15-01(c) Age of Financial Statements of the Predecessor 
Proposed Rule 15-01(c) would provide that the age of financial statements for a private 
operating company that would be the predecessor to a shell company in a registration statement 
or proxy statement would be based on whether the private operating company would qualify as a 
smaller reporting company if it were filing its own initial registration statement.  Because we 
believe that t his proposed amendment would be consistent with existing practice, we do not 
expect it to have significant economic effects for registrants or investors.  This proposed rule also 
should help maintain consistency in disclosure requirements across the different routes of going-
public, which may reduce compliance uncertainty for registrants and their predecessors and 
increase investor confidence.   
4. Rule 15-01(d) Acquisitions of Businesses by a Shell Company 
Registrant or Its Predecessor That Are Not or Will Not Be the 
Predecessor 
 
Proposed Rule 15-01(d) would require application of Rules 3-05 or 8-04 (or Rule 3-14 as 
it relates to a real estate operation), the Regulation S-X provisions related to financial statements 
of an acquired business, to acquisitions of businesses by a shell company registrant, or its 
predecessor, that are not or will not be the predecessor to the registrant.  Given our understanding 
that this proposed amendment codifies current market practices, we believe that the incremental 
benefits and costs should be limited.  
We also are proposing to amend Rule 1-02(w) of Regulation S-X to require that the 
significance of the acquired business be calculated using the private operating company’s 

259 
 
financial information as the denominator instead of that of the shell company registrant.  The 
current use of the shell company registrant, which has nominal activity, for the denominator 
results in limited to no sliding scale for business acquisitions, including those made by the 
private operating company that will be the predecessor to the shell company because every 
acquisition would be significant and thus require financial statements.  Therefore, the proposed 
amendment may alleviate registrants’ compliance burden to the extent that it would not result in 
disclosure related to insignificant acquisitions.  Although, the proposed amendment may reduce 
the information available to investors about business acquisitions by the private operating 
company that will be the predecessor to the shell company, it may also reduce investors’ 
information processing costs by focusing on financial statements of acquired businesses that are 
significant rather than all acquired businesses.  
This proposed amendment to Rule 11-01(d) may change the application of Rule 11-
01(b)(3) such that subsequent business acquisitions may be tested against pro forma amounts that 
combine the SPAC and the private operating company.  This may result in fewer subsequent 
acquisitions being significant because the denominator of the significance tests, including the 
combined total assets of the private operating company and SPACs, are larger than only the 
private company’s total assets.  Accordingly, registrants’ compliance burden would likely be 
reduced.  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.  
Proposed Rule 15-01(d)(2) would require a shell company that omits from a registration 
statement or proxy statement the financial statements of a recently acquired business that is not 
or will not be its predecessor pursuant to Rule 3-05(b)(4)(i) file those financial statements in an  

260 
 
Item 2.01(f) Form 8-K.  The proposed amendment would alleviate any ambiguity regarding the 
timing in which these financial statements are required to be filed, which would facilitate 
compliance for the registrant.  This amendment also should help ensure that investors receive 
predictable and timely disclosure about the acquired business. 
5. Rule 15-01(e) Financial Statements of a Shell Company 
Registrant After the Combination with Predecessor 
 
Proposed Rule 15-01(e) would allow a registrant to exclude the pre-acquisition financial 
statements of a shell company (including a SPAC) for periods prior to the acquisition once the 
following conditions have been met: (1) the financial statements of the shell company have been 
filed for all required periods through the acquisition date, and (2) the financial statements of the 
registrant include the period in which the acquisition was consummated.  The proposed rule 
could reduce disclosure 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.  Thus, this proposed rule should reduce compliance costs related to 
filing previous year financial statements of a shell company.  Investors may also benefit from the 
increased efficiency in processing business combination filings. 
6. Other Amendments 
We are proposing additional amendments to Regulation S-X, as well as an amendment to 
Form 8-K.
539
  The proposed amendment to Rule 11-01(d) would state that a SPAC is a business 
for purposes of the rule, which may cause an issuer that is not a SPAC to be required to file 
financial statements of the SPAC in a resale registration statement on Form S-1.  This proposed 
                                                 
539
  See supra Section IV.B.6 for additional regulatory baseline information.  

261 
 
amendment may facilitate the compliance process for companies engaging in an acquisition with 
a SPAC and alleviate their compliance burden.  Investors also would likely benefit from having 
the financial statements of the SPAC, particularly when they underpin adjustments to pro forma 
financial information in a transaction when an operating company is the legal acquirer of a 
SPAC.  As a result of the proposed amendment, a registrant may incur additional compliance 
costs if it is required to provide financial statements of the SPAC in a resale registration 
statement.  However, any additional costs should be mitigated to the extent that financial 
statements of the SPAC were previously prepared, audited, and filed with the Commission.   
The proposed revision to Item 2.01(f) of Form 8-K, which would apply to all shell 
companies, clarifies that the information provided in the Form 8-K should relate to the “acquired 
business” and not the “registrant,” as currently stated in the Form.  The proposed 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 “acquired businesses” due to registrants’ more consistent 
application of Item 2.01(f).  
We are also proposing amendments to Rules 3-01, 8-02, and 10-01(a)(1) of Regulation S-
X to clarify that the requirement of “financial statements” would apply to both the registrant and 
its predecessors rather than only to the registrant alone, as the existing rules may unintentionally 
imply for the balance sheet in Rules 3-01 and 8-02 and financial statements for Rule 10-01(a)(1).  
Because these proposed amendments would codify existing financial reporting practices, they 
should not impact registrants’ compliance costs. 

262 
 
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 certain filings with the Commission.  
The proposed amendments would update this guidance.
540
  More specifically, the proposed 
amendments would 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 proposed amendments 
to Item 10(b) would also state that projections that are not based on historical financial results or 
operational history should be clearly distinguished from projected measures based on historical 
financial results or operational history.  In addition, the proposed amendments would 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 measure or operational history 
with equal or greater prominence.  Finally, for projections based on a non-GAAP measure, the 
proposed amendments to Item 10(b) would state that the presentation should include a clear 
definition or explanation of the non-GAAP measure, a description of the most closely related 
GAAP measure, and an explanation why the non-GAAP measure was selected instead of a 
GAAP measure.  To the extent that registrants conform projections included in Commission 
filings to some or all of the proposed amendments to the guidance set forth in Item 10(b), 
investors would have additional information to evaluate the reasonableness of the projections and 
make more informed investment decisions.  For example, the proposals related to historical 
financial results or operational history could inform investors about potential biases in 
                                                 
540
  See supra Section V.B.1 for additional regulatory baseline information.  

263 
 
assumptions underlying different financial projections and help them more efficiently process the 
underlying assumptions of the financial projections in making their investment decisions.
541
  
These benefits would be mitigated to the extent that registrants are already providing this 
information, or include projections of future economic performance that do not follow some or 
all of the proposed amendments.   
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 proposed amendments, investors may benefit from improved care and 
presentation with respect to any third-party projections in a registrant’s filing.  These benefits 
would be mitigated to the extent that registrants already follow the Commission’s guidance set 
forth in Item 10(b) for third party projections included in their filings, or choose not to do so.  To 
the extent that registrants follow the guidance in the proposed amendments to Item 10(b), the 
incremental compliance costs are likely to be limited.  Registrants should already have 
information about historical financial results or operational history and GAAP financial 
measures, and should be able to easily obtain this information in connection with any included 
third-party estimates.  Moreover, potential liability for false or misleading projections is likely to 
shape disclosure practices with respect to third-party projections in addition to the existing 
guidance in Item 10(b). 
The proposed amendments to Item 10(b) could discourage registrants from including 
projections in their filings, which would provide investors with less information for their 
                                                 
541
 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) (By employing a sample from 1994 to 
2007, this article shows management forecasts providing over half of accounting-based information to the market.  In 
summary, the management forecast literature suggests that earnings projections and realizations both provide value-
relevant information to the market.). 

264 
 
investment decisions.  In addition, the proposed additional contextual disclosure, to the extent 
included by registrants, could increase investors’ processing cost of any included financial 
projections. 
5. Investment Company Act Safe Harbor 
As discussed above, whether a SPAC meets the definition of investment company under 
Section 3(a)(1)(A) of the Investment Company Act in the period between its IPO and either the 
completion of its de-SPAC transaction or its dissolution is a question of facts and 
circumstances.
542
  Currently, SPACs typically provide disclosures indicating that they believe 
they do not meet the investment company definition under Section 3(a).  They further typically 
disclose to prospective investors that if they are determined to be an investment company in the 
future, the costs and logistics of compliance with the Investment Company Act would be 
prohibitive.  We are, however, concerned that SPACs may fail to recognize when their activities 
raise the investor protection concerns addressed by the Investment Company Act.  To assist 
SPACs in focusing on, and appreciating when, they may be subject to investment company 
regulation, we are proposing Rule 3a-10, which would provide a safe harbor from the definition 
of “investment company” under Section 3(a)(1)(A) of the Investment Company Act that we 
believe would enhance investor protection.
543
 
We have designed the proposed conditions of the safe harbor to align with the structures 
and practices that we preliminarily believe would distinguish a SPAC that is likely to raise 
investor protection concerns under the Investment Company Act from those that we believe 
generally do not.
544
  Specifically, the proposed rule would promote investor protection by 
                                                 
542
  See supra Section VI.A. 
543
  See supra Section VI.   
544
  See supra note 295 for a description of investor protection concerns addressed by the Investment Company Act. 

265 
 
highlighting to SPACs and their sponsors the potential Investment Company Act concerns that 
SPAC activities may raise, such that investors would benefit from a reduced risk that the SPACs 
they invest in will engage in activities typically associated with investment companies but 
without the investor protections provided by the Investment Company Act.  This may, in turn, 
reduce the possibility for regulatory arbitrage, which may be used by some SPACs in an attempt 
to operate like an investment company without investment company registration.
545
  A reduction 
of the possibility of regulatory arbitrage would also reduce costs related to potential uncertainty 
about a SPAC’s legal status and promote confidence in the SPAC market among market 
participants.  Finally, a reduction in the possibility of regulatory arbitrage would potentially 
promote competition among all companies engaging in investment management activities 
regulated by the Investment Company Act.  
In terms of expected investor protection benefits for investors in SPACs that would rely 
on the proposed safe harbor, the safe harbor conditions are designed to ensure that SPACs do not 
engage in activities that would make them investment companies.  For example, the proposed 
conditions on the nature and management of SPAC assets are designed to ensure that a SPAC 
relying on the safe harbor would not engage in portfolio management practices resembling those 
that management investment companies employ.
546
  
In addition, the proposed conditions for SPAC activities are designed to ensure that 
SPACs relying on the safe harbor would have a business purpose aimed at completing a single 
de-SPAC transaction, after which the surviving company would be primarily engaged in the 
                                                 
545
  The significant compliance costs of investment company registration under the Investment Company Act may 
give some SPACs an incentive to try to engage in such regulatory arbitrage. 
546
  See supra Section VI.B.1. 

266 
 
business of the target company or companies and have at least one class of exchange listed 
securities.
547
  As a result, a SPAC relying on the safe harbor would not be engaging in activities 
that raise investor protection concerns addressed by the Investment Company Act.   
Finally, the proposed duration conditions are designed to ensure that a SPAC relying on 
the safe harbor would have a limited time period to announce and complete a de-SPAC 
transaction before being required to distribute the SPACs assets in cash to investors.
548
  The 
proposed 18-month condition for the announcement of a de-SPAC agreement and condition that 
the de-SPAC transaction close within 24 months would potentially reduce the risk that investors 
may come to view a SPAC holding securities for a prolonged period as a fund-like investment, 
thereby necessitating the regulatory protections of the Investment Company Act.  We recognize 
that most SPACs are listed on a national securities exchange and as such are subject to exchange 
listing standards requiring that the SPAC completes a de-SPAC transaction within 36-months (or 
three years) of the effectiveness of its IPO registration statement.
549
  For such SPACs the 
proposed safe harbor duration condition would have reduced benefits since the exchange rules 
already provide a limit on the duration of the SPAC, albeit 12 months longer that the proposed 
limit. 
Beyond providing investor protection benefits, we expect that the proposed safe harbor 
could reduce compliance costs for some market participants.  Specifically, because registering as 
an investment company and complying with the associated Investment Company Act 
requirements would be potentially cost-prohibitive for most SPACs, we expect registrants, 
sponsors, and investors would all benefit from the additional certainty regarding a SPAC’s status 
                                                 
547
  See supra Section VI.B.2. 
548
  See supra Section VI.B.3. 
549
  See supra note 393 and accompanying text.  

267 
 
to the extent it meets the conditions of the safe harbor.  Such benefits would directly accrue for 
SPACs that already meet the conditions of the proposed safe harbor, or for future SPACs that 
would meet the conditions even in the absence of the proposed safe harbor.  Because of the 
compliance costs and significant operational changes involved with investment company 
registration, we expect that most SPACs that do not presently meet the conditions of the 
proposed safe harbor would seek to fall within the safe harbor by making changes to their 
operations in order to meet the safe harbor conditions.  However, for some SPACs that currently 
do not meet such conditions, there may be potentially meaningful costs related to bringing the 
operations in line with the new safe harbor (discussed in more detail below).
550
  We also expect 
that most future SPACs that would otherwise under the baseline have run operations not meeting 
the safe harbor conditions would take advantage of the legal certainty conferred by the proposed 
safe harbor and elect to meet the conditions.  In addition, because SPACs that operate within the 
boundaries of the safe harbor would be assured that they would not qualify as investment 
companies, there may also be an increased propensity for sponsors to launch new SPACs 
operating within the safe harbor conditions to the extent that they might not have otherwise 
chosen to create a SPAC due to the uncertainty of the Investment Company Act status.  Thus, the 
reduced uncertainty regarding the legal status of SPACs operating within the proposed safe 
harbor could facilitate capital formation.  Finally, the proposed safe harbor would also promote 
efficiency of a SPAC’s compliance process by providing a clear framework for SPACs to 
determine their status under the Act. 
                                                 
550
  As discussed in more detail below, such SPACs may alternatively seek to operate outside the safe harbor without 
making any operational changes or make other changes to their operations in order to avoid meeting the definition of 
an investment company under Section 3(a)(1)(A) of the Investment Company Act, including, for example, by 
avoiding investing, reinvesting or trading in securities.  

268 
 
To the extent the potential benefits to investors of current and future SPACs operating 
under the new safe harbor would be significant, we may see an increase in investor demand for 
SPACs that could potentially lower the cost of capital for SPACs.  In turn, a lower cost of capital 
could increase the size and number of SPAC IPO offerings and thereby promote capital 
formation.  
For current or future SPACs that would meet the safe harbor conditions absent the 
proposed rule, we do not expect any direct costs from the proposed safe harbor.  By contrast, for 
SPACs currently not meeting the proposed safe harbor conditions, or for future SPACs that 
would otherwise not meet the safe harbor conditions, there may be costs related to SPACs 
changing their operations to meet the conditions or to make other changes to their operations in 
order to avoid falling under the definition of an investment company under Section 3(a)(1)(A) of 
the Investment Company Act. 
In terms of potential costs of bringing SPAC operations in line with the proposed safe 
harbor conditions, we do not expect that the proposed safe harbor conditions with respect to the 
nature and management of SPAC assets would impose significant costs on SPACs and their 
sponsors and investors, as it is our understanding that most SPACs’ assets are already held as 
government securities, government money-market funds, or cash items.
551
  We also understand 
that SPACs generally are not actively managing these assets, most of which are held in an 
escrow or trust account.
552
  To the extent there are some SPACs that are currently holding other 
types of assets, they would have to liquidate such assets and move them into an allowable asset 
class prior to completion of the de-SPAC transaction to rely on the proposed safe harbor, and 
                                                 
551
  See supra Section IX.B.6.a. 
552
  Id. 

269 
 
would thereby incur some transactions costs and possibly also realize some capital losses 
depending on how market conditions for such assets have changed.  
With respect to the proposed safe harbor conditions for SPAC activities, we do not expect 
the condition that SPACs have to seek to complete a single de-SPAC transaction to impose any 
significant costs on SPAC operations under the baseline.  It is our understanding that almost all 
current SPACs seek to complete one single de-SPAC transaction, albeit such a transaction may 
involve multiple target companies, which would still be feasible under this proposed safe harbor 
condition  
We also do not expect the proposed condition that a SPAC wishing to rely on the safe 
harbor to be primarily engaged in the business of seeking to complete a de-SPAC transaction 
would impose any significant incremental costly constraints on SPAC activities under the 
baseline.  It is our understanding that most SPACs presently communicate to investors their sole 
intent to seek a target company to operate and that they do not intend to act as an investment 
company under the Investment Company Act.
553
 
Adherence to the proposed duration conditions under the safe harbor is likely to impose 
costs on SPACs that would seek to avail themselves of the proposed safe harbor by limiting the 
time they have to search for a target company and complete a de-SPAC transaction compared to 
the baseline.  The option of waiting to invest can be valuable, and to the extent that SPACs 
would have to shorten the duration of their search for an appropriate target company and 
complete a de- SPAC transaction in order to take advantage of the safe harbor, the proposed 
                                                 
553
  See supra Section IX.B.6.b. 

270 
 
duration conditions would potentially reduce the value of this option for SPACs.
554
  
Additionally, to the extent an expected value-increasing de-SPAC transaction would not occur 
under the proposed duration conditions, but it could have under the baseline, the proposed rules 
may lead to forced liquidation of the SPAC and impose associated costs on both investors  and 
sponsors (in particular, the loss of their respective portions of the expected value increase).  
However, because of the typical compensation structure of SPAC sponsors, they have strong 
incentives to complete a de-SPAC transaction rather than liquidating the SPAC and returning the 
proceeds in the trust or escrow account to the SPAC’s shareholders.  Therefore, SPACs that are 
seeking to meet the proposed safe harbor conditions may in some cases compromise on the 
quality of the type of targets pursued to speed up their search, or offer to pay more for the target 
to complete a de-SPAC transaction sooner, compared to under the baseline.
555
  In some 
circumstances, the duration conditions may give sponsors of SPACs seeking to avail themselves 
of the proposed safe harbor increased incentives to complete a de-SPAC transaction even if 
liquidation would be the better choice for investors.  That is, the duration conditions may 
increase the agency costs of the sponsors’ managerial control.  However, such agency costs 
would be mitigated by other provisions of this proposal, such as the proposed specialized 
disclosure and procedural requirements in de-SPAC transactions and the proposed amendments 
aligning de-SPAC transactions with traditional initial public offerings.
556
 
                                                 
554
  The value of the option to wait derives from the fact that whereas the choice to wait is generally reversible, the 
choice to invest now rather than later is generally irreversible.  See, e.g., Robert McDonald & Daniel Siegel, The 
Value of Waiting to Invest, 101 Q.
 J. ECON. 707, 707-27 (1986). 
555
  See supra note 454 for some evidence of such behavior under SPAC’s current self-imposed duration limitations.  
556
  See supra Sections II.F and III. 

271 
 
Based on the data presented above for recent SPACs that have at least a 24-month 
history,
557
 approximately 65% completed a de-SPAC transaction no later than 24 months after 
the IPO date.  Thus, the proposed 24-month condition for completion of a de-SPAC transaction 
may be a binding constraint for a significant percentage of SPACs.  For the same sample of 
SPACs, the condition that a SPAC would need to announce a de-SPAC transaction agreement in 
a Form 8-K filing no later than 18 months after the IPO date would have been met by 
approximately 59% of the SPACs.
558
 Therefore, unconditionally, the 18-month announcement 
condition is potentially binding for a larger percentage of SPACs than the 24-month de-SPAC 
transaction completion condition.  The data also show that if a sample SPAC had met the 24-
month transaction completion condition, around 12% of such SPACs (12 of 99 cases) would not 
have met the 18-month announcement condition.  Conversely, among the sample SPACs 
meeting the 18 month announcement condition, only approximately 2.2% of such SPACs (2 
cases of 89) would not have met the 24 month condition.  Among all sample SPACs, around 
57% (87 of 152) would have met both the 18-month and the 24-month deadlines.  Thus, we 
expect that the combined effect of the two proposed duration conditions would be to force a 
significant proportion of SPACs that would seek to take advantage of the safe harbor to conclude 
their search for a target sooner than they would have under the baseline or forgo a de-SPAC 
transaction, either of which could potentially impose costs on SPACs and their investors and 
sponsors, as discussed above. 
A SPAC that seeks to rely on the proposed safe harbor would also be required to 
distribute its assets in cash to investors as soon as reasonably practicable if it does not meet 
                                                 
557
  See supra Section IX.B.6.c. 
558
  Id. 

272 
 
either the 18 month deadline or the 24 month deadline.  Because a SPAC would be required to 
hold only liquid assets such as cash items, government securities, or government money market 
funds, to rely on the proposed safe harbor, we do not expect SPACs to incur significant 
incremental cost from this condition in terms of direct transaction costs.  Moreover, a SPAC 
already must plan for the distribution of its assets back to the investors if not used in a de-SPAC 
transaction.  Therefore, this condition should also not impose a new significant burden on a 
SPAC. 
The proposed duration conditions may lead SPACs to complete less profitable de-SPAC 
transactions, or fail to complete a de-SPAC transaction at all.  To the extent investors anticipate 
this, there may be a reduction in investor demand that leads to fewer SPAC initial public 
offerings and/or less capital being raised in these offerings, which could potentially reduce 
capital formation depending on the type of investments SPAC investors would shift their funds 
to instead.  In addition, an increase in SPACs that liquidate without a de-SPAC transaction 
and/or a reduction of capital raised through SPACs may ultimately result in fewer publicly traded 
operating companies and therefore a reduced investment opportunity set for investors.  Such 
negative investment opportunity effects may be mitigated to the extent potential SPAC targets 
would instead go public through initial public offerings without SPAC involvement.    
The proposed duration conditions may also affect the bargaining environment in de-
SPAC transactions.  Knowing that SPACs would face a regulatory imposed deadline for when to 
announce an agreement in order to qualify for the safe harbor, target companies may deliberately 
prolong negotiations so that they can attempt to extract better terms as the regulatory imposed 
deadlines approaches.  Such strategic behavior by targets may reduce returns to SPAC investors 
further, but may not be an economic loss per se if the transaction is still completed, as the 

273 
 
immediate effect in such a case would be a pure wealth transfer from SPAC investors to target 
company owners.  The potential for an increase in target bargaining power would be mitigated 
by the fact that most SPACs’ securities are listed on a national securities exchange and therefore 
already subject to the exchanges’ required deadlines (36 months or 3 years) for completion of a 
business combination.  However, to the extent target company bargaining power would increase 
and lead to worse terms in de-SPAC transactions for investors it could potentially reduce ex ante 
demand among investors for SPAC investments, which could reduce the number of operating 
companies ultimately being traded in public markets, all else being equal.  However, such effects 
would be mitigated if potential target operating companies instead access public capital markets 
in alternative ways.  
Any SPAC that would find the proposed safe harbor conditions too costly to comply with 
could seek to not rely on the safe harbor and instead choose to bear the legal uncertainty of 
operating outside of it.  Besides the direct compliance costs associated with being an investment 
company, a SPAC that operates as an investment company would also potentially be subject to 
delisting, as current exchange rules do not appear to provide for SPACs to operate as an 
investment company and maintain their listing. 
As an alternative to relying on the proposed safe harbor, it is possible that current or 
future SPACs would seek to avoid being considered an investment company under the 
Investment Company Act by holding different assets than are commonly held today.  However, 
holding different assets (such as cash items) may provide a lower return than holding the types of 
assets permitted under the safe harbor conditions.  Thus, the possibility of switching assets to 

274 
 
cash items to avoid being an investment company may not fully mitigate the potential costs 
imposed on the SPAC market from the proposed safe harbor conditions.
559
 
D. Effects on Efficiency, Competition, and Capital Formation 
1. Efficiency 
The proposed rules and amendments would enhance and standardize disclosure about 
specific aspects inherent to the SPAC structure at both the SPAC initial public offering stage and 
the de-SPAC transaction stage.  Requiring the SPAC and the target company to provide such 
disclosure may in some cases afford market participants greater access to information relevant to 
voting, redemption, and investment decisions.  By increasing the standardization and 
comparability of disclosures, the proposed rules may make it easier for investors to properly and 
efficiently process information about SPACs and for market prices to reflect such information.  
In addition, invested capital may be more likely to be more efficiently deployed.     
Additionally, the proposed rules would increase the incentives for issuers and 
underwriters to exercise the care necessary to ensure accuracy in disclosures by affirming the 
underwriter status of SPAC IPO underwriters in connection with de-SPAC transactions and 
proposing a new definition of “blank check company” for purposes of the PSLRA safe harbor.  
In addition, the proposed rules regarding shell company business combination transactions would 
make certain disclosures and liabilities more consistent with traditional IPOs, which could 
benefit investors and potentially decrease the cost of capital for shell companies.  To the extent 
that disclosure accuracy is improved, investors would have access to more reliable information 
when making their investing decisions, which would lead to an increase in market efficiency.   
                                                 
559
  As indicated in supra note 314, if a SPAC were to significantly change its asset composition contrary to its 
original representations, it would raise questions whether the initial representations were false and misleading.  

275 
 
2. Competition 
By improving the informational environment at the SPAC initial public offering and the 
de-SPAC stages through changes in disclosure requirements and the scope of liability, the 
proposed rules and amendments could encourage greater competition between SPAC sponsors 
and SPAC underwriters, in both SPAC IPO and de-SPAC activities.  For example, by 
standardizing and increasing the comparability between the disclosures provided by SPACs, the 
proposed rules and amendments may lead to improved investor awareness and more efficient 
information processing.  To the extent that the proposed rules and amendments lead to an 
increase in competition between shell company mergers, including de-SPAC transactions, and 
traditional initial public offerings, they may bring down the costs of capital raising through these 
approaches. 
If the proposed rules and amendments create significant costs that lead to a reduction in 
shell company mergers and overall initial public offering activity in the SPAC market, this could 
reduce competition for investment opportunities.  Such a reduction could result in higher fees in 
both the traditional IPO and SPAC markets.  Additionally, if some of the proposed new rules and 
amendments disincentivize underwriters and PIPE investors from participating in de-SPAC 
transactions and related financings, it could reduce competition among service and capital 
providers in the SPAC market and lead to higher fees. 
To the extent that the proposed safe harbor from the Investment Company Act would 
reduce the costs of compliance, it may encourage additional sponsor participation in the SPAC 
market and thus encourage competition among SPACs.  However, for potential SPACs that 
would not meet the safe harbor conditions, the proposed safe harbor may increase the costs of 

276 
 
sponsoring a SPAC, and thus the proposed rule may have an adverse effect on competition 
among SPACs. 
3. Capital Formation 
Enhanced disclosure at both the SPAC initial public offering and the de-SPAC stages, 
combined with a stronger incentive to perform better due diligence in the de-SPAC transaction 
stage, would likely improve investor protection at both stages.  In addition, the proposed rules 
and amendments for shell company mergers would likely improve investor protection.  For 
example, proposed Rule 145a would help shareholders of reporting shell companies more 
consistently receive the full protections of the Securities Act disclosure and liability provisions in 
business combinations involving reporting shell companies, regardless of the transaction 
structure.  Increased protections could incentivize more investors to invest in shell companies, 
including SPACs, thus enhancing capital formation.  In addition, to the extent that the proposed 
safe harbor from the Investment Company Act reduces regulatory uncertainty and thus 
encourages participation in SPACs, it may also lead to an increase in capital formation.
560
  
If the proposed rules and amendments create significant costs for shell companies, 
including SPACs, this may limit the number of private companies that go public through shell 
companies, including a de-SPAC transaction mechanism, or at all.
561
  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 
                                                 
560
  As discussed in supra Section IX.C.5, an increase in investor demand for SPACs could potentially lower the cost 
of capital for SPAC, which may increase the size and number of SPAC IPO offerings. 
561
  For example, as discussed in more detail in supra Section IX.C.5, for SPACs that would take advantage of the 
proposed Investment Company Act Safe Harbor, the duration requirements could potentially lead investors to 
anticipate less profitable de-SPAC transactions or a lower likelihood of completion of de-SPAC transactions, which, 
in turn, could reduce investor demand for SPAC initial public offerings.  Moreover, an increase in SPACs that 
liquidate without a de-SPAC transaction and/or a reduction of capital raised through SPACs may ultimately result in 
fewer publicly traded operating companies and therefore a reduced investment opportunity set for investors.   

277 
 
consider the traditional initial public offering channel a more viable alternative.  We are not able 
to estimate how many companies would consider using a traditional initial public offering 
mechanism if the cost of the overall SPAC transaction structure increases.  It is possible, 
however, that a significant increase in the cost of shell company mergers and de-SPAC 
transactions could deter some private companies from going public, and thus potentially reduce 
overall initial public offering activity and capital formation. 
E. Reasonable Alternatives 
1. Disclosure-Related Proposals 
a. Require Disclosure of Policies and Procedures That Address 
Conflicts of Interest 
As an alternative to Item 1603 as proposed, we could include a complementary 
requirement to describe any policies and procedures used or to be used by a SPAC to minimize 
potential or actual conflicts of interest related to disclosures provided in response to proposed 
Items 1603(b) and 1603(c).  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.  On the other hand, requiring this information would increase compliance costs for SPACs 
and may cause some of these companies to adopt policies and procedures that would not be 
efficient or cost-effective given their particular organizational structure.  In this regard, we note 
that there could be incentives to provide such disclosure voluntarily, as it would indicate to 
investors the degree to which conflicts of interest may be ameliorated.  
b.  Certain Reports, Opinions, or Appraisals 
We are proposing to require the filing of reports, opinions, or appraisals provided to the 
SPAC or its sponsor relating to valuation and/or fairness of a  de-SPAC transaction or related 

278 
 
financing transactions (Item 1607) as exhibits to registration statements and schedules provided 
in connection with a de-SPAC transaction.  We are also proposing to require disclosures 
summarizing the negotiation, report, opinion, or appraisal and 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 could require disclosure of only a summary of the 
reports, opinions, appraisals, and negotiations.  This could reduce some of the costs of 
compliance to the extent that it is more costly to obtain a report that will become public.  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. 
c. Require a Fixed Re-Determination Date to Measure Public Float 
for Smaller Reporting Company Status 
When re-determining a post-business combination company’s eligibility for smaller 
reporting company status, instead of requiring the public float threshold to be measured as of a 
date within four days after the consummation of the de-SPAC transaction, we could alternatively 
require the re-determination to occur on a fixed date, such as the consummation date or on the 
fourth day after consummation.  A fixed re-determination date would have the benefit of 
establishing a consistent date for all post-business combination companies to use and remove any 
management judgment in the selection of a re-determination date, while still requiring that the 
re-determination of smaller reporting company status occur before the post-business combination 
company makes its first filing.  However, reduced flexibility regarding the time frame within 
which the required re-determination must be made could increase costs for post-business 
combination companies without substantial additional benefits for investors.  

279 
 
d. Re-Determine Smaller Reporting Company Status of a Post-
Business Combination Company Without a Public Float Test 
As another alternative, we considered whether the re-determination for smaller reporting 
company status of the combined company following a de-SPAC transaction should require only 
a re-measurement of the revenue component of smaller reporting company test and not its public 
float component.  Generally, smaller reporting company status is re-determined on an annual 
basis based on the issuer’s public float as well as annual revenues.  Revenues of the combined 
company may be more relevant to smaller reporting company status than public float because, 
generally, the target company has generated revenue while the SPAC has not done so.  
Accordingly, the revenue test may be the more determinative factor than the public float test in 
determining whether the combined company following de-SPAC transaction remains a smaller 
reporting company 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 smaller reporting company status.  Also, t he 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, 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.   
However, compared to public float, revenue, if used as a sole basis of the significance 
test, may be subject to a greater degree of managerial discretion.
562
  Also, using revenue alone 
may expose a large number of investors to business-specific risks because SPAC targets may 
                                                 
562
  See Jenny Zha Giedt, Modelling Receivables and Deferred Revenues to Detect Revenue Management, 54 (2) 
A
BACUS 181, 181–209 (2018) (focusing on the SEC Accounting and Auditing Enforcement Releases, i.e., AAER, 
from 1982 to 2016, and documenting that forty-seven percent of all financial misstatements are related to revenue). 

280 
 
represent nascent industries that could feature extended pre- or low-revenue periods but, as 
indicated above, may have a public float following a de-SPAC transaction that would exceed the 
threshold for smaller reporting company status.  Thus, we believe it is appropriate that these 
companies should take the public float into account in re-determining smaller reporting company 
status following the consummation of a de-SPAC transaction. 
e. Structured Data Requirement 
We could change the scope of the proposed Inline XBRL tagging requirements for the 
proposed SPAC disclosures, such as by excluding certain subsets of registrants or disclosures.  
For example, the tagging requirements could exclude the SPAC initial public offering 
disclosures.  Under such an alternative, SPACs would submit initial public offering disclosures 
in unstructured HTML or ASCII and would not incur Inline XBRL compliance costs until their 
first periodic filing on Form 10-Q, 20-F, or 40-F.
563
  This could make it incrementally easier for 
SPACs to consummate an initial public offering.  However, narrowing the scope of the proposed 
tagging requirements, whether based on filing, offering size, or other criteria, would diminish the 
extent of any informational benefits that would accrue as a result of the proposed disclosure 
requirements by making the excluded disclosures comparatively costlier to process and analyze.  
As another alternative, we could require only the quantitative SPAC-related disclosures 
to be tagged in Inline XBRL.  Excluding qualitative disclosures from the tagging requirements 
could provide some incremental cost savings for registrants compared to the proposal, because 
incrementally less time would be required to select and review the particular tags to apply to 
                                                 
563
  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 61 (Mar. 
2022), 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).  

281 
 
quantitative disclosures.  However, we expect these incremental cost savings would be low, 
because SPACs would be subject to similar Inline XBRL requirements, including requirements 
to tag quantitative and qualitative disclosures, in other Commission filings.
564
  Moreover, 
narrowing the scope of tagging requirements to exclude qualitative information would diminish 
the extent of informational benefits that would accrue to investors by inhibiting the efficient 
extraction and searching of narrative SPAC-related disclosures (e.g., disclosures regarding 
conflicts of interest, fairness determinations, and financial projections), thus creating the need to 
manually review search results drawn from entire documents to find these disclosures.
565
  Such 
an alternative would also inhibit the automatic comparison of narrative disclosures against prior 
periods.  It also may be harder for investors to perform a targeted assessment of a filing for 
particular types of narrative SPAC-related disclosures because they would need to assess the 
entire filing for relevant information. 
2. Liability-Related Proposals 
a. PSLRA Safe Harbor 
As an alternative to addressing the use of projections in de-SPAC transactions and other 
business combinations involving blank check companies that are not penny stock issuers by 
proposing to amend the “blank check company” definition, 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 
                                                 
564
  See supra Section IX.C.1.a.5. 
565
  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 that would be required by proposed Item 1606(b) of Regulation S-K, such as disclosures in 
the risk factors section or in the description of stock incentive plans.  However, if Inline XBRL is used, it would 
enable a user to search for the term “dilution” exclusively within the proposed fairness determination disclosure, 
thereby likely reducing the number of irrelevant results. 

282 
 
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 proposed rule.     
b. Issuing Guidance on Underwriter Status 
Instead of proposing Rule 140a, the Commission could issue guidance that would 
describe the factors that should be considered in determining underwriter status in connection 
with de-SPAC transactions, which could potentially be relevant for parties other than SPAC IPO 
underwriters.  Issuing guidance rather than designating an underwriter by rule within the context 
of these transactions might prompt the full range of parties involved in facilitating de-SPAC 
transactions to consider their potential liability and thus take greater care in performing their 
designated functions.  This could result in more robust investor protections overall.  On the other 
hand, compared to the proposed rule, this alternative would rely on the judgment of de-SPAC 
participants to apply the guidance and may result in weaker incentives for those parties that are 
potentially subject to Section 11 liability to perform robust due diligence.  As a result of such 
weaker incentives, there could be a reduced impact on the accuracy of the disclosure in de-SPAC 
transactions and investor protection benefits. 
3.  Expanding Disclosure in Reporting Shell Company Business 
Combinations 
 
Proposed Rule 145a would deem any 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.  As 

283 
 
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 the same as what 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 the same as they would receive 
had a registration statement been filed for the transaction.  This would ensure that the reporting 
shell company’s shareholders receive 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 that the 
costs of liability associated with the purchase and sale of securities and potential Securities Act 
registration of shell company business combinations under proposed 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 that is required.  Only by deeming the 
transaction to be a sale would investors necessarily receive the protections that apply in 
connection with a purchase and sale of securities under the federal securities laws, such as the 
availability of private actions under Section 10(b) and Rule 10b-5.  In addition, to the extent 
there is not an available exemption for the reporting shell company business combination, only 

284 
 
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 Disclosures 
The proposed amendments to Item 10(b) of Regulation S-K present our 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 adopt 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.  
5. Investment Company Act Safe Harbor 
a. Shorter Duration Limitations 
As an alternative, we considered shorter duration limitations by instead requiring a SPAC 
to announce a transaction no later than 12-months from the IPO registration date, and to 
complete a de-SPAC transaction or liquidate the SPAC no later than 18-months after the IPO 
registrations date.  The benefit of this alternative is that it would further decrease the possibility 
of regulatory arbitrage.  It would also reduce the risk that investors may come to view a SPAC 
holding securities as a fund-like investment, and the related risk of investor protection concerns.  
We expect this alternative would impose the same type of costs we discussed above for the 
proposed duration conditions, but at a greater magnitude.  Based on a sample of SPACs with 

285 
 
effective IPO dates from January 1, 2016 to June 30, 2020 (i.e., a sample of SPACs with at least 
an 18-month history since the IPO date as of December 31, 2021; 189 SPACs in total), we find 
that approximately 36% of the SPACs in the sample announced a transaction agreement no later 
than 12-months after the date of the initial public offering and 40% of the SPACs had completed 
a de-SPAC transaction no later than 18-months after the date of the initial public offering.  The 
proportion of SPACs in the sample that both announced a de-SPAC transaction by 12-months 
and completed the de-SPAC transaction by 18-months was approximately 33%, which is a 
significantly lower proportion compared to 57% of sample SPACs that would have managed to 
meet both of the proposed duration conditions, as discussed above.  Thus, we expect that costs 
would be greater under this alternative by forcing a greater proportion of SPACs to conclude 
their search for a target or liquidate earlier than they may otherwise do.  In addition, because of 
the tighter deadlines this alternative would impose, those SPACs that would be at risk of not 
being able to meet the proposed longer duration conditions would likely be at comparatively 
greater risk of not meeting the deadlines under this alternative, which may also increase the costs 
such SPACs would face in trying to meet these alternative duration conditions. 
b. No Announcement Condition 
We also considered an alternative that would keep the 24-month condition for completion 
of a de-SPAC transaction, but remove the duration condition for the announcement of a 
transaction.  This alternative would increase the proportion of SPACs meeting the duration 
condition to 65% compared to 57% under the proposal.  The benefit of this alternative would 
thus be to increase the proportion of SPACs not having to potentially sub-optimally come to a 
merger agreement earlier (or, in some circumstances, potentially inefficiently liquidating the 
SPAC), while still imposing a firm 24-month maximum lifespan for SPACs seeking to take 

286 
 
advantage of the proposed safe harbor.  However, by not imposing an 18-month announcement 
condition investors would lose any investor protection benefits that may be associated with an 
earlier signal of a SPAC’s intent to complete a de-SPAC transaction than they might receive 
under this alternative. 
c. Longer Duration Limitations 
As an alternative, we could require a longer duration before a SPAC would have to 
complete a de-SPAC transaction.  For example, if we increase this duration to no later than 36 
months after the IPO date (with no announcement condition), less than 4% of the sample SPACs 
that completed a de-SPAC transition would not have met such a condition.  As discussed above, 
the national securities exchanges already require SPACs to complete a de-SPAC transaction 
within 36 months (or 3 years).  Thus, based on both the recent evidence and the current exchange 
rules for SPACs, we expect that this alternative would not impose the potential costs of a 
truncated search period for a target company for most SPACs, in particular SPACs with 
exchange-traded securities.  However, as discussed above, the longer the SPAC operates with its 
assets invested in securities and its income derived from securities, the more likely investors will 
come to view the SPAC as a fund-like investment and the more likely the SPAC appears to be 
deviating from its stated business purpose.  In turn, this may raise investor protection concerns 
and increase the possibility of regulatory arbitrage compared to the proposed duration conditions. 
F.  Requests for Comment 
155. Because of the potential for one or more of the proposed amendments to have interactive 
effects, we are requesting public input on the extent to which such interactive effects are 
likely to conflict with the overall aims of this rulemaking, if adopted as proposed. 

287 
 
156. Have we correctly characterized the benefits and costs from the proposed new disclosure 
requirements at the SPAC IPO stage?  Are there any other benefits or costs that should be 
considered?  Please provide supportive data to the extent available. 
157. Our analysis suggests the proposed rules and amendments would generally strengthen the 
investor protection in SPAC transactions at the initial public offering stage.  Are there 
any significant costs or benefits associated with adopting these rules and amendments 
that we have not considered that would lead to a different characterization?  Please 
provide supportive data to the extent available. 
158. Have we correctly characterized the benefits and costs from the proposed new disclosure 
requirements at the de-SPAC transaction stage and the alignment of disclosure 
requirements in the de-SPAC disclosure documents with IPOs?  Are there any other 
benefits or costs that should be considered?  Please provide supportive data to the extent 
available.  
159. Our analysis suggests the proposed rules and amendments would generally strengthen 
investor protection in de-SPAC transactions.  Are there any significant costs or benefits 
associated with adopting these rules and amendments that we have not considered that 
would lead to a different characterization?  Please provide supportive data to the extent 
available. 
160. Have we correctly characterized the benefits and costs from proposed Item 1608 holding 
all other aspects of the proposed amendments constant?  Have we correctly characterized 
the benefits and costs that would accrue given the potential interactive effects with 
proposed Rule 145a?  Are there other interactive effects with respect to other proposed 

288 
 
items that, had we considered, would substantially alter our assessment of the associated 
costs, benefit, or anticipated effects on efficiency, competition, or capital formation? 
161. Have we correctly characterized the benefits and costs from the proposed amendments to 
the enhanced projections disclosure requirements (Item 1609 of Regulation S-K)?  Are 
there any other benefits and costs that should be considered?  Please provide supportive 
data to the extent available.  
162. Would the effects of the proposed amendments related to the PSLRA safe harbor have 
significant interactive effects with proposed Item 1609 of Regulation S-K such that our 
estimates of the incremental costs and benefits of adopting Item 1609 should be revised?  
Please provide either qualitative or quantitative data to the extent available.  
163. How, and to what extent, would investors benefit from the proposed requirement to tag 
the SPAC specialized disclosures in Inline XBRL?  What would be the costs of the 
proposed requirement to registrants?  Should we consider alternative tagging 
requirements for the proposed SPAC disclosures?  If so, what would be their benefits and 
costs? 
164. Have we correctly characterized the benefits and costs from the proposed re-
determination of smaller reporting company status?  Are there any other benefits and 
costs that should be considered?  Please provide supportive data to the extent available.  
165. For the re-determination of a post-business combination company’s smaller reporting 
company status, what would be the benefits and costs of requiring a fixed date to measure 
public float?  If the benefits outweigh the costs of requiring a fixed date, do the relative 
benefits and costs of different possible fixed dates indicate that one approach would be 
preferential?  

289 
 
166. What would be the costs and benefits of relying solely on revenues to re-determine a 
post-business combination company’s smaller reporting company status rather than 
including the public float?  
167. Have we correctly characterized the benefits and costs from the proposal to require target 
companies to be co-registrants to Form S-4 and F-4?  Are there any other benefits and 
costs that should be considered?  Please provide supportive data to the extent available.  
168. Would the relative benefits and costs associated with the proposed amendments related to 
de-SPAC-transaction disclosures and liability have additional effects on the calculus of 
pursuing a de-SPAC business combination versus a traditional IPO that we have not 
considered?  In terms of the market choice to utilize a de-SPAC transaction versus a 
traditional IPO, would the change in relative benefits and costs associated with the 
proposed rules and amendments be beneficial or detrimental in terms of their effects on 
efficiency, competition and capital formation?  Please provide supportive evidence or 
data to the extent available.  
169. Have we correctly characterized the benefits and costs from the proposed amendments 
related to the PSLRA safe harbor?  Are there any other benefits and costs that should be 
considered?  Please provide supportive data to the extent available.  
170.  With respect to the proposed changes to the definition of “blank check company” for 
purposes of the PSLRA safe harbor, are there any additional benefits and costs that would 
apply primarily to blank check companies that are not penny stock issuers and not 
SPACs?  Please provide supportive data to the extent available.  
171. Have we correctly characterized the benefits and costs of the underwriter status and 
liability proposals?  Are there any other benefits and costs for SPACs, SPAC IPO 

290 
 
underwriters, target companies and investors that should be considered?  Please provide 
supportive data to the extent available.  
172. Have we correctly characterized the scope and scale of both SPAC and non-SPAC shell 
companies that would be affected by proposed Rule 145a?  Please provide data or 
analysis to the extent available.  
173. Have we correctly characterized the benefits and costs of proposed Rule 145a?  Are there 
any other benefits and costs that should be considered?  Are there any additional benefits 
and costs that would apply primarily to non-SPAC shell companies that are not business-
combination related shell companies?  Please provide supportive data to the extent 
available.  
174. As noted above, we are unable to estimate the number of shell companies that are 
currently private that could be impacted by proposed Article 15 of Regulation S-X.  We 
request data on the number of these entities that may be impacted by the proposed rule.  
Would analysis of the economic effects on these currently private entities broadly impact 
the balance of costs and benefits to adopting Article 15 of Regulation S-X as proposed? 
175. Have we correctly characterized the benefits and costs of proposed new Article 15 of 
Regulation S-X and the related proposed amendments?  Are there any other benefits and 
costs that should be considered?   Please provide supportive data to the extent available.  
176. Have we correctly characterized the benefits and costs to proposed Rule 15-01(b)? Are 
there additional costs, particularly to investors, of permitting a shell company registrant 
to include in its Form S-4/F-4/proxy or information statement two (rather than three) 
years of statements of comprehensive income, changes in stockholders’ equity, and cash 
flows for the private operating company for all transactions involving an EGC shell 

291 
 
company and a private operating company that would qualify as an EGC that would 
affect our assessment of the likely effects of this proposed rule on investor protection? 
177. Have we correctly characterized the benefits and costs of the enhanced projection 
guidance (amendments to Item 10(b) of Regulation S-K)?  Are there any other benefits 
and costs that should be considered?  Please provide supportive data to the extent 
available.  
178. Have we correctly characterized the benefits and costs of the proposed Investment 
Company Act safe harbor?  Are there any other benefits and costs that should be 
considered?  Please provide supportive data to the extent available.  
179. Is it feasible for SPACs to hold most of their assets in cash accounts rather than 
Government securities or Government money market funds?  What would be the costs to 
SPACs of holding their assets in cash?  How costly would it be for SPACs that are 
currently invested in Government securities or Government funds to switch to cash? 
Please provide supportive data or estimates to the extent available.    
180. Have we correctly characterized the effects on efficiency, competition and capital 
formation from the proposed rules and amendments?  Are there any effects that should be 
considered?  Please provide supportive data to the extent available. 
X. PAPERWORK REDUCTION ACT 
A. Summary of the Collections of Information 
Certain provisions of our rules, schedules, and forms that would be affected by the 
proposed new rules and amendments contain “collection of information” requirements within the 
meaning of the PRA.
566
  We are submitting the proposed new rules and amendments to the 
                                                 
566
  44 U.S.C. 3501 et seq. 

292 
 
Office of Management and Budget (“OMB”) for review and approval in accordance with the 
PRA and its implementing regulations.
567
  The hours and costs associated with preparing, filing 
and sending the schedules and forms, and retaining records constitute reporting and cost burdens 
imposed by each collection of information.
568
  An agency may not conduct or sponsor, and a 
person is not required to comply with, a collection of information requirement unless it displays 
a currently valid OMB control number.  The titles for the 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 10-K (OMB Control No. 3235-0063); 
• Form 10-Q (OMB Control No. 3235-0070); and 
• Rule 3a-10 under the Investment Company Act (a proposed new collection of 
information).
569
 
                                                 
567
  44 U.S.C. 3507(d) and 5 CFR 1320.11. 
568
  The paperwork burdens for Regulation S-X, Regulation S-K, Regulation C, 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. 
569
  We estimate that there would be a negligible or no change in burden to Form 20-F and Form 8-K as a result of 
the proposed amendments to Regulation S-X, in that these proposed amendments would be codifying existing 

293 
 
The forms, schedules, and regulations listed above were adopted under the Securities Act, 
the Exchange Act, and/or the Investment Company Act.  These regulations, schedules, and forms 
set forth the disclosure requirements for registration statements, annual and quarterly reports, 
current reports, proxy and information statements, and tender offer statements filed by registrants 
to provide investors with information to make informed investment, voting, and redemption 
decisions.  In addition, we are proposing a new requirement that certain entities adopt a board 
resolution in order to rely on the safe harbor provided by proposed Rule 3a-10 of the Investment 
Company Act.  Compliance with these information collections is mandatory to the extent 
applicable to each registrant.
570
  Other than the proposed new collection of information (Rule 3a-
10 under the Investment Company Act), responses to these information collections are not kept 
confidential, and there is no mandatory retention period for the information disclosed.    
Responses to the information collection under the Investment Company Act are kept 
confidential, subject to the provisions of applicable law. 
A description of the proposed new rules and amendments, including the need for the 
information and its use, as well as a description of the likely respondents, can be found in 
Sections II through VI above, and a discussion of the economic effects of the proposed new rules 
and amendments can be found in Section IX above. 
                                                 
interpretations of existing rules.  Accordingly, we are not making any revisions to the PRA burden estimates for 
Form 20-F and Form 8-K at this time. 
570
  Registrants claiming smaller reporting company status have the option to comply with the scaled disclosures 
available to them on an item-by-item basis.  In addition, if an entity determines not to rely on the safe harbor 
provided in Rule 3a-10 of the Investment Company Act, it would not be required to adopt the board resolution 
contemplated in that proposed rule. 

294 
 
B. Estimates of the Effects of the Proposed New Rules and Amendments on the 
Collections of Information 
 
The following Table 1 summarizes the estimated effects of the proposed new rules and 
amendments on the paperwork burdens associated with the affected forms and schedules. 
PRA Table 1.  Estimated Paperwork Burden Effects of the Proposed New Rules and 
Amendments Applicable to SPACs 
 
Proposed Requirement and Effects Affected Forms 
and Schedules 
Estimated Effect Per Affected 
Response
*
 
Item 1602: Registered offerings by special 
purpose acquisition companies 
• 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 
Item 1603: SPAC sponsor; conflicts of interest 
• Require certain disclosure regarding the sponsor 
and its affiliates and any promoters of SPACs. 
• Require disclosure regarding conflicts of interest 
between the sponsor or its affiliates or promoters 
and unaffiliated security holders. 
• 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 

295 
 
Proposed Requirement and Effects Affected Forms 
and Schedules 
Estimated Effect Per Affected 
Response
*
 
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: Fairness of the de-SPAC transaction 
and any related financing transaction 
• Require disclosure on whether a SPAC reasonably 
believes that a de-SPAC transaction and any 
related financing transactions are fair or unfair to 
investors. 
• Require a discussion of the bases for this 
reasonable belief. 
• 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 
Item 1607: Reports, opinions, appraisals and 
negotiations 
• Require disclosure regarding any report, opinion or 
appraisal received by a SPAC or its sponsor from 
an outside party relating to the fairness of a de-
SPAC transaction or any related financing 
transaction, including disclosure on the 
qualifications of the outside party, 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 in de-
SPAC transactions 
• 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: Financial projections in de-SPAC 
transactions 
• Require additional disclosures regarding financial 
projections disclosed in a disclosure document for 
a de-SPAC transaction. 
• Forms S-4 and 
F-4 
• Schedules 14A 
and 14C 
• Schedule TO 
• 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 

296 
 
Proposed Requirement and Effects Affected Forms 
and Schedules 
Estimated Effect Per Affected 
Response
*
 
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 
Proposed 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 more closely align required disclosures about the 
target private operating company with those required 
in a Form S-1 or F-1 for an initial public offering, 
including: 
• Expanding the circumstances in which target 
companies may report two years, instead of three 
years, of audited financial statements (resulting in 
a net decrease in burden) (proposed Rule 15-
01(b)); and 
• Further aligning the requirements for audited 
financial statements in these transactions with 
those required in a registered initial public offering 
(resulting in a net decrease in burden) (proposed 
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
**
 
Proposed Amendments to Align Non-Financial 
Statement Disclosures in De-SPAC Transactions 
• Amend the forms and schedules filed in 
connection with de-SPAC transactions to more 
closely align required non-financial statement 
disclosures about the target private operating 
company with those required in a Form S-1 or F-1 
for an initial public offering. 
• 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 

297 
 
Proposed Requirement and Effects Affected Forms 
and Schedules 
Estimated Effect Per Affected 
Response
*
 
Proposed Amendment to Forms S-4 and F-4 
• Amend Form S-4 and Form F-4 to require that the 
SPAC and the target private operating company be 
treated as co-registrants when the Form S-4 or 
Form F-4 is filed by the SPAC in connection with 
a de-SPAC transaction 
• Forms S-4 and 
F-4 
• 100 hour increase in 
compliance burden per Form S-
4 or F-4*** 
Proposed Rule 3a-10 under the Investment 
Company Act 
• Require the board of directors of a SPAC relying 
on Rule 3a-10 to adopt an appropriate resolution 
evidencing that SPAC is primarily engaged in the 
business of seeking to complete a single de-SPAC 
transaction. 
• None 
• 1 hour increase in compliance 
burden per SPAC 
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 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 proposed Rule 
15-01(b) than under the current rules from registrants that would not otherwise have prepared financial 
statements for such year.  Coupled with an incremental increase in burden for the proposed 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 proposing to require that a post-business combination company re-
determine whether it is a smaller reporting company (SRC) following a de-SPAC transaction.  
As proposed, the post-business combination company would be required to reflect this re-
determination in its first periodic report after the de-SPAC transaction and in Commission filings 
thereafter until its next annual re-determination of SRC status.  We estimate that the proposed re-
determination of SRC status would 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 would lose SRC status, which takes into account the increased incremental 

298 
 
burden in providing disclosures pursuant to non-SRC disclosure requirements.  The following 
Table 2 sets forth our estimates regarding the increase in compliance burden when a post-
business combination company loses SRC status: 
PRA Table 2. Increase in Compliance Burden After Losing SRC Status 
Form / Schedule Estimated Increase in 
Internal Hours per 
Filing 
Estimated Increase in 
Outside Professional Hours 
per Filing 
Estimated Increase in 
Outside Professional 
Costs per Filing 
Form 10-K
*
 439 147 $58,800 
Form 10-Q
*
 36.57 11.88 $4,752 
Schedule 14A
**
 0.75 0.25 $100 
Schedule 14C
***
 0.75 0.25 $100 
Form S-1
*
 5.75 17.25 $6,900 
Notes: 
* The estimated increases in compliance burdens are based on the difference between the current estimates for 
the applicable form 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 $100 (0.25 professional hours x $400/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 smaller reporting companies 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 $100 (0.25 professional 
hours x $400/hour) per report, based on our estimate of the compliance burden for Item 407(d)(5) and (e)(4) and 
(5) of Regulation S-K. 
 
C. Incremental and Aggregate Burden and Cost Estimates 
We estimate below the incremental and aggregate increase in paperwork burden as a 
result of the proposed new rules and 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 

299 
 
the size and complexity of their business.  These estimates include the time and the cost of 
preparing and reviewing disclosure, filing documents, and retaining records.  We believe that 
some registrants will experience costs in excess of this average and some registrants will 
experience less than the average costs.  Our methodologies for deriving these estimates are 
discussed below. 
Our estimates represent the burden for all SPACs that file registration statements with the 
Commission for registered offerings and all registrants that file disclosure documents in 
connection with a de-SPAC transaction or a business combination involving a shell company or 
a reporting shell company.
571
  Additionally, our estimates take into account an expected increase 
in the number of Securities Act registration statements as a result of proposed Rule 145a.  Based 
on a review of Commission filings during the period 2011 – 2021 and an analysis of the effects 
of the proposed new rules and amendments,
572
 the staff estimates that: 
• SPACs will file an average of 90 registration statements each year for registered offerings 
on Form S-1 and 8 registration statements on Form F-1, other than for de-SPAC 
transactions; 
• An average of 30 registration statements on Form S-4 and 4 registration statements on 
Form F-4, 30 definitive proxy statements on Schedule 14A, 4 definitive information 
statements on Schedule 14C, and 2 tender offer statements on Schedule TO will be filed 
each year in connection with de-SPAC transactions; and 
                                                 
571
  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.” 
572
  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. 

300 
 
• An average of 20 registration statements on Form S-4 and 2 registration statements on 
Form F-4 will be filed each year for business combination transactions involving a 
reporting shell company and a non-shell company, other than de-SPAC transactions.
573
 
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 Table 3 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 $400 per 
hour.
574
 
PRA Table 3.  Standard Estimated Burden Allocation for Specified Forms, Schedules, and 
Records 
 
Form / Schedule / Record Type Internal Outside Professionals 
Forms S-1, F-1, S-4, and F-4 25% 75% 
Schedules 14A and 14C 75% 25% 
Schedule TO 25% 75% 
Form 10-K and Form 10-Q 75% 25% 
Resolution prepared in accordance 
with Rule 3a-10 
50% 50% 
 
                                                 
573
  This estimate represents the upper bound of the estimated number of Forms S-4 and F-4 filed for these 
transactions. 
574
  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 
$400 per hour.  This is the rate we typically estimate for outside legal services used in connection with public 
company reporting. 

301 
 
The following Table 4 summarizes the estimated effects of the proposed new rules and 
amendments, other than Rule 145a, on the paperwork burdens associated with the affected forms, 
schedules, and records: 
PRA Table 4. Calculation of the Incremental Change in Burden Estimates of Current 
Responses Resulting from the Proposed New Rules and Amendments, Other Than 
Rule 145a 
 
Form / 
Schedule / 
Record 
Number 
of 
Estimated 
Affected 
Responses 
Estimated 
Burden 
Hour 
Increase 
or 
Decrease 
/ Affected 
Response 
Total 
Incremental 
Increase or 
Decrease in 
Burden 
Hours 
Estimated 
Increase or 
Decrease in 
Internal 
Burden 
Hours 
Estimated 
Increase or 
Decrease in 
Outside 
Professional 
Hours 
Total Increase or 
Decrease in 
Outside 
Professional Costs 
(A) (B) (C) = (A) * 
(B) 
(D) = (C) * 
(Allocation 
%) 
(E) = (C) * 
(Allocation 
%) 
(F) = (E) * $400 
Schedule 
14A 
30 (30) (900) (675) (225) ($90,000) 
Schedule 
14C 
4 (30) (120) (90) (30) ($12,000) 
Schedule 
TO 
2 (27) (54) (14) (41) ($16,200) 
Form S-1 90 6  540  135  405  $108,000  
Form S-4 30 95  2,850  713  2,138  $855,000  
Form F-1 8 6  48  12  36  $9,600  
Form F-4 4 95  380  95  285  $114,000  
Resolution 
prepared in 
accordance 
with 
Rule 3a-
10
+
 
98 1  98  49  49  $19,600  
Total 266 112 2,842  225  2,617  $988,000  
Notes: 
+ As discussed above, we believe that proposed Rule 3a-10 would offer market participants a number of benefits, 
including the reduction of compliance costs for some market participants.  As a result, while no SPAC would be 
required to rely on Rule 3a-10, for purposes of this analysis, we assume that all SPACs conducting an initial 
public offering subsequent to adoption of the proposed rule would rely on proposed Rule 3a-10 and, therefore, 
prepare a board resolution in accordance with the conditions of Rule 3a-10. 
 

302 
 
The following Table 5 summarizes the estimated effects of proposed Rule 145a on the 
paperwork burdens associated with the affected forms: 
PRA Table 5. Calculation of the Change in Burden Estimates of the Affected Forms 
Resulting from Proposed Rule 145a 
 
Form / 
Schedule / 
Record 
Estimated 
Increase 
in the 
Number 
of 
Responses 
Estimated 
Burden 
Per Form 
Total 
Incremental 
Increase or 
Decrease in 
Burden 
Hours 
Estimated 
Increase in 
Internal 
Burden 
Hours 
Estimated 
Increase in 
Outside 
Professional 
Hours 
Total Increase in 
Outside 
Professional Costs 
(A) (B) (C) = (A) * 
(B) 
(D) = (C) * 
(Allocation 
%) 
(E) = (C) * 
(Allocation 
%) 
(F) = (E) * $400 
Form S-4 20 3,826 76,512 19,128 57,384 $22,953,551 
Form F-4 2 1,441 2,882 720 2,161 $864,554 
Total 22 5,267 79,394 19,848 59,545 $23,818,105 
 
In addition, we estimate that an average of 50 fewer post-business combination 
companies following a de-SPAC transaction will qualify as smaller reporting companies than 
under the current rules until the next annual re-determination date.
575
  While we cannot predict 
with certainty the number of these post-business combination companies, we estimate for 
purposes of our PRA calculations that currently all post-business combination companies qualify 
as SRCs following de-SPAC transactions in which the SPAC is the legal acquirer and that 80% 
of these companies that are eligible to use the scaled SRC disclosure provisions do so.
576
  We 
estimate that these registrants would file, on average, one Form 10-K, 1.5 Forms 10-Q, one 
                                                 
575
  This estimate is based, in part, on our estimate of the number of de-SPAC transactions in which the SPAC is the 
legal acquirer. 
576
  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. 

303 
 
Schedule 14A, and one registration statement on Form S-1 prior to the next re-determination of 
SRC status. 
The following Table 6 summarizes the estimated effects of the proposed re-determination 
of SRC status on the paperwork burdens associated with the affected forms and schedules: 
PRA Table 6. Calculation of the Incremental Change in Burden Estimates of Current 
Responses Resulting from the Proposed Re-Determination of SRC Status 
 
Form / 
Schedule / 
Record 
Number of 
Estimated 
Affected 
Responses 
Estimated 
Burden 
Hour 
Increase or 
Decrease / 
Affected 
Response 
Total 
Incremental 
Increase or 
Decrease in 
Burden 
Hours 
Estimated 
Increase or 
Decrease in 
Internal 
Burden 
Hours 
Estimated 
Increase or 
Decrease in 
Outside 
Professional 
Hours 
Total 
Increase or 
Decrease in 
Outside 
Professional 
Costs 
(A) (B) (C) = (A) * 
(B) 
(D) = (C) * 
(Allocation %) 
(E) = (C) * 
(Allocation 
%) 
(F) = (E) * 
$400 
Schedule 
14A 
40 1 40 30 10 $4,000 
Schedule 
14C 
4 1 4 3 1 $400 
Form S-1 40 23 920 230 690 $276,000 
Form 10-K 40 586 23,440 17,560 5,880 $2,352,000 
Form 10-Q 60 48 2,880 2,194 713 $285,120 
Total 184 659 27,284 20,017 7,294 $2,917,520 
 
The following Table 7 summarizes the requested paperwork burden changes to existing 
information collections, including the estimated total reporting burdens and costs, under the 
proposed new rules and amendments. 
  

304 
 
 
PRA Table 7.  Requested Paperwork Burden under the Proposed New Rules and 
Amendments
+
 
+ Figures in this table have been rounded to the nearest whole number. 
++See PRA Tables 4 and 6 for the number of affected responses for Schedule 14A. 
+++ See PRA Tables 4 and 6 for the number of affected responses for Form S-1. 
++++ See PRA Tables 4 and 5 for the number of affected responses for Form S-4 and Form F-4. 
 
D. Request for Comment 
Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order to: 
• Evaluate whether the proposed changes to the collections of information are necessary for 
the proper performance of the functions of the Commission, including whether the 
information will have practical utility; 
• Evaluate the accuracy of our estimates of the additional burden hours that would result 
from adoption of the proposed new rules and amendments; 
Form / 
Schedule 
Current Burden Program Change Requested Change in Burden 
Current 
Annual 
Respons
es 
Current 
Burden 
Hours 
Current Cost 
Burden 
Number of 
Affected 
Responses 
Estimated 
Increase 
or 
Decrease 
in Outside 
Prof. 
Hours 
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 
6,369 777,590 $103,678,712 ++ 
(645) ($86,000) 6,369  776,945  $103,592,712  
Schedule 
14C 
569 56,356 $7,514,944 4 
(90) ($12,000) 569  56,266  $7,502,944  
Schedule 
TO 
1,378 29,972 $11,988,600 2 
(14) ($16,200) 1,378  29,959  $11,972,400  
Form S-1 898 146,062 $178,916,043 +++ 
320 $384,000  898  178,916,363 $179,300,043  
Form S-4 588 562,362 $677,255,579 ++++ 
19,840 $23,890,904 608 563,075  $701,146,483 
Form F-1 66 26,707 $32,293,375 8 
12  $14,400  66  26,719  $32,307,775  
Form F-4 39 14,049 $17,073,825 ++++ 
815  $989,581  41 14,144  $18,063,406 
Form 10-K 8,272 14,188,040 $1,893,793,119 40 
17,560  $2,352,000  8,292  14,205,600  $1,896,145,119 
Form 10-Q 22,925 3,182,333 $421,490,754 60 
2,194  $285,120  22,925  3,184,527  $421,775,874  
Total 41,124 18,983,471 $3,334,004,951 370 
20,190 $3,944,320 41,124 197,773,642  $3,347,949,271  

305 
 
• Determine whether there are ways to enhance the quality, utility, and clarity of the 
information to be collected; 
• Evaluate whether there are ways to minimize the burden of the collections of information 
on those who respond, including through the use of automated collection techniques or 
other forms of information technology; and 
• Evaluate whether the proposed new rules and amendments would have any effects on any 
other collection of information not previously identified in this section. 
Any member of the public may direct to us any comments concerning the accuracy of 
these burden estimates and any suggestions for reducing these burdens.  Persons submitting 
comments on the collection of information requirements should direct their comments to the 
Office of Management and Budget, Attention: Desk Officer for the U.S. Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a 
copy to, Vanessa A. Countryman, Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549-1090, with reference to File No. S7-  13-22.  Requests for 
materials submitted to OMB by the Commission with regard to the collection of information 
should be in writing, refer to File No. S7-  13-22 and be submitted to the U.S. Securities and 
Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington DC 20549-2736.  
OMB is required to make a decision concerning the collections of information between 30 and 
60 days after publication of this release.  Consequently, a comment to OMB is best assured of 
having its full effect if the OMB receives it within 30 days of publication. 

306 
 
XI. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT 
For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 
(“SBREFA”),
577
 the Commission must advise the OMB as to whether a proposed regulation 
constitutes a “major” rule.  Under SBREFA, a rule is considered “major” where, if adopted, it 
results or is likely to result in: 
• An annual effect on the economy of $100 million or more (either in the form of an 
increase or a decrease); 
• A major increase in costs or prices for consumers or individual industries; or 
• Significant adverse effects on competition, investment or innovation. 
If a rule is “major,” its effectiveness will generally be delayed for 60 days pending Congressional 
review. 
We request comment on whether our proposed amendments would be a “major rule” for 
purposes of SBREFA.  We solicit comment and empirical data on: 
• The potential effect on the U.S. economy on an annual basis; 
• Any potential increase in costs or prices for consumers or individual industries; and 
• Any potential effect on competition, investment or innovation. 
We request those submitting comments to provide empirical data and other factual support for 
their views to the extent possible. 
XII. INITIAL REGULATORY FLEXIBILITY ANALYSIS AND CERTIFICATION 
The Regulatory Flexibility Act
578
 requires an agency, when issuing a rulemaking 
proposal, to prepare and make available for public comment an Initial Regulatory Flexibility 
                                                 
577
  Pub. L. No. 104-121, Tit. II, 110 Stat. 857 (1996). 
578
  5 U.S.C. 601 et seq. 

307 
 
Analysis (“IRFA”) that describes the impact of the proposed rule on small entities, unless the 
Commission certifies that the rule, if adopted, would not have a significant economic impact on a 
substantial number of small entities.
579
  This IRFA has been prepared in accordance with the 
Regulatory Flexibility Act.  It relates to the proposed new rules and amendments described in 
Sections II through VI above. 
A. Reasons for, and Objectives of, the Proposed Action 
As discussed throughout the release, we are proposing new Subpart 1600 of Regulation 
S-K and amendments to existing forms and schedules to require specialized disclosures in 
registered offerings by SPACs, including initial public offerings, and in disclosure documents for 
de-SPAC transactions with respect to, among other things, compensation paid to sponsors, 
conflicts of interest, and dilution.  For de-SPAC transactions, we are also proposing to require 
disclosure of a fairness determination, additional disclosures on the target private operating 
company, a re-determination of smaller reporting company status following the completion of a 
de-SPAC transaction, and a minimum dissemination period for certain disclosure documents in 
these transactions.  These proposed rules and amendments would be applicable to, depending on 
the circumstances, registration statements on Forms S-1, F-1, S-4 and F-4 filed under the 
Securities Act and Schedules 14A, 14C and TO under the Exchange Act.  The proposed rules 
would also clarify the underwriter status of SPAC IPO underwriters in connection with de-SPAC 
transactions and would require that the target company be named as a co-registrant in a Form S-4 
or F-4 filed by a SPAC for a de-SPAC transaction.  Further, we are proposing to amend the 
definition of “blank check company” for purposes of the PSLRA such that the safe harbor under 
the PSLRA for forward-looking information would not be available to SPACs and certain other 
                                                 
579
  5 U.S.C. 603(a); 5 U.S.C. 605(b). 

308 
 
blank check companies; to update and expand our guidance in Item 10(b) of Regulation S-K 
regarding the use of projections in Commission filings;
580
 and to require additional disclosure 
when projections are disclosed in connection with de-SPAC transactions. 
In regard to business combination transactions involving a reporting shell company,
581
 
we are proposing Securities Act Rule 145a to deem these transactions with a non-shell company 
to involve a sale of securities to the shell company’s shareholders.  In addition, we are proposing 
amendments to the financial statement reporting requirements for transactions involving shell 
companies in Regulation S-X.  Finally, we are proposing a new safe harbor, Rule 3a-10, under 
the Investment Company Act that would provide that a SPAC that satisfies the conditions of the 
safe harbor would not be an investment company and therefore would not be subject to 
regulation as an investment company under the Investment Company Act. 
The need for and objectives of the proposed rules and amendments are discussed in more 
detail in Sections II – VI above.  We discuss the economic impact, including the estimated costs 
and burdens, of the proposed rules and amendments on all registrants, including small entities, in 
Sections IX and X above. 
B. Legal Basis 
We are proposing the new rules and rule amendments under the authority set forth in 
Sections 6, 7, 10, 19(a), and 28 of the Securities Act; Sections 3, 12, 13, 14, 15, 23(a), and 36 of 
the Exchange Act; and Sections 6(c) and 38(a) of the Investment Company Act. 
                                                 
580
  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. 
581
  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.” 

309 
 
C. Regulatory Flexibility Act Certification 
Pursuant to Section 605(b) of the Regulatory Flexibility Act, the Commission hereby 
certifies that proposed Rule 3a-10 under the Investment Company Act would not, if adopted, 
have a significant economic impact on a substantial number of small entities.
582
  Based on 
information available to the Commission, there were 861 initial public offerings conducted by 
SPACs in 2020 and 2021, of which 6 were for SPACs that sold $50 million or less in units.
583
  
As a result, we believe that approximately 0.7% of SPACs directly affected by proposed Rule 
3a-10 would be small entities.
584
  Accordingly, the Commission believes that proposed Rule 3a-
10 would not, if adopted, have a significant economic impact on a substantial number of small 
entities. 
D. Small Entities Subject to the Proposed Rules and Amendments 
The proposed rules and amendments would apply to registrants that are small entities.  
The Regulatory Flexibility Act defines “small entity” to mean “small business,” “small 
organization,” or “small governmental jurisdiction.”
585
  17 CFR 230.157 (Securities Act Rule 
157) defines an issuer, other than an investment company, to be a “small business” or “small 
organization” for purposes of the Regulatory Flexibility Act 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.  17 CFR 240.0-10(a) (Exchange Act Rule 0-
10(a)) defines an issuer, other than an investment company, to be a “small business” or “small 
                                                 
582
  The definition of “small entity” is set forth in Section XII.D below. 
583
  Based on data from Dealogic M&A module as of Jan. 2022. 
584
  While no SPAC would be required to rely on proposed Rule 3a-10, for purposes of this analysis, we assume that 
all SPACs conducting an initial public offering subsequent to adoption of the proposed rule would rely on proposed 
Rule 3a-10. 
585
  5 U.S.C. 601(6). 

310 
 
organization” if it had total assets of $5 million or less on the last day of its most recent fiscal 
year.  An investment company is a small entity if, together with other investment companies in 
the same group of related investment companies, it has net assets of $50 million or less as of the 
end of its most recent fiscal year.
586
 
The proposed specialized disclosure and other requirements applicable to SPACs would 
not apply to issuers that raise less than $5 million at the time of their initial public offerings.
587
  
However, we acknowledge that there may be instances where a SPAC may be a small entity at 
the time of a subsequent registered offering or at the time of a de-SPAC transaction.
588
  While 
we are not aware to date of any such instances, we request comment on the number of these 
small entities.  In addition, 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;
589
 therefore, we request comment on the number of these small entities. 
In regard to proposed Rule 145a and the proposed amendments to Regulation S-X, we 
estimate that there are 163 reporting shell companies that are small entities.
590
  However, due to 
data limitations, we are unable to estimate the number of private operating companies and 
                                                 
586
  See 17 CFR 270.0-10(a). 
587
  See supra note 12 and the discussion of the proposed definition of “special purpose acquisition company” in 
Section II.A. 
588
  As noted above, the vast majority of initial public offerings by SPACs in 2020 and 2021 raised more than $50 
million.  In 2020, the smallest amount raised in an initial public offering by a SPAC was $40 million, and, in 2021, 
the smallest amount raised in an initial public offering by a SPAC was $44 million.  When viewed over a 10-year 
period, we do not expect the outcome to be different due to how SPACs are structured to address Rule 419.  See 
supra note 12.  Further, with respect to proposed Rule 140a, we do not expect any underwriters in SPAC initial 
public offerings to be small entities. 
589
  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 notes 12 and 13. 
590
  This estimate does not include business combination related shell companies. 

311 
 
private shell companies that are small entities that may engage in a business combination 
transaction.
591
  We request comment on the number of these small entities. 
E. Reporting, Recordkeeping, and Other Compliance Requirements 
We expect that the proposed specialized disclosure and other requirements applicable to 
SPACs and target private operating companies would have an incremental effect on reporting, 
recordkeeping and other compliance burdens for registrants, including small entities.  These 
proposed requirements would increase compliance costs for registrants, and compliance with 
these proposed requirements would 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 proposed rules and amendments 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.
592
  The proposed rules 
and amendments are discussed in detail in Sections II – VI above.  We discuss the economic 
effect, including the estimated costs and burdens, of the proposed rules and amendments on all 
registrants, including small entities, in Section IX above. 
Proposed Rule 145a, in deeming certain business combination transactions involving a 
reporting shell company to involve a sale of securities to the reporting shell company’s 
shareholders, may impose reporting, recordkeeping, or compliance requirements and related 
                                                 
591
  We believe that it is unlikely that a reporting company would engage in a business combination transaction with 
a shell company such that it would be subject to proposed Rule 145a.  Therefore, we are not estimating the number 
of reporting companies for purposes of this analysis. 
592
  We do not expect the proposed re-determination of smaller reporting company status following a de-SPAC 
transaction to have any effect on small entities because we do not expect any small entities to lose smaller reporting 
company following this re-determination, based on the public float and revenue thresholds in the smaller reporting 
company definition. 

312 
 
costs on small entities that are reporting shell companies to the extent such a deemed sale of 
securities would require such a small entity to register the transaction under the Securities Act or 
comply with an exemption from registration.  These costs could also include the costs associated 
with the proposed amendments to Regulation S-X, which would require an issuer in a business 
combination transaction involving a shell company to comply with financial statement reporting 
requirements that would align with those applicable in traditional initial public offerings.  The 
proposed changes to the financial statement requirements would increase compliance costs for 
small entities when these transactions are registered under the Securities Act, although we do not 
expect the increase in incremental compliance costs resulting from the proposed amendments to 
be significant because the proposed amendments would codify existing staff guidance on 
financial statement requirements for these transactions. 
F. Duplicative, Overlapping or Conflicting Federal Rules 
The proposed disclosure requirements in Subpart 1600 may partially duplicate and 
overlap with a number of existing disclosure requirements under Regulation S-K that are 
currently applicable to SPAC registered offerings and in de-SPAC transactions.  To the extent 
that the disclosure requirements in proposed Subpart 1600 overlap with these existing disclosure 
requirements, the requirements of proposed Subpart 1600 would be controlling.  Other than these 
proposed disclosure requirements, the Commission believes that the proposed new rules and 
amendments would not duplicate, overlap or conflict with other federal rules. 
G. Significant Alternatives 
The Regulatory Flexibility Act 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: 

313 
 
• 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 proposed specialized disclosure and other requirements with respect to SPAC 
registered offerings and de-SPAC transactions are intended to improve the usefulness and clarity 
of the information provided to investors so that they can make better informed decisions as to 
whether to purchase securities in SPAC registered offerings, or in secondary trading markets, 
and in voting, investment and redemption decisions in connection with de-SPAC transactions.  
They are also intended to enhance investor protections as well as provide additional clarity 
regarding the legal obligations of target companies and others in connection with a de-SPAC 
transaction.  We believe that these proposed requirements are equally appropriate for SPACs of 
all sizes that are engaged in a registered offering and for SPACs and target private operating 
companies that are engaged in a de-SPAC transaction.  As a result, we do not believe that it is 
appropriate to propose different compliance or reporting requirements for small entities; clarify, 
consolidate or simplify compliance and reporting requirements for small entities; or to exempt 
small entities from these requirements.  As noted above, in our view, a private operating 
company’s method of becoming a public company should not negatively impact investor 
protection. 
With respect to using performance rather than design standards, these proposed 
requirements use primarily design standards in order to promote uniform compliance 

314 
 
requirements for all registrants.  Further, we believe that the proposed 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. 
 Proposed Rule 145a would deem business combinations involving a reporting shell 
company and a  non-shell company to involve a sale of securities to the reporting shell 
company’s shareholders.  Given that proposed Rule 145a is intended to address potential 
disparities in the disclosure and liability protections available to reporting shell company 
shareholders, we do not believe that it is appropriate to propose different compliance or reporting 
requirements for small entities; clarify, consolidate or simplify compliance and reporting 
requirements for small entities; or to exempt small entities from the proposed rule. 
The proposed amendments to Regulation S-X 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 already report consistent with this staff guidance.  Further, the amendments are not 
expected to have any significant adverse effect on small entities (and are, in fact, expected to 
relieve burdens for some of these entities).  Accordingly, we do not believe that it is necessary to 
exempt small entities from all or part of the proposed amendments to Regulation S-X; establish 
different compliance or reporting requirements for such entities; or clarify, consolidate or 
simplify compliance and reporting requirements for small entities.  Likewise, while we primarily 
use design standards to promote consistency, we do not believe it is necessary to use 
performance standards in connection with this aspect of the proposed rules. 

315 
 
H. Request for Comment 
We encourage the submission of comments with respect to any aspect of this IRFA and 
certifications.  In particular, we request comments regarding: 
• The number of small entities that may be affected by the proposed rules and amendments; 
• The existence or nature of the potential impact of the proposed rules and amendments on 
small entities discussed in the analysis;  
• How the proposed amendments could further lower the burden on small entities; and 
• How to quantify the impact of the proposed rules and amendments. 
Commenters are asked to describe the nature of any impact and provide empirical data 
supporting the extent of the impact.  Comments will be considered in the preparation of the Final 
Regulatory Flexibility Analysis, if the proposed rules and amendments are adopted, and will be 
placed in the same public file as comments on the proposed rules and amendments themselves. 
STATUTORY AUTHORITY AND TEXT OF PROPOSED RULE AND FORM 
AMENDMENTS 
 
We are proposing 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; Sections 3, 12, 13, 14, 
15, 23(a), and 36 of the Exchange Act; and Sections 6(c) and 38(a) of the Investment Company 
Act. 
List of Subjects 
17 CFR Parts 210 
Accountants, Accounting, Banks, Banking, Employee benefit plans, Holding companies, 
Insurance companies, Investment companies, Oil and gas exploration, Reporting and 
recordkeeping requirements, Securities, Utilities. 

316 
 
17 CFR Parts 229, 230, 232, 239, 240, and 249 
Administrative practice and procedure, Reporting and recordkeeping requirements, 
Securities. 
17 CFR Part 270 
Investment companies, Reporting and recordkeeping requirements, Securities. 
In accordance with the foregoing, we are proposing to amend title 17, chapter II of the 
Code of Federal Regulations as follows: 
PART 210 – FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, 
INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, 
AND ENERGY POLICY AND CONSERVATION ACT OF 1975 
1. The authority citation for part 210 continues to read as follows: 
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 
77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n, 78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-
20, 80a-29, 80a-30, 80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, and sec. 102(c), Pub. L. 
112-106, 126 Stat. 310 (2012), unless otherwise noted. 
2. Amend § 210.1-02 by revising paragraph (d) and paragraph (w)(1) introductory 
text 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 

317 
 
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 a company that will be a predecessor to 
an issuer 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, 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 the 
regulations and forms applicable to those entities for the purpose of expressing an opinion 
thereon.  The standards of the PCAOB and U.S. GAAS may be modified or supplemented by the 
Commission.  
*   *   *   *   * 
(w) *  *  * 
(1) The term significant subsidiary means a subsidiary, including its subsidiaries, which 
meets any of the conditions in paragraph (w)(1)(i), (ii), or (iii) of this section; however if the 
registrant is a registered investment company or a business development company, the tested 
subsidiary meets any of the conditions in paragraph (w)(2) of this section instead of any of the 
conditions in this paragraph (w)(1).  In either an acquisition by a shell company (other than a 
business combination related shell company) of a business that is not the predecessor or an 
acquisition by the shell company’s predecessor, use the predecessor’s financial statements 
instead of the registrant and the subsidiaries consolidated in applying the significance tests in 
paragraphs (w)(1)(i), (ii), and (iii) of this section. 
*   *   *   *   * 

318 
 
3. Amend § 210.3-01 by revising paragraph (a) to read as follows: 
§ 210.3-01 Consolidated balance sheets. 
(a) There shall 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 shall be filed an audited 
balance sheet as of a date within 135 days of the date of filing the registration statement. 
*   *   *   *   * 
4. Amend § 210.3-05 by revising paragraph (b)(4)(ii) to read as follows: 
§ 210.3-05 Financial statements of businesses acquired or to be acquired. 
*   *   *   *   * 
(b) *   *   * 
(4) *  *  * 
(ii) A registrant, other than a foreign private issuer required to file reports on Form 6-K 
(§ 249.306 of this chapter) or a shell company (other than a business combination related shell 
company), that omits from its initial registration statement financial statements of a recently 
consummated business acquisition pursuant to paragraph (b)(4)(i) of this section must file those 
financial statements and any pro forma information specified by §§ 210.11-01 through 210.11-03 
(Article 11) under cover of Form 8-K (§ 249.308 of this chapter) no later than 75 days after 
consummation of the acquisition.  A shell company (other than a business combination related 
shell company) that acquires a business, which is not or will not be its predecessor, that omits 
from a registration statement or proxy statement the financial statements of that recently 
consummated business acquisition pursuant to (b)(4)(i) of this section shall refer to § 210.15-
01(d)(2). 

319 
 
*   *   *   *   * 
5. Amend § 210.3-14 by revising paragraph (b)(3)(ii) to read as follows: 
§ 210.3-14 Special instructions for financial statements of real estate operations acquired or 
to be acquired. 
*   *   *   *   * 
(b) *  *  * 
(3) *   *   * 
(ii) A registrant, other than a foreign private issuer required to file reports on Form 6-K 
(§ 249.306 of this chapter) or shell company (other than a business combination related shell 
company), that omits from its initial registration statement financial statements of a recently 
consummated acquisition of a real estate operation pursuant to paragraph (b)(3)(i) of this section 
must file those financial statements and any pro forma information specified by §§ 210.11-01 
through 210.11-03 (Article 11) under cover of Form 8-K (§ 249.308 of this chapter) no later than 
75 days after consummation of the acquisition.  A shell company (other than a business 
combination related shell company) that acquires a real estate operation, which is not or will not 
be its predecessor that omits from a registration statement or proxy statement the financial 
statements of a recently consummated business acquisition pursuant to (b)(4)(i) of this section 
shall refer to § 210.15-01(d)(2).  
*   *   *   *   * 
6. Amend § 210.8-02 by revising it to read as follows: 
§ 210.8-02 Annual financial statements. 
Smaller reporting companies shall file an audited balance sheet for the registrant and for 
its predecessors as of the end of each of the most recent two fiscal years, or as of a date within 

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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 rule 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 regulation may be omitted. 
*   *   *   *   * 
8. Amend § 210.11-01 by revising paragraph (d) introductory text to read as follows: 
§ 210.11-01 Presentation requirements. 
*   *   *   *   * 
(d) For purposes of this rule, the term business should be evaluated in light of the facts 
and circumstances involved and whether there is sufficient continuity of the acquired entity's 
operations prior to and after the transactions so that disclosure of prior financial information is 
material to an understanding of future operations.  A presumption exists that a separate entity, a 
subsidiary, or a division is a business.  A special purpose acquisition company, as defined in 
§ 229.1601(a), is a business for purposes of this rule.  However, a lesser component of an entity 
may also constitute a business.  Among the facts and circumstances which should be considered 
in evaluating whether an acquisition of a lesser component of an entity constitutes a business are 
the following: 

321 
 
*   *   *   *   * 
9. Add an undesignated center heading and § 210.15-01 to read as follows: 
Acquisitions of Businesses by a Shell Company (Other Than a Business Combination 
Related Shell Company) 
§ 210.15-01 Acquisitions of businesses by a shell company ( other than a business 
combination related shell company). 
(a) Audit requirements of predecessor.  The term audit (or examination), when used in 
regard to financial statements of a business 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 
PCAOB for the purpose of expressing an opinion thereon. 
(b) Financial statements.  When the registrant is a shell company (other than a business 
combination related shell company) and the financial statements of a business that will be a 
predecessor to the registrant are required in a registration statement or proxy statement, the 
registrant must file financial statements of the business in accordance with §§ 210.3-01 through 
210.3-12 and 210.10-01 (Articles 3 and 10 of Regulation S-X) as if the filing were a Securities 
Act registration statement for the initial public offering of the business's equity securities.  The 
financial statements of the business may be filed pursuant to §§ 210.8-01 through 210.8-08 
(Article 8) when that business would qualify to be a smaller reporting company based on its 
annual revenues as of the most recently completed fiscal year, if it were filing a registration 
statement itself. 
(c) Age of financial statements of the predecessor.  The financial statements of a business 
that will be a predecessor to a shell company (other than a business combination related shell 

322 
 
company) shall 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, if it were filing a registration statement itself) in determining the 
age of financial statements of the predecessor business in the registration statement or proxy 
statement of the registrant. 
(d) Acquisitions of businesses by a shell company or its predecessor that are not or will 
not be the predecessor.  Registrants shall apply § 210.3-05 (§ 210.8-04 when that business would 
qualify to be a smaller reporting company based on its annual revenues as of the most recently 
completed fiscal year if it were filing a registration statement itself) to acquisitions of businesses 
by a shell company (other than a business combination related shell company) or its predecessor 
that are not or will not be the predecessor to the registrant. 
(1) See § 210.1-02(w)(1) for rules on applying the significance tests to acquisitions of 
businesses by a shell company (other than a business combination related shell company) or its 
predecessor that are not or will not be the predecessor. 
(2) A shell company (other than a business combination related shell company) that omits 
from a registration statement or proxy statement the financial statements of a recently acquired 
business that is not or will not be its predecessor pursuant to Rule 3-05(b)(4)(i) of Regulation S-
X (§ 210.1-02(b)(4)(i)) must file those financial statements in its Form 8-K filed pursuant to Item 
2.01(f). 
(e) Financial statements of shell company.  After a shell company (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 a filing once the financial statements of the predecessor have been 

323 
 
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. 
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 
10. The authority citation for part 229 continues to read as follows: 
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 
77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 
78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-
38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C. 1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 
1904 (2010); and sec. 102(c), Pub. L. 112-106, 126 Stat. 310 (2012). 
11. Amend § 229.10 by: 
a. Revising paragraph (b); and 
b. Adding paragraph (f)(2)(iv). 
The revisions and additions read as follows. 
§ 229.10 (Item 10) General 
*   *   *   *   * 
(b) Commission policy on projections.  The Commission encourages the use in 
documents specified in Rule 175 under the Securities Act (§ 230.175 of this chapter) and Rule 
3b-6 under the Exchange Act (§ 240.3b-6 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 herein represent the Commission’s views on important factors to be 
considered in formulating and disclosing such projections.  These guidelines also apply to 

324 
 
projections of future economic performance of persons other than the registrant, such as the 
target company in a business combination transaction, that are included in the registrant’s 
Commission filings. 
(1)   Basis for projections.  The Commission believes that management must have the 
option to present in Commission filings its good faith assessment of a registrant’s future 
performance.  Management, however, must have a reasonable basis for such an assessment.  
Although a history of operations or experience in projecting may be among the factors providing 
a basis for management's assessment, the Commission does not believe that a registrant always 
must have had such a history or experience in order to formulate projections with a reasonable 
basis.  An outside review of management’s projections may furnish additional support for having 
a reasonable basis for a projection.  If management decides to include a report of such a review 
in a Commission filing, there also should be disclosure of the qualifications of the reviewer, the 
extent of the review, the relationship between the reviewer and the registrant, and other material 
factors concerning the process by which any outside review was sought or obtained.  Moreover, 
in the case of a registration statement under the Securities Act, the reviewer would be deemed an 
expert and an appropriate consent must be filed with the registration statement. 
(2)   Format for projections.  (i) In determining the appropriate format for projections 
included in Commission filings, consideration must be given to, among other things, the 
financial items to be projected, the period to be covered, and the manner of presentation to be 
used.  Although traditionally projections have been given for three financial items generally 
considered to be of primary importance to investors (revenues, net income (loss) and earnings 
(loss) per share), projection information need not necessarily be limited to these three items.  
However, management should take care to assure that the choice of items projected is not 

325 
 
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.  The period that appropriately may be covered by a projection depends to a large extent 
on the particular circumstances of the company involved.  For certain companies in certain 
industries, a projection covering a two or three year period may be entirely reasonable.  Other 
companies may not have a reasonable basis for projections beyond the current year.  
Accordingly, management should select the period most appropriate in the circumstances.  In 
addition, management, in making a projection, should disclose what, in its opinion, is the most 
probable specific amount or the most reasonable range for each financial item projected based on 
the selected assumptions.  Ranges, however, should not be so wide as to make the disclosures 
meaningless.  Moreover, several projections based on varying assumptions may be judged by 
management to be more meaningful than a single number or range and would be permitted. 
(ii) The presentation of projected measures that are not based on historical financial 
results or operational history should be clearly distinguished from projected measures that are 
based on historical financial results or operational history. 
(iii) It   generally would be misleading to present projections that are based on historical 
financial results or operational history without presenting such historical financial measure or 
operational history with equal or greater prominence. 

326 
 
(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 closely 
related, and an explanation why the non-GAAP measure was selected instead of a GAAP 
measure. 
*   *   *   *   * 
(f) *   *   * 
*   *   *   *   * 
(2) *   *   * 
(iv) Upon the consummation of a de-SPAC transaction, as defined in Item 1601(a) of 
Regulation S-K (17 CFR 229.1601(a)), 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 next periodic report. 
(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 Item 
1601(d) of Regulation S-K (17 CFR 229.1601(d)), 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. 
*   *   *   *   * 

327 
 
12. Amend § 229.601 by adding paragraph (b)(101)(i)(D) to read as follows: 
§ 229.601 (Item 601) Exhibits. 
*   *   *   *   * 
(b) *   *   * 
(101) *   *   * 
(i) *   *   * 
(D) Any filing that is subject to the exceptions listed in paragraphs (A), (B), or (C), and 
contains any disclosure required by subpart 229.1600 of this part, must include an Interactive 
Data File consisting solely of that disclosure. 
*   *   *   *   * 
13. Amend part 229 by adding 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) Fairness of the de-SPAC transaction and any related financing 
transaction. 
229.1607 (Item 1607) Reports, opinions, appraisals and negotiations. 
229.1608 (Item 1608) Tender offer filing obligations in de-SPAC transactions. 

328 
 
229.1609 (Item 1609) Financial 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 229.1600: 
(a) De-SPAC transaction.  The term de-SPAC transaction means a business combination 
such as a merger, consolidation, exchange of securities, acquisition of assets, or similar 
transaction involving a special purpose acquisition company and one or more target companies 
(contemporaneously, in the case of more than one target company). 
(b) Special purpose acquisition company (SPAC).  The term special purpose acquisition 
company means 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 
§ 230.419 (Rule 419 under the Securities Act); 
(2) Complete a de-SPAC transaction within a specified time frame; and 
(3) Return all remaining proceeds from the registered offering and any concurrent 
offerings to its shareholders if the company does not complete a de-SPAC transaction within the 
specified time frame. 
(c) SPAC sponsor.  The term SPAC sponsor means the entity and/or person(s) primarily 
responsible for organizing, directing or managing the business and affairs of a special purpose 
acquisition company, other than in their capacities as directors or officers of the special purpose 
acquisition company as applicable. 
(d) Target company.  The term target company means an operating company, business or 
assets. 

329 
 
§ 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 
and its affiliates, and whether this compensation 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 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 
§ 229.506 (Item 506 of Regulation S-K), and 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) 
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 
     
 

330 
 
Instruction 1 to Item 1602(a)(4).  If the offering includes an over-allotment option, 
include separate rows in the tabular disclosure showing remaining pro forma net tangible book 
value per share with and without the exercise of the over-allotment option. 
 (5) State whether there may be actual or potential conflicts of interest between the SPAC 
sponsor or 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) shall include, but not be limited to, a brief description of the following in plain 
English as required by § 230.421(d) of this chapter: 
(1) The manner in which the special purpose acquisition company will identify and 
evaluate potential business combination candidates and whether it will solicit shareholder 
approval for the de-SPAC transaction; 
(2) The material terms of the trust or escrow account and the amount or percentage of the 
gross offering proceeds that the special purpose acquisition company will place in the trust or 
escrow account; 
(3) The material terms of the securities being offered, including redemption rights, and 
whether the securities are the same class as those held by the SPAC sponsor and its affiliates; 
(4) The period of time in which the special purpose acquisition company intends to 
consummate a de-SPAC transaction and its plans in the event that it does not consummate a de-
SPAC transaction within this time period, including whether, and if so, how, it may extend the 
time period; any limitations on extensions, including the number of times; the consequences to 

331 
 
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, and the extent to which this 
compensation may result in a material dilution of the purchasers’ equity interests; and 
(7) Any material actual or potential conflicts of interest between the SPAC sponsor or its 
affiliates or promoters and purchasers in the offering, including those that may arise in 
determining whether to pursue a de-SPAC transaction. 
(c) Dilution.  In addition to the disclosure required by § 229.506 (Item 506 of Regulation 
S-K), describe material potential sources of future dilution following the registered offering by 
the special purpose acquisition company.  Disclose in tabular format 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. 
§ 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. 

332 
 
(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 executive officers, directors or affiliates in 
determining whether to proceed with a de-SPAC transaction. 
(6) Disclose the nature (e.g., cash, shares of stock, warrants and rights) and amounts of all 
compensation that has 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 special purpose 
acquisition company and its affiliates.  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.  Provide an organizational chart that shows 
the relationship between the special purpose acquisition company, the SPAC sponsor, and the 
SPAC sponsor’s affiliates. 
(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. 

333 
 
(9) Disclose, in a tabular format to the extent practicable, the material terms of any 
agreement, arrangement or understanding regarding restrictions on whether and when the SPAC 
sponsor and its affiliates may sell securities of the special purpose acquisition company, 
including the date(s) on which the agreement, arrangement or understanding may expire; the 
natural persons and entities subject to such an agreement, arrangement or understanding; any 
exceptions under such an agreement, arrangement or understanding; and any terms that would 
result in an earlier expiration of such an agreement, arrangement or understanding. 
(b) Conflicts of interest.  Describe any actual or potential material conflict of interest, 
including any material conflict of interest 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 the SPAC sponsor, executive officers and directors or 
the manner in which the SPAC sponsor compensates its executive officers and directors, 
between: 
(1) The SPAC sponsor or its affiliates or the special purpose acquisition company’s 
officers, directors, or promoters; and 
(2) Unaffiliated security holders. 
(c) 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: 

334 
 
(1) State whether the special purpose acquisition company reasonably believes that the 
de-SPAC transaction is fair or unfair to unaffiliated security holders, and whether the special 
purpose acquisition company or the SPAC sponsor has received a report, opinion or appraisal 
from an outside party regarding the fairness of the transaction. 
(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, and whether this compensation 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 there may be 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.  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) shall include, but not be limited to, 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) Whether the special purpose acquisition company reasonably believes that the de-
SPAC transaction is fair or unfair to unaffiliated security holders, the bases for such belief, and 

335 
 
whether the special purpose acquisition company or the SPAC sponsor has received any report, 
opinion or appraisal from an outside party concerning the fairness of the de-SPAC transaction; 
(3) Any material actual or potential conflicts of interest between the SPAC sponsor or its 
affiliates or promoters and unaffiliated security holders in connection with the de-SPAC 
transaction; 
(4) In a tabular format, the terms and amount of the compensation received or to be 
received by the SPAC sponsor and its affiliates in connection with the de-SPAC transaction or 
any related financing transaction, and whether that compensation has resulted or may result in a 
material dilution of the equity interests of unaffiliated security holders of the special purpose 
acquisition company; 
(5) The material terms of any financing transactions that have occurred or will occur in 
connection with the consummation of the de-SPAC transaction, the anticipated use of proceeds 
from these financing transactions and the dilutive impact, if any, of these financing transactions 
on unaffiliated security holders; and 
(6) The rights of security holders to redeem the outstanding securities of the special 
purpose acquisition company and the potential impact of redemptions on the value of the 
securities owned by non-redeeming shareholders. 
(c) Dilution.  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. 
(1) Provide sensitivity analysis disclosure in tabular format that expresses the amount of 
potential dilution under a range of reasonably likely redemption levels.  At each redemption level 
in the sensitivity analysis, quantify the dilutive impact on non-redeeming shareholders of each 

336 
 
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.  
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. 
(2) Provide a description of the model, methods, assumptions, estimates, and parameters 
necessary to understand the sensitivity analysis disclosure. 
§ 229.1605 (Item 1605) Background of and reasons for the de-SPAC transaction; terms of 
the de-SPAC transaction; effects. 
(a) Furnish a summary of the background of the de-SPAC transaction.  Such summary 
shall include, but not be limited to, 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 for engaging in the de-SPAC 
transaction and 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 security holders of the 
combined company as a result of the de-SPAC transaction after the completion of the de-SPAC 
transaction; 

337 
 
(5) A brief statement as to the accounting treatment of the de-SPAC transaction, if 
material; and 
(6) The Federal income tax consequences of the de-SPAC transaction, if material. 
(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.  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 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. 
(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) Fairness of the de-SPAC transaction and any related financing 
transaction. 

338 
 
(a) Fairness.  State whether the special purpose acquisition company reasonably believes 
that the de-SPAC transaction and any related financing transaction are fair or unfair to 
unaffiliated security holders of the special purpose acquisition company.  If any director voted 
against, or abstained from voting on, approval of the de-SPAC transaction or any related 
financing transaction, identify the director, and indicate, if known, after making reasonable 
inquiry, the reasons for the vote against the transaction or abstention. 
(b) Factors considered in determining fairness.  Discuss in reasonable detail the material 
factors upon which the belief stated in paragraph (a) of this section is based and, to the extent 
practicable, the weight assigned to each factor.  Such factors shall include, but not be limited to, 
the valuation of the target company, the consideration of any financial projections, any report, 
opinion or appraisal described in § 229.1607 (Item 1607 of Regulation S-K), and the dilutive 
effects 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 or any 
related financing transaction is structured so that approval of at least a majority of unaffiliated 
security holders is required. 
(d) Unaffiliated representative.  State whether or not a majority of directors 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 or any related financing transaction and/or preparing a report concerning 
the fairness of the de-SPAC transaction or any related financing transaction. 
(e) Approval of directors.  State whether or not the de-SPAC transaction or any related 
financing transaction was approved by a majority of the directors of the special purpose 
acquisition company who are not employees of the special purpose acquisition company. 

339 
 
Instruction 1 to Item 1606: A statement that the special purpose acquisition company has 
no reasonable belief as to the fairness or unfairness of the de-SPAC transaction or any related 
financing transaction to unaffiliated security holders will not be considered sufficient disclosure 
in response to paragraph (a) of this section. 
§ 229.1607 (Item 1607) Reports, opinions, appraisals and negotiations. 
(a) Report, opinion or appraisal.  State whether or not the special purpose acquisition 
company or SPAC sponsor has 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 special 
purpose acquisition company, SPAC sponsor or security holders who are not affiliates. 
(b) Preparer and summary of the report, opinion or appraisal.  For each report, opinion 
or appraisal described in response to paragraph (a) of this section or any negotiation or report 
described in response to § 229.1606(d) (Item 1606(d) of Regulation S-K) concerning the terms 
of the transaction: 
(1) Identify the outside party and/or unaffiliated representative; 
(2) Briefly describe the qualifications of the outside party and/or unaffiliated 
representative; 
(3) Describe the method of selection of the outside party and/or unaffiliated 
representative; 
(4) Describe any material relationship that existed during the past two years or is 
mutually understood to be contemplated and any compensation received or to be received as a 
result of the relationship between: 
(i) The outside party, its affiliates, and/or unaffiliated representative; and 

340 
 
 (ii) The special purpose acquisition company, the SPAC sponsor and/or their respective 
affiliates, 
(5) 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 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 Item 1607(b): The information called for by paragraphs (b)(1), (2),  and 
(3) of this section must be given with respect to the firm that provides the report, opinion, or 
appraisal rather than the employees of the firm that prepared the report. 
(c) All reports, opinions or appraisals referred to in paragraph (a) of this section shall 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 in de-SPAC transactions. 
If the special purpose acquisition company files a  Schedule TO ( § 240.14d-100) pursuant 
to § 240.13e-4(c)(2) (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) of Schedule 14A, as applicable, in 

341 
 
addition to the information otherwise required by Schedule TO.  Such redemption shall be 
conducted in compliance with all other provisions of Rule 13e-4 and Regulation 14E. 
§ 229.1609 (Item 1609) Financial projections in de-SPAC transactions. 
(a) With respect to any projections disclosed in the filing, 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 factors that may impact such assumptions.  The disclosure 
referred to in this section should include 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. 
(c) If the projections relate to the performance of the special purpose acquisition 
company, state whether the projections reflect the view of the special purpose acquisition 
company’s management or board about its future performance as of the date of the filing.  If the 
projections relate to the target company, disclose whether 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 about its future performance as of the date of the filing.  If the projections 
no longer reflects the views of the special purpose acquisition company’s or the target 
company’s management or board regarding the future performance of their respective companies 
as the date of the filing, state the purpose of disclosing the projections and the reasons for any 
continued reliance by the management or board on the projections.  
§ 229.1610 (Item 1610) Structured data requirement. 
Provide the disclosure required by this subpart 229.1600 in an Interactive Data File in 
accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual. 

342 
 
PART 230–-GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933 
14. The general authority citation for part 230 continues to read as follows: 
Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 
78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 
80a-29, 80a-30, and 80a-37, and Pub. L. No. 112-106, sec. 201(a), sec. 401, 126 Stat. 313 
(2012), unless otherwise noted. 
*  *  *  *  * 
15. Revise § 230.137(d)(1) to read as follows: 
§ 230.137 Publications or distributions of research reports by brokers or dealers that are 
not participating in an issuer’s registered distribution of securities. 
*   *   *   *   * 
(d) *  *  * 
(1) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 
*   *   *   *   * 
16. Revise § 230.138(a)(4)(i) to read as follows: 
§ 230.138 Publications or distributions of research reports by brokers or dealers about 
securities other than those they are distributing. 
(a) *  *  * 
(4) *  *  * 
(i) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 
*   *   *   *   * 
17. Revise § 230.139(a)(1)(ii)(A)  to read as follows: 

343 
 
§ 230.139 Publications or distributions of research reports by brokers or dealers 
distributing securities. 
(a) *  *  * 
(1) *  *  * 
(ii) *  *  * 
(A) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 
*   *   *   *   * 
18. Add § 230.140a to read as follows: 
§ 230.140a Definition of “distribution” in section 2(a)(11) for certain parties 
A person who has acted as an underwriter of the securities of a special purpose 
acquisition company and takes steps to facilitate the de-SPAC transaction, or any related 
financing transaction, or otherwise participates (directly or indirectly) in the de-SPAC 
transaction will be deemed 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 Act.  Terms 
used in this subsection have the same definitions as in Item 1601 of Regulation S-K (17 CFR 
229.1601). 
19. 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 rule, a reporting shell company is a company 

344 
 
other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB (§ 229.1101(b) of 
this chapter), that has: 
(1) No or nominal operations;  
(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; and 
(3) 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.). 
*   *   *   *   * 
20. Amend § 230.163A by: 
a. Removing the preliminary note; 
b. Adding an introductory paragraph; and 
c. Revising paragraph (b)(3)(i). 
The revision and addition read as follows: 
§ 230.163A Exemption from section 5(c) of the Act for certain communications made by or 
on behalf of issuers more than 30 days before a registration statement is filed. 
Attempted compliance with this section does not act as an exclusive election and the 
issuer also may claim the availability of any other applicable exemption or exclusion.  Reliance 
on this section does not affect the availability of any other exemption or exclusion from the 
requirements of section 5 of the Act. 
*   *   *   *   * 

345 
 
(b) *  *  * 
(3) *  *  * 
(i) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 
*   *   *   *   * 
21. Amend § 230.164 by: 
a. Removing the preliminary notes; 
b. Adding an introductory paragraph; and 
c. Revising paragraph (e)(2)(i). 
The revision and addition read as follows: 
§ 230.164 Post-filing free writing prospectuses in connection with certain registered 
offerings. 
This section is not available for any communication that, although in technical 
compliance with this section, is part of a plan or scheme to evade the requirements of section 5 
of the Act.  Attempted compliance with this section does not act as an exclusive election and the 
person relying on this section also may claim the availability of any other applicable exemption 
or exclusion.  Reliance on this section does not affect the availability of any other exemption or 
exclusion from the requirements of section 5 of the Act. 
*   *   *   *   * 
(e) *  *  * 
(2) *  *  * 
(i) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 
*   *   *   *   * 
22. Amend § 230.174 by revising the heading and paragraph (g) to read as follows: 

346 
 
§ 230.174 Delivery of prospectus by dealers; exemptions under section 4(a)(3) of the Act. 
*   *   *   *   * 
 (g) If the registration statement relates to an offering of securities of a blank check 
company issuing penny stock, as defined in Rule 405 (§ 230.405), the statutory period for 
prospectus delivery specified in section 4(a)(3) of the Act shall not terminate until 90 days after 
the date funds and securities are released from the escrow or trust account pursuant to Rule 419 
under the Act (17 CFR 230.419). 
*   *   *   *   * 
23. Amend § 230.405 by: 
a. Adding the definition for “blank check company” in alphabetical order; 
b. Adding the definition for “blank check company issuing penny stock” in 
alphabetical order; 
c. Revising paragraph (1)(ii)(A) in the definition for “ineligible issuer”; and 
d. Adding paragraph (3)(iv) to the definition for “smaller reporting company”. 
The additions and revisions read as follows: 
§ 230.405 Definitions of terms. 
*   *   *   *   * 
Blank check company.  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. 
*   *   *   *   * 
Blank check company issuing penny stock.  The term blank check company issuing penny 
stock means a company that is subject to § 230.419 of this chapter. 

347 
 
*   *   *   *   * 
Ineligible issuer. (1) *   *   * 
 (ii) *   *   * 
(A) A blank check company issuing penny stock (as defined in § 230.405); 
*   *   *   *   * 
Smaller reporting company. *   *   * 
(3) *   *   * 
(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 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 next periodic report. 
(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. 
*   *   *   *   * 
24. Amend § 230.419 by: 
a. Revising the heading; 

348 
 
b. Revising paragraph (a)(1); 
c. Removing paragraph (a)(2); 
d. Redesignating paragraph (a)(3) as paragraph (a)(2); and 
e. Revising paragraph (b)(1)(i). 
The revisions read as follows: 
§ 230.419 Offerings by blank check companies issuing penny stock. 
(a) *  *  * 
(1) The provisions of this section shall apply to every registration statement filed under 
the Act relating to an offering by a blank check company that: 
(i) Is a development stage company; and 
(ii) Is issuing “penny stock,” as defined in § 240.3a51-1 of this chapter (Rule 3a51-1) 
under the Securities Exchange Act of 1934 (“Exchange Act”). 
*  *  *  *  *  
(b) *  *  * 
(1) *  *  * 
(i) Except as otherwise provided in this section or prohibited by other applicable law, all 
securities issued in connection with an offering by a blank check company subject to this section 
and the gross proceeds from the offering shall be deposited promptly into: 
*   *   *   *   * 
25. Revise § 230.430B(b)(2)(iv)(A) to read as follows: 
§ 230.430B Prospectus in a registration statement after effective date. 
(b) *  *  * 
(2) *  *  * 

349 
 
(iv) *  *  * 
(A) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 
*   *   *   *   * 
26. Revise § 230.437a(a)(1) to read as follows: 
§ 230.437a Written consents. 
(a) *  *  * 
(1) Are not a blank check company issuing penny stock, as defined in § 230.405 (Rule 
405); and 
*   *   *   *   * 
PART 232 — REGULATION S-T — GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS 
27. The general authority citation for part 232 continues to read in part 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, 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted. 
*   *   *   *   * 
28. 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)(1)(i); 
c. Removing the period and adding in its place “; and” in paragraph (b)(1)(ii); 
d. Adding paragraph (b)(1)(iii); 
e. Adding paragraph (b)(4); and 
f. Revising Note 1 to § 232.405. 

350 
 
The revisions and additions 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), paragraph (101) of Part II 
–   Information Not Required to be Delivered to Offerees or Purchasers of Form F-10 (§ 239.40 of 
this chapter), Note D.5 of Exchange Act Rule 14a-101 (§ 240.14a-101 of this chapter), General 
Instruction L of Exchange Act Rule 14d-100 (240.14d-100 of this chapter), paragraph 101 of the 
Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the 
General Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General 
Instructions to Form 6-K (§ 249.306 of this chapter), 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), and General 
Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter) 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), paragraph (101) of Part II –   Information Not Required to be Delivered to 

351 
 
Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter), Note D.5 of Exchange Act Rule 
14a-101 (§ 240.14a-101 of this chapter), General Instruction L of Exchange Act Rule 14d-100 
(240.14d-100 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20-F (§ 
249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40-F (§ 249.240f 
of this chapter), paragraph C.(6) of the General Instructions to Form 6-K (§ 249.306 of this 
chapter), 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), or General Instruction C.4 of Form N-CSR (§§ 249.331 
and 274.128 of this chapter), as applicable;  
*   *   *   *   * 
(4) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, Item 
601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter), paragraph (101) of Part II - 
Information Not Required to be Delivered to Offerees or Purchasers of Form F-10 (§ 239.40 of 
this chapter), Note D.5 of Exchange Act Rule 14a-101 (§ 240.14a-101 of this chapter), General 
Instruction L of Exchange Act Rule 14d-100 (240.14d-100 of this chapter), paragraph 101 of the 
Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the 
General Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General 
Instructions to Form 6-K (§ 249.306 of this chapter), 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), 

352 
 
General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this chapter); or General 
Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter). 
*   *   *   *   * 
(b) *   *   * 
(1) *   *   * 
(iii) The disclosure set forth in paragraph (4) of this section. 
*   *   *   *   * 
(4) The disclosure provided under Regulation S-K (17 CFR 229) and related provisions 
that is required to be tagged, including, as applicable: 
(a) The information required by Subpart 1600 of Regulation S-K (§ 229.1601 through 
§ 229.1610 of this chapter). 
*   *   *   *   * 
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 of this chapter (Form S-1), § 239.13 of this chapter (Form S-3), § 239.25 of this chapter 
(Form S-4), § 239.18 of this chapter (Form S-11), § 239.31 of this chapter (Form F-1), § 239.33 
of this chapter (Form F-3), § 239.34 of this chapter (Form F-4), § 249.310 of this chapter (Form 
10-K), § 249.308a of this chapter (Form 10-Q), and § 249.308 of this chapter (Form 8-K).  Note 
D.5 of Section 240.14a-101 of this chapter (Note D.5 of Exchange Act Rule 14a-101) specifies 
the circumstances under which an Interactive Data File must be submitted with respect to 
§ 240.14a-101 of this chapter (Schedule 14A).  General Instruction L of Section 240.14d-100 of 
this chapter (General Instruction L) of Exchange Act Rule 14d-100) specifies the circumstances 

353 
 
under which an Interactive Data File must be submitted with respect to § 240.14d-100 of this 
chapter (Schedule TO).  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 of this chapter (Form 40-F) and § 249.306 of this chapter (Form 6-K).  
Section 229.601(b)(101) (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 
17 CFR 210.6-01 through 210.6-10 (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 

354 
 
(§§ 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), 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 
29. The general authority citation for part 239 continues to read as follows: 
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, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat. 
312, unless otherwise noted. 
*  *  *  *  * 
30. Amend Form S-1 (referenced in § 239.11) by adding General Instruction VIII to 
read as follows: 
Note: The text of Form S-1 does not, and this amendment will not, appear in the Code of 
Federal Regulations. 
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 

355 
 
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, attention is 
directed to the requirements of Form S-4 applicable to de-SPAC transactions, including, but not 
limited to, General Instruction L. 
31. 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. 
The addition and revisions read as follows: 
Note: The text of Form S-4 does not, and this amendment will not, appear in the Code of 
Federal Regulations. 
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 

356 
 
of Items 1603 through 1607 and 1609 of Regulation S-K (17 CFR 229.1603 through 229.1607 
and 229.1609), as well as the structured data provision of Item 1610 of Regulation S-K (17 CFR 
229.1610), shall apply in addition to the provisions of this Form.  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 defined in Item 1601(b) of Regulation S-K (17 CFR 229.1601(b)), in a de-SPAC transaction, 
the term “registrant” for purposes of the disclosure requirements of this Form shall mean the 
special purpose acquisition 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 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. 

357 
 
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 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E 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 action is to be taken 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, provide the financial statements required by § 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 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.  If the company being acquired will 
be a predecessor to a registrant that is a shell company, see § 210.15-01(a). 

358 
 
*   *   *   *   * 
SIGNATURES 
*   *   *   *   * 
Instructions. 
1. The registration statement shall be signed by the registrant, its principal executive officer or 
officers, its principal financial officer, its controller or principal accounting officer, and by at 
least a majority of the board of directors or persons performing similar functions.  If the 
registrant is a foreign person, the registration statement shall also be signed by its authorized 
representative in the United States.  Where the registrant is a limited partnership, the registration 
statement shall be signed by a majority of the board of directors of any corporate general partner 
signing the registration statement.  If the securities to be registered on this Form will be issued by 
the special purpose acquisition company in a de-SPAC transaction, as such terms are defined in 
Items 1601(b) and (a) of Regulation S-K, the term “registrant” for purposes of this instruction 
shall mean the special purpose acquisition and the target company, as such term is defined in 
Item 1601(d) of Regulation S-K. 
*   *   *   *   * 
32. Amend Form F-1 (referenced in § 239.31) by adding General Instruction VII to 
read as follows: 
Note: The text of Form F-1 does not, and this amendment will not, appear in the Code of 
Federal Regulations. 
FORM F-1 
*   *   *   *   * 
GENERAL INSTRUCTIONS 

359 
 
*   *   *   *   * 
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, attention is 
directed to the requirements of Form F-4 applicable to de-SPAC transactions, including, but not 
limited to, General Instruction I. 
*  *  *  *  * 
33. Amend Form F-4 (referenced in § 239.34) by: 
a. Adding General Instruction I; 
b. Revising Instruction 1 to paragraph (b)(5) of Item 17; and 
c. Revising the Instructions to paragraph (b)(5) and (b)(6) of Item 17; and 
d. Revising Instruction 1 to the signature block. 
The addition and revisions read as follows: 
Note: The text of Form F-4 does not, and this amendment will not, appear in the Code of 
Federal Regulations. 
FORM F-4 
*   *   *   *   * 

360 
 
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), as well as the structured data provision of Item 1610 of Regulation S-K (17 CFR 
229.1610), shall apply in addition to the provisions of this Form.  To the extent that the 
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 defined in Item 1601(b) 
of Regulation S-K (17 CFR 229.1601(b)), in a de-SPAC transaction, the term “registrant” for 
purposes of the disclosure requirements of this Form shall mean the special purpose acquisition 
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 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; 

361 
 
d. 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 
e. 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 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E 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 action is to be taken 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.  If the foreign company being 
acquired will be a predecessor to a registrant that is a shell company, see § 210.15-01(a). 

362 
 
*   *   *   *   * 
Instructions to paragraph (b)(5) and (b)(6): 
If the financial statements required by paragraphs (b)(5) and (b)(6) are prepared on the basis of a 
comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to 
U.S. GAAP in accordance with Item 18 of Form 20-F (§ 249.220f of this chapter) if the foreign 
business being acquired will be a predecessor to the issuer that is a shell company or, in all other 
circumstances, with Item 17 of Form 20-F (§ 249.220f of this chapter) unless a reconciliation is 
unavailable or not obtainable without unreasonable cost or expense.  At a minimum, provide a 
narrative description of all material variations in accounting principles, practices and methods 
used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. when 
the financial statements are prepared on a basis other than U.S. GAAP. 
SIGNATURES 
*   *   *   *   * 
Instructions 
1. The registration statement 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 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 
the special purpose acquisition company in a de-SPAC transaction, as such terms are defined in 
Items 1601(b) and (a) of Regulation S-K, the term “registrant” for purposes of this instruction 

363 
 
shall mean the special purpose acquisition and the target company, as such term is defined in 
Item 1601(d) of Regulation S-K. 
*   *   *   *   * 
PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE 
ACT OF 1934 
34. The general authority citation for part 240 continues to read 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, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 
78o, 78o4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 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; Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and sec. 503 and 602, Pub. L. 
112-106, 126 Stat. 326 (2012), unless otherwise noted. 
*  *  *  *  * 
35. Amend § 240.12b-2 by adding paragraph (3)(iv) to the definition of “smaller 
reporting company” to read as follows: 
§ 240.12b-2 Definitions. 
*  *  *  *  * 
Smaller reporting company. *   *   * 
(3) *   *   * 
(iv) Upon the consummation of a de-SPAC transaction, as defined in Item 1601(a) of 
Regulation S -K (17 CFR 229.1601(a)), 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-

364 
 
K, following the de-SPAC transaction and reflect this re-determination in in its next periodic 
report. 
(A) Public float is measured as of a date within 4 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 Item 
1601(d) of Regulation S-K (17 CFR 229.1601(d)), 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. 
*   *   *   *   * 
36. 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 held or action is taken, or the 
maximum number of days permitted for disseminating the proxy statement under the applicable 
laws of the jurisdiction of incorporation or organization. 
37. Amend § 240.14a-101 by adding paragraph D.5 to the Notes and paragraph (f) to 
Item 14 to read as follows: 

365 
 
*   *   *   *   * 
§ 240.14a-101 Schedule 14A. Information required in proxy statement. 
*   *   *   *   * 
Notes  *   *   *   
D. *   *   *   
5. Interactive Data File.   An Interactive Data File must be included in accordance with 
§ 232.405 of this chapter (Rule 405 of Regulation S-T) and the EDGAR Filer Manual where 
applicable pursuant to Item 14(f) of this Schedule and § 229.1610 of this chapter ( Item 1610 of 
Regulation S-K). 
*   *   *   *   * 
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 
through 229.1607 and 229.1609 (Items 1603 through 1607 and 1609 of Regulation S-K), as well 
as the structured data provision of § 229.1610 (Item 1610 of Regulation S-K), shall apply to the 
transaction in addition to the provisions of this schedule.  To the extent that the disclosure 
requirements of Subpart 229.1600 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 of this chapter (Item 101 of Regulation S-K), 
description of business; 

366 
 
(ii) Information required by § 229.102 of this chapter (Item 102 of Regulation S-K), 
description of property;  
(iii) Information required by § 229.103 of this chapter (Item 103 of Regulation S-K), 
legal proceedings; 
(iv) Section 229.304 of this chapter (Item 304 of Regulation S-K), changes in and 
disagreements with accountants on accounting and financial disclosure; 
(v) Information required by § 229.403 of this chapter (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; 
(vi) Information required by § 229.701 of this chapter (Item 701 of Regulation S-K), 
recent sales of unregistered securities; and 
(vii) If any directors are appointed without action by the security holders of the special 
purpose acquisition company, §§ 229.103(c)(2), 229.401, and 229.404(a) and (b) of this chapter 
(Items 103(c)(2), 401, and 404(a) and (b) of Regulation S-K). 
*   *   *   *   * 
38. 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 held or action is taken, or the maximum number of days permitted 

367 
 
for disseminating the information statement under the applicable laws of the jurisdiction of 
incorporation or organization. 
39. Amend § 240.14d-100 by: 
a. Redesignating General Instruction K as General Instruction M; and 
b. Adding new General Instructions K  and L. 
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. De-SPAC Transactions.  If the filing relates to a de-SPAC transaction, as defined in 
§ 229.1601(a) of this chapter (Item 1601(a) of Regulation S-K), then the disclosure provisions of 
§§ 229.1603 through 229.1609 of this chapter (Items 1603 through 1609 of Regulation S-K), as 
well as the structured data provision of § 229.1610 of this chapter (Item 1610 of Regulation S-
K), shall apply to the transaction in addition to the provisions of this statement.  To the extent 
that the disclosure requirements of Subpart 229.1600 of this chapter are inconsistent with the 
disclosure requirements of this filing, the requirements of Subpart 229.1600 of this chapter are 
controlling. 
L. Interactive Data File.  An Interactive Data File must be included in accordance with 
§ 232.405 of this chapter (Rule 405 of Regulation S-T) and the EDGAR Filer Manual where 

368 
 
applicable pursuant to Item 14(f) of § 240.14a-101 of this chapter ( Schedule 14A) and 
§ 229.1610 of this chapter ( Item 1610 of Regulation S-K). 
*   *   *   *   * 
PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 
40. 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), and Sec. 72001, Pub. L. 114-94, 129 Stat. 1312 
(2015), unless otherwise noted. 
 Section 249.220f is also issued under secs. 3(a), 202, 208, 302, 306(a), 401(a), 401(b), 
406 and 407, Pub. L. 107-204, 116 Stat. 745, and secs. 2 and 3, Pub. L. 116-222, 134 Stat. 1063. 
*  *  *  *  * 
 Section 249.308 is also issued under 15 U.S.C. 80a-29 and 80a-37. 
*  *  *  *  * 
41. Amend Form 20-F (referenced in § 249.220f) by adding Instruction 4 to Item 8 to 
read as follows: 
Note: The text of Form 20-F does not, and this amendment will not, appear in the Code of 
Federal Regulations. 
FORM 20-F 
*   *   *   *   * 
Item 8. Financial Information 
*   *   *   *   * 
Instructions to Item 8: 

369 
 
*   *   *   *   * 
4. When the issuer is a shell company that will acquire a business that will be its predecessor, 
provide the information required by § 240.15-01 (Rule 15-01 of Regulation S-X). 
*   *   *   *   * 
42. Amend Form 8-K (referenced in § 249.308) by r evising paragraph (f) of Item 2.01 
by removing the phrase “the registrant were filing a general form for registration of securities on 
Form 10” and adding in its place “the acquired business were filing a general form for 
registration of securities on Form 10”.  The revision reads as follows: 
Note: The text of Form 8-K does not, and this amendment will not, appear in the Code of 
Federal Regulations. 
FORM 8-K 
*   *   *   *   * 
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, disclose the 
information that would be required if the acquired business 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.  
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 

370 
 
CFR 240.12b-2), the registrant may identify the filing in which that disclosure is included instead 
of including that disclosure in this report. 
*   *   *   *   * 
Part 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940 
43. The authority citation for part 270 continues to read in part as follows: 
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, and Pub. L. 111-203, sec. 939A, 
124 Stat. 1376, unless otherwise noted. 
44. Add § 270.3a-10 to read as follows: 
§ 270.3a-10 Special Purpose Acquisition Companies 
(a) Notwithstanding section 3(a)(1)(A) of the Act, a special purpose acquisition company 
(“SPAC”) will not be deemed to be an investment company; provided that: 
(1) The SPAC’s assets consist solely of Government securities, securities issued by 
government money market funds as defined in § 270.2a-7(a)(14), and cash items prior to 
completion of the de-SPAC transaction; 
(2) The assets set forth in paragraph (a)(1) of this section are not at any time acquired or 
disposed of for the primary purpose of recognizing gains or decreasing losses resulting from 
market value changes; 
(3) The SPAC: 
(i) Seeks to complete a single de-SPAC transaction as a result of which: 
(A) The surviving company, either directly or through a primarily controlled company, 
will be primarily engaged in the business of the target company or companies, which business is 
not that of an investment company, and 

371 
 
(B ) The surviving company will have at least one class of securities listed for trading on a 
national securities exchange; 
(ii) Files a Form 8-K with the Commission, no later than 18 months after the effective date 
of its initial registration statement, disclosing an agreement to engage in the de-SPAC transaction 
with at least one target company; and 
(iii) Completes the de-SPAC transaction no later than 24 months after the effective date of 
its initial registration statement. 
(4) Any assets of the SPAC: 
(i) That are not used in connection with the de-SPAC transaction; or 
(ii) I n the event of a failure of the SPAC to file a Form 8-K within the time frame set 
forth in paragraph (a)(3)(ii) of this section or complete a de-SPAC transaction within the time 
frame set forth in paragraph (a)(3)(iii) of this section 
will be distributed in cash to investors as soon as reasonably practicable thereafter; 
(5) The SPAC is primarily engaged in the business of seeking to complete a single de-
SPAC transaction, as set forth in paragraphs (a)(3) of this section and evidenced by: 
(i) The activities of its officers, directors and employees; 
(ii) Its public representations of policies; 
(iii) I ts historical development; and 
(iv) An appropriate resolution of its board of directors, which resolution or action has 
been recorded contemporaneously in its minute books or comparable documents; and 
(6) The SPAC does not hold itself out as being primarily engaged in the business of 
investing, reinvesting or trading in securities. 
(b) For purposes of this section: 

372 
 
(1) Initial registration statement means the registration statement that the SPAC filed 
under the Securities Act of 1933 for its initial public offering. 
(2) Primarily controlled company means an issuer that: 
(i) Is controlled within the meaning of section 2(a)(9) of the Act by the surviving 
company following a de-SPAC transaction with a degree of control that is greater than that of 
any other person; and 
(ii) Is not an investment company. 
(3) Surviving company means the public company issuer that survives a de-SPAC 
transaction and in which the shareholders of the SPAC immediately prior to the de-SPAC 
transaction will own equity interests immediately following the de-SPAC transaction.  
(4) De-SPAC transaction has the same meaning as defined in § 229.1601(a) of this 
chapter (Item 1601(a) of Regulation S-K). 
(5) Special purpose acquisition company has the same meaning as defined in 
§ 229.1601(b) of this chapter (Item 1601(b) of Regulation S-K). 
(6) Tar
get company has the same meaning as defined in § 229.1601(d) of this chapter 
(Item 1601(d) of Regulation S-K). 
By the Commission. 
Dated: March 30, 2022. 
 
 
Vanessa A. Countryman, 
Secretary. 

Conformed to Federal Register version 

SECURITIES AND EXCHANGE COMMISSION 

17 CFR Parts 210, 229, 230, 232, 239, 240, 249, and 270 

[Release Nos. 33-11048; 34-94546; IC-34549; File No. S7-13-22] 

RIN 3235-AM90 

Special Purpose Acquisition Companies, Shell Companies, and Projections 

AGENCY: Securities and Exchange Commission. 

ACTION: Proposed rules. 

SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing rules 

intended to enhance investor protections in initial public offerings by special purpose acquisition 

companies (“SPACs”) and in subsequent business combination transactions between SPACs and 

private operating companies.  Specifically, we are proposing specialized disclosure requirements 

with respect to, among other things, compensation paid to sponsors, conflicts of interest, dilution, 

and the fairness of these business combination transactions.  The proposed new rules and 

amendments to certain rules and forms under the Securities Act of 1933 and the Securities 

Exchange Act of 1934 would address the application of disclosure, underwriter liability, and 

other provisions in the context of, and specifically address concerns associated with, business 

combination transactions involving SPACs as well as the scope of the Private Securities 

Litigation Reform Act of 1995.  Further, we are proposing a rule that would deem any business 

combination transaction involving a reporting shell company, including a SPAC, to involve a 

sale of securities to the reporting shell company’s shareholders and are proposing to amend a 

number of financial statement requirements applicable to transactions involving shell companies.  

In addition, we are proposing to update our guidance regarding the use of projections in 

Commission filings as well as to require additional disclosure regarding projections when used in 



2 
 

connection with business combination transactions involving SPACs.  Finally, we are proposing 

a new safe harbor under the Investment Company Act of 1940 that would provide that a SPAC 

that satisfies the conditions of the proposed rule would not be an investment company and 

therefore would not be subject to regulation under that Act. 

DATES: Comments should be received on or before June 13, 2022. 

ADDRESSES: Comments may be submitted by any of the following methods: 

Electronic comments: 

• Use the Commission’s internet comment form 

(https://www.sec.gov/rules/submitcomments.htm); or 

• Send an email to [email protected].  Please include File Number S7-13-22 on the 

subject line; or. 

Paper comments: 

• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange 

Commission, 100 F Street NE, Washington, DC 20549-1090. 

All submissions should refer to File Number S7-13-22.  This file number should be 

included on the subject line if email is used.  To help the Commission process and review your 

comments more efficiently, please use only one method.  The Commission will post all 

comments on the Commission’s website (http://www.sec.gov/rules/proposed.shtml).  Comments 

are also available for website viewing and printing in the Commission’s Public Reference Room, 

100 F Street NE, Washington, DC 20549 on official business days between the hours of 10 a.m. 

and 3 p.m.  Operating conditions may limit access to the Commission’s Public Reference Room.  

All comments received will be posted without change.  Persons submitting comments are 

https://www.sec.gov/rules/submitcomments.htm
http://www.sec.gov/rules/proposed.shtml


3 
 

cautioned that we do not redact or edit personal identifying information from comment 

submissions.  You should submit only information that you wish to make available publicly. 

Studies, memoranda, or other substantive items may be added by the Commission or staff 

to the comment file during this rulemaking.  A notification of the inclusion in the comment file 

of any such materials will be made available on our website.  To ensure direct electronic receipt 

of such notifications, sign up through the “Stay Connected” option at www.sec.gov to receive 

notifications by email. 

FOR FURTHER INFORMATION CONTACT: Charles Kwon, Office of Rulemaking, 

Division of Corporation Finance, at (202) 551-3430; or with respect to proposed Rules 140a and 

145a under the Securities Act, Adam Turk, Office of Chief Counsel, Division of Corporation 

Finance, at (202) 551-3500; with respect to proposed Rule 15-01 of Regulation S-X, Ryan 

Milne, Office of Chief Accountant, Division of Corporation Finance, at (202) 551-3400; with 

respect to the proposed 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 proposed Rule 3a-10 under the Investment Company Act,  

Rochelle Kauffman Plesset, Seth Davis, or Taylor Evenson, Senior Counsels; Lisa Reid Ragen, 

Branch Chief; or Thoreau Bartmann, Assistant Director, Chief Counsel’s Office, Division of 

Investment Management, at (202) 551-6825; U.S. Securities and Exchange Commission, 100 F 

Street NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: The Commission is proposing for public comment 

new 17 CFR 210.15-01 (Rule 15-01 of Regulation S-X), new 17 CFR 229.1601 through 

229.1610 (Subpart 1600 of Regulation S-K), new 17 CFR 230.140a (Securities Act Rule 140a), 



4 
 

new 17 CFR 230.145a (Securities Act Rule 145a), and new 17 CFR 270.3a-10 (Investment 

Company Act Rule 3a-10).  We are also proposing for public comment amendments to: 

Commission Reference CFR Citation 
(17 CFR) 

Securities Act of 1933 
(“Securities Act”)1 

Rule 137 § 230.137 

 Rule 138 § 230.138 
 Rule 139 § 230.139 
 Rule 163A § 230.163A 
 Rule 164 § 230.164 
 Rule 174 § 230.174 
 Rule 405 § 230.405 
 Rule 419 § 230.419 
 Rule 430B § 230.430B 
 Rule 437a § 230.437a 
 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 
(“Exchange Act”)2 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 
(17 CFR 229.10 through 229.1406) 

Item 10 § 229.10 

 Item 601 § 229.601 
Regulation S-T 

(17 CFR 232.10 through 232.903) 
Rule 405 § 232.405 

                                                 
1  15 U.S.C. 77a et seq. 
2  15 U.S.C. 78a et seq. 



5 
 

Commission Reference CFR Citation 
(17 CFR) 

Regulation S-X 
(17 CFR 210.1-01 through 210.13-02) 

Rule 1-02 § 210.1-02 

 Rule 3-01 § 210.3-01 
 Rule 3-02 § 210.3-02 
 Rule 3-05 § 210.3-05 
 Rule 3-14 § 210.3-14 
 Rule 8-02 § 210.8-02 
 Rule 10-01 § 210.10-01 
 Rule 11-01 § 210.11-01 

 
 

TABLE OF CONTENTS 

I. INTRODUCTION ................................................................................................................... 8 
II. PROPOSED NEW SUBPART 1600 OF REGULATION S-K ............................................ 22 

A. Definitions......................................................................................................................... 24 
B. Sponsors ............................................................................................................................ 28 
C. Conflicts of Interest........................................................................................................... 32 
D. Dilution ............................................................................................................................. 36 
E. Prospectus Cover Page and Prospectus Summary Disclosure .......................................... 41 
1. Prospectus Cover Page ................................................................................................... 42 
2. Prospectus Summary ...................................................................................................... 42 
F. Disclosure and Procedural Requirements in De-SPAC Transactions............................... 46 
1. Background of and Reasons for the De-SPAC Transaction; Terms and Effects ........... 46 
2. Fairness of the De-SPAC Transaction ........................................................................... 52 
3. Reports, Opinions, and Appraisals ................................................................................. 55 
4. Proposed Item 1608 of Regulation S-K ......................................................................... 58 
G. Structured Data Requirement ............................................................................................ 61 

III. ALIGNING DE-SPAC TRANSACTIONS WITH INITIAL PUBLIC OFFERINGS ......... 64 
A. Aligning Non-Financial Disclosures in De-SPAC Disclosure Documents ...................... 67 
B. Minimum Dissemination Period ....................................................................................... 70 
C. Private Operating Company as Co-Registrant to Form S-4 and Form F-4....................... 74 
D. Re-Determination of Smaller Reporting Company Status ............................................... 78 
E. PSLRA Safe Harbor .......................................................................................................... 82 
F. Underwriter Status and Liability in Securities Transactions ............................................ 87 
1. Participants in a Distribution as “Underwriters” ............................................................ 92 
2. The De-SPAC Transaction as a “Distribution” of the Combined Company’s Securities

 ........................................................................................................................................ 94 
3. Proposed Rule: SPAC IPO Underwriters are Underwriters in Registered De-SPAC 

Transactions ................................................................................................................... 96 



6 
 

IV. BUSINESS COMBINATIONS INVOLVING SHELL COMPANIES .............................. 101 
A. Shell Company Business Combinations and the Securities Act of 1933 ........................ 101 
1. Shell Company Business Combinations ...................................................................... 101 
2. Proposed Rule 145a ...................................................................................................... 104 
3. Excluded Transactions ................................................................................................. 108 
B. Financial Statement Requirements in Business Combination Transactions Involving Shell 
Companies ........................................................................................................................... 112 
1. Number of Years of Financial Statements ................................................................... 113 
2. Audit Requirements of Predecessor ............................................................................. 116 
3. Age of Financial Statements of the Predecessor .......................................................... 117 
4. Acquisitions of Businesses by a Shell Company Registrant or Its Predecessor That Are 

Not or Will Not Be the Predecessor ............................................................................. 118 
5. Financial Statements of a Shell Company Registrant After the Combination with 

Predecessor................................................................................................................... 122 
6. Other Amendments ...................................................................................................... 124 

V. ENHANCED PROJECTIONS DISCLOSURE .................................................................. 127 
A. Background ..................................................................................................................... 127 
B. Rule Proposals ................................................................................................................ 129 
1. Item 10(b) of Regulation S-K....................................................................................... 130 
2. Item 1609 of Regulation S-K ....................................................................................... 132 

VI. PROPOSED SAFE HARBOR UNDER THE INVESTMENT COMPANY ACT ............ 135 
A. Background ..................................................................................................................... 135 
1. Potential Status as an Investment Company ................................................................ 136 
2. Rationale for the Safe Harbor....................................................................................... 137 
3. Boundaries of the Safe Harbor ..................................................................................... 138 
B. Conditions ....................................................................................................................... 141 
1. Nature and Management of SPAC Assets ................................................................... 142 
2. SPAC Activities ........................................................................................................... 145 
3. Duration Limitations .................................................................................................... 152 

VII. ADDITIONAL REQUESTS FOR COMMENT ................................................................. 160 
VIII. GENERAL REQUEST FOR COMMENTS................................................................ 164 
IX. ECONOMIC ANALYSIS ................................................................................................... 165 

A. Broad Economic Considerations..................................................................................... 168 
B. Baseline and Affected Parties ......................................................................................... 177 
1. SPAC Initial Public Offerings ...................................................................................... 177 
2. De-SPAC Transactions ................................................................................................ 186 
3. Blank Check Companies .............................................................................................. 198 
4. Shell-Company Business Combinations ...................................................................... 199 
5.  Projections Under Item 10(b) of Regulation S-K......................................................... 202 
6. Investment Company Act Safe Harbor ........................................................................ 202 
C.  Benefits and Costs of the Proposed Rules .................................................................. 209 
1.  Disclosure-Related Proposals ....................................................................................... 209 
2. Liability-Related Proposals .......................................................................................... 243 
3. Shell-Company Related Proposals ............................................................................... 252 
4. Enhanced Projections Disclosure (Amendments to Item 10(b) of Regulation S-K) .... 262 
5. Investment Company Act Safe Harbor ........................................................................ 264 



7 
 

D. Effects on Efficiency, Competition, and Capital Formation ........................................... 274 
1. Efficiency ..................................................................................................................... 274 
2. Competition .................................................................................................................. 275 
3. Capital Formation ......................................................................................................... 276 
E. Reasonable Alternatives.................................................................................................. 277 
1. Disclosure-Related Proposals ....................................................................................... 277 
2. Liability-Related Proposals .......................................................................................... 281 
3. Expanding Disclosure in Reporting Shell Company Business Combinations ............. 282 
4. Enhanced Projections Disclosures ............................................................................... 284 
5. Investment Company Act Safe Harbor ........................................................................ 284 
F.  Requests for Comment .................................................................................................... 286 

X. PAPERWORK REDUCTION ACT ................................................................................... 291 
A. Summary of the Collections of Information ................................................................... 291 
B. Estimates of the Effects of the Proposed New Rules and Amendments on the Collections 
of Information ...................................................................................................................... 294 
C. Incremental and Aggregate Burden and Cost Estimates ................................................. 298 
D. Request for Comment ..................................................................................................... 304 

XI. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT .................... 306 
XII. INITIAL REGULATORY FLEXIBILITY ANALYSIS AND CERTIFICATION ........... 306 

A. Reasons for, and Objectives of, the Proposed Action ..................................................... 307 
B. Legal Basis ...................................................................................................................... 308 
C. Regulatory Flexibility Act Certification ......................................................................... 309 
D. Small Entities Subject to the Proposed Rules and Amendments .................................... 309 
E. Reporting, Recordkeeping, and Other Compliance Requirements ................................. 311 
F. Duplicative, Overlapping or Conflicting Federal Rules ................................................. 312 
G. Significant Alternatives .................................................................................................. 312 

STATUTORY AUTHORITY AND TEXT OF PROPOSED RULE AND FORM 
AMENDMENTS ........................................................................................................................ 315 
 
 
 
  



8 
 

I. INTRODUCTION 

Special purpose acquisition companies first began to emerge in the 1990s as an 

alternative to blank check companies regulated pursuant to Rule 419 under the Securities Act.3  

In response to widespread fraud and abuse in blank check offerings, Congress passed the 

Securities Enforcement Remedies and Penny Stock Reform Act of 1990,4 which required the 

Commission to adopt rules governing registration statements filed by blank check companies 

offering penny stock.5  In response, the Commission adopted comprehensive disclosure and 

other requirements for blank check offerings in Rule 419.6  Following the adoption of Rule 419, 

securities offerings by SPACs, which are not subject to the rule’s requirements but have many 

similar features, began to appear, with the number of these offerings fluctuating over the years.7  

In the past two years, however, the U.S. securities markets have experienced an unprecedented 

surge in the number of initial public offerings by SPACs, with SPACs raising more than $83 

billion in such offerings in 2020 and more than $160 billion in such offerings in 2021.8  In 2020 

and 2021, more than half of all initial public offerings were conducted by SPACs. 

                                                 
3  The term “blank check company” is defined in 17 CFR 230.419(a)(2) 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 
(Exchange Act Rule 3a51-1). 
4  Pub. L. 101-429, 104 Stat. 931 (Oct. 15, 1990). 
5  Id. at sec. 508; Section 7(b) of the Securities Act. 
6  Blank Check Offerings, Release No. 33-6932 (Apr. 13, 1992) [57 FR 18037 (Apr. 28, 1992)].  Rule 419 requires a 
blank check company to meet certain disclosure and investor protection requirements in registered offerings of 
securities. 
7  Between 2011 and 2021, the average number of initial public offerings by SPACs registered under the Securities 
Act per year was 98, with the highest number of such offerings (613) in 2021 and the lowest number of such 
offerings (9) in 2012.  In 2008, both the New York Stock Exchange and Nasdaq adopted rules to permit the listing of 
SPACs on these exchanges for the first time.  See, e.g., Release No. 34-57785 (May 6, 2008) [73 FR 27597 (May 
13, 2008)] and Release No. 34-58228 (July 25, 2008) [73 FR 44794 (July 31, 2008)]. 
8  By comparison, SPACs raised a total of $13.6 billion in initial public offerings in 2019 and a total of $10.8 billion 
in initial public offerings in 2018.  As used in this release, “initial public offering” refers to a securities offering 



9 
 

A SPAC is typically a shell company9 that is organized for the purpose of merging with 

or acquiring one or more unidentified private operating companies (a “de-SPAC transaction”) 

within a certain time frame (often two years) and that conducts a firm commitment underwritten 

initial public offering of $5 million or more in units consisting of redeemable shares and 

warrants.10  A SPAC is organized and managed by its sponsor, which is usually compensated 

through an amount equal to a percentage (often 25 percent) of the SPAC’s initial public offering 

proceeds (in the form of discounted shares and warrants) to be received upon the completion of a 

de-SPAC transaction.11  Although SPACs are not subject to the requirements of Rule 419,12 they 

                                                 
registered under the Securities Act by an issuer that was not subject to the reporting requirements of Section 13 or 
15(d) of the Exchange Act immediately prior to the registration. 
9  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. 
10  The descriptions included in this release of common features currently seen in SPACs and SPAC transaction 
structures are based, in part, on reviews by the Commission staff of SPAC filings with the Commission.  The terms 
“private operating company” and “target company” are used interchangeably in this release, unless otherwise 
indicated.  We are proposing to define the term “target company” for purposes of the requirements applicable to 
SPACs.  See infra Section II.A. 
11  This sponsor compensation is often referred to as the sponsor’s “promote” or “founder shares,” which usually 
amounts to around 20% of the total shares of a SPAC after its initial public offering.  The underwriting fees in a 
SPAC’s initial public offering are typically between 5% and 5.5% of the offering proceeds, of which 3.5% is also 
usually conditioned on the completion of the de-SPAC transaction. 
12  Issuers that raise more than $5 million in a firm commitment underwritten initial public offering are excluded 
from the definition of “blank check company” in Rule 419, and thus are not subject to the requirements of the rule, 
because they are not selling “penny stock,” as defined in Exchange Act Rule 3a51-1.  The definition of “penny 
stock” in Exchange Act Section 3(a)(51) and Rule 3a51-1 encompasses any equity security except those excluded 
under the rule, such as an NMS stock, as defined in 17 CFR 242.600(b)(55), that meets certain criteria; securities 
issued by a registered investment company; and securities of an issuer that has net tangible assets in excess of $2 
million, or $5 million if the issuer has been in continuous operation for less than three years, or average revenue of 
at least $6 million for the last three years.  In 1993, the Commission issued guidance stating that issuers may 
aggregate the proceeds of a firm commitment underwritten initial public offering in order to exceed the $5 million 
net tangible assets test in Rule 3a51-1(g)(1).  See Penny Stock Definition for Purposes of Blank Check Rule, Release 
No. 33-7024 (Oct. 25, 1993) [58 FR 58099 (Oct. 29, 1993)].  SPACs often have provisions in their governing 
instruments that prohibit them from being “penny stock” issuers.  As used in this release, the term “SPAC” excludes 
those issuers that are subject to Rule 419.  In Dec. 2020, the Commission received a rulemaking petition 
(“Rulemaking Petition”) requesting that the Commission adopt rule amendments to permit SPACs to conduct initial 
public offerings on a best-efforts basis without being subject to Rule 419.  See Rulemaking Petition from Loeb & 
Loeb LLP, File No. 4-768 (Dec. 21, 2020), available at: https://www.sec.gov/rules/petitions/2020/petn4-768.pdf.  
As of the date of this release, we have not received any comment letters in response to the Rulemaking Petition. 

https://www.sec.gov/rules/petitions/2020/petn4-768.pdf


10 
 

are typically structured to operate under similar, though usually less stringent, conditions in order 

to attract investors and to comply with exchange listing requirements.13 

Following its initial public offering, a SPAC generally places all or substantially all of the 

offering proceeds into a trust or escrow account,14 and the SPAC’s shares and warrants are 

typically registered under Section 12(b) of the Exchange Act and then begin trading on a national 

securities exchange.15  If a SPAC does not complete a de-SPAC transaction within the time 

frame specified in its governing instruments, the SPAC may seek an extension of the time frame 

from its shareholders or may dissolve and liquidate, with the sponsor not earning the “promote” 

and the assets held in the trust or escrow account returned on a pro rata basis to its 

shareholders.16 

If, on the other hand, a SPAC identifies a candidate for a business combination 

transaction, the shareholders of the SPAC have the opportunity to either: (1) redeem their shares 

prior to the business combination and receive a pro rata amount of the initial public offering 

                                                 
13  These conditions are generally market driven, and are typically set forth in their governing instruments and/or 
contractual arrangements, or are pursuant to the laws of the state or country of organization or the listing standards 
of national securities exchanges.  See, e.g., NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule 
IM-5101-2.  For example, Section 102.06 of the NYSE Listed Company Manual requires, among other things, that 
at least 90% of the initial public offering proceeds, together with the proceeds of any other concurrent sales of equity 
securities, be held in a trust account controlled by an independent custodian until the consummation of a business 
combination with a fair market value equal to at least 80% of the net assets held in the trust, with the time period to 
consummate the de-SPAC transaction not to exceed three years.  In contrast, under Rule 419, a blank check 
company must, among other things, complete a merger or acquisition within 18 months after the effective date of its 
registration statement and must place the offering proceeds and the securities sold in the offering in an escrow or 
trust account until the completion of the merger or acquisition, which precludes trading in the blank check 
company’s securities until after the merger or acquisition is completed. 
14  The assets in the trust or escrow account are typically invested in U.S. government securities and money market 
funds that invest in U.S. government securities.  See infra Section VI. 
15  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 one 
year after the SPAC’s initial public offering or upon the completion of a de-SPAC transaction. 
16  Exchange rules require a listed SPAC to complete a de-SPAC transaction within a specified timeframe not to 
exceed 36 months after its initial public offering.  See, e.g., NYSE Listed Company Manual Section 102.06.and 
Nasdaq Listing Rule IM-5101-2. 



11 
 

proceeds held in the trust or escrow account, or (2) remain a shareholder of the company after the 

business combination.17  To offset shareholder redemptions and 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.18  De-SPAC transactions often 

result in the former SPAC’s shareholders owning a minority interest in the post-business 

combination company, with the former private operating company’s shareholders and PIPE 

investors owning a majority interest in the post-business combination company following these 

transactions.19 

Shareholder approval is often required in de-SPAC transactions, and, in such cases, a 

SPAC provides its shareholders with a proxy statement on Schedule 14A, or an information 

statement on Schedule 14C if it is not soliciting proxies from its shareholders.20  If a SPAC or 

the target company is registering an offering of its securities (or the securities of a new holding 

company) to be issued in the de-SPAC transaction, then a registration statement on Form S-4 or 

                                                 
17  According to a study of SPAC initial public offerings between 2010 and 2018, an average of 54.4% and a median 
of 57.1% of shares issued in an initial public offering by a SPAC during this period were redeemed prior to the 
completion of a de-SPAC transaction.  Usha R. Rodrigues and Michael Stegemoller, SPACs: Insider IPOs (SSRN 
Working Paper, 2021).  Another analysis found that, between July 1, 2021 and Dec. 1, 2021, mean and median 
SPAC redemption rates were 55% and 66%, respectively.  Michael Klausner, Michael Ohlrogge, and Emily Ruan, A 
Sober Look at SPACs, 39 YALE J. ON REGUL. 228 (2022).  See infra Section IX.C.1.a.4. for a discussion of 
shareholder redemptions based on analysis by the Division of Economic and Risk Analysis (DERA) of available 
data. 
18  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. 
19  According to one study, of the 47 SPAC mergers that occurred between Jan. 2019 and June 2020, SPAC 
shareholders, including the sponsor, held a median of 35% of the merged company after a de-SPAC transaction (of 
which the sponsor held a median of 12% of the merged company), with the remaining 65% of the merged company 
held by other parties including the target company’s shareholders and PIPE investors.  Klausner, Ohlrogge, and 
Ruan, supra note 17. 
20  17 CFR 240.14a-2 (Exchange Act Rule 14a-2) and 17 CFR 240.14c-2 (Exchange Act Rule 14c-2). 



12 
 

F-4 would be filed for the securities offering.  If no registration statement or proxy or 

information statement is required, then the SPAC disseminates a tender offer statement 

(Schedule TO) for the redemption offer to its security holders with information about the target 

company.21  Regardless of how the de-SPAC transaction is structured, the operations of the 

private company are conducted by the post-business combination company following the 

consummation of a de-SPAC transaction, with the shareholders of the private company now 

owning shares in a publicly listed company. 

De-SPAC transactions can be viewed as a way for private operating companies to 

become public reporting companies under the Exchange Act and obtain a listing on a national 

securities exchange while avoiding certain of the safeguards for investors and conventions of the 

typical initial public offering process.22  From the perspective of the shareholders and 

management of a private operating company, some of the purported advantages of combining 

with a SPAC compared to conducting an underwritten initial public offering could include: 

greater pricing certainty in merger negotiations; a relatively shorter time frame in becoming a 

                                                 
21  The Commission has promulgated rules under the Exchange Act setting forth filing, disclosure, and 
dissemination requirements in connection with tender offers.  See, e.g., Regulations 14D and 14E and Exchange Act 
Rule 13e-4.  When an issuer conducts a tender offer, the issuer may be required to file and disseminate a 
Schedule TO pursuant to Rule 13e-4.  The redemption rights in a SPAC context generally have indicia of being a 
tender offer, such as a limited period of time for the SPAC security holders to request redemption of their securities.  
The Commission staff, however, has not insisted that SPACs comply with the tender offer rules when a SPAC files a 
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 Regulation 14A or 14C, 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 when a SPAC does not file a Schedule 14A or 
14C in connection with the de-SPAC transaction or an extension.  SPACs that do not file a Schedule 14A or 14C, 
such as SPACs that are foreign private issuers, have generally filed and disseminated Schedules TO for the 
redemptions of their securities and complied with the procedural requirements of the tender offer rules.  In these 
circumstances, 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.F.4 for a 
discussion of proposed Item 1608 of Regulation S-K and Section IV.A. for a discussion of proposed Rule 145a 
under the Securities Act, which would affect when a SPAC may be required to file a Form S-4 or F-4 in connection 
with a de-SPAC transaction. 
22  See infra note 119. 



13 
 

public company; and the perceived freedom to use projections in connection with de-SPAC 

transactions, with reduced liability exposure.23  De-SPAC transactions also offer private 

operating companies an infusion of capital from the SPAC,24 as well as potentially greater share 

liquidity for the post-business combination company based on the existing trading market for the 

SPAC’s securities.25 

Although the basic structure of SPACs has existed since the 1990s, the recent surge in 

SPAC offerings and the increasing use of de-SPAC transactions as a mechanism for private 

operating companies to access the U.S. public securities markets have caused some market 

observers to express concerns about various aspects of the SPAC structure.26  For example, some 

commentators have raised concerns regarding the amount of sponsor compensation and other 

costs and their dilutive effects on a SPAC’s shareholders.27  A number of commentators have 

also pointed to the nature of the sponsor compensation (i.e., dependent on the completion of a 

de-SPAC transaction) as a potential conflict of interest in the SPAC structure that could lead 

sponsors to enter into de-SPAC transactions that are unfavorable to unaffiliated shareholders of 

                                                 
23  See, e.g., Klausner, Ohlrogge, and Ruan, supra note 17; Rodrigues and Stegemoller, supra note 17; Minmo 
Gahng, Jay R. Ritter, and Donghang Zhang, SPACs (SSRN Working Paper, 2021). 
24  Typically, much of this cash comes from PIPE investors around the time of the de-SPAC transaction and not 
from investors in the SPAC’s initial public offering.  See, e.g., Klausner, Ohlrogge, and Ruan, supra note 17. 
25  However, one study found evidence of illiquidity in SPAC shares, with relatively thin trading volume particularly 
during the period before the announcement of a proposed de-SPAC transaction.  Rodrigues and Stegemoller, supra 
note 17. 
26  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. 
27  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, The Wall 
Street Journal, Apr. 25, 2021. 

https://financialservices.house.gov/events/eventsingle.aspx?EventID=407753
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-deanes-20210524.pdf


14 
 

the SPACs without performing robust due diligence in connection with these transactions, when 

the alternative is to liquidate the SPACs and return the initial public offering proceeds to the 

shareholders.28  Other commentators have criticized stock exchange listing rules under which 

SPAC shareholders have voted in favor of proposed de-SPAC transactions while still redeeming 

their shares prior to the closing of the transactions.29  A number of studies have found that 

returns are relatively poor for investors in companies following a de-SPAC transaction.30 

In addition, some commentators have expressed concerns regarding the adequacy of the 

disclosures provided to investors in these transactions in terms of explaining the potential 

benefits, risks and effects for investors, as well as the potential benefits for the sponsor and other 

affiliates of the SPAC.31  One of these commentators also expressed the view that the disclosure 

                                                 
28  See, e.g., Klausner, Ohlrogge, and Ruan, supra note 17; Rodrigues and Stegemoller, supra note 17; Gahng, 
Ritter, and Zhang, supra note 23; 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. 
29  See Mira Ganor, The Case for Non-Binary, Contingent, Shareholder Action, 23 U. PA. J. BUS. L. 390 (2021); 
Rodrigues and Stegemoller, supra note 17.  We note that exchange listing rules only explicitly require that, when a 
shareholder vote on a business combination is held, the public shareholders voting against a business combination 
have a right to redeem shares.  See, e.g., Nasdaq Listing Rule IM-5101-2 (stating, in part, that “public Shareholders 
voting against a business combination must have the right to convert their shares of common stock into a pro rata 
share of the aggregate amount then in the deposit account (net of taxes payable and amounts distributed to 
management for working capital purposes) if the business combination is approved and consummated”). 
30  See, e.g., Lora Dimitrova, Perverse Incentives of Special Purpose Acquisition Companies, the “Poor Man’s 
Private Equity Funds,” JOURNAL OF ACCOUNTING AND ECONOMICS (2017); Johannes Kolb and Tereza Tykvová, 
Going Public via Special Purpose Acquisition Companies: Frogs Do Not Turn Into Princes, JOURNAL OF 
CORPORATE FINANCE (2016); Klausner, Ohlrogge, and Ruan, supra note 17; Gahng, Ritter, and Zhang, supra note 
23; Chen Lin, Fangzhou Lu, Roni Michaely, and Shihua Qin, SPAC IPOs and Sponsor Network Centrality (SSRN 
Working Paper, 2021).  See also Testimony of Scott Kupor, Andreessen Horowitz, before the Investor Protection, 
Entrepreneurship, and Capital Markets Subcommittee of the U.S. House Committee on Financial Services, May 24, 
2021, https://financialservices.house.gov/uploadedfiles/hhrg-117-ba16-wstate-kupors-20210524.pdf; Alexander 
Osipovich and Dave Michaels, Investors Flock to SPACs, Where Risks Lurk and Track Records Are Poor, The Wall 
Street Journal, Nov. 13, 2020. 
31  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 SEC actions have highlighted disclosures about the 
private operating company that are allegedly incomplete, inaccurate, and materially misleading.  See, e.g., In the 

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


15 
 

about the private operating company provided through the de-SPAC transaction process may be 

less complete and less reliable than that provided by an issuer in a traditional initial public 

offering.32  Other 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,33 as well as the lack of a named underwriter in these transactions 

that would typically perform traditional gatekeeping functions, such as due diligence, and would 

be subject to liability under Section 11 of the Securities Act for untrue statements of material 

facts or omissions of material facts.34  In response to a number of these and other issues, the 

Commission staff has provided guidance relating to SPACs on five occasions since December 

2020.35 

                                                 
Matter of Momentus, Inc., Stable Road Acquisition Corp., SRC-NI Holdings, LLC, and Brian Kabot, Release No. 
33-10955, 34-92391 (July 13, 2021); In the Matter of Nikola Corp., Release No. 33-11018, 34-93838 (Dec. 21, 
2021); 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). 
32  See AFR Letter. 
33  See, e.g., Michael Dambra, Omri Even-Tov, and Kimberlyn George, Should SPAC Forecasts be Sacked? (SSRN 
Working Paper, 2022); AFR Letter; Park Testimony; Rodrigues and Stegemoller, supra note 17.  See also Heather 
Somerville and Eliot Brown, SPAC Startups Made Lofty Promises.  They Aren’t Working Out., The Wall Street 
Journal, Feb. 25, 2022. 
34  See AFR Letter; Deane Testimony; Rodrigues Testimony.  See also John C. Coffee Jr., Gatekeeper Failure and 
Reform: The Challenge of Fashioning Relevant Reforms, 84 B. U. L. REV. 301 (2004) and John C. Coffee, Jr., 
Gatekeepers: The Professions and Corporate Governance (2006). 
35  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); and 
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).  This 
guidance and other staff statements (including those cited herein) 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 
content of these documents and, like all staff 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. 



16 
 

In September 2021, the Commission’s Investor Advisory Committee36 issued preliminary 

recommendations regarding SPACs and expressed concerns about whether sponsors and target 

companies have engaged in regulatory arbitrage by using de-SPAC transactions as a path to the 

public markets.  In addition, the Investor Advisory Committee expressed concerns about 

potential conflicts of interest between sponsors and retail investors, and the effectiveness of the 

disclosures provided in these transactions.37  Among other things, the Investor Advisory 

Committee recommended that the Commission “regulate SPACs more intensely” through an 

enhanced focus on and stricter enforcement of existing disclosure rules in areas such the 

sponsor’s role in a SPAC, the process and risks in identifying and assessing target companies, 

PIPE financing terms, and de-SPAC transaction due diligence, as well as application of the Plain 

English disclosure rules.38  The Investor Advisory Committee also recommended that the 

Commission prepare and publish a report analyzing the parties involved in SPAC transactions at 

various stages and the compensation and incentives of these parties. 

                                                 
36  The Investor Advisory Committee was established by Section 911 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (“Dodd-Frank Act”), Pub. L. 111-203, 124 Stat. 1376 (2010), to advise and consult with 
the Commission on regulatory priorities, issues, and initiatives. 
37  See Recommendations of the Investor Advisory Committee Regarding Special Purpose Acquisition Companies 
(Sept. 9, 2021) (“IAC Recommendations”), available at: https://www.sec.gov/spotlight/investor-advisory-
committee-2012/20210909-spac-recommendation.pdf.  The Dodd-Frank Act authorizes the Investor Advisory 
Committee to submit findings and recommendations for review and consideration by the Commission.  The 
Commission then issues a public statement assessing the finding or recommendation and disclosing the 
Commission’s intended action, if any, in regard to the finding or recommendation.  See Section 911(g) of the Dodd-
Frank Act. 
38  17 CFR 230.421(d) (Securities Act Rule 421(d)) requires registrants to write the prospectus cover page, 
prospectus summary, and risk factors sections of prospectuses using plain English principles, including the use of 
short sentences; definite, concrete, everyday language; active voice; tabular presentation of complex information 
whenever possible; no legal or business jargon; and no multiple negatives.  Plain English Disclosure, Release No. 
33-7497 (Jan. 28, 1998) [63 FR 6370 (Feb. 6, 1998)]. 

https://www.sec.gov/spotlight/investor-advisory-committee-2012/20210909-spac-recommendation.pdf
https://www.sec.gov/spotlight/investor-advisory-committee-2012/20210909-spac-recommendation.pdf


17 
 

Also in September 2021, the Commission’s Small Business Capital Formation Advisory 

Committee39 held a panel discussion on initial public offerings, direct listings, and SPACs.40  

The panelists expressed their views on a range of topics related to SPACs, including the factors 

behind the significant growth of the SPAC market over the past two years, the potential benefits 

of SPACs to the public markets, the potential benefits of enhanced disclosure requirements 

applicable to SPACs, and perceived issues surrounding the use of projections in de-SPAC 

transactions.  The panel discussion also addressed the costs embedded in the SPAC structure and 

the dilutive effects of these costs on non-redeeming shareholders, as well as the poor market-

adjusted returns of companies, on average, following de-SPAC transactions.41 

Having considered these and other perspectives on the SPAC market, we are of the view 

that greater transparency and more robust investor protections could assist investors in evaluating 

and making investment, voting, and redemption decisions with respect to these transactions.  

Accordingly, we are proposing new rules and rule amendments to enhance existing disclosure 

requirements and investor protections in initial public offerings by SPACs and in de-SPAC 

transactions.  A number of the rules and amendments we are proposing are intended to improve 

the usefulness and clarity of the information provided to investors so that they can make better 

informed decisions as to whether to purchase securities in SPAC initial public offerings, to 

purchase or sell SPAC securities in secondary trading markets, and in voting, investment and 

redemption decisions in connection with de-SPAC transactions.   

                                                 
39  The Small Business Capital Formation Advisory Committee was established by Section 2 of the SEC Small 
Business Advocate Act of 2016, Pub. L. 114-284, 130 Stat. 1447 (2016), to provide advice to the Commission on 
the Commission’s rules, regulations, and policies relating to (1) capital raising by emerging, privately held small 
businesses and public companies with less than $250 million in public market capitalization; (2) trading in their 
securities; and (3) public reporting and corporate governance requirements applicable to these companies. 
40  The panelists were Isabelle Freidheim, Michael Klausner, David Ni, and Phyllis Newhouse. 
41  See Transcript of SEC Small Business Capital Formation Advisory Committee (Sept. 27, 2021), available at: 
https://www.sec.gov/info/smallbus/acsec/sbcfac-transcript-092721.pdf. 

https://www.sec.gov/info/smallbus/acsec/sbcfac-transcript-092721.pdf


18 
 

The proposed rules and amendments, if adopted, could help the SPAC market function 

more efficiently by improving the relevance, completeness, clarity, and comparability of the 

disclosures provided by SPACs at the initial public offering and de-SPAC transaction stages, and 

by providing important investor protections to strengthen investor confidence in this market.  In 

developing these proposals, we have considered the recommendations and views discussed 

above, as well as the Commission staff’s experience in reviewing disclosures in SPAC initial 

public offerings and de-SPAC transactions. 

Specifically, we are proposing to add new Subpart 1600 of Regulation S-K that would set 

forth specialized disclosure requirements in connection with initial public offerings by SPACs 

and in connection with de-SPAC transactions.  In new Subpart 1600, we are proposing to, among 

other things: 

• Require additional disclosures about the sponsor of the SPAC, potential conflicts of 

interest, and dilution; 

• Require additional disclosures on de-SPAC transactions, including a requirement that 

the SPAC state (1) whether it reasonably believes that the de-SPAC transaction and 

any related financing transaction are fair or unfair to investors, and (2) whether it has 

received any outside report, opinion, or appraisal relating to the fairness of the 

transaction; and 

• Require certain disclosures on the prospectus cover page and in the prospectus 

summary of registration statements filed in connection with SPAC initial public 

offerings and de-SPAC transactions. 

In addition, in view of the increasing number of private companies using de-SPAC 

transactions to become publicly-traded reporting companies, we are proposing amendments to 



19 
 

provide procedural protections and to align the disclosures provided, as well as the legal 

obligations of companies, in de-SPAC transactions more closely with those in traditional initial 

public offerings.  Specifically, we are proposing to: 

• Amend the registration statement forms and schedules filed in connection with de-

SPAC transactions to require additional disclosures about the private operating 

company; 

• Require that disclosure documents in de-SPAC transactions be disseminated to 

investors at least 20 calendar days in advance of a shareholder meeting or the earliest 

date of action by consent, or the maximum period for disseminating such disclosure 

documents permitted under the laws of the jurisdiction of incorporation or 

organization if such period is less than 20 calendar days; 

• Deem a private operating company in a de-SPAC transaction to be a co-registrant of a 

registration statement on Form S-4 or Form F-4 when a SPAC files such a registration 

statement for a de-SPAC transaction, such that the private operating company and its 

signing persons would be subject to liability under Section 11 of the Securities Act as 

signatories to the registration statement; 

• Amend the definition of smaller reporting company to require a re-determination of 

smaller reporting company status following the consummation of a de-SPAC 

transaction; and 

• Define “blank check company” to encompass SPACs and certain other blank check 

companies for purposes of the Private Securities Litigation Reform Act of 1995 

(PSLRA)42 such that the safe harbor for forward-looking statements under the 

                                                 
42  Pub. L. No. 104-67, 109 Stat. 737 (1995). 



20 
 

PSLRA would not be available to SPACs, including with respect to projections of 

target companies seeking to access the public markets through a de-SPAC 

transaction. 

Underwriters play a critical role in the securities offering process as gatekeepers to the 

public markets.  In light of this important role, we are proposing a new rule, Securities Act 

Rule 140a, that would deem anyone who has acted as an underwriter of the securities of a SPAC 

and 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 a 

distribution and to be an underwriter in the de-SPAC transaction.  By affirming the underwriter 

status of SPAC IPO underwriters in connection with de-SPAC transactions, the proposed rule 

should better motivate SPAC underwriters to exercise the care necessary to ensure the accuracy 

of the disclosure in these transactions by affirming that they are subject to Section 11 liability for 

that information. 

In addition, private companies have historically used shell companies with Exchange Act 

reporting obligations in various forms of transactions, including SPACs, to become a public 

company without undergoing a traditional initial public offering.  In many cases, such shell 

company shareholders may not receive a Securities Act registration statement containing 

disclosures about the private company that is entering the public market for the first time.  Due to 

the significant increase in the use of reporting shell company business combination transactions 

as a means to enter the U.S. capital markets, and in an effort to provide reporting shell company 

shareholders with more consistent Securities Act protections regardless of transaction structure, 

we are proposing to add new Rule 145a that would deem any business combination of a21 
 

reporting shell company, involving another entity that is not a shell company, to involve a sale of 

securities to the reporting shell company’s shareholders.43 

Further, we are proposing new Article 15 of Regulation S-X, as well as related 

amendments, to more closely align the financial statement reporting requirements in business 

combinations involving a shell company and a private operating company with those in 

traditional initial public offerings.  This is consistent with our view that the manner in which a 

company goes public should not generally result in substantially different financial statement 

disclosures being provided to investors. 

We are also proposing amendments intended to enhance the reliability of projections 

disclosure in Commission filings, as well as additional requirements when projections are 

disclosed in connection with de-SPAC transactions.  The proposed amendments to Item 10(b) of 

Regulation S-K would address broader concerns regarding the use of projections generally, while 

proposed Item 1609 of Regulation S-K would address concerns specific to de-SPAC 

transactions. 

 Finally, as the SPAC market has grown dramatically in recent years, some SPACs have 

sought to operate in novel ways that suggest a need for SPACs and their sponsors to increase 

                                                 
43  Throughout this release, 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 as a shell company that is: “(1) Formed by an entity that is 
not a shell company solely for the purpose of changing the corporate domicile of that entity solely within the United 
States; or (2) Formed by an entity that is not a shell company solely for the purpose of completing a business 
combination transaction (as defined in 17 CFR 230.165(f)) among one or more entities other than the shell company, 
none of which is a shell company.”  For purposes of proposed Rule 145a (see infra Section IV.A.), the term 
“reporting shell company” is defined as a company, other than an asset-backed issuer as defined in Item 1101(b) of 
Regulation AB, that has: (1) no or nominal operations; (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; and (3) an obligation to file reports under Section 13 or Section 15(d) of the Exchange Act.  
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 
 

their focus on evaluating when a SPAC could be an investment company and thus subject to the 

requirements under the Investment Company Act of 1940 (“Investment Company Act”).44  We 

are concerned that SPACs may fail to recognize when their activities raise the investor protection 

concerns addressed by the Investment Company Act.  To assist SPACs in focusing on, and 

appreciating, when they may be subject to investment company regulation, we are proposing a 

new safe harbor under the Investment Company Act.  The proposed rule would provide a safe 

harbor from the definition of “investment company” under Section 3(a)(1)(A) of the Investment 

Company Act for SPACs that satisfy certain conditions that limit a SPAC’s duration, asset 

composition, business purpose and activities.45   

 We welcome feedback and encourage interested parties to submit comments on any or all 

aspects of the proposed new rules and amendments.  When commenting, it would be most 

helpful if you include the reasoning behind your position or recommendation. 

II. PROPOSED NEW SUBPART 1600 OF REGULATION S-K 

We are proposing to add new Subpart 1600 to Regulation S-K to set forth specialized 

disclosure requirements applicable to SPACs regarding the sponsor, potential conflicts of 

interest, and dilution, and to require certain disclosures on the prospectus cover page and in the 

prospectus summary.46  Proposed Subpart 1600 would also require enhanced disclosure for de-

SPAC transactions, including a fairness determination requirement.  We are proposing to amend 

a number of forms and schedules used by SPACs for initial public offerings and de-SPAC 

                                                 
44  15 U.S.C. 80a-1 et seq. 
45  See infra Section VI for a discussion of proposed Rule 3a-10. 
46  The proposed requirements in new Subpart 1600 would, to an extent, codify and standardize some of the 
disclosures already commonly provided by SPACs. 



23 
 

transactions to require the information set forth in proposed Subpart 1600.47  To the extent that 

the disclosure requirements in proposed Subpart 1600 address the same subject matter as the 

existing disclosure requirements of the forms or schedules, the requirements of proposed Subpart 

1600 would be controlling.48  The following table summarizes the proposed items in Subpart 

1600, as described more fully below:49 

Item Summary Description Principal Objective(s) Applicable forms 
and schedules 

Item 1601, 
Definitions 

Definitions for the terms “special 
purpose acquisition company,”  
“de-SPAC transaction,” “target 
company,” and “SPAC sponsor.” 

Establish the scope of the issuers 
and transactions subject to the 
requirements of Subpart 1600. 

Forms S-1, F-1, S-4, 
and F-4; Schedules 
14A, 14C, and TO 

Item 1602, Registered 
offerings by special 
purpose acquisition 

companies 

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. 

Enhance the clarity and 
readability of prospectuses in 
SPAC initial public offerings and 
the disclosures relating to dilution 
in these prospectuses. 

Forms S-1 and F-1 

Item 1603, SPAC 
sponsor; conflicts of 

interest 

Require certain disclosure regarding 
the sponsor and its affiliates and any 
promoters of SPACs and disclosure 
regarding conflicts of interest 
between the sponsor or its affiliates 
or promoters and unaffiliated 
security holders. 

Provide investors with a more 
complete understanding of the 
role of sponsors and their 
conflicts of interest. 

Forms S-1, F-1, S-4, 
and F-4; Schedules 
14A, 14C and 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. 

Enhance the clarity and 
readability of prospectuses in  
de-SPAC transactions and 
disclosures relating to dilution in 
these prospectuses. 

Forms S-4 and F-4; 
Schedules 14A, 14C, 

and TO 

                                                 
47  See the proposed amendments to Forms S-1, F-1, S-4, and F-4, and Schedules 14A and TO.  While we are not 
proposing amendments to Schedule 14C, the disclosure contemplated by proposed Subpart 1600 would 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, but would be authorized to be registered on Form S-4 or F-4, the proposed requirements of 
Form S-4 or F-4, as applicable, in regard to de-SPAC transactions would apply in that context. 
48  Proposed General Instruction L.1. to Form S-4; Proposed General Instruction I.1. to Form F-4; Proposed Item 
14(f)(1) to Schedule 14A; Proposed General Instruction K to Schedule TO.  We are also proposing to re-designate 
existing General Instruction K to Schedule TO as General Instruction L to the schedule. 
49  The information in this table is not comprehensive and is intended only to summarize the proposed items of 
Subpart 1600.  This table should be read together with the complete text of this release. 



24 
 

Item Summary Description Principal Objective(s) Applicable forms 
and schedules 

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 a proposed de-SPAC 
transaction. 

Provide investors with a more 
complete understanding of the 
background of and motivations 
behind a proposed de-SPAC 
transaction. 

Forms S-4 and F-4; 
Schedules 14A, 14C, 

and TO 

Item 1606, Fairness 
of the de-SPAC 
transaction and any 
related financing 
transaction 

Require disclosure on whether a 
SPAC reasonably believes that a de-
SPAC transaction and any related 
financing transactions are fair or 
unfair to investors, as well as a 
discussion of the bases for this 
reasonable belief. 

Provide investors with additional 
information regarding a proposed 
de-SPAC transaction and address 
concerns regarding potential 
conflicts of interest and 
misaligned incentives. 

Forms S-4 and F-4; 
Schedules 14A, 14C, 

and TO 

Item 1607, Reports, 
opinions, appraisals 

and negotiations 

Require disclosure on whether a 
SPAC or its sponsor has received a 
report, opinion or appraisal from an 
outside party regarding the fairness 
of a de-SPAC transaction or any 
related financing transaction. 

Provide investors with additional 
information underlying a fairness 
determination by a SPAC. 

Forms S-4 and F-4; 
Schedules 14A, 14C, 

and TO 

Item 1608, Tender 
offer filing 

obligations in de-
SPAC transactions* 

Require additional disclosures in a 
Schedule TO filed in connection 
with a de-SPAC transaction. 

Align the information provided in 
such a Schedule TO with the 
information provided in other 
filings in connection with a de-
SPAC transaction. 

Schedule TO 

Item 1609, Financial 
projections in de-

SPAC transactions** 

Require additional disclosures 
regarding financial projections 
disclosed in a disclosure document 
for a de-SPAC transaction. 

Provide investors with additional 
information regarding the use of 
projections in connection with a 
de-SPAC transaction. 

Forms S-4 and F-4; 
Schedules 14A, 14C, 

and TO 

Item 1610, Structured 
data requirement*** 

Require information disclosed 
pursuant to Subpart 1600 to be 
tagged in a structured, machine-
readable data language. 

Provide investors and other 
market participants with 
information that is more readily 
available and more easily 
accessible for aggregation, 
comparison, filtering, and other 
analysis 

Forms S-1, F-1, S-4, 
and F-4; Schedules 
14A, 14C, and TO 

Notes: 
* Proposed Item 1608 is discussed in Section II.F.4. 
** Proposed Item 1609 is discussed in Section V.B.2. 
*** Proposed Item 1610 is discussed in Section II.G. 

 
A. Definitions 

For purposes of proposed new Subpart 1600, we are proposing Item 1601 to define the 

term “special purpose acquisition company” 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 



25 
 

requirements of Rule 419;50 (2) complete a de-SPAC transaction within a specified time frame; 

and (3) return all remaining proceeds from the registered offering and any concurrent offerings to 

its shareholders if the company does not complete a de-SPAC transaction within the specified 

time frame.51  While the proposed definition does not include certain features common to 

SPACs, such as the listing of the SPAC’s securities on a national securities exchange52 or the 

issuance of redeemable securities, the proposed definition incorporates the key defining features 

of the issuers that in our view should be subject to the disclosure and procedural requirements of 

Subpart 1600, while remaining sufficiently broad to take into account potential variations in the 

SPAC structure and the possibility that SPACs may continue to evolve.  In particular, the 

proposed definition would encompass issuers that would otherwise be subject to Rule 419’s 

investor protection requirements but for the fact that the issuer is not issuing “penny stock.”53  At 

the same time, the proposed definition does not include criteria such as listing on a national 

securities exchange, certain requirements that are applicable to exchange-traded SPACs,54 or the 

issuance of redeemable securities, as these criteria would 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. 

The term “de-SPAC transaction” would be defined as a business combination such as a 

merger, consolidation, exchange of securities, acquisition of assets, or similar transaction 

                                                 
50  Blank check companies subject to Rule 419 must comply with a comprehensive set of disclosure and investor 
protection requirements under the rule and would not be subject to the requirements applicable to SPACs under the 
proposed rules.  See supra notes 6 and 13. 
51  Proposed Item 1601(b). 
52  In this regard, we note that the securities of SPACs were not listed on national securities exchanges until the 
2000s. 
53  See supra note 12. 
54  See infra note 57. 



26 
 

involving a SPAC and one or more target companies (contemporaneously, in the case of more 

than one target company).55  The term “target company” would be defined as an operating 

company, business, or assets.56  As proposed, these definitions are intentionally broad and, taken 

together, would encompass more typical transactions such as the acquisition of one or more 

private operating companies by a SPAC, as well as less common transactions that may or may 

not be permitted under exchange listing rules but for which the proposed enhanced disclosure 

and procedural requirements described below may be appropriate because they raise the same 

investor protection concerns.57 

The term “SPAC sponsor” would be defined 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.58  Although a sponsor of a 

SPAC may perform a variety of functions within the SPAC’s structure, the proposed definition 

encompasses activities that, based on the staff’s experience reviewing SPAC filings and public 

                                                 
55  Proposed Item 1601(a). 
56  Proposed Item 1601(d). 
57  The proposed definitions would apply to both exchange-traded SPACs and SPACs traded in the over-the-counter 
market.  Some transactions encompassed by the proposed definitions may not be permitted under exchange listing 
rules for SPACs, and nothing in this release is intended to indicate that such transactions are or should be permitted 
under the exchanges’ SPACs listing rules or that exchange listing requirements should not, at a minimum, apply to 
SPACs seeking an exchange listing.  The Commission has consistently recognized the importance of national 
securities exchange listing standards.  Among other things, such listing standards help ensure that exchange-listed 
companies will have sufficient public float, investor base, and trading interest to provide the depth and liquidity 
necessary to promote fair and orderly markets.  Furthermore, Section 6(b)(5) of the Exchange Act requires exchange 
listing rules be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable 
principles of trade, and protect investors and the public interest.  The Commission has also stated that listing 
standards are of significant importance to investors that may rely on the status an exchange listing ascribes to a 
security.  See, e.g., Release No. 34-57785 (May 6, 2008) [73 FR 27597, 27599 (May 13, 2008)] (SR-NYSE-2008-
17) (order approving initial and continued listing standards for NYSE exchange-listed SPACs). 
58  Proposed Item 1601(c).  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.  See infra Section 
II.B. for a discussion of the activities of a sponsor. 



27 
 

commentary, are commonly associated with sponsors of SPACs.  We are proposing to define this 

term broadly so that the appropriate entities or persons are subject to the proposed enhanced 

disclosure requirements applicable to the sponsors of a SPAC.59 

Request for Comment 

1. Should we define the term “special purpose acquisition company” as proposed?  Does the 

proposed definition provide a workable approach to determining which issuers would be 

subject to the requirements of proposed Subpart 1600?  Should we define this term 

differently?  If so, how?  For example, are there certain other common characteristics of 

SPACs that should be included in the definition, such as redemption rights, exchange 

listing, the placing of initial public offering proceeds in a trust or escrow account, and/or 

that the de-SPAC transaction must meet a minimum fair market value (e.g., at least 80%) 

of the value of the proceeds in the trust or escrow account?  Should we include a 

reference to “shell company” in the definition? 

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?60 

3. Should we define the term “SPAC sponsor” as proposed?  Does the proposed definition 

reflect those activities commonly associated with a SPAC’s sponsor?  Would the 

proposed definition encompass persons or entities that are not commonly considered to 

be sponsors of a SPAC?  If so, how should we revise the definition to avoid scoping in 

such persons or entities?  In regard to natural persons, should we exclude from the scope 

                                                 
59  Proposed Item 1603. 
60  See supra notes 13 and 16. 



28 
 

of the definition the activities performed by natural persons in their capacities as directors 

and/or officers of the SPAC, as proposed? 

4. Should we define the term “target company” as proposed?  Is this definition sufficiently 

clear?  Would this definition, in combination with the other proposed definitions, be 

overly broad and encompass transactions that should not be treated as de-SPAC 

transactions? 

5. Are there other terms that we should define in proposed Subpart 1600?  If so, which 

terms and how should we define them? 

6. With respect to the proposed definition of “special purpose acquisition company,” is it 

clear what “has indicated that its business plan” is intended to convey?  Should we 

require registrants to affirmatively state in filings whether they are a special purpose 

acquisition company?  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?  

Should we also amend Schedule 14A, Schedule 14C and Schedule TO to include this 

check box on the cover pages of these schedules? 

B. Sponsors 

 The sponsor’s role is critical to the success of a SPAC.  At the earliest stage, the sponsor 

typically organizes and manages the SPAC, including appointing the initial directors and officers 

of the SPAC, and provides the initial capital for the SPAC’s operations prior to its initial public 

offering.61  In subsequent stages, among other things, the sponsor may work with one or more 

                                                 
61  See proposed Item 1601(c) for the proposed definition for “SPAC sponsor.”  There is often an identity of interest 
between the sponsor and the SPAC’s officers and directors, in that the same persons may work for both the sponsor 
and the SPAC in different capacities.  In many instances, SPACs will not hold a public election for directors until 



29 
 

investment banks in preparing for the SPAC’s initial public offering and may place the proceeds 

from the offering into a trust or escrow account.  Following the initial public offering, the 

sponsor typically identifies potential candidates for a business combination transaction, 

negotiates the transaction to acquire the target private operating company and promotes the 

transaction to the SPAC’s shareholders.  As discussed above, the value of the sponsor’s 

compensation is usually contingent on the completion of a de-SPAC transaction.62 

 In view of the central role of the sponsor in a SPAC’s activities, we are proposing 

Item 1603(a) to require additional disclosure about the sponsor, its affiliates and any promoters63 

of the SPAC in registration statements and schedules filed in connection with SPAC registered 

offerings and de-SPAC transactions, including disclosure on the following: 

• The experience, material roles, and responsibilities of these parties, as well as any 

agreement, arrangement or understanding (1) between the sponsor and the SPAC, its 

executive officers, directors or affiliates, in determining whether to proceed with a de-

SPAC transaction and (2) regarding the redemption of outstanding securities; 

• The controlling persons of the sponsor and any persons who have direct and indirect 

material interests in the sponsor, as well as an organizational chart that shows the 

relationship between the SPAC, the sponsor, and the sponsor’s affiliates;  

• Tabular disclosure of the material terms of any lock-up agreements with the sponsor and 

its affiliates; and 

                                                 
the de-SPAC transaction or thereafter.  Some SPACs provide that only the founder shares may vote in director 
elections until the de-SPAC transaction. 
62  See text accompanying supra notes 14-16. 
63  The term “promoter” is defined in Securities Act Rule 405 and Exchange Act Rule 12b-2. 



30 
 

• The nature and amounts of all compensation that has or will be awarded to, earned by, or 

paid to the 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 sponsor, its affiliates and any promoters upon the 

completion of a de-SPAC transaction.64 

Proposed Item 1603(a)’s disclosure requirements are intended to provide a SPAC’s 

prospective investors and existing shareholders with detailed information relating to the sponsor 

that could be important in understanding and analyzing a SPAC, including how the rights and 

interests of the sponsor, its affiliates, and any promoters may differ from, and may conflict with, 

those of public shareholders.65  Given that a SPAC does not conduct an operating business, 

information about the background and experience of the sponsor is often important in assessing a 

SPAC’s prospects for success and may be a relevant factor in the market value of a SPAC’s 

securities.66  To the extent that a sponsor’s activities and arrangements with a SPAC are carried 

out through, or in conjunction with, the sponsor’s affiliates and any promoters of the SPAC, we 

are proposing to require corresponding disclosure with respect to these affiliates and promoters.  

In addition, enhanced disclosure on the sponsor’s compensation and the 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 

                                                 
64  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. 
65  Proposed Item 1603(a) would operate in addition to existing disclosure requirements that may be applicable to a 
SPAC’s arrangements with its sponsor such as Item 701 of Regulation S-K, which requires disclosure about, among 
other things, the terms of any private securities transactions between a SPAC and its sponsor within the past three 
years, and Item 404 of Regulation S-K, which requires disclosure about certain related party transactions. 
66  See, e.g., Lin, Lu, Michaely, and Qin, supra note 30; Andrea Pawliczek, A. Nicole Skinner, and Sarah L.C. 
Zechman, Signing Blank Checks: The Roles of Reputation and Disclosure in the Face of Limited Information (SSRN 
Working Paper, 2021). 



31 
 

evaluating the potential risks and merits of a proposed de-SPAC transaction because it could 

highlight additional motivations for completing a de-SPAC transaction. 

While proposed Item 1603 calls for detailed disclosure about the sponsor, its experience 

and its rights and interests, we note that some of this information is already being provided, to an 

extent, by SPACs.  Codifying and amplifying these existing disclosure practices would help 

ensure that issuers provide consistent and comprehensive information across transactions, so that 

investors can make more informed investment, voting and redemption decisions. 

Request for Comment 

7. Should we require additional information regarding sponsors of SPACs pursuant to 

Item 1603(a), as proposed?  If so, should we also require disclosure regarding the 

sponsor’s affiliates and any promoters of the SPAC, as proposed? 

8. Should we require disclosure about the experience and material roles and responsibilities 

of the sponsor, its affiliates and any promoters of the SPAC in directing and managing 

the SPAC’s activities, as proposed?  How would investors use this information? 

9. Should we require more or less information about the sponsor’s compensation and 

reimbursements?  Should we require this disclosure only when the amounts exceed a de 

minimis threshold?  If so, what should the de minimis threshold be? 

10. Should we require additional disclosure about the sponsor’s agreements, arrangements, or 

understandings in determining whether to proceed with a de-SPAC transaction and 

regarding the redemption of outstanding securities of the SPAC, as proposed? 

11. Should we require disclosure about the controlling persons of the sponsor and any 

persons who have direct and indirect material interests in the sponsor, as proposed?  

Should we take a different approach than requiring disclosure on persons with “material 



32 
 

interests” in the sponsor?  Should we consider requiring additional disclosure on the 

controlling persons of entities that own or control the sponsor?  Should we require an 

organizational chart that shows the relationship among the SPAC, the sponsor, and the 

sponsor’s affiliates, as proposed?  Would both narrative disclosure and an organizational 

chart be helpful to investors? 

12. Should we require disclosure of the material terms of any lock-up agreements with the 

sponsor and its affiliates as proposed?  Would the proposed requirement to provide this 

disclosure in a tabular format be helpful to investors?  Should we instead require this 

disclosure in a non-tabular format? 

13. Is there additional information regarding sponsors that should be disclosed?  Should we 

require more or less information about the sponsor depending on the size or other 

characteristics of a SPAC? 

14. Should additional disclosure be required regarding affiliated entities involved in the 

SPAC’s operations? 

C. Conflicts of Interest 

Within a SPAC’s structure, there may be a number of potential or actual conflicts of 

interest between the sponsor and public investors that could influence the actions of the SPAC.  

A notable example is the potential conflict of interest stemming from the contingent nature of the 

sponsor’s compensation, whereby the sponsor and its affiliates have significant financial 

incentives to pursue a business combination transaction even though the transaction could result 

in lower returns for public shareholders than liquidation of the SPAC or an alternative 



33 
 

transaction.67  Other conflicts of interest may arise when a sponsor is a sponsor of multiple 

SPACs and manages several different SPACs at the same time; when a sponsor and/or its 

affiliates hold financial interests in, or have contractual obligations to, other entities; or when a 

SPAC enters into a business combination with a private operating company affiliated with the 

sponsor, the SPAC, or the SPAC’s founders, officers, or directors.  Further, a SPAC’s officers 

often do not work full-time at the SPAC, may work for both the sponsor and the SPAC, and/or 

may have responsibilities at other companies, which may impact such officers’ ability to devote 

adequate time and attention to the activities of the SPAC and may influence their decision to 

proceed with a particular de-SPAC transaction.  These potential conflicts of interest could be 

particularly relevant for investors to the extent that they arise when a SPAC and its sponsor are 

evaluating and deciding whether to recommend a business combination transaction to 

shareholders, especially as the SPAC nears the end of the period to complete such a transaction 

under, e.g., its governing instruments or the proposed safe harbor under the Investment Company 

Act,68 if adopted, and the sponsor may be under pressure to find a target and complete the de-

SPAC transaction on less favorable terms or face losing the value of its securities in the SPAC. 

We are proposing Item 1603(b) to require disclosure of any actual or potential material 

conflict of interest between (1) the sponsor or its affiliates or the SPAC’s officers, directors, or 

promoters, and (2) unaffiliated security holders.  This would include any conflict of interest in 

determining whether to proceed with a de-SPAC transaction and any conflict of interest arising 

from the manner in which a SPAC compensates the sponsor or the SPAC’s executive officers 

and directors, or the manner in which the sponsor compensates its own executive officers and 

                                                 
67  See, e.g., Usha Rodrigues and Mike Stegemoller, Exit, Voice, and Reputation: The Evolution of SPACs, 37 DEL. 
J. CORP. L. 849 (2013). 
68  See infra Section VI. 



34 
 

directors.  In addition, we are proposing Item 1603(c) to require disclosure regarding the 

fiduciary duties each officer and director of a SPAC owes to other companies.  Such disclosure 

could allow investors to assess whether and to what extent officers or directors may have to 

navigate a conflict of interest consistent with their obligations under the laws of the jurisdiction 

of incorporation or organization, may be compelled to act in the interest of another company or 

companies that compete with the SPAC for business combination opportunities, or may have 

their attention divided such that it may affect their decision-making with respect to the SPAC. 

The proposed disclosure requirements would provide a SPAC’s shareholders and 

prospective investors with a more complete understanding of any actual or potential material 

conflicts of interest associated with the SPAC and the benefits that may be realized by the 

sponsor and its affiliates and any promoters arising from these conflicts of interest.  Such 

disclosure could allow investors to more accurately assess the potential risk associated with the 

conflicts of interest in a SPAC.  Further, disclosure about the fiduciary duties a SPAC’s officers 

and directors owe to other companies could allow the SPAC’s shareholders and prospective 

investors to better assess the actions of these officers and directors in managing the SPAC’s 

activities and in determining to proceed with a proposed de-SPAC transaction. 

Request for Comment 

15. Should we require disclosure with respect to material conflicts of interest that may arise 

in connection with de-SPAC transactions, as proposed?  Should we include a materiality 

threshold, as proposed?  Is it clear what would constitute an actual or potential material 

conflict of interest, or is further guidance or specification needed?  For example, are there 

other specific conflicts of interest that we should identify in the rule? 



35 
 

16. Would the proposed disclosure requirements adequately inform investors as to potential 

material conflicts of interest?  Are there approaches that could minimize potential 

boilerplate or duplicative disclosure?  Should we require that this disclosure be presented 

in a tabular format? 

17. Is there any additional information that we should require regarding conflicts of interest?  

For example, should we also require a description of any policies and procedures used or 

to be used to minimize potential or actual conflicts of interest?  Should we require 

disclosure of how the board of directors assesses and manages such conflicts, in 

particular where directors themselves have conflicts of interest? 

18. Should SPACs be required to provide additional disclosure regarding material conflicts 

of interest in Exchange Act reports following their initial public offerings?  For example, 

should periodic reports require that any changes in previously disclosed conflicts of 

interest be reported?  Should we require disclosure about material conflicts of interest 

relating to both the SPAC and the identified target company in the Form 8-K that is 

required to be filed in connection with the announcement of a de-SPAC transaction? 

19. Should we require disclosure about any fiduciary duties each officer and director of a 

SPAC owes to other companies, as proposed?  How would investors use this 

information?  Should we require additional or different disclosure regarding these 

fiduciary duties?  Would this requirement potentially result in the disclosure of 

information that is not relevant to SPAC investors?  Should this disclosure requirement 

be focused instead on material conflicts of interests arising from these fiduciary duties to 

other companies?  Should we require that this disclosure be provided in a tabular format?  

Should we consider other approaches to this disclosure? 



36 
 

D. Dilution 

We are proposing Items 1602(a)(4), 1602(c) and 1604(c) to require additional disclosure 

about the potential for dilution in (1) registration statements filed by SPACs, including those for 

initial public offerings, and (2) de-SPAC transactions.  Proposed Item 1602(c) would be 

applicable to all registered offerings by a SPAC other than a de-SPAC transaction, while 

proposed Item 1604(c) would be applicable to all de-SPAC transactions.  We are also proposing 

Item 1602(a)(4) to require simplified tabular dilution disclosure on the prospectus cover page in 

registered offerings by a SPAC on Form S-1 or F-1 other than for de-SPAC transactions. 

There are a number of potential sources of dilution in a SPAC’s structure, including 

dilution resulting from shareholder redemptions, sponsor compensation, underwriting fees, 

outstanding warrants and convertible securities, and PIPE financings.  This dilution may be 

particularly pronounced for the shareholders of a SPAC who do not redeem their shares prior to 

the consummation of the de-SPAC transaction and who may not realize or appreciate that these 

costs are disproportionately borne by the non-redeeming shareholders.69  According to one study, 

the median dilutive impact of sponsor compensation, underwriting fees, warrants, and rights 

equaled 50.4% of the cash raised in a SPAC initial public offering.70  Further, several 

commentators have asserted that the complexity of the disclosures in these transactions makes it 

difficult for investors to understand the dilutive impact of sponsor compensation on the SPAC’s 

non-redeeming shareholders.71 

                                                 
69  For example, the dilutive impact of underwriting fees deferred until the completion of a de-SPAC transaction and 
the number of shares received by the sponsor is not required to be disclosed in a manner that takes into account the 
additional dilution caused by redemptions. 
70  Klausner, Ohlrogge, and Ruan, supra note 17. 
71  See, e.g., AFR Letter; Klausner, Ohlrogge, and Ruan, supra note 17; Michael Klausner, Michael Ohlrogge, and 
Harald Halbhuber, SPAC Disclosure of Net Cash Per Share (SSRN Working Paper, 2022). 



37 
 

In light of the potential for significant dilution embedded within the typical SPAC 

structure, enhanced disclosure regarding dilution could enable investors in a SPAC initial public 

offering 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.72  We are 

therefore proposing to require dilution disclosure in registration statements filed by SPACs other 

than for de-SPAC transactions that would require a description of material potential sources of 

future dilution following a SPAC’s initial public offering, as well as tabular disclosure of the 

amount of potential future dilution from the public offering price that will be absorbed by non-

redeeming SPAC shareholders, to the extent quantifiable.73  This proposed disclosure would be 

in addition to the disclosure already required under Item 506 of Regulation S-K.74 

In addition, we are proposing to require simplified tabular dilution disclosure 

incorporating a range of potential redemption levels on the prospectus cover page of SPAC 

registration statements on Forms S-1 and F-1.75  In providing disclosure pursuant to Item 506, 

SPACs currently provide prospective investors with estimates of dilution as a function of the 

                                                 
72  In this regard, we note that the initial purchasers in SPAC initial public offerings often resell or redeem their 
shares prior to the completion of the de-SPAC transaction.  See, e.g., Benjamin Mullin and Amrith Ramkumar, 
BuzzFeed Suffers Wave of SPAC Investor Withdrawals Before Going Public, The Wall Street Journal, Dec. 2, 2021.  
See also supra note 17. 
73  Proposed Item 1602(c). 
74  Under Item 506, a company is required to provide disclosure regarding dilution when (1) the company is not 
subject to the reporting requirements of the Exchange Act and is registering an offering of common equity securities 
where there is substantial disparity between the public offering price and the effective cash cost to officers, directors, 
promoters, and affiliated persons of common equity acquired by them in transactions during the past five years, or 
which they have the right to acquire; or (2) the company is registering an offering of common equity securities and 
the company has had losses in each of its last three fiscal years and there is a material dilution of the purchasers' 
equity interest.  In the first instance, a company must provide a comparison of the public contribution under the 
proposed public offering and the effective cash contribution of such persons.  In both instances, Item 506 requires 
disclosure of the net tangible book value per share before and after the distribution; the amount of the increase in 
such net tangible book value per share attributable to the cash payments made by purchasers of the shares being 
offered; and the amount of the immediate dilution from the public offering price which will be absorbed by such 
purchasers. 
75  Proposed Item 1602(a)(4). 



38 
 

difference between the initial public offering price and the pro forma net tangible book value per 

share after the offering.  These estimates often include an assumption that the maximum 

allowable number of shares eligible will be redeemed prior to the de-SPAC transaction.76  While 

this information can be useful, investors may benefit from a more detailed and prominent tabular 

presentation of this dilution disclosure that shows various potential levels of redemption, not just 

the upper bound on dilution attributable to redemptions.  We are therefore proposing to require 

that registration statements on Form S-1 or Form F-1 filed by SPACs, including for an initial 

public offering, include on the prospectus cover page a simplified dilution table, in the following 

format, which would present the reader with an estimate of the remaining pro forma net tangible 

book value per share at quartile intervals up to the maximum redemption threshold: 

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 

     

 

The proposed Item 1602(a)(4) dilution disclosure would be calculated in a manner 

consistent with the methodologies and assumptions more fully articulated in the disclosures 

provided pursuant to Item 506 elsewhere in the prospectus.  If the initial public offering includes 

an overallotment option, the table would need to include separate rows showing remaining pro 

forma net tangible book value per share with the exercise and without the exercise of the over-

allotment option.  We are also proposing to require that SPACs provide a cross-reference to the 

more detailed dilution disclosure later in the prospectus when providing this tabular disclosure 

on the prospectus cover page. 

                                                 
76  In practice, redemption rates rarely reach this level. 



39 
 

In regard to de-SPAC transactions, investors could benefit from clearer dilution 

disclosure that takes into account the unique characteristics of the SPAC structure, including any 

terms negotiated with the target private operating company, as well as the potential for additional 

financing from PIPE investors.  At the time of a de-SPAC transaction, investors are making a 

decision as to whether to remain a shareholder of the post-business combination company going 

forward.  Apart from the operating success of the post-business combination company, dilution 

is likely to have a significant impact on the value of a shareholder’s continued investment in the 

company.  We are therefore proposing Item 1604(c) to require disclosure of each material 

potential source of additional dilution that non-redeeming shareholders may experience at 

different phases of the SPAC lifecycle by electing not to redeem their shares in connection with 

the de-SPAC transaction.77 

For example, to the extent material, this disclosure would need to explain that, when a 

SPAC’s shareholders retain their warrants after redeeming their shares prior to the de-SPAC 

transaction, the non-redeeming shareholders and the post-business combination company may 

face potential additional dilution.  Proposed Item 1604(c)(1) would also require a sensitivity 

analysis in a tabular format that shows the amount of potential dilution under a range of 

reasonably likely redemption levels and quantifies the increasing impact of dilution on non-

redeeming shareholders as redemptions increase.  We are also proposing to require disclosure of 

a description of the model, methods, assumptions, estimates, and parameters necessary to 

understand the sensitivity analysis disclosure. 

                                                 
77  Depending on the circumstances, material potential sources of additional disclosure may include dilution from 
sponsor compensation, underwriting fees, outstanding warrants and convertible securities, and financing transactions 
(including PIPE transactions). 



40 
 

Request for Comment 

20. Should we require disclosure of material potential sources of future dilution in 

registration statements filed by SPACs for initial public offerings and in disclosure 

documents for de-SPAC transactions, as proposed?  How would investors benefit from 

this additional disclosure?  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?  Should we provide additional 

explanation on how to calculate the amount of dilution for purposes of these disclosure 

requirements?  Should we provide further guidance about disclosures that SPACs should 

consider making to help non-affiliated shareholders understand the potential for dilution 

and the consequences of dilution for non-affiliated shareholders? 

21. Should we also consider requiring enhanced dilution disclosure in other Commission 

filings?  If so, what additional information should we require in this context?  How would 

investors use this additional dilution disclosure? 

22. Should we require simplified tabular disclosure regarding dilution on the prospectus 

cover page of a Form S-1 or Form F-1, as proposed?  Should we require additional or less 

information, or alternative information, in the tabular disclosure?  For example, would a 

tabular presentation of cash remaining per non-redeemed share in lieu of a tabular 

presentation of remaining pro forma net tangible book value per share be useful to 

investors?  Should we consider adding a similar requirement to provide simplified tabular 

disclosure (1) in the prospectus summary of a Form S-1 or F-1 or (2) on the prospectus41 
 

cover page and/or in the prospectus summary of a Form S-4 or Form F-4 for a de-SPAC 

transaction?  If so, what information should be included in such tabular disclosure?  Are 

there other ways to present the potential for dilution to investors in a more accessible 

format? 

23. Should we require, in disclosure documents for de-SPAC transactions, a sensitivity 

analysis in a tabular format, as proposed?  Should we consider additional or alternative 

approaches to this disclosure requirement? 

24. Are there any significant challenges in providing the proposed enhanced dilution 

disclosure at the initial public offering stage or at the de-SPAC transaction stage? 

25. Should we consider additional amendments that would highlight or simplify dilution 

disclosure so that it is more clear and accessible for investors? 

E. Prospectus Cover Page and Prospectus Summary Disclosure 

In response to concerns raised about the complexity of disclosures in Securities Act 

registration statements filed by SPACs for initial public offerings and for de-SPAC 

transactions,78 we are proposing Item 1602 to require that certain information be included on the 

prospectus cover page and in the prospectus summary using plain English principles.79  Given 

the unique nature of SPAC offerings and the potential risks they present to investors, investors 

could benefit from requiring the issuer to highlight certain disclosures on the cover page and in 

the prospectus summary, in a form that can be more easily read and understood. 

                                                 
78  See, e.g., IAC Recommendations, supra note 37 (expressing concerns “relating to the effectiveness of disclosure 
about the risks, economics and mechanics of SPACs as a result of the complexity of these transactions and the 
staggered nature of the disclosure process”); Rodrigues Testimony; Klausner, Ohlrogge, and Ruan, supra note 17. 
79  See Securities Act Rule 421(d).  See supra note 38. 



42 
 

1. Prospectus Cover Page 

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.  In regard to registered offerings (including 

initial public offerings) by SPACs other than de-SPAC transactions, we are proposing 

Item 1602(a) to require information on the prospectus cover page in plain English about, among 

other things, the time frame for the SPAC to consummate a de-SPAC transaction, redemptions, 

sponsor compensation, dilution (including simplified tabular disclosure), and conflicts of 

interest.  In regard to de-SPAC transactions, we are proposing Item 1604(a) to require that 

SPACs include information on the prospectus cover page in plain English about, among other 

things, the fairness of the de-SPAC transaction, material financing transactions, sponsor 

compensation and dilution, and conflicts of interest. 

Investors should benefit from having these significant aspects of SPAC offerings and de-

SPAC transactions disclosed prominently on the prospectus cover page in plain English,80 in 

addition to the information otherwise required under Item 501 of Regulation S-K.  Although 

most SPACs already provide much of the proposed information on prospectus cover pages, the 

proposed rules would standardize this information across all registration statements filed by 

SPACs for initial public offerings and for de-SPAC transactions. 

2. Prospectus Summary 

 Item 503 of Regulation S-K requires a brief summary of the information in the prospectus 

where the length or complexity of the prospectus makes a summary useful.  While the 

information that should be included in a prospectus summary will depend on the particular 

                                                 
80  Id. 



43 
 

offering and issuer, a prospectus summary should provide disclosure in clear language of the 

most significant aspects of the transaction being registered.81  In light of the often complex 

disclosure in registration statements filed by SPACs, a requirement that SPACs present certain 

information in the prospectus summary in plain English should help investors more easily to 

identify and assess those aspects of the transaction that are likely to be important in their 

investment, voting, and redemption decisions.82 

In regard to registered offerings other than de-SPAC transactions, we are proposing 

Item 1602(b) to require that SPACs include the following information in the prospectus 

summary in plain English: 

• The process by which a potential business combination candidate will be identified and 

evaluated; 

• Whether shareholder approval is required for the de-SPAC transaction;  

• The material terms of the trust or escrow account, including the amount of gross offering 

proceeds that will be placed in the trust; 

• The material terms of the securities being offered, including redemption rights; 

• Whether the securities being offered are the same class as those held by the sponsor and 

its affiliates; 

• The length of the time period during which the SPAC intends to consummate a de-SPAC 

transaction, and its plans if it does not do so, including, whether and how the time period 

may be extended, the consequences to the sponsor of not completing an extension of this 

                                                 
81  See Instruction to Item 503(a) and 17 CFR 230.421(b) (Securities Act Rule 421(b)). 
82  In the context of asset-backed offerings, the Commission previously specified that certain information be 
included on the prospectus cover page and in the prospectus summary.  See Items 1102 and 1103 of Regulation S-K.  
Asset-Backed Securities, Release No. 33-8518 (Dec. 22, 2004) [70 FR 1506 (Jan. 7, 2005)].  See also Item 3 of Form 
S-4 and Item 3 of Form F-4 (specifying that certain information be included in the prospectus summary). 



44 
 

time period, and whether shareholders will have voting or redemption rights with respect 

to an extension of time to consummate a de-SPAC transaction; 

• Any plans to seek additional financing and how such additional financing might impact 

shareholders;  

• Tabular disclosure of sponsor compensation and the extent to which material dilution 

may result from such compensation; and 

• Material conflicts of interest. 

Based on the Commission staff’s experience in reviewing registration statements filed by 

SPACs, we believe these topics are among those that investors are likely to find most important 

when considering an investment in the SPAC prior to the identification of a potential business 

combination candidate. 

In regard to registered de-SPAC transactions, we are proposing Item 1604(b) to require 

that registrants include the following information in the prospectus summary in plain English: 

• The background and material terms of the de-SPAC transaction; 

• The fairness of the de-SPAC transaction; 

• Material conflicts of interest; 

• Tabular disclosure on sponsor compensation and dilution; 

• Financing transactions in connection with de-SPAC transactions; and 

• Redemption rights. 

Based on the Commission staff’s experience in reviewing registration statements for de-SPAC 

transactions, we believe investors would find this information, in particular those topics that 

illuminate potential conflicts of interest and the overall fairness of the proposed transaction, 

important when making an investment decision at the de-SPAC transaction stage. 



45 
 

Request for Comment 

26. Would requiring certain information in regard to SPAC offerings on the prospectus cover 

page and in the prospectus summary make it easier for investors to review and understand 

the disclosures in these registration statements?  Are there other ways we could make 

these registration statements easier for investors to understand? 

27. Should we require the proposed cover page disclosures for SPAC initial public offerings 

and de-SPAC transactions?  Is there other information that we should require to be 

included on the cover page, either in addition to, or in lieu of, the information proposed to 

be required?  Conversely, are there any proposed additional cover page disclosures that 

we should not adopt? 

28. Should we require the inclusion of the proposed specified information in the prospectus 

summary?  Is there other information that we should require to be included in the 

prospectus summary? 

29. Is the subset of the disclosure under proposed Item 1605 that we are proposing to require 

to be more prominently presented on the prospectus cover page and in the prospectus 

summary via proposed Items 1604(a) and (b) the most informative or otherwise important 

information for purposes of the prospectus cover page and the prospectus summary?  

Should any additional disclosure provided pursuant to proposed Item 1605 be added to or 

replace an existing element of the information proposed to be required on the prospectus 

cover page or in the prospectus summary? 

30. Are there other changes we should consider in regard to the prospectus cover page and 

prospectus summary?  For example, should we impose any additional formatting 

requirements, such as the use of tables or bullet points, for certain information in the 



46 
 

prospectus summary?  Would such formatting requirements improve the clarity of this 

disclosure? 

F. Disclosure and Procedural Requirements in De-SPAC Transactions 

We are proposing specialized disclosure and procedural requirements in de-SPAC 

transactions so that investors can better understand and evaluate the merits of a prospective de-

SPAC transaction.83  The proposed rules would require: (1) additional disclosures on the 

background of and reasons for the transaction; (2) a statement from the SPAC as to whether it 

reasonably believes that the de-SPAC transaction and any related financing transaction are fair or 

unfair to unaffiliated security holders; (3) disclosure on any outside report, opinion, or appraisal 

relating to the fairness of the transaction; and (4) additional information in a Schedule TO filed 

in connection with a de-SPAC transaction, as well as clarify the need to comply with the 

procedural requirements of the tender offer rules when filing such a Schedule TO.84 

1. Background of and Reasons for the De-SPAC Transaction; Terms and 
Effects 

 
In order to provide investors with a more complete understanding of the de-SPAC 

transaction, we are proposing Item 1605 of Regulation S-K which would require disclosure of 

the background, material terms, and effects of the de-SPAC transaction, including: 

                                                 
83  As discussed above, a SPAC is required to provide its shareholders with a proxy statement on Schedule 14A if 
shareholder approval is required in a de-SPAC transaction.  If a SPAC is registering an offering of its shares to be 
issued in the de-SPAC transaction, the SPAC generally files a registration statement on Form S-4 or F-4.  
Alternatively, if shareholder approval is required but the SPAC is not soliciting proxies from its shareholders, the 
SPAC is required to provide an information statement on Schedule 14C.  Otherwise, if no registration statement, 
proxy statement or information statement is required, the SPAC must disseminate a Schedule TO (tender offer 
statement) to its shareholders.  See Section IV.A. for a discussion of proposed Rule 145a, which would affect when a 
SPAC may be required to file a Form S-4 or F-4 in connection with a de-SPAC transaction. 
84  In addition, we are proposing new rules applicable to business combinations involving shell companies more 
generally, which would include de-SPAC transactions.  See infra Section IV. 



47 
 

• 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;85 

• A brief description of any related financing transaction, including any payments from the 

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;86 and 

• Disclosure regarding the accounting treatment and the federal income tax consequences 

of the de-SPAC transaction, if material.87 

These disclosure requirements are modeled, in part, on Item 1004(a)(2) and Item 1013(b) 

of Regulation M-A88 and are intended to provide investors with, among other things, an 

                                                 
85  For example, this disclosure could encompass whether any portion of the underwriting fees in connection with a 
SPAC’s initial public offering is contingent upon the SPAC’s completion of a de-SPAC transaction and whether the 
underwriter in the SPAC’s initial public offering has provided additional services to the SPAC following the initial 
public offering, such as locating potential target companies, providing financial advisory services, acting as a 
placement agent for PIPE transactions, and/or arranging debt financing.  For a discussion of the role of the 
underwriter in connection with a de-SPAC transaction, see infra Section III.F. 
86  This proposed disclosure requirement is intended to address situations where the shares of a SPAC are being 
exchanged for shares of a new holding company or the target company in a de-SPAC transaction. 
87  Proposed Items 1605(a) and (b).  This disclosure would be required in any Form S-4 or F-4 or Schedule 14A, 
14C, or TO filed in connection with a de-SPAC transaction.  We note that registrants are already subject to similar 
disclosure requirements in Schedules 14A and 14C and in Forms S-4 and F-4.  These proposed disclosure 
requirements are intended to complement these existing requirements by setting forth specialized disclosure 
requirements that are specific to de-SPAC transactions. 
88  17 CFR 229.1000 through 229.1016.  Regulation M-A is a subpart (the 1000 series) of Regulation S-K.  
Item 1004(a)(2) sets forth disclosure requirements regarding the material terms of mergers or similar transactions, 
and Item 1013(b) requires disclosure of alternative means considered by the subject company or affiliate in the 
context of a going-private transaction.  In our view, these rules are appropriate models for the proposed specialized 
disclosure requirements for de-SPAC transactions, in that Item 1004(a)(2) sets forth disclosure requirements for 
mergers generally and the same potential for self-interested transactions exists in de-SPAC transactions as in going-
private transactions. 



48 
 

enhanced basis upon which to evaluate a SPAC’s reasons for proposing a de-SPAC transaction 

and for choosing a particular structure and financing for the transaction, through a specialized 

disclosure rule tailored to SPACs that would address disclosure issues more specific to de-SPAC 

transactions.  These proposed requirements would also help promote consistent disclosure, which 

would allow for greater comparability of these disclosures across de-SPAC transactions.  As 

proposed, Item 1605(b) would require a reasonably detailed discussion of the reasons for, and the 

structure and timing of, a proposed de-SPAC transaction, which could include a discussion of the 

key events and activities in identifying the target private operating company and in negotiating 

the terms of the merger or acquisition, as well as the material factors considered by a SPAC’s 

board of directors in approving the terms of the proposed de-SPAC transaction and in 

recommending shareholder approval of the transaction. 

In addition, we are proposing Item 1605(c) to require disclosure of the effects of the de-

SPAC transaction and any related financing transaction on the SPAC and its affiliates, the 

sponsor and its affiliates, the private operating company and its affiliates, and unaffiliated 

security holders of the SPAC.  Such disclosure could allow investors to better assess whether the 

transactions have been structured in a manner that would benefit one of these parties in particular 

or that would be to the detriment of other parties.  As proposed, the disclosure must provide a 

reasonably detailed discussion of both the benefits and detriments to non-redeeming shareholders 

of the de-SPAC transaction and any related financing transaction, with such benefits and 

detriments quantified to the extent practicable.89  For example, if the sponsor’s interests and 

returns may differ from those of public investors in regard to a prospective de-SPAC transaction, 

the disclosure should describe and quantify, to the extent practicable, dollar amounts or 

                                                 
89  Proposed Item 1605(c). 



49 
 

prospective returns the sponsor and its affiliates stand to gain or lose that are dependent on the 

completion of the transaction. 

We are also proposing Item 1605(d) to require disclosure of the SPAC’s sponsors’, 

officers’ and directors’ material interests in the de-SPAC transaction or any related financing 

transaction, including any fiduciary or contractual obligations to other entities and any interest 

in, or affiliation with, the private operating company that is the target of the de-SPAC 

transaction.  This proposed disclosure requirement is intended to address, among other things, 

the concern that a sponsor may be proposing a de-SPAC transaction that will produce benefits or 

detriments that are not fully disclosed to investors.90 

Under Item 403 of Regulation S-K, SPACs currently provide tabular disclosure regarding 

the beneficial ownership of its equity or voting securities, as applicable, by management and 

beneficial owners of more than 5% of a class of voting securities.91  The proposed disclosure 

requirement in Item 1605(d) would be broader than Item 403, and would require disclosure of 

any material interests that the sponsor and the SPAC’s officers and directors have in a de-SPAC 

transaction or any related financing transaction, including fiduciary or contractual obligations to 

other entities as well as any interest in, or affiliation with, the target company.  The proposed 

disclosure requirement would also encompass material interests that are non-pecuniary in nature 

that may nevertheless affect the decision to proceed with a prospective de-SPAC transaction or 

related financing transaction.  In the context of a de-SPAC transaction, this disclosure could help 

investors, when making an investment, voting or redemption decision with respect to the de-

                                                 
90  See, e.g., IAC Recommendations, supra note 37 (stating that “there may be financial arrangements that constitute 
conflicts of interest that are not fully disclosed or understood by investors”); Rodrigues and Stegemoller, supra note 
17; Klausner, Ohlrogge, and Ruan, supra note 17; Deane Testimony. 
91  Under Item 403, beneficial ownership is determined in accordance with 17 CFR 240.13d-3(d)(1) (Exchange Act 
Rule 13d-3(d)(1)), pursuant to which a person is generally deemed to be the beneficial owner of securities that the 
person has the right to acquire within 60 days. 



50 
 

SPAC transaction, to assess whether, on balance, the benefits of the de-SPAC transaction justify 

the detriments, and particularly whether the sponsor is motivated to complete a de-SPAC 

transaction by interests not held by all investors.   

Proposed Item 1605(e) would require disclosure of whether or not security holders are 

entitled to any redemption or appraisal rights, and if so, a summary of the redemption or 

appraisal rights.92  Under the proposed rules, SPACs would be required to disclose, among other 

things, whether shareholders may redeem their shares regardless of whether they vote in favor of 

or against a proposed de-SPAC transaction, or abstain from voting, and whether shareholders 

have the right to redeem their securities at the time of any extension of the time period to 

complete a de-SPAC transaction.  If there are no redemption or appraisal rights available for 

security holders who object to the de-SPAC transaction, the proposed rules would require 

disclosure of any other rights that may be available to security holders under the law of the 

jurisdiction of organization.  These disclosures would help investors better assess the impact of 

any redemption or appraisal rights on a proposed de-SPAC transaction, including whether the 

existence of such rights might lead some investors to redeem their securities after voting in favor 

of a de-SPAC transaction.93 

                                                 
92  This proposed disclosure requirement would build upon, and be in addition to, the existing disclosure requirement 
in Item 202 of Regulation S-K (Description of registrant’s securities).  Under Item 202, SPACs are currently 
required to disclose the redemption provisions of their capital stock being registered, such as whether redemptions 
would be required under certain circumstances at the SPAC’s option, e.g., whether a SPAC may require the 
redemption of warrants held by public shareholders for nominal consideration if the underlying shares trade above a 
certain threshold price. 
93  One commentator has observed that SPAC shareholders may vote in favor of a proposed de-SPAC transaction 
while redeeming their shares prior to the closing of the transaction, such that the vote is decoupled from any 
economic interest in the post-business combination company.  Rodrigues and Stegemoller, supra note 17.  See also 
supra note 29. 



51 
 

Request for Comment 

31. Would the proposed disclosure requirements provide investors with important 

information regarding the background of and reasons for a de-SPAC transaction?  Is there 

any additional information about the background of and reasons for the de-SPAC 

transaction that we should require to be disclosed?  Are there any additional or alternative 

requirements that we should consider to further improve the disclosures about de-SPAC 

transactions? 

32. Should we adopt the proposed disclosure requirements with respect to the effects of the 

de-SPAC transaction and any related financing transaction, as proposed?  Should we 

require additional or alternative disclosure regarding the effects of the de-SPAC 

transaction and any related financing transaction? 

33. Should we require disclosure 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?  Should we require additional or alternative 

disclosure regarding the interests of these parties in the de-SPAC transaction? 

34. Should we require disclosure regarding whether or not security holders are entitled to any 

redemption or appraisal rights and a summary of any such rights, as proposed?  Is there 

additional or alternative disclosure about redemption or appraisal rights that we should 

require? 

35. Would the disclosure requirements in proposed Item 1605 result in duplicative 

disclosures?  If so, are there alternative approaches that we should consider to avoid this 

result? 



52 
 

2. Fairness of the De-SPAC Transaction 

To address concerns regarding potential conflicts of interest and misaligned incentives in 

connection with the decision to proceed with a de-SPAC transaction and to assist investors in 

assessing the fairness of a particular de-SPAC transaction to unaffiliated investors,94 we are 

proposing 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 transaction are fair or unfair to the 

SPAC’s unaffiliated security holders, as well as a discussion of the bases for this statement.95  

We are proposing to require that this statement encompass both the de-SPAC transaction and any 

related financing transaction so that the fairness determination would require consideration of the 

combined effects of both transactions, which are often dependent on each other, on unaffiliated 

security holders.  As proposed, a SPAC would be required to include this statement in any Forms 

S-4 and F-4 or Schedules 14A, 14C, and TO filed in connection with a de-SPAC transaction.96  

Proposed Item 1606(a) would also require disclosure on whether any director voted against, or 

abstained from voting on, approval of the de-SPAC transaction or any related financing 

                                                 
94  See supra note 28.  See also Michael Klausner and Michael Ohlrogge, SPAC Governance: In Need of Judicial 
Review (SSRN Working Paper, 2021). 
95  In this regard, we are proposing an instruction to Item 1606 that a “statement that the special purpose acquisition 
company has no reasonable belief as to the fairness or unfairness of the de-SPAC transaction or any related 
financing transaction to unaffiliated security holders will not be considered sufficient disclosure in response to [Item 
1606(a)].”  As proposed, a SPAC would not be required to disclose that a de-SPAC transaction and any related 
financing transaction are fair but rather would be required to state its reasonable belief as to the fairness or 
unfairness of the transaction as well as the bases for this statement. 
96  We have modeled certain of the proposed requirements in Item 1606 and Item 1607 (see infra Section II.F.3.), on 
the disclosures required in going-private transactions subject to 17 CFR 240.13e-3 (Exchange Act Rule 13e-3).  See 
Items 1014 and 1015 of Regulation M-A.  In our view, the disclosure requirements in Rule 13e-3 provide an 
appropriate model for the proposed requirements with respect to de-SPAC transactions, in that the conflicts of 
interests and misaligned incentives inherent in going-private transactions are similar to those often present in de-
SPAC transactions. 



53 
 

transaction, and if so, identification of the director and, if known after making a reasonable 

inquiry, the reasons for the vote against the transaction or abstention. 

Under proposed Item 1606(b), a SPAC would be required to discuss in reasonable detail 

the material factors upon which a 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.  These factors would include but not be limited to: the valuation 

of the private operating company; the consideration of any financial projections; any report, 

opinion, or appraisal obtained from a third party; and the dilutive effects of the de-SPAC 

transaction and any related financing transaction on non-redeeming shareholders.  Together, 

these proposed disclosures are intended to help investors assess the reasonableness of the 

SPAC’s stated belief about the fairness of the transaction. 

To provide additional context for understanding the process by which a SPAC 

determined to proceed with a de-SPAC transaction, we are proposing Items 1606(c), (d), and (e), 

which would require disclosure on whether: 

• The de-SPAC transaction or any related financing transaction is structured so that 

approval of at least a majority of unaffiliated security holders is required; 

• A majority of directors who are not employees of the SPAC 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 or any related financing transaction 

and/or preparing a report concerning the fairness of the de-SPAC transaction or any 

related financing transaction; and 

• The de-SPAC transaction or any related financing transaction was approved by a majority 

of the directors of the SPAC who are not employees of the SPAC. 



54 
 

Request for Comment 

36. Should we adopt Item 1606 as proposed? 

37. Should we require a statement from the SPAC as to whether it reasonably believes that 

the de-SPAC transaction and any related financing transaction are fair or unfair to 

unaffiliated security holders, as proposed?  Should the scope of the fairness determination 

include both the de-SPAC transaction and any related financing transaction, as proposed?  

Should the fairness determination be as to the SPAC’s security holders as a whole, rather 

than to the SPAC’s unaffiliated security holders?  The factors enumerated in proposed 

Item 1606(b) in determining fairness include, but are not limited to, the valuation of the 

target company, the consideration of any financial projections, any report, opinion, or 

appraisal described in Item 1607 of Regulation S-K, and the dilutive effects described in 

Item 1604(c) of Regulation S-K.  Is there any additional or alternative information that 

should be disclosed in connection with the SPAC’s fairness determination? 

38. Should we include an instruction to Item 1606 that a statement that the SPAC has no 

reasonable belief as to the fairness or unfairness of the de-SPAC transaction or any 

related financing transaction to unaffiliated security holders will not be considered 

sufficient disclosure in response to Item 1606(a), as proposed? 

39. What are the potential benefits and costs of the statement that would be required by 

proposed Item 1606(a)?  Would the costs of complying with this disclosure requirement 

discourage SPAC initial public offerings or discourage private operating companies from 

pursuing business combinations with SPACs? 

40. Should we require registrants to disclose whether any director voted against, or abstained 

from voting on, the approval of a de-SPAC transaction or any related financing 



55 
 

transaction, as well as the reasons for such vote or abstention, as proposed?  Are there 

additional or alternative disclosures that we should require in this regard? 

41. Should we require registrants to discuss in reasonable detail the material factors and, to 

the extent practicable, the weight assigned to each factor underlying the fairness 

determination, as proposed?  Are there additional or alternative factors that should be 

specified in the proposed rule to enhance an investor’s understanding of the fairness 

determination? 

42. How would investors use disclosure about whether the approval of at least a majority of 

unaffiliated security holders is required and whether the de-SPAC transaction or any 

related financing transaction was approved by a majority of non-employee directors of 

the SPAC?  How would investors use disclosure about whether a representative has been 

retained to represent the investors in the negotiations of the de-SPAC transaction? 

3. Reports, Opinions, and Appraisals 

In addition, we are proposing Item 1607 to require disclosure about certain reports, 

opinions, or appraisals from outside parties.97  Proposed Item 1607(a) would require disclosure 

about whether or not the SPAC or its sponsor has received any report, opinion, or appraisal 

obtained 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, the sponsor or security holders who are not affiliates.98  This 

requirement would provide additional transparency about whether a SPAC’s board of directors 

                                                 
97  As noted above, we have modeled the proposed requirements in Item 1607 on the disclosures required in going-
private transactions subject to Exchange Act Rule 13e-3.  See Item 1015 of Regulation M-A. 
98  Though currently not a routine practice in de-SPAC transactions, SPACs often obtain fairness opinions in 
connection with de-SPAC transactions involving an affiliated private operating company. 



56 
 

and/or its sponsor have access to information underlying a fairness determination that 

shareholders could find useful in making voting, investment, and redemption decisions in 

connection with the de-SPAC transaction.99 

To assist investors in considering the usefulness and reliability of any outside party 

report, opinion or appraisal described in response to proposed Item 1607(a), as well as any 

negotiation or report by an unaffiliated representative acting solely on behalf of unaffiliated 

security holders described in response to proposed Item 1606(d), proposed Item 1607(b) would 

require disclosure of: 

• The identity, qualifications, and method of selection of the outside party and/or 

unaffiliated representative; 

• Any material relationship between (1) the outside party, its affiliates, and/or unaffiliated 

representative, and (2) the SPAC, its sponsor and/or their affiliates, 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;100 

• Whether the SPAC or the sponsor determined the amount of consideration to be paid to 

the private operating company or its security holders, or the valuation of the private 

operating company, or whether the outside party recommended the amount of 

consideration to be paid or the valuation of the private operating company; and 

                                                 
99  For example, the proposed rule would require a SPAC to disclose whether or not the SPAC or its sponsor has 
received a fairness opinion or valuation report from a financial advisor. 
100  For example, this disclosure could include whether the compensation for a financial advisor’s fairness opinion is 
conditioned on the completion of the de-SPAC transaction or whether the amount of compensation due the financial 
advisor may include a bonus or may be increased depending on the ultimate financial terms of the de-SPAC 
transaction. 



57 
 

• A summary concerning the negotiation, report, opinion or appraisal, which would be 

required to include a description of the procedures followed; the findings and 

recommendations; the bases for and methods of arriving at such findings and 

recommendations; instructions received from the SPAC or its sponsor; and any limitation 

imposed by the SPAC or its sponsor on the scope of the investigation. 

Finally, proposed Item 1607(c) would 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, as applicable. 

Request for Comment 

43. Should we require disclosure regarding reports, opinions, or appraisals from an outside 

party, as proposed?  Is there any additional or alternative information that we should 

require with respect to these reports, opinions, or appraisals?  Is there any proposed 

information that should not be required? 

44. Should we require that the reports, opinions or appraisals be filed as exhibits to the 

Form S-4, Form F-4, or Schedule TO for the de-SPAC transaction or included in the 

Schedule 14A or Schedule 14C for the transaction, as proposed?  Should we require 

instead that such reports, opinions, or appraisals be made available for inspection and 

copying upon written request?  Should we require the filing of board books and other 

written materials presented to the board in connection with the reports, opinions, or 

appraisals, as is the case with going-private transactions?  Are there other means by 

which investors should be able to access such report, opinion, or appraisal, such as 

posting on a website? 



58 
 

45. As proposed, filers would be required to include a summary of the report, opinion, or 

appraisal and file such report, opinion, or appraisal as an exhibit to the filing.  Would 

investors benefit from having both the summary and the actual report, opinion, or 

appraisal disclosed, or would one or the other item of disclosure be sufficient? 

4. Proposed Item 1608 of Regulation S-K 

We are proposing Item 1608 of Regulation S-K to codify a staff position that a 

Schedule TO filed in connection with a de-SPAC transaction should contain substantially the 

same information about a target private operating company that is required under the proxy rules 

and that a SPAC must comply with the procedural requirements of the tender offer rules when 

conducting the transaction for which the Schedule TO is filed, such as a redemption of the SPAC 

securities.  Redemption rights offered by a SPAC to its security holders in connection with the 

de-SPAC transaction or an extension of the timeframe to complete a de-SPAC transaction 

generally have indicia of being a tender offer, but the Commission staff has not objected if a 

SPAC does not comply with the tender offer rules when the SPAC files a Schedule 14A or 14C 

in connection with a de-SPAC transaction or an extension and complies with Regulation 14A or 

14C, because the federal proxy rules would generally mandate substantially similar disclosures 

and applicable procedural protections as required by the tender offer rules.101  Proposed Item 

1608, if adopted, would not affect the availability of this staff position for those SPACs that file 

Schedule 14A or 14C for their de-SPAC transactions or extensions.  SPACs that are unable to 

avail themselves of this position and file a Schedule TO (such as foreign private issuers102), 

                                                 
101  See supra note 21. 
102  “Foreign private issuer” is defined in Securities Act Rule 405 and Exchange Act Rule 3b-4(c).  A foreign private 
issuer is any foreign issuer other than a foreign government, except for an issuer that (1) has more than 50% of its 
outstanding voting securities held of record by U.S. residents and (2) any of the following: (i) a majority of its 
officers and directors are citizens or residents of the United States, (ii) more than 50 percent of its assets are located 
in the United States, or (iii) its business is principally administered in the United States. 



59 
 

however, would be subject to the requirements of proposed Item 1608 of Regulation S-K, which 

would codify the staff’s view regarding the information required to be included in a Schedule TO 

filed for a SPAC redemption and clarify the need to comply with the procedural requirements of 

the tender offer rules.103 

Proposed Item 1608 would require a SPAC that files a Schedule TO pursuant to 

Exchange Act Rule 13e-4(c)(2) for any redemption of securities offered in connection with a de-

SPAC transaction to include disclosures required by specified provisions of Forms S-4 and F-4, 

and Schedule 14A, as applicable.  Proposed Item 1608 would specify and standardize the 

information required in a Schedule TO that is filed in connection with a de-SPAC transaction so 

that it is consistent with the information required by the proposed amendments to Forms S-4 and 

F-4 and Schedule 14A.  As a result, SPAC shareholders who are not solicited for their votes to 

approve a de-SPAC transaction (in a solicitation subject to Regulation 14A) would nevertheless 

receive the same information about the target private operating company that could be material 

to their redemption decisions.104  Proposed Item 1608 would clarify that SPACs that file a 

Schedule TO for a redemption also must comply with the procedural requirements of Rule 13e-4 

and Regulation 14E (such as the requirement to keep the redemption period open for at least 20 

business days).  This proposed codification would eliminate any potential ambiguity as to the 

                                                 
103  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 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.” 
104  Proposed Item 1608 would also be consistent with exchange listing rules regarding the use of Schedule TO in 
de-SPAC transactions.  See, e.g., Nasdaq Listing Rule IM-5101-2(e) and NYSE Listed Company Manual Section 
102.06(c). 



60 
 

SPAC’s obligation to provide the tender offer rules’ procedural protections to the SPAC security 

holders who are considering whether to redeem their securities. 

Request for Comment 

46. Should we adopt Item 1608 as proposed? 

47. Is there any additional or alternative information that we should require in proposed 

Item 1608 when a Schedule TO is filed in connection with a de-SPAC transaction? 

48. Are there any requirements of Rule 13e-4 and Regulation 14E that should not apply to 

SPACs that file a Schedule TO for the redemption of the SPAC securities?   

49. Are there any other provisions of Rule 13e-4 or Regulation 14E that should be amended 

to ensure that SPAC security holders are provided with the information material to their 

decision on whether to redeem their SPAC securities or to address other issues arising 

from the SPAC redemption process?  For example, should we amend Exchange Act Rule 

14e-5, which generally prohibits a bidder or its affiliates from making purchases outside 

of a tender offer, to permit a sponsor’s purchases of SPAC securities outside of the 

redemption offer as long as certain conditions are satisfied (such as requiring disclosures 

of the sponsor’s purchases and limiting the purchase price to no more than the price 

offered through the redemption offer), e.g., in a manner consistent with the Division of 

Corporation Finance’s Tender Offers and Schedules Compliance and Disclosure 

Interpretation 166.01 (Mar. 22, 2022)?105   

50. As noted above, the staff has taken the position that a SPAC filing a Schedule 14A or 

14C in connection with a de-SPAC transaction or an extension of the time frame to 

complete a de-SPAC transaction would not need to file a Schedule TO or otherwise 

                                                 
105  This staff interpretation is available at: https://www.sec.gov/divisions/corpfin/guidance/cdi-tender-offers-and-
schedules.htm. 

https://www.sec.gov/divisions/corpfin/guidance/cdi-tender-offers-and-schedules.htm
https://www.sec.gov/divisions/corpfin/guidance/cdi-tender-offers-and-schedules.htm61 
 

comply with the tender offer rules, including the procedural requirements of the tender 

offer rules, such as the all-holders requirement.  Should we codify this position?  Should 

we reconsider this position? 

G. Structured Data Requirement 

We are proposing to require SPACs to tag all information disclosed pursuant to Subpart 

1600 of Regulation S-K in a structured, machine-readable data language.  Specifically, we are 

proposing to require SPACs to tag the disclosures required under Subpart 1600 in Inline XBRL 

in accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual.106  The proposed 

requirements would include detail tagging of the quantitative disclosures and block text tagging 

of the narrative disclosures that would be required under Subpart 1600. 

In 2009, the Commission adopted rules requiring operating companies to submit the 

information from the financial statements (including footnotes and schedules thereto) included in 

certain registration statements and periodic and current reports in a structured, machine-readable 

data language using eXtensible Business Reporting Language (“XBRL”).107  In 2018, the 

Commission adopted modifications to these requirements by requiring issuers to use Inline 

XBRL, which is both machine-readable and human-readable, to reduce the time and effort 

                                                 
106  This tagging requirement would be implemented by including a cross-reference to Rule 405 of Regulation S-T in 
Subpart 1600 of Regulation S-K, and by revising 17 CFR 232.405(b) of Regulation S-T to include the proposed 
SPAC-related disclosures.  A corresponding Note and Instruction would also be added to Schedules 14A and TO, 
respectively.  Pursuant to Rule 301 of Regulation S-T, the EDGAR Filer Manual is incorporated by reference into 
the Commission’s rules.  In conjunction with the EDGAR Filer Manual, Regulation S-T governs the electronic 
submission of documents filed with the Commission.  Rule 405 of Regulation S-T specifically governs the scope 
and manner of disclosure tagging requirements for operating companies and investment companies, including the 
requirement in 17 CFR 232.405(a)(3) to use Inline XBRL as the specific structured data language to use for tagging 
the disclosures. 
107  Interactive Data to Improve Financial Reporting, Release No. 33-9002 (Jan. 30, 2009) [74 FR 6776 (Feb. 10, 
2009)] (“2009 Financial Statement Information Adopting Release”) (requiring submission of an Interactive Data 
File to the Commission in exhibits to such reports).  See also Interactive Data to Improve Financial Reporting, 
Release No. 33-9002A (Apr. 1, 2009) [74 FR 15666 (Apr. 7, 2009)]. 



62 
 

associated with preparing XBRL filings and improve the quality and usability of XBRL data for 

investors.108 

Requiring Inline XBRL tagging of the Subpart 1600 disclosures would benefit investors 

by making SPAC disclosures more readily available and easily accessible to investors and other 

market participants for aggregation, comparison, filtering, and other analysis, as compared to 

requiring a non-machine readable data language such as ASCII or HTML.  This would enable 

automated extraction and analysis of granular SPAC disclosures, allowing investors and other 

market participants to more efficiently perform large-scale analysis and comparison of SPAC 

disclosures across SPAC transactions and time periods, including information on sponsor 

compensation and material conflicts of interest.  At the same time, we do not expect the 

incremental compliance burden associated with tagging the additional information to be unduly 

burdensome, because SPACs subject to the proposed tagging requirements would be subject to 

similar Inline XBRL requirements in other Commission filings.109  However, because issuers 

(including SPACs) are not required to tag any filings until after they have filed a periodic report 

on Form 10-Q, 20-F, or 40-F, the proposed tagging requirement for disclosures in SPAC IPO 

registration statements would accelerate the tagging obligations (and related compliance 

burdens) of SPACs compared to those of other filers.110  Enhancing the usability of the SPAC 

initial public offering disclosures through a tagging requirement is of particular importance given 

the unique nature of SPAC offerings and the potential risks they present to investors. 

                                                 
108  Inline XBRL Filing of Tagged Data, Release No. 33-10514 (June 28, 2018) [83 FR 40846, 40847 (Aug. 16, 
2018)].  Inline XBRL allows filers to embed XBRL data directly into an HTML document, eliminating the need to 
tag a copy of the information in a separate XBRL exhibit.  Id. at 40851. 
109  Id. 
110  See 17 CFR 229.601(b)(101)(i)(A). 



63 
 

Request for Comment 

51. Should we require SPACs to tag the disclosures required by Subpart 1600 of Regulation 

S-K, as proposed?  Are there any changes we should make to ensure accurate and 

consistent tagging?  If so, what changes should we make?   

52. Should we modify the scope of the Subpart 1600 disclosures required to be tagged?  For 

example, should we require tagging of quantitative disclosures only?  Should we limit the 

tagging requirement to only those disclosures required in de-SPAC transactions? 

53. Where an item in Subpart 1600 requests that a registrant provide a tabular presentation 

without specifying a particular format for the table, or data points to include in the table, 

such as the proposed disclosure related to SPAC sponsor compensation, dilution of 

unaffiliated shareholders, and the related sensitivity analysis, should we instead require 

specific elements in the tabular presentation?  If we do not propose a specific tabular 

presentation or required elements, would detail tagging provide useful data for investors 

and other market participants? 

54. Should we require SPACs to use a different structured data language to tag the Subpart 

1600 disclosures?  If so, what structured data language should we require, and why? 

55. We have not proposed exemptions or different requirements from the proposed structured 

data requirement for foreign private issuers, smaller reporting companies,111 or emerging 

growth companies.112  Should we exempt or provide different requirements from some or 

all of the proposed structured data requirements for these or other classes of registrants? 

                                                 
111  See infra Section III.D. 
112  Section 101(a) of the JOBS Act amended Section 2(a) of the Securities Act [15 U.S.C. 77b(a)] and Section 3(a) 
of the Exchange Act [15 U.S.C. 78c(a)] to define an “emerging growth company” as an issuer with less than $1 
billion in total annual gross revenues during its most recently completed fiscal year, as such amount is indexed for 
inflation every five years by the Commission.  If an issuer qualifies as an EGC on the first day of its fiscal year, it 



64 
 

III. ALIGNING DE-SPAC TRANSACTIONS WITH INITIAL PUBLIC OFFERINGS 

As discussed above, private operating companies have increasingly turned to de-SPAC 

transactions as a means of accessing public securities markets and becoming public reporting 

companies.  As the SPACs that were part of the unprecedented growth in the SPAC market in 

2020 and 2021 continue to identify target private operating companies and consummate de-

SPAC transactions, it is likely that a significant proportion of companies in the coming years that 

enter the U.S. public securities markets will do so through de-SPAC transactions. 

A private operating company’s path to the public markets through a de-SPAC transaction 

usually commences when a SPAC begins considering it as a potential business combination 

candidate.  After agreeing to the terms of the business combination, the SPAC typically files a 

Form 8-K announcing the transaction that includes limited information on the material terms of 

the business combination agreement.113  This announcement is usually followed by a disclosure 

document (a Securities Act registration statement, proxy statement, or information statement) 

filed by the SPAC that includes more extensive information about the private operating 

company.114  SPACs 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 

                                                 
maintains that status until the earliest of (1) the last day of the fiscal year of the issuer during which it has total 
annual gross revenues of $1.07 billion or more; (2) 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; (3) the date on which the 
issuer has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; or (4) the date 
on which the issuer is deemed to be a “large accelerated filer” (as defined in Exchange Act Rule 12b-2).  See Section 
2(a)(19) of the Securities Act [15 U.S.C. 77b(a)(19)]; Section 3(a)(80) of the Exchange Act [15 U.S.C. 78c(a)(80)]; 
and Inflation Adjustments and Other Technical Amendments under Titles I and II of the JOBS Act, Release No. 33- 
10332 (Mar. 31, 2017) [82 FR 17545 (Apr. 12, 2017)]. 
113  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. 
114  The disclosure document may be a Form S-4 or F-4, Schedule 14A or Schedule TO, depending on, among other 
things, whether shareholder approval is required and whether the SPAC is registering an offering of shares to be 
issued in the transaction. 



65 
 

required for the transaction,115 (2) which entity will have a continuing Exchange Act reporting 

obligation following the transaction,116 and (3) the disclosures provided in connection with the 

transaction.117 

After the completion of the de-SPAC transaction, the post-business combination 

company is required to file a Form 8-K within four business days that includes even more 

information about the private operating company that is equivalent to the information that a new 

reporting company would be required to provide when filing a Form 10 under the Exchange 

Act.118  The result is that investors may receive disclosures about the future public company that 

                                                 
115  SPACs may use cash, securities, or a combination of both to acquire a target company in a de-SPAC transaction, 
and the form of consideration is a factor in determining whether a registration statement, proxy or information 
statement, or tender offer statement is required to be filed in connection with a de-SPAC transaction.  Additionally, 
the SPAC, the target company or a new holding company may issue securities in a de-SPAC transaction, which may 
necessitate the filing of a registration statement on Form S-4 or F-4 for the transaction. 
116  For example, when a holding company is formed to acquire both the private operating company and the SPAC, 
and the holding company files a registration statement for the de-SPAC transaction, generally the holding company 
would continue as the registrant with the Exchange Act reporting obligation following the transaction.  In these 
situations, the private operating company would be the holding company’s predecessor, as the term is used in 
Regulation S-X, with respect to the financial statements and possibly the accounting acquirer under generally 
accepted accounting principles as used in the United States (“U.S. GAAP”), with the equity ownership percentage in 
the combined company held by the former owners of the private operating company and the degree to which former 
management of the private operating company continues with the combined company among the factors that could 
impact the accounting acquirer determination under U.S. GAAP.  Under the proposed amendments to Regulation S-
X, the SPAC would be an acquired business.  See infra Section IV.B. 
117  The disclosures required in connection with a de-SPAC transaction are determined by the applicable disclosure 
form (Form S-4 or F-4, Schedule 14A or 14C, or Schedule TO) and which entity is filing the form.  Under the 
proposed amendments, companies would not be subject to the same disclosure requirements in every de-SPAC 
transaction structure.  For example, if the SPAC is a domestic registrant and a new holding company is a foreign 
issuer, and the private operating company meets the criteria to be a foreign private issuer, the holding company (the 
company filing the de-SPAC transaction filing) would also qualify as a foreign private issuer.  Foreign private issuer 
status would permit the foreign holding company to file a Form F-4 for the de-SPAC transaction and apply the 
foreign private issuer disclosure regime.  In contrast, if a de-SPAC transaction is structured so that (1) a domestic 
SPAC is the company issuing securities as the acquiring entity of the foreign private operating company, (2) there is 
no foreign holding company, and (3) the SPAC makes the de-SPAC transaction filing, the registrant would continue 
to be a domestic issuer and follow domestic reporting rules until the next determination date for foreign private 
issuer status. 
118  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.  By the time the Form 8-K with Form 10 
information is filed, the securities of the post-business combination company have often already begun trading on a 
national securities exchange with a new ticker symbol, in that the securities of the SPAC generally trade on an 
exchange until the consummation of the de-SPAC transaction, after which the securities of the post-business 
combination company generally commence trading on the following business day. 



66 
 

differ from, or are not provided in the same manner as, the information disclosed in a Form S-1 

or F-1 filed in connection with a traditional initial public offering.  Additionally, some of the 

investor protections afforded in a traditional initial public offering are not available or are more 

attenuated when a private operating company becomes a public company through a de-SPAC 

transaction.119 

In light of the increasingly common reliance on de-SPAC transactions as a vehicle for 

private operating companies to access the U.S. public securities markets, we are proposing a 

number of new rules and amendments to existing rules to align more closely the treatment of 

private operating companies entering the public markets through de-SPAC transactions with that 

of companies conducting traditional initial public offerings.  In our view, a private operating 

company’s method of becoming a public company should not negatively impact investor 

protection.  Accordingly, the proposed new rules and amendments are intended to provide 

investors with disclosures and liability protections comparable to those that would be present if 

the private operating company were to conduct a traditional firm commitment initial public 

offering. 

These proposed new rules and amendments would (1) more closely align the non-

financial statement disclosure requirements with respect to the private operating company in 

disclosure documents for a de-SPAC transaction with the disclosure required in a Form S-1 or F-

                                                 
119  For example, a private company engaged in a traditional initial public offering is generally more limited in its 
ability to make communications about its offering prior to the filing of a Securities Act registrations statement on 
Form S-1 than companies engaged in a business combination transaction that will be registered on Form S-4 or F-4.  
De-SPAC transactions also often lack named underwriters that perform due diligence and other traditional 
gatekeeping functions, and it may be more difficult for investors to trace their purchases to the registered de-SPAC 
transaction for purposes of establishing a Section 11 claim for material misstatements or omissions in de-SPAC 
disclosure documents. 



67 
 

1 for an initial public offering;120 (2) require a minimum dissemination period for disclosure 

documents in de-SPAC transactions; (3) treat the private operating company as a co-registrant of 

the Form S-4 or Form F-4 for a de-SPAC transaction when a SPAC is filing the registration 

statement; (4) require a re-determination of smaller reporting company status following the 

consummation of a de-SPAC transaction; (5) amend the definition of “blank check company” for 

PSLRA purposes such that the safe harbor for forward-looking information would not apply to 

projections in filings by SPACs and certain other blank check companies that are not penny 

stock issuers; and (6) provide, in a Commission rule, that underwriters in a SPAC initial public 

offering are deemed to be underwriters in a subsequent de-SPAC transaction under certain 

circumstances. 

A. Aligning Non-Financial Disclosures in De-SPAC Disclosure Documents 
 

In regard to non-financial statement disclosures, we are proposing 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 such company pursuant to the following 

items in Regulation S-K would be required in the registration statement or schedule filed in 

connection with the de-SPAC transaction: (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-

                                                 
120  We are also proposing to more closely align the financial statement disclosure requirements with respect to the 
private operating company in any business combination involving a shell company with the disclosure required in a 
Form S-1 for an initial public offering, which would encompass de-SPAC transactions.  See infra Section IV.B. 



68 
 

SPAC transaction and any related financing transaction);121 and (6) Item 701 (recent sales of 

unregistered securities).122  If the private operating company is a foreign private issuer,123 the 

proposed rules would include the option of providing disclosure relating to the private operating 

company in accordance with Items 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E of Form 20-F, consistent with 

disclosure that could be provided by these entities in an initial public offering.124 

The proposed additional information is already required to be included in a Form 8-K due 

within four business days of the completion of the de-SPAC transaction, such that registrants 

currently should already be preparing this information in anticipation of this Form 8-K filing in 

connection with a de-SPAC transaction.125  Aligning the disclosure requirements in de-SPAC 

transactions in this manner with those in initial public offerings would mandate that this 

additional information about the private operating company be provided to shareholders before 

they make voting, investment, or redemption decisions in connection with the proposed 

                                                 
121  We note that 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. 
122  Proposed General Instruction L.2. to Form S-4; Proposed General Instruction I.2. to Form F-4; Proposed Item 
14(f) of Schedule 14A; Proposed General Instruction K to Schedule TO.  We note that disclosure pursuant to Item 
303 (management's discussion and analysis of financial condition and results of operations) of Regulation S-K is 
already required with respect to a non-reporting target company in Forms S-4 and F-4 and in Schedules 14A and 
14C for a de-SPAC transaction.  As proposed, disclosure pursuant to Item 701 of Regulation S-K would 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. 
123  See supra note 102. 
124  Disclosure requirements for foreign private issuers differ from domestic registrants, including the absence of 
quarterly reporting requirements, the use of different forms with different disclosure provisions, and an ability to 
present financial statements in accordance with IFRS instead of U.S. GAAP.  In addition, foreign private issuers are 
not required to file current reports on Form 8-K using the Form 8-K disclosure criteria; rather, they can furnish 
current reports on Form 6-K applying the disclosure requirements of that Form.  See Foreign Issuer Reporting 
Enhancements, Release 33-8959 (Sep. 23, 2008) [73 FR 58300 (Oct. 6, 2008)]. 
125  This Form 8-K is required to include the same information that would be required for a newly reporting 
company when filing a Form 10 under the Exchange Act.  See Items 2.01(f), 5.01(a)(8), and 9.01(c) of Form 8-K.  
In this regard, we note that these items of Form 8-K each provide that if any disclosure required by these items has 
been previously reported, the registrant may identify the filing in which that disclosure is included instead of 
including that disclosure in the Form 8-K. 



69 
 

transactions.126  As proposed, this information would also 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 being required in a Form 8-K due within four business days of 

the completion of the de-SPAC transaction.  Further, if this disclosure is included in a Form S-4 

or Form F-4, 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 initial public offering. 

Request for Comment 

56. Should we require additional information regarding the private operating company in 

disclosure documents filed in connection with a de-SPAC transaction, as proposed?  

Would these additional disclosures provide investors with a better understanding of the 

private operating company’s operations and related risks?  Should we require more or 

less disclosure regarding the private operating company in the registration statements or 

schedules filed in connection with de-SPAC transactions? 

57. What are the benefits of providing this information earlier to investors when they are 

making voting, investment, and redemption decisions in connection with a de-SPAC 

transaction or at or before the commencement of trading in the post-business combination 

company’s securities on a securities exchange?  Would it be unduly burdensome to 

provide this additional information regarding the private operating company at this earlier 

point in time? 

                                                 
126  In this regard, we note that many, but not all, Forms S-4 and F-4 and Schedules 14A and 14C that are filed in 
connection with de-SPAC transactions contain information about the target company as proposed.  The proposed 
amendments, if adopted, would require that this information be provided in all de-SPAC transactions subject to the 
specialized disclosure requirements in Subpart 1600. 



70 
 

58. Should a private operating company that would qualify as a foreign private issuer have 

the option of providing disclosure in accordance with certain items of Form 20-F, as 

proposed? 

59. Should we require additional or less information in proposed Item 1608 and Schedule TO 

when a SPAC files a Schedule TO in connection with a de-SPAC transaction?  For 

example, should we require disclosure regarding management's discussion and analysis 

of financial condition and results of operations (Item 303 of Regulation S-K) pursuant to 

Item 1608 or Schedule TO? 

60. Should the proposed disclosure requirements with respect to the private operating 

company be scaled to take into account the size, nature, or certain characteristics of the 

company? 

B. Minimum Dissemination Period 

In addition to the need for enhanced disclosure in de-SPAC transactions, we recognize 

the importance of ensuring that SPAC shareholders have adequate time to analyze the 

information presented in these transactions.  There is currently no federally mandated period in 

business combination transactions to provide security holders with a minimum amount of time to 

consider proxy statement or other disclosures.127  In view of the unique circumstances 

surrounding de-SPAC transactions, we are proposing to amend Exchange Act Rules 14a-6 and 

14c-2, as well as to add instructions to Forms S-4 and F-4,128 to require that prospectuses and 

proxy and information statements filed in connection with de-SPAC transactions be distributed 

                                                 
127  In Form S-4 and Form F-4, however, there is a minimum 20-business day period requirement in sending a 
prospectus to security holders prior to a security holder meeting 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. 
128  Proposed General Instruction L.3. to Form S-4; Proposed General Instruction I.3. to Form F-4. 



71 
 

to shareholders at least 20 calendar days in advance of a shareholder meeting or the earliest date 

of action by consent, or the maximum period for disseminating such disclosure documents 

permitted under the applicable laws of the SPAC’s jurisdiction of incorporation or organization 

if such period is less than 20 calendar days.129  As stated above, SPACs are organized for the 

purpose of completing a de-SPAC transaction within a certain time frame, and as a SPAC 

approaches the end of this period, there is less time available for a SPAC to find a candidate for a 

business combination transaction, prepare and file the appropriate de-SPAC disclosure 

documents with the Commission, disseminate such documents to its shareholders, receive the 

requisite shareholder approval when applicable, and consummate the de-SPAC transaction.  

Although the laws of a SPAC’s jurisdiction of incorporation or organization may require the 

SPAC to send a notice to its shareholders at least a specified number of days before the 

shareholder meeting to approve a proposed business combination transaction, such notices are 

generally limited to information regarding the time, place, and purpose of the meeting, along 

with a copy or summary of the business combination agreement.130  They do not generally 

require a minimum period of time for dissemination of any other information about the 

transaction (including any proxy statements or other materials required by the federal securities 

laws) to shareholders.131  Similarly, such requirements do not exist in exchange listing 

                                                 
129  The proposed amendments would be applicable to Forms S-4 and F-4 and Schedules 14A and 14C.  We are not 
proposing to amend the 20 business day period when a Schedule TO is filed in connection with a de-SPAC 
transaction.  See supra Section II.F.4. 
130  See, e.g., DEL. CODE ANN. tit. 8, sec. 251(c) (2022) (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]”). 
131  See R. Franklin Balotti, et al., Delaware Law of Corporations and Business Organizations, § 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 



72 
 

standards.132  Without a minimum period for dissemination of prospectuses, proxy statements, 

and other materials before a shareholder meeting (or action by consent), a SPAC and its sponsor 

may have incentives to provide prospectuses or proxy or information statements for a de-SPAC 

transaction to the SPAC’s security holders within an abbreviated time frame, leaving the security 

holders with relatively little time to review what are often complex disclosure documents for 

these transactions. 

We are proposing a minimum 20-calendar day dissemination period for prospectuses and 

proxy and information statements that, in our view, would provide an important investor 

protection.133  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 and that relying on the safe harbor we are proposing under the Investment Company Act 

would also limit the time frame in which to announce and complete a de-SPAC transaction.134  

Nevertheless, given 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, the proposed 

20-calendar day period would establish a minimum time period for shareholders to review 

                                                 
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.”). 
132  Although both the NYSE and Nasdaq generally require that listed companies solicit proxies and provide proxy 
statements for all shareholder meetings, neither requires a minimum number of days between when proxy materials 
are provided to shareholders and when the meeting is held.  Instead, for example, NYSE Listed Company Manual 
Section 402.03 simply “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.” 
133  The proposed 20-calendar day period is the same length of time as the 20-day advance disclosure period in 17 
CFR 13e-3(f)(1) (Exchange Act Rule 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)]. 
134  See infra Section VI.B.3. 



73 
 

prospectuses and proxy and information statements in de-SPAC transactions (subject to the 

carve-out discussed below),135 so that they have sufficient time to consider the disclosures and to 

make more informed voting, investment and redemption decisions.136  In the event that the laws 

of a SPAC’s jurisdiction of incorporation or organization have a provision applicable to the 

dissemination of prospectuses and proxy and information statements required under the federal 

securities laws, we are proposing to include a provision 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.137 

Request for Comment 

61. Should we require a minimum dissemination period for prospectuses and proxy or 

information statements in de-SPAC transactions as proposed?  Is a 20–day period 

necessary or appropriate to enable shareholders to review and consider these disclosure 

documents relating to a de-SPAC transaction?  Should this 20 calendar day period be 

                                                 
135  When a registrant incorporates by reference information about the registrant or the company being acquired in 
the Form S-4 or F-4 for a de-SPAC transaction, the 20-business day period in Form S-4 and Form F-4, which we are 
not proposing to amend, would continue to be applicable.  General Instruction A.2 of Form S-4 and General 
Instruction A.2 of Form F-4. 
136  The proposed minimum dissemination period is intended to apply to the dissemination of certain Commission 
filings in connection with de-SPAC transactions and is not intended to impact any requirements of the jurisdiction of 
incorporation or organization regarding the notice of an annual or special meeting, such as Section 251(c) of the 
Delaware General Corporation Law.   
137  For example, if the jurisdiction has no minimum dissemination period and does not have a maximum 
dissemination period, the minimum 20-day period, as proposed, would apply.  If the jurisdiction has a minimum 
dissemination period of less than 20 days (e.g., 10 days) and does not have a maximum dissemination period, the 
minimum 20-day period, as proposed, would apply.  If the jurisdiction has a minimum dissemination period of less 
than 20 days (e.g., 10 days) and a maximum dissemination period of less than 20 days (e.g., 15 days), the maximum 
dissemination period under the jurisdiction would apply.  If the jurisdiction has no minimum dissemination period 
and a maximum dissemination period of less than 20 days (e.g., 15 days), the maximum dissemination period under 
the jurisdiction would apply. 



74 
 

longer or shorter?  Should the minimum dissemination period be based on business days 

(e.g., 20 business days) instead of calendar days as proposed? 

62. Would there be timing concerns on the part of SPACs in meeting the proposed minimum 

20-day dissemination period?  Should we include an exception for the applicable laws of 

the SPAC’s jurisdiction of incorporation or organization, as proposed?  Should we 

include other exceptions to the proposed minimum 20-day dissemination period? 

63. Would additional guidance be helpful in determining how to apply this proposed 

requirement? 

64. Are there additional or alternative requirements we should adopt in connection with the 

dissemination of disclosure documents in a de-SPAC transaction? 

C. Private Operating Company as Co-Registrant to Form S-4 and Form F-4 

Under Section 6(a) of the Securities Act, each “issuer” must sign a Securities Act 

registration statement.138  The Securities Act broadly defines the term “issuer” to include every 

person who issues or proposes to issue any securities.139  Currently, when a SPAC offers and 

sells its securities in a registered de-SPAC transaction, only the SPAC, 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 transaction.  In these situations, the private operating 

company, for which the de-SPAC transaction effectively serves as its initial public offering, and 

                                                 
138  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. 
139  Section 2(a)(4) of the Securities Act. 



75 
 

its officers and directors do not sign the registration statement that contains disclosure about the 

private operating company’s business and financial results and thereby may avoid liability as 

signatories to the registration statement under Section 11 of the Securities Act, unlike if the 

private operating company had conducted a traditional initial public offering registered on Form 

S-1 or Form F-1.140 

We are proposing to amend Form S-4 and Form F-4 to require that the SPAC and the 

target company be treated as co-registrants when these registration statements are filed by the 

SPAC in connection with a de-SPAC transaction.141  In view of the protections that the 

Securities Act provides to investors in a traditional initial public offering, it is appropriate in our 

view to interpret Section 6(a) to encompass the target company, in addition to the SPAC, as an 

issuer for purposes of Section 6(a) and the signature requirements of Form S-4 or Form F-4. 

A de-SPAC transaction marks the introduction of the 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.142  Accordingly, it is 

the private operating company that, in substance, issues or proposes to issue its securities, as 

                                                 
140  Even when not liable under Section 11, the private operating company and its affiliates, however, may be subject 
to enforcement actions by the Commission, including those under Securities Act Section 17(a) and Exchange Act 
Section 10(b) and Rule 10b-5, as well as potential liability under 17 CFR 240.10b-5 (Exchange Act Rule 10b-5) in 
private rights of action.  See, e.g., In the Matter of Momentus, Inc., et al., Release No. 34-92391 (July 13, 2021) 
(settled proceeding charging privately held company with violations of Section 17(a) of the Securities Act and 
Section 10(b) of the Exchange Act and Rule 10b-5 for, among other things, allegedly materially false statements and 
omissions in the registration statement/proxy statement filed in connection with a business combination with a 
publicly traded SPAC). 
141  Proposed General Instruction L.4. to Form S-4; Proposed General Instruction I.4. to Form F-4.  Section 6(a) of 
the Securities Act uses the term “issuer,” but Securities Act registration statement forms use the term “registrant.”  
The term “registrant” is defined in Rule 405 as “the issuer of the securities for which the registration statement is 
filed.”  As a co-registrant of the Form S-4 or Form F-4, the private operating company would have an Exchange Act 
reporting obligation pursuant to Section 15(d) of the Exchange Act following the effectiveness of the registration 
statement. 
142  That is, the operations of the private company constitute the business and the basis for the financial and other 
disclosures of the newly combined public company following a de-SPAC transaction. 



76 
 

securities of the newly combined public company.143  While similar policy considerations can 

arise in other business combination contexts, given the substantial increase in the number of 

SPAC transactions in recent years, the number of shareholders typically impacted by such 

transactions, and concerns that are unique to the SPAC structure, we are concerned that a narrow 

approach to registrant status in de-SPAC transactions could undermine the statutory liability 

scheme that Congress applied to initial public offerings of securities. 

We are proposing to amend the signature instructions to Form S-4 and F-4 to state that, if 

a SPAC is offering its securities in a de-SPAC transaction that is registered on the form, the term 

“registrant” for purposes of the signature requirements of the form would mean the SPAC and 

the target company.144  This requirement would make the additional signatories to the form, 

including the principal executive officer, principal financial officer, controller/principal 

accounting officer, and a majority of the board of directors or persons performing similar 

functions of the target company, liable (subject to a due diligence defense for all parties other 

than the SPAC and the target company), for any material misstatements or omissions in the 

                                                 
143  The legislative history of the broad definition of the term “issuer” in the Securities Act 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 Act, the person(s) that have access to the information relevant to investors 
are responsible as an “issuer” for providing such information.  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.”).  
144  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 (“If the securities to be offered are those of a corporation not yet in 
existence at the time the registration statement is filed which will be a party to a consolidation involving two or 
more existing corporations, then each such existing corporation shall be deemed a registrant and shall be so 
designated on the cover page of this Form, and the registration statement shall be signed by each such existing 
corporation and by the officers and directors of each such existing corporation as if each such existing corporation 
were the registrant.”). 



77 
 

Form S-4 or Form F-4 and would thereby mitigate the risk that the target company’s directors 

and management would not be held accountable to investors for the accuracy of the disclosures 

in the registration statement due to the absence of the deterrent threat of liability under 

Section 11.145  Moreover, this proposed requirement could improve the reliability of the 

disclosure provided to investors in connection with de-SPAC transactions by creating strong 

incentives for such additional signing persons to review more closely the disclosure about the 

target company in these registration statements and to conduct more searching due diligence in 

connection with de-SPAC transactions and related registration statements. 

Request for Comment 

65. Should we amend Form S-4 and Form F-4, as proposed, to require that the SPAC and the 

private operating company be treated as co-registrants when the registration statement is 

filed by the SPAC in connection with a de-SPAC transaction? 

66. Would amending Form S-4 and Form F-4 in this manner improve the disclosure provided 

in connection with de-SPAC transactions that are registered on these forms? 

67. Should the proposed amendment to Form S-4 and Form F-4 be extended to apply to all 

business combination transactions where a shell company, other than a business 

combination related shell company, is the acquirer? 

68. Should the sponsor of a SPAC also be required to sign a Form S-4 or Form F-4 filed in 

connection with a de-SPAC transaction, as well as a Form S-1 or Form F-1 filed for a 

SPAC’s initial public offering, in view of, among other things, the sponsor’s control over 

the SPAC and the sponsor’s role in preparing these registration statements?  Would such 

                                                 
145  In this regard, we note that the target company’s directors and executive officers are the parties most similarly 
situated to the directors and officers of a private company conducting a traditional initial public offering, in terms of 
their knowledge of, and background in, the company going public through a de-SPAC transaction. 



78 
 

a requirement be consistent with the Commission’s approach in requiring a majority of 

the board of directors of any corporate general partner to sign a registration statement 

when the registrant is a limited partnership? 

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? 

D. Re-Determination of Smaller Reporting Company Status 

 Smaller reporting companies are 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.146  For example, smaller reporting companies are not 

required to provide quantitative and qualitative information about market risk pursuant to 

Item 305 of Regulation S-K.147  In general, a smaller reporting company is a company that is not 

an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent that is 

not a smaller reporting company, and had (1) 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.148  Smaller reporting company 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.  Once a company determines that it is not a 

                                                 
146  See, e.g., 17 CFR 229.10(f) (Item 10(f) of Regulation S-K); Rules 8-01, 8-02, 8-03, 8-07, and 8-08 of Regulation 
S-X; Item 1A of Form 10 and Form 10-K; Item 3.02 of Form 8-K.  A foreign private issuer is not eligible to use the 
scaled disclosure requirements for smaller reporting companies 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); Instruction 2 to definition of “smaller reporting company” in Securities Act Rule 405 and Exchange Act Rule 
12b-2. 
147  Item 305(e) of Regulation S-K. 
148  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. 



79 
 

smaller reporting company, it will retain this 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.149 

Currently, most SPACs qualify as smaller reporting companies,150 and a post-business 

combination company after a de-SPAC transaction is permitted by rule151 to retain this status 

until the next annual determination date when a SPAC is the legal acquirer of the private 

operating company in a de-SPAC transaction.  The absence of a re-determination of smaller 

reporting company status upon the completion of these de-SPAC transactions permits certain 

post-business combination companies to avail themselves of scaled disclosure and other 

accommodations when they otherwise would not have qualified as a smaller reporting company 

had they become public companies through a traditional initial public offering. 

In view of the informational asymmetries that result when a private operating company 

chooses to go public through such a de-SPAC transaction and the increasing prevalence of these 

transactions as a vehicle for private operating companies to become reporting companies under 

the Exchange Act, we are proposing to require a re-determination of smaller reporting company 

status following the consummation of a de-SPAC transaction.  As proposed, this re-

determination of smaller reporting company status would occur prior to the time the post-

business combination company makes its first Commission filing, other than the Form 8-K with 

Form 10 information,152 with the public float threshold measured as of a date within four 

business days after the consummation of the de-SPAC transaction and the revenue threshold 

                                                 
149  See Item 10(f)(2)(iii) of Regulation S-K; Securities Act Rule 405; Exchange Act Rule 12b-2. 
150  See infra Section IX.B.2.f. 
151  See Item 10(f)(2) of Regulation S-K; Securities Act Rule 405; Exchange Act Rule 12b-2. 
152  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. 



80 
 

determined by using the annual revenues of the private operating company as of the most 

recently completed fiscal year for which audited financial statements are available.153  The 

applicable thresholds in the current definition would remain unchanged. 

The proposed four-business day window to calculate the public float threshold following 

a de-SPAC transaction would end on the due date for the Form 8-K with Form 10 information 

that a post-business combination company is required to file after the completion of a de-SPAC 

transaction.  The proposed four-business day period would provide some flexibility for issuers to 

measure public float, compared to the annual re-determination of smaller reporting company 

status,154 and would allow for a more accurate reflection of a post-business combination 

company’s public float, in view of the limited trading history of the common equity securities of 

the post-business combination company following a de-SPAC transaction. 

We are proposing to require a post-business combination company to reflect this 

re-determination of smaller reporting company status in its first periodic report (Form 10-K or 

Form 10-Q) following a de-SPAC transaction, which would provide the post-business 

combination company with time to prepare for any loss of the scaled disclosure and other 

accommodations available to smaller reporting companies.155  As proposed, a post-business 

                                                 
153  Proposed Item 10(f)(2)(iv) and the proposed amendments to the definition of “smaller reporting company” in 
Securities Act Rule 405 and Exchange Act Rule 12b-2.  The float determination would be required to precede the 
first Commission filing after the Form 8-K with Form 10 information. 
154  In re-determining smaller reporting company 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. 
155  For example, as proposed, a post-business combination company would be required to re-determine whether it 
qualifies as a smaller reporting company, using the initial qualification thresholds in the definition, prior to the time 
the company makes its first Commission filing (e.g., a Form 8-K, registration statement or periodic report) after the 
filing of a Form 8-K with Form 10 information, with its public float measured as of a date within four business days 
after the completion of the de-SPAC transaction.  The company would not be required to reflect this re-
determination of smaller reporting company status in any Commission filing until it files its first periodic report 
(Form 10-K or Form 10-Q) following the de-SPAC transaction.  Thus, if a SPAC qualified as a smaller reporting 
company 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 smaller81 
 

combination company that fails to qualify for smaller reporting company status after a de-SPAC 

transaction would remain unqualified until its next annual re-determination of this status. 

Request for Comment 

70. As proposed, the re-determination of smaller reporting company status must be based on 

public float measured as of a date within four business days after the consummation of 

the de-SPAC transaction and the annual revenues of the private operating company as of 

the most recently completed fiscal year for which audited financial statements are 

available.  Should we require the re-determination of smaller reporting company status 

upon the completion of a de-SPAC transaction, as proposed?  Should public float be 

determined within a different time frame (e.g., 30 days) or through a different method 

(e.g., as the average over a certain period)?  Should the annual revenues of the private 

operating company be used in determining whether the revenue threshold has been met, 

as proposed? 

71. Should we require a post-business combination company following a de-SPAC 

transaction to reflect the re-determination of smaller reporting company status in its next 

periodic report, as proposed?  Alternatively, should we require a post-business 

combination company to reflect the re-determination of smaller reporting company status 

at an earlier or later point in time after the completion of a de-SPAC transaction, such as 

in the first periodic report that covers the period in which the de-SPAC transaction 

occurred (e.g., when a de-SPAC transaction is completed after the end of a fiscal year but 

prior to the due date of the Form 10-K for that fiscal year)?  Should we provide an 

                                                 
reporting companies when filing a registration statement between the re-determination date and the post-business 
combination company’s first periodic report. 



82 
 

accommodation if a de-SPAC transaction is completed close in time to the due date for 

the registrant’s first periodic report? 

72. To the extent that a post-business combination company no longer qualifies for smaller 

reporting company status as a result of the proposed re-determination of this status 

following a de-SPAC transaction, would the proposed re-determination make it more 

difficult for such a company to file a registration statement after the filing of its first 

periodic report that complies with the disclosure requirements applicable to non-smaller 

reporting companies?  If so, should we provide any accommodations for this scenario? 

73. Should we make any additional changes with respect to re-determining smaller reporting 

company status after the completion of a de-SPAC transaction?  For example, should we 

replace the public float test with a revenue test for this purpose?  Should we provide any 

guidance with respect to how to apply this proposal? 

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? 

E. PSLRA Safe Harbor 

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 things, the forward-looking statement is identified as such and is accompanied by 

meaningful cautionary statements.156  The safe harbor is not available, however, when a forward-

                                                 
156  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. 



83 
 

looking statement is made in connection with an offering by a blank check company or an initial 

public offering.157 

For purposes of the safe harbor, the term “blank check company” and certain other 

terms158 “have the meanings given those terms by rule or regulation of the Commission.”159  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.160  

This definition, which has not been amended since it was adopted by the Commission in 1992, 

predates the enactment of the PSLRA in 1995.  SPACs that raise more than $5 million in a firm 

commitment underwritten initial public offering are excluded from this definition of “blank 

check company” because they are not selling “penny stock.”161 

Projections of the private operating company’s performance are typically prepared and 

disclosed in connection with a de-SPAC transaction.  Some market participants are of the view 

that the PSLRA safe harbor for forward-looking statements is available in de-SPAC transactions 

when a SPAC is not a blank check company under Rule 419 and thus may not exercise the same 

level of care in preparing forward-looking statements, such as projections, as in a traditional 

                                                 
157  Section 27A(b) of the Securities Act and Section 21E(b) of the Exchange Act.  In addition, the safe harbor is not 
available for an offering by a penny stock issuer, a roll-up transaction, a going private transaction, an offering by a 
partnership or a limited liability company, a tender offer, or an offering by an issuer convicted of specified securities 
law violations or subject to certain injunctive or cease and desist actions. 
158  These other terms are “rollup transaction,” “partnership,” “limited liability company,” “executive officer of an 
entity,” and “direct participation investment program.” 
159  Section 27A(i)(7) of the Securities Act and Section 21E(i)(5) of the Exchange Act. 
160  See supra notes 3 and 13.  The statutory definition of “blank check company” appears in Section 7(b)(3) of the 
Securities Act. 
161  See supra note 12. 



84 
 

initial public offering.162  As noted above, a number of commentators have raised concerns about 

the use of projections that they believe to be unreasonable in de-SPAC transactions.163 

To address concerns about the use of forward-looking statements, such as projections, in 

connection with de-SPAC transactions, and pursuant to the statutory authority under the PSLRA 

to define “blank check company” by Commission rule or regulation, we are proposing to amend 

the definition of “blank check company” for purposes of the PSLRA to remove the “penny 

stock” condition and to 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.”164  As discussed above, private 

companies are increasingly using de-SPAC transactions as a mechanism to become public 

companies.  For purposes of the PSLRA, we see no reason to treat forward-looking statements 

made in connection with de-SPAC transactions differently than forward-looking statements 

made in traditional initial public offerings, in that both instances involve private issuers entering 

the public U.S. securities markets for the first time and similar informational asymmetries that 

exist between these issuers (and their insiders and early investors) and public investors.  

Moreover, we see no reason to treat blank check companies differently for purposes of the 

PSLRA safe harbor depending on whether they raise more than $5 million in a firm commitment 

underwritten initial public offering and thus are not selling penny stock. 

                                                 
162  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, The Wall Street Journal, Mar. 15, 2021; Public 
Statement on SPACs, IPOs and Liability Risk under the Securities Laws (Division of Corporation Finance, Apr. 8, 
2021). 
163  See supra note 33. 
164  We are also proposing to amend the definition to remove the reference to “development stage company” because 
the reference would be unnecessary for purposes of the proposed definition. 



85 
 

Amending the definition of “blank check company” in this manner would clarify that the 

statutory safe harbor in the PSLRA is not available for forward-looking statements, such as 

projections, made in connection with de-SPAC transactions involving an offering of securities by 

a SPAC or other issuer that meets the definition of “blank check company” as amended, such 

that forward-looking statements by SPACs, such as statements regarding the projections of target 

private operating companies in these transactions, would not fall under the safe harbor.165  The 

proposed amendment would also eliminate the current overlap in the safe harbor in regard to the 

exclusion for offerings by blank check companies and the exclusion for penny stock issuers.166  

To avoid multiple definitions for the term “blank check company,” we are proposing to amend 

Rule 419 in a manner that would otherwise retain the current scope of the rule.  We are also 

proposing to amend the references to “blank check company” in various Securities Act rules to 

“blank check company issuing penny stock,” as such term would be defined in Securities Act 

Rule 405, to maintain the current scope of these rules.167 

Request for Comment 

75. Should we define “blank check company” in Rule 405, as proposed?  Should we include 

a reference in the definition to “development stage company” or the issuance of “penny 

stock”?  Should we consider other changes to the proposed definition? 

                                                 
165  Forward-looking statements made by target private operating companies do not fall under the safe harbor, 
because the safe harbor is not available to companies that are not subject to the reporting requirements of Section 
13(a) or 15(d) of the Exchange Act at the time that the statement is made.  Further, the safe harbor would not be 
available to the subset of shell companies that meet the amended definition of “blank check company” (i.e., 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).   
166  The exclusion in the safe harbor for offerings by “blank check companies” is subsumed by the exclusion for 
penny stock issuers, in that the term “blank check company,” as currently defined in Rule 419, is “a development 
stage company that … is issuing ‘penny stock.’” 
167  See proposed amendments to Rules 137, 138, 139, 163A, 164, 174, 430B, and 437a.  As proposed, the term 
“blank check company issuing penny stock” would be defined as a company that is subject to Rule 419.  Due to 
current Federal Register formatting requirements, we are also proposing technical changes to Rule 163A and 
Rule 164 to move the Preliminary Note(s) in these rules to introductory paragraphs of the respective rules. 



86 
 

76. Would the proposed amendments improve the quality of projections in connection with 

de-SPAC transactions by clarifying that the safe harbor under the PSLRA is unavailable?  

Would the proposed amendment discourage some SPACs from disclosing projections in 

connection with these transactions or affect the ability of SPACs or target companies to 

comply with their obligations under the laws of their jurisdiction of incorporation or 

organization to disclose projections used by the board of directors or the companies’ 

fairness opinion advisers? 

77. As an alternative approach, should we issue an interpretation addressing whether a de-

SPAC transaction is an “initial public offering” for purposes of the PSLRA? 

78. Would including the proposed Rule 405 definition of “blank check company” in 

Rule 419 create confusion for registrants and investors?  Should we consider retaining a 

separate definition of “blank check company” for purposes of Rule 419?  If so, why? 

79. Should we amend the references to “blank check company” in Securities Act Rules 137, 

138, 139, 163A, 164, 174, 430B and 437a to refer to “blank check company issuing 

penny stock,” as proposed? 

80. Should we amend Rule 419 so that some or all of its conditions are applicable to SPACs 

that raise more than $5 million in a firm commitment underwritten initial public offering?  

If so, which conditions?  What would be the advantages and drawbacks of such an 

approach?  Should we amend the definition of “penny stock” to bring more SPACs 

within the scope of Rule 419? 

81. Are there other rule amendments we should consider in connection with the PSLRA? 



87 
 

F. Underwriter Status and Liability in Securities Transactions 

Underwriters form an essential link in the distribution of securities from an issuer to 

investors.  The term “underwriter” is broadly defined in Section 2(a)(11) of the Securities Act to 

mean “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.”168  The determination of whether a particular 

person is an “underwriter” does not depend on the person’s business but rather on that person’s 

relationship to a particular securities offering.  Any person whose activities with respect to any 

given offering fall within one of the prongs of the Section 2(a)(11) definition is deemed to meet 

the statutory definition of underwriter—commonly known as a “statutory underwriter.”169  

Congress enacted a broad definition of “underwriter” in order to “include as underwriters all 

persons who might operate as conduits for securities being placed into the hands of the investing 

public.”170  Correspondingly, the Commission’s longstanding view is that, depending on facts 

and circumstances, any person, including an individual investor who is not a professional in the 

securities business, can be an “underwriter” within the meaning of the Securities Act if that 

                                                 
168  15 U.S.C. 77b(a)(11).  Section 2(a)(11) states that the term “issuer” shall include, in addition to an issuer, any 
person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common 
control with the issuer.  Therefore, any person who purchased securities from an affiliate of an issuer is an 
underwriter under Section 2(a)(11) if that person purchased with a view to the distribution of the securities. 
169  See 2 Louis Loss (late), Joel Seligman, and 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.”).  
170  Thomas Lee Hazen, The Law of Securities Regulation, section 4:98. 



88 
 

person acts as a link in a chain of transactions through which securities are distributed from an 

issuer or its control persons to the public.171 

As intermediaries between an issuer and the investing public, underwriters play a critical 

role as “gatekeepers” to the public markets.172  Historically, in initial public offerings, where the 

investing public might be unfamiliar with a particular issuer, financial firms that act as 

underwriters would lend their well-known name to support that issuer’s offering.  Where public 

investors may not have been inclined to invest with the company seeking to conduct a public 

offering, they could take comfort in the fact that a large, well-known financial institution, acting 

as underwriter, was including its name on the first page of the issuer’s prospectus.173  In 

exchange, in a firm commitment underwritten offering, the underwriters earn the “gross spread” 

                                                 
171  17 CFR 230.144, Preliminary Note; Notice of Adoption of Rule 144 Relating to the Definition of the Terms 
“Underwriter” in Sections 4(1) and 2(11) and “Brokers Transactions” in Section 4(4) of the Securities Act of 1933, 
Adoption of Form 144, and Rescission of Rules 154 and 155 Under That Act, Release No. 33-5223 (Jan. 11, 1972) 
[37 FR 591 (Jan. 13, 1972)].   
172  See, e.g., Ronald J. Gilson & Reinier Kraakman, The Mechanisms of Market Efficiency, 70 VA. L. REV. 549, 620 
(1984); Coffee, supra note 34, at 302 n. 1, 308 nn.13-14; John C. Coffee, Jr., Brave New World?: The Impact(s) of 
the Internet on Modern Securities Regulation, 52 BUS. LAW. 1195, 1210-13, 1232-33 (1999) (each discussing the 
role of underwriters as “gatekeepers” or “reputational intermediaries”).  See also Securities Act Concepts and Their 
Effects of Capital Formation, Release No. 33-7314 (July 25, 1996) [61 FR 40044 (July 31, 1996)] (discussing the 
role of gatekeepers in maintaining the quality of disclosure); Michael P. Dooley, The Effects of Civil Liability on 
Investment Banking and the New Issues Market, 58 VA. L. REV. 776 (1972) (“The most important function 
performed during origination is the selection of candidates for public investment.  The decision to underwrite a 
particular issue is normally made only after careful investigation of the issuer and evaluation of its prospects.  Not 
all corporations are able to win sponsorship of proposed flotations, and prestigious underwriters reject many more 
candidates than they accept.  After initially deciding to sponsor a flotation, the managing underwriter must conduct 
another, more intensive investigation into the issuer’s affairs in order to satisfy the duty to conduct a ‘reasonable 
investigation’ imposed on underwriters by section 11 of the 1933 Act… [t]he screening and investigative processes 
employed in origination should weed out those prospective issuers least likely to make productive use of publicly 
invested funds and should identify elements of risk in those issues which are selected and presented to the public.  
The successful performance of these functions is important to the protection of investors and to the optimum 
allocation of economic resources.”). 
173  See, e.g., Harold S. Bloomenthal & Samuel Wolff, Due diligence defenses—Underwriter’s responsibilities and 
liabilities, 3B Sec. & Fed. Corp. Law § 12:42 (2d ed.) (“The managing or initiating underwriter plays a critical role 
in determining access to capital markets.  The decision of a particular investment banking firm to put together an 
underwriting syndicate in order to float an issue of securities or to refrain from doing so for a particular issuer 
obviously has significance beyond investors since it determines to a degree the shape of our economy.  However, it 
has specific and immediate significance to members of the investing public in that in large part reliance is being 
placed on such underwriters to screen the multitude of issuers seeking access to the capital markets.”).  



89 
 

between the price stated on the cover of the prospectus (the price at which the underwriters will 

sell the issuer’s shares to the public for the first time) and the price at which the underwriters are 

able to negotiate with the issuer for the initial purchase of the issuer’s shares.174 

An underwriter’s participation in an issuer’s offering also exposes the underwriter to 

potential liability under the Securities Act.  The civil liability provisions of the Securities Act 

reflect the unique position underwriters occupy in the chain of distribution of securities and 

provide strong incentives for underwriters to take steps to help ensure the accuracy of disclosure 

in a registration statement.  Section 11 of the Securities Act imposes on underwriters, among 

other parties identified in Section 11(a), civil liability for any part of the registration statement, at 

effectiveness, which contained an untrue statement of a material fact or omitted to state a 

material fact required to be stated therein or necessary to make the statements therein not 

misleading, to any person acquiring such security.175  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.176  These provisions provide significant investor protections to those who 

acquire securities sold pursuant to a registration statement by providing tools to hold companies, 

underwriters, and other parties accountable for misstatements and omissions in connection with 

                                                 
174  SPACs initially engage in firm commitment underwritten offerings in order to first sell their securities to the 
public.  See supra Section I.  However, as we further discuss below, the compensation structure for SPAC initial 
public offerings is generally different than that in traditional firm commitment offerings because a significant 
portion of the compensation is deferred.   
175  15 U.S.C. 77k.  
176  15 U.S.C. 77l(a)(2).   



90 
 

public offerings of securities.177  As a result, anyone who might be named as a potential 

defendant in these suits has strong incentives to take the necessary steps to avoid such liability. 

One defense available to an underwriter in a distribution is the “due diligence” defense, 

which shields an underwriter from liability if it can establish that, after reasonable investigation, 

the underwriter had reasonable ground to believe and did believe, at the time the registration 

statement became effective, that the statements therein were true and that there was no omission 

to state a material fact required to be stated therein or necessary to make the statements therein 

not misleading.178  To establish its “due diligence” defense, an underwriter must establish that it 

exercised reasonable care in verifying the statements in the registration statement.  Underwriters 

in a traditional initial public offering are therefore motivated to take the investigative steps 

necessary to establish the “due diligence” defense.179  The statutory provision of a due diligence 

defense appears to reflect an intent to improve the standards of conduct to which persons 

associated with the distribution of securities are to be held by imposing upon them standards of 

“honesty, care, and competence.”180  It was believed that the imposition of civil liability under 

                                                 
177  See William O. Douglas & George E. Bates, The Federal Securities Act of 1933, 43 YALE L.J.171 (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.”). 
178  See Section 11(b)(3) of the Securities Act. [15 U.S.C. 77k(b)(3).]. 
179  Similarly, Section 12(a)(2) of the Securities Act provides a defense for defendants who, in the exercise of 
“reasonable care,” could not have known of the alleged misstatement or omission (15 U.S.C. 77l(a)(2)).  Courts 
generally have construed these two defenses similarly.  See, e.g., In re WorldCom Inc. Sec. Litig., 346 F. Supp. 2d 
628, 663-64 (S.D.N.Y. 2004). 
180  H.R. No. 85, 73d Cong., 1st Sess. (1933) (From the Introductory Statement to the Report submitted by Mr. 
Rayburn, Committee on Interstate and Foreign Commerce: “Honesty, care, and competence are the demands of 
trusteeship.  These demands are made by the bill on the directors of the issues, its experts, and the underwriters who 
sponsor the issue.  If it be said that the imposition of such responsibilities upon these persons will be to alter 
corporate organization and corporate practice in this country, such a result is only what your committee expects.”). 



91 
 

the Securities Act upon participants in a distribution would cause them to exercise the care 

necessary to assure the accuracy of the statements in the registration statement.181 

Consistent with this intent, the Commission has stated that the due diligence efforts 

performed by underwriters are central to the integrity of our disclosure system.182  The investing 

public relies on underwriters to “screen the multitude of issuers seeking access to the capital 

markets” and expects them to verify the accuracy of the information in the registration 

statement.183  Moreover, although the Securities Act does not expressly require an underwriter to 

conduct a due diligence investigation, the Commission has long expressed the view that 

underwriters nonetheless have an affirmative obligation to conduct reasonable due diligence.184  

The Commission has stated that “an underwriter [in a securities offering] impliedly represents 

that he has made such an investigation [of the accuracy of the information in the registration 

statement] in accordance with professional standards” and “[i]nvestors properly rely on this 

                                                 
181  Id. (“The duty of care to discover varies in its demands upon participants in security distribution with the 
importance of their place in the scheme of distribution and with the degree of protection that the public has a right to 
expect.”).  See also New High Risk Ventures, Release No. 33-5275 (July 27, 1972) [37 FR 16011 (Aug. 9, 1972)] 
(discussing the Commission’s views that Section 11 was designed by Congress to incentivize persons associated 
with the distribution of securities to “exercise the ‘honesty, care and competence’ necessary to assure the accuracy 
of the [s]tatements in the registration statement”). 
182  See, e.g., Circumstances Affecting the Determination of What Constitutes Reasonable Investigation & 
Reasonable Grounds for Belief Under Section 11 of the Sec. Act Treatment of Info. Inc. by Reference into 
Registration Statements, Release No. 33-6335 (Aug. 6, 1981) [46 FR 42015 (Aug. 18, 1981)] (“In sum, the 
Commission strongly affirms the need for due diligence and its attendant vigilance and verification.”). 
183  See Bloomenthal, supra note 173.  See also Release No. 33-5275, supra note 181. 
184  See, e.g., In re Charles E. Bailey & Co., 35 S.E.C. 33, at 41 (Mar. 25, 1953) (“[An underwriter] owe[s] a duty to 
the investing public to exercise a degree of care reasonable under the circumstances of th[e] offering to assure the 
substantial accuracy of representations made in the prospectus and other sales literature.”); In re Brown, Barton & 
Engel, 41 SEC 59, at 64 (June 8, 1962) (“[I]n undertaking a distribution . . . [the underwriter] had a responsibility to 
make a reasonable investigation to assure [itself] that there was a basis for the representations they made and that a 
fair picture, including adverse as well as favorable factors, was presented to investors.”); In the Matter of the 
Richmond Corp., infra note 185 (“It is a well established practice, and a standard of the business, for underwriters to 
exercise diligence and care in examining into an issuer’s business and the accuracy and adequacy of the information 
contained in the registration statement….  The underwriter who does not make a reasonable investigation is derelict 
in his responsibilities to deal fairly with the investing public.”). 



92 
 

added protection which has a direct bearing on their appraisal of the reliability of the 

representations in the prospectus.”185 

1. Participants in a Distribution as “Underwriters” 

Common interpretations of the underwriter definition in Section 2(a)(11) traditionally 

have focused on the words “with a view to” in the phrase “purchased from an issuer with a view 

to ... distribution.”  Thus, an investment banking firm that arranges with an issuer for the public 

sale of its securities is clearly an “underwriter.”  However, as noted above, the statutory 

definition of underwriter is much broader.  Both federal courts and the Commission previously 

have found that other parties involved in securities offerings can be deemed “statutory 

underwriters” under the underwriter definition, such as by selling “for an issuer;”186 and/or 

                                                 
185  In the Matter of the Richmond Corp., Release No. 33-4584 (Feb. 27, 1963).  See also In re WorldCom, Inc. Sec. 
Litig., 346 F. Supp. 2d 628, 684 (S.D.N.Y. 2004) (“Underwriters … have special access to information about an 
issuer at a critical time in the issuer’s corporate life, at a time it is seeking to raise capital.  The public relies on the 
underwriter to obtain and verify relevant information and then make sure that essential facts are disclosed.”); 
Sanders v. John Nuveen & Co., Inc., 524 F.2d 1064, 1069–70 (7th Cir. 1975) (“An underwriter’s relationship with 
the issuer gives the underwriter access to facts that are not equally available to members of the public who must rely 
on published information.  And the relationship between the underwriter and its customers implicitly involves a 
favorable recommendation of the issued security.  Because the public relies on the integrity, independence and 
expertise of the underwriter, the underwriter’s participation significantly enhances the marketability of the security.  
And since the underwriter is unquestionably aware of the public’s reliance on his participation in the sale of the 
issue, the mere fact that he has underwritten it is an implied representation that he has met the standards of his 
profession in his investigation of the issuer.”); Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341, 
370 (2d Cir. 1973) (“No greater reliance in our self-regulatory system is placed on any single participant in the 
issuance of securities than upon the underwriter.  He is most heavily relied upon to verify published materials 
because of his expertise in appraising the securities issue and the issuer, and because of his incentive to do so.  He is 
familiar with the process of investigating the business condition of a company and possesses extensive resources for 
doing so….  Prospective investors look to the underwriter … to pass on the soundness of the security and the 
correctness of the registration statement and prospectus.”); Escott v. BarChris Const. Corp., 283 F. Supp. 643, 697 
(S.D.N.Y. 1968) (“The purpose of Section 11 is to protect investors.  To that end the underwriters are made 
responsible for the truth of the prospectus.”). 
186  See SEC v. Chinese Consolidated Benevolent Association, 120 F.2d 738 (2d Cir. 1941) (charitable association 
deemed a statutory underwriter in promoting the sale of war bonds, collecting funds and distributing the securities to 
its members notwithstanding the charitable association’s lack of a relationship with the issuer of the bonds); SEC v. 
Kern, 425 F.3d 143 (2d Cir. 2005).  See also Release No. 33-5223, supra note 171 (stating that any persons may be 
underwriters within the meaning of Section 2(a)(11) “if they act as links in a chain of transactions through which 
securities move from an issuer to the public…. the Commission hereby emphasizes and draws attention to the fact 
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 



93 
 

directly or indirectly “participating” in a distribution by engaging in activities “necessary to the 

distribution”187 or in “distribution-related activities.”188  Such parties can attain underwriter 

status even if they do not receive compensation for their services,189 do not sell securities directly 

to the public,190 and do not have privity of contract with the issuer.191  Similarly, courts have 

interpreted the underwriter definition broadly to include promoters, officers, and control persons 

who have arranged for public trading of an unregistered security or have stimulated investor 

interest in such security through advertisements, research reports, or other promotional efforts.192  

Moreover, the Commission has stated that “there is nothing in Section 2[(a)](11) which places a 

                                                 
distribution of the securities and that the person does not participate or have a participation in any such undertaking, 
and does not participate or have a participation in the underwriting of any such undertaking.”). 
187  See, e.g., Harden v. Raffensperger, Hughes & Co., 65 F.3d 1392 (7th Cir. 1995) (third party retained as a 
“qualified independent underwriter” to perform due diligence and recommend a minimum yield for a bond offering 
deemed a statutory underwriter).  The defendant argued that it was not an underwriter because it had neither 
purchased nor sold any of the distributed securities.  The court held that the defendant’s activities fell within the 
“participates” and “has a participation” language of Section 2(a)(11), reasoning that Section 2(a)(11) is broad 
enough to encompass all persons who engage in the steps necessary to the distribution of securities. 
188  See, e.g., Geiger v. SEC, 363 F.3d 481, 487 (D.C. Cir. 2004) (defendant “participated” in a distribution as a 
statutory underwriter through its actions in finding a buyer, negotiating the terms of the transaction, and facilitating 
the resale of securities). 
189  See, e.g., Chinese Consolidated Benevolent Association, supra note 186, at 740 (“The solicitation of offers to 
buy the unregistered bonds, either with or without compensation, brought defendant’s activities literally within the 
prohibition of the statute.”); see also J. William Hicks, 7A Exempted Trans. Under Securities Act 1933 § 9:39 
(citing the Brief for the Securities and Exchange Commission in Chinese Consolidated Benevolent Association: 
“The legislative history of Section 2[(a)](11) makes it apparent that Congress did not intend to require the elements 
of compensation or a contract with the issuer in order to make a distributor of securities an underwriter.  In an earlier 
draft of the Securities Act, which was considered by the House Committee on Interstate and Foreign Commerce, the 
definition of underwriter … would have made the underwriting relationship depend upon the receipt of 
compensation.  In abandoning that definition and adopting the definition which is included in the bill as enacted, 
Congress showed a clear intention of extending the term to include all persons who sell for an issuer, whether or not 
they do so for profit.”). 
190  See, e.g., Raffensperger, supra note 187. 
191  See, e.g., Chinese Consolidated Benevolent Association, supra note 186, at 740 (Hand, J. explaining, “Whether 
the Chinese government as issuer authorized the solicitation, or merely availed itself of gratuitous and even 
unknown acts on the part of the defendant whereby written offers to buy, and the funds collected for payment, were 
transmitted to the Chinese banks does not affect the meaning of the statutory provisions which are quite explicit.  In 
either case, the solicitation was equally for the benefit of the Chinese government and broadly speaking was for the 
issuer in connection with the distribution of the bonds.”). 
192  See, e.g., SEC v. Allison, No. C-81-19 RPA, 1982 WL 1322 (N.D. Cal. 1982). 



94 
 

time limit on a person’s status as an underwriter” because the “public has the same need for 

protection afforded by registration whether the securities are distributed shortly after their 

purchase or after a considerable length of time.”193 

2. The De-SPAC Transaction as a “Distribution” of the Combined 
Company’s Securities 

Underwriter status depends upon a person’s activities occurring “in connection with” a 

“distribution” of any security.  The Commission has explained that underwriter status under the 

“participation” prong of the underwriter definition depends on the putative underwriter “enjoying 

substantial relationships with the issuer or underwriter, or engaging in the performance of any 

substantial functions in the organization or management of the distribution.”194  The Securities 

Act does not define the term “distribution;” however, the federal courts and the Commission 

have interpreted the term as synonymous with a “public offering” within the meaning of Section 

4(a)(2) of the Act.195  Moreover, a distribution has been said to comprise “the entire process by 

which in the course of a public offer [a] block of securities is dispersed and ultimately comes to 

rest in the hands of the investing public.”196 

                                                 
193  Release No. 33-5223, supra note 171, at 4.  See also Gilligan, Will & Co. v. SEC, 267 F.2d 461 (2d Cir. 1959) 
(holding that a distribution exists if there are sales to those who cannot “fend for themselves” and citing Ralston 
Purina Co., 346 U.S. 119 (1953)). 
194  See Opinion of General Counsel relating to Rule 142, Release No. 33-1862 (Dec. 14, 1938). 
195  See J. William Hicks, 7A Exempted Trans. Under Securities Act 1933 § 9:18.  Courts have equated the term 
“distribution” with a public offering of securities.  See, e.g., Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195, 215 
(3d Cir. 2006) (“We agree with the rationale of those courts and similarly hold that the term “distribution” in § 
2(a)(11) is synonymous with ‘public offering.’”); see also Gilligan, Will & Co., supra note 193, at 466 (“a 
‘distribution’ requires a ‘public offering”’ (citation omitted)). 
196  J. William Hicks, 7A Exempted Trans. Under Securities Act 1933 § 9:18 (citing Geiger v. SEC, 363 F.3d 481, 
484, 487 (D.C. Cir. 2004), where the court agreed with the SEC that the petitioners, Charles F. Kirby and Gene 
Geiger (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 an ongoing distribution and related manipulation had occurred where a broker-
dealer sold securities on a “delayed delivery” basis and there was a real possibility at the time of purchase that the 
purchaser would cancel the order and quoting Lewisohn Copper Corp., 38 S.E.C. 226, 234 (1958)); accord In the 



95 
 

The purpose of a SPAC initial public offering is to raise a pool of cash in order to 

subsequently merge with a private operating company in a de-SPAC transaction that will convert 

the private operating company into a public company.  Although the timing of a SPAC initial 

public offering and a de-SPAC transaction is bifurcated because a private operating company is 

not identified at the SPAC initial public offering stage, the result of a de-SPAC transaction, 

however structured, is consistent with that of a traditional initial public offering.  The substance 

of a de-SPAC transaction is, in many ways, analogous to the distribution that occurs in a 

traditional IPO—i.e., a SPAC’s assets consist primarily of highly liquid assets, such as cash and 

government securities, and the combined company effectively distributes its securities to public 

holders of SPAC shares in exchange for the contribution of the SPAC’s assets to the combined 

company.  The de-SPAC transaction marks the introduction of the private operating company to 

the public capital markets197 and is effectively how the private operating company’s securities 

“come to rest” —in other words, are distributed—to public investors as shareholders of the 

combined company.198  Accordingly, as in a traditional underwritten initial public offering, 

                                                 
Matter of Oklahoma-Texas Tr., 2 S.E.C. 764, 769, 1937 WL 32951 (Sept. 23, 1937), aff'd, 100 F.2d 888 (10th Cir. 
1939) (finding an ongoing distribution where portions of a registered offering continued to be held by securities 
dealers).  
197  Such a transaction may take a variety of forms and involve a multitude of issuers.  However, the rule we are 
proposing would apply to all de-SPAC transactions involving a registered offer of securities.   
198  A court has addressed in dicta whether a somewhat analogous situation involving the introduction of private 
companies to the public markets through an existing shareholder base was a distribution.  See SEC v. Datronics 
Engineers, Inc., 490 F.2d 250, 254 (4th Cir. 1973), cert denied, 416 U.S. 937 (1974) wherein Datronics, a public 
corporation, acquired a number of privately-held, target companies in merger transactions.  A subsidiary of the 
defendant would merge with the target company, with the subsidiary surviving the merger.  Both the shareholder-
principals of the target and Datronics received stock in the surviving subsidiary.  After the merger, Datronics 
distributed some of its shares to its shareholders as a dividend.  In this way, formerly privately-held companies 
became publicly owned without going through a registered public offering.  The court stated in dicta, “we think that 
Datronics was an underwriter within the meaning of the 1933 Act.  Hence its transactions were covered by the 
prohibitions, and were not within the exemptions, of the Act.  §§ 3(a)(1) and 4(1) of the 1933 Act, 15 U.S.C. §§ 77c, 
77d.  By definition, the term underwriter ‘means 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….’  § 2(11) of the 1933 Act, 15 U.S.C. § 77b(11). …  By this 
underwriter distribution Datronics violated [Section] 5 of the 1933 Act—sale of unregistered securities.” 



96 
 

public investors—who were unfamiliar with the formerly private company—would benefit from 

the additional care and diligence exercised by SPAC underwriters in connection with the de-

SPAC transaction.199 

3. Proposed Rule: SPAC IPO Underwriters are Underwriters in Registered 
De-SPAC Transactions 

Proposed Rule 140a would clarify that a person who has acted as an underwriter in a 

SPAC initial public offering (“SPAC IPO underwriter”) and participates in the distribution by 

taking steps to facilitate the de-SPAC transaction, or any related financing transaction,200 or 

otherwise participates (directly or indirectly) in the de-SPAC transaction will be deemed 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.  Clarifying the 

underwriter status of SPAC IPO underwriters in connection with de-SPAC transactions should 

motivate them to exercise the care necessary to help ensure the accuracy of the disclosures in 

these transactions by affirming that they are subject to Section 11 liability for registered de-

SPAC transactions.201  In this way, proposed Rule 140a underscores and reinforces that the 

liability protections in de-SPAC transactions involving registered offerings have the same effect 

as those in underwritten initial public offerings.   

                                                 
199  See Gilligan, Will & Co., supra note 193. 
200  Most SPAC deals contain an available cash condition that represents a minimum amount of proceeds below 
which the target will not be obligated to consummate the transaction.  The cash condition represents a number the 
sponsor group believes it can reasonably achieve given their banking syndicate, network, access to capital, and the 
target company itself.  Since cash in trust is subject to redemption, one mechanism to ensure the cash condition will 
be satisfied is to secure commitments for a PIPE investment.  See SPAC Research Weekly Newsletter (Oct. 19, 
2020), available at https://www.spacresearch.com/newsletter?date=2020-10-19.  In addition the staff has observed 
that for the vast majority of PIPEs associated with de-SPAC transactions, the closing of the PIPE financing is cross-
conditioned on the closing of the de-SPAC transaction. 
201  Under Section 11, “any person acquiring such security” has a right of recovery.  The Commission’s longstanding 
view for traditional firm commitment registered offerings is that standing to sue under this provision extends to all 
purchasers of securities, whether the purchase occurred in the offering or subsequently in the secondary market.  See 
Brief of the SEC in DeMaria v. Andersen, 318 F.3d 170 (2d Cir. 2003). 

https://www.spacresearch.com/newsletter?date=2020-10-19


97 
 

As described above, the purpose of a SPAC’s initial public offering is to facilitate a 

subsequent de-SPAC transaction, and for target companies merging with a SPAC, the de-SPAC 

transaction is the means chosen, out of the several avenues available under the securities laws, 

for a private operating company to go public.  It is the method by which the target company’s 

securities, as securities of the combined company, are distributed into the hands of public 

investors.  Although SPAC IPO underwriters typically are not retained to act as firm 

commitment underwriters in the de-SPAC transaction, they nevertheless typically participate in 

activities that are necessary to that distribution.202  For instance, it is common for a SPAC IPO 

underwriter (or its affiliates) to participate in the de-SPAC transaction as a financial advisor to 

the SPAC, and engage in activities necessary to the completion of the de-SPAC distribution such 

as assisting in identifying potential target companies, negotiating merger terms, or finding 

investors for and negotiating PIPE investments.  Furthermore, receipt of compensation in 

connection with the de-SPAC transaction could constitute direct or indirect participation in the 

de-SPAC transaction.  While SPAC IPO underwriting fees—those fees the SPAC IPO 

underwriters earn for their efforts in connection with the initial offering of SPAC shares to the 

public—generally range between 5% and 5.5% of IPO proceeds, a significant portion (typically 

3.5% of IPO proceeds) is deferred until, and conditioned upon, the completion of the de-SPAC 

transaction.203  A SPAC IPO underwriter therefore typically has a strong financial interest in 

taking steps to ensure the consummation of the de-SPAC transaction.204  For these reasons, 

                                                 
202  See generally Chinese Consolidated Benevolent Association, supra note 186 and accompanying text.   
203  See Klausner, Ohlrogge, and Ruan, supra note 17.  It is not necessary, however, for a SPAC IPO underwriter to 
derive a pecuniary benefit from the distribution in order for Section 2(a)(11) to apply.  See Brief for the SEC at 19, 
Chinese Consolidated Benevolent Association, supra note 186 (“The legislative history of Section 2[(a)](11) makes 
it apparent that Congress did not intend to require the elements of compensation or a contract with the issuer in order 
to make a distributor of securities an underwriter.”) 
204  See Robert J. Haft, Peter M. Fass, Michele Haft Hudson, and Arthur F. Haft, Tax-Advantaged Securities, 
Overview of SPACs § 6:134.60. 



98 
 

proposed Rule 140a would clarify that the SPAC IPO underwriter is an underwriter with respect 

to the distribution that occurs in the de-SPAC transaction, when it takes steps to facilitate the de-

SPAC transaction, or any related financing transaction, or otherwise participates (directly or 

indirectly) in the de-SPAC transaction. 

We note that proposed Rule 140a addresses the underwriter status of only the SPAC IPO 

underwriter in the context of a de-SPAC transaction.  In addition, we have discussed above some 

of the activities that are sufficient to establish that the SPAC IPO underwriter is participating in 

the distribution of target company securities.  This discussion, however, is not intended to 

provide an exhaustive assessment of underwriter status in the SPAC context, and neither is it 

intended to limit the definition of underwriter for purposes of Section 2(a)(11) of the Securities 

Act.  Federal courts and the Commission may find that other parties involved in securities 

distributions, including other parties that perform activities necessary to the successful 

completion of de-SPAC transactions, are “statutory underwriters” within the definition of 

underwriter in Section 2(a)(11).  For example, financial advisors, PIPE investors, or other 

advisors, depending on the circumstances, may be deemed statutory underwriters in connection 

with a de-SPAC transaction if they are purchasing from an issuer “with a view to” distribution, 

are selling “for an issuer,” and/or are “participating” in a distribution.  

Request for Comment 

82. Should we adopt a definition of distribution in Rule 140a, as proposed? 

83. Does the current regulatory regime provide sufficient incentives for participants in a de-

SPAC transaction to conduct appropriate due diligence on the target private operating 

company and the disclosures provided to public investors in connection with the de-

SPAC transaction?  Would proposed Rule 140a likely result in improved diligence of 



99 
 

private company targets in de-SPAC transactions and related disclosure?  Would the 

other measures we are proposing in this release mitigate the need for proposed Rule 

140a? 

84. Does the SPAC IPO underwriter have the means and access necessary (via contract or 

otherwise) to perform due diligence at the de-SPAC transaction stage, particularly where 

the SPAC IPO underwriter is not retained as an advisor in the de-SPAC transaction or the 

target is the registrant for the de-SPAC transaction?  Could such access be reasonably 

obtained in the course of the negotiation of the underwriting agreement for the SPAC 

initial public offering or otherwise? 

85. Will shareholders after the de-SPAC transaction have difficulty recovering against SPAC 

IPO underwriters liable under Securities Act Section 11 due to potential challenges in 

tracing the shares they hold to an effective registration statement for the de-SPAC 

transaction?  Are there steps we should take to address the challenges shareholders might 

face in tracing their shares to such a registration statement?  For example, should we 

consider rulemaking to define “any person acquiring such security” under Securities Act 

Section 11 in the context of de-SPAC transactions and, if so, how should it be defined? 

86. Should we limit the application of proposed Rule 140a to situations in which the SPAC 

IPO underwriter takes steps to facilitate the de-SPAC transaction, or any related 

financing transaction, or otherwise participates (directly or indirectly) in the de-SPAC 

transaction, as proposed? 

87. Would a determination that SPAC IPO underwriters are engaged in a distribution of the 

private operating company’s securities, as proposed, raise additional issues we should 

address?  For example, does it raise questions about when the SPAC IPO underwriters’ 



100 
 

participation in the SPAC initial public offering distribution is completed for purposes of 

calculating the restricted period under Regulation M? 

88. As noted above, there may be additional parties that are involved in a de-SPAC 

transaction that may fall within the statutory definition of underwriter because they are 

“participating in the distribution” of the target private operating company’s securities to 

the public.  Should proposed Rule 140a be expanded to expressly include such other 

parties?  If so, which parties?  Should the rule instead deem any party playing a 

significant role at the de-SPAC transaction stage to be an underwriter?  Should the 

Commission provide additional guidance as to which additional parties may be 

underwriters and what activities or other considerations would be relevant to determining 

whether a party falls within the statutory definition of underwriter in a de-SPAC 

transaction? 

89. Is it clear what parties would be considered a SPAC IPO underwriter for purposes of 

proposed Rule 140a?  Should we limit underwriter status as clarified by Rule 140a to the 

entities acting as traditional underwriter in a SPAC IPO?  Are there other parties that 

should be specifically excluded from the application of the rule? 

90. Are there alternative approaches we should consider that would enhance the incentives of 

participants in a de-SPAC transaction to assure the accuracy of the disclosures provided 

to public investors in connection with the de-SPAC transaction and/or align liability 

protections for investors across the various avenues for private operating companies to go 

public?101 
 

IV. BUSINESS COMBINATIONS INVOLVING SHELL COMPANIES 

 In response to concerns regarding the use of shell companies205 as a means of accessing 

the U.S. capital markets, and as discussed more fully below, we are proposing new rules that 

would apply to business combination transactions involving shell companies, which include de-

SPAC transactions.  First, we are proposing 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.  Second, we are proposing 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 initial public offering.206  The issues we are addressing with these rule 

proposals are common to these shell company transactions, regardless of whether the shell 

company is a SPAC. 

A. Shell Company Business Combinations and the Securities Act of 1933 

1. Shell Company Business Combinations 

SPAC initial public offerings and business combinations occurred with increased 

frequency in 2020 and 2021,207 but a business combination with a reporting shell company208 is 

                                                 
205  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 43 for the definition of “reporting shell 
company.” 
206  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 19001 (May 6, 1985)]. 
207  See supra notes 7 and 8 regarding the 2020-2021 increase in popularity of SPACs as a means for private 
companies to access the public markets.   
208  See supra note 9. 



102 
 

not a new means for a private company to become a U.S. public company with an Exchange Act 

reporting obligation.209  Historically, private companies have utilized shell companies in various 

forms of transactions,210 such as spin-offs, reverse mergers, and de-SPAC transactions to become 

U.S. public companies,211 in many cases without filing a Securities Act registration statement.212  

Due to abuses involving shell company transactions, over the years the Commission has adopted 

various rules and limitations intended to address the misuse of shell companies.213  For example: 

                                                 
209  See generally, Ronald M. Shapiro and Laurence M. Katz, The “Going Public through the Back Door” 
Phenomenon—An Assessment, 29 MD. L. REV. 320 (1969); Leib Orlanski, Going Public through the Backdoor and 
the Shell Game, 58 VA. L. REV. 1451 (1972) (both describing various ways of combining with a public shell 
company as a method to bring private corporations public). 
210  Shell company business combinations can take many forms.  They can be as simple in structure as a statutory 
merger, with a private operating company merging with and into a shell company that has previously filed a Form 
10 with the Commission, or as complex as a de-SPAC transaction involving multiple merging entities, tax blockers, 
and/or a new holding company.  Among de-SPAC transactions, the Commission staff has observed a number of 
variations, only some of which are consistently registered transactions.  For example, in de-SPAC transactions 
structured as share exchanges, securities can be offered and sold to the public holders of SPAC securities from the 
target, a new holding company, or they can retain their interests in the reporting SPAC. 
211  These transactions generally can take the form of either a “reverse merger” in which the private business merges 
into the shell company, with the shell company surviving and the former shareholders of the private business 
controlling the surviving entity or, in another common type of transaction, a “back door registration,” the shell 
company merges into the formerly private company, with the formerly private company surviving and the 
shareholders of the shell company becoming shareholders of the surviving entity.  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 (July 21, 2005)] (“Shell 
Company Adopting Release”).  Both alternatives transform a private company into a public company by combining 
directly or indirectly with a public company (whether through a merger, exchange offer, or otherwise). 
212  For example, unregistered transactions can involve a direct or indirect offer and sale of the public shell’s 
securities to holders of the target entity’s securities in consideration for their interests in the target entity.  The public 
shell is then the entity that survives the business combination.  In the context of SPACs, where there is no 
registration statement, transactions are typically disclosed to the SPAC’s public shareholders in a proxy or 
information statement if there is a vote or consents being solicited, or otherwise in a Schedule TO.  In shell company 
mergers where there is no vote, the shell company’s shareholders may only learn about the transaction when the 
shell company files an Item 5.06 Form 8-K to report a change in shell company status.  With respect to de-SPAC 
transactions, the Commission staff has observed that in 2020 (Sept. 30, 2019 to Oct. 1, 2020), 21 de-SPAC 
transactions were registered on Form S-4 or F-4 and 16 were disclosed on proxy or information statements soliciting 
shareholder votes or consents, respectively.  Over the same months in 2021, 212 de-SPAC transactions were 
registered on Form S-4 or F-4 and 48 were disclosed on proxy or information statements. 
213  We note that these rules and limitations generally do not apply to shell companies that qualify as “business 
combination related shell companies” as defined in Rule 405.  See infra Section IV.A.3. 



103 
 

• Rule 144 is not available for the resale of securities initially issued by either reporting 

or non-reporting shell companies;214 

• Shell companies are not permitted to use Form S-8;215 

• Shell companies are considered ineligible issuers that cannot use free writing 

prospectuses for communications during a registered offering;216 and 

• Broker-dealers are able to rely on the “piggyback” exception to publish quotations for 

shell companies for only 18 months following the initial priced quotation on OTC 

Markets.217 

Although many of these rules address concerns related to market manipulation and penny stock 

fraud, the Commission also has previously expressed concerns about the use of a shell company 

to distribute securities to the public without the protections afforded by the Securities Act 

including, where required, a registration statement.218  The lack of a registration statement could 

deprive investors of the critical disclosures and protections that come with Securities Act 

registration.219  The use of shell companies to complete business combinations can thus also 

provide companies with opportunities to avoid the disclosure, liability, and other provisions 

                                                 
214  See 17 CFR 230.144(i), 17 CFR 230.145(c) and (d), and Revisions to Rules 144 and 145, Release No. 33-8869 
(Dec. 6, 2007) [72 FR 71546 (Dec. 17, 2007)]. 
215  See Form S-8 [17 CFR 239.16b], General Instruction A.1, Rule as to Use of Form S-8; Shell Company Adopting 
Release, supra note 211. 
216  See 17 CFR 230.165(e)(2)(ii) and Securities Offering Reform, Release No. 33-8591 (July 19, 2005) [70 FR 
44722 (Aug. 3, 2005)]. 
217  See 17 CFR 240.15c2-11(f)(3)(i)(B)(2) and Publication or Submission of Quotations Without Specified 
Information, Release No. 33-10842 (Sept. 16, 2020) [85 FR 68124 (Oct. 27, 2020)]. 
218  See generally Spin Offs and Shell Corporations, Release No. 33-4982 (July 2, 1969) [34 FR 11581 (July 15, 
1969)] (stating the Commission’s concern over the use of shell companies to effect unregistered distributions of 
securities in spin-offs and in other contexts). 
219  Id.  See also Notice of Adoption of Rules 145 and 153A, Prospective Rescission of Rule 133, Amendment of 
Form S-14 Under the Securities Act of 1933, and Amendment of Rule 14a-2, 14a-6 and 14c-5 Under the Securities 
Exchange Act of 1934, Release No. 33-5316 (Oct. 6, 1972) [37 FR 23631 (Nov. 7, 1972)] (“Rule 145 Adopting 
Release”). 



104 
 

applicable in traditional registered offerings.220  These concerns are still present when shell 

companies are used in business combinations to provide private companies with access to the 

public markets.  

2. Proposed Rule 145a 

The substantive reality of a reporting shell company221 business combination with a 

company that is not a shell company is that reporting shell company investors have effectively 

exchanged their security representing an interest in the reporting shell company for a new 

security representing an interest in the combined operating company.  As noted above, however, 

unlike investors in transaction structures in which the Securities Act applies and a registration 

statement would be filed (absent an exemption), investors in reporting shell companies may not 

always receive the disclosures and other protections afforded by the Securities Act at the time the 

change in the nature of their investment occurs due to the business combination involving 

another entity that is not a shell company. 

Under the Securities Act, all offers and sales of securities must either be registered or be 

exempt from registration, and any offer or sale that is not registered or exempt violates 

Section 5.222  Section 2(a)(3) of the Securities Act defines a “sale” as, among other things, 

                                                 
220  For example, in SEC v. M & A W., Inc., 538 F.3d 1043, 1053 (9th Cir. 2008), the court considered a civil 
enforcement action against an individual engaged in the business of assisting private corporations to become 
publicly-traded companies through reverse merger transactions with reporting shell companies, alleging the sale of 
unregistered securities.  The court noted: “[W]e are informed by the purpose of registration, which is ‘to protect 
investors by promoting full disclosure of information thought necessary to informed investment decisions.’  The 
express purpose of the reverse mergers at issue in this case was to transform a private corporation into a corporation 
selling stock shares to the public, without making the extensive public disclosures required in an initial offering.  
Thus, the investing public had relatively little information about the former private corporation.  In such 
transactions, the investor protections provided by registration requirements are especially important.”). 
221  See supra note 43 for a definition of this term. 
222  15 U.S.C. 77e. 



105 
 

“every contract of sale or disposition of a security or interest in a security, for value.”223  In view 

of the remedial purpose of the Securities Act, courts and the Commission have broadly 

interpreted this term, particularly with respect to the creation of a public market in shares of a 

private company.224  Moreover, the Commission has concluded that certain business 

combination and other transactions involve a sale of securities within the meaning of Section 

2(a)(3).225 

Due to the significant increase in reporting shell company business combination 

transactions as a means to enter the U.S. capital markets, including through the use of a SPAC, 

and in an effort to provide reporting shell company shareholders with more consistent Securities 

Act protections regardless of transaction structure, we are proposing new Rule 145a226 that 

would deem any business combination of a reporting shell company227 involving another entity 

that is not a shell company to involve a sale of securities to the reporting shell company’s 

                                                 
223  15 U.S.C. 77b(3). 
224  In this regard, the Supreme Court has stated that securities legislation, enacted for the purpose of avoiding 
frauds, is to be construed “not technically and restrictively, but flexibly to effectuate its remedial purposes.”  SEC v. 
Cap. Gains Rsch. Bureau, Inc., 375 U.S. 180, 195, 84 S. Ct. 275, 284–85 (1963).  See also SEC v. Harwyn Indus. 
Corp., 326 F. Supp. 943, 954 (S.D.N.Y. 1971) (construing “value” in Section 2(a)(3) to include the creation of a 
public market in the shares with its resulting benefits to the defendants, the court stated, “…[W]e must look to its 
overall purpose, which is to provide adequate disclosure to members of the investing public, rather than engage in 
strangulating literalism.”); SEC v. Datronics Engineers, Inc., 490 F.2d 250, 254 (4th Cir. 1973), cert denied, 416 
U.S. 937 (1974); In the Matter of UniversalScience.com, Inc., Release No. 33-7879 (Aug. 8, 2000) (distribution of 
securities as purported “free stock” constituted a sale because it was a disposition for value, the “value” arising “by 
virtue of the creation of a public market for the issuer’s securities.”); and Thomas Lee Hazen, The Law of Securities 
Regulation § 12:22 (“Concepts of purchase and sale are to be construed flexibly in order to accomplish the purpose 
of the securities laws.  The courts will consider the economic reality of the transaction and whether it lends itself to 
fraud in the making of an investment decision.”). 
225  See 17 CFR 230.145(a) and (b) (Securities Act Rules 145(a) and (b)) and Rule 145 Adopting Release, supra note 
219 (Rule 145 deems the submission to a vote of stockholders of a proposal for certain mergers, consolidations, or 
reclassifications of securities or transfers of assets to involve a “sale,” “offer,” “offer to sell,” or “offer for sale” of 
the securities of the new or surviving corporation to the security holders of the disappearing corporation). 
226  See proposed 17 CFR 230.145a. 
227  See supra note 43 for a definition of this term. 



106 
 

shareholders.228  It is our preliminary view that such a transaction would be “a disposition of a 

security or interest in a security… for value,”229 regardless of the form or structure deployed, and 

regardless of whether a shareholder vote or consent is solicited.230  By deeming such transactions 

to be a “sale” for the purposes of the Securities Act, the proposed rule is intended to address 

potential disparities in the disclosure and liability protections available to reporting shell 

company shareholders depending on the transaction structure deployed in a reporting shell 

company business combination. 

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 in the 

business combination.231  However, our current view is that Section 3(a)(9) of the Securities 

Act,232 which exempts any securities exchange by an issuer with its existing security holders 

exclusively where no commission or other remuneration is paid or given directly or indirectly for 

soliciting such exchange, generally would not be available for the sales covered by proposed 

Rule 145a.  In these circumstances, we believe that the deemed exchange by the reporting shell 

company’s existing shareholders for the combined company’s securities should be viewed as part 

                                                 
228  This expresses our views as to the substance of these transactions for the purposes of the Securities Act.  Neither 
proposed Rule 145a nor the description in this section is intended to express a view with respect to the treatment of 
these transactions under other laws including, but not limited to, state corporate law and the Internal Revenue Code. 
229  Although no securities may actually be changing hands, in substance, shareholders in a reporting shell company 
merger are effectively exchanging their interests in the shell company for interests in a non-shell company; these 
shareholders can be viewed as having surrendered “value” for the purposes of Section 2(a)(3). 
230  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. 
231  We note that even if an exemption applies, if Rule 145a is adopted, investors would have the protections of the 
anti-fraud provisions in Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 thereunder of the 
Exchange Act. [15 U.S.C. 77q; 15 U.S.C. 78j; and 17 CFR 240.10b-5, respectively]. 
232  15 U.S.C. 77c(a)(9). 



107 
 

of the same offering as the exchange of the private company’s securities for their interests in the 

combined company.233  As a result, because the exchange would not be exclusively with the 

reporting shell company’s existing security holders, Section 3(a)(9) would not be available to 

exempt the deemed sale to reporting shell company shareholders in proposed Rule 145a, if 

adopted.  In addition, we note that Section 3(a)(9) would not be available where a commission or 

other remuneration is paid or given directly or indirectly for soliciting of participation in the 

deemed exchange.  This would occur, for example, if a proxy solicitor is compensated to solicit 

the approval of the reporting shell company’s shareholders for the business combination. 

Given the substance of the transactions that would be covered by new Rule 145a, we are 

proposing the rule so that shareholders more consistently receive the full protections of the 

Securities Act disclosure and liability provisions in business combinations involving reporting 

shell companies, regardless of the transaction structure.  Not only would registration in this 

context result in enhanced liabilities for signatories to any registration statement and potential 

underwriter liability as described elsewhere in this release,234 it would also include liability under 

Securities Act Section 11(a)(4) for experts, which include every accountant, engineer, or 

appraiser, or any person whose profession gives authority to a statement made by him, who has 

with his consent been named as having prepared or certified any part of the registration statement 

or as having prepared or certified any report or valuation which is used in connection with the 

registration statement.235  In addition, if the transaction is registered, Rule 145a would, in some 

                                                 
233  We note that none of the non-exclusive safe harbors in 17 CFR 230.152(b) would be likely to apply.  In 
particular, the closing of the business combination with the reporting shell company would be simultaneous with the 
deemed exchange of reporting shell company securities with its own holders and would therefore not meet the 30-
day safe harbor in 17 CFR 230.152(b)(1). 
234  See supra Sections III.C and III.F, respectively.   
235  See 15 U.S.C. 77k(a)(4).  This would include auditors who opine on the financial statements associated with the 
business combination.  Depending on the transaction and whether services are provided by other parties, this could 



108 
 

cases, provide reporting shell company investors with additional pre-sale disclosure about a 

transaction that would significantly alter the nature of their investment.236  In this way, proposed 

Rule 145a is consistent with the intent of other rules intended to “inhibit the creation of public 

markets in securities of issuers about which adequate current information is not available to the 

public.”237  The proposed rule should also eliminate potential regulatory arbitrage opportunities 

to avoid disclosure requirements or liability through the use of alternative transaction structures 

when combining with a reporting shell company.238 

3. Excluded Transactions 

We wish to emphasize that proposed Rule 145a would have no impact on business 

combinations between two bona fide non-shell entities.  However, we note that any reporting 

shell company that is made to appear to have, or has cloaked itself as having, more than 

“nominal” assets or operations would still be subject to Rule 145a in a business combination 

transaction.239 

The Commission has historically recognized the usefulness of shell companies formed 

solely to change an entity’s domicile or to effect a business combination transaction.240  As a 

                                                 
also include, for example, valuation consultants, outside reviewers of management projections, or anyone who 
provides a fairness opinion about the transaction. 
236  Some public shell company business combinations are not disclosed to investors until after the transaction has 
closed.  See supra note 212. 
237  See Rule 145 Adopting Release, supra note 219. 
238  See infra Sections III.F for a discussion of the sources of liability in registered de-SPAC transactions. 
239  We reiterate the Commission’s previous position on structuring transactions to avoid shell company status in 
adopting the 2005 shell company limitations.  See Shell Company Adopting Release, supra note 211, at n.32. 
240  See the Supplementary Information to the Shell Company Adopting Release, supra note 211 (“We recognize that 
companies and their professional advisors often use shell companies for many legitimate corporate structuring 
purposes.  Similarly, our definition and use of the term ’shell company’ is not intended to imply that shell companies 
are inherently fraudulent.  Rather, these rules target regulatory problems that we have identified where shell 
companies have been used as vehicles to commit fraud and abuse our regulatory processes.”). 



109 
 

result, the Commission has excluded such so-called business combination related shell 

companies241 from many of the shell company requirements and prohibitions that have been put 

in place to ensure the protection of investors in such companies.242  Consistent with this, the 

proposed rule would not apply to reporting shell companies that are business combination related 

shell companies as this term is defined in Securities Act Rule 405.243 

 In addition, we are proposing to exclude the business combination of one shell company 

into another shell company from the scope of Rule 145a.  Such a business combination would 

not amount to a fundamental change in the nature of the reporting shell company shareholder’s 

investment unlike a business combination with an entity that is not a shell company.244 

Request for Comment 

91. Should we adopt Rule 145a as proposed? 

92. Should we be seeking to align the required disclosures and liabilities associated with shell 

company business combinations among the various available transaction structures in 

order to provide reporting shell company investors consistent disclosures and protections 

across transaction structures?  Are there alternative approaches that would accomplish 

this goal? 

                                                 
241  See supra note 43 for the definition of “business combination related shell company.” 
242  See Shell Company Adopting Release, supra note 211. 
243  Neither a SPAC nor any such entity formed to facilitate a merger with a SPAC meets the definition of a business 
combination related shell company because neither of these entities is 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. 
244  However, such a business combination may continue to fall within Securities Act Rule 145 because there is a 
shareholder vote and the transaction is one to which Rule 145 would apply (e.g., a statutory merger or consolidation 
or similar plan or acquisition where the sole purpose of the transaction is not to change an issuer’s domicile solely 
within the United States). 



110 
 

93. How would the proposed rule affect business combinations involving both SPACs and 

non-SPAC reporting shell companies?  Would these entities be more likely to register 

such transactions? 

94. If the deemed sale to reporting shell company shareholders is required to be registered 

under the Securities Act pursuant to the proposed amendments, should we provide 

guidance with respect to the timing of the effectiveness of such registration statement in 

relation to the business combination? 

95. Are there other transactions that have purposes or results similar to reporting shell 

company business combinations that we should deem to constitute sales?  Conversely, 

does the proposed rule deem too broad of a set of reporting shell company business 

combinations to be sales?  For example, should the rule be limited to SPACs? 

96. Should proposed Rule 145a be limited to deeming shell company business combinations 

“sales” with respect to only reporting shell company shareholders?  Are there other 

parties whose interest in a shell company would be such that a shell company business 

combination should be deemed a sale?  For example, holders of securities other than 

common shares? 

97. Should reporting shell companies be prohibited from relying on the exemption in 

Securities Act Section 3(a)(9) in a transaction deemed a sale under proposed Rule 145a?  

Should we provide additional guidance on the potential availability or lack of availability 

of other exemptions from registration for the proposed Rule 145a sale?  If so, what 

exemptions should we address? 

98. Should we exclude business combination related shell companies from the scope of 

proposed Rule 145a, as proposed? 



111 
 

99. Should Rule 145a exclude the business combination of one shell company into another 

shell company, as proposed?  How frequently do such mergers occur in absence of the 

proposed Rule 145a?  In such a situation, would either or both companies’ shareholders 

benefit from registration under the Securities Act? 

100. Securities Act Rule 145(a) deems sales within the meaning of Section 2(a)(3) of the 

Securities Act for certain transactions submitted for the vote or consent of security 

holders.  Securities Act Rules 145(c) and (d) include provisions that have the effect of 

limiting resales with respect to parties to transactions described in Rule 145(a) and their 

affiliates that involve shell companies.  Although proposed Rule 145a would apply to all 

reporting shell company business combinations, not all of these business combinations 

would also fall within Rule 145(a).  Should we consider resale limitations for Rule 145a?  

Should any such resale limitations be similar to those in existing Rule 145? 

101. Should we consider guidance or additional rule amendments for transactions where the 

provisions of existing Rule 145 and Rule 145a could overlap?  For example, are there any 

rules that currently reference Rule 145 that should be amended to apply (or not apply) to 

transactions covered by proposed Rule 145a (e.g., Rule 500 of Regulation D, which states 

the availability of the exemptions for Rule 145(a) transactions; Securities Act Rule 135, 

which allows notice of a registered offering, including for a Rule 145(a) transaction; or 

Rule 172, which prohibits the use of access equals delivery in Rule 145(a) transactions)?  

What, if any, issues should the Commission address through guidance? 

102. Are there other potential opportunities for regulatory arbitrage in shell company or SPAC 

transactions that the Commission should consider addressing? 



112 
 

B. Financial Statement Requirements in Business Combination Transactions 
Involving Shell Companies 

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

private operating company become those of the registrant for financial reporting purposes.  In 

other words, the private operating company becomes the predecessor.245  How the private 

operating company 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/F-1 and 

the requirements of Form S-4/F-4.  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. 

We are proposing amendments to our forms, schedules, and rules 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 initial public offerings.  The 

financial statements that would be required under the proposed amendments are based, in part, 

on current staff guidance for transactions involving shell companies.246  Codifying this guidance 

should reduce any asymmetries between financial statement disclosures in business combination 

transactions involving shell companies and traditional initial public offerings.  Accordingly, we 

are proposing new Article 15 of Regulation S-X and related amendments to address certain 

inconsistencies in the reporting of financial information that can arise when applying existing 

                                                 
245  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. 
246  Commission staff has provided informal guidance to address practical questions related to financial reporting 
issues for shell company mergers in the Division of Corporation Finance’s Financial Reporting Manual (“FRM”).  
The FRM is not a rule, regulation or statement of the Commission, and the Commission has neither approved nor 
disapproved its content.   



113 
 

requirements to business combination transactions involving shell companies compared to the 

financial statement requirements for a Securities Act registration statement. 

1. Number of Years of Financial Statements 

A registration statement on Form S-4 and F-4 and a proxy or information statement 

require financial statements of the target company for the same number of years of financial 

statements as would be required by the target in an annual report and any subsequent interim 

periods.247  Three years of statements of comprehensive income, changes in stockholders’ equity, 

and cash flows are required, except in the following scenarios when two years are permitted: 

• The target company would qualify as a smaller reporting company;248 

• The target company would be an emerging growth company (“EGC”)249 if it were 

conducting an initial public offering of common equity securities and the registrant is an 

EGC that has not yet filed or been required to file its first annual report, even if the target 

would not be a smaller reporting company;250 or 

• The transaction is registered on a Form F-4 and either (1) the target company is a first 

time adopter of International Financial Reporting Standards (“IFRS”) as issued by the 

International Accounting Standards Board (“IASB”), or (2) the Form F-4 is the initial 

registration statement of the private company and it provides U.S. GAAP financial 

statements.251 

                                                 
247  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. 
248  See supra Section III.D. 
249  See supra note 112. 
250  An EGC is permitted to include two years of statements of comprehensive income in its Securities Act 
registration statement for an initial public offering of its common equity securities.  EGCs that are not smaller 
reporting companies are still required to include three years of statements of comprehensive income in their annual 
reports.  See Rule 3-02 of Regulation S-X. 
251  Item 17(b)(5) of Form F-4; General Instruction G of Form 20-F; and Instruction 3 to Item 8.A.2 of Form 20-F. 



114 
 

Our proposed amendments would expand the circumstances in which target companies may 

report two years of financial statements under the second bullet above by removing whether or 

not the shell company has filed its first annual report as a factor in determining the number of 

years required.  Because the scenarios described in the first and third bullets above are already 

aligned with the financial statements required in a traditional initial public offering, we have not 

proposed any changes related to them.  In addition, the proposed amendments would not affect 

the number of years of statements of comprehensive income that are required for the private 

operating company when it exceeds both the smaller reporting company and EGC revenue 

thresholds (that is, three years would continue to be required).252  However, to align the reporting 

with a traditional initial public offering, the proposed amendments would potentially reduce the 

number of years required when the target company would be an EGC if it were conducting an 

initial public offering of common equity securities and the registrant is an EGC that has filed or 

been required to file its first annual report. 

In a traditional initial public offering under the Securities Act, the registrant may provide 

two years of statements of comprehensive income, changes in stockholders’ equity, and cash 

flows when its most recently completed fiscal year revenue is below the smaller reporting 

company or EGC revenue thresholds (and all the other EGC qualifications are met), or as noted 

in the third scenario above for a foreign private issuer.  We are proposing to align the number of 

                                                 
252  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.  In addition to providing three years of financial statements due to the 
private operating company not qualifying as an EGC, the private operating company would not be able to take 
advantage of the delayed adoption dates for new or revised accounting standards permitted by EGCs in its financial 
statements.  In the staff’s view, the private operating company’s revenue, as predecessor, should be used to 
determine whether the registrant qualifies as an EGC after the transaction.  See FAQ 47 of the Division of 
Corporation Finance’s Jumpstart Our Business Startups Act Frequently Asked Questions, available at 
https://www.sec.gov/divisions/corpfin/guidance/cfjjobsactfaq-title-i-general.htm (last revised Dec. 21, 2015).  The 
FAQ does not represent a rule, regulation or statement of the Commission, and the Commission has neither 
approved nor disapproved its content. 

https://www.sec.gov/divisions/corpfin/guidance/cfjjobsactfaq-title-i-general.htm


115 
 

fiscal years required to be included in the financial statements for a private company that will be 

the predecessor(s) in a shell company combination with the financial statements required to be 

included in a Securities Act registration statement for an initial public offering of equity 

securities in proposed Rule 15-01(b) of Regulation S-X. 

Proposed Rule 15-01(b) would provide that when the registrant is a shell company, and 

the financial statements of a business253 that will be a predecessor to the registrant are required in 

a registration statement or proxy statement, the registrant must file financial statements of the 

business that will be a predecessor to the registrant in accordance with § 210.3-01 to 3-12 and 

§ 210.10-01 (Articles 3 and 10 of Regulation S-X) or § 210.8-01 to 8-08 (Article 8), if 

applicable, as if the filing were a Securities Act registration statement for the initial public 

offering of that business’s equity securities.  As a result, a shell company registrant would be 

permitted to include in its Form S-4/F-4/proxy or information statement two years of statements 

of comprehensive income, changes in stockholders’ equity, and cash flows for the private 

operating company for all transactions involving an EGC shell company and a private operating 

company that 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 or not.  The 

proposed amendments would not affect the number of years of statements of comprehensive 

income that are required for the private operating company when it exceeds both the smaller 

                                                 
253  We use the term “business” in this context, rather than “private operating company,” 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.  In a 
business combination transaction involving a shell company, the private operating company would meet the 
definition of a business. 



116 
 

reporting company and EGC revenue thresholds (that is, three years would continue to be 

required).254 

2. Audit Requirements of Predecessor 

Proposed Rule 15-01(a) would align the level of audit assurance required for the target 

private operating company in business combination transactions involving a shell company with 

the audit requirements for an initial public offering.255  Specifically, we are proposing that the 

term audit (or examination), when used in regard to financial statements of a business that is or 

will be a predecessor to a shell company, 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.  As a result, a target private operating company would be 

required to comply with Article 2 of Regulation S-X as if it were filing an initial public offering 

for its audited financial statements.  Forms S-4 and F-4256 currently provide that, for an 

acquisition by a registrant that is not a shell company, (i) the target operating company financial 

statements may be audited in accordance with U.S. Generally Accepted Auditing Standards,257 

(ii) the financial statements of the most recent fiscal year are required to be audited only to the 

extent practicable,258 and (iii) financial statements before the latest fiscal year need not be 

audited if they were not previously audited.259  The staff, however, has advised registrants that it 

                                                 
254  The private operating company would also not be able to take advantage of the delayed adoption dates for new 
or revised accounting standards as that transition is only available to EGC companies.  As described in FAQ 47 of 
the Division of Corporation Finance’s Jumpstart Our Business Startups Act Frequently Asked Questions, the staff 
takes the view that the private operating company’s revenue, as predecessor, will determine the post-transaction 
EGC status.  See Securities Act Section 7(a)(2)(B). 
255  See proposed Rule 15-01(a) of Regulation S-X and Instruction 1 to Item 17(b) of Form S-4. 
256  See Instruction 1 to Item 17(b)(5) of Form F-4 and General Instruction E(c)(2) of Form 20-F. 
257  See 17 CFR 210.1-02(d) (Rule 1-02(d) of Regulation S-X). 
258  See Instruction 1 to Item 17(b)(7) of Form S-4. 
259  Id. 



117 
 

expects the financial statements of the business, i.e., target private operating company, in a 

transaction involving a shell company to be audited to the same extent as a registrant in an initial 

public offering, because at consummation the financial statements of the target private operating 

company become that of the registrant.260  The proposed amendments would codify this existing 

staff guidance. 

3. Age of Financial Statements of the Predecessor 

Proposed Rule 15-01(c) would provide that the age of financial statements for a private 

operating company that would be the predecessor to a shell company in a registration statement 

or proxy statement would be based on whether the private operating company would qualify as 

smaller reporting company if filing its own initial registration statement.  Absent this 

amendment, our rules require filing financial statements of the private operating company that 

would be required in an annual report, which do not have the same age requirements as those in 

the context of an initial registration statement.261  Similar to the other proposed amendments to 

Regulation S-X, this amendment would further align the financial statement requirements for a 

private operating company involved in a business combination with a shell company with those 

required in a Securities Act registration statement for an initial public offering.  If the private 

operating company would qualify to be a smaller reporting company, it would apply Rule 8-08 

of Regulation S-X for the age of financial statements.262  Otherwise, the private operating 

                                                 
260  See FRM at Section 4110.5 for a chart that outlines the staff’s application of certain PCAOB requirements in 
various filings with the SEC, which includes transactions involving a shell company. 
261  For example, in an annual report, a domestic company with net losses in its recently completed fiscal year would 
have up to 90 days after its most recently completed fiscal year-end to update its third quarter financial statements.  
In contrast, in an initial registration statement, it would have up to only 45 days.  See General Instruction A. to Form 
10-K and 17 CFR 210.3-12 (Rule 3-12 of Regulation S-X). 
262  See 17 CFR 210.8-08 (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 



118 
 

company would apply the age of financial statement requirements in Rules 3-01(c) and 3-12 of 

Regulation S-X.  Based on the staff’s experience reviewing these transactions, we believe this 

proposed amendment to be consistent with existing practice. 

We are not proposing amendments to the age requirements for the financial statements of 

the shell company registrant because we continue to believe that the age requirements in Articles 

3 and 8 of Regulation S-X that apply to existing registrants are appropriate.  Thus, the existing 

provisions in Articles 3 and 8 of Regulation S-X for reporting companies required to file under 

Exchange Act Section 13(a) or 15(d) would continue to apply to shell companies.263 

4. Acquisitions of Businesses by a Shell Company Registrant or Its 
Predecessor That Are Not or Will Not Be the Predecessor 

 
The financial statements of a target private operating company 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.264  The financial statements of any other 

businesses, besides the predecessor, that have been, or are probable to be, acquired may also be 

required.265  For example, “Shell Company A” and “Target Private Operating Company B” are 

part of a business combination and a Form S-4 registration statement is filed.  Target Private 

Operating Company B acquired “Company C” before the Form S-4 was filed.  The proposed 

amendments in this section would address the reporting required for Company C in this non-

exclusive example. 

                                                 
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. 
263  See Rule 3-01(c) of Regulation S-X (Rule 8-08 for smaller reporting companies), which applies to reporting 
companies required to file under Exchange Act Section 13(a) or 15(d). 
264  See Item 17 of Form S-4 or Form F-4, § 240.14A-3(b), and Items 13 and 14 of Schedule 14A. 
265  See 17 CFR 230.408(a) (Securities Act Rule 408(a)) and 17 CFR 240.12b-20 (Exchange Act Rule 12b-20). 



119 
 

Under existing rules,266 financial statements of a business acquired or probable of being 

acquired by the target private operating company (e.g., “Company C” in the above example) are 

required to be filed in a registration statement or proxy/information statement only when 

omission of those financial statements would render the target company’s financial statements 

substantially incomplete or misleading.  In order to specify when such financial statements are 

required, we are proposing new Rule 15-01(d) of Regulation S-X to require application of Rules 

3-05 or 8-04 (or Rule 3-14 as it relates to a real estate operation), the Regulation S-X provisions 

related to financial statements of an acquired business, to acquisitions of businesses by a shell 

company registrant, or its predecessor, that are not or will not be the predecessor to the 

registrant.267  This proposal would further align the financial reporting for a shell company 

business combination contained in Forms S-4 or F-4 and a proxy or information statement with 

what would be required to be included in a Securities Act registration statement for an initial 

public offering of the target private operating company.  Based on staff’s experience reviewing 

these transactions, we understand this proposed amendment to be consistent with the current 

market practice of applying Rule 3-05 (or Rule 8-04) to acquisitions by the target private 

operating company in the context of a business combination involving a shell company. 

In connection with this proposed amendment in Rule 15-01(d), we also considered and 

are proposing amendments related to the significance tests in Rule 1-02(w) of Regulation S-X 

that determine when acquired business financial statements are required.  The existing tests as 

applied to acquisitions involving shell companies appear inconsistent with the reasons 

                                                 
266  Id. 
267  17 CFR 210.8-04 (Rule 8-04) applies when the registrant or, depending on the context, its predecessor would 
qualify to be a smaller reporting company based on its annual revenues as of the most recently completed fiscal year 
if it were filing a registration statement itself. 



120 
 

underlying the sliding scale approach adopted in Rule 3-05.268  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 and does not address the scenario when there is 

both a shell company registrant and target private operating company that is or will be its 

predecessor.  Because a shell company has nominal activity, the application of such tests results 

in limited to no sliding scale for business acquisitions, including those made by the private 

operating company that will be the predecessor to the shell company, because every acquisition 

would be significant and thus require financial statements.269  Such application may limit the 

ability to recognize which acquisitions have a greater impact on the predecessor than others.270 

We are proposing to amend Rule 1-02(w) of Regulation S-X to require that significance 

of the acquired business be calculated using the private operating company’s financial 

information as the denominator instead of that of the shell company registrant.  Using the private 

operating company’s financial statements for the denominator should produce results more 

                                                 
268  Instructions for the Presentation and Preparation of Pro Forma Financial Information and Requirements for 
Financial Statements of Businesses Acquired or To Be Acquired, Release No. 33-6413 (June 24, 1982) [47 FR 
29832 (July 9, 1982)] (“Rule 3-05 Adopting Release”).  The requirements are based on the significant subsidiary 
tests using a sliding scale so that the requirements for filing such financial statements, as well as the periods covered 
by such financial statements, will vary with the percentage impact of the acquisition on the registrant.  In adopting 
the sliding scale approach, the Commission stated its belief that the selected percentages “meet the objectives of 
providing adequate financial information to investors, shareholders and other users while at the same time reducing 
the reporting burdens of registrants involved in acquisitions.” 
269  For example, financial statements of a business that the private operating company has acquired and represents 
less than 5% of its total assets, revenue and net income could be required in the Form S-4 because the acquired 
business would be compared to the shell company’s financial statements. 
270  The 2020 amendments to Rules 1-02(w) and 3-05 did not affect the financial statements related to the acquisition 
of a business that is the subject of a proxy statement or registration statement on Form S-4 or Form F-4.  See 
Amendments to Financial Disclosures about Acquired and Disposed Businesses, Release 33-10786, (May 21, 2020) 
[85 FR 54002 (Aug. 31, 2020)], n.20.121 
 

consistent with the sliding scale approach in Rule 3-05 and recognizes that certain acquisitions 

have a greater impact than others.271 

Related to the application of the significance tests, we considered the impact of the 

application of 17 CFR 210.11-01(b)(3)(i)(B) (“Rule 11-01(b)(3)(i)(B) of Regulation S-X”).  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.272  While we are not proposing amendments to this paragraph in Rule 

11-01, based on the proposed amendment to 17 CFR 210.11-01(d) (“Rule 11-01(d)”) described 

below, we highlight that application of this rule may change and result in a future acquired 

business being compared to the pro forma amounts related to the shell company and target 

private operating company business combination transaction in filings made after the 

consummation of the business combination transaction.273  The impact of such application would 

be that the SPAC’s financial statements, including its cash, would be part of the pro forma 

financial information and will likely increase the denominator in the significance tests compared 

to measuring an acquisition solely on the target private operating company. 

We are proposing new 17 CFR 210.15-01(d)(2) (“Rule 15-01(d)(2)”) to specify when the 

financial statements of a recently acquired business (or real estate operation) that is not the 

private operating company that will be the predecessor, which are omitted from a shell company 

                                                 
271  Ibid. 
272  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 or Rule 3-14 and the pro forma information required by Rule 11-01 
through 11-02 of Regulation S-X. 
273  Pursuant to the proposed amendment to Rule 11-01d) that would stipulate that the SPAC is a business, an 
acquisition of the SPAC is considered to be an acquisition of a business, and the conditions to use pro forma 
financial statements depicting the acquisition as the denominator in the significance tests may be met. 



122 
 

registration, proxy, or information statement under Regulation S-X, would be required to be 

filed.  Rule 3-05(b)(4)(ii) of Regulation S-X provides that financial statements of a probable of 

being acquired or recently acquired business may be omitted from a registration, proxy, or 

information statement when their significance is measured at 50% or less (or Rule 3-14(b)(3)(ii) 

as it relates to a real estate operation).  The rule further provides that financial statements of a 

recently acquired business, when omitted from the registration statement or proxy or information 

statement, must be filed under cover of Form 8-K within 75 days after consummation of the 

acquisition.  Because the significance of the acquisition is greater than 20% but less than 50%, 

the recently acquired business’s financial statements, which are omitted from the registration, 

proxy, or information statement, must be filed.274  However, it is unclear how those financial 

statements are to be filed when the private operating company is not yet subject to Exchange Act 

reporting requirements and thus may not be able to file a Form 8-K.  Rather than requiring a 

post-effective amendment, we are proposing in Rule 15-01(d)(2) that the financial statements of 

the acquired business omitted from the previously-filed registration, proxy, or information 

statement would be required in an Item 2.01(f) Form 8-K filed with Form 10 information. 

5. Financial Statements of a Shell Company Registrant After the 
Combination with Predecessor 

 
In recent years, the staff has received questions on whether the historical financial 

statements of the shell company are required in filings made after the business combination.  Due 

to the lack of clarity regarding the application of the financial statement requirements in Articles 

3 and 8 of Regulation S-X, we are proposing new Rule 15-01(e), which would allow a registrant 

to exclude the financial statements of a shell company, including a SPAC, for periods prior to the 

                                                 
274  Rule 3-05 generally requires financial statements of an acquired business when the conditions in Rule 1-02(w) 
related to significant subsidiary exceed 20%. 



123 
 

acquisition once the following conditions have been met: (1) the financial statements of the shell 

company have been filed for all required periods through the acquisition date, and (2) the 

financial statements of the registrant include the period in which the acquisition was 

consummated. 

In the example of a de-SPAC transaction, 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.275  The proposed rule would apply regardless 

of whether the de-SPAC transaction is accounted for as a forward acquisition of the target 

private operating company by the SPAC or a reverse recapitalization of the target private 

operating company.  The financial statements of the SPAC would be required in all filings 

(including registration statements and the Form 8-K with Form 10 information filed following 

the de-SPAC transaction) prior to the filing of the first periodic report that includes those post-

business combination financial statements.  The proposed amendments should not result in a 

significant change from current practice as it relates to periodic reports because the staff in the 

last several years has not objected to the registrant excluding the historical financial statements 

of the SPAC from periodic reports once the financial statements for the registrant include the 

period in which the acquisition or recapitalization was consummated. 

Further, the proposed amendments would not change the requirement that a registrant 

must provide all material information as may be necessary to make required statements, in light 

                                                 
275  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. 



124 
 

of the circumstances under which they were made, not misleading,276 so if there is information 

included in or about the historical SPAC financial statements that would be material to an 

investor, a registrant would still be required to provide such information. 

6. Other Amendments 

In addition, we are proposing a number of other related amendments as follows: 

• We are proposing 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 under the rule.  Nonetheless, given the significant equity transactions generally 

undertaken by a SPAC, we believe the financial statements of the SPAC could be 

material to an investor, particularly when they underpin adjustments to pro forma 

financial information in a transaction when an operating company is the legal acquirer of 

a SPAC.  As a result of the proposed rule, an issuer that is not a SPAC may be required to 

file financial statements of the SPAC in a resale registration statement on Form S-1. 

• 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.  We are proposing 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 and for periods prior to 

consummation of the acquisition and not the shell company registrant. 

                                                 
276  See Exchange Act Rule 12b-20, Securities Act Rule 408(a). 



125 
 

• Rule 3-02 of Regulation S-X requires that statements of comprehensive income be filed 

for the registrant and its predecessors.  However, as it relates to balance sheets, certain 

provisions in Regulation S-X specify that they be filed for the registrant and do not 

specifically refer to balance sheets of predecessors.  We do not believe the intent of these 

rules is to provide the predecessor’s statements of comprehensive income without the 

balance sheets as that would not be considered a complete set of financial statements and 

would be inconsistent with Article 3 of Regulation S-X that requires both.  We are 

proposing amendments to Rules 3-01, 8-02, and 10-01(a)(1) of Regulation S-X to 

specifically refer to financial statements of predecessors consistent with the provision 

regarding income statements.  These amendments codify existing financial reporting 

practices, and we do not expect them to result in any changes in disclosures. 

Request for Comment 

103. Should we adopt the amendments and new rules related to aligning financial statement 

disclosures, including Rule 15-01 of Regulation S-X, as proposed? 

104. Should Rule 15-01 provide that the term audit (or examination), when used in regard to 

financial statements of a business that is or will be a predecessor to a shell company, 

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, as proposed? 

105. Should Article 15 of Regulation S-X address financial statement requirements for the 

acquisition by a shell company of a business that will be its predecessor, as proposed, or 

should we limit the requirements to apply only to a de-SPAC transaction, and if so, why? 



126 
 

106. Should the significance tests that determine whether the financial statements of 

businesses that are not or will not be the predecessor are required to be filed employ the 

denominator of the private operating company in lieu of that of the shell company 

registrant, as proposed?  Should the pro forma financial information that gives effect to 

the shell company transaction be allowed to be used as the denominator in measuring the 

significance of other acquisitions not involving a predecessor?  Should there be 

restrictions on when such pro forma financial information is used to measure 

significance, such as only for acquisitions that occur subsequent to consummation of the 

transaction and not for acquisitions that are done in tandem with the shell company 

transaction? 

107. Should the financial statements of a shell company not be required in filings once the 

financial statements of the registrant include the period in which the acquisition was 

consummated, as proposed?  Are there situations in which investors would continue to 

rely upon the information in the shell company financial statements after the acquisition 

was consummated and reflected in the financial statements of the registrant, or other 

factors we should consider in determining when the shell company financial statements 

should not be required in filings after the acquisition is complete?  Should the accounting 

for the transaction as a forward acquisition or reverse recapitalization determine whether 

the financial statements are required in filings made after the acquisition was 

consummated? 

108. Should Rule 11-01(d) of Regulation S-X be amended to state that a SPAC is a business 

for purposes of the rule, as proposed?  Would it change the existing application of Rule 

11-01(b)(3)(i)(B) of Regulation S-X as it relates to de-SPAC transactions?  Should 



127 
 

eliciting the financial statements of the SPAC in a resale registration statement of an 

issuer that is not a SPAC be accomplished through a rule that specifically requires the 

SPAC financial statements to be filed (subject to the provisions of proposed Rule 15-

01(e))? 

109. The Form 8-K filed pursuant to Item 2.01(f) may require a third fiscal year of certain 

financial statements for an acquired business that is the predecessor to a shell company 

and an emerging growth company, while Rule 15-01(b), as proposed, would only require 

two.  Should we amend the Form 8-K requirement to provide an exception to the required 

Form 10-type information so the financial statements of the acquired business need not 

be presented for any period prior to the earliest audited period previously presented in 

connection with a registration, proxy, or information statement of the registrant? 

V. ENHANCED PROJECTIONS DISCLOSURE 

A. Background 

Disclosure of financial projections is not expressly required by the federal securities laws; 

however, there are various reasons why registrants produce and disclose such information.  For 

example, projections may be disclosed to comply with state or foreign corporate law regarding 

the board’s decision to approve a business combination transaction or the basis underlying a 

fairness opinion issued by a financial advisor.277  Companies engaged in business combination 

transactions may use projections to negotiate the offered consideration, terms, and conditions and 

to allocate risks in those transactions.  Companies may also disclose projections to avoid claims 

                                                 
277  See, e.g., In re Netsmart Techs., Inc., 924 A.2d 171 (Del. Ch. 2007), and the disclosure of the substantive work 
performed by the financial advisor, see, e.g., In re Pure Res., Inc., 808 A.2d 421 (Del. Ch. 2002).   



128 
 

that the omission of such information violates federal anti-fraud provisions or to satisfy certain 

requirements under Regulation M-A.278 

Recent events have raised renewed concerns about the use of projections, particularly 

with respect to de-SPAC transactions in which private operating companies disclose projections 

that may lack a reasonable basis.279  For example, some companies have presented projections of 

significant increases in revenue or market share even though they do not have any operations at 

the time such projections were prepared.280  Other companies have allegedly used materially 

misleading assumptions, failed to take into account foreseeable future events in developing 

                                                 
278  See Exchange Act Rules 10b-5, 12b-20, 13e-3(b)(1)(ii), and 17 CFR 240.14a-9 (Exchange Act Rule 14a-9), 
Securities Act Rule 408(a), and Exchange Act Section 14(e).  See also Item 1004(b)(2)(iii) and 1011(c) of 
Regulation M-A.  Omission of projections used by the board or the fairness opinion advisers, in particular, have 
been the subject of various lawsuits filed in federal courts alleging violation of Rule 14a-9.  See, e.g., Smith v. 
Robbins & Myers, Inc., 969 F.Supp.2d 850 (2013), Azar v. Blount Intern., Inc., No. 3:16-cv-483-SI, 2017 WL 
1055966, 2017 U.S. Dist. LEXIS 39493 (D. Or. Mar. 20, 2017), and NECA-IBEW Pension Trust Fund v. Precision 
Castparts Corp., No. 3:16-cv-01756-YY, 2017 WL 4453561, 2017 U.S. Dist. LEXIS 165139 (D. Or. Oct. 3, 2017), 
adopted by 2018 WL 533912, 2018 U.S. Dist. LEXIS 11463 (D. Or. Jan. 24, 2018) (relating to disclosed projections 
that management knew were not reflective of management’s plans for the registrant). 
279  The Commission recently has brought enforcement actions alleging the use of baseless or unsupported 
projections about future revenues and the use of materially misleading underlying financial projections.  These cases 
involve both SPACs and other reporting companies.  See the following matters related to SPACs: In the Matter of 
Momentus, Inc., et. al., Exch. Act Rel. 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, Exch. Act Rel. No. 34-86164 (June 
20, 2019); and, SEC vs. Milton, Case No. 1:21-cv-6445 (S.D.N.Y., filed July 29, 2021).  See the following non-
SPAC cases: SEC vs. CanaFarma Hemp Products Corp, et al., Case No. 1:21-cv-08211 (S.D.N.Y., filed Oct. 5, 
2021); SEC v. Thomas, et al., Civil Action No. 19-cv-1132 (D. Nev., filed June 28, 2019); In the Matter of Ribbon 
Communications Inc., et. al., Exch. Act Rel. No. 34-83791 (Aug. 7, 2018); SEC v. Enviro Board Corporation, et al., 
[Civil Action No. 2:16-cv-06427 (C.D. Cal., filed Aug. 26, 2016)]; and SEC v. Roberts, et. al., Civil Action No. 
8:15-cv-2093-T-17-MAP (M.D. Fla., filed Sept. 9, 2015).  See also Dave Michaels, Regulators Hit Space SPAC 
Over Disclosures, The Wall Street Journal, July 26, 2021. 
280  Some news reports have also suggested that many post-business combination companies, particularly those with 
less revenue or that are early stage companies, do not meet revenue or earnings targets that they provided to 
investors at the time of the de-SPAC transaction.  An analysis performed by The Wall Street Journal indicates that, 
of the 63 companies that became public companies through a de-SPAC transaction in 2021 and had less than $10 
million in sales at the time of the transaction, at least 30 did not meet their projections.  The article reported that the 
companies in the analysis expected to miss their 2021 revenue projections fell short by an average of 53% and that 
companies falling short of their earnings projections have estimated losses that are approximately 40% greater, on 
average, than they projected at the time of the de-SPAC transaction.  See Heather Somerville, SPACs Fall Short of 
Lofty Goals, The Wall Street Journal, Feb. 26, 2022. 

https://www.sec.gov/news/press-release/2021-208


129 
 

projections, or used projections unsupported by a target’s experience.281  Similar potentially 

misleading projections have been used in non-SPAC filings, including with respect to future 

revenues, prospects and profitability.282  Although the Commission has previously acknowledged 

that projections and other forward-looking information can provide useful information for 

investors when making voting and investment decisions,283 it has also recognized that the use of 

such forward-looking information could raise investor protection concerns.284  Accordingly, the 

Commission adopted Item 10(b) of Regulation S-K to set forth its views on important factors to 

be considered in formulating and disclosing such projections in certain Commission filings.285  

Item 10(b) states that management has the option to present in Commission filings its good faith 

assessment of a registrant’s future performance, but it also states that management must have a 

reasonable basis for such an assessment.  Item 10(b) further expresses the Commission’s views 

on the need for disclosure of the assumptions underlying the projections, the limitations of such 

projections, and the format of the projections. 

B. Rule Proposals 

We are proposing to amend Item 10(b) of Regulation S-K to expand and update the 

Commission’s views on the use of projections.  Among other things, the proposed amendments 

would address the presentation of projections by companies with no history of operations and 

                                                 
281  See supra note 275. 
282  Id. 
283  Disclosure of Projections of Future Economic Performance, Release No. 33-5362 (Feb. 2, 1973) [38 FR 7220 
(Mar. 19, 1973)] and Guides for Disclosure of Projections of Future Economic Performance, Release No. 33-5992 
(Nov. 7, 1978) [43 FR 53246 (Nov. 15, 1978)]. 
284  See Release No. 33-5362, supra note 283. 
285  See Adoption of Integrated Disclosure System, Release 33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)].  
In connection with the adoption of the integrated reporting system, the Commission rescinded several staff guides 
relating to the preparation of registration statements and reports and relocated the substance of some of them into 
Item 10(b) of Regulation S-K.  See Rescission of Guides and Redesignation of Industry Guides, Release No. 33-
6384 (Mar. 16, 1982) [47 FR 11476 (Mar. 16, 1982)]. 



130 
 

provide that the guidance in the item also applies to projections of future economic performance 

of persons other than the registrant, such as the target company in a business combination.  

Further, given the widespread use of projections in de-SPAC transactions and the resulting 

heightened concerns, we are also proposing new Item 1609 of Regulation S-K that would be 

applicable to financial projections used in de-SPAC transactions and would set forth additional 

disclosure requirements relating to financial projections. 

The proposed revisions to Item 10(b) of Regulation S-K and proposed Item 1609 of 

Regulation S-K are intended to help address concerns about the use of projections in de-SPAC 

transactions and similar circumstances.  By providing additional guidance for registrants and 

mandating specific disclosures in de-SPAC transactions, these proposed rules could enhance the 

attention and level of care companies bring to the preparation of financial projections, both in de-

SPAC transaction filings and in other filings made with the Commission. 

1. Item 10(b) of Regulation S-K 

We are proposing to amend Item 10(b) to present the Commission’s updated views on 

projected financial information.  The proposed amendments to Item 10(b) would continue to 

state the Commission’s view that projected financial information included in filings subject to 

Item 10(b) must have a reasonable basis.  To address specific concerns that some companies may 

present projections more prominently than actual historical results (or the fact that they have no 

operations at all) or use non-GAAP financial measures in the projections without a clear 

explanation or definition of such a measure, we propose to amend 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;  



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• It generally would be misleading to present projections that are based on historical 

financial results or operational history without presenting such historical measure or 

operational history with equal or greater prominence; and 

• The presentation of projections that include a non-GAAP financial measure should 

include a clear definition or explanation of the measure, a description of the GAAP 

financial measure to which it is most closely related,286 and an explanation why the non-

GAAP financial measure was used instead of a GAAP measure.287 

These proposed changes, if adopted, should assist registrants in presenting their 

projections in an appropriate format and with the appropriate context, which in turn should 

facilitate investors’ evaluation of the projections, assessment of the reasonableness of the bases 

for these projections (particularly when compared to historical performance and results), and 

determinations about the appropriate reliance to place on the projections when making an 

investment or voting decision. 

Finally, Item 10(b) currently refers to projections regarding the future performance of a 

“registrant.”  In business combination transactions, it is common for projections of the target 

company to be included in the Securities Act registration statement or proxy statement filed by 

the acquiring company.  In such a case, it may be unclear if the guidance in Item 10(b) applies to 

the target company’s projections because the target company is not the registrant for that filing.  

In our view, Item 10(b) should apply to such projections because they are nevertheless being 

presented to investors through the registration statement or proxy statement filed by the 

                                                 
286  The reference to the nearest GAAP measure called for by amended 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. 
287  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)]. 



132 
 

acquiring company.  Accordingly, we are proposing to amend Item 10(b) to state that the 

guidance therein applies to any 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. 

Request for Comment 

110. Should we amend Item 10(b) of Regulation S-K, as proposed?  Is there additional or 

different guidance we should provide? 

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? 

112. Are the proposed amendments to Item 10(b)  necessary in light of proposed Item 1609 of 

Regulation S-K, which is limited to de-SPAC transactions? 

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? 

2. Item 1609 of Regulation S-K 

We are also proposing new Item 1609 of Regulation S-K that would apply only to de-

SPAC transactions.288  The nature of the SPAC structure and de-SPAC transactions raise 

heightened concerns about the use of projections in such transactions.  As noted above, a 

sponsor’s compensation may depend to a large extent on the completion of the de-SPAC 

                                                 
288  The disclosure would be required in the forms or schedules filed for de-SPAC transactions. 



133 
 

transaction, and thus the SPAC and its sponsor may have an incentive to use a private operating 

company’s financial projections in seeking support for the de-SPAC transaction.289  In particular, 

such projections could be used to value the private operating company and may influence how 

investors evaluate a proposed de-SPAC transaction.290  Similarly, as a consequence of the 

SPAC’s expected valuation of the private operating company on the basis of this type of 

financial projections, controlling shareholders and management of the private operating company 

may have an incentive to be overly aggressive in their development of projections as a means of 

justifying a higher price for their company.291  Aggressive projections may also be used by the 

SPAC or the private operating company to justify the target’s valuation in order to help meet any 

exchange listing requirement that the target has a fair market value equal to at least 80% of the 

balance of funds in the SPAC’s trust account.292 

For these reasons, we are proposing additional disclosures intended to assist investors in 

assessing the bases of projections used in de-SPAC transactions and determining to what extent 

they should rely on such projections.  Proposed Item 1609 would require a registrant to provide 

the following disclosures: 

• With respect to any projections disclosed by the registrant, the purpose for which the 

projections were prepared and the party that prepared the projections; 

                                                 
289  There is evidence that, in a majority of de-SPAC transactions announced in the twelve months ending in the first 
quarter of 2021, the private operating companies were pre-revenue, thus making financial projections an important 
basis for SPACs and private operating companies to find additional investments and to receive support for de-SPAC 
transactions.  See “Why Have SPAC Valuations Skyrocketed?,” Stuart Gleichenhaus and Bill Stotzer, FTI 
Consulting, Aug. 6, 2021. 
290  In this regard, we note that there also is evidence of the different uses of, and greater reliance on, financial 
projections by retail investors than by institutional investors.  See Dambra, Even-Tov, and George, supra note 33. 
291  See Kimball Chapman, Richard M. Frankel, and Xiumin Martin, SPACs and Forward-Looking Disclosure: Hype 
or Information? (SSRN Working Paper, 2021). 
292  See, e.g., NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule IM-5101-2. 



134 
 

• All material bases of the disclosed projections and all material assumptions 

underlying the projections, and any factors that may materially impact such 

assumptions (including a discussion of any factors that may cause the assumptions to 

be no longer reasonable, 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 still reflect view of the board or management of the 

SPAC or target company, as applicable, as of the date of the filing; if not, then 

discussion of the purpose of disclosing the projections and the reasons for any 

continued reliance by the management or board on the projections. 

These proposed disclosures would inform investors about why the projections were prepared, 

and by whom, which could allow them to better understand the motivations underlying such 

projections.  In addition, the proposed disclosures could help investors assess the continued 

reliability of the projections both independently and through the views of the board or 

management. 

Request for Comment 

114. Should we adopt Item 1609 as proposed?  Are there additional disclosures that we should 

require in de-SPAC transaction filings related to financial projections? 

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? 

116. Should we prohibit the disclosure of any specific financial measures or metrics? If so, 

which measures or metrics? 



135 
 

117. Will proposed Item 1609 discourage the use of financial projections in de-SPAC 

transactions?  What impact would this have on investors?  Would our proposal have any 

impact on the ability to comply with state or foreign law obligations regarding 

disclosures of projections used in business combination transactions? 

118. Both the proposed amendments relating to the PSLRA safe harbor and proposed Item 

1609 may result in market participants using financial projections in de-SPAC 

transactions in a different manner than they do currently.  Would adoption of only one of 

the proposals strike a better balance in terms of the costs and benefits with respect to the 

use of projections?  If so, which proposal? 

VI. PROPOSED SAFE HARBOR UNDER THE INVESTMENT COMPANY ACT 

 A. Background 

While the number of SPACs has grown dramatically in recent years,293 some SPACs 

have sought to operate in novel ways that suggest that SPACs and their sponsors should increase 

their focus on evaluating when a SPAC could be an investment company.294  We are concerned 

that SPACs may fail to recognize when their activities raise the investor protection concerns 

addressed by the Investment Company Act.295  To assist SPACs in focusing on, and appreciating 

                                                 
293  See supra notes 7-8 and accompanying text. 
294  The growth of the SPAC industry, among other things, has also sparked debate about the status of SPACs as 
investment companies.  See, e.g., Kristi Marvin, 49 Law Firms Unite and Push Back on Recent SPAC Litigation, 
SPAC Insider (Aug. 27, 2021), available at https://spacinsider.com/2021/08/27/49-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). 
295  The Investment Company Act regulates the organization of investment companies that engage primarily in 
investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public.  The 
Act is designed to minimize conflicts of interest that arise in these complex operations protecting investors by 
preventing insiders from managing the companies to their benefit and to the detriment of public investors; 
preventing the issuance of securities having inequitable or discriminatory provisions; preventing the management of 
investment companies by irresponsible persons; preventing the use of unsound or misleading methods of computing 
earnings and asset value; preventing changes in the character of investment companies without the consent of 
investors; preventing investment companies from engaging in excessive leveraging; and ensuring the disclosure of 

https://spacinsider.com/2021/08/27/49-law-firms-unite-push-back-on-spac-litigation/
https://spacinsider.com/2021/08/27/49-law-firms-unite-push-back-on-spac-litigation/


136 
 

when, they may be subject to investment company regulation, we are proposing Rule 3a-10, 

which would provide a safe harbor from the definition of “investment company” under Section 

3(a)(1)(A)296 of the Investment Company Act for SPACs that meet the conditions discussed 

below.297  We believe that certain SPAC structures and practices may raise serious questions as 

to their status as investment companies.  While a SPAC would not be required to rely on the safe 

harbor, we have designed the proposed conditions of the safe harbor to align with the structures 

and practices that we preliminarily believe would distinguish a SPAC that is likely to raise these 

questions from one that would not.  

1. Potential Status as an Investment Company 

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 engage primarily, in the business of investing, 

reinvesting, or trading in securities.  Depending on the facts and circumstances, SPACs could 

meet the definition of “investment company” in Section 3(a)(1)(A).  To assess a SPAC’s status 

as an investment company under that definition, we generally look to the SPAC’s assets, the 

sources of its income, its historical development, its public representations of policy, and the 

activities of its officers and directors (known as the “Tonopah factors”).298  

                                                 
full and accurate information about the companies and their sponsors.  See Section 1(b) of the Investment Company 
Act [15 U.S.C. 80a-1(b)].  
296  15 U.S.C. 80a-3(a)(1)(A). 
297  Proposed 17 CFR 270.3a-10.  SPACs that meet the proposed rule’s conditions would not need to register under 
the Investment Company Act. 
298  See In the Matter of Tonopah Mining Co., 26 S.E.C. 426 (July 21, 1947).  See generally SEC v. National Presto 
Industries, Inc., 486 F.3d 305 (7th Cir. May 15, 2007), rev’g. SEC v. National Presto Industries Inc., Case No. 02 C 
5057 (N.D. Ill, Oct. 31, 2005).  The Tonopah factors were first used by the Commission to determine an issuer’s 
primary engagement under Section 3(b)(2), but have been applied in part or in totality to determine an issuer’s 
primary engagement in other contexts under the Investment Company Act, including Section 3(a)(1)(A) of the Act.  
Certain Prima Facie Investment Companies, Release No. IC-10937 (Nov. 13, 1979) [44 FR 66608 (Nov. 20, 1979)] 
at n.24 (“Proposing Release to Rule 3a-1”) (“Although [Tonopah] was decided under [S]ection 3(b)(2) of the Act, 
the “primary engagement” standard set forth in that case also appears to be applicable to the identical standard of 
Section 3(a)(1)[A] and [S]ection 3(b)(1).”).  The Commission has also considered the activities of the company’s 



137 
 

SPACs are generally formed to identify, acquire and operate a target company through a 

business combination and not with a stated purpose of being an investment company.299  We 

understand that SPACs typically view their public representations, historical development and 

efforts of officers and directors as consistent with those of issuers that are not investment 

companies.  At the same time, most SPACs ordinarily invest substantially all their assets in 

securities, often for a period of a year or more, meaning that investors hold interests for an 

extended period in a pool of securities.  Moreover, whatever income a SPAC generates during 

this period is generally attributable to its securities holdings.  The asset composition and sources 

of income for most SPACs may therefore raise questions about their status as investment 

companies under Section 3(a)(1)(A) of the Investment Company Act and, in assessing this status, 

these factors would need to be weighed together with the other Tonopah factors. 

2. Rationale for the Safe Harbor 

The safe harbor we are proposing focuses on conditions that limit a SPAC’s duration, 

asset composition, business purpose and activities as a means of enhancing investor 

protection.300  The proposed rule is designed so that, if a SPAC satisfies the rule’s conditions, 

                                                 
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). 
299  See generally supra Section I. 
300  We understand that SPACs typically place most of their assets in a trust or escrow accounts.  Although the 
Commission has never addressed the status of SPACs under the Investment Company Act, the Commission has 
addressed the status of escrow or trust accounts established by blank check companies that comply with Rule 419 
under the Securities Act (“Rule 419 Accounts”).  The Commission took the position that “although a Rule 419 
Account 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, 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 6 
(“Rule 419 Adopting Release”), at text accompanying n.32.  SPACs have evolved since the Commission adopted 
Rule 419, and as noted above, SPACs are not subject to the requirements of Rule 419.  See supra notes 12 and 13 
and accompanying text. 



138 
 

together with the disclosure requirements being proposed in this release, such SPAC’s operations 

would be limited and differ sufficiently from those of investment companies so as to generally 

not raise the types of investor protection concerns that the Investment Company Act is intended 

to address.  In addition, the proposed rule may also promote investor protection by highlighting 

for SPACs and their sponsors the Investment Company Act concerns that certain SPAC activities 

may raise. 

The proposed rule may also have the effect of providing more certainty to SPACs 

regarding their status under the Investment Company Act.  This in turn, could facilitate capital 

formation because SPACs that operate within the boundaries of the safe harbor would be assured 

that they would not qualify as investment companies.  The rule may also promote efficiency by 

providing a clear framework for SPACs to determine their status under the Investment Company 

Act.301 

3. Boundaries of the Safe Harbor 

While a SPAC would not be required to rely on the safe harbor, we have designed the 

proposed conditions of the safe harbor to align with the structures and practices that we 

preliminarily believe would distinguish a SPAC that is likely to raise serious questions as to its 

status as an investment company under the Investment Company Act from one that would not.  

Activities that would raise these concerns include, solely by way of example and without 

limitation, if a SPAC were to invest in securities not permitted by the proposed safe harbor, 

actively manage its portfolio, or hold itself out in a manner that suggests investors should invest 

to gain exposure to the portfolio it holds prior to the de-SPAC transaction. 

                                                 
301  For these reasons, we believe the safe harbor, subject to the proposed conditions, would be necessary or 
appropriate in the public interest, and consistent with the protection of investors and the purposes fairly intended by 
the policy and provisions of the Act.  See Section 6(c) of the Investment Company Act [15 U.S.C.80a-6(c)].  See 
also Section 38(a) of the Investment Company Act [15 U.S.C.80a-37(a)]. 



139 
 

A SPAC would raise similar concerns if it were to invest its assets in securities, including 

those permitted by the safe harbor, for a lengthier period of time without identifying a target 

company.  As discussed below, we are concerned that, the longer the SPAC operates with its 

assets invested in securities and its income derived from securities, the more likely investors will 

come to view the SPAC as a fund-like investment and the more likely the SPAC will appear to 

be deviating from its stated business purpose.302  Similarly, if a SPAC did not seek to engage in a 

business combination but instead sought to acquire a minority interest in a target company with 

the intention of being a passive investor, it is more likely that it will appear to be an investment 

company.  Investors in SPACs that engage in the activities discussed above may be at a 

significantly greater risk of acquiring SPAC shares expecting a fund-like investment.303 

The safe harbor we are proposing only addresses investment company status under 

Section 3(a)(1)(A) of the Investment Company Act, commonly known as the “subjective test.”  

Section 3(a)(1)(C) of the Investment Company Act provides an alternate “objective test” that 

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,304 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.  If a SPAC owns or proposes to acquire 40% or more of investment securities, it would 

                                                 
302  See infra Section VI.B.2.b. 
303  In considering the investment company status of SPACs that do not comply with the safe harbor, we would use 
the traditional framework for evaluating the status of a potential investment company discussed above. 
304  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. 15 U.S.C. 80a-3(a)(2). 



140 
 

likely need to register and be regulated as an investment company under the Investment 

Company Act. 

The safe harbor we are proposing is intended to address the status of a qualifying SPAC 

from the time of the SPAC’s initial public offering until it completes its de-SPAC transaction.305  

For purposes of the proposed rule, the definitions of SPAC, de-SPAC transaction, and target 

company would be the same as those set forth in proposed Item 1601 of Regulation S-K.306   

Request for Comment 

119. Instead of a safe harbor, should we provide an interpretation concerning when SPACs 

would meet the definition of “investment company”?  Alternatively, should we exempt 

SPACs that meet the definition of “investment company” from any provisions of the 

Investment Company Act, and if so, which provisions?  Are there any changes we should 

make to the proposed approach that would better achieve the objectives of the proposed 

rule?  Are there conditions we should include in addition to those set forth below?  

120. We request comment on whether the safe harbor should include an exemption from 

Section 3(a)(1)(C), in addition to Section 3(a)(1)(A).  If such an expansion is needed, 

please explain the circumstances in which a SPAC could meet the definition of 

“investment company” in Section 3(a)(1)(C) while still complying with the conditions in 

the proposed safe harbor. 

121. Should the proposed rule incorporate the definitions of de-SPAC transaction, special 

purpose acquisition company and target company as proposed in Item 1601?  Should any 

                                                 
305  The remaining company (or companies) after the de-SPAC transaction may also raise separate questions of 
Investment Company Act status.  If a remaining company meets the definition of “investment company” following 
the de-SPAC transaction, that company would need to register as an investment company or rely on an appropriate 
exclusion or exemption under the Investment Company Act. 
306  See supra Section II.A.141 
 

of these definitions be different under proposed Rule 3a-10?  If so, please identify the 

definition, how the definition should be changed, and why. 

122. We understand that SPACs typically place most of their assets in a trust or escrow 

account as required by the listing standards.  In the event that these accounts may also be 

“issuers” under the Investment Company Act,307 does the safe harbor need to address 

these accounts under that Act?  Alternatively, should the rule text specify that assets and 

activities of the SPAC (as discussed below) include those of the trust? 

123. As proposed, an existing SPAC that has not completed a de-SPAC transaction prior to the 

effective date of the rule would not be prohibited from relying on the safe harbor if it 

satisfies the conditions.  Should we permit an existing SPAC to rely on the safe harbor if 

it does not have a board resolution but has other contemporary evidence of its intent and 

otherwise meets the conditions of the safe harbor?  Alternatively, should we limit reliance 

on the safe harbor to SPACs formed after the effective date of the rule?  If proposed Rule 

3a-10 is adopted, should the rule’s effective date reflect the possibility that some SPAC’s 

may need to alter their operations or more quickly complete a de-SPAC transaction in 

order to meet the conditions of the rule?  If so, should we provide an extended or delayed 

effective date? Should we provide a compliance or transition period, and if so, why? 

B. Conditions 

The conditions to the safe harbor focus on certain defining characteristics of SPACs308 

and are designed to ensure that SPACs wishing to rely on the safe harbor do not operate, or hold 

themselves out, as investment companies. 

                                                 
307  See supra note 300. 
308  The conditions are also consistent with our approach with respect to Rule 419 Accounts.  Id. 



142 
 

The conditions are discussed in more detail below. 

1. Nature and Management of SPAC Assets 

In order to rely on the proposed safe harbor, a SPAC’s assets309 must consist solely of 

Government securities,310 Government money market funds311 and cash items312 prior to the 

completion of the de-SPAC transaction.313 Thus, all proceeds obtained by the SPAC, including 

those from any SPAC offering, cash infusion from the sponsor, or any interest, dividend, 

distribution or other such return derived from the SPAC’s underlying assets would need to be 

held in these assets.  We understand that SPACs typically acquire these assets in part because 

they may be easily liquidated to fund any acquisition or other expenses related to the de-SPAC 

transaction and investor redemptions and, unlike the investments of registered investment 

companies, are not primarily made to achieve an investment purpose.314  This condition reflects 

the SPAC’s intended business purpose to acquire assets to fund a de-SPAC transaction and also 

generally limits the SPAC’s assets to those that may be consistent with cash management 

practices rather than primarily investment purposes.315  

                                                 
309  For purposes of the rule, any references to the SPAC’s assets refer to both the assets held in the trust or escrow 
account and any assets held by the SPAC directly. 
310  The term “Government security” has the same meaning as defined in Section 2(a)(16) of the Investment 
Company Act.  15 U.S.C. 80a-2(a)(16). 
311  The term “Government money market fund” has the same meaning as defined in paragraph (a)(14) of Rule 2a-7 
under the Investment Company Act.  17 CFR 270.2a-7.  
312  The Commission has previously included the following as cash items for purposes of Rule 3a-1: cash, coins, 
paper currency, demand deposits with banks, timely checks of others, cashier checks, certified checks, bank drafts, 
money orders, travelers’ checks, and letters of credit.  See Proposing Release to Rule 3a-1, supra note 298, at text 
accompanying n.11.  We take the same view here with respect to the proposed rule. 
313  Proposed Rule 3a-10(a)(1). 
314  If a SPAC were to significantly change its asset composition contrary to its original representations, it would 
raise questions whether the initial representations were false and misleading. 
315  This limited asset composition would not, on its own, distinguish a SPAC from an investment company.  This 
provision is designed to operate together with the other conditions to the safe harbor, and nothing in this provision is 
meant to address the status under Section 3(a)(1)(A) of a company that is not relying on this safe harbor, including 
those primarily engaged in the business of investing in government securities and/or government money market 



143 
 

Under the proposed rule, a SPAC seeking to rely on the safe harbor may not acquire any 

other type of asset, including interests in an operating company, prior to the completion of a de-

SPAC transaction.  Acquiring other types of assets and then transferring such assets to another 

entity or to SPAC shareholders would suggest that the SPAC’s primary business is that of 

investing in securities.  Nothing in this provision, however, is intended to preclude the SPAC 

from using SPAC assets to pay expenses related to the operation of the SPAC. 

Under the proposed rule, the assets set forth in paragraph (a)(1) may not at any time be 

acquired or disposed of for the primary purpose of recognizing gains or decreasing losses 

resulting from market value changes.316  Unlike management investment companies, SPACs 

typically do not actively manage their portfolios, often holding their Government securities to 

maturity.  The proposed provision is therefore intended to allow SPACs the flexibility to hold 

their assets consistent with cash management practices yet ensure that SPACs relying on the safe 

harbor do not engage in activities that would necessitate the investor protections of the 

Investment Company Act, like portfolio management practices resembling those that 

management investment companies employ. 

Request for Comment 

124. Should we allow SPACs seeking to rely on the safe harbor to invest in Government 

securities?  Alternatively, should we limit these SPACs to only certain types of 

Government securities, such as U.S. Treasury securities? 

                                                 
funds.  For example, an issuer that holds these types of 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). 
316  Proposed Rule 3a-10(a)(2).  This provision is similar to that found in paragraph (a)(3)(iii) in 17 CFR 270.3a-7 
(Rule 3a-7), and we propose to apply this provision in the same manner in the proposed rule. 



144 
 

125. Should we allow SPACs to invest in government money market funds, as defined in Rule 

2a-7?  Should we instead limit the type of money market funds that a SPAC may invest 

in to money market funds that only hold U.S. Treasury securities?  Conversely, should 

the provision be expanded to permit SPACs to invest in all types of money market funds 

provided that they rely on Rule 2a-7?317 

126. In addition to the questions raised above, as a general matter, is paragraph (a)(1) too 

narrow?  For example, should the safe harbor be expanded to include SPACs that acquire 

investment securities or other assets (e.g., assets that are not for investment purposes 

relevant to the operation of the SPAC)?  If yes, please explain which investment 

securities and/or assets and why such an expansion of the safe harbor would be 

appropriate. 

127. Does paragraph (a)(2) provide enough flexibility with respect to a SPAC’s holdings but 

yet prevent SPACs from engaging in activities similar to management investment 

companies?  

128. As noted, we understand that SPACs typically place most of their assets in trust or 

escrow accounts.  Should the rule text address the manner in which a SPAC holds its 

assets?  For example, should the rule require SPAC assets to be held in trust or escrow 

accounts?  If yes, should the safe harbor be conditioned on complying with the terms of 

the custody rules under the Investment Company Act as if they applied to these accounts? 

                                                 
317  The Commission has taken the position that money market funds relying on Rule 2a-7 may be treated as cash 
equivalents for purposes of Rule 2a-7 for GAAP purposes.  See Money Market Fund Reform; Amendments to Form 
PF, Release No. IC-31166 (July 23, 2014) [79 FR 47736 (Aug. 14, 2014)]. 



145 
 

2. SPAC Activities 

a. De-SPAC Transactions 

The proposed rule would provide a safe harbor only to those SPACs that seek to 

complete a single de-SPAC transaction as a result of which the surviving public entity (the 

“surviving company”),318 either directly or through a primarily controlled company,319 will be 

primarily engaged in the business of the target company or companies, which is not that of an 

investment company.  Thus, to rely on the rule, the SPAC must have a business purpose aimed at 

providing its shareholders with the opportunity to own interests in a public entity that, in contrast 

to an investment company, will either be an operating company, or will, through a primarily 

controlled company, operate such operating company.320  In addition, the SPAC would need to 

seek to complete a de-SPAC transaction as a result of which the surviving company would have 

at least one class of securities listed for trading on a national securities exchange.321 

                                                 
318  The proposed rule defines the term “surviving company” to mean the public company issuer that survives a de-
SPAC transaction and in which the shareholders of the SPAC immediately prior to the de-SPAC transaction will 
own equity interests immediately following the de-SPAC transaction.  Proposed Rule 3a-10(b)(3). 
319  The proposed rule defines the term “primarily controlled company" to mean an issuer that (i) is controlled within 
the meaning of Section 2(a)(9) of the Investment Company Act by the surviving company following a de-SPAC 
transaction with a degree of control that is greater than that of any other person and (ii) is not an investment 
company.  Proposed Rule 3a-10(b)(2). 
320  As drafted, the proposed rule would permit a SPAC relying on the safe harbor to seek to engage in a de-SPAC 
transaction with any company other than an investment company.  Thus, a SPAC may seek to engage in a de-SPAC 
transaction with a target company that is not considered an investment company under Section 3(a) or that is 
excepted or exempted from the definition of investment company by order under Section 3(b) [15 U.S.C. 80a-3(b)] 
or by rules or regulations under Section 3(a). 
321  Proposed Rule 3a-10(a)(3)(i).  The post-business combination surviving company would have to qualify for 
listing on a national securities exchange by meeting initial listing standards just as any company seeking an 
exchange listing would have to do.  If the surviving company did not qualify for listing, it could not be listed for 
trading on a national securities exchange and delisting procedures would commence. 



146 
 

A SPAC would be able to engage in only one de-SPAC transaction while relying on the 

safe harbor, but such transaction may involve the combination of multiple target companies,322 

provided that the SPAC treats them for all purposes as part of a single de-SPAC transaction.  

Such intentions would be evidenced by the description in any disclosure or reporting documents, 

and that the closing with respect to all target companies occurs contemporaneously and within 

the required time frames.323  We are imposing this limitation because we are concerned that a 

SPAC that makes multiple acquisitions could be engaging in the types of activities that raise the 

investor protection concerns addressed by the Investment Company Act.  A SPAC that purchases 

multiple companies as part of a single transaction (and complies with the other conditions of the 

safe harbor) would not raise these concerns as it would still appear to be seeking to be primarily 

engaged in the business of an operating company or companies after the de-SPAC transaction, 

and not to be engaged in investment management activities.  

While recognizing that de-SPAC transactions may have various structures and may 

involve intermediary entities, the proposed safe harbor is intended to ensure that the SPAC must 

be seeking a business combination in which the surviving entity, directly or through a primarily 

controlled company,324 is primarily engaged in the business of the target company or companies 

and not merely seeking an investment opportunity.  “Primary control” within the definition of 

“primarily controlled company” means that the surviving company must have “control”325 of 

                                                 
322  The proposed definitions of “special purpose acquisition company” and “de-SPAC transaction” anticipate that a 
SPAC may engage in a de-SPAC transaction with more than one target company contemporaneously.  See supra 
Section II.A. 
323  See infra Section VI.B.3.  
324  See supra note 319. 
325  See Section 2(a)(9) of the Investment Company Act for the definition of “control”[15 U.S.C. 80a-2(9)]. 



147 
 

such company and the degree of that control must be greater than that of any other person.326  

The “primarily control” standard, which is similar to that found in other status rules under the 

Investment Company Act,327 is designed to distinguish a holding company structure for an 

operating company from an investment in securities of an operating company.328  As we 

previously expressed in a similar context, this level of control is more consistent with an active 

role in managing the affairs of a company than if the issuer owns a lesser controlling interest in 

such company.329  We believe that a lesser degree of control, or lack of control, would in these 

circumstances more closely resemble the activities of an investment company.330 

In order to rely on the safe harbor, the surviving company must also have at least one 

class of securities listed for trading on a national securities exchange.331  This condition 

recognizes that a SPAC’s business plan is to engage in a de-SPAC transaction, the result of 

which is that SPAC shareholders receive the publicly traded shares of the surviving company.332  

Similar to the other parts of this condition, this provision helps to ensure that the SPAC has a 

business purpose that is different from engaging primarily in the business of investing, 

reinvesting or trading in securities. 

                                                 
326  See, e.g., paragraph (b)(2) of 17 CFR 270.3a-8 (Rule 3a-8 under the Investment Company Act). 
327  See, e.g., Rule 3a-8 under the Investment Company Act; 17 CFR 270.3a-1 (Rule 3a-1 under the Investment 
Company Act). 
328  See, e.g., Certain Research and Development Companies, Release No. IC-25835 (Nov. 26, 2002) [67 FR 71915 
(Dec. 3, 2002)] (“Proposing Release to Rule 3a-8”) at nn.57-58 and accompanying text. 
329  See Proposing Release to Rule 3a-1, supra note 287, at n.32.  See also Proposing Release to Rule 3a-8, supra 
note 328, at text before n.58 (“The Commission traditionally has viewed the fact that an issuer’s degree of control 
over a company is greater than that of any other person as strong evidence that the issuer is engaged in a business 
through the other company.”). 
330  Id. 
331  Proposed Rule 3a-10(a)(3)(i)(B).  As noted in supra note 321, the surviving company would have to apply for 
and be approved for listing by meeting the initial listing standards of a national securities exchange.  Otherwise, it 
could not be listed and traded on an exchange. 
332  See supra Section I. 



148 
 

b. Evidence of Primary Engagement 

The proposed rule would require a SPAC wishing to rely on the safe harbor to be 

primarily engaged in the business of seeking to complete a de-SPAC transaction in the manner 

and within the time frame set forth in the rule.  Such engagement must be evidenced by the 

activities of its officers, directors and employees, its public representations of policies, and its 

historical development.333  For example, the officers, directors and employees of a SPAC 

wishing to rely on this safe harbor would need to be primarily focused on activities related to 

seeking a target company to operate and not on activities related to the management of its 

securities portfolio.  These conditions incorporate three of the Tonopah factors and are intended, 

together with the other conditions to the safe harbor, to ensure that a SPAC may only rely on the 

safe harbor if it is primarily engaged in a business other than that of investing, reinvesting or 

trading in securities.  These factors are also similar to those used to determine the primary 

engagement of a business in different contexts under the Investment Company Act.334   

To rely on the safe harbor, the SPAC’s board of directors would also need to adopt an 

appropriate resolution evidencing that the company is primarily engaged in the business of 

seeking to complete a single de-SPAC transaction as described by the rule, and which is recorded 

contemporaneously in its minute books or comparable documents.335  This condition is similar to 

other exclusionary rules under the Investment Company Act in which the issuer may only rely on 

                                                 
333  Proposed Rule 3a-10(a)(5)(i) through (iii).  Such evidence may also include its articles of incorporation or other 
formation documents. 
334  See, e.g., Rule 3a-8 under the Investment Company Act.  As discussed previously, in addition to these factors, 
the Tonopah factors also focus on the company’s assets and sources of income.  See supra Section VI.A.1.  While 
proposed paragraph (a)(1) addresses the asset composition of SPACs wishing to rely on the safe harbor, the 
proposed safe harbor does not include a separate condition specifically addressing a SPAC’s source of income 
because the sources of income are addressed in the proposed rule’s limitations regarding the SPACs’ activities and 
the types of assets it may acquire. 
335  Proposed Rule 3a-10(a)(5)(iv). 



149 
 

the safe harbor provided by the rule if the issuer’s board of directors adopts an appropriate 

resolution evidencing that the company is primarily engaged in a non-investment business.336  

Such action serves to publicly document the intent of management and helps to establish a 

shared understanding of shareholders concerning the business purpose of this issuer. 

A SPAC relying on the proposed rule also may not hold itself out as being primarily 

engaged in the business of investing, reinvesting or trading in securities.  Given that SPACs 

invest in the same types of securities as certain investment companies, such as money market 

funds, a SPAC relying on the rule may not hold itself out, or otherwise suggest, that the SPAC 

operates in a manner similar to these types of investment companies.  For example, a SPAC 

could not market itself as a means for gaining exposure to U.S. Treasury securities.  

Request for Comment 

129. Do SPACs engage in other activities that should be expressly permitted or prohibited by 

the safe harbor?  If yes, please explain these business activities and why they should be 

permitted or prohibited. 

130. As proposed, should the SPAC be required to seek a de-SPAC transaction in which the 

surviving company is required either to directly or through a primarily controlled 

company be primarily engaged in the business of the target company?  Are the proposed 

definitions of “surviving company” and “primarily controlled company” appropriate?  

Should the proposed definitions be revised, and if so, how? 

131. Should the safe harbor be limited to SPACs that seek de-SPAC transactions that result in 

the surviving company having at least a majority interest in the target company?  

                                                 
336  See 17 CFR 270.3a-2 (Rule 3a-2 under the Investment Company Act); Rule 3a-8 under the Investment Company 
Act. 



150 
 

Conversely, should the safe harbor permit the SPAC to seek a de-SPAC transaction in 

which the surviving company is only required to control the target company?  Are there 

other approaches, such as requiring the de-SPAC transaction to result in a consolidation 

of the SPAC and the target company? 

132. As proposed, should we require that the surviving company be primarily engaged in the 

business of operating the target company or companies?  Is the use of the term “primarily 

engaged” consistent with current business practices in this context?  Should we instead 

require that the surviving company be “solely” in the business of the target company or 

companies?  If so, how should “solely” be defined?  Alternatively, should we require that 

the surviving company be engaged in the business of the target company (and in activities 

related or incidental thereto)?337 

133. As proposed, should the SPAC be limited to only one de-SPAC transaction while relying 

on the safe harbor?  Why or why not?  Similarly, should a SPAC, as proposed, be limited 

to engaging in a combination with multiple target companies only if the combination 

occurs as part of a single de-SPAC transaction with a single closing?  Why or why not?  

Should there be a limit on how many target companies may be part of a single de-SPAC 

transaction?  If so, what should that limit be and why?  For example, would limiting the 

safe harbor to two target companies strike an appropriate balance of the relevant 

regulatory considerations? 

134. As proposed, should we require a SPAC to be “primarily engaged” in the business of 

seeking to complete a single de-SPAC transaction?  Should we instead require that the 

SPAC should be “solely” in the business of seeking to complete a single de-SPAC 

                                                 
337  See generally Rule 3a-7 under the Investment Company Act. 



151 
 

transaction?  Why or why not?  Alternatively, should we require that the SPAC be 

engaged in the business of seeking to complete a single de-SPAC transaction (and in 

activities related or incidental thereto)?338 

135. As drafted, the proposed rule would permit a SPAC relying on the safe harbor to seek to 

engage in a de-SPAC transaction with any company other than an investment company.  

Should the safe harbor further limit the types of companies in which a SPAC may seek a 

de-SPAC transaction?  For example, should a SPAC be precluded from seeking to engage 

in a de-SPAC transaction with issuers relying on Section 3(c)(1) or Section 3(c)(7)?  

Should a SPAC be precluded from seeking to engage in a de-SPAC transaction with 

issuers relying on other exclusions under Section 3(c)?  Should a SPAC be precluded 

from seeking to engage in a de-SPAC transaction with issuers otherwise relying on an 

exclusion or exemption by order from the definition of “investment company” by Section 

3(b) or the rules or regulations under Section 3(a)?  If so please identify which issuers 

and why? 

136. Should the rule include as evidence of the SPAC’s business purpose the SPAC’s 

historical development given the SPAC’s short duration?  Should the rule include, as 

evidence of the SPAC’s business purpose, the SPAC’s public representation of policies 

and the activities of its officers, directors and employees?  Similarly, is it appropriate to 

require the board of directors to adopt a resolution stating that the SPAC is primarily 

engaged in the business of seeking to complete a de-SPAC transaction as described by 

the rule?  Should we require that the SPAC’s activities also, or instead, be evidenced by 

its articles of incorporation, other formation documents or by-laws?  If so, which 

                                                 
338  Id. 



152 
 

documents should be required?  If a SPAC’s business purpose is evidenced in its 

formation documents or by-laws, should we condition the proposed rule on those 

provisions being subject to change only with the approval of shareholders?  Should the 

rule include a separate condition that addresses the SPAC’s sources of income?  For 

example, should a SPAC’s income be limited to that derived from assets in proposed 

Rule 3a-10(a)(1)?  Are any other conditions necessary to ensure that SPACs do not 

convey to investors that they have attributes similar to investment companies?  Given the 

nature of a SPAC’s activities and the proposed conditions of the safe harbor, should the 

proposed rule also include a condition providing that a SPAC must not be a special 

situation investment company?339 

137. Should we include a condition to the safe harbor that SPACs must disclose their intention 

to rely on the safe harbor?  Would such a condition be redundant to the disclosure 

requirements under the Securities Act or under the Exchange Act?  Should the safe 

harbor include a condition that the SPAC’s board of directors must adopt a resolution 

indicating that the SPAC intends to rely on the safe harbor? 

3. Duration Limitations 

To rely on the safe harbor, a SPAC would have a limited time period to announce and 

complete a de-SPAC transaction.  Specifically, the proposed rule would require a SPAC to file a 

report on Form 8-K with the Commission announcing that it has entered into an agreement with 

the target company (or companies) to engage in a de-SPAC transaction no later than 18 months 

after the effective date of the SPAC’s registration statement for its initial public offering.  The 

                                                 
339  See Proposing Release to Rule 3a-1, supra note 298, at n.19 and accompanying text.  See also In the Matter of 
United Stores Corp., 10 S.E.C. 1145 (Feb. 12, 1942). 



153 
 

SPAC must then complete the de-SPAC transaction no later than 24 months after the effective 

date of its registration statement for its initial public offering.340  Following the completion of the 

de-SPAC transaction, any assets that are not used in connection with the de-SPAC transaction 

would need to be distributed in cash to investors as soon as reasonably practicable thereafter. 

The SPAC would also be required to distribute its assets in cash to investors as soon as 

reasonably practicable if it does not meet either the 18-month deadline or the 24-month 

deadline.341  Given that the time needed for such distribution in either case may be dependent on 

facts and circumstances, we are not defining the term “reasonably practicable.”  What is 

reasonably practicable generally would depend on, among other things, any logistical or legal 

limitations on an orderly, immediate return of funds to investors. 

We are proposing these duration conditions mindful of the framework of the Investment 

Company Act, the rules thereunder, and past Commission positions.  The Investment Company 

Act provides that any issuer that meets the definition of “investment company” must register and 

be regulated under that Act unless the issuer can rely on an exclusion or exemption.  The 

Investment Company Act requires that an issuer will register and be subject to the Act’s 

regulatory requirements once the issuer meets the definition.342  The Commission, however, has 

in the past provided conditional, temporary relief to certain issuers that meet the definition of 

“investment company” for only a short period of time.  For example, Rule 3a-2 provides a one-

year safe harbor to so-called “transient investment companies,” which are issuers that, as a result 

                                                 
340  Proposed Rule 3a-10(a)(3)(ii) and (iii).  As we discuss below, the average time between the announcement by a 
SPAC of its intended de-SPAC transaction and the completion of that transaction is approximately 5 months.  See 
infra Section IX.B.6. 
341  Proposed Rule 3a-10(a)(4). 
342  See generally Sections 7(a) and 8(a) of the Investment Company Act [15 U.S.C. 80a-7(a); 15 U.S.C. 80a-8(a)] 



154 
 

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.343  In 

addition, as discussed previously, the Commission took the position that Rule 419 Accounts need 

not be required to register as an investment company nor regulated as an investment company 

under the Investment Company Act in part because the rule limits the duration of such accounts 

to 18 months.344 The Commission has also at times granted short-term, conditional exemptive 

relief under Section 6(c) of the Investment Company Act345 to certain issuers that needed 

additional time to restructure their businesses beyond that afforded by Rule 3a-2.346 

Accordingly, the proposed rule would require a SPAC wishing to rely on the safe harbor 

to enter into an agreement with a target company no later than 18 months after its initial public 

offering, as evidenced by its filing a report on Form 8-K.347  A SPAC may enter into agreements 

                                                 
343  See Transient Investment Companies, Release No. IC-11552 (Jan. 14, 1981) [46 FR 6882 (Jan. 22, 1981)] 
(“Adopting Release to Rule 3a-2”).  See Transient Investment Companies, Release No. IC-10943 (Nov. 16, 1979) 
[44 FR 67152 (Nov. 23, 1979)], at text accompany nn.5-6 (“Proposing Release to Rule 3a-2”) (“Examples of 
unusual business occurrences include: (1) a ‘start-up’ company’s investing its offering proceeds in securities while 
arranging to purchase operating assets; (2) a company’s selling a large operating division and investing the proceeds 
in securities pending acquisition of additional operating assets; and (3) a company making a tender offer to 
stockholders of a non-investment company and failing to obtain a majority of the target company’s stock.”).   
344  See 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.]”).  . 
345  Section 6(c) gives the Commission the broad power to exempt conditionally or unconditionally any person, 
security, or transaction from any provisions of the Act or any rule thereunder, provided that the exemption is 
“necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of [the Act].”  An applicant requesting such relief must explain in its 
application that, given its particular facts and circumstances, the requested relief would meet the section’s standards.  
See generally Amendments to Procedures With Respect to Applications Under the Investment Company Act of 1940, 
Release No. IC-33921 (July 6, 2020) [85 FR 57089 (Sept. 15, 2020)]. 
346  See, e.g., General Electric Company and GE Capital International Holdings Ltd., Release No. IC-32477 (Feb. 
13, 2017) [82 FR 11079 (Feb. 17, 2017)] (notice), Release No. IC-32532 (Mar. 13, 2017) (order).   
347  See infra Section IX.B.6. (discussing baseline data regarding average duration).  One press report suggests that 
the average period of time between a SPAC’s initial public offering and the signing of its business combination 
agreement may be decreasing, with the average such period of time being approximately 7.5 months for de-SPAC 
transactions that closed in 2021.  See “De-SPACs Still Popular But Becoming Harder To Close,” available at: 
https://www.law360.com/mergersacquisitions/articles/1464716/de-spacs-still-popular-but-becoming-harder-to-close. 

https://www.law360.com/mergersacquisitions/articles/1464716/de-spacs-still-popular-but-becoming-harder-to-close


155 
 

with additional target companies348 after the 18-month period provided that the business 

combination contemplated by such later agreements are part of the de-SPAC transaction and all 

of the transactions close contemporaneously within the 24-month period.  The condition that the 

de-SPAC transaction close within 24 months is designed to allow SPACs to complete their stated 

business purpose while balancing the risk that investors may come to view a SPAC holding 

securities for a prolonged period as a fund-like investment, thereby necessitating the regulatory 

protections of the Investment Company Act. 

This timeframe is longer than the one-year timeframe of Rule 3a-2.  We are proposing a 

longer time frame under Rule 3a-10 because we understand that the search for a de-SPAC target 

frequently takes more than one year and an issuer relying on Rule 3a-10 would be more 

restricted in its business purpose and activities throughout the period of reliance than an issuer 

relying on Rule 3a-2.349  This proposed timeframe reflects a consideration of the Tonopah 

factors, including the factor that focuses on an issuer’s historical development as well as our 

position with respect to Rule 419.  While an issuer relying on Rule 3a-10 may have certain 

characteristics resembling those of an investment company for a longer period than an issuer 

relying on Rule 3a-2, its assets, income and purpose, and the activities of its officers and 

directors, would be further restricted under the other conditions of Rule 3a-10.  Accordingly, the 

conditions are designed to work together to reduce the likelihood that investors will come to 

view the SPAC as a fund-like investment.  Nevertheless, we stress that the inability of a SPAC to 

                                                 
348  These additional agreements would need to be evidenced by the filing of a Form 8-K. 
349  We stress that, for an issuer satisfying the safeguards tailored for transient investment companies under Rule 3a-
2, a company’s inability to become engaged primarily in a noninvestment company business within that rule’s one 
year period would continue to raise serious questions concerning the applicability of the Investment Company Act to 
that company.  See Adopting Release to Rule 3a-2, supra note 343, at text following n.5.  See also infra note 358 
and accompanying text (quoting from Proposing Release to Rule 3a-2, supra note 343). 



156 
 

identify a target and complete a de-SPAC transaction within the proposed timeframe would raise 

serious questions concerning the applicability of the Investment Company Act to that SPAC. 

While we understand most SPACs commit to closing a de-SPAC transaction within 24 

months, we also acknowledge that the duration limits we are proposing are shorter than the 

actual timeline of some SPACs that recently completed their de-SPAC transactions.350  We 

understand that SPACs that choose to rely on the proposed safe harbor may need to seek to 

identify and complete de-SPAC transactions on an accelerated timeline.  Nonetheless, we are 

concerned that, the longer a SPAC operates with its assets invested in securities and its income 

derived from securities, the more likely investors will come to view the SPAC as a fund-like 

investment and the more likely the SPAC appears to be deviating from its stated business 

purpose.351  We have sought to strike a balance between providing flexibility for the SPAC to 

pursue its stated purpose and recognizing that, beyond some horizon, the SPAC’s historical 

development would become difficult to distinguish from that of an investment company.  While 

exchange listing rules contemplate potentially longer SPAC lifespans, those rules were adopted 

for a different regulatory purpose. 

The proposed rule would also require that any assets that are not used in connection with 

the de-SPAC transaction be distributed in cash to SPAC shareholders as soon as reasonably 

practicable after the completion of the de-SPAC transaction.352  Thus, in the event that the de-

SPAC transaction requires fewer assets than are owned by the SPAC, the SPAC would be unable 

to seek another de-SPAC transaction with its remaining assets, or otherwise continue to operate 

                                                 
350  See infra Section IX.B.6. 
351  We also note that some SPACs in the past have sought an extension to their lifespan by obtaining approval of 
their shareholders.  The proposed rule does not provide for any extensions. 
352  Proposed Rule 3a-10(a)(4)(i). 



157 
 

as a SPAC, even if the de-SPAC transaction met the duration conditions.  As discussed 

previously, a SPAC that is relying on the safe harbor would already be precluded from engaging 

in more than one de-SPAC transaction pursuant to proposed Rule 3a-10(a)(3)(i).  This separate 

condition supplements that provision and is designed to ensure that a SPAC may not continue to 

operate after its single de-SPAC transaction and still qualify for the safe harbor. 

A SPAC seeking to rely on the safe harbor would also be required to distribute the 

SPAC’s assets in cash to investors in the event that the SPAC fails to meet either the 18-month 

or the 24-month deadline.353  As proposed, a SPAC would be required to distribute its assets in 

cash to investors if the SPAC fails to enter into an agreement with a target company within 18 

months even if it believes that it would complete a transaction within 24 months.  This condition 

would result in a SPAC that fails to meet these timing requirements either distributing its assets 

as soon as reasonably practicable or registering as an investment company.  In any event, such a 

SPAC would not be permitted to continue to rely on the safe harbor.354 

A SPAC would not be able to rely on Rule 3a-2 subsequent to its reliance on proposed 

Rule 3a-10 in the event that it fails to meet either proposed Rule 3a-10’s 18-month or 24-month 

time frame.355  A failure to meet either timeframe would not constitute an unusual business 

occurrence under that rule.356  In addition, Rule 3a-2 specifically states that the 12-month safe 

harbor provided under that rule begins once the issuer acquires specified amounts of 

securities.357  Generally, the commencement date for reliance on Rule 3a-2 (and the 12 month 

                                                 
353  Proposed Rule 3a-10(a)(4)(ii). 
354  Once a SPAC has distributed its assets, the SPAC must cease to operate as a SPAC, and it may not rely on the 
safe harbor again. 
355  The proposed rule would also preclude a SPAC from relying on proposed Rule 3a-10 after Rule 3a-2, because 
the time period in the proposed rule begins on the effective date of its initial registration statement.  
356  See supra note 343 and accompanying text. 
357  Rule 3a-2(b). 



158 
 

safe harbor provided under that rule) would have passed in the event a SPAC wished later to rely 

on that rule subsequent to its reliance on proposed Rule 3a-10.  Finally, both Rule 3a-2 and 

proposed Rule 3a-10 are safe harbors that provide or would provide temporary relief to certain 

issuers that may be investment companies, provided that, among other conditions, they transition 

to a non-investment company business in a short period of time.  When it was considering Rule 

3a-2, the Commission was concerned that issuers could circumvent the Investment Company Act 

by repeatedly relying on the Rule 3a-2 safe harbor, explaining that  “where an issuer’s activities 

would bring it within the definition of investment company more frequently than would be 

permitted by the rule, the investor protection concerns of the Act would be relevant, the need for 

shareholder protections would not be met, and there would be no persuasive public interest from 

the standpoint of investors in permitting a non-transient investment company to avoid complying 

with the prohibitions and regulatory provisions of the Act.”358  This concern would also arise if 

SPACs were to rely on the Rule 3a-2 safe harbor following reliance on proposed Rule 3a-10. 

Request for Comment 

138. Should we require, as proposed, that the SPAC reach an agreement with at least one 

target company within 18 months?  Should we require that the SPAC reach an agreement 

with at least one target company within 12 months, which would be more consistent with 

the time period in Rule 3a-2?  Should the time period be even shorter than 12 months 

(e.g., 6 months)?  Should the time period be longer (e.g., 20 months, 24 months, 36 

months)?  If the time period should be longer, please explain why such a longer period is 

necessary and how any such longer period would be consistent with the framework of the 

Investment Company Act, the rules thereunder, and prior Commission positions. 

                                                 
358  See Proposing Release to Rule 3a-2, supra note 343. 



159 
 

139. Is there an alternative way to limit the duration of the SPAC?  Should we require that 

such an agreement be evidenced by the filing of the Form 8-K?  Should a SPAC be 

permitted, as proposed, to enter into agreements with other target companies after the 18-

month period provided that all transactions close within 24 months? 

140. Should we include an option for SPACs that have not identified a target within 18 

months, or completed the de-SPAC transaction within 24 months to extend these 

deadlines?  If so, what would that be and what conditions should be included?  For 

example, should we provide that a SPAC can obtain an extra 2, 4 or 6 months and stay 

within the safe harbor if it obtains approval from its shareholders?  Please explain how 

any extensions of these deadlines would be consistent with the framework of the 

Investment Company Act, the rules thereunder, and prior Commission positions. 

141. Should we require, as proposed, that the SPAC complete the de-SPAC transaction within 

a 24-month period?  Should the time period be 18 months, as in Rule 419 or 12 months, 

as in Rule 3a-2?  Should the period be longer (e.g., 30 months)?  If so, how would that 

longer period be consistent with the framework of the Investment Company Act, the rules 

thereunder, and past Commission positions? 

142. The rule proposal requires that any assets of the SPAC that are not used in connection 

with the de-SPAC transaction, or in the event of the SPAC’s failure to  meet the timelines 

required for identification or completion of a de-SPAC transaction, be distributed in cash 

to investors as soon as reasonably practicable.  Should we allow distributions “in-kind”?  

Are there any other distributions made by the SPAC that should be covered by the rule?  

Should the rule text define the term “reasonably practicable”?  If yes, how should the 

term be defined?  If the term “reasonably practicable” is not defined, could that 



160 
 

potentially result in unnecessarily extended periods of time before investor assets are 

returned?  Instead of defining the term “reasonably practicable,” should we specifically 

require that such assets be distributed within a defined time period such as 30 days?  15 

days?  7 days?  Should we require the SPAC to provide notification to the Commission, 

its investors and/or the SPAC’s board of directors if the distribution of cash takes longer 

than a certain period of time, e.g., 30 days? 

143. The proposed rule would require, following completion of a de-SPAC transaction, or in 

the event that the SPAC failed to identify or complete a de-SPAC transaction, the SPAC 

to distribute all remaining assets and cease operating as a SPAC.  The proposed rule, 

however, does not specifically mandate that the SPAC dissolve.  Should we include this 

requirement as a condition to the safe harbor?  Why or why not? 

144. In adopting Rule 3a-2, the Commission identified examples of companies that may be 

able to rely on that safe harbor.  These examples did not specifically include SPACs or 

blank check companies.  Are SPACs currently relying on Rule 3a-2 and, if so, what is the 

basis for their reliance?  Should the Commission provide guidance concerning, or amend 

Rule 3a-2 to address, the ability of SPACs to rely on that safe harbor? 

VII. ADDITIONAL REQUESTS FOR COMMENT 

As discussed above, we believe that the proposed new rules and amendments would 

enhance the disclosure requirements applicable to SPACs in initial public offerings and in de-

SPAC transactions and provide important investor protections in connection with de-SPAC 

transactions.  In considering the SPAC market as a whole, we are requesting comment on a 

number of additional matters relating to the disclosures provided by SPACs, investor protection 

measures, and the treatment of companies following a de-SPAC transaction.161 
 

145. Are there disclosure requirements that we have not proposed that would be helpful for 

investors in SPACs at the initial public offering stage or at the de-SPAC transaction 

stage? 

146. Should the disclosure requirements and filer status determinations in a de-SPAC 

transaction be the same no matter the de-SPAC structure?  Do our proposals accomplish 

this, or are there other disclosure requirements and filer status determinations impacted 

by transaction structure that we should address? 

147. What are the reasons, other than possible reporting outcomes, why a de-SPAC transaction 

is structured so that an entity other than the SPAC is the acquirer and filing the 

registration statement or proxy or information statement for the de-SPAC transaction?  

Are there tax or other reasons that we should consider in relation to the proposed 

amendments in this release and whether the disclosure requirements should be further 

aligned across all de-SPAC transaction structures? 

148. Should we consider amendments to other registration statement forms under the 

Securities Act to require enhanced disclosures for offerings by SPACs that are similar to 

those proposed above with respect to Forms S-1 and F-1?  Should we consider similar 

amendments to Regulation A and Form 1-A? 

149. The periodic reports filed by SPACs under the Exchange Act generally contain limited 

information due to the absence of an operating business.  Should some of the disclosure 

requirements we are proposing also be required in the periodic reports filed by a SPAC 

following its initial public offering?  If so, which disclosures?  Are there other disclosures 

that we should require in the Exchange Act reports filed by a SPAC? 



162 
 

150. 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.359  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? 

151. Currently, the post-business combination company is required to file a Form 8-K with 

Form 10 information within four business days after the completion of a de-SPAC 

transaction.  Should we require the filing of this Form 8-K within a shorter time frame in 

order to reduce the gap in timing between the completion of the transaction and the 

public availability of this information in the Form 8-K? 

152. Are there other rule changes the Commission should consider to enhance investor 

protections in initial public offerings by SPACs and in de-SPAC transactions? 

                                                 
359  According to one study, institutional investors typically purchase the vast majority of the securities in a SPAC’s 
initial public offering and are far more likely to redeem their shares instead of reselling the shares, resulting in 
limited secondary market trading of SPAC shares.  Klausner, Ohlrogge, and Ruan, supra note 17. 



163 
 

• We have not proposed requirements for SPAC offerings comparable to those 

applicable to blank check companies under Rule 419.  Should we consider requiring 

SPACs to comply with conditions similar to those in Rule 419?  If so, which 

conditions? 

• The shareholders of a SPAC are permitted to vote in favor of a proposed de-SPAC 

transaction while redeeming their shares prior to the closing of the transaction and 

retaining their warrants, such that the vote is decoupled from any continuing share 

ownership in the post-business combination company (unless and until the warrants 

are exercised).360  Should the Commission adopt rule changes or other approaches to 

address this situation?  For example, should the Commission condition the continued 

availability of an exclusion from the requirements of Rule 419 on whether 

shareholders voting to approve a de-SPAC transaction retain an economic interest in 

the combined company?  Should we address this issue through the Commission’s 

authority under Section 19(c) of the Exchange Act to adopt rules applicable to 

national securities exchanges? 

153. A post-business combination company following a de-SPAC transaction is subject to 

different treatment under various rules based on its status as a former shell company.  For 

example, a post-business combination company following a de-SPAC transaction is an 

“ineligible issuer,” based on its status as a former shell company, which prevents the 

company from using free writing prospectuses pursuant to Securities Act Rules 164 and 

433 for a three-year period.361  As a former shell company, the post-business combination 

                                                 
360  See Rodrigues and Stegemoller, supra note 17. 
361  See Securities Act Rule 164(e)(1). 



164 
 

company is also ineligible to file a registration statement on Form S-8 for a 60-day period 

following the de-SPAC transaction,362 and the safe harbor in Rule 139 for broker-dealer 

research reports is not available for research reports on the post-business combination 

company for a three-year period.363  In this regard, we note that the treatment of former 

shell companies under these rules is based on heightened concerns regarding fraud and 

other abuses surrounding many shell company transactions.  To better align de-SPAC 

transactions with initial public offerings, should we consider amending these and other 

rules relating to former shell companies to treat companies that have become public 

companies through a de-SPAC transaction in the same or similar manner as those that 

have completed traditional initial public offerings?  Should we differentiate SPACs from 

other shell companies in applying these rules?  If so, on what basis? 

154. Are there areas relating to SPACs where additional Commission guidance would be 

helpful?  For example, would it be useful if the Commission reiterated or expanded upon 

the Commission staff’s guidance in 2020 and 2021 regarding SPACs?364 

VIII. GENERAL REQUEST FOR COMMENTS 

We request and encourage any interested person to submit comments on any aspect of 

our proposals, other matters that might have an impact on the proposed amendments, and any 

suggestions for additional changes.  With respect to any comments, we note that they are of 

greatest assistance if accompanied by supporting data and analysis of the issues addressed in 

those comments and by alternatives to our proposals where appropriate. 

                                                 
362  See General Instruction A.1 to Form S-8. 
363  See Securities Act Rule 139(a)(1)(ii)(B). 
364  See supra note 35. 



165 
 

IX. ECONOMIC ANALYSIS 

We are mindful of the costs and benefits of these proposed new rules and amendments.  

The discussion below addresses the potential economic effects of the proposed new rules and 

amendments, including the likely benefits and costs, as well as the potential effects on efficiency, 

competition, and capital formation.365  We have analyzed the expected economic effects of the 

proposed 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 by type. 

As discussed above, we are proposing new rules and amendments to existing rules that 

are intended to enhance investor protections in SPAC registered offerings, including initial 

public offerings, and in de-SPAC transactions.  The proposed new rules and amendments would 

require disclosures with respect to, among other things, compensation paid to sponsors, conflicts 

of interest, dilution, and the fairness of de-SPAC transactions.  The proposed new rules and 

amendments would also revise certain rules and forms under the Securities Act and the Exchange 

Act to specify their application in the context of de-SPAC transactions, including, among other 

things, a proposed rule that a SPAC and a target company be treated as co-registrants when a 

SPAC files a registration statement for a de-SPAC transaction and a proposed rule that addresses 

the underwriter status of SPAC IPO underwriters in any subsequently registered de-SPAC 

transaction.   

                                                 
365  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)], 
and Section 2(c) of the Investment Company Act [15 U.S.C. 80a-2(c)] require the Commission, when engaging in 
rulemaking where it is required to consider or determine whether an action is necessary or appropriate in (or, with 
respect to the Investment Company Act, consistent with) the public interest, 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. 



166 
 

Additional proposed rules are intended to align de-SPAC transactions more closely with 

initial public offerings.  One would require certain non-financial disclosures regarding the target 

private operating company that are typically filed on Form 8-K within 4 days after the 

completion of a de-SPAC transaction to be included in the disclosures that are filed in 

connection with an anticipated de-SPAC transaction (Form S-4 or F-4, a proxy or information 

statement, or a Schedule TO).  The other would require the surviving entity following a de-

SPAC transaction to re-determine its eligibility for smaller reporting company status within four 

business days of the completion of the transaction. 

We are also proposing new rules and amendments that would apply to shell companies 

more broadly.  Proposed Rule 145a would deem any business combination involving a reporting 

shell company that is not a business combination related shell company, and another entity that is 

not a shell company, to involve a sale of securities to the reporting shell company’s shareholders.  

In addition, the proposed amendments to Regulation S-X are intended to more closely align the 

financial statement requirements in business combinations between a shell company (other than a 

business combination related shell company) and a non-shell company with those required on 

Forms S-1 or F-1 for an initial public offering.   

Furthermore, we are proposing to: (i) amend Item 10(b) of Regulation S-K to expand and 

update our views with respect to projections used in Commission filings; (ii) require additional 

disclosures regarding projections when disclosed in connection with de-SPAC transactions;  and 

(iii) amend the definition of “blank check company” for purposes of the PSLRA safe harbor for 

forward-looking statements, such that the safe harbor would not be available for projections by 

blank check companies that are not penny stock issuers, which would include SPACs and target 

companies in de-SPAC transactions.  Finally, we are proposing to create a safe harbor from the 



167 
 

definition of “investment company” under the Investment Company Act for SPACs that meet 

certain conditions. 

Overall, we expect the proposed new rules and amendments relating to SPAC 

transactions, in particular, and in some cases to shell company business combinations more 

broadly, to provide investors366 with improved and, in some instances, potentially earlier367 

access to more consistent, comprehensive, and readily comparable information and to enhance 

their ability to make more informed investment decisions, which can lead to more efficient 

pricing of securities.368  Both public reporting companies seeking to make an acquisition (SPACs 

or other shell or blank check companies, in some cases) and target private operating companies 

may incur costs related to the production and public disclosure of the proposed required 

information; however, these costs may be mitigated to the extent that either party may already 

voluntarily produce or provide such information in response to evolving market demands.369  We 

further anticipate that addressing the liability of various parties in de-SPAC transactions or other 

shell company business combinations could encourage those parties to exercise greater care in 

either the selection of an intended target company or the preparation and review of the required 

disclosures.  This could result in more reliable information for investors regarding a private 

                                                 
366  Throughout this section, “investor” can refer to any current or a potential shareholder of a company, though it is 
generally understood costs and benefits may accrue to such investors heterogeneously based on size, sophistication, 
and affiliation. 
367  See infra Sections IX.C.1.b.7 & IX.C.1.b.8. 
368  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 ACCOUNTING REV. 
1269 (2014) (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, 31(3) REV. FIN. STUD. 898, 898-942 (2018) (increased disclosure regimes lead to increased liquidity 
and lower crash risk). 
369  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/. 

https://ipo-edge.com/join-spac-to-the-future-iii-with-nasdaq-cowen-gallagher-ve-icr-morrow-sodali-morganfranklin-featuring-gigcapital-hennessy-and-switchback/
https://ipo-edge.com/join-spac-to-the-future-iii-with-nasdaq-cowen-gallagher-ve-icr-morrow-sodali-morganfranklin-featuring-gigcapital-hennessy-and-switchback/


168 
 

company target at the time of a transaction, and would further align the protections afforded to 

investors with those of an initial public offering.   

To the extent that the proposed rules would also provide better, more readily accessible 

information about SPACs, they may result in less adverse selection than might otherwise occur 

at the de-SPAC transaction.  Overall, we expect the proposals may enhance the protection of 

investors, as well as promote market efficiency.  We are mindful that some aspects of this 

rulemaking may deter some forms of communications or some transactions that might otherwise 

be efficient or to the economic benefit of issuers and investors.  They also may deter some 

business combinations that otherwise would have created value.  We discuss these considerations 

in more detail below. 

In many cases, we are unable to quantify the relative magnitudes of various economic 

effects because we lack information to quantify such effects with a reasonable degree of 

accuracy.  Where we are unable to quantify the economic effects of the proposed new rules and 

amendments, we have provided a qualitative assessment of the potential effects and encourage 

commenters to provide data, studies, reports and other information that would help quantify the 

benefits, costs, and potential impacts on efficiency, competition, and capital formation.370 

A. Broad Economic Considerations 

Although a significant level of information asymmetry exists when a private company 

“goes public,” the traditional initial public offering process (IPO) has developed mechanisms 

                                                 
370  For our estimates of the paperwork burdens associated with the proposed rules and amendments for purposes of 
the Paperwork Reduction Act of 1995 (“PRA”), please see Section X below.  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 and maintain records.  As a result, these estimates do not reflect the full economic 
effects or full scope of economic costs of the proposed rules and amendments that are discussed in this analysis.  



169 
 

that can alleviate adverse selection problems.371  Those mechanisms include mandated public 

disclosures, staff review of registration statements,372 and the effects of Section 11 liability, 

which, among other things, motivates due diligence performed by underwriters, accountants, and 

other offering participants.  These mechanisms generally lead to lower levels of information 

asymmetry, which can improve the security’s pricing and placement efficiency and encourages 

investor participation in the IPO market.  The traditional IPO process, however, is associated 

with costs, which could be significant for certain firms.  Those costs can be direct, in the form of 

fees, or indirect in the form of underpricing, as has long been recognized in the academic 

literature.373 

Alternative ways374 of going public have emerged that may allow companies to avoid 

some of the costs of the traditional initial public offering process, though this also might involve 

                                                 
371  Adverse selection is sometimes described as the ‘lemons’ problem:  when buyers have less information than 
sellers, their bids will be lower to reflect this uncertainty.  In response, the sellers of high quality products may exit 
the market, causing further decline in buyers’ willingness to pay, which could cause a market failure.  See, e.g., 
George Akerlof, The Market for “Lemons”: Quality Uncertainty and the Market Mechanism, 84 QTR. J. ECON. 488 
(1970). 
372  This review includes benefits such as, for example, the production of additional valuable information in response 
to comments issued by the Commission staff during the filing reviews.  See, e.g., Michelle Lowry, Roni Michaely, 
& Ekaterina Volkova, Information Revealed Through the Regulatory Process: Interactions Between the SEC and 
Companies Ahead of Their IPO, 33 REV. FIN. STUD. 5510 (2020). 
373  See Alexander Ljungqvist, Chapter 7 - IPO Underpricing, in 1 HANDBOOK OF EMPIRICAL CORPORATE FINANCE 
375 (B. Espen Eckbo ed., 2007); Kevin Rock, Why New Issues are Underpriced, 15 J. FIN. ECON. 187 (1986); Tim 
Loughran & Jay Ritter, Why Has IPO Underpricing Changed Over Time?, 33 FIN. MGMT. 5 (2004). 
374  While equity in a private company might also become publicly traded by participation in a roll-up, because such 
transactions typically involve multiple companies and the surviving entity thus may resemble each of the rolled-up 
entities less specifically, individually, we do not consider this a comparable way of going public for the purposes of 
our discussion.  Additionally, a handful of companies have listed their shares directly on a national securities 
exchange without the use of a traditional underwriter and without raising capital.  As with participation in a roll-up, 
this method of accessing the public markets is not frequently used.  From 2018 through 2021, only twelve 
companies went public using this approach.  (This Commission estimate includes 9 direct listings on NYSE and 3 
direct listings on Nasdaq that occurred on or before Dec. 31, 2021.)  In December 2020, the Commission issued an 
order approving a proposed rule change submitted by New York Stock Exchange LLC (NYSE) that would allow 
private companies to list on the NYSE via a direct listing and raise capital at the same time.  See Release No. 34-
90768 (Dec. 22, 2020) [85 FR 85807 (Dec. 29, 2020)] (SR-NYSE-2019-67).  In May 2021, the Commission 
approved a similar proposed rule change submitted by The Nasdaq Stock Market LLC.  See Release No. 34-91947 
(May 19, 2021) [86 FR 28169 (May 25, 2021)] (SR-NASDAQ-2020-057).  While, it is possible that the number of 
companies that would seek to offer securities via direct listing will increase following these recent regulatory 



170 
 

forgoing some of the benefits typically considered desirable by market participants (e.g., 

potentially better pricing due to underwriter help with the placement of securities as well as more 

robust due diligence and disclosure).375  While pursuit of these alternatives suggest private 

operating companies are interested in accessing the benefits of being publicly traded, it is not 

clear that these alternatives represent net improvements in the mechanism design of the 

traditional IPO process.  

One way a private company may become a public reporting company is via merger with 

a shell company that has already obtained exchange listing, quotation, or otherwise registered a 

class of securities under the Exchange Act.  In recent years, a significant number of private 

companies have opted to become a public reporting company via a merger with a particular kind 

of shell company, a SPAC.  SPACs have been in existence since the 1990s, and though their use 

by private companies as an alternative mechanism for becoming a public reporting company has 

varied over time, it has increased dramatically in the past three years.  We estimate that in the 

past year alone, approximately 200 companies have become listed on an exchange via a de-

SPAC transaction, which is slightly more than a sevenfold increase since 2019 and a twentyfold 

increase since 2015.376 

As with a traditional IPO, becoming a public reporting company through a de-SPAC 

transaction might also be subject to adverse selection given that this type of transaction is 

associated with significant information asymmetries between public investors in the SPAC and 

                                                 
changes, it is unclear that future use would become comparable in purpose or scope to mergers with shell companies 
as an alternative means to access the public market.  See Release No. 34-94311 (Feb. 24, 2022) [87 FR 11780 (Mar. 
2, 2022)] (SR-NASDAQ-2021-045) (order disapproving proposed rule change to modify certain price limitations in 
a direct listing with a capital raise). 
375  See, e.g., James Brau & Stanley Fawcett, Initial Public Offerings: An Analysis of Theory and Practice, 61 J. FIN. 
399 (2006). 
376  Staff review of Form 8-K filings identified 28 private operating companies acquired in calendar year 2019 and 
10 in calendar year 2015 that could be confirmed in the Dealogic M&A module as a de-SPAC transaction.  



171 
 

the private company that the SPAC intends to acquire.  Public SPAC investors could rely on 

various mechanisms to overcome the adverse selection problem in the SPAC context: the 

contingent nature of sponsor compensation; the right to vote to approve a de-SPAC transaction 

or redeem shares; projections regarding anticipated future performance, to the extent they 

improve price formation; potential liability; and any additional unregistered investments by 

investors at the de-SPAC transaction stage.377  While in some cases, a private company might 

prefer these alternative mechanisms to a traditional IPO, their general efficacy in resolving the 

problems or costs of information asymmetry might, in practice, be limited.378 

Some economic theorists have argued that the structure of SPAC sponsor compensation 

may efficiently incentivize transactions that benefit investors,379 but the effects in practice may 

be more ambiguous.  On one hand, because almost all of the SPAC sponsor’s compensation is 

contingent on the completion of a de-SPAC transaction, the sponsors may therefore have an 

incentive to select target companies that would maximize their own, as well as investors’, returns 

at exit.  As noted above, however, there is also a potential conflict of interest for sponsors 

precisely because their compensation (e.g., 20% promote) is dependent on the completion of a 

de-SPAC transaction.380  This could create an incentive to enter into unfavorable, or less 

favorable, de-SPAC transactions than would otherwise be optimal for the SPAC’s unaffiliated 

shareholders because the sponsor’s alternative to a de-SPAC transaction is to liquidate the 

                                                 
379  For a detailed description of the SPAC process, see Section I. 
378  In addition to the potentially problematic incentives embedded in the SPAC structure as described in the 
following sections, we further acknowledge that in some cases management and other insiders in target companies 
may find that a de-SPAC transaction is a more attractive option for becoming a public reporting company than a 
traditional initial public offering for reasons that conflict more directly with adequate investor protections.  These 
reasons may include the lack of a named underwriter or actionable liability.   
379  See, e.g., Sris Chatterjee, N.K. Chidambaran, Gautam Goswami, Security design for a non-standard IPO: The 
case of SPACs, 69 J. INT’L MONEY & FIN. 151 (2016). 
380  See supra note 12. 



172 
 

SPAC, and return the initial public offering proceeds, forfeiting their potential promote.  While 

reputational concerns may be a mitigating source of discipline, sponsors may also be more likely 

to prioritize private benefits when these concerns are less pressing; for example, in periods when 

the market is broadly less risk-averse or if the sponsor does not intend to pursue serial SPAC 

activities. 

In addition, voting rights and redemption rights may protect SPAC investors, because 

SPAC investors have the right to vote against a de-SPAC transaction and may redeem their 

shares if they believe holding shares in the combined company is not in their best interest.381 

However, these rights can also create potential conflicts of interest between non-redeeming 

shareholders and shareholders who choose to redeem shares but continue to hold warrants.  

When SPAC investors redeem the shares but retain and later exercise the warrants of the initial 

IPO unit, the equity shares of the non-redeeming shareholders are diluted relative to what they 

would be absent such exercise.  A further conflict may arise because the value of the warrants is 

enhanced by greater volatility of the underlying security.  Thus, warrant-holders may incur 

greater financial benefits from high-risk mergers in a manner that may not be aligned with the 

interests of the non-redeeming SPAC investors.  Additionally, in cases where the SPAC is 

structured so that the shareholders are able to vote in favor of a merger but also redeem their 

shares, this could present a moral hazard problem, in economic terms, because these redeeming 

shareholders would not bear the full cost of a less than optimal choice of target.    

The use of projections regarding the future earnings and performance of the target 

company in the de-SPAC transaction may be another mechanism that helps SPAC investors 

                                                 
381  For listed SPACs, existing exchange listing standards, if a shareholder vote is held, require public shareholders 
voting against a de-SPAC transaction to have the right to redeem their shares if the de-SPAC transaction is approved 
and consummated.  See infra Section IX.B.1.a.  SPACs have often extended this redemption right to shareholders 
voting in favor of the de-SPAC transaction as well. 



173 
 

overcome adverse selection, insofar as they provide information that could improve price 

formation.  However, there may also be conflicts of interest associated with those projections 

given some features of the SPAC structure.  The need to secure shareholder approval and meet 

the respective exchange listing’s valuation requirement382 to complete the de-SPAC transaction 

may imply that it is in the target company’s interest to present the most favorable projections of 

its future performance.  SPAC sponsors’ interests in completing the de-SPAC transaction in 

order to receive their compensation could also affect the degree to which they would be 

motivated to scrutinize or question a target company’s projections.383  Additionally, the basis, 

source, and support for any projections may not be adequately disclosed to shareholders, thereby 

limiting their value.  For example, there may be confusion among some practitioners as to 

whether Item 10(b) of Regulation S-K, which states the Commission’s views regarding the 

reasonableness of projections, applies to projections regarding the target company’s future 

performance that may be included in the SPAC’s filings.   

Applicable liability provisions may also provide some protections for SPAC investors.  

For example, SPACs are liable for material misstatements or omissions in their proxy 

solicitations under Section 14(a) and Rule 14a-9 of the Exchange Act.  However, such liability 

generally requires proof of negligence.  Similarly, SPAC investors may be protected by the 

application of Section 11 and Section 12(a)(2) of the Securities Act for material misstatements or 

omissions made in connection with SPAC transactions involving the filing of a registration 

                                                 
382  See infra Section IX.B.1.a. 
383  See supra note 67 and accompanying text.   



174 
 

statement.  However, as discussed above, there are potential gaps or inconsistencies in these 

protections that the proposed amendments are intended to address.384   

Another mechanism that could help investors overcome the adverse selection problem is 

the potential signal of deal quality implied by the presence of PIPE investors.385  These investors, 

who are generally institutional investors, are often afforded an opportunity to gain considerable 

insight into the details of a de-SPAC transaction and the future financial prospects of the target 

company (subject to confidentiality agreements) for purposes of evaluating whether to 

participate in a PIPE that often occurs close in time to a de-SPAC transaction.  Public SPAC 

investors could benefit from the participation of PIPE investors in a de-SPAC transaction in a 

number of ways.  At present, some PIPE investments in connection with de-SPAC transactions 

function as a backstop to offset high levels of redemption, thereby ensuring a de-SPAC 

transaction does not fail to meet the minimum cash requirement necessary to complete its 

intended business combination.  In other cases, PIPE investments enable the SPAC to acquire a 

larger target, or one with a higher valuation, giving SPAC IPO investors access to a different 

type of target company than they might otherwise be able to acquire.386  On the other hand, the 

presence of PIPE investors in a de-SPAC transaction may not benefit public SPAC investors 

because they typically invest at a discount.  When a de-SPAC redemption rate is high, the PIPE 

discount can exacerbate the dilution of the equity position of the SPAC’s non-redeeming 

                                                 
384  See supra Sections III.C & III.F. 
385  See, e.g., Mike Hopkins & Donald G. Ross, Key Drivers of Private Equity Firm Certification at Initial Public 
Offering, 16 J. PRIVATE EQUITY, 69 (2013). 
386  This role of PIPEs has been more common, historically, see, e.g., Vijay M. Jog & Chengye Sun, Blank Check 
IPOs: A Home Run for Management (SSRN Working Paper, 2007) (“the median value of the transaction in relation 
to gross proceeds is approximately 178 percent, meaning that the size of the acquisition is higher than the proceeds 
raised through the IPO since many [blank check companies] raised additional debt to finance the acquisitions”), and 
could be a contributing factor to the differences we continue to observe between average capital raised via SPAC 
IPO (see infra Section IX.B.6.a) and PIPE financing (see infra  Section IX.B.2.c) and the average consideration paid 
per SPAC target (see infra Section IX.B.2.c).   



175 
 

shareholders.  Additionally, because PIPEs may, in some cases, involve the purchase of only 

warrants, similar misalignments of incentives with respect to a de-SPAC transaction may occur 

with this category of warrant-only holders as those previously discussed in that they may have 

incentives to pursue riskier targets than would be optimal for a non-redeeming SPAC 

shareholder.  As such, the PIPE’s financial participation in a de-SPAC transaction may not be a 

reliable indication that the transaction would benefit unaffiliated SPAC investors. 

Therefore, while a number of the mechanisms associated with a SPAC transaction 

structure could mitigate adverse selection concerns for investors and could, theoretically, 

improve the process by which private companies may become publicly traded, many of their 

potential benefits over the traditional IPO process may be mitigated by countervailing conflicts 

of interest.  As a result of the complexity inherent in the SPAC structure, investors may lack or 

otherwise be unable to readily decipher critical information regarding certain financial incentives 

(such as contingent sponsor or IPO underwriter compensation or the potential dilutive effects of 

PIPE financing) of the SPAC, the target company, their respective affiliates, or other parties in a 

manner necessary to properly assess the value of an investment position. 

There is also a question of whether investors, particularly retail investors, fully 

understand the costs involved in de-SPAC transactions and how these costs may affect investors’ 

post-de-SPAC transaction returns on their original investments.  Specifically, investors may not 

fully anticipate the dilutive effects of sponsor compensation (the “promote”), PIPE financing, 

and outstanding warrants following de-SPAC transactions.  In a similar vein, the potential 

uncertainty regarding the availability of the PSLRA safe harbor and the applicability of the 

guidance of Item 10(b) of Regulation S-K to projections of a target company in a de-SPAC 

transaction may result in the use of unreasonable or aspirational projections in connection with 



176 
 

de-SPAC transactions that may misrepresent the benefits and risks involved in such transactions.  

Furthermore, while the SPAC vehicle may allow a private company to go public without using 

the traditional IPO process, the disclosure regarding the private company provided in connection 

with a de-SPAC transaction may be less complete or less reliable than that provided in a 

traditional IPO for reasons discussed in the release, including, among other reasons, the lack of 

due diligence by traditional gatekeepers, such as underwriters.387  By strengthening investor 

protection, the proposed rules could increase investors’ confidence in SPAC transactions, while 

keeping this alternative route of going public attractive for private companies.  

In addition to the SPAC-specific items that are of central concern to this proposal, we are 

also proposing amendments to address further areas of incongruity in requirements that guide the 

disclosures and liabilities in the broader context of shell-company mergers and the use of 

projections.  For example, proposed Rule 145a would help investors in reporting shell companies 

more consistently receive the full protections of the Securities Act disclosure and liability 

provisions in business combinations involving shell companies, regardless of the transaction 

structure.  Reporting shell companies would have to register offerings subject to proposed Rule 

145a by filing a Securities Act registration statement unless there is an applicable exemption.  

Additionally, we are proposing new Article 15 of Regulation S-X and amendments to our forms, 

schedules, and rules 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 initial public offerings.  For example, we are proposing to align the number of fiscal 

years required to be included in the financial statements for a private company that will be the 

                                                 
387  Although as discussed above, a court could find that many parties to a de-SPAC transaction may meet the 
definition of “underwriter,” all of these issues may be compounded by the lack of a designated underwriter in de-
SPAC transactions that could perform due diligence and would be subject to liability under Section 11 of the 
Securities Act. 



177 
 

predecessor(s) in a shell company combination with the financial statements required to be 

included in a Securities Act registration statement for an initial public offering of equity 

securities in proposed Regulation S-X Rule 15-01(b).  Other proposed amendments would codify 

certain current staff guidance for transactions involving shell companies.  

In our analysis below, we first discuss the proposed provisions that pertain to specialized 

disclosure requirements for SPACs in registered offerings and for de-SPAC transactions and then 

address the proposals concerning liability related to de-SPAC transactions and the PSLRA safe 

harbor.  We then analyze the impact of the proposed new rules and amendments that would 

apply to shell companies and to the use of projections in Commission filings.  Finally, we discuss 

the proposed safe harbor for SPACs from being deemed an investment company under the 

Investment Company Act.  Where appropriate, we discuss the interactions between the proposed 

new rules and amendments. 

B. Baseline and Affected Parties 

To assess the economic impact of the proposed rules, the Commission uses as its baseline 

the current regulatory framework and existing market practices, including Commission staff 

guidance and other staff positions.  We discuss in this section those parties likely to be affected 

by the proposed rules and some of the relevant regulatory and market baselines.  The remainder 

of the discussion of the regulatory and market baselines is integrated into our analysis of the 

benefits and costs of the proposed rules to aid comprehension and minimize repetition.388  

1. SPAC Initial Public Offerings 

The parties most likely to be directly affected by the proposed rules regarding specialized 

disclosure requirements for SPACs in initial public offerings and other registered offerings are 

                                                 
388  See also supra Sections I-IV for further discussion of existing regulatory framework and market practices. 



178 
 

existing or potential sponsors intending to organize a new SPAC, SPACs, prospective investors 

in such offerings, and any other market participants whose service or activities involve analysis 

of the information, data, and disclosures related to SPACs and their sponsors in these offerings.  

In 2021, there were approximately 620 SPAC initial public offerings.   

In addition, these proposed amendments would necessarily have secondary impacts on 

the prospects or opportunities of private companies that would be potential targets of such newly 

organized SPACs if, as a result of their adoption, a different number or type of SPAC sponsors 

and their affiliates participate in the market.  Similarly, given that proposed Rule 140a clarifies 

the underwriter status of SPAC IPO underwriters at the de-SPAC transaction stage, this proposed 

rule may affect the number and type of potential targets that might be selected for acquisition by 

potentially reducing the number of SPAC IPOs underwriters are willing to support or by 

potentially deterring SPAC IPO underwriters from directly or indirectly participating in the de-

SPAC transaction or any related financing transaction.389 Other potentially affected parties 

include those parties who provide advisory or other services to sponsors of SPACs in connection 

with these registered offerings. 

a. SPAC Initial Public Offerings and Exchange Listing 

SPACs initial public offerings on national securities exchanges have greatly increased in 

recent years.  Moreover, SPAC listings have migrated from the over-the-counter market to three 

national securities exchanges: first NYSE American (formerly AMEX), then Nasdaq and NYSE 

(see Table 1).390   

                                                 
389  See Jessica Bai, Angela Ma, and Miles Zheng, Reaching for Yield in the Going-Public Market: Evidence from 
SPACs (SSRN Working Paper, 2021). 
390  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 proposal to adopt 
listing standards to permit the listing of SPACs on July 25, 2008.  See Release No. 34-57785 (May 6, 2008) [73 FR 



179 
 

Table 1. Number of SPAC IPOs, 1990-2021a 

  

1990-

2000 

2001-

2005 

2006-

2010 

2011-

2015 

2016-

2020 2021 

Total  18 41 128 66 400 620 

NASDAQ 18 0 3 56 248 434 

NYSE - - 1 0 147 183 

AMEX - 6 78 0 5 3 

OTC  -  35 46 10  -  -  

a Estimates are based on all SPACs identified by Dealogic, SPAC Insider, Audit Analytics, and staff manual review, 
that conducted an initial public offering with a confirmed pricing date as of December 30,2021. 

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 de-SPAC transaction.391  

Among other things, 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.392  These exchanges further require that within three years, for 

NYSE, or 36 months, for Nasdaq and NYSE American, of the effectiveness of its IPO 

registration statement (or such shorter period specified in the registration statement under Nasdaq 

and NYSE American rules or its constitutive documents or by contract under NYSE rules), the 

                                                 
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).  
391  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 describe in this section.  See CBOE BZX Rule 14.2(b). 
392  NYSE Listed Company Manual Section 102.06; Nasdaq Listing Rule IM-5101-2(a); NYSE American Company 
Guide Section 119(a). 



180 
 

SPAC complete one or more business combinations having an aggregate fair market value of at 

least 80% of the value of the net assets in the account excluding certain costs.393  NYSE, Nasdaq, 

and NYSE American require that a de-SPAC transaction meeting the 80% requirement be 

approved by a majority of the SPAC’s independent directors,394 and all three exchanges require, 

if a shareholder vote is held, that a majority of the shares voted at the shareholder meeting 

approve the de-SPAC transaction meeting the 80% requirement.395  In addition, if a de-SPAC 

transaction meeting the 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 taxes and working capital 

disbursements.396  If a shareholder vote on a de-SPAC 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.397 

b. SPAC Sponsors 

Historically, it has been suggested that one reason a SPAC vehicle might provide a more 

attractive route to the public markets was the benefit of the leadership and professional advice by 

                                                 
393  NYSE Listed Company Manual Section 102.06(e); Nasdaq Listing Rule IM-5101-2(b); NYSE American 
Company Guide Section 119(b). 
394  NYSE Listed Company Manual Section 102.06(d); Nasdaq Listing Rule IM-5101-2(c); NYSE American 
Company Guide Section 119(c). 
395  NYSE Listed Company Manual Section 102.06(a); Nasdaq Listing Rule IM-5101-2(d); NYSE American 
Company Guide Section 119 (d). 
396  NYSE Listed Company Manual Section 102.06(b); Nasdaq Listing Rule IM-5101-2(d); NYSE American 
Company Guide Section 119(d). 
397  NYSE Listed Company Manual Section 102.06(c); Nasdaq Listing Rule IM-5101-2(e); NYSE American 
Company Guide Section 119(e).181 
 

one or more individuals comprising the SPAC sponsor, including in some cases beyond the de-

SPAC and into the life of the target as public operating company.398  Although the majority of 

sponsors are financial institutions, a sizable fraction (47%) of SPACs are sponsored by 

individuals. 

Figure 1. Distribution of SPACs by Sponsor Type, 2019-2021a 

 
a Data presents the average composition of SPAC offerings by sponsor type as categorized by SPAC Insider.  See 
SPAC Insider, 1H 2021 SPAC Report (2021).  Note, sponsor composition data for 2021 SPAC sponsorship reflects 
only data through end second quarter. 

c. SPAC IPO Underwriters 

During the period 1990-2021, the average number of underwriters participating in a 

SPAC IPO was 2.5.399  Approximately 99% of these SPAC IPOs were done via a firm 

                                                 
398  See Robert Berger, SPACs: An Alternative Way to Access the Public Markets, 20 J. APPLIED CORPORATE 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.”). 
399 This estimate is based on staff analysis of data as described in Table 1, note a.   

47%

20%

9%

8%

7%
6% 3%

Individuals

Private Equity

Venture Capital

Asset Managers

Banks

Hedge Funds

Other



182 
 

commitment offering.400  The average fee charged by SPAC IPO underwriters during this time 

was approximately 5.6%.401  This reflects a decline from the underwriting fees associated with 

the earliest SPACs (approximately 7-7.5%),402 when underwriters typically received their full 

compensation at the time of the SPAC IPO.403  As mentioned above, a portion of this fee is 

typically deferred until, and conditioned upon, the completion of the de-SPAC transaction.404  In 

a typical SPAC underwriting, this deferred fee is placed in the SPAC trust or escrow account.  

During the period 1990-2021, we estimate that the average size of the deferred underwriter fee 

was 3.4%.405  We do not observe significant differences in the structure or level of underwriter 

fees and deferred fees, as disclosed at the IPO stage, between SPACs that have completed a de-

SPAC transaction and those that have not.  We observe that among SPACs that have completed a 

de-SPAC transaction the average number of underwriters was 3.1, which is slightly higher than 

the average number of underwriters per SPAC IPO.406  SPAC underwriters may provide other 

services to the SPAC or its eventual target after the IPO as well.  For example, the SPAC 

underwriter may help the SPAC identify potential targets, provide financial advisory services to 

the SPAC or the target, or act as a PIPE placement agent. 

                                                 
400  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 12. 
401  This estimate is based on staff analysis of data as described in Table 1, note a. 
402  See, e.g., Lola Miranda Hale, SPAC: A Financing Tool with Something for Everyone, 18 J. CORP. ACCT. & FIN. 
67 (2007) (“The underwriting discounts are typically around 7-7.5 percent of the public offering price”). 
403  See Yochanan Shachmurove & Milos Vulanovic, Specified Purpose Acquisition Company IPOs, in THE OXFORD 
HANDBOOK OF IPOS (Douglas Cumming ed., 2018). 
404  See supra Section III.E.3. 
405  This estimate is based on staff analysis of data as described in Table 1, note a, and may be positively skewed 
because the data features a greater proportion of deals occurring between 2019 and 2021. 
406 Based on staff analysis of data as described in Table 1, note a.  We note that timing differences in where a SPAC 
might currently be, relative to its dissolution date, might result in overestimation of this difference.  



183 
 

d. Warrants 
 
 SPAC IPOs most often register the offering of a unit composed of a common share, 

warrants, or fractions thereof, and—in some cases—rights.407  In their earliest form, SPAC units 

usually included two in-the-money warrants exercisable for full shares at the later of completion 

of the de-SPAC transaction or one year after the effective date of the IPO registration 

statement.408  These warrants could thus become highly dilutive to the equity shareholders given 

that warrants may begin trading separately from the unit common share once a Form 8-K 

containing the balance sheet of IPO proceeds has been filed.409  Shareholders could experience 

equity dilution if redeeming shareholders retain and later exercise their warrants.  

  

                                                 
407  See, e.g. Gül Okutan Nilsson, Incentive Structure of Special Purpose Acquisition Companies, 19 EUR BUS ORG 
Law Review (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.”). 
408  See, e.g., Hale, supra note 402 (“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 8 (2008) (“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.”). 
409  Historically, this typically occurred around 90 days after the initial public offering.  Over the past decade, the 
usual number of days has decreased to approximately 60.  See, e.g., Anh L. Tran, Blank Check Acquisitions (SSRN 
Working Paper, 2010);James S. Murray, The Regulation and Pricing of Special Purpose Acquisition Corporation 
IPOs (SSRN Working Paper, 2014); James S. Murray, Innovation, Imitation and Regulation in Finance: The 
Evolution of Special Purpose Acquisition Corporations, 6 REV. INTEGRATIVE BUS. & ECON. 1 (2017). 



184 
 

Figure 2. Warrants offered in SPAC IPO Units, 1990 – 2021a 

 
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 filed in connection with all SPACs identified by Dealogic, SPAC Insider, 
Audit Analytics, and staff manual review, that conducted an initial public offering with a confirmed pricing date as 
of December 30,2021. 

As SPAC offerings have evolved, however, the highly dilutive aspects of the warrant 

component of a SPAC offering unit appear to have somewhat attenuated.  As indicated in Figure 

2, many SPACs offer units with smaller warrant components.  The majority of SPACs that have 

conducted an IPO in the past three years offered units with fractional warrants or units where 

warrants represented only fractional shares.  The dilutive capacity of these warrants is further 

tempered by the fact that in current practice, warrants (or fractions thereof) are only offered at 

exercise prices higher than the SPAC IPO offering price.  However, the reduced dilution 

attributable to warrants as a component of SPAC IPO units does not imply that current SPAC 

IPOs offer a security that is inherently less exposed to potential dilution or that warrants 

purchased separately from units, such as in sponsor compensation or PIPE financing 

transactions, are not still a significant source of dilution.  Furthermore, while warrant features 

have in some respects become less dilutive, maximum allowable redemptions have generally 

increased, creating the possibility for non-redeeming shareholders to experience greater dilution 

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0 0.1 0.11 0.125 0.1667 0.2 0.25 0.33 0.5 0.75 1 2 10



185 
 

albeit from a different source.  The emergent size and significance of PIPE financing in de-SPAC 

transactions410 has presented yet another potential source of dilution. 

e. Time to Complete a De-SPAC Transaction 

Because SPACs are not blank check companies issuing penny stock, they have not been 

subject to Rule 419’s requirements, including the requirement that an acquisition occur by a date 

18 months after the effective date of the blank check company’s initial registration statement.411 

Nevertheless, SPACs use, as a matter of practice, features of Rule 419 that would appear to 

enhance protections for investors, including a pre-specified intended lifespan before dissolution 

that is communicated to investors at the time of the initial public offering.  Table 2 documents 

the average proposed lifespans (in months) that SPACs in each period disclosed in their initial 

public offering registration materials as well as the average actual number of months used by 

those SPACs that successfully completed a de-SPAC transaction, by cohort.  We note that since 

2006, the typical SPAC generally pre-commits to a lifespan at least two months, on average, 

longer than the 18-month limit in Rule 419 and approximately 13 months shorter than the 

exchange listing 36-month limit.412 

  

                                                 
410  See infra Section IX.B.2.c. 
411  See supra note 12.  See also Rule 419(e)(2)(iv) under the Securities Act (“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.]”). 
412  See supra Sections VI.B.3 & IX.B.1.a. 



186 
 

Table 2. Average Proposed Acquisition Periods in SPAC IPOs (months), 1990-2021a 

  1990-
2000 

2001-
2005 

2006-
2010 

2011-
2015 

2016-
2020 2021 

Proposed Acquisition Period - 17.25 20.84 20.58 21.98 20.45 

Proposed Extension - 6.30 6.50 5.11 6.00 5.34 

Proposed Period with Extension - 23.55 24.40 23.40 22.90 21.71 

Realized Average Acquisition 
Periodb 19.25 20.11 19.83 22.15 15.32 8.58 

a Averages reported here are estimated over the subsample of SPAC IPOs (see supra Table 1 note a) after offerings withdrawn 
after the IPO pricing date have been removed.  Proposed acquisition periods and proposed extension data is drawn from 
information as provided by the SPAC in its initial registration materials including prospectuses and Form S-1 or Form F-1.  
SPACs that disclose they would hold a shareholder vote to approve an extension period but did not pre-commit to specified 
extension period are treated as having such data missing for purposes of computing averages. 
b Data on realized average acquisition period for IPO cohorts 2016-2020 and 2021 reflect a downward bias due to the 
outstanding proportion of SPACs that conducted an IPO between 2019 and 2021 that have not yet completed their proposed 
acquisition period or approved extensions.  See infra note 457. 

 

2. De-SPAC Transactions 

The primary parties affected by the proposed disclosure requirements at the de-SPAC 

transaction stage include SPACs, sponsors of SPACs, investors, potential PIPE investors, and 

target private operating companies.  Additionally, the proposed rules to amend or otherwise 

clarify the existing liability framework would affect SPACs, target companies, investors in 

SPACs, and the underwriters that SPACs use at the SPAC IPO and the de-SPAC stages.413  

We are mindful that parties may be differentially affected for a number of reasons.  For 

example, to the extent that regulatory changes we are proposing, if adopted, would become 

effective while some current SPACs are in the process of completing a de-SPAC transaction, 

                                                 
413  See, e.g., Luisa Beltran, SPACs Are Scrambling to Find Mergers.  What That Means for Investors, BARRONS, 
Feb. 24, 2022. 



187 
 

these SPACs may incur greater unanticipated transaction costs to comply with the full set of new 

requirements.  Other SPACs that have not yet found a target may find themselves ex-post to have 

inefficiently entered the market as compared to a SPAC that completes an IPO with knowledge 

of the costs associated with the proposed amendments.  However, the fact that some of the 

proposed amendments may reduce costs or simply codify existing best practices may offset some 

of the potentially more costly elements of other amendments, thus the differential impact of the 

proposed amendments affecting parties at the de-SPAC transaction stage is expected to vary. 

Based on staff analysis of SPACs that registered a distribution of securities between 1990 

and 2021, it appears that approximately half of all SPACs following their initial public offerings 

have announced a subsequent de-SPAC transaction, and about one third have completed their de-

SPAC transaction.  It is possible that SPACs currently searching for targets may still identify 

targets, complete de-SPAC transactions, and thereby increase the fractions of SPACs with 

announcements and completed transactions.  However, the overall success rate of approximately 

one-third is generally consistent with previous research findings over more limited historical 

subsamples,414 suggesting that the number or proportion of SPACs and related parties that would 

directly incur the costs, or experience the benefits, of our de-SPAC-related proposals may be 

smaller than the population of parties affected by our proposed amendments pertaining to a 

SPAC’s initial registration and public offering. 

Of the SPAC initial public offerings in 2020 and 2021, a majority have not yet filed a 

Form 8-K announcing that the SPAC has found a target company, or else have not filed a Form 

                                                 
414  Studies performed in 2016 or later reviewing the 2003–2013 cohort of SPACs find that approximately 51.5% of 
SPACs that had an initial public offering during the decade successfully complete 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). 



188 
 

8-K that would follow within 4 days of a completed a de-SPAC transaction.  As of December 31, 

2021, approximately 77 of 248 SPAC IPOs in 2020 (31%) and an additional 495 of 613 SPAC 

IPOs in 2021 (81%) had not yet announced a target or have withdrawn an announced business 

combination and resumed searching.  Some market participants have opined that, of recently 

listed SPACs that have not yet secured a target, a greater proportion are likely to liquidate 

without completing an acquisition.415  This may be due to factors such as changing market 

conditions (increased volatility, increasing interest or inflation rates, etc.) and an increasingly 

limited number of viable target private companies (particularly companies with valuations in the 

range that would match the 80% requirement of most SPACs).  

Table 3. SPAC Outcomes, 1990-2021a 

Filed IPO Priced Merger Announced Merger Completed Liquidated 

1672 1273 653 475 96 

a Estimates reported here are based on the respective subsamples of SPAC IPOs (see supra Table 1 note a) 
that reflect all confirmed, completed activity as of December 31, 2021. 

 

a. Filings in Connection with a De-SPAC Transaction 

Like any merger or acquisition activity pursued by other public reporting companies, the 

timing and types of filings that accompany a de-SPAC transaction are usually a function of the 

way the business combination is structured and the form of consideration employed.  Such 

transactions may require providing existing shareholders information in advance of a vote.  

Others may simply require providing shareholders with information and a specified period of 

time in which to redeem shares, if desired.  Similarly, such transactions may include an offer of 

                                                 
415  See, e.g., Jemima McEvoy, Take Back The SPAC: More And More Companies Are Canceling High-Profile 
Deals To Go Public, FORBES, Dec. 22, 2021. 



189 
 

securities as a part of the merger or exchange offer, and if so, may require the filing of a 

registration statement.  The cumulative effects of our proposals would vary in impact on 

individual de-SPAC transactions based on their unique deal structure and the disclosures they 

would thus already be obligated or otherwise incentivized to provide.  

A recent review of 462 de-SPAC transactions completed in 2020 and 2021 found that 

approximately 99% of transactions were accompanied by proxy disclosures and 81.0% involved 

a related filing of a registration statement on either Form S-4 or Form F-4.416  Of the 81.0% 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.417 

b. Target Form 10 Information in Connection with De-SPAC 
Transactions 

If a shell company that has Exchange Act reporting obligations, including a SPAC, 

acquires a target that is not subject to the reporting requirements of Section 13(a) or 15(d) of the 

Exchange Act, after the business combination, it must file a Form 8-K that includes the same 

disclosures about the target company that would have been provided if the target had instead 

registered a class of securities under Section 12 of the Exchange Act on Form 10.418  This Form 

10 information in a Form 8-K must be filed within four business days after the completion of a 

                                                 
416  See Michael Levitt, Valerie Jacob, Sebastian Fain, Pamela Marcogliese, Paul Tiger, & Andrea Basham, 2021 
De-SPAC Debrief, FRESHFIELDS (Jan. 24, 2022), available at https://blog.freshfields.us/post/102hgzy/2021-de-spac-
debrief.  We note that the scope of this study is limited to 2020 and 2021.  
417  Id. 
418  See supra Section III A. 

https://blog.freshfields.us/post/102hgzy/2021-de-spac-debrief
https://blog.freshfields.us/post/102hgzy/2021-de-spac-debrief


190 
 

de-SPAC transaction.419  Because we are proposing to require these disclosures to instead be 

included filings related to the de-SPAC transaction that occur prior to the consummation of the 

proposed business combination, whether in a proxy, information, or registration statement or 

Schedule TO, any SPAC that would otherwise file Form 10 information about its target in a 

Form 8-K following a de-SPAC transaction would be affected. 

Figure 3. Number of Business Days to File Form 8-K After De-SPAC Transactiona 

 
a Data represents the percent of filed Forms 8-K that could be identified, based on staff review, as filed in connection 
with a de-SPAC transaction that occurred between January 1, 2006 and December 31, 2021, and does not include 
de-SPAC transactions unaccompanied by an 8-K filing.  Staff noted that de-SPAC transactions unaccompanied by a 
Form 8-K containing Form 10 information were otherwise accompanied by a Form 20-F and/or Form 6-K when the 
combined company was a foreign private issuer (FPI) and, in the remaining cases where the combined company was 
not an FPI, the de-SPAC transaction was accompanied by either a long form (Form 10-12B) or a short form (Form 
8-A12B) registration. 

As illustrated in Figure 3, staff review of Forms 8-K filed in connection with 

approximately 300 de-SPAC transactions completed between January 1, 2006 and December 31, 

2021 found that approximately 47% of combined companies filed the Form 8-K on the fourth 

business day after the de-SPAC transaction and approximately 88% of combined companies filed 

                                                 
419 See Shell Company Adopting Release, supra note 211, at 15-17, 21 (adopting amendments requiring the entity 
surviving a merger with a shell company to file its report on Form 8-K within four business days after completion of 
the merger and limiting the use of Form S-8 to register offerings of securities). 

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

1 2 3 4 5 >5



191 
 

the Form 8-K within the 4-business day time limit.  However, as discussed below in Section 

C.1.b.8, some registrants currently may voluntarily disclose Form 10 information before filing 

the Form 8-K given the staff’s observations regarding incorporation by reference of this 

information into the Form 8-K from filings made in connection with the de-SPAC transaction. 

c. PIPES in Connection with De-SPAC Transactions 

PIPEs have supported de-SPAC transactions since their general increased market 

presence began in 2005.420  However, in some recent SPACs, 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 and how well those 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, approximately 65% of the cash delivered in these 

merger transactions was contributed by public investors, and the amount typically contributed by 

third-party PIPE investors was approximately 25%, with the remaining funding provided by the 

sponsor.421  In such cases, while the equity position of the PIPE investors in the combined 

company following a de-SPAC transaction was dilutive, it did not eclipse the ownership stake of 

the SPAC IPO shareholders.  Because PIPE investors may receive confidential information with 

which to make an investment decision (including one-on-one conversations with the target’s 

management, which may convey soft information) and may also engage in extended and detailed 

due diligence,422 their participation has at times been considered a benefit to SPAC IPO 

                                                 
420  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 FOR 
PRIVATE INVESTMENTS IN PUBLIC EQUITY 281 (Steven Dresner ed., 2015). 
421  See Klausner, Ohlrogge, & Ruan, supra note 17.  The authors analyzed data for the 47 SEC-registered SPACs 
that merged, and thereby brought companies public, between Jan. 2019 and June 2020.  
422  Id. 



192 
 

investors, providing a meaningful indicator of the expected future financial performance of a 

proposed de-SPAC transaction.  

As the SPAC market has evolved, so too have the role and the structure 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 and 

median amounts raised in PIPE financings (respectively approximately $300 million and $200 

million) were similar to the average size of the SPAC trust account at the time of the IPO.423  

This may reflect that in more recent SPACs, in addition to enabling larger deals, some PIPEs 

may provide capital to enhance deal certainty.424 In this alternative role, the financing raised via 

PIPE investment may ensure that a deal that otherwise may fail due to a high redemption rate can 

proceed to completion.  In these cases,425 the ownership stake of the PIPE investors in the 

combined company may exceed that of the non-redeeming SPAC investors.426    

PIPE investors may, therefore, come to have a larger stake in the combined company than 

SPAC IPO investors may have anticipated when making an initial investment.  As a result, 

SPAC IPO investors may thus find that they hold a smaller stake in the combined company than 

                                                 
423  See Levitt et al., supra note 416.  The difference between average and median PIPEs in this sample reflect that 
the data is positively skewed, implying that while some deals may involve low or no additional financing via PIPEs, 
other deals feature large investments outside the SPAC IPO process. 
424  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 billions) suggests 
that many PIPE offerings in connections with a de-SPAC transaction still appear to facilitate larger acquisitions 
rather than replace SPAC share redemptions.  See Levitt et al., supra note 416. 
425  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. 
426  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 at the consummation of the de-SPAC transaction. 



193 
 

they would find optimal.  Further, they may not be able to purchase an ownership claim in the 

combined company at the same price as a PIPE investor when PIPEs are offered at a discount to 

the open market price.  Although PIPE discounts may offset differences in the securities’ 

liquidity, discounts to PIPE investors contribute to the dilution of SPAC investors.   

Staff review of PIPEs in connection with de-SPAC transactions that occurred between 

January 2018 and June 2021 found the average and median discount to PIPE investors were 

respectively 1.8% and 2.4% when estimated over all PIPEs and slightly higher (respectively 

4.4% and 2.4%) for PIPE offerings without warrants.427  These results appear generally 

consistent with a recent study that was more narrowly scoped to the height of the SPAC boom 

that found, between 2019 and June 2020, that the median discount received by PIPE investors 

was 5.5% relative to the market value of the publicly traded securities, and, in 37% of SPACs 

with PIPE deals, the PIPE was at a 10% discount or more.428 This level of discount appears to be 

more broadly consistent with estimated discounts associated with PIPE financing outside the 

SPAC context as, by comparison, a recent study indicates that the average discount for PIPE 

investors is 11.2%, and for the subsample of PIPES that do not include warrants, the average 

discount is 5.7%.429  While PIPE discounts may, on average, be smaller in the context of SPACs 

than in other PIPE financing, it is nevertheless a concern that the dilution they may cause may 

not be adequately anticipated by SPAC IPO investors.          

                                                 
427 These estimates are based on staff analysis of data as described in Table 1, note a, and additional data from 
PrivateRaise. 
428 See Klausner, Ohlrogge, and Ruan, supra note 17. 
429 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 3001 PIPE transactions by U.S. firms listed on NYSE or 
NASDAQ between 2001 and 2015. 



194 
 

d.  Use of Projections in Connection with De-SPAC Transactions 

Proposed Item 1609 of Regulation S-K would apply to projections used in de-SPAC 

transactions.  Hence, proposed Item 1609 would potentially affect preparers and users of 

financial projections related to de-SPAC transactions, including SPACs, their sponsors, target 

companies, their 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 

420 SPACs with IPO dates from 2015 to 2020.430  They found that 249 (59.29%) de-SPAC 

transactions were accompanied by at least one forecast.  Dambra, Even-Tov, and George (2022) 

focus on de-SPAC transactions between January 1, 2010, and December 31, 2020.  They restrict 

their sample to de-SPAC acquisitions with a single target and exclude SPACs that either delisted 

before the merger effective date, that traded on the OTC market, or focused on the biotech 

industry, yielding a sample of 142 observations.431  They identify 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.  They removed firms 

“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 studies suggest that the use of projections is fairly common 

in the de-SPAC transactions and may have become increasingly common over time.  

                                                 
430  See Chapman, Frankel, and Martin, supra note 291. 
431  See Dambra, supra note 33. 



195 
 

e. Use of Fairness Opinions 

According to one source, in 2021, only 15% of de-SPAC transactions disclosed that they 

were supported by fairness opinions.432  In contrast, a study of mergers and acquisitions more 

broadly found that 85% of bidders obtain fairness opinions.433  The results indicate that deals in 

which bidders obtain fairness opinions may be associated with higher stock price reactions to the 

deal announcement and also better post-merger operating performance.434  This study suggests 

that, for mergers and acquisitions in which a proxy vote is required, a fairness opinion obtained 

by the bidder can mitigate information risks and enhance communications between bidder boards 

of directors and their shareholders.435 

f. SPAC Filer Status 

Figure 4 below shows the proportion of SPACs that claimed smaller reporting company 

or EGC status, or both, in their first annual report after the initial public offering.  Since 2016, 

almost all SPACs in their initial public offerings have claimed either smaller reporting company 

or EGC status, with the majority claiming both.  For example, in 2021, 399 SPACs in their initial 

public offerings claimed both smaller reporting company and EGC status, while 48 only claimed 

EGC status. 

                                                 
432  See Levitt, Jacob, Fain, Marcogliese, Tiger, & Basham, supra note 416. 
433  This finding is based on deals that occurred between 1995 and 2015, involving a publicly traded bidder that 
seeks 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 the use of fairness opinions is disclosed only if bidders are required to 
file proxy statements to solicit a shareholder vote.  They note that listing rules of the NYSE, Amex, 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, if the bidder issues less than 20% equity or uses cash to finance the deal, the bidder would not be 
required to disclose the fairness opinion even if the firm had obtained one.  See Tingting Liu, The Wealth Effects of 
Fairness Opinions in Takeovers, 53 FIN. REV. 533 (2018) (finding positive wealth effects from fairness opinions 
after the SEC approved Rule 2290 in Oct. 2007 which regulates the identification and disclosure of conflicts of 
interest of investment banks rendering fairness opinions.) 
434  Id. 
435  Id. 



196 
 

Figure 4. Annual SPAC Cohorts by Smaller Reporting and Emerging Growth Company 
Statuses Reported at Original Registration Stagea 

 
a Data presented here reflects the self-reported status disclosed by SPACs as of the Form S-1, Form F-1, or an 
amendment to either that was filed most proximate in time to the date of the initial public offering. 

g. Changes in Jurisdiction of the Combined Company 

As we consider the potential economic effects of the proposed new rules and 

amendments, we take into consideration elements of the both the economic and the regulatory 

baseline, which would include accounting for variations between the applicable legal 

frameworks in the jurisdictions in which SPACs are incorporated or organized.  Table 4 presents 

information on the jurisdiction of incorporation or organization for each SPAC that conducted its 

initial public offering after 1990 and completed a de-SPAC transaction before 2022.  The first 

two columns state the percentage of SPACs that were originally incorporated or organized in 

each of six listed jurisdictions.  The second two columns state—for each originating 

jurisdiction—the percentage of combined companies that were incorporated or organized in the 

listed jurisdictions following a de-SPAC transaction.  

0

50

100

150

200

250

300

350

400

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

EGC_Only EGC_SRC SRC_Only Neither



197 
 

While the majority of SPACs that subsequently consummate a de-SPAC transaction 

remain incorporated in the same location, Table 4 indicates that the jurisdiction of incorporation 

or organization of the combined company may change 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 incorporation or organization.  To the extent that different jurisdictions 

have different disclosure requirements and provide differing levels of investor protections, the 

baseline regulatory regime will vary across SPACs and may change upon the de-SPAC 

transaction. 

Table 4 Distribution of Combined Company Jurisdiction of Incorporation or Organization 
by SPAC Jurisdiction of Incorporation or Organization, 1990-2021a 
 

At IPO Post de-SPAC transaction 
Incorporation % of de-SPACs Incorporation % of IPOs 

Delaware 71.88% 

Delaware 84.68% 
Cayman Islands 4.03% 
Bermuda 2.02% 
Israel 1.61% 
New York 0.81% 
Utah 0.81% 
Luxembourg 0.81% 
Bahamas 0.40% 
British Columbia 0.40% 
British Virgin Islands 0.40% 
Illinois 0.40% 
India 0.40% 
Jersey 0.40% 
Marshall Islands 0.40% 
Maryland 0.40% 
Nevada 0.40% 
Ohio 0.40% 
Ontario 0.40% 
Quebec 0.40% 
Virginia 0.40% 



198 
 

Cayman 
Islands 23.48% 

Delaware 54.32% 
Cayman Islands 33.33% 
Netherlands 3.70% 
Israel 2.47% 
Luxembourg 2.47% 
British Virgin Islands 1.23% 
New York 1.23% 
Ontario 1.23% 

British Virgin 
Islands 3.77% 

British Virgin Islands 46.15% 
Delaware 15.38% 
Cayman Islands 7.69% 
Ireland 7.69% 
Mexico 7.69% 
Singapore 7.69% 
United Kingdom 7.69% 

Massachusetts 0.29% Massachusetts 100.00% 
Nevada 0.29% Cayman Islands 100.00% 
Marshall 
Islands 0.29% Nevada 100.00% 
a Estimates reported here are based on the subsample of SPAC IPOs (see supra Table 1 note a) after 
offerings withdrawn after the IPO pricing date and SPACs with a missing merger completion date 
have been removed.  State of incorporation data 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 December 31, 2021.  
 

3. Blank Check Companies 

We are also proposing an amendment to the definition of “blank check company” for 

purposes of the PSLRA safe harbor provisions.436  The proposed amendment would affect 

SPACs and certain other blank check companies that may not already be excluded from the 

PSLRA safe harbor, as well as investors and other market participants whose access to the 

informational content of forward-looking statements, or potential remedies in the case of 

material omissions or misstatements, would otherwise differ.437  We estimate that in addition to 

                                                 
436  See supra Section III.D. 
437  Although the PSLRA safe harbor may currently affect private litigation against some SPAC and blank check 
companies, those companies are subject to state and federal enforcement actions. 



199 
 

potentially affected SPACs, as previously discussed,438 approximately 30 non-SPAC entities that 

self-identified as blank check companies but did not self-identify as penny stock issuers may also 

be affected by the proposed amendment.439  Because such non-SPAC blank check companies 

may not be subject to the same limitations on duration as SPACs, the number of filings or 

disclosures they might make under the presumed protections of the safe harbor may be greater.  

However, due to the nature of a blank check company as a development stage company with no 

specific plan or purpose other than to merge with or acquire an unidentified company or 

companies, or other entity, or person,440 it is unlikely that the nature of the forward-looking 

statements such a registrant might produce would differ in substance from the informational 

content provided by SPACs and therefore should not have a differential impact on investors or 

other market participants. 

4. Shell-Company Business Combinations 

Proposed Securities Act Rule 145a and proposed Article 15 of Regulation S-X would 

affect SPACs and other shell companies (other than business combination related shell 

                                                 
438  See supra Sections IX.B.1.a & IX.B.2. 
439  This estimate is based on staff review of all registrants, by unique CIK, that filed at least one periodic or current 
report between 2019 and 2021 and, as of its most recent filing, identifies its SIC code as 6770.  We exclude CIKs 
that have already been identified as SPACs and those associated with filings that self-identify as penny stock issuers 
under Rule 419.  We note that this estimate may represent an upper bound on the number of additional affected 
parties because it is based on registrants’ self-reported SIC and penny stock issuer status.  Studies have reported that 
self-reported SIC codes may contain errors that could cause a higher number of issuers to be counted as affected 
parties than in effect would be.  See, e.g., Murat Aydogdu, Chander Shekar, & 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 versus when the registrant is 
mistaken in its belief that it is a blank check company when it may not be.  In the latter case, even if mistaken about 
its blank check company status as a registrant, the party would still be affected by the proposed amendment because 
they may currently make, or believe they are able to make, forward looking statements under the PSLRA safe 
harbor, and would not if the proposed amendment is adopted. 
440  See the definition of “blank check company” in Rule 419(a)(2)(i) of the Securities Act. 



200 
 

companies) involved in business combination transactions.  Proposed Rule 145a would impact 

the disclosures reporting shell company investors may receive and potential sources of liability.  

Proposed Article 15 of Regulation S-X would impact the financial statements associated with 

business combinations involving shell companies and, thus, would also affect parties that are 

typically associated with the preparation, review, and dissemination of financial statements and 

the information they contain.441  Table 5 below illustrates that the proportion of SPAC to non-

SPAC reporting shell-company business combinations has shifted due to the increasing number 

of SPACs entering the market.  It also shows that, in 2021, more than one-third of all targets 

acquired by a reporting shell company appear to merge with a non-SPAC entity. 

Table 5. Distribution by Year of Shell-Mergers Reported on Form 8-Ka 

  2016 2017 2018 2019 2020 2021 
SPAC 9.5% 8.8% 17.8% 30.2% 42.2% 65.2% 
Non-SPAC 90.5% 91.2% 82.2% 69.8% 57.8% 34.8% 
a Based on Form 8-Ks by calendar year of filing that contain Item 5.06 (Change in Shell 
Company Status) disclosures, excluding filings by asset-backed securities issuers. 

 
 

We estimate that in addition to existing SPACs that have yet to complete a de-SPAC 

transaction, approximately 160 additional existing reporting shell companies may be affected by 

                                                 
441  We acknowledge the possibility of a situation in which a previously non-public shell company files an initial 
registrant statement. The financial statements included in the registration statement would be required to comply 
with Regulation S-X, including the proposed amendments in Rule 15-01.  As we currently lack the data necessary to 
estimate the number of shell companies that are private, at present, that could be impacted by proposed Article 15, 
they are not included in the estimates discussed in this analysis.  However, the extent to which this may impact our 
conclusions is limited because, based on staff observation and experience with common transaction structures, we 
believe it is unlikely proposed Article 15 will impact many such shell companies.201 
 

the proposed amendments.442  Almost all of these non-SPAC reporting shell companies trade on 

the OTC market443 and tend to be smaller than SPACs in terms of market capitalization and total 

assets.444 We further estimate that approximately 11.0% (18) of these shells would also be 

affected by the proposed amendment to redefine the term “blank check company” for purposes 

of the PSLRA.445  

Our estimate of approximately 160 shell companies represents an upper bound on the 

number of potentially affected shell companies because some of these shell companies could 

engage in transactions pursuant to an exemption from registration, or otherwise may engage in 

transactions that would not require registration.  For example, if a shell company were to acquire 

another shell company, the acquiring shell would not be affected by proposed Rule 145a or 

proposed Article 15.  Similarly, a shell company that obtains a fairness determination from a 

court or authorized governmental entity might also be exempt.446  Given that a more precise 

estimate would require us to make assumptions about what proportion of future shell company 

mergers may be exempt or not require registration, we request additional data or comments that 

would help inform our expectations about how many shell companies that are not SPACs would 

also be involved in transactions that would be affected by the proposed rules.  

                                                 
442  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 (Forms 10-K, 20-F, or 40-F) or an amendment thereto filed in calendar year 2021 
by unique CIKs of entities that are not already identified as SPACs. 
443  Based on staff review of periodic filings,  approximately 72.7% of these shells trade OTC, 26.1% do not trade, 
and 0.6% each appear to have traded on Nasdaq Global Market and NYSE Market, respectively. 
444  As of yearend 2021, the average market capitalization of non-SPACs shell companies was $154,731,262.50 
while the average market capitalization of SPACs was $306,204,218.60.  Based on the most recent periodic 
disclosure filed per registrant before Dec. 31, 2021, the average total asset position of a non-SPAC shell was 
$33,666,553.41 while the average of SPAC total assets was $309,570,778.30. 
445  This estimate is based on a cross-tabulation, by unique CIK, of potentially affected parties identified as blank 
check companies (see supra note 439) and as shell companies (see supra note 442). 
446  See Section 3(a)(10) of the Securities Act; Staff Legal Bulletin No. 3A (CF) (June 18, 2008), available at 
https://www.sec.gov/corpfin/staff-legal-bulletin-3a.  

https://www.sec.gov/corpfin/staff-legal-bulletin-3a


202 
 

5.  Projections Under Item 10(b) of Regulation S-K 

The proposed amendments to Item 10(b) would update the Commission’s view on factors 

to be considered in formulating and disclosing financial projections and would specify the 

application of Item 10(b) to financial projections prepared by parties other than management.  To 

the extent that parties elect to follow the updated guidance set forth in the proposed amendments, 

it would affect registrants and other entities providing financial projections in Commission 

filings, such as a target firm involved in a business combination with a reporting registrant.  A 

recent study examined management earnings forecasts by focusing on public companies from 

2000 to 2018.447  Drawing management earnings forecast data from IBES Guidance, they find 

that management provides earnings forecasts in 15,295 (30.8%) out of 49,595 firm-years.  The 

proposed amendments to Item 10(b) would also affect investors and other users of the financial 

projections included in Commission filings, to the extent that parties elect to follow the updated 

guidance.  

6. Investment Company Act Safe Harbor 

The proposed safe harbor would affect all current and future SPACs, sponsors, investors, 

and potential target companies.  For statistics on these affected parties in the SPAC market, see 

                                                 
447  See Claude Francoeur, Yuntian Li, Zvi Singer, & Jing Zhang. Earnings Forecasts of Female CEOs: Quality and 
Consequences, REV. ACCT. STUD. (2022).  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, e.g., Zahn Bozanic, Darren T. Roulstone, and 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.)   



203 
 

our discussion above.448  For a description of Section 3(a)(1)(A) of the Investment Company Act 

under the Securities Act, see our discussion above.449 

a. Nature and Management of SPAC Assets 

Most SPACs hold a majority of their assets in a trust (or escrow) account, which is also 

required by current listing standards.450  For example, Table 6 shows that, on average, 

approximately 90% of the initial offering proceeds raised in a SPAC IPO in 2021 were deposited 

in trust accounts.  

Table 6. Average SPAC IPO Capital Raised and Amounts in Trust, 2001-2021a 

  2001-
2005 2006-2010 2011-2015 2016-2020 2021 

IPO Initial Offeringb 45.82 134.08 121.63 272.93 265.22 
IPO Offering w Overallotmentc 56.87 212.95 160.40 337.54 330.75 

Trust/Initial Offering 88.53% 97.38% 94.66% 91.46% 89.55% 
a Averages reported here are estimated over the subsample of SPAC IPOs (see supra Table 1 note a) after offerings 
withdrawn after the IPO pricing date have been removed. 
b In millions of dollars. 
c In millions of dollars, includes exercise of overallotment as reported in Dealogic. 

 

It is also our understanding that SPAC assets, particularly those held in the trust account, 

are largely invested in Government securities or Government money market funds.451  We also 

understand that SPACs generally disclose in their IPO prospectuses that any income earned on 

assets in the trust account will be used toward the de-SPAC transaction, after possible deductions 

for tax payments.  Some SPACs also disclose that a portion of the interest income could be used 

toward any potential dissolution expenses. 

                                                 
448  See supra Sections IX.B.1 and IX.B.2  
449  See supra Section VI.A.1. 
450  See supra note 392 and accompanying text. 
451  See, e.g., Rodrigues & Stegemoller, supra note 17. 



204 
 

b. SPAC Activities 

Currently, the typical SPAC discloses in its IPO prospectuses that it is formed as a blank 

check company for the purpose of effecting a business combination with one or more businesses.  

In addition, SPACs usually provide disclosures in their IPO prospectuses indicating that they 

believe they do not meet the investment company definition under Section 3(a).  They further 

typically disclose to prospective investors that if they are determined to be an investment 

company in the future, the costs and logistics of compliance with the Investment Company Act 

would be prohibitive.   

Current exchange listing standards and SPACs’ own disclosures in their initial public 

offering registration statements generally require that SPACs must combine with a target that is 

unidentified at the time of their initial public offerings.452  As a result of exchange rules and their 

own disclosed commitments to investors, SPACs generally have a limited period to find a target 

and negotiate the terms of a de-SPAC transaction agreement.453  Because of the incentives 

provided to sponsors by the SPAC structure to complete a de-SPAC transaction, the limited 

period provided for a SPAC to search for a target and complete a transaction deal may cause 

some SPACs to pursue comparatively less attractive targets as they get closer to their de-SPAC 

transaction deadlines.454  In addition, the limited period to search for a target and complete a de-

                                                 
452  See Nasdaq Listing Rule IM-5101-2 (listing standards for companies with a business plan to “engage in a merger 
or acquisition with one or more unidentified companies”); NYSE American Company Guide Section 119 (similar). 
453  This limited period may go beyond the pre-committed lifespan SPACs disclose in their IPO registration 
statements.  As we discuss in infra Section IX.B.6.c, SPACs currently may pre-commit to hold a vote on a pre-
specified extension period, if needed, to complete a de-SPAC transaction.  SPACs may also ask shareholders ex-post 
to vote for an extension of the lifespan of the SPAC, even if they did not pre-commit to such a vote.  Based on the 
sample of SPACs analyzed in infra Section IX.B.6.c, the vast majority of SPACs conclude a de-SPAC transaction or 
liquidate the SPAC within 36 months of their IPO date.   
454  There is some evidence consistent with such incentives.  See, e.g., Dimitrova, supra note 30 (finding that four-
year post-IPO buy-and-hold abnormal return is on average 8.8% lower if the acquisition is announced at the end of 
the (self-imposed) two-year deadline instead of at the estimated earlier optimal time).  



205 
 

SPAC transaction may increase the bargaining power of target companies in negotiations with 

SPACs compared to other potential buyers that do not face such regulatory or self-imposed time 

constraints.  

Most SPACs tend to pursue only one target company for a de-SPAC transaction.  Of the 

483 de-SPAC transactions that occurred over the 1990 – 2021 period involving SEC registered 

SPACs, 3.3% (16/483) of transactions had 2 or more targets (14 transactions had 2 targets, 2 had 

3 targets).455 

c. Duration Statistics: Announcement and Completion of De-SPAC 
Transactions 

 
To rely on the proposed safe harbor from Investment Company status, a SPAC would be 

required to announce a de-SPAC transaction no later than 18 months after the effective date of 

the registration statement for the SPAC’s initial public offering, and complete the transaction no 

later than 24 months after the date of the initial public offering.  For the sake of comparison to 

other current requirements, this is a shorter period than the 36 months a SPAC can remain listed 

under current exchange rules as discussed above.456 

Below we provide statistics on the timing of announcements and completion of de-SPAC 

transactions for a sample of SPACs with effective IPO dates between January 1, 2016 and 

December 31 2019.  We chose December 31, 2019, as the end date to ensure that at there is at 

least a 24-month history available for each SPAC included in the sample in order to reduce 

potential reverse survivorship bias in the estimates.457  

                                                 
455  Based on data from Dealogic M&A module as of Jan. 2022.  
456  See supra note 393 and accompanying text. 
457  Note that the number of SPAC IPOs increased significantly in the 2020-2021 period.  To the extent this increase 
has increased competition for target companies, it may affect the time it takes for more recent SPACs to announce or 
complete a de-SPAC transaction, or their ability to complete a de-SPAC transaction at all.  As of Dec. 31, 2021, 
approximately 77 of 248 SPAC IPOs in 2020 (31%) and an additional 495 of 613 SPAC IPOs in 2021 (81%) had 



206 
 

We have data on 152 SPAC initial public offerings between January 1, 2016 and 

December 31, 2019.458  Among these SPACs, all disclosed in their IPO prospectus that they 

would be limited to a 24 month lifespan or less, where almost 59% (89 of 152) disclosed that 

they would be limited to a 24-month period, and the rest to a shorter time period, in some cases 

as short as 12 months (18, or 12%, of cases).  In around 14% of the SPACs (22 of 152), there 

was disclosure in their IPO prospectus about a pre-commitment to hold a vote on an optional 

extension period ranging from three to 24 months.  There were five cases in which the 

combination of the initial lifespan and pre-committed extension period exceeded a 24-month 

potential total lifespan for the SPAC.  However, we recognize that SPACs may, and some 

currently do, ask shareholders to vote for an extension of the lifespan of the SPAC even if they 

did not pre-commit to such a vote or a specified extension period in the event of a vote. 

As of December 31, 2021, approximately 96% (146 of 152) of the SPACs in the sample 

had announced an agreement to enter into a de-SPAC transaction, and approximately 91% had 

completed a de-SPAC transaction.  Among the 13 cases (9%) in the sample where SPACs had 

not completed a de-SPAC transaction at this time, seven SPACs had been formally liquidated,459 

whereas six SPACs were still active (four of which had announced a de-SPAC transaction).  As 

of December 31, 2021, the lifespan of the six still active SPACs ranged between 25 to 37 months 

since the IPO date. 

Overall, approximately 59% (89 of 152) of the SPACs in the sample announced an 

agreement to enter into a de-SPAC transaction no later than 18-months after the date of the initial 

                                                 
not yet announced a target or have withdrawn an announced business combination and resumed searching (see supra 
Section IX.B.2).  See also supra note 413 and accompanying text.  
458  Based on data from Dealogic M&A module as of Jan. 2022. 
459  In two of these cases, a de-SPAC transaction was announced but later withdrawn. 



207 
 

public offering, and 88% (134 of 152) announced a transaction agreement no later than 24 

months after the IPO date.  Figure 5 shows the distribution of the timing of announcements for 

de-SPAC transaction agreements expressed in event-time relative to the IPO effective date for 

the 146 sample SPACs that had made such an announcement by December 31, 2021.  The 

longest time to an announcement was 39 months, and the shortest was four months. 

 

Figure 5: Distribution of De-SPAC Transaction Agreement Announcements (In SPAC IPO 
Event Time). 

 

 

Approximately 65% (99 of 152) of the SPACs in the sample had completed a de-SPAC 

transaction no later than 24 months after the IPO date, whereas only 31% (47 of 152) of the 

SPACs in the sample had completed a de-SPAC transaction no later than 18 months after the 



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IPO date.  Figure 6 shows the distribution of the timing of de-SPAC transactions expressed in 

event-time relative to the IPO effective date for the 139 SPACs in the sample that completed de-

SPAC transactions by December 31, 2021.  The longest time to completion was 43 months, and 

the shortest was eight months. 

 

Figure 6: Distribution of Completed De-SPAC Transactions (In SPAC IPO Event Time). 

  

Among the 139 SPACs in the sample that completed a de-SPAC transaction by 

December 31, 2021, the average and median times between the announcement and the 

completion of the transaction were respectively 150 days (approximately 5 months) and 142 days 

(approximately 4.7 months).  The time between announcement and completion of the merger 

was less than 6 months in 78% of the cases, and the shortest time observed in the sample was 



209 
 

less than two months (50 days).  For the subsample of 99 SPACs that completed the de-SPAC 

transactions in no more than 24 months since the IPO date, the average and median times 

between the announcement and the completion of the transaction were respectively 142 days 

(approximately 4.7 months) and 125 days (approximately 4.1 months).  For this subsample, 

approximately 79% of the de-SPAC transactions occurred less than 6 months after the 

announcement, and there were 12 cases in which the announcement of the transaction agreement 

was made more than 18 months after the IPO date. 

C.  Benefits and Costs of the Proposed Rules 

1.  Disclosure-Related Proposals 

a. SPAC Initial Public Offerings and Other Registered Offerings 

1. Definitions (Item 1601)  
 

We are proposing Item 1601 to identify certain parties and transactions to which the 

requirements of the subpart, as well as other parts of this proposal, would apply.  Defining the 

terms “special purpose acquisition company,” “de-SPAC transaction,” “SPAC sponsor,” and 

“target company” as proposed would establish the scope of the issuers and transactions subject to 

the requirements of Subpart 1600, and thereby provide both registrants and investors with notice 

of the associated obligations.  The definitions may impose costs if the new definitions are not 

consistent with current understanding and consequently cause confusion for registrants, investors 

and market participants.  Both the costs and benefits would be small to the extent that the new 

definitions are consistent with widely accepted views.  

2. Prospectus Cover Page and Prospectus Summary Disclosures 
(Item 1602) 

 
Proposed Item 1602 would require a prospectus filed in connection with a SPAC’s initial 

public offering to disclose information on certain features unique to SPAC offerings and the 



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potential associated risks, in addition to the information currently required by Item 501 and Item 

503 of Regulation S-K, on the prospectus cover page and in the prospectus summary, 

respectively, as discussed above.460  The proposed additional disclosures may reduce SPAC 

investors’ information processing costs and improve their investment decisions.  Investors in 

SPACs vary in financial sophistication and ability to process the information provided in SPAC 

IPO prospectuses.  We expect that the potential benefits may especially accrue to investors that 

are less financially sophisticated. 

Specifically, because investors are likely to allocate their attention selectively,461 

requiring disclosure regarding important features and associated risks of SPAC investments on 

the prospectus cover page (including cross-references to the locations of the more detailed 

related disclosures) and prospectus summary may increase the likelihood that investors pay 

attention to the information by making it more salient.462  In addition, the proposed additional 

disclosures in the prospectus summary may further reduce information processing costs, 

particularly for less financially sophisticated investors, by providing information in plain English 

about important SPAC features in a concise format.463  

                                                 
460  See supra Section II.E for more information about current disclosure requirements. 
461  See, e.g., George Loewenstein, Cass R. Sunstein, & Russell Golman, Disclosure: Psychology Changes 
Everything, 6 ANN. REV. ECON. 391 (2014). 
462  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). 
463  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).  Thus, summary disclosure may provide 
benefits by focusing investors’ attention and reducing information processing costs. 



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Proposed Item 1602(b)(6) would require tabular disclosure in the prospectus summary 

regarding the nature and amount of the compensation received or to be received by 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.  There is empirical evidence that visualization 

improves individual perception of information.464  For example, one experimental study shows 

that tabular reports can lead to better decision making.465  Because sponsors’ compensation may 

be a material cost to SPAC investors, the tabular format of these required disclosures may help 

investors (especially those that are less financially sophisticated) more easily process the financial 

implications of compensation of the SPAC sponsor, its affiliates and promoters, thereby potentially 

incrementally improving their investment decisions.466 

Additionally, the proposed rules and amendments would standardize this disclosure across 

all registration statements filed for SPAC initial public offerings, which may make it easier and 

less costly for investors to compare terms across offerings and thereby promote better investment 

decisions.  

Finally, to the extent the proposed additional disclosures on the cover page and in the 

prospectus summary would increase investors’ awareness of sponsors’ incentives and potential 

conflicts of interest, it may have an incremental disciplining effect on sponsors’ behavior.  For 

example, to the extent sponsors would face potentially greater scrutiny by more attentive 

                                                 
464  See John Hattie, VISIBLE LEARNING: A SYNTHESIS OF OVER 800 META-ANALYSES RELATING TO ACHIEVEMENT 
(2008). 
465  See Izak Benbasat & Albert Dexter, An Investigation of the Effectiveness of Color and Graphical Information 
Presentation Under Varying Time Constraints, 10-1 MIS Q. 59 (1986).  
466  See infra Section IX.C.1.a.4 for the discussion of proposed Item 1602(a)(4), which would require that the 
prospectus cover page include a simplified dilution table depicting the estimated remaining pro forma net tangible 
book value per share that would be realized at quartile intervals up to the maximum redemption threshold.  



212 
 

investors, they may take some additional care in finding and negotiating terms with target 

companies, or take steps to mitigate the extent of any disclosed conflict of interests. 

The proposed additional disclosures that would be required to be included on the 

prospectus cover page and in the prospectus summary may increase compliance costs for SPACs 

to the extent that they would need to provide additional information in their IPO prospectuses 

than they currently provide.  We believe that SPACs should have this information readily 

available and in some cases may already be disclosing it, such as the time frame for the SPAC to 

consummate a de-SPAC transaction.  Thus, we expect that any compliance costs resulting from 

these proposed items would not be significant. 

There could also be some potential costs for investors.  In particular, there is a risk that, 

by requiring more items to be added to the cover page and the prospectus summary, the salience 

of the current required disclosures may be reduced because they will have to compete with the 

new required disclosures for investors’ attention compared to the baseline.  In addition, because 

Item 501(b) of Regulation S-K limits the information on the outside cover page to one page, 

there is a risk that the amount of information required to be included could generally impair the 

readability of the cover page.  As a result, some investors may pay less attention to the cover 

page as a whole. 

3. Sponsors and Conflicts of Interest (Item 1603) 

Proposed Item 1603(a) would require disclosure of certain information regarding a 

SPAC’s sponsor, its affiliates and any promoters, both at the SPAC initial public offering stage 

and at the de-SPAC transaction stage.  To the extent that such disclosures are not already 

provided or are partially provided, this proposed disclosure requirement would provide investors 

with information related to the experience and incentives (due to characteristics of the 



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compensation structure, for example) of the sponsor.467  Investors may benefit from such 

disclosure, as it could allow them to better evaluate the circumstances that may impact their 

investment decision in a specific SPAC.  The proposed disclosure is likely to be beneficial to 

investors who may consider investing in a SPAC at a point in time that precedes the existence 

and disclosure of information about an acquisition target, or to investors seeking to evaluate a 

proposed de-SPAC transaction.468  

Proposed Item 1603(b) would require disclosure of conflicts of interest at both the SPAC 

initial public offering stage and at the de-SPAC transaction stage.  This disclosure would also be 

required in any Schedules TO filed in connection with a redemption.  We believe that this 

proposed disclosure requirement would benefit investors by enabling them to better assess any 

actual or potential material conflicts of interest held by sponsors, its affiliates, officers and 

directors of the SPAC, and/or promoters.  Such disclosure could allow investors to more 

accurately assess the potential risk associated with the conflicts of interest in a SPAC and thus 

make better investment decisions.   

Further, disclosure under proposed Item 1603(c) would provide investors information 

about the fiduciary duties that a SPAC’s officers and directors owe to other companies.  We 

expect that this disclosure would allow the SPAC’s shareholders and prospective 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 compete 

with the SPAC.  In addition, to the extent that a SPAC’s officers and directors owe fiduciary 

duties to other companies, these obligations may limit the attention that they are able to provide 

                                                 
467  See supra Section II.B for more information about current disclosure requirements. 
468  Academic literature provides some evidence that characteristics of the SPAC sponsor, such as experience or 
network may be indicative of its ability to select and execute quality transactions.  See, e.g., Lin, supra note 30.   



214 
 

to the SPAC.  We expect that these disclosures would benefit investors by allowing them to 

better assess the actions of the officers and directors in managing the SPACs activities, including 

a proposed de-SPAC transaction.  

Proposed Item 1603(a) may increase compliance costs for SPACs, mainly in the form of 

collecting, preparing, and filing the required information for disclosure on sponsors, their 

affiliates and any promoters.  We do not expect, however, such costs to be substantial because 

most of this information should be readily available, and some of it is currently being provided 

by SPACs. 

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 conflicts of interest; (ii) developing and maintaining methods for tracking any such 

conflicts of interest; and (iii) seeking legal or other advice.  While the direct costs associated 

with Item 1603(b) disclosure requirements would depend on the extent to which a SPAC already 

provides this disclosure under current practices, we expect these costs to generally be low.  As a 

baseline matter, 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.469  

Therefore, it would appear that most SPACs are generally aware of these actual or potential 

conflicts and would therefore only bear costs insofar as our proposed requirements would 

involve providing greater detail or specificity in the disclosures of conflicts of interest. 

Similarly, we do not expect the disclosures of a SPAC officer or director’s fiduciary 

duties to other companies, as would be required by proposed Item 1603(c) to be very costly to 

prepare.  Given the significance of a fiduciary relationship, it is unlikely that a director or officer 

                                                 
469  For examples of such disclosures, see Jog & Sun, supra note 386. 



215 
 

– and, by extension, the SPAC – would not already know what relationships would require 

disclosure.  The incremental costs to produce, track, or review records also should be low 

because signed, written documents typically accompany the entrance into a relationship that 

engenders a fiduciary duty. 

4. Dilution (Items 1602(a)(4) and 1602(c)) 

As discussed above,470 SPAC shares may experience dilution from various transactions 

by a number of parties or combinations of parties at various stages of a SPAC’s lifecycle.  For 

example, sponsors typically obtain their “promote” at a nominal value (e.g., $25,000) with most 

of their compensation typically contingent on the completion of a de-SPAC transaction.  When 

sponsors receive compensation at the de-SPAC transaction stage, their compensation comes out 

of the stakes of SPAC investors who do not redeem their shares, leading to an interactive effect 

between redemptions and the promote that magnifies the dilution.  PIPE investments, due to their 

typical discount to the IPO offering price and potential interactive effects with redemptions, can 

further dilute non-redeeming SPAC investors.  Finally, investors that redeem their shares 

typically get to keep their warrants.  Future exercises of these warrants further dilutes non-

redeeming SPAC shareholders’ equity.  Because most of these potentially dilutive transactions 

may occur after the SPAC’s initial public offering and both the direct and indirect dilutive effects 

can be unique to the specific SPAC’s structure, they may be difficult for prospective investors 

and other interested market participants to identify, anticipate, or adequately assess.  In the 

absence of a more complete appreciation of these dilutive effects, the decision to invest, vote, or 

redeem, or the price at which one might be willing to enter or exit a position, may lack relevant 

                                                 
470  See supra Section II.D for more information about existing disclosure requirements under Item 506 of 
Regulation S-K. 



216 
 

information and, as a consequence, be suboptimal.  SPAC investors who remain investors in the 

combined company absorb the above-mentioned dilution effects.  To the extent that investors 

may not understand the extent of the dilution, or may exhibit inertia regarding the decision to 

redeem, the dilution may not be reflected in market prices at the time of the target acquisition.471 

Proposed Item 1602(c) would require that registration statements filed by SPACs, other 

than for de-SPAC transactions, describe all material potential sources of future dilution 

following the SPAC’s initial public offering and include tabular disclosure of the amount of 

potential future dilution from the public offering price that will be absorbed by non-redeeming 

SPAC shareholders, to the extent known and quantifiable.  The proposed rule would benefit 

investors by providing them with more detailed information on the potential impact of dilution 

on the value of their SPAC shares, thus enabling them to better understand the effects of dilution 

on their investments and ultimately make better investment decisions.   

We are further proposing to require that registration statements on Form S-1 or Form F-1 

filed by SPACs, including for an initial public offering, include a simplified dilution table 

depicting the estimated remaining pro forma net tangible book value per share that would be 

realized at quartile intervals up to the maximum redemption threshold.  Given the empirical 

evidence that visualization improves individual perception of information and that dilution that 

may occur due to redemption may be a significant cost to investors,472 we expect that the tabular 

format of this disclosure will help investors (especially those that are less financially 

sophisticated) more easily process the financial implications of dilution and potentially improve 

their investment decisions.  Moreover, the tabular presentation may provide investors with this 

                                                 
471  See Gahng, Ritter, & Zhang, supra note 23; Klausner, Ohlrogge, & Ruan, supra note 17.   
472  See Hattie, supra note 464, and Benbasat & Dexter, supra note 465.  



217 
 

information in a format that might more accurately represent the dilution that they might 

experience if they choose to invest in the SPAC, as compared to current disclosures.473  For 

example, Figure 7 shows the average maximum allowable number of shares eligible to be 

redeemed prior to the de-SPAC transaction disclosed by SPACs in their registration statements.  

As shown, the maximum potential dilution is fairly stable over time, on average about 90% of 

net tangible book value per share.  Figure 7 also presents the average realized redemptions in de-

SPAC transactions, which appear to vary considerably over time.  Thus, despite the fact that 

SPACs are currently disclosing the maximum potential dilution that may occur as a function of 

redemptions, this information may not be as useful for investors as a presentation of the same 

information in a scenario table at quartile intervals of redemption, given that actual redemptions 

in connection with a de-SPAC transaction rarely reach the maximum allowable amount.  The 

proposed amendments would provide investors with more granular information about potential 

dilution, which could allow them to better anticipate the effects of such dilution on future 

returns.474  Additionally, the tabular format of the disclosure would standardize the dilution 

information, allowing investors to more easily analyze it and compare it across SPACs. 

  

                                                 
473  See supra note 74. 
474  See Klausner, supra note 71. 



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Figure 7. Dilution Disclosures in IPO Registration Statements vs. Realized Redemptions at 
de-SPAC 

 

 

We expect the incremental costs of these proposed disclosure requirements to be, in most 

cases, low.  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.  Second, 

while the proposed rules would require registrants to account for potential future sources of 

dilution and analyze several levels of redemption, which may require the services or input of 

quantitative specialists (analysts, forecasters, or other consultants), the material sources and the 

levels of dilution are generally common across SPAC offerings (thus a standard approach based 

on best practices may emerge, reducing costs over time) and are known and quantifiable.  For 

example, sources of dilution may include shareholder redemptions, sponsor compensation, 

underwriting fees, outstanding warrants and convertible securities, and PIPE financings.  For 

proposed Item 1602(a)(4), registrants will be required to analyze only four levels of redemption 

(i.e., 25%, 50%, 75%, and maximum redemption).  Third, many initial registration statements 

filed by SPACs already include disclosures regarding dilution.  Thus, the additional burden of 

these disclosures becoming a formal requirement may be relatively modest.  We therefore expect 

0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00

100.00

Average Realized Redemption Average Disclosed Maximum



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that the proposed disclosure requirements should benefit the market broadly and investors in 

particular, insofar as the enhanced information on potential sources of dilution improves price 

formation. 

5. Structured Data Requirement (Item 1610) 

Proposed Item 1610 would require all disclosures in proposed Items 1601-1609 of 

Regulation S-K to be tagged in Inline XBRL.475  We expect that this requirement would augment 

the informational benefits of the proposed new disclosure requirements by making them more 

easily retrievable and usable for aggregation, comparison, filtering, and other analysis.  XBRL 

requirements for public operating company financial statement disclosures have been observed 

to mitigate information asymmetry by reducing information processing costs, thereby making the 

disclosures easier to access and analyze.476  This reduction in information processing cost has 

been observed to facilitate the monitoring of companies by external parties, and, as a result, to 

influence behavior of companies, including their disclosure choices.477 

                                                 
475  See supra Section II.G. 
476  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, 127-53 (2012) (finding evidence that 
“mandatory XBRL disclosure decreases information risk and information asymmetry in both general and uncertain 
information environments”); Yuyun Huang, Jerry T. Parwada, Yuan George Shan, & Joey Wenling Yang, Insider 
Profitability and Public Information: Evidence From the XBRL Mandate (SSRN Working Paper, 2020) (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”). 
477  See, e.g., Jeff Zeyun Chen, 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, Jeong-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 (2014 Am. Acct. 
Assoc. Annual Meeting Aug. 6, 2014) (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) (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”). 



220 
 

While these observations are specific to operating company financial statement 

disclosures and not to disclosures outside the financial statements, such as the proposed 

specialized disclosure requirements applicable to SPACs, they indicate that the proposed Inline 

XBRL requirements could directly or indirectly (i.e., through information intermediaries, such as 

financial media, data aggregators, and academic researchers) provide investors with increased 

insight into the proposed specialized SPAC disclosures at specific SPACs, and allow them to 

compare it to information provided by other SPACs at the time of their initial public offerings, 

perhaps through filtering by criteria, such as offering size or the name of the sponsor.478  Also, 

like Inline XBRL financial statements (including footnotes), the proposed SPAC specialized 

disclosures would include tagged narrative disclosures in addition to tagged quantitative 

disclosures.479  Tagging narrative disclosures can facilitate analytical benefits, such as automatic 

comparison/redlining of these disclosures against that provided by other SPACs in their initial 

public offerings and the performance of targeted assessments of specific SPAC specialized 

disclosures.480 

We expect the proposed requirement to tag SPAC specialized disclosures in Inline XBRL 

would 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 footnotes) 

                                                 
478  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, 259-287 (2018). 
479  For example, proposed Item 1603 would consist largely of narrative disclosure regarding the SPAC sponsor, but 
would also include quantitative disclosure regarding the compensation paid (or to be paid) to the SPAC sponsor, its 
affiliates, and any promoters for all services rendered in all capacities to the SPAC and its affiliates. 
480  To illustrate, using the search term “warrant” to search through the text of all SPAC registration statements for 
initial public offerings to determine how many such initial public offerings disclosed the inclusion of warrants 
within SPAC sponsor compensation could return many narrative disclosures outside of the discussion (e.g., 
disclosures related to warrants offered to investors as part of the initial public offering).221 
 

and cover page information in certain registration statements and periodic reports in Inline 

XBRL.  However, SPACs are 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.  Various preparation solutions 

have been developed and used by operating companies to fulfill XBRL requirements, and some 

evidence suggests that, for smaller companies, XBRL compliance costs have decreased over 

time.481  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 typically operate as shell companies with no or nominal operations, 

it may be more likely that SPACs outsource their tagging obligations to a third-party service 

provider, and thus avoid the aforementioned software licensing and training costs.  They would, 

however, incur the costs of retaining such third party services. 

b. De-SPAC Transactions482 

1. Prospectus Cover Page, Summary, and Disclosure of Dilution 
(Item 1604) 

 
In connection with a de-SPAC transaction, many SPACs currently register an offering of 

securities using a Form S-4 or F-4.  We expect most de-SPAC transactions to include a 

                                                 
481  An AICPA survey of 1,032 reporting companies with $75 million or less in market capitalization in 2018 found 
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 for 
fully outsourced XBRL creation and filing, representing a 45% decline in average cost and a 69% decline in median 
cost since 2014.  See Michael Cohn, AICPA Sees 45% Drop in XBRL Costs for Small Companies, ACCT. TODAY 
(Aug. 15, 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 in XBRL costs per quarter), available at 
https://www.accountingtoday.com/news/aicpa-sees-45-drop-in-xbrl-costs-for-small-reporting-companies (retrieved 
from Factiva database); 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)].  
482  The benefits of proposed Item 1603 in connection with disclosures regarding sponsors and conflicts of interest in 
connection with a de-SPAC transaction on a proxy, information, or registration statement or Schedule TO are 
expected to be largely the same as the effects of those disclosures made in connection with a SPAC IPO, though 

https://www.accountingtoday.com/news/aicpa-sees-45-drop-in-xbrl-costs-for-small-reporting-companies


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Securities Act registration statement going forward.  Proposed Items 1604(a) and 1604(b) would 

require any prospectus accompanying a registration statement at the de-SPAC transaction stage 

to include certain information unique to the de-SPAC transaction on the cover page and in the 

summary, in a style and substance comparable to the additional disclosures that proposed Item 

1602 would require at the initial public offering stage.483  In addition, proposed Item 1604(c) 

would require disclosure in the prospectus of each material potential source of additional dilution 

that non-redeeming shareholders may experience by electing not to redeem their shares in 

connection with the de-SPAC transaction, a sensitivity analysis in tabular format that expresses 

the amount of potential dilution under a range of reasonably likely redemption levels, and a 

description of the model, methods, assumptions, estimates, and parameters necessary to 

understand the sensitivity analysis disclosure.484  

We expect the proposed Items 1604(a) and 1604(b) would have similar potential direct 

benefits to investors as those we discussed for proposed Item 1602 above.485  That is, we expect 

that including 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.  Additionally, the proposed additions to the 

de-SPAC transaction prospectus summary may reduce information-processing costs of investors, 

particularly less financially sophisticated investors, by providing certain SPAC-specific 

                                                 
they may be incrementally higher in so far 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.  See supra Section IX.C.1.a.3.  
We would similarly expect the costs of compliance with Item 1603 to be comparable at the de-SPAC transaction 
stage as in connection with a SPAC IPO.  However, to the extent that Item 1603 would require SPACs to disclose 
certain information in connection with their IPOs, the costs of making those same disclosures at the de-SPAC 
transaction stage should be lower because the materials necessary would have largely already been prepared.  
483  See supra Section II.E for more information about the regulatory baseline. 
484 See supra Section II.D for more information about the regulatory baseline. 
485  See discussion in supra Section IX.C.1.a.2.  



223 
 

disclosures concisely and in plain English.  Moreover, like for proposed Item 1602(b)(6), 

proposed Item 1604(b)(4) would require tabular disclosure in the prospectus summary regarding 

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 SPAC.  Presenting this information in tabular format may 

further help reduce information-processing costs for some investors.486  Additionally, proposed 

Items 1604(a) and 1604(b) would standardize the required information across all registration 

statements filed for de-SPAC transactions, making it potentially easier and less costly for 

investors to compare terms across transactions.  Overall, because of the aforementioned potential 

effects on investors’ attention and information processing costs, the proposed additional 

disclosures on the prospectus cover page and in prospectus summary may help improve 

investors’ investment decisions. 

Certain items that proposed Items 1604(a) and 1604(b) would require SPACs to include 

on the prospectus cover page and in the summary may potentially 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.  

In turn, this may have an ex ante disciplining effect on sponsors that would mitigate the potential 

costs to investors of conflicts of interests.  In addition, the SPAC would be required to state 

whether it 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 SPAC sponsor received any 

report, opinion, or appraisal from an outside party regarding the fairness of the de-SPAC 

                                                 
486  See supra notes 464 and 465 and accompanying text.  



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transaction.  Prominent disclosure of these items may increase investor attention to the fairness 

or unfairness of the transaction, which may incentivize sponsors to avoid transactions that could 

potentially be viewed as unfair.487 

As with proposed Item 1602, the additional items that proposed Items 1604(a) and 

1604(b) would require to be included on the de-SPAC transaction prospectus cover page and in 

the prospectus summary may increase compliance costs for SPACs to the extent that they would 

need to provide additional information compared to what they currently provide.  To the extent 

that SPACs already disclose some of this information or have most of this information readily 

available, these costs would be mitigated.   

There could also be some potential costs to investors from proposed Items 1604(a) and 

1604(b).  In particular, as with proposed Item 1602, there is a risk that, by requiring more items 

to be added to the cover page and the summary, the salience of the current required disclosures 

may be reduced because they will have to compete with the new required disclosures for 

investors’ attention compared to the baseline.  In addition, because Item 501(b) of Regulation S-

K limits the information on the outside cover page to one page, there is a risk that the amount of 

information required to be included could generally impair the readability of the cover page.  As 

a result, some investors may pay less attention to the cover page as a whole. 

We expect proposed Item 1604(c) would benefit investors by providing them with 

detailed information on the potential impact of dilution on the value of their SPAC shares in 

connection with the de-SPAC transaction, thus enabling them to better understand the effects of 

dilution on their investments and ultimately make better investment decisions.  Besides requiring 

                                                 
487  Here we are considering the potential incremental benefits of the placement of this information on the cover 
page and in the summary.  For a discussion of the incremental informational value of these disclosures, see infra 
Section IX.C.1.b.3.  



225 
 

disclosure of each material potential source of future dilution that non-redeeming shareholders 

may experience, proposed Item 1604(c) also would require sensitivity analysis disclosure in 

tabular format that expresses the amount of potential dilution under a range of reasonably likely 

redemption levels.  This sensitivity analysis may provide investors with information that could 

more accurately represent the dilution that they might experience if they choose not to redeem 

their shares as compared to current disclosures.488  Such more granular information about 

potential dilution may allow investors to better anticipate the effects of the dilution on future 

returns.  In addition, as discussed above,489 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.  

We expect some incremental compliance costs of proposed Item 1604(c) to the extent 

registrants are not already providing disclosures similar in nature to what is required by the 

proposed amendment.  In particular, the proposed rules would require registrants to engage in a 

sensitivity analysis to account for potential future sources of dilution and analyze several levels 

of redemption, which may require the services or input of quantitative specialists (analysts, 

forecasters, or other consultants).  However, we expect the compliance costs of providing this 

disclosure would be mitigated by several factors.  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.  Second, material sources and the levels of dilution are 

generally common across SPAC offerings (thus a standard approach based on best practices may 

emerge, reducing costs over time), and are known and quantifiable.  For example, sources of 

                                                 
488  See supra note 74. 
489  See supra notes 464 and 465, and accompanying text.    



226 
 

dilution may include shareholder redemptions, sponsor compensation, underwriting fees, 

outstanding warrants and convertible securities, and PIPE financings.  Third, although proposed 

Item 1604(c) does not specify the number of redemption levels to be analyzed, the fact that this 

disclosure could be calculated in a manner consistent with the methodologies and assumptions 

used in the disclosures provided pursuant to Item 506 elsewhere in the prospectus may reduce 

incremental costs.  Thus, depending on how significant these mitigating factors are, the 

additional burden to registrants of this disclosure may be limited. 

2.  Background, Material Terms, and Effects of the De-SPAC 
Transaction (Item 1605) 

 
Proposed Items 1605(a), (b) and (c) of Regulation S-K would require disclosure of the 

background (e.g., description of any contacts, negotiations, or transactions concerning the 

transaction), material terms, and effects of the de-SPAC transaction and any related financing 

transaction.  In addition, proposed Item 1605(d) would require disclosure of any material 

interests of a SPAC’s sponsor, officers, and directors in a de-SPAC transaction or any related 

financing transaction, including fiduciary or contractual obligations to other entities and any 

interest in, or affiliation with, the target company.490  Such disclosure would benefit investors by 

providing them with more detailed information about significant aspects of de-SPAC 

transactions, thereby enabling them to make more informed decisions.  For example, some of the 

proposed disclosures may enable investors to better assess whether the de-SPAC transaction or 

any related financing transaction has been structured in a manner that would benefit, for 

example, the SPAC’s sponsor to the detriment of unaffiliated security holders of the SPAC. 

                                                 
490 See supra Section II.F.1 for information about the regulatory baseline.  



227 
 

Proposed Item 1605(e) would require disclosure as to whether or not security holders are 

entitled to any redemption or appraisal rights, and if so, a summary of the redemption or 

appraisal rights.  These disclosures would help investors to better assess the impact of any 

redemption or appraisal rights on a proposed de-SPAC transaction, including whether the 

existence of such rights might lead some investors to redeem their securities after voting in favor 

of a de-SPAC transaction.   

The proposed disclosures could increase the compliance costs for de-SPAC transactions.  

The magnitude of these costs would depend on the amount of information that SPACs and target 

companies are already disclosing in connection with de-SPAC transactions.  To the extent that 

registrants already disclose some of this information or have most of this information readily 

available, these costs would be mitigated.   

3. Fairness of the De-SPAC Transaction and Reports, Opinions, 
Appraisals and Negotiations (Items 1606 and 1607) 

Proposed Item 1606(a) would require a statement from a SPAC as to whether it 

reasonably believes that the de-SPAC transaction and any related financing transaction 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.  In addition, proposed Item 1606(b) would require a discussion of 

the material factors upon which the statement as to the fairness or unfairness of the transaction is 

based.  Proposed Items 1606(c) through 1606(e) would 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 shareholders, and whether the 

transaction(s) were approved by a majority of directors of the SPAC who are not employees of 



228 
 

the SPAC.  These proposed rules could allow investors to better evaluate potential conflicts of 

interest and misaligned incentives in connection with the decision to proceed with a de-SPAC 

transaction, which in turn would assist them in assessing the fairness of a particular de-SPAC 

transaction and any related financing transaction to unaffiliated security holders.491 

As discussed in the baseline, SPACs rarely report the use of a fairness opinion when 

evaluations of prospective target are disclosed in de-SPAC-related filings.492  A recent review of 

de-SPAC transactions in 2021 reported that approximately 85% did not disclose that a fairness 

opinion was obtained in connection with a de-SPAC transaction.493  To the extent that the 

proposed required disclosures with respect to the fairness or unfairness of the proposed business 

combination would increase the use of fairness opinions, the cost of obtaining such services 

would present a new cost to the transaction that would likely be passed along to shareholders.  

The average costs for fairness opinions obtained by SPAC acquirers where such information was 

presented in an itemized format in SEC filings was approximately $270,000.00.494 

Thus, SPACs may incur additional costs associated with proposed Item 1606(a) to the 

extent that, in response to this proposed item, SPACs newly seek to obtain fairness opinions.  In 

addition, there is some potential for indirect costs to SPACs if they respond by providing for 

approval by unaffiliated security holders or directors, or retain an unaffiliated representative to 

act on behalf of unaffiliated security holders for purposes of negotiating the terms of a de-SPAC 

transaction of any related financing transaction.  However, some costs to collecting or producing 

                                                 
491 See supra Sections II.F.2 and II.F.3 for additional information about the regulatory baseline. 
492  See supra Section IX.B.2.e. 
493  See Levitt, Jacob, Fain, Marcogliese, Tiger, & Basham, supra note 416. 
494  As calculated over the observations in the baseline sample (reference first table in de-SPAC baseline (or its 
footnotes)) where data is available in the Dealogic M&A module or SDC Platinum database. 



229 
 

the newly required disclosures may be mitigated by other components of the regulatory baseline, 

which in this case includes the requirements imposed by self-regulatory organizations such a 

listing standards and FINRA rules.495 

In particular, if the SPAC obtained its fairness opinion from a FINRA member, some of 

the disclosures responsive to proposed Item 1606(a) may already be prepared and provided to the 

SPAC because of existing FINRA requirements.  Specifically, FINRA Rule 5150 requires its 

members (i.e., broker-dealers or underwriters) to provide specified disclosures in a fairness 

opinion if it knows, or has reason to know, that the opinion will be provided to shareholders.496  

Some of the information that is required to be disclosed includes the following: (1) whether the 

FINRA member will receive any additional significant payment or compensation contingent on 

the completion of the merger transaction;497 (2) if the FINRA member independently verified 

information provided by the company requesting the opinion, a description of the information 

that was verified;498 and (3) whether or not the fairness opinion addresses the fairness of the 

compensation to be received by the company’s officers, directors  or employees relative to the 

compensation to the public shareholders of the company.499  

Proposed Item 1607(a) would require disclosure about whether or not the SPAC or its 

sponsor has received any report, opinion, or appraisal obtained 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, the 

                                                 
495  For example, see existing FINRA Rule 5150 requirements for disclosures required of a broker-dealer when 
providing a fairness opinion in the role of financial advisor. 
496  Id. 
497  FINRA Rule 5150(a)(2). 
498  FINRA Rule 5150(a)(4). 
499  FINRA Rule 5150(a)(6). 



230 
 

sponsor or security holders who are not affiliates.  Proposed Item 1607(c) would require any 

such report, opinion, or appraisal to be filed as an exhibit 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, as applicable.  In addition, under proposed Item 1607(b), investors would receive 

information regarding, among other things, the outside party, including its qualifications and 

certain material relationships with the SPAC, its sponsors and their affiliates.  We expect that 

these disclosures would benefit investors by providing relevant information about the fairness of 

a de-SPAC transaction and any related financing transaction.  In addition, by providing more 

information to investors, these disclosures may lead to improved market participation, liquidity, 

and price efficiency.  We expect that these disclosures would increase the costs associated with 

the de-SPAC transaction.  However, those costs should be mitigated because the disclosure 

requirement does not require preparation of additional reports, appraisals and opinions, rather, it 

requires disclosure of documents that were obtained by management.  

4. Proposed Item 1608 of Regulation S-K 

We are proposing Item 1608 of Regulation S-K 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 

clarify that a SPAC must comply with the procedural requirements of the tender offer rules when 

conducting the transaction for which the Schedule TO is filed.500  For example, proposed Item 

1608 would clarify 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 requirement to keep the 

redemption period open for at least 20 business days.  

                                                 
500  See supra Section II.F.4 



231 
 

We expect that both the benefits and costs associated with this proposal to present modest 

changes from current practice, if any, because, historically, relatively few de-SPAC transactions 

have involved the filing of a Schedule TO alone and because, due to the staff position, most of 

the proposed disclosures are currently already provided.  Between 2000 and 2021, of the 

approximately 575 registrants that filed a proxy statement on Schedule 14A, an information 

statement on Schedule 14C, a Schedule TO, or a registration statement on Form S-4 or F-4 that 

could relate to a de-SPAC transaction, a small portion of those registrants (approximately 7.1% 

or 41) filed a Schedule TO.501  A smaller portion of these Schedule TO filings (approximately 

20% or 8) occurred alone (i.e., without the concurrent filing of a proxy statement, information 

statement, or registration statement that would provide additional disclosures regarding the de-

SPAC transaction) (see Figure 8).  However, given that the staff has historically expressed the 

view that a Schedule TO 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 

                                                 
501  Staff review of SPACs that conducted an IPO between 2000 and 2021 and subsequently filed any type of 
potential de-SPAC transaction related filing (SC TO, SC13E4F, PRE 14A, PRE 14C, DEFA14A, DEFA14C, 
DEFM14A, DEFM 14C, DEF 14A, DEF 14C, S-4, or F-4) found that only approximately 7.1% of such SPACs, by 
unique CIK, filed a Schedule TO.  It appears that 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 420 (“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, Yochana 
Shachmrove, & 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); Rodrigues, supra note 67 
(20.0% to 74.4% from 2003-2011); Vulanovic, supra note 414 (20% to 81.52% from 2003-2013).  As such, historic 
use may be a poor predictor for estimates of future usage. 



232 
 

and Item 1011(c) of Regulation M-A and the importance of this information in making a 

redemption decision, the proposed rule is unlikely to result in a meaningful difference in the 

nature or amount of information provided by registrants.502  

Figure 8. De-SPAC Transactions Involving Schedule TO, 2000-2021 

 

Finally, of the registrants that filed only a Schedule TO, 75% were foreign private issuers 

that originally registered an offering of shares via a Form F-1, while the remaining 25% were 

registrants incorporated or organized in a foreign jurisdiction that originally registered an 

offering of shares using a Form S-1.  It is possible that, holding all else constant, any benefits or 

costs accruing as the result of proposed Item 1608 would do so to SPACs that are similar to these 

entities that may either not hold a shareholder vote or else hold a vote that is not subject to 

federal proxy rules.  However, it is unclear what proportion of future SPACs would be of this 

                                                 
502  See supra note 103. 

SC TO Only, 20%

SC TO and Proxy or 
Information 

Statement, 39%

SC TO and S-4 or 
F-4, 7%

SC TO, Proxy or 
Information 

Statement, and S-4 
or F-4, 34%



233 
 

type, since in the event proposed Rule 145a is also adopted, the number of SPACs may be less 

likely to file Schedules TO.   

5. Enhanced Projections Disclosure Requirements (Item 1609) 

Proposed Item 1609 complements the proposed amendments to Item 10(b) of Regulation 

S-K,503 and pertains to projections made in connection with an anticipated de-SPAC 

transaction.504  Proposed Item 1609 would require a registrant to disclose who prepared the 

projections and the purposes for which the projections were prepared.  It would also require a 

discussion of all material bases of the disclosed projections and all material assumptions 

underlying projections, and any factors that may impact such assumptions.  Furthermore, the 

proposed rule would require the board or management of the SPAC or target company to 

confirm at the date of the filing whether the projections reflect their current view, and if not, the 

purpose of disclosing the projections and the reasons for any continued reliance by management 

or the board on the projections. 

In general, we expect that proposed Item 1609 would allow investors to better evaluate 

and use projections in connection with de-SPAC transactions.  The required disclosure of 

preparers’ identity and purposes for which the projections were prepared would help reveal 

potential conflicts of interest and the qualifications of the preparers’ projection ability.  The 

requirement to discuss material assumptions and underlying rationales would also inform 

investors about the verifiability of the projections.  The proposed requirement to disclose 

whether the projections still reflect the views of management or the board should provide 

investors with further insight into the reliability and utility of those projections.  Overall, the 

                                                 
503  See supra Section V.B.1; infra Section IX.C.4. 
504  See supra Section III.D & Section VI.  For additional information about the regulatory baseline for Item 1609, 
see supra Section V.B.2. 



234 
 

proposed disclosure under Item 1609 should benefit investors by helping them assess whether 

and to what extent they should rely on projections used in a de-SPAC transaction in making 

voting, redemption, and investment decisions.505 

Proposed Item 1609, by requiring projection providers to identify themselves and related 

parties to confirm their reliance on the projections, would likely also increase the preparers’ 

sense of accountability, and potentially increase their incentives to make reliable projections.506  

In turn, investors could benefit from potentially improved projections in their investment 

decisions.  The enhanced disclosure transparency about projections and the plausible improved 

projection accuracy would, in turn, facilitate more efficient allocation of capital.507 

We do not expect the direct compliance costs to be substantial since companies should 

have the required information (e.g., the party that provides the projections and the assumptions 

of growth rates or discount multiples) readily available at their disposal.  To the extent that 

proposed Item 1609 increases contextual information related to SPAC projections, investors 

                                                 
505  D. Eric Hirst, Lisa Koonce, & Shankar Venkatram, How Disaggregation Enhances the Credibility of 
Management Earnings Forecasts, 45 J. ACCT. RESEARCH 811 (2007), experimentally show 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.  Furthermore, 
Zahn Bozanic, Darren T. Roulston, & Andrew Van Buskirk, Management Earnings Forecasts and Other Forward-
looking Statements, 65 J. ACCT. & ECON. 1 (2018), demonstrate that non-earnings-forecast forward-looking 
statements can generate significant responses from both investors and analysts.  Their findings indicate that the 
forward-looking statements, even statements unrelated to earnings, can provide value-relevant information to the 
capital market participants.  
506  Auditing literature provides evidence that audit quality increases and misreporting decreases when engaging 
partners are required to sign the audit report or when their identities are disclosed.  Joseph V. Carcello & Chan Li, 
Costs and Benefits of Requiring an Engagement Partner Signature: Recent Experience in the United Kingdom, 88 
ACCT. REV. 1511 (2013), document evidence that audit quality and audit fees increase in the first year when 
engaging 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 demonstrate that PCAOB’s requirement 
of disclosing engaging partners’ identity can reduce misreporting. 
507  See Amy P. Hutton, Gregory S. Miller, & Gregory S. Skinner, The Role of Supplementary Statements with 
Management Earnings Forecasts, 41 J. ACCT. RESEARCH 867,867-890 (2003).  They find that good news earnings 
forecasts are positively associated with investor reaction (i.e., have information content) only when the forecasts are 
accompanied by verifiable supplementary forward-looking disclosures.  



235 
 

would incur incremental costs in processing the added information.508  Potentially heightened 

accountability under proposed Item 1609 may also dampen the willingness of the managements 

and boards of SPACs and target companies to provide projections, which may decrease the 

amount of forward-looking information made available to investors and thus increases valuation 

uncertainty.  To the extent that proposed Item 1609 dampens the willingness to provide 

projections, it would likely reduce projections without reasonable bases more than those with 

reasonable bases.  Thus, the incremental costs of proposed Item 1609 would likely be justified by 

the incremental benefit of increased investor protection against materially misleading or 

speculative projections in connection with de-SPAC transactions. 

6. Structured Data Requirement 

As with the proposed specialized disclosure requirements applicable to SPACs at the IPO 

stage as discussed above, proposed Item 1610 would also require that the proposed disclosures 

prepared in compliance with respective sections of Regulation S-K Subpart 1600 applicable to 

de-SPAC transactions be tagged in Inline XBRL.509  For the same reasons discussed above, we 

expect that the tagging requirement for de-SPAC transaction disclosures would augment the 

informational benefits to investors resulting from the proposed new disclosure requirements.510  

For example, tagging the disclosure of terms and amounts of the compensation received or to be 

received by a SPAC’s 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 

                                                 
508  See Elizabeth Blankespoor, Ed deHaan, & Iván Marinovic, Disclosure Processing Costs, Investors’ Information 
Choice, and Equity Market Outcomes: A review, 70 J. ACCT. & ECON. 1, 1-46 (2020).  They 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.  
509  See supra Section II.G. 
510  See supra Section IX.C.1.a.5. 



236 
 

quantitative and qualitative comparisons to similar disclosure in other de-SPAC transactions or 

make it easier to compare these disclosures – including numeric values – to those presented at 

the SPAC’s IPO stage.511 

Unlike the proposed Inline XBRL tagging requirement for SPAC specialized disclosures 

which would apply to registration statements for initial public offerings, the proposed tagging 

requirement for de-SPAC transaction disclosures would not impose a tagging obligation on 

registrants that were not previously subject to tagging obligations, because SPACs are already 

subject to Inline XBRL tagging obligations as of their first periodic report on Form 10-Q, Form 

20-F, or Form 40-F.512  As such, the Inline XBRL tagging requirement for de-SPAC transaction 

disclosures would 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.  As previously noted, there is some 

indication that these costs have trended downward in the years since the initial adoption of 

XBRL requirements for SEC filings.513 

7. Minimum Dissemination Period  

The proposed minimum dissemination period for prospectuses and proxy and information 

statements filed in connection with de-SPAC transactions is designed to ensure that SPAC 

shareholders have adequate time to review the information disclosed therein before making 

voting, investment and redemption decisions.  To the extent that this would provide investors 

with more time than they would otherwise have because the SPAC’s jurisdiction of incorporation 

or organization does not provide for a minimum dissemination period before a shareholder 

meeting or action by consent, or has a minimum dissemination period of fewer than 20 calendar 

                                                 
511  See proposed Item 1604(a)(3) of Regulation S-K. 
512  See supra note 110 and accompanying text. 
513  See supra note 481 and accompanying text. 



237 
 

days, this may allow them to make more informed choices.  Relative to the current baseline, this 

proposal is likely to provide its greatest potential benefits to SPAC shareholders in de-SPAC 

transactions involving SPACs that do not incorporate by reference any information about the 

SPAC or the target, and are not incorporated in Delaware, or do not file a Schedule TO.514  

While Delaware General Corporation Law only requires that due notice of an upcoming meeting 

be provided 20 days prior to the event, and does not mandate a minimum period for 

dissemination of proxy statements or joint prospectus/proxy statements required by the federal 

securities laws,515 we believe, based on staff experience reviewing filings, that the notices of the 

meeting mandated by Delaware 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 notice requirement.516   

While we recognize that the additional time we propose to provide to shareholders for 

review of de-SPAC transaction related disclosures may in effect shorten the time a SPAC may 

otherwise have to pursue a business combination within its limited time before dissolution, the 

incremental costs of formalizing a minimum review period should in most cases be low based on 

the existing requirements and practices discussed above and market-specific incentives.  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 

                                                 
514  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 proposed 20 calendar day minimum dissemination period would 
not have an incremental effect.  Similarly, there would be no incremental effect on the dissemination of Forms S-4 
or F-4 in connection with a de-SPAC transaction if the registration incorporates any information about the registrant 
or its target by reference because a similar 20 business day requirement applies.  See supra note 127.  Further, in the 
event that proposed Rule 145a is adopted, we anticipate the majority of de-SPAC transactions would be 
accompanied by an S-4 or F-4 in which incorporation by reference is highly likely to occur. 
515  See supra Section II.F.5 
516  See supra Section III.B for more information about the regulatory baseline.  



238 
 

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. 

Notwithstanding this, we acknowledge that any costs associated with this proposal would 

likely increase as the dissolution date approaches, because, under such conditions, unique 

logistical costs like expedited printing and delivery would accrue.  It is plausible that a de-SPAC 

transaction would not be able to proceed due to these proposed timing requirements, which could 

result in negative consequences (e.g., forgone returns) for sponsors and SPAC shareholders.  

Given the significance of a de-SPAC transaction to SPACs and targets, however, we think it is 

more likely that SPACs and targets will account for the proposed dissemination period in 

establishing a timeline for their business combination.  Another potential cost of the minimum 

dissemination period is that it 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.  However, given 

the state of current market practices as discussed above, we expect the incremental costs on this 

aspect of deal-formation uniquely attributable to the proposed minimum dissemination period are 

minimal. 

8. Aligning Non-Financial Disclosures in De-SPAC Disclosure 
Documents  

We are proposing 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, the registration 

statement or schedule filed in connection with the de-SPAC must include disclosures relating to 

the target company that would be provided in a Form S-1 or F-1 for an initial public offering.517  

Currently, this information is required to be included in a Form 8-K with Form 10 information 

                                                 
517  See supra Section III A. 



239 
 

that must be filed within 4 business days after the completion of a de-SPAC transaction.  In 

contrast, the proposed disclosure requirements would require that target company information be 

provided to shareholders before they make voting, investment, or redemption decisions in 

connection with the de-SPAC transaction.  This 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.  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. 

We expect that a SPAC or its sponsors would absorb the related costs if the proposed 

additional information necessitates earlier or increased information production and 

dissemination, although a portion of these costs may accrue to non-redeeming shareholders if 

costs are paid from the trust or escrow account of the SPAC.  Generally, we expect that such 

costs will be low to the extent that SPACs disclose this information about the target company 

prior to the completion of the de-SPAC transaction; however, we recognize that some items may 

be more costly to disclose earlier than others. 

The costs and benefits of these proposed disclosures 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.  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 



240 
 

least one of the required Form 10 items by reference.518  Most of the Form 8-K filings that 

incorporated items by reference referred to disclosures previously filed in a proxy or information 

statement (88% of filers), and 46% of these filings incorporated disclosures from a registration 

statement filed in connection with the de-SPAC transaction.519   

Figure 9. Incorporation by Reference in Form 8-K by Regulation S-K Disclosure Itema 

 

a Data here represents the frequency of incorporation by reference per item that would be affected by the proposed 
amendment as a percent of Forms 8-K filed in connection with a de-SPAC transaction (described in Figure 3 note a) 
that incorporated any item by reference. 

 

Figure 9 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 Items 101 (description of business), Item 102 (description of property), 

and Item 103 (legal proceedings) of Regulation S-K are most commonly incorporated by 

                                                 
518  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. 
519  Because some filers incorporate disclosure by reference from more than one source, the total percentage of usage 
across sources exceeds 100%. 

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

101 102 103 304 403 701241 
 

reference.  Less frequently incorporated by reference are disclosures pursuant to Item 304 

(changes in and disagreements with accountants on accounting and financial disclosure), Item 

403 (security ownership of certain beneficial owners and management, assuming the completion 

of the de-SPAC transaction and any related financing transaction), and Item 701 (recent sales of 

unregistered securities) of Regulation S-K.520  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 this proposed rule may be mitigated. 

As a result of this proposed rule, investors may obtain disclosure required by Item 403 of 

Regulation S-K regarding the target company’s beneficial ownership structure before making a 

voting, redemption, or investment decision in connection with the de-SPAC transaction, which 

could, in some cases, represent a meaningful change to the informational environment in 

advance of the completion of a de-SPAC transaction, particularly when this information may be 

critical to an investor’s ability to evaluate potential conflicts of interest.  In addition, the 

disclosures may allow investors to identify potential misalignments of interests between non-

redeeming shareholders and other parties to the de-SPAC transaction.  This proposed 

requirement therefore may provide increased investor protections and generally improve the 

information environment for investors to make a voting, redemption, or investment decision in 

connection with the de-SPAC transaction.   

                                                 
520  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 and disagreements with accountants 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%. 



242 
 

Because a SPAC and its intended target should have access to this information in advance 

of a de-SPAC transaction, we do not anticipate significant costs to preparing such information 

and incorporating it into disclosures disseminated at an earlier stage in the de-SPAC transaction 

process.   

 We believe that the proposed additional information is unlikely to impose significant 

changes to the information that a SPAC would otherwise disclose or the costs for incremental 

changes relative to current market practice.  To the extent that these requirements may lead to the 

production and dissemination of information that would not be disclosed until after the 

completion of the de-SPAC transaction, the availability of this information in the registration 

statement or schedule filed in connection with the de-SPAC transaction may improve investor 

decision-making. 

9. Re-Determination of Smaller Reporting Company Status 

The main benefit from the proposed amendment to re-determine smaller reporting 

company status of a post-business combination company following a de-SPAC transaction 

would be to reduce regulatory arbitrage by requiring a target company going public through a de-

SPAC transaction to provide similar information to investors as a comparable company 

conducting a traditional initial public offering.521  For larger target companies, this would require 

providing more comprehensive and more detailed disclosure to investors soon after the de-SPAC 

transaction.  Overall, we expect this amendment to increase investor protection by allowing 

investors to assess the combined company more thoroughly and sooner.  Large target companies 

may also reap the benefit of reduced cost of capital insofar as providing additional historical 

                                                 
521 See infra Section III.C for more information on the regulatory baseline. 



243 
 

periods of financial statement data might further reduce information asymmetries or otherwise 

improve price formation.522  

The proposed amendment would increase compliance costs compared to the current 

baseline for large target companies that, after combining with the SPAC, do not meet the smaller 

reporting company definition as of the proposed new re-determination date.  Those companies 

may need to provide more detailed disclosure to investors soon after the de-SPAC transaction.  

We note, however, that some of these companies that meet the definition of emerging growth 

company could avail themselves of the accommodations associated with EGC reporting 

requirements, which could mitigate some of the disclosure costs required by the proposed 

amendment.  We do not expect the proposed amendment to impose any costs on post-business 

combination companies when, at the time of the de-SPAC transaction, neither the SPAC nor the 

target company  meet the smaller reporting company definition. 

2. Liability-Related Proposals 

In addition to the proposals discussed above pertaining to disclosures, we are proposing 

to clarify and amend the existing liability framework in an effort to resolve certain ambiguities 

and protect investors.  In this section, we discuss the potential costs and benefits of the proposed 

amendment to Form S-4 and Form F-4 to require that the SPAC and the target company be 

treated as co-registrants when these registration statements are filed by the SPAC in connection 

with a de-SPAC transaction.  In addition, we discuss the proposed amendment to the definition 

of “blank check company” for purposes of the PSLRA to remove the “penny stock” condition, 

and proposed Rule 140a that would clarify the underwriter status of SPAC IPO underwriters in 

registered de-SPAC transactions. 

                                                 
522  See supra note 368. 



244 
 

a. Private Operating Company as Co-Registrant to Form S-4 and 
Form F-4 

 
When a de-SPAC transaction is registered on a Form S-4 or F-4, the party that files a 

registration statement currently depends on the structure of the merger or acquisition.  While the 

result of any de-SPAC transaction involving a registered offering would be that the target 

company becomes a public reporting company, the liability it and its officers and directors face 

for disclosures in the registration statement that inform investors’ decisions regarding the de-

SPAC transaction is largely a function of how the transaction is structured.  For example, when 

the de-SPAC transaction is structured such that the SPAC registers the offering of its shares to 

target shareholders and the target merges into the SPAC, the SPAC would typically sign the 

registration statement as the registrant and the SPAC and certain officers and directors of the 

SPAC that sign the registration statement would incur liability for disclosures in the registration 

statement.  Alternatively, a de-SPAC transaction can be structured so that the target registers the 

offering of its shares to SPAC shareholders, such that the target would typically be the registrant, 

and the target and certain officers and directors of the target would sign the registration statement 

and incur liability for disclosures in the registration statement.523   

We are proposing to amend Form S-4 and Form F-4 to require that the SPAC and the 

target company be treated as co-registrants when a registration statement is filed by the SPAC in 

connection with a de-SPAC transaction.  As a result, both the SPAC and the target, and certain 

officers and directors of the SPAC and target, would be required to sign the registration 

statement and incur potential liability for statements and omissions therein.  Treating the target 

as a co-registrant in this situation is intended to provide similar investor protections as if the 

                                                 
523 See supra Section III.C for more information about the regulatory baseline.  



245 
 

target had entered the public market through a traditional IPO (or a de-SPAC transaction 

structure in which a Securities Act registration statement is filed by the target, rather than the 

SPAC). 

The liability associated with being a co-registrant could incentivize the target company’s 

directors and management to exercise greater care in the preparation and presentation of material 

information about the company, its financial condition, and its future prospects; perform more 

robust due diligence with respect to materials it obtains from third-party sources in connection 

with the de-SPAC transaction; and more closely monitor disclosures in the registration 

statement.  Thus, the proposed requirement could improve the reliability of the disclosure 

provided to investors about the target company, reduce the instances of misstatements and 

omissions, and generally improve investors’ decision making with regard to these transactions. 

The proposed co-registrant requirement would increase compliance costs for targets 

compared to the baseline in cases where the target would not already have been the registrant at 

the time of the de-SPAC transaction.  Under the proposed rule, a target and its signing officers 

and directors would be liable to investors for the accuracy of the disclosures in such a 

registration statement.  This increase in potential liability from the current baseline for targets 

and their signing officers and directors could impact the decision of a private company to go 

public via a de-SPAC transaction.  It is possible that, due to some of the ways the proposed rules 

would alter differences, actual or perceived, between the disclosure requirements and liabilities 

associated with becoming a public reporting company via a traditional IPO versus being acquired 

by a SPAC, some targets could reconsider a traditional initial public offering instead.  It is also 

possible that other potential targets may determine that the liability costs (including, but not 

limited to, increased litigation risk and the potential need for new insurance coverage or higher 



246 
 

premiums for existing coverage) associated with being a co-registrant would be too high and 

elect not to go public.  Given the multifaceted benefits of being a public company, however, it is 

unclear that the costs of being a co-registrant would be the determining factor that would 

discourage a target from going public through a de-SPAC transaction or outweigh other factors 

that typically drive the going public decision such as liquidity for company insiders and the 

lower cost of capital. 

b. PSLRA Safe Harbor 
 

Defining the term “blank check company” for purposes of the PSLRA as proposed, 

would make the PSLRA safe harbor unavailable for forward-looking statements made in 

connection with an offering by a blank check company that is not issuing “penny stock” as 

defined in Exchange Act Rule 3a51-1, including an offering of securities by a SPAC in 

connection with a de-SPAC transaction.524  As noted above, many commentators have raised 

concerns about the use of forward-looking statements that they believe to be unreasonable in de-

SPAC transactions.525  By providing greater clarity regarding the availability of the PSLRA safe 

harbor, the proposed amendment should strengthen the incentives for a blank check company 

that is not issuing penny stock, including a SPAC, to avoid potentially unreasonable and 

potentially misleading forward-looking statements, and to expend more effort or care in the 

preparation and review of forward-looking statements.526  For example, if less time and effort is 

required to produce meaningful cautionary statements than to produce careful and robust 

forward-looking statements, absent the proposed changes, market participants may have an 

incentive to underinvest in the production of reliable forward-looking statements.  By increasing 

                                                 
524  See supra Section IX.B.3.  See also supra Section III.E for more information about the regulatory baseline.  
525  See supra note 33. 
526 See supra note 279. 



247 
 

the potential costs to companies of making forward-looking statements, the proposed changes are 

expected to increase the incentives for blank check companies that are not issuing penny stock to 

exercise more care in making any such statements.  Similar investor protection benefits may 

apply to registered securities offerings of non-SPAC registrants that would meet the current 

definition of a “blank check company” but for the “penny stock” condition.   

The net economic effect of this proposed amendment, however, would depend on, among 

other things: (1) the extent to which practitioners currently are willing to advise their clients that 

the PSLRA safe harbor is available for forward-looking statements made by blank check 

companies that are not issuing penny stock that otherwise meet the conditions of the safe harbor; 

(2) the extent to which the market does not already discount the informational value of forward-

looking statements; and (3) the costs associated with valuable information that may no longer be 

provided due to any perceived increase in the risk of potential litigation.     

While amending the definition of “blank check company” in this manner would clarify 

that the statutory safe harbor in the PSLRA is not available for forward-looking statements made 

in connection with offerings by SPACs or other blank check companies that are not penny stock 

issuers, it could impose costs on any such companies that currently attempt to rely upon the safe 

harbor to communicate value-relevant information to investors through forward-looking 

statements.  For such companies, this proposed amendment could increase the perceived risk of 

litigation and dissuade them from including such forward-looking information.  This information 

could be valuable in offerings involving business combinations with private operating companies 

given that less historical information regarding private companies is likely otherwise 



248 
 

available.527  In addition, we note that, while there is no prohibition on the use of forward-

looking statements in connection with an initial public offering, the fact that the express terms of 

the PSLRA provide that the safe harbor is unavailable for such statements, and the concomitant 

heightened litigation risks associated with providing forward-looking statements, may have 

created a chilling effect given that, in staff experience, projections are almost never provided to 

the public in connection with an IPO.  The proposed amendments similarly may lead to fewer 

forward-looking statements in connection with offerings by SPACs or other blank check 

companies that are not penny stock issuers.  This effect would likely be stronger for blank check 

companies affected by the proposal that are considering whether to include forward-looking 

statements about younger target companies with fewer observable periods of profit historically, 

as most of their value typically comes in the form of future growth options.  Such blank check 

companies that are not penny stock issuers might otherwise be the most likely to use forward-

looking statements to communicate the potential for future value creation to investors at the time 

of a business combination. 

Additionally, if the proposed amendment reduces the amount of potentially relevant 

information presented to investors in connection with a de-SPAC transaction or other business 

combination involving a blank check company that is not a penny stock issuer due to perceived 

litigation risk, this may negatively affect investors’ ability to accurately value these companies 

and allocate their investments accordingly.  For blank check companies that are SPACs, such 

costs could be mitigated if some of the other amendments that we are concurrently proposing are 

                                                 
527  See Vijay Jog & Bruce J. McConomy, 30 J. BUS. FIN. & ADVER. 125 (2003) (finding that the voluntary provision 
of earnings forecasts in connection with Canadian IPOs (subject to a two-year horizon maximum and accompanied 
by a statement of opinion by a public accountant) had incremental value beyond other methods of signaling firm 
quality such as the use of a highly reputable underwriter or auditor, including “a favorable and noticeable impact on 
the degree of underpricing and the post-issue return performance” and that benefits are most pronounced for “small 
firms and those making conservative forecasts.”). 



249 
 

adopted and improve the flow of relevant information to investors at the de-SPAC transaction 

stage.  Similar costs may also be mitigated for investors in non-SPAC blank check companies 

not issuing penny stock that would be subject to proposed Rule 145a as reporting shell-

companies.528  Because reporting shell company shareholders may, under proposed Rule 145a, 

receive registration statement disclosures in connection with a reporting shell company’s merger 

activity, the proposed rule could result in incremental information about the target company 

being provided to reporting shell company shareholders, to the extent that those investors would 

not otherwise receive such information. 

c. Underwriter Status and Liability in Securities Transactions 
 

Proposed Rule 140a would clarify that a person who has acted as an underwriter in a 

SPAC IPO and participates in the distribution by taking steps to facilitate the de-SPAC 

transaction, or any related financing transaction, or otherwise participates (directly or indirectly) 

in the de-SPAC transaction will be deemed 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.  The statutory definition of an “underwriter” under the Securities Act is broad 

and does not include an element of intent; as a result, a person could perform functions that 

would cause the person to meet the statutory definition of an “underwriter” within the meaning 

of Section 2(a)(11) of the Securities Act without appreciating that they are doing so.  This may in 

turn lead to both deal-specific and market-wide economic inefficiencies such as underinvestment 

in diligence or screening.  For example, an investment banker, or financial advisor providing 

services in connection with a de-SPAC transaction may not adequately fulfill their role as a 

                                                 
528  See supra Section IX.B.4 and note 445.  



250 
 

gatekeeper for disclosures in a de-SPAC transaction registration statement if they are unaware 

that they are an underwriter and face potential liability as such.529    

A key benefit from proposed Rule 140a would be the incentives that it would create for 

SPAC IPO underwriters that may be subject to Section 11 liability for registered de-SPAC 

transactions to perform due diligence to ensure the accuracy of the disclosures in these 

transactions.  Improved due diligence would enhance investor protection by allowing investors to 

better evaluate the target company and, in turn, potentially make better investment decisions.  

We expect that clarifying the application of underwriter liability, combined with the disclosures 

of proposed Subpart 1600 of Regulation S-K, could significantly improve the ability of SPAC 

shareholders to evaluate the target company.  This may allow these investors to better price the 

securities of the combined company and decrease the likelihood that they overvalue the target 

company under consideration.  Additionally, more clearly defined Section 11 liability may 

enhance shareholders’ ability to pursue a remedy, if needed. 

Potential Section 11 liability may deter a SPAC IPO underwriter from participating in the 

de-SPAC transaction or any related financing transactions by increasing their costs.  The extent 

to which proposed Rule 140a would impose new costs on SPAC IPO underwriters would depend 

heavily on the extent to which they do not already perform due diligence that would be sufficient 

to perfect such a defense in connection with the de-SPAC transaction or a related financing 

transaction.  If SPAC IPO underwriters decide not to provide services in connection with the de-

SPAC transaction or a related financing transaction due to proposed Rule 140a, the SPAC may 

incur greater monetary and non-monetary costs related to identifying, negotiating with, and 

hiring financial advisors.  Also, because a significant portion of SPAC IPO underwriting fees 

                                                 
529  See supra Section III.E.3 for more regulatory baseline information.  



251 
 

(typically 3.5% of IPO proceeds) is usually deferred until, and conditioned upon, the completion 

of the de-SPAC transaction, SPAC IPO underwriters that decide not to participate in the de-

SPAC transaction as a result of this proposal may revise their compensation agreements so that 

they would be paid only at the time of the SPAC initial public offering.  Such a change in the 

timing of compensation may increase the up-front transaction costs of the initial public offering 

for SPAC investors and sponsors.  It is possible, however, that underwriter compensation may 

decrease if underwriters would not be expected to provide any services in connection with the 

de-SPAC transaction or any related financing transaction. 

Alternatively, proposed Rule 140a may cause SPAC IPO underwriters to demand higher 

compensation for their participation in the de-SPAC transaction or any related financing 

transaction given the potential exposure to Section 11 liability.  The fees that SPAC IPO 

underwriters currently charge for their efforts in connection with a SPAC initial public offering 

generally range between 5% and 5.5% of the initial public offering proceeds, with potentially 

additional merger advising fees charged at the de-SPAC transaction stage.  It is difficult to 

predict whether these fees would increase to incentivize SPAC underwriters to participate in de-

SPAC transactions or the amount of any such increase.  For comparison, the underwriter fees in 

the traditional initial public offering process, where underwriters have Section 11 liability, are, 

on average, 7% of the IPO proceeds.530  It is possible, however, that SPAC IPO underwriters 

could demand higher fees for potentially bearing Section 11 liability in connection with the de-

SPAC transaction or any related financing transaction.  Any increase in the compensation of 

SPAC IPO underwriters would increase the transaction costs to investors and sponsors, 

potentially lowering their returns on their investment.   

                                                 
530  See, e.g., Hsuan-Chi Chen & Jay Ritter, The Seven Percent Solution, 55 J. FIN. 1105 (2000). 



252 
 

Finally, to the extent that SPAC IPO underwriters decide not to participate in the de-

SPAC transaction or any related financing transaction due to potential Section 11 liability, 

investors would not have the protection of any due diligence that SPAC IPO underwriters may 

have performed in connection with such transactions.  However, if SPAC IPO underwriters are 

able and willing to absorb some of the costs associated with potential Section 11 liability (e.g., 

because of other benefits, such as revenues from future repeat business with sponsors), the 

potential cost increase for SPAC shareholders and sponsors may be small. 

3. Shell-Company Related Proposals 

a. Proposed Rule 145a 

Proposed Rule 145a would deem 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.  Proposed Rule 145a is intended to address concerns regarding the use of reporting 

shell companies generally as a means by which private unregistered companies access the U.S. 

capital markets.  One reason for these concerns is that reporting shell company shareholders may 

not receive the Securities Act protections (including disclosure and liability) they receive in a 

traditional IPO because of transaction structure.  Under the proposed rule, SPACs and other 

reporting shell companies would have to register these deemed sales by filing a Securities Act 

registration statement unless there is an applicable exemption.531 

Proposed Rule 145a would potentially provide shareholders in a reporting 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.  

                                                 
531  See supra Section IV.A.2 for more information about the regulatory baseline.   



253 
 

Currently, if a reporting shell company buys a target by issuing its shares as consideration for the 

interests of the target shareholders, and the reporting shell company is the surviving entity, 

reporting shell company investors are unlikely to receive a 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.   

Proposed Rule 145a is intended to address potential disparities in the types of disclosure 

and liability protections available to reporting shell company shareholders depending on the 

transaction structure used in a reporting shell company business combination, and thus, is 

expected to bolster investor protection for reporting shell company shareholders.  This could be 

of particular benefit to shareholders in reporting shell companies that may not otherwise receive 

information about the intended target, or potentially even notification that a specific business 

combination will be entered into, until after the transaction has occurred.  Additionally, receipt of 

registration materials may provide a beneficial nudge to reporting shell company shareholders 

who might otherwise be vulnerable to inertia by calling attention to the nature in which their 

investment would be transformed should they continue to hold their securities.532  However, 

these informational benefits to affected reporting shell company shareholders may be mitigated 

to the extent that the reporting shell company is able to rely on an exemption from registration 

and shareholders do not receive offering materials in connection with the deemed sale.  Because 

it is unclear the extent to which reporting shell company shareholders may be able to anticipate 

which disclosure and liability protections will be available to them at the time of a business 

                                                 
532  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”). 



254 
 

combination (as a function of whether an exemption would be available), the extent to which 

proposed Rule 145a might improve price or capital formation is also unclear. 

As a result of proposed Rule 145a, reporting shell companies, including SPACs, would 

be required to register the deemed sale of their securities to their shareholders at the time of 

certain business combinations, unless there is an available exemption.  Costs would increase to 

the extent that a business combination is not already structured in a manner that otherwise would 

have been considered a sale to the reporting shell company shareholders under the securities 

laws.  This would include all costs associated with conducting a registered offering of securities, 

such as preparing a Securities Act registration statement, if no exemption is available.  The 

proposed 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, such as through the use of cash, rather than stock, as 

consideration.  Because proposed Rule 145a would deem such a transaction to involve a sale to 

reporting shell company shareholders that would need to be registered unless there is an 

applicable exemption, affected parties may opt not to pursue such a transaction rather than incur 

the new transaction costs involved.  There may also be financial-exclusion related costs if 

reporting shell companies are increasingly incentivized to pursue exemptions from registration 

and as a consequence pre-emptively seek to place their securities with only certain types of 

investors such as accredited investors or non-accredited sophisticated investors.   

To the extent that this proposal would apply the strict liability standard of Section 11 to 

transaction-related disclosures to which it would not otherwise apply, we expect there to be extra 

costs associated with greater care in preparation and review of any reporting shell company 



255 
 

registration statement.533  Also, there could be some costs associated with timing issues 

generated by SEC staff review of any registration statement.  Some of these costs may be 

mitigated to the extent that the reporting shell company or target is already preparing disclosure 

documents, particularly Securities Act registration statements, in connection with a business 

combination that would be covered by proposed 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 or F-4.  Reporting shell companies and SPACs also typically prepare Forms 

8-K containing Form 10 disclosures that are filed shortly after the business combination.  

b. Financial Statement Requirements in Business Combination 
Transactions Involving Shell Companies 

 
Proposed Article 15 of Regulation S-X and related amendments aim to align more closely 

the financial statement reporting requirements in business combinations involving a shell 

company and a private operating company with those in traditional initial public offerings.  

These amendments may reduce the potential for regulatory arbitrage by private companies that 

go public through a business combination with a shell company rather than a traditional initial 

public offering.  Furthermore, the proposed disclosure and audit requirements (e.g., proposed 

Rule 15-01(a)) may reduce information asymmetry surrounding shell company business 

combinations, including de-SPAC transactions, which may in turn benefit private operating 

companies going public by reducing the cost of capital.534  The proposed rules and amendments 

                                                 
533  See generally supra Section IX.C.2 discussion on costs of increased liability. 
534  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 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.  



256 
 

that clarify applicable definitions and streamline compliance processes (e.g., Rule 15-01(b), (c), 

(d), (e)), are expected to reduce ambiguity and facilitate compliance.   

The proposed rules and amendments may allow investors to more readily locate and 

process relevant information, reduce processing costs, and increase their confidence in the 

reporting provided by entities involved in these business combinations.535  In turn, the proposed 

rules and amendments may help investors to more efficiently make voting, redemption, and 

investment decisions.  In addition, many of the proposed rules and amendments would codify 

existing staff guidance or financial reporting practices.  Thus, to the extent that registrants are 

already preparing statements and reports consistent with the proposed rules and amendments, the 

incremental benefits and costs would be limited.  Below, we discuss the potential benefits and 

costs of each individual item under proposed Rule 15-01 of Regulation S-X and the other 

amendments.536 

1. Rule 15-01(a) Audit Requirements of Predecessor 

Proposed Rule 15-01(a) would align the level of audit assurance required for the target 

private operating company in merger transactions involving a shell company with the audit 

requirements for an initial public offering of equity securities.  The proposed rule would codify 

existing staff guidance that financial statements of the business, i.e., target private operating 

company, in a transaction involving a shell company should be audited to the same extent as a 

registrant in an initial public offering; that is, 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.   

                                                 
535  See supra note 508. 
536  See supra Section IV.B for additional regulatory baseline information. 



257 
 

Proposed Rule 15-01(a) should benefit investors by requiring assurance over financial 

statements consistent with a traditional IPO.537  To the extent that audited financial statements 

may have more predictive power of future cash flows, the proposed rule also may benefit shell 

companies and target private operating companies by lowering their cost of capital.538  The 

proposed amendment may, however, increase the compliance costs (e.g., audit costs) of the 

business combination.  To the extent that target private operating companies are, in practice, 

already including financial statements audited under PCAOB standards, the above incremental 

benefits and costs likely would be limited.   

2. Rule 15-01(b) Number of Years of Financial Statements 

Under proposed Rule 15-01(b), a shell company registrant would be permitted to include 

in its Form S-4/F-4/proxy or information statement two years of statements of comprehensive 

income, changes in stockholders’ equity, and cash flows for the private operating company for 

all transactions involving an EGC shell company and a private operating company that 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 or not.    

For such transactions, registrants may benefit from reduced cost of producing audited 

financial statements because this rule would potentially reduce the number of years of financial 

statements required from three years to two years.  For those transactions, this proposed rule 

would cause some information loss for investors.  However, at least two years’ of statements of 

                                                 
537  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).  The author documented 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.  
538  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). 



258 
 

comprehensive income, changes in stockholders’ equity, and cash flows for the private operating 

company would be provided, the same amount that would be required for an initial public 

offering.  

3. Rule 15-01(c) Age of Financial Statements of the Predecessor 

Proposed Rule 15-01(c) would provide that the age of financial statements for a private 

operating company that would be the predecessor to a shell company in a registration statement 

or proxy statement would be based on whether the private operating company would qualify as a 

smaller reporting company if it were filing its own initial registration statement.  Because we 

believe that this proposed amendment would be consistent with existing practice, we do not 

expect it to have significant economic effects for registrants or investors.  This proposed rule also 

should help maintain consistency in disclosure requirements across the different routes of going-

public, which may reduce compliance uncertainty for registrants and their predecessors and 

increase investor confidence.   

4. Rule 15-01(d) Acquisitions of Businesses by a Shell Company 
Registrant or Its Predecessor That Are Not or Will Not Be the 
Predecessor 

 
Proposed Rule 15-01(d) would require application of Rules 3-05 or 8-04 (or Rule 3-14 as 

it relates to a real estate operation), the Regulation S-X provisions related to financial statements 

of an acquired business, to acquisitions of businesses by a shell company registrant, or its 

predecessor, that are not or will not be the predecessor to the registrant.  Given our understanding 

that this proposed amendment codifies current market practices, we believe that the incremental 

benefits and costs should be limited.  

We also are proposing to amend Rule 1-02(w) of Regulation S-X to require that the 

significance of the acquired business be calculated using the private operating company’s 



259 
 

financial information as the denominator instead of that of the shell company registrant.  The 

current use of the shell company registrant, which has nominal activity, for the denominator 

results in limited to no sliding scale for business acquisitions, including those made by the 

private operating company that will be the predecessor to the shell company because every 

acquisition would be significant and thus require financial statements.  Therefore, the proposed 

amendment may alleviate registrants’ compliance burden to the extent that it would not result in 

disclosure related to insignificant acquisitions.  Although, the proposed amendment may reduce 

the information available to investors about business acquisitions by the private operating 

company that will be the predecessor to the shell company, it may also reduce investors’ 

information processing costs by focusing on financial statements of acquired businesses that are 

significant rather than all acquired businesses.  

This proposed amendment to Rule 11-01(d) may change the application of Rule 11-

01(b)(3) such that subsequent business acquisitions may be tested against pro forma amounts that 

combine the SPAC and the private operating company.  This may result in fewer subsequent 

acquisitions being significant because the denominator of the significance tests, including the 

combined total assets of the private operating company and SPACs, are larger than only the 

private company’s total assets.  Accordingly, registrants’ compliance burden would likely be 

reduced.  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.  

Proposed Rule 15-01(d)(2) would require a shell company that omits from a registration 

statement or proxy statement the financial statements of a recently acquired business that is not 

or will not be its predecessor pursuant to Rule 3-05(b)(4)(i) file those financial statements in an  



260 
 

Item 2.01(f) Form 8-K.  The proposed amendment would alleviate any ambiguity regarding the 

timing in which these financial statements are required to be filed, which would facilitate 

compliance for the registrant.  This amendment also should help ensure that investors receive 

predictable and timely disclosure about the acquired business. 

5. Rule 15-01(e) Financial Statements of a Shell Company 
Registrant After the Combination with Predecessor 

 
Proposed Rule 15-01(e) would allow a registrant to exclude the pre-acquisition financial 

statements of a shell company (including a SPAC) for periods prior to the acquisition once the 

following conditions have been met: (1) the financial statements of the shell company have been 

filed for all required periods through the acquisition date, and (2) the financial statements of the 

registrant include the period in which the acquisition was consummated.  The proposed rule 

could reduce disclosure 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.  Thus, this proposed rule should reduce compliance costs related to 

filing previous year financial statements of a shell company.  Investors may also benefit from the 

increased efficiency in processing business combination filings. 

6. Other Amendments 

We are proposing additional amendments to Regulation S-X, as well as an amendment to 

Form 8-K.539  The proposed amendment to Rule 11-01(d) would state that a SPAC is a business 

for purposes of the rule, which may cause an issuer that is not a SPAC to be required to file 

financial statements of the SPAC in a resale registration statement on Form S-1.  This proposed 

                                                 
539  See supra Section IV.B.6 for additional regulatory baseline information.261 
 

amendment may facilitate the compliance process for companies engaging in an acquisition with 

a SPAC and alleviate their compliance burden.  Investors also would likely benefit from having 

the financial statements of the SPAC, particularly when they underpin adjustments to pro forma 

financial information in a transaction when an operating company is the legal acquirer of a 

SPAC.  As a result of the proposed amendment, a registrant may incur additional compliance 

costs if it is required to provide financial statements of the SPAC in a resale registration 

statement.  However, any additional costs should be mitigated to the extent that financial 

statements of the SPAC were previously prepared, audited, and filed with the Commission.   

The proposed revision to Item 2.01(f) of Form 8-K, which would apply to all shell 

companies, clarifies that the information provided in the Form 8-K should relate to the “acquired 

business” and not the “registrant,” as currently stated in the Form.  The proposed 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 “acquired businesses” due to registrants’ more consistent 

application of Item 2.01(f).  

We are also proposing amendments to Rules 3-01, 8-02, and 10-01(a)(1) of Regulation S-

X to clarify that the requirement of “financial statements” would apply to both the registrant and 

its predecessors rather than only to the registrant alone, as the existing rules may unintentionally 

imply for the balance sheet in Rules 3-01 and 8-02 and financial statements for Rule 10-01(a)(1).  

Because these proposed amendments would codify existing financial reporting practices, they 

should not impact registrants’ compliance costs. 



262 
 

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 certain filings with the Commission.  

The proposed amendments would update this guidance.540  More specifically, the proposed 

amendments would 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 proposed amendments 

to Item 10(b) would also state that projections that are not based on historical financial results or 

operational history should be clearly distinguished from projected measures based on historical 

financial results or operational history.  In addition, the proposed amendments would 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 measure or operational history 

with equal or greater prominence.  Finally, for projections based on a non-GAAP measure, the 

proposed amendments to Item 10(b) would state that the presentation should include a clear 

definition or explanation of the non-GAAP measure, a description of the most closely related 

GAAP measure, and an explanation why the non-GAAP measure was selected instead of a 

GAAP measure.  To the extent that registrants conform projections included in Commission 

filings to some or all of the proposed amendments to the guidance set forth in Item 10(b), 

investors would have additional information to evaluate the reasonableness of the projections and 

make more informed investment decisions.  For example, the proposals related to historical 

financial results or operational history could inform investors about potential biases in 

                                                 
540  See supra Section V.B.1 for additional regulatory baseline information.  



263 
 

assumptions underlying different financial projections and help them more efficiently process the 

underlying assumptions of the financial projections in making their investment decisions.541  

These benefits would be mitigated to the extent that registrants are already providing this 

information, or include projections of future economic performance that do not follow some or 

all of the proposed amendments.   

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 proposed amendments, investors may benefit from improved care and 

presentation with respect to any third-party projections in a registrant’s filing.  These benefits 

would be mitigated to the extent that registrants already follow the Commission’s guidance set 

forth in Item 10(b) for third party projections included in their filings, or choose not to do so.  To 

the extent that registrants follow the guidance in the proposed amendments to Item 10(b), the 

incremental compliance costs are likely to be limited.  Registrants should already have 

information about historical financial results or operational history and GAAP financial 

measures, and should be able to easily obtain this information in connection with any included 

third-party estimates.  Moreover, potential liability for false or misleading projections is likely to 

shape disclosure practices with respect to third-party projections in addition to the existing 

guidance in Item 10(b). 

The proposed amendments to Item 10(b) could discourage registrants from including 

projections in their filings, which would provide investors with less information for their 

                                                 
541 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) (By employing a sample from 1994 to 
2007, this article shows management forecasts providing over half of accounting-based information to the market.  In 
summary, the management forecast literature suggests that earnings projections and realizations both provide value-
relevant information to the market.). 



264 
 

investment decisions.  In addition, the proposed additional contextual disclosure, to the extent 

included by registrants, could increase investors’ processing cost of any included financial 

projections. 

5. Investment Company Act Safe Harbor 

As discussed above, whether a SPAC meets the definition of investment company under 

Section 3(a)(1)(A) of the Investment Company Act in the period between its IPO and either the 

completion of its de-SPAC transaction or its dissolution is a question of facts and 

circumstances.542  Currently, SPACs typically provide disclosures indicating that they believe 

they do not meet the investment company definition under Section 3(a).  They further typically 

disclose to prospective investors that if they are determined to be an investment company in the 

future, the costs and logistics of compliance with the Investment Company Act would be 

prohibitive.  We are, however, concerned that SPACs may fail to recognize when their activities 

raise the investor protection concerns addressed by the Investment Company Act.  To assist 

SPACs in focusing on, and appreciating when, they may be subject to investment company 

regulation, we are proposing Rule 3a-10, which would provide a safe harbor from the definition 

of “investment company” under Section 3(a)(1)(A) of the Investment Company Act that we 

believe would enhance investor protection.543 

We have designed the proposed conditions of the safe harbor to align with the structures 

and practices that we preliminarily believe would distinguish a SPAC that is likely to raise 

investor protection concerns under the Investment Company Act from those that we believe 

generally do not.544  Specifically, the proposed rule would promote investor protection by 

                                                 
542  See supra Section VI.A. 
543  See supra Section VI.   
544  See supra note 295 for a description of investor protection concerns addressed by the Investment Company Act. 



265 
 

highlighting to SPACs and their sponsors the potential Investment Company Act concerns that 

SPAC activities may raise, such that investors would benefit from a reduced risk that the SPACs 

they invest in will engage in activities typically associated with investment companies but 

without the investor protections provided by the Investment Company Act.  This may, in turn, 

reduce the possibility for regulatory arbitrage, which may be used by some SPACs in an attempt 

to operate like an investment company without investment company registration.545  A reduction 

of the possibility of regulatory arbitrage would also reduce costs related to potential uncertainty 

about a SPAC’s legal status and promote confidence in the SPAC market among market 

participants.  Finally, a reduction in the possibility of regulatory arbitrage would potentially 

promote competition among all companies engaging in investment management activities 

regulated by the Investment Company Act.  

In terms of expected investor protection benefits for investors in SPACs that would rely 

on the proposed safe harbor, the safe harbor conditions are designed to ensure that SPACs do not 

engage in activities that would make them investment companies.  For example, the proposed 

conditions on the nature and management of SPAC assets are designed to ensure that a SPAC 

relying on the safe harbor would not engage in portfolio management practices resembling those 

that management investment companies employ.546  

In addition, the proposed conditions for SPAC activities are designed to ensure that 

SPACs relying on the safe harbor would have a business purpose aimed at completing a single 

de-SPAC transaction, after which the surviving company would be primarily engaged in the 

                                                 
545  The significant compliance costs of investment company registration under the Investment Company Act may 
give some SPACs an incentive to try to engage in such regulatory arbitrage. 
546  See supra Section VI.B.1. 



266 
 

business of the target company or companies and have at least one class of exchange listed 

securities.547  As a result, a SPAC relying on the safe harbor would not be engaging in activities 

that raise investor protection concerns addressed by the Investment Company Act.   

Finally, the proposed duration conditions are designed to ensure that a SPAC relying on 

the safe harbor would have a limited time period to announce and complete a de-SPAC 

transaction before being required to distribute the SPACs assets in cash to investors.548  The 

proposed 18-month condition for the announcement of a de-SPAC agreement and condition that 

the de-SPAC transaction close within 24 months would potentially reduce the risk that investors 

may come to view a SPAC holding securities for a prolonged period as a fund-like investment, 

thereby necessitating the regulatory protections of the Investment Company Act.  We recognize 

that most SPACs are listed on a national securities exchange and as such are subject to exchange 

listing standards requiring that the SPAC completes a de-SPAC transaction within 36-months (or 

three years) of the effectiveness of its IPO registration statement.549  For such SPACs the 

proposed safe harbor duration condition would have reduced benefits since the exchange rules 

already provide a limit on the duration of the SPAC, albeit 12 months longer that the proposed 

limit. 

Beyond providing investor protection benefits, we expect that the proposed safe harbor 

could reduce compliance costs for some market participants.  Specifically, because registering as 

an investment company and complying with the associated Investment Company Act 

requirements would be potentially cost-prohibitive for most SPACs, we expect registrants, 

sponsors, and investors would all benefit from the additional certainty regarding a SPAC’s status 

                                                 
547  See supra Section VI.B.2. 
548  See supra Section VI.B.3. 
549  See supra note 393 and accompanying text.  



267 
 

to the extent it meets the conditions of the safe harbor.  Such benefits would directly accrue for 

SPACs that already meet the conditions of the proposed safe harbor, or for future SPACs that 

would meet the conditions even in the absence of the proposed safe harbor.  Because of the 

compliance costs and significant operational changes involved with investment company 

registration, we expect that most SPACs that do not presently meet the conditions of the 

proposed safe harbor would seek to fall within the safe harbor by making changes to their 

operations in order to meet the safe harbor conditions.  However, for some SPACs that currently 

do not meet such conditions, there may be potentially meaningful costs related to bringing the 

operations in line with the new safe harbor (discussed in more detail below).550  We also expect 

that most future SPACs that would otherwise under the baseline have run operations not meeting 

the safe harbor conditions would take advantage of the legal certainty conferred by the proposed 

safe harbor and elect to meet the conditions.  In addition, because SPACs that operate within the 

boundaries of the safe harbor would be assured that they would not qualify as investment 

companies, there may also be an increased propensity for sponsors to launch new SPACs 

operating within the safe harbor conditions to the extent that they might not have otherwise 

chosen to create a SPAC due to the uncertainty of the Investment Company Act status.  Thus, the 

reduced uncertainty regarding the legal status of SPACs operating within the proposed safe 

harbor could facilitate capital formation.  Finally, the proposed safe harbor would also promote 

efficiency of a SPAC’s compliance process by providing a clear framework for SPACs to 

determine their status under the Act. 

                                                 
550  As discussed in more detail below, such SPACs may alternatively seek to operate outside the safe harbor without 
making any operational changes or make other changes to their operations in order to avoid meeting the definition of 
an investment company under Section 3(a)(1)(A) of the Investment Company Act, including, for example, by 
avoiding investing, reinvesting or trading in securities.  



268 
 

To the extent the potential benefits to investors of current and future SPACs operating 

under the new safe harbor would be significant, we may see an increase in investor demand for 

SPACs that could potentially lower the cost of capital for SPACs.  In turn, a lower cost of capital 

could increase the size and number of SPAC IPO offerings and thereby promote capital 

formation.  

For current or future SPACs that would meet the safe harbor conditions absent the 

proposed rule, we do not expect any direct costs from the proposed safe harbor.  By contrast, for 

SPACs currently not meeting the proposed safe harbor conditions, or for future SPACs that 

would otherwise not meet the safe harbor conditions, there may be costs related to SPACs 

changing their operations to meet the conditions or to make other changes to their operations in 

order to avoid falling under the definition of an investment company under Section 3(a)(1)(A) of 

the Investment Company Act. 

In terms of potential costs of bringing SPAC operations in line with the proposed safe 

harbor conditions, we do not expect that the proposed safe harbor conditions with respect to the 

nature and management of SPAC assets would impose significant costs on SPACs and their 

sponsors and investors, as it is our understanding that most SPACs’ assets are already held as 

government securities, government money-market funds, or cash items.551  We also understand 

that SPACs generally are not actively managing these assets, most of which are held in an 

escrow or trust account.552  To the extent there are some SPACs that are currently holding other 

types of assets, they would have to liquidate such assets and move them into an allowable asset 

class prior to completion of the de-SPAC transaction to rely on the proposed safe harbor, and 

                                                 
551  See supra Section IX.B.6.a. 
552  Id. 



269 
 

would thereby incur some transactions costs and possibly also realize some capital losses 

depending on how market conditions for such assets have changed.  

With respect to the proposed safe harbor conditions for SPAC activities, we do not expect 

the condition that SPACs have to seek to complete a single de-SPAC transaction to impose any 

significant costs on SPAC operations under the baseline.  It is our understanding that almost all 

current SPACs seek to complete one single de-SPAC transaction, albeit such a transaction may 

involve multiple target companies, which would still be feasible under this proposed safe harbor 

condition  

We also do not expect the proposed condition that a SPAC wishing to rely on the safe 

harbor to be primarily engaged in the business of seeking to complete a de-SPAC transaction 

would impose any significant incremental costly constraints on SPAC activities under the 

baseline.  It is our understanding that most SPACs presently communicate to investors their sole 

intent to seek a target company to operate and that they do not intend to act as an investment 

company under the Investment Company Act.553 

Adherence to the proposed duration conditions under the safe harbor is likely to impose 

costs on SPACs that would seek to avail themselves of the proposed safe harbor by limiting the 

time they have to search for a target company and complete a de-SPAC transaction compared to 

the baseline.  The option of waiting to invest can be valuable, and to the extent that SPACs 

would have to shorten the duration of their search for an appropriate target company and 

complete a de- SPAC transaction in order to take advantage of the safe harbor, the proposed 

                                                 
553  See supra Section IX.B.6.b. 



270 
 

duration conditions would potentially reduce the value of this option for SPACs.554  

Additionally, to the extent an expected value-increasing de-SPAC transaction would not occur 

under the proposed duration conditions, but it could have under the baseline, the proposed rules 

may lead to forced liquidation of the SPAC and impose associated costs on both investors  and 

sponsors (in particular, the loss of their respective portions of the expected value increase).  

However, because of the typical compensation structure of SPAC sponsors, they have strong 

incentives to complete a de-SPAC transaction rather than liquidating the SPAC and returning the 

proceeds in the trust or escrow account to the SPAC’s shareholders.  Therefore, SPACs that are 

seeking to meet the proposed safe harbor conditions may in some cases compromise on the 

quality of the type of targets pursued to speed up their search, or offer to pay more for the target 

to complete a de-SPAC transaction sooner, compared to under the baseline.555  In some 

circumstances, the duration conditions may give sponsors of SPACs seeking to avail themselves 

of the proposed safe harbor increased incentives to complete a de-SPAC transaction even if 

liquidation would be the better choice for investors.  That is, the duration conditions may 

increase the agency costs of the sponsors’ managerial control.  However, such agency costs 

would be mitigated by other provisions of this proposal, such as the proposed specialized 

disclosure and procedural requirements in de-SPAC transactions and the proposed amendments 

aligning de-SPAC transactions with traditional initial public offerings.556 

                                                 
554  The value of the option to wait derives from the fact that whereas the choice to wait is generally reversible, the 
choice to invest now rather than later is generally irreversible.  See, e.g., Robert McDonald & Daniel Siegel, The 
Value of Waiting to Invest, 101 Q. J. ECON. 707, 707-27 (1986). 
555  See supra note 454 for some evidence of such behavior under SPAC’s current self-imposed duration limitations.  
556  See supra Sections II.F and III. 



271 
 

Based on the data presented above for recent SPACs that have at least a 24-month 

history,557 approximately 65% completed a de-SPAC transaction no later than 24 months after 

the IPO date.  Thus, the proposed 24-month condition for completion of a de-SPAC transaction 

may be a binding constraint for a significant percentage of SPACs.  For the same sample of 

SPACs, the condition that a SPAC would need to announce a de-SPAC transaction agreement in 

a Form 8-K filing no later than 18 months after the IPO date would have been met by 

approximately 59% of the SPACs.558 Therefore, unconditionally, the 18-month announcement 

condition is potentially binding for a larger percentage of SPACs than the 24-month de-SPAC 

transaction completion condition.  The data also show that if a sample SPAC had met the 24-

month transaction completion condition, around 12% of such SPACs (12 of 99 cases) would not 

have met the 18-month announcement condition.  Conversely, among the sample SPACs 

meeting the 18 month announcement condition, only approximately 2.2% of such SPACs (2 

cases of 89) would not have met the 24 month condition.  Among all sample SPACs, around 

57% (87 of 152) would have met both the 18-month and the 24-month deadlines.  Thus, we 

expect that the combined effect of the two proposed duration conditions would be to force a 

significant proportion of SPACs that would seek to take advantage of the safe harbor to conclude 

their search for a target sooner than they would have under the baseline or forgo a de-SPAC 

transaction, either of which could potentially impose costs on SPACs and their investors and 

sponsors, as discussed above. 

A SPAC that seeks to rely on the proposed safe harbor would also be required to 

distribute its assets in cash to investors as soon as reasonably practicable if it does not meet 

                                                 
557  See supra Section IX.B.6.c. 
558  Id. 



272 
 

either the 18 month deadline or the 24 month deadline.  Because a SPAC would be required to 

hold only liquid assets such as cash items, government securities, or government money market 

funds, to rely on the proposed safe harbor, we do not expect SPACs to incur significant 

incremental cost from this condition in terms of direct transaction costs.  Moreover, a SPAC 

already must plan for the distribution of its assets back to the investors if not used in a de-SPAC 

transaction.  Therefore, this condition should also not impose a new significant burden on a 

SPAC. 

The proposed duration conditions may lead SPACs to complete less profitable de-SPAC 

transactions, or fail to complete a de-SPAC transaction at all.  To the extent investors anticipate 

this, there may be a reduction in investor demand that leads to fewer SPAC initial public 

offerings and/or less capital being raised in these offerings, which could potentially reduce 

capital formation depending on the type of investments SPAC investors would shift their funds 

to instead.  In addition, an increase in SPACs that liquidate without a de-SPAC transaction 

and/or a reduction of capital raised through SPACs may ultimately result in fewer publicly traded 

operating companies and therefore a reduced investment opportunity set for investors.  Such 

negative investment opportunity effects may be mitigated to the extent potential SPAC targets 

would instead go public through initial public offerings without SPAC involvement.    

The proposed duration conditions may also affect the bargaining environment in de-

SPAC transactions.  Knowing that SPACs would face a regulatory imposed deadline for when to 

announce an agreement in order to qualify for the safe harbor, target companies may deliberately 

prolong negotiations so that they can attempt to extract better terms as the regulatory imposed 

deadlines approaches.  Such strategic behavior by targets may reduce returns to SPAC investors 

further, but may not be an economic loss per se if the transaction is still completed, as the 



273 
 

immediate effect in such a case would be a pure wealth transfer from SPAC investors to target 

company owners.  The potential for an increase in target bargaining power would be mitigated 

by the fact that most SPACs’ securities are listed on a national securities exchange and therefore 

already subject to the exchanges’ required deadlines (36 months or 3 years) for completion of a 

business combination.  However, to the extent target company bargaining power would increase 

and lead to worse terms in de-SPAC transactions for investors it could potentially reduce ex ante 

demand among investors for SPAC investments, which could reduce the number of operating 

companies ultimately being traded in public markets, all else being equal.  However, such effects 

would be mitigated if potential target operating companies instead access public capital markets 

in alternative ways.  

Any SPAC that would find the proposed safe harbor conditions too costly to comply with 

could seek to not rely on the safe harbor and instead choose to bear the legal uncertainty of 

operating outside of it.  Besides the direct compliance costs associated with being an investment 

company, a SPAC that operates as an investment company would also potentially be subject to 

delisting, as current exchange rules do not appear to provide for SPACs to operate as an 

investment company and maintain their listing. 

As an alternative to relying on the proposed safe harbor, it is possible that current or 

future SPACs would seek to avoid being considered an investment company under the 

Investment Company Act by holding different assets than are commonly held today.  However, 

holding different assets (such as cash items) may provide a lower return than holding the types of 

assets permitted under the safe harbor conditions.  Thus, the possibility of switching assets to 



274 
 

cash items to avoid being an investment company may not fully mitigate the potential costs 

imposed on the SPAC market from the proposed safe harbor conditions.559 

D. Effects on Efficiency, Competition, and Capital Formation 

1. Efficiency 

The proposed rules and amendments would enhance and standardize disclosure about 

specific aspects inherent to the SPAC structure at both the SPAC initial public offering stage and 

the de-SPAC transaction stage.  Requiring the SPAC and the target company to provide such 

disclosure may in some cases afford market participants greater access to information relevant to 

voting, redemption, and investment decisions.  By increasing the standardization and 

comparability of disclosures, the proposed rules may make it easier for investors to properly and 

efficiently process information about SPACs and for market prices to reflect such information.  

In addition, invested capital may be more likely to be more efficiently deployed.     

Additionally, the proposed rules would increase the incentives for issuers and 

underwriters to exercise the care necessary to ensure accuracy in disclosures by affirming the 

underwriter status of SPAC IPO underwriters in connection with de-SPAC transactions and 

proposing a new definition of “blank check company” for purposes of the PSLRA safe harbor.  

In addition, the proposed rules regarding shell company business combination transactions would 

make certain disclosures and liabilities more consistent with traditional IPOs, which could 

benefit investors and potentially decrease the cost of capital for shell companies.  To the extent 

that disclosure accuracy is improved, investors would have access to more reliable information 

when making their investing decisions, which would lead to an increase in market efficiency.   

                                                 
559  As indicated in supra note 314, if a SPAC were to significantly change its asset composition contrary to its 
original representations, it would raise questions whether the initial representations were false and misleading.  



275 
 

2. Competition 

By improving the informational environment at the SPAC initial public offering and the 

de-SPAC stages through changes in disclosure requirements and the scope of liability, the 

proposed rules and amendments could encourage greater competition between SPAC sponsors 

and SPAC underwriters, in both SPAC IPO and de-SPAC activities.  For example, by 

standardizing and increasing the comparability between the disclosures provided by SPACs, the 

proposed rules and amendments may lead to improved investor awareness and more efficient 

information processing.  To the extent that the proposed rules and amendments lead to an 

increase in competition between shell company mergers, including de-SPAC transactions, and 

traditional initial public offerings, they may bring down the costs of capital raising through these 

approaches. 

If the proposed rules and amendments create significant costs that lead to a reduction in 

shell company mergers and overall initial public offering activity in the SPAC market, this could 

reduce competition for investment opportunities.  Such a reduction could result in higher fees in 

both the traditional IPO and SPAC markets.  Additionally, if some of the proposed new rules and 

amendments disincentivize underwriters and PIPE investors from participating in de-SPAC 

transactions and related financings, it could reduce competition among service and capital 

providers in the SPAC market and lead to higher fees. 

To the extent that the proposed safe harbor from the Investment Company Act would 

reduce the costs of compliance, it may encourage additional sponsor participation in the SPAC 

market and thus encourage competition among SPACs.  However, for potential SPACs that 

would not meet the safe harbor conditions, the proposed safe harbor may increase the costs of 



276 
 

sponsoring a SPAC, and thus the proposed rule may have an adverse effect on competition 

among SPACs. 

3. Capital Formation 

Enhanced disclosure at both the SPAC initial public offering and the de-SPAC stages, 

combined with a stronger incentive to perform better due diligence in the de-SPAC transaction 

stage, would likely improve investor protection at both stages.  In addition, the proposed rules 

and amendments for shell company mergers would likely improve investor protection.  For 

example, proposed Rule 145a would help shareholders of reporting shell companies more 

consistently receive the full protections of the Securities Act disclosure and liability provisions in 

business combinations involving reporting shell companies, regardless of the transaction 

structure.  Increased protections could incentivize more investors to invest in shell companies, 

including SPACs, thus enhancing capital formation.  In addition, to the extent that the proposed 

safe harbor from the Investment Company Act reduces regulatory uncertainty and thus 

encourages participation in SPACs, it may also lead to an increase in capital formation.560  

If the proposed rules and amendments create significant costs for shell companies, 

including SPACs, this may limit the number of private companies that go public through shell 

companies, including a de-SPAC transaction mechanism, or at all.561  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 

                                                 
560  As discussed in supra Section IX.C.5, an increase in investor demand for SPACs could potentially lower the cost 
of capital for SPAC, which may increase the size and number of SPAC IPO offerings. 
561  For example, as discussed in more detail in supra Section IX.C.5, for SPACs that would take advantage of the 
proposed Investment Company Act Safe Harbor, the duration requirements could potentially lead investors to 
anticipate less profitable de-SPAC transactions or a lower likelihood of completion of de-SPAC transactions, which, 
in turn, could reduce investor demand for SPAC initial public offerings.  Moreover, an increase in SPACs that 
liquidate without a de-SPAC transaction and/or a reduction of capital raised through SPACs may ultimately result in 
fewer publicly traded operating companies and therefore a reduced investment opportunity set for investors.   



277 
 

consider the traditional initial public offering channel a more viable alternative.  We are not able 

to estimate how many companies would consider using a traditional initial public offering 

mechanism if the cost of the overall SPAC transaction structure increases.  It is possible, 

however, that a significant increase in the cost of shell company mergers and de-SPAC 

transactions could deter some private companies from going public, and thus potentially reduce 

overall initial public offering activity and capital formation. 

E. Reasonable Alternatives 

1. Disclosure-Related Proposals 

a. Require Disclosure of Policies and Procedures That Address 
Conflicts of Interest 

As an alternative to Item 1603 as proposed, we could include a complementary 

requirement to describe any policies and procedures used or to be used by a SPAC to minimize 

potential or actual conflicts of interest related to disclosures provided in response to proposed 

Items 1603(b) and 1603(c).  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.  On the other hand, requiring this information would increase compliance costs for SPACs 

and may cause some of these companies to adopt policies and procedures that would not be 

efficient or cost-effective given their particular organizational structure.  In this regard, we note 

that there could be incentives to provide such disclosure voluntarily, as it would indicate to 

investors the degree to which conflicts of interest may be ameliorated.  

b.  Certain Reports, Opinions, or Appraisals 

We are proposing to require the filing of reports, opinions, or appraisals provided to the 

SPAC or its sponsor relating to valuation and/or fairness of a de-SPAC transaction or related 



278 
 

financing transactions (Item 1607) as exhibits to registration statements and schedules provided 

in connection with a de-SPAC transaction.  We are also proposing to require disclosures 

summarizing the negotiation, report, opinion, or appraisal and 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 could require disclosure of only a summary of the 

reports, opinions, appraisals, and negotiations.  This could reduce some of the costs of 

compliance to the extent that it is more costly to obtain a report that will become public.  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. 

c. Require a Fixed Re-Determination Date to Measure Public Float 
for Smaller Reporting Company Status 

When re-determining a post-business combination company’s eligibility for smaller 

reporting company status, instead of requiring the public float threshold to be measured as of a 

date within four days after the consummation of the de-SPAC transaction, we could alternatively 

require the re-determination to occur on a fixed date, such as the consummation date or on the 

fourth day after consummation.  A fixed re-determination date would have the benefit of 

establishing a consistent date for all post-business combination companies to use and remove any 

management judgment in the selection of a re-determination date, while still requiring that the 

re-determination of smaller reporting company status occur before the post-business combination 

company makes its first filing.  However, reduced flexibility regarding the time frame within 

which the required re-determination must be made could increase costs for post-business 

combination companies without substantial additional benefits for investors.  



279 
 

d. Re-Determine Smaller Reporting Company Status of a Post-
Business Combination Company Without a Public Float Test 

As another alternative, we considered whether the re-determination for smaller reporting 

company status of the combined company following a de-SPAC transaction should require only 

a re-measurement of the revenue component of smaller reporting company test and not its public 

float component.  Generally, smaller reporting company status is re-determined on an annual 

basis based on the issuer’s public float as well as annual revenues.  Revenues of the combined 

company may be more relevant to smaller reporting company status than public float because, 

generally, the target company has generated revenue while the SPAC has not done so.  

Accordingly, the revenue test may be the more determinative factor than the public float test in 

determining whether the combined company following de-SPAC transaction remains a smaller 

reporting company 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 smaller reporting company status.  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, 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.   

However, compared to public float, revenue, if used as a sole basis of the significance 

test, may be subject to a greater degree of managerial discretion.562  Also, using revenue alone 

may expose a large number of investors to business-specific risks because SPAC targets may 

                                                 
562  See Jenny Zha Giedt, Modelling Receivables and Deferred Revenues to Detect Revenue Management, 54 (2) 
ABACUS 181, 181–209 (2018) (focusing on the SEC Accounting and Auditing Enforcement Releases, i.e., AAER, 
from 1982 to 2016, and documenting that forty-seven percent of all financial misstatements are related to revenue). 



280 
 

represent nascent industries that could feature extended pre- or low-revenue periods but, as 

indicated above, may have a public float following a de-SPAC transaction that would exceed the 

threshold for smaller reporting company status.  Thus, we believe it is appropriate that these 

companies should take the public float into account in re-determining smaller reporting company 

status following the consummation of a de-SPAC transaction. 

e. Structured Data Requirement 

We could change the scope of the proposed Inline XBRL tagging requirements for the 

proposed SPAC disclosures, such as by excluding certain subsets of registrants or disclosures.  

For example, the tagging requirements could exclude the SPAC initial public offering 

disclosures.  Under such an alternative, SPACs would submit initial public offering disclosures 

in unstructured HTML or ASCII and would not incur Inline XBRL compliance costs until their 

first periodic filing on Form 10-Q, 20-F, or 40-F.563  This could make it incrementally easier for 

SPACs to consummate an initial public offering.  However, narrowing the scope of the proposed 

tagging requirements, whether based on filing, offering size, or other criteria, would diminish the 

extent of any informational benefits that would accrue as a result of the proposed disclosure 

requirements by making the excluded disclosures comparatively costlier to process and analyze.  

As another alternative, we could require only the quantitative SPAC-related disclosures 

to be tagged in Inline XBRL.  Excluding qualitative disclosures from the tagging requirements 

could provide some incremental cost savings for registrants compared to the proposal, because 

incrementally less time would be required to select and review the particular tags to apply to 

                                                 
563  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 61 (Mar. 
2022), 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).281 
 

quantitative disclosures.  However, we expect these incremental cost savings would be low, 

because SPACs would be subject to similar Inline XBRL requirements, including requirements 

to tag quantitative and qualitative disclosures, in other Commission filings.564  Moreover, 

narrowing the scope of tagging requirements to exclude qualitative information would diminish 

the extent of informational benefits that would accrue to investors by inhibiting the efficient 

extraction and searching of narrative SPAC-related disclosures (e.g., disclosures regarding 

conflicts of interest, fairness determinations, and financial projections), thus creating the need to 

manually review search results drawn from entire documents to find these disclosures.565  Such 

an alternative would also inhibit the automatic comparison of narrative disclosures against prior 

periods.  It also may be harder for investors to perform a targeted assessment of a filing for 

particular types of narrative SPAC-related disclosures because they would need to assess the 

entire filing for relevant information. 

2. Liability-Related Proposals 

a. PSLRA Safe Harbor 

As an alternative to addressing the use of projections in de-SPAC transactions and other 

business combinations involving blank check companies that are not penny stock issuers by 

proposing to amend the “blank check company” definition, 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 

                                                 
564  See supra Section IX.C.1.a.5. 
565  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 that would be required by proposed Item 1606(b) of Regulation S-K, such as disclosures in 
the risk factors section or in the description of stock incentive plans.  However, if Inline XBRL is used, it would 
enable a user to search for the term “dilution” exclusively within the proposed fairness determination disclosure, 
thereby likely reducing the number of irrelevant results. 



282 
 

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 proposed rule.   

b. Issuing Guidance on Underwriter Status 

Instead of proposing Rule 140a, the Commission could issue guidance that would 

describe the factors that should be considered in determining underwriter status in connection 

with de-SPAC transactions, which could potentially be relevant for parties other than SPAC IPO 

underwriters.  Issuing guidance rather than designating an underwriter by rule within the context 

of these transactions might prompt the full range of parties involved in facilitating de-SPAC 

transactions to consider their potential liability and thus take greater care in performing their 

designated functions.  This could result in more robust investor protections overall.  On the other 

hand, compared to the proposed rule, this alternative would rely on the judgment of de-SPAC 

participants to apply the guidance and may result in weaker incentives for those parties that are 

potentially subject to Section 11 liability to perform robust due diligence.  As a result of such 

weaker incentives, there could be a reduced impact on the accuracy of the disclosure in de-SPAC 

transactions and investor protection benefits. 

3.  Expanding Disclosure in Reporting Shell Company Business 
Combinations 

 
Proposed Rule 145a would deem any 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.  As 



283 
 

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 the same as what 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 the same as they would receive 

had a registration statement been filed for the transaction.  This would ensure that the reporting 

shell company’s shareholders receive 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 that the 

costs of liability associated with the purchase and sale of securities and potential Securities Act 

registration of shell company business combinations under proposed 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 that is required.  Only by deeming the 

transaction to be a sale would investors necessarily receive the protections that apply in 

connection with a purchase and sale of securities under the federal securities laws, such as the 

availability of private actions under Section 10(b) and Rule 10b-5.  In addition, to the extent 

there is not an available exemption for the reporting shell company business combination, only 



284 
 

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 Disclosures 

The proposed amendments to Item 10(b) of Regulation S-K present our 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 adopt 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.  

5. Investment Company Act Safe Harbor 

a. Shorter Duration Limitations 

As an alternative, we considered shorter duration limitations by instead requiring a SPAC 

to announce a transaction no later than 12-months from the IPO registration date, and to 

complete a de-SPAC transaction or liquidate the SPAC no later than 18-months after the IPO 

registrations date.  The benefit of this alternative is that it would further decrease the possibility 

of regulatory arbitrage.  It would also reduce the risk that investors may come to view a SPAC 

holding securities as a fund-like investment, and the related risk of investor protection concerns.  

We expect this alternative would impose the same type of costs we discussed above for the 

proposed duration conditions, but at a greater magnitude.  Based on a sample of SPACs with 



285 
 

effective IPO dates from January 1, 2016 to June 30, 2020 (i.e., a sample of SPACs with at least 

an 18-month history since the IPO date as of December 31, 2021; 189 SPACs in total), we find 

that approximately 36% of the SPACs in the sample announced a transaction agreement no later 

than 12-months after the date of the initial public offering and 40% of the SPACs had completed 

a de-SPAC transaction no later than 18-months after the date of the initial public offering.  The 

proportion of SPACs in the sample that both announced a de-SPAC transaction by 12-months 

and completed the de-SPAC transaction by 18-months was approximately 33%, which is a 

significantly lower proportion compared to 57% of sample SPACs that would have managed to 

meet both of the proposed duration conditions, as discussed above.  Thus, we expect that costs 

would be greater under this alternative by forcing a greater proportion of SPACs to conclude 

their search for a target or liquidate earlier than they may otherwise do.  In addition, because of 

the tighter deadlines this alternative would impose, those SPACs that would be at risk of not 

being able to meet the proposed longer duration conditions would likely be at comparatively 

greater risk of not meeting the deadlines under this alternative, which may also increase the costs 

such SPACs would face in trying to meet these alternative duration conditions. 

b. No Announcement Condition 

We also considered an alternative that would keep the 24-month condition for completion 

of a de-SPAC transaction, but remove the duration condition for the announcement of a 

transaction.  This alternative would increase the proportion of SPACs meeting the duration 

condition to 65% compared to 57% under the proposal.  The benefit of this alternative would 

thus be to increase the proportion of SPACs not having to potentially sub-optimally come to a 

merger agreement earlier (or, in some circumstances, potentially inefficiently liquidating the 

SPAC), while still imposing a firm 24-month maximum lifespan for SPACs seeking to take 



286 
 

advantage of the proposed safe harbor.  However, by not imposing an 18-month announcement 

condition investors would lose any investor protection benefits that may be associated with an 

earlier signal of a SPAC’s intent to complete a de-SPAC transaction than they might receive 

under this alternative. 

c. Longer Duration Limitations 

As an alternative, we could require a longer duration before a SPAC would have to 

complete a de-SPAC transaction.  For example, if we increase this duration to no later than 36 

months after the IPO date (with no announcement condition), less than 4% of the sample SPACs 

that completed a de-SPAC transition would not have met such a condition.  As discussed above, 

the national securities exchanges already require SPACs to complete a de-SPAC transaction 

within 36 months (or 3 years).  Thus, based on both the recent evidence and the current exchange 

rules for SPACs, we expect that this alternative would not impose the potential costs of a 

truncated search period for a target company for most SPACs, in particular SPACs with 

exchange-traded securities.  However, as discussed above, the longer the SPAC operates with its 

assets invested in securities and its income derived from securities, the more likely investors will 

come to view the SPAC as a fund-like investment and the more likely the SPAC appears to be 

deviating from its stated business purpose.  In turn, this may raise investor protection concerns 

and increase the possibility of regulatory arbitrage compared to the proposed duration conditions. 

F.  Requests for Comment 

155. Because of the potential for one or more of the proposed amendments to have interactive 

effects, we are requesting public input on the extent to which such interactive effects are 

likely to conflict with the overall aims of this rulemaking, if adopted as proposed. 



287 
 

156. Have we correctly characterized the benefits and costs from the proposed new disclosure 

requirements at the SPAC IPO stage?  Are there any other benefits or costs that should be 

considered?  Please provide supportive data to the extent available. 

157. Our analysis suggests the proposed rules and amendments would generally strengthen the 

investor protection in SPAC transactions at the initial public offering stage.  Are there 

any significant costs or benefits associated with adopting these rules and amendments 

that we have not considered that would lead to a different characterization?  Please 

provide supportive data to the extent available. 

158. Have we correctly characterized the benefits and costs from the proposed new disclosure 

requirements at the de-SPAC transaction stage and the alignment of disclosure 

requirements in the de-SPAC disclosure documents with IPOs?  Are there any other 

benefits or costs that should be considered?  Please provide supportive data to the extent 

available.  

159. Our analysis suggests the proposed rules and amendments would generally strengthen 

investor protection in de-SPAC transactions.  Are there any significant costs or benefits 

associated with adopting these rules and amendments that we have not considered that 

would lead to a different characterization?  Please provide supportive data to the extent 

available. 

160. Have we correctly characterized the benefits and costs from proposed Item 1608 holding 

all other aspects of the proposed amendments constant?  Have we correctly characterized 

the benefits and costs that would accrue given the potential interactive effects with 

proposed Rule 145a?  Are there other interactive effects with respect to other proposed 



288 
 

items that, had we considered, would substantially alter our assessment of the associated 

costs, benefit, or anticipated effects on efficiency, competition, or capital formation? 

161. Have we correctly characterized the benefits and costs from the proposed amendments to 

the enhanced projections disclosure requirements (Item 1609 of Regulation S-K)?  Are 

there any other benefits and costs that should be considered?  Please provide supportive 

data to the extent available.  

162. Would the effects of the proposed amendments related to the PSLRA safe harbor have 

significant interactive effects with proposed Item 1609 of Regulation S-K such that our 

estimates of the incremental costs and benefits of adopting Item 1609 should be revised?  

Please provide either qualitative or quantitative data to the extent available.  

163. How, and to what extent, would investors benefit from the proposed requirement to tag 

the SPAC specialized disclosures in Inline XBRL?  What would be the costs of the 

proposed requirement to registrants?  Should we consider alternative tagging 

requirements for the proposed SPAC disclosures?  If so, what would be their benefits and 

costs? 

164. Have we correctly characterized the benefits and costs from the proposed re-

determination of smaller reporting company status?  Are there any other benefits and 

costs that should be considered?  Please provide supportive data to the extent available.  

165. For the re-determination of a post-business combination company’s smaller reporting 

company status, what would be the benefits and costs of requiring a fixed date to measure 

public float?  If the benefits outweigh the costs of requiring a fixed date, do the relative 

benefits and costs of different possible fixed dates indicate that one approach would be 

preferential?  



289 
 

166. What would be the costs and benefits of relying solely on revenues to re-determine a 

post-business combination company’s smaller reporting company status rather than 

including the public float?  

167. Have we correctly characterized the benefits and costs from the proposal to require target 

companies to be co-registrants to Form S-4 and F-4?  Are there any other benefits and 

costs that should be considered?  Please provide supportive data to the extent available.  

168. Would the relative benefits and costs associated with the proposed amendments related to 

de-SPAC-transaction disclosures and liability have additional effects on the calculus of 

pursuing a de-SPAC business combination versus a traditional IPO that we have not 

considered?  In terms of the market choice to utilize a de-SPAC transaction versus a 

traditional IPO, would the change in relative benefits and costs associated with the 

proposed rules and amendments be beneficial or detrimental in terms of their effects on 

efficiency, competition and capital formation?  Please provide supportive evidence or 

data to the extent available.  

169. Have we correctly characterized the benefits and costs from the proposed amendments 

related to the PSLRA safe harbor?  Are there any other benefits and costs that should be 

considered?  Please provide supportive data to the extent available.  

170.  With respect to the proposed changes to the definition of “blank check company” for 

purposes of the PSLRA safe harbor, are there any additional benefits and costs that would 

apply primarily to blank check companies that are not penny stock issuers and not 

SPACs?  Please provide supportive data to the extent available.  

171. Have we correctly characterized the benefits and costs of the underwriter status and 

liability proposals?  Are there any other benefits and costs for SPACs, SPAC IPO 



290 
 

underwriters, target companies and investors that should be considered?  Please provide 

supportive data to the extent available.  

172. Have we correctly characterized the scope and scale of both SPAC and non-SPAC shell 

companies that would be affected by proposed Rule 145a?  Please provide data or 

analysis to the extent available.  

173. Have we correctly characterized the benefits and costs of proposed Rule 145a?  Are there 

any other benefits and costs that should be considered?  Are there any additional benefits 

and costs that would apply primarily to non-SPAC shell companies that are not business-

combination related shell companies?  Please provide supportive data to the extent 

available.  

174. As noted above, we are unable to estimate the number of shell companies that are 

currently private that could be impacted by proposed Article 15 of Regulation S-X.  We 

request data on the number of these entities that may be impacted by the proposed rule.  

Would analysis of the economic effects on these currently private entities broadly impact 

the balance of costs and benefits to adopting Article 15 of Regulation S-X as proposed? 

175. Have we correctly characterized the benefits and costs of proposed new Article 15 of 

Regulation S-X and the related proposed amendments?  Are there any other benefits and 

costs that should be considered?   Please provide supportive data to the extent available.  

176. Have we correctly characterized the benefits and costs to proposed Rule 15-01(b)? Are 

there additional costs, particularly to investors, of permitting a shell company registrant 

to include in its Form S-4/F-4/proxy or information statement two (rather than three) 

years of statements of comprehensive income, changes in stockholders’ equity, and cash 

flows for the private operating company for all transactions involving an EGC shell 



291 
 

company and a private operating company that would qualify as an EGC that would 

affect our assessment of the likely effects of this proposed rule on investor protection? 

177. Have we correctly characterized the benefits and costs of the enhanced projection 

guidance (amendments to Item 10(b) of Regulation S-K)?  Are there any other benefits 

and costs that should be considered?  Please provide supportive data to the extent 

available.  

178. Have we correctly characterized the benefits and costs of the proposed Investment 

Company Act safe harbor?  Are there any other benefits and costs that should be 

considered?  Please provide supportive data to the extent available.  

179. Is it feasible for SPACs to hold most of their assets in cash accounts rather than 

Government securities or Government money market funds?  What would be the costs to 

SPACs of holding their assets in cash?  How costly would it be for SPACs that are 

currently invested in Government securities or Government funds to switch to cash? 

Please provide supportive data or estimates to the extent available.    

180. Have we correctly characterized the effects on efficiency, competition and capital 

formation from the proposed rules and amendments?  Are there any effects that should be 

considered?  Please provide supportive data to the extent available. 

X. PAPERWORK REDUCTION ACT 

A. Summary of the Collections of Information 

Certain provisions of our rules, schedules, and forms that would be affected by the 

proposed new rules and amendments contain “collection of information” requirements within the 

meaning of the PRA.566  We are submitting the proposed new rules and amendments to the 

                                                 
566  44 U.S.C. 3501 et seq. 



292 
 

Office of Management and Budget (“OMB”) for review and approval in accordance with the 

PRA and its implementing regulations.567  The hours and costs associated with preparing, filing 

and sending the schedules and forms, and retaining records constitute reporting and cost burdens 

imposed by each collection of information.568  An agency may not conduct or sponsor, and a 

person is not required to comply with, a collection of information requirement unless it displays 

a currently valid OMB control number.  The titles for the 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 10-K (OMB Control No. 3235-0063); 

• Form 10-Q (OMB Control No. 3235-0070); and 

• Rule 3a-10 under the Investment Company Act (a proposed new collection of 

information).569 

                                                 
567  44 U.S.C. 3507(d) and 5 CFR 1320.11. 
568  The paperwork burdens for Regulation S-X, Regulation S-K, Regulation C, 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. 
569  We estimate that there would be a negligible or no change in burden to Form 20-F and Form 8-K as a result of 
the proposed amendments to Regulation S-X, in that these proposed amendments would be codifying existing 



293 
 

The forms, schedules, and regulations listed above were adopted under the Securities Act, 

the Exchange Act, and/or the Investment Company Act.  These regulations, schedules, and forms 

set forth the disclosure requirements for registration statements, annual and quarterly reports, 

current reports, proxy and information statements, and tender offer statements filed by registrants 

to provide investors with information to make informed investment, voting, and redemption 

decisions.  In addition, we are proposing a new requirement that certain entities adopt a board 

resolution in order to rely on the safe harbor provided by proposed Rule 3a-10 of the Investment 

Company Act.  Compliance with these information collections is mandatory to the extent 

applicable to each registrant.570  Other than the proposed new collection of information (Rule 3a-

10 under the Investment Company Act), responses to these information collections are not kept 

confidential, and there is no mandatory retention period for the information disclosed.    

Responses to the information collection under the Investment Company Act are kept 

confidential, subject to the provisions of applicable law. 

A description of the proposed new rules and amendments, including the need for the 

information and its use, as well as a description of the likely respondents, can be found in 

Sections II through VI above, and a discussion of the economic effects of the proposed new rules 

and amendments can be found in Section IX above. 

                                                 
interpretations of existing rules.  Accordingly, we are not making any revisions to the PRA burden estimates for 
Form 20-F and Form 8-K at this time. 
570  Registrants claiming smaller reporting company status have the option to comply with the scaled disclosures 
available to them on an item-by-item basis.  In addition, if an entity determines not to rely on the safe harbor 
provided in Rule 3a-10 of the Investment Company Act, it would not be required to adopt the board resolution 
contemplated in that proposed rule. 



294 
 

B. Estimates of the Effects of the Proposed New Rules and Amendments on the 
Collections of Information 

 
The following Table 1 summarizes the estimated effects of the proposed new rules and 

amendments on the paperwork burdens associated with the affected forms and schedules. 

PRA Table 1.  Estimated Paperwork Burden Effects of the Proposed New Rules and 
Amendments Applicable to SPACs 
 

Proposed Requirement and Effects Affected Forms 
and Schedules 

Estimated Effect Per Affected 
Response* 

Item 1602: Registered offerings by special 
purpose acquisition companies 

• 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 

Item 1603: SPAC sponsor; conflicts of interest 

• Require certain disclosure regarding the sponsor 
and its affiliates and any promoters of SPACs. 

• Require disclosure regarding conflicts of interest 
between the sponsor or its affiliates or promoters 
and unaffiliated security holders. 

• 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 



295 
 

Proposed Requirement and Effects Affected Forms 
and Schedules 

Estimated Effect Per Affected 
Response* 

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: Fairness of the de-SPAC transaction 
and any related financing transaction 

• Require disclosure on whether a SPAC reasonably 
believes that a de-SPAC transaction and any 
related financing transactions are fair or unfair to 
investors. 

• Require a discussion of the bases for this 
reasonable belief. 

• 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 

Item 1607: Reports, opinions, appraisals and 
negotiations 

• Require disclosure regarding any report, opinion or 
appraisal received by a SPAC or its sponsor from 
an outside party relating to the fairness of a de-
SPAC transaction or any related financing 
transaction, including disclosure on the 
qualifications of the outside party, 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 in de-
SPAC transactions 

• 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: Financial projections in de-SPAC 
transactions 

• Require additional disclosures regarding financial 
projections disclosed in a disclosure document for 
a de-SPAC transaction. 

• Forms S-4 and 
F-4 

• Schedules 14A 
and 14C 

• Schedule TO 

• 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 



296 
 

Proposed Requirement and Effects Affected Forms 
and Schedules 

Estimated Effect Per Affected 
Response* 

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 

Proposed 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 more closely align required disclosures about the 
target private operating company with those required 
in a Form S-1 or F-1 for an initial public offering, 
including: 

• Expanding the circumstances in which target 
companies may report two years, instead of three 
years, of audited financial statements (resulting in 
a net decrease in burden) (proposed Rule 15-
01(b)); and 

• Further aligning the requirements for audited 
financial statements in these transactions with 
those required in a registered initial public offering 
(resulting in a net decrease in burden) (proposed 
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** 

Proposed Amendments to Align Non-Financial 
Statement Disclosures in De-SPAC Transactions 

• Amend the forms and schedules filed in 
connection with de-SPAC transactions to more 
closely align required non-financial statement 
disclosures about the target private operating 
company with those required in a Form S-1 or F-1 
for an initial public offering. 

• 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 



297 
 

Proposed Requirement and Effects Affected Forms 
and Schedules 

Estimated Effect Per Affected 
Response* 

Proposed Amendment to Forms S-4 and F-4 

• Amend Form S-4 and Form F-4 to require that the 
SPAC and the target private operating company be 
treated as co-registrants when the Form S-4 or 
Form F-4 is filed by the SPAC in connection with 
a de-SPAC transaction 

• Forms S-4 and 
F-4 

• 100 hour increase in 
compliance burden per Form S-
4 or F-4*** 

Proposed Rule 3a-10 under the Investment 
Company Act 

• Require the board of directors of a SPAC relying 
on Rule 3a-10 to adopt an appropriate resolution 
evidencing that SPAC is primarily engaged in the 
business of seeking to complete a single de-SPAC 
transaction. 

• None • 1 hour increase in compliance 
burden per SPAC 

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 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 proposed Rule 
15-01(b) than under the current rules from registrants that would not otherwise have prepared financial 
statements for such year.  Coupled with an incremental increase in burden for the proposed 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 proposing to require that a post-business combination company re-

determine whether it is a smaller reporting company (SRC) following a de-SPAC transaction.  

As proposed, the post-business combination company would be required to reflect this re-

determination in its first periodic report after the de-SPAC transaction and in Commission filings 

thereafter until its next annual re-determination of SRC status.  We estimate that the proposed re-

determination of SRC status would 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 would lose SRC status, which takes into account the increased incremental 



298 
 

burden in providing disclosures pursuant to non-SRC disclosure requirements.  The following 

Table 2 sets forth our estimates regarding the increase in compliance burden when a post-

business combination company loses SRC status: 

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

Form / Schedule Estimated Increase in 
Internal Hours per 

Filing 

Estimated Increase in 
Outside Professional Hours 

per Filing 

Estimated Increase in 
Outside Professional 

Costs per Filing 

Form 10-K* 439 147 $58,800 

Form 10-Q* 36.57 11.88 $4,752 

Schedule 14A** 0.75 0.25 $100 

Schedule 14C*** 0.75 0.25 $100 

Form S-1* 5.75 17.25 $6,900 

Notes: 
* The estimated increases in compliance burdens are based on the difference between the current estimates for 
the applicable form 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 $100 (0.25 professional hours x $400/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 smaller reporting companies 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 $100 (0.25 professional 
hours x $400/hour) per report, based on our estimate of the compliance burden for Item 407(d)(5) and (e)(4) and 
(5) of Regulation S-K. 

 

C. Incremental and Aggregate Burden and Cost Estimates 

We estimate below the incremental and aggregate increase in paperwork burden as a 

result of the proposed new rules and 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 



299 
 

the size and complexity of their business.  These estimates include the time and the cost of 

preparing and reviewing disclosure, filing documents, and retaining records.  We believe that 

some registrants will experience costs in excess of this average and some registrants will 

experience less than the average costs.  Our methodologies for deriving these estimates are 

discussed below. 

Our estimates represent the burden for all SPACs that file registration statements with the 

Commission for registered offerings and all registrants that file disclosure documents in 

connection with a de-SPAC transaction or a business combination involving a shell company or 

a reporting shell company.571  Additionally, our estimates take into account an expected increase 

in the number of Securities Act registration statements as a result of proposed Rule 145a.  Based 

on a review of Commission filings during the period 2011 – 2021 and an analysis of the effects 

of the proposed new rules and amendments,572 the staff estimates that: 

• SPACs will file an average of 90 registration statements each year for registered offerings 

on Form S-1 and 8 registration statements on Form F-1, other than for de-SPAC 

transactions; 

• An average of 30 registration statements on Form S-4 and 4 registration statements on 

Form F-4, 30 definitive proxy statements on Schedule 14A, 4 definitive information 

statements on Schedule 14C, and 2 tender offer statements on Schedule TO will be filed 

each year in connection with de-SPAC transactions; and 

                                                 
571  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.” 
572  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. 



300 
 

• An average of 20 registration statements on Form S-4 and 2 registration statements on 

Form F-4 will be filed each year for business combination transactions involving a 

reporting shell company and a non-shell company, other than de-SPAC transactions.573 

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 Table 3 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 $400 per 

hour.574 

PRA Table 3.  Standard Estimated Burden Allocation for Specified Forms, Schedules, and 
Records 
 

Form / Schedule / Record Type Internal Outside Professionals 

Forms S-1, F-1, S-4, and F-4 25% 75% 

Schedules 14A and 14C 75% 25% 

Schedule TO 25% 75% 

Form 10-K and Form 10-Q 75% 25% 

Resolution prepared in accordance 
with Rule 3a-10 

50% 50% 

 

                                                 
573  This estimate represents the upper bound of the estimated number of Forms S-4 and F-4 filed for these 
transactions. 
574  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 
$400 per hour.  This is the rate we typically estimate for outside legal services used in connection with public 
company reporting.301 
 

The following Table 4 summarizes the estimated effects of the proposed new rules and 

amendments, other than Rule 145a, on the paperwork burdens associated with the affected forms, 

schedules, and records: 

PRA Table 4. Calculation of the Incremental Change in Burden Estimates of Current 
Responses Resulting from the Proposed New Rules and Amendments, Other Than 
Rule 145a 
 

Form / 
Schedule / 
Record 

Number 
of 

Estimated 
Affected 

Responses 

Estimated 
Burden 
Hour 

Increase 
or 

Decrease 
/ Affected 
Response 

Total 
Incremental 
Increase or 
Decrease in 

Burden 
Hours 

Estimated 
Increase or 
Decrease in 

Internal 
Burden 
Hours 

Estimated 
Increase or 
Decrease in 

Outside 
Professional 

Hours 

Total Increase or 
Decrease in 

Outside 
Professional Costs 

(A) (B) (C) = (A) * 
(B) 

(D) = (C) * 
(Allocation 

%) 

(E) = (C) * 
(Allocation 

%) 

(F) = (E) * $400 

Schedule 
14A 

30 (30) (900) (675) (225) ($90,000) 

Schedule 
14C 

4 (30) (120) (90) (30) ($12,000) 

Schedule 
TO 

2 (27) (54) (14) (41) ($16,200) 

Form S-1 90 6  540  135  405  $108,000  
Form S-4 30 95  2,850  713  2,138  $855,000  
Form F-1 8 6  48  12  36  $9,600  
Form F-4 4 95  380  95  285  $114,000  
Resolution 
prepared in 
accordance 
with 
Rule 3a-
10+ 

98 1  98  49  49  $19,600  

Total 266 112 2,842  225  2,617  $988,000  
Notes: 
+ As discussed above, we believe that proposed Rule 3a-10 would offer market participants a number of benefits, 
including the reduction of compliance costs for some market participants.  As a result, while no SPAC would be 
required to rely on Rule 3a-10, for purposes of this analysis, we assume that all SPACs conducting an initial 
public offering subsequent to adoption of the proposed rule would rely on proposed Rule 3a-10 and, therefore, 
prepare a board resolution in accordance with the conditions of Rule 3a-10. 

 



302 
 

The following Table 5 summarizes the estimated effects of proposed Rule 145a on the 

paperwork burdens associated with the affected forms: 

PRA Table 5. Calculation of the Change in Burden Estimates of the Affected Forms 
Resulting from Proposed Rule 145a 
 

Form / 
Schedule / 
Record 

Estimated 
Increase 

in the 
Number 

of 
Responses 

Estimated 
Burden 

Per Form 

Total 
Incremental 
Increase or 
Decrease in 

Burden 
Hours 

Estimated 
Increase in 

Internal 
Burden 
Hours 

Estimated 
Increase in 

Outside 
Professional 

Hours 

Total Increase in 
Outside 

Professional Costs 

(A) (B) (C) = (A) * 
(B) 

(D) = (C) * 
(Allocation 

%) 

(E) = (C) * 
(Allocation 

%) 

(F) = (E) * $400 

Form S-4 20 3,826 76,512 19,128 57,384 $22,953,551 
Form F-4 2 1,441 2,882 720 2,161 $864,554 
Total 22 5,267 79,394 19,848 59,545 $23,818,105 

 

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

companies following a de-SPAC transaction will qualify as smaller reporting companies than 

under the current rules until the next annual re-determination date.575  While we cannot predict 

with certainty the number of these post-business combination companies, we estimate for 

purposes of our PRA calculations that currently all post-business combination companies qualify 

as SRCs following de-SPAC transactions in which the SPAC is the legal acquirer and that 80% 

of these companies that are eligible to use the scaled SRC disclosure provisions do so.576  We 

estimate that these registrants would file, on average, one Form 10-K, 1.5 Forms 10-Q, one 

                                                 
575  This estimate is based, in part, on our estimate of the number of de-SPAC transactions in which the SPAC is the 
legal acquirer. 
576  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. 



303 
 

Schedule 14A, and one registration statement on Form S-1 prior to the next re-determination of 

SRC status. 

The following Table 6 summarizes the estimated effects of the proposed re-determination 

of SRC status on the paperwork burdens associated with the affected forms and schedules: 

PRA Table 6. Calculation of the Incremental Change in Burden Estimates of Current 
Responses Resulting from the Proposed Re-Determination of SRC Status 
 

Form / 
Schedule / 
Record 

Number of 
Estimated 
Affected 

Responses 

Estimated 
Burden 
Hour 

Increase or 
Decrease / 
Affected 
Response 

Total 
Incremental 
Increase or 
Decrease in 

Burden 
Hours 

Estimated 
Increase or 
Decrease in 

Internal 
Burden 
Hours 

Estimated 
Increase or 
Decrease in 

Outside 
Professional 

Hours 

Total 
Increase or 
Decrease in 

Outside 
Professional 

Costs 

(A) (B) (C) = (A) * 
(B) 

(D) = (C) * 
(Allocation %) 

(E) = (C) * 
(Allocation 

%) 

(F) = (E) * 
$400 

Schedule 
14A 

40 1 40 30 10 $4,000 

Schedule 
14C 

4 1 4 3 1 $400 

Form S-1 40 23 920 230 690 $276,000 
Form 10-K 40 586 23,440 17,560 5,880 $2,352,000 
Form 10-Q 60 48 2,880 2,194 713 $285,120 
Total 184 659 27,284 20,017 7,294 $2,917,520 

 

The following Table 7 summarizes the requested paperwork burden changes to existing 

information collections, including the estimated total reporting burdens and costs, under the 

proposed new rules and amendments. 

  



304 
 

 

PRA Table 7.  Requested Paperwork Burden under the Proposed New Rules and 
Amendments+ 

+ Figures in this table have been rounded to the nearest whole number. 

++See PRA Tables 4 and 6 for the number of affected responses for Schedule 14A. 
+++ See PRA Tables 4 and 6 for the number of affected responses for Form S-1. 
++++ See PRA Tables 4 and 5 for the number of affected responses for Form S-4 and Form F-4. 

 

D. Request for Comment 

Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order to: 

• Evaluate whether the proposed changes to the collections of information are necessary for 

the proper performance of the functions of the Commission, including whether the 

information will have practical utility; 

• Evaluate the accuracy of our estimates of the additional burden hours that would result 

from adoption of the proposed new rules and amendments; 

Form / 
Schedule 

Current Burden Program Change Requested Change in Burden 

Current 
Annual 
Respons

es 

Current 
Burden 
Hours 

Current Cost 
Burden 

Number of 
Affected 

Responses 

Estimated 
Increase 

or 
Decrease 

in Outside 
Prof. 

Hours 

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 

6,369 777,590 $103,678,712 ++ (645) ($86,000) 6,369  776,945  $103,592,712  

Schedule 
14C 

569 56,356 $7,514,944 4 (90) ($12,000) 569  56,266  $7,502,944  

Schedule 
TO 

1,378 29,972 $11,988,600 2 (14) ($16,200) 1,378  29,959  $11,972,400  

Form S-1 898 146,062 $178,916,043 +++ 320 $384,000  898  178,916,363 $179,300,043  
Form S-4 588 562,362 $677,255,579 ++++ 19,840 $23,890,904 608 563,075  $701,146,483 
Form F-1 66 26,707 $32,293,375 8 12  $14,400  66  26,719  $32,307,775  
Form F-4 39 14,049 $17,073,825 ++++ 815  $989,581  41 14,144  $18,063,406 
Form 10-K 8,272 14,188,040 $1,893,793,119 40 17,560  $2,352,000  8,292  14,205,600  $1,896,145,119 
Form 10-Q 22,925 3,182,333 $421,490,754 60 2,194  $285,120  22,925  3,184,527  $421,775,874  
Total 41,124 18,983,471 $3,334,004,951 370 20,190 $3,944,320 41,124 197,773,642  $3,347,949,271  



305 
 

• Determine whether there are ways to enhance the quality, utility, and clarity of the 

information to be collected; 

• Evaluate whether there are ways to minimize the burden of the collections of information 

on those who respond, including through the use of automated collection techniques or 

other forms of information technology; and 

• Evaluate whether the proposed new rules and amendments would have any effects on any 

other collection of information not previously identified in this section. 

Any member of the public may direct to us any comments concerning the accuracy of 

these burden estimates and any suggestions for reducing these burdens.  Persons submitting 

comments on the collection of information requirements should direct their comments to the 

Office of Management and Budget, Attention: Desk Officer for the U.S. Securities and Exchange 

Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a 

copy to, Vanessa A. Countryman, Secretary, U.S. Securities and Exchange Commission, 100 F 

Street NE, Washington, DC 20549-1090, with reference to File No. S7-13-22.  Requests for 

materials submitted to OMB by the Commission with regard to the collection of information 

should be in writing, refer to File No. S7-13-22 and be submitted to the U.S. Securities and 

Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington DC 20549-2736.  

OMB is required to make a decision concerning the collections of information between 30 and 

60 days after publication of this release.  Consequently, a comment to OMB is best assured of 

having its full effect if the OMB receives it within 30 days of publication. 



306 
 

XI. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT 

For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 

(“SBREFA”),577 the Commission must advise the OMB as to whether a proposed regulation 

constitutes a “major” rule.  Under SBREFA, a rule is considered “major” where, if adopted, it 

results or is likely to result in: 

• An annual effect on the economy of $100 million or more (either in the form of an 

increase or a decrease); 

• A major increase in costs or prices for consumers or individual industries; or 

• Significant adverse effects on competition, investment or innovation. 

If a rule is “major,” its effectiveness will generally be delayed for 60 days pending Congressional 

review. 

We request comment on whether our proposed amendments would be a “major rule” for 

purposes of SBREFA.  We solicit comment and empirical data on: 

• The potential effect on the U.S. economy on an annual basis; 

• Any potential increase in costs or prices for consumers or individual industries; and 

• Any potential effect on competition, investment or innovation. 

We request those submitting comments to provide empirical data and other factual support for 

their views to the extent possible. 

XII. INITIAL REGULATORY FLEXIBILITY ANALYSIS AND CERTIFICATION 

The Regulatory Flexibility Act578 requires an agency, when issuing a rulemaking 

proposal, to prepare and make available for public comment an Initial Regulatory Flexibility 

                                                 
577  Pub. L. No. 104-121, Tit. II, 110 Stat. 857 (1996). 
578  5 U.S.C. 601 et seq. 



307 
 

Analysis (“IRFA”) that describes the impact of the proposed rule on small entities, unless the 

Commission certifies that the rule, if adopted, would not have a significant economic impact on a 

substantial number of small entities.579  This IRFA has been prepared in accordance with the 

Regulatory Flexibility Act.  It relates to the proposed new rules and amendments described in 

Sections II through VI above. 

A. Reasons for, and Objectives of, the Proposed Action 

As discussed throughout the release, we are proposing new Subpart 1600 of Regulation 

S-K and amendments to existing forms and schedules to require specialized disclosures in 

registered offerings by SPACs, including initial public offerings, and in disclosure documents for 

de-SPAC transactions with respect to, among other things, compensation paid to sponsors, 

conflicts of interest, and dilution.  For de-SPAC transactions, we are also proposing to require 

disclosure of a fairness determination, additional disclosures on the target private operating 

company, a re-determination of smaller reporting company status following the completion of a 

de-SPAC transaction, and a minimum dissemination period for certain disclosure documents in 

these transactions.  These proposed rules and amendments would be applicable to, depending on 

the circumstances, registration statements on Forms S-1, F-1, S-4 and F-4 filed under the 

Securities Act and Schedules 14A, 14C and TO under the Exchange Act.  The proposed rules 

would also clarify the underwriter status of SPAC IPO underwriters in connection with de-SPAC 

transactions and would require that the target company be named as a co-registrant in a Form S-4 

or F-4 filed by a SPAC for a de-SPAC transaction.  Further, we are proposing to amend the 

definition of “blank check company” for purposes of the PSLRA such that the safe harbor under 

the PSLRA for forward-looking information would not be available to SPACs and certain other 

                                                 
579  5 U.S.C. 603(a); 5 U.S.C. 605(b). 



308 
 

blank check companies; to update and expand our guidance in Item 10(b) of Regulation S-K 

regarding the use of projections in Commission filings;580 and to require additional disclosure 

when projections are disclosed in connection with de-SPAC transactions. 

In regard to business combination transactions involving a reporting shell company,581 

we are proposing Securities Act Rule 145a to deem these transactions with a non-shell company 

to involve a sale of securities to the shell company’s shareholders.  In addition, we are proposing 

amendments to the financial statement reporting requirements for transactions involving shell 

companies in Regulation S-X.  Finally, we are proposing a new safe harbor, Rule 3a-10, under 

the Investment Company Act that would provide that a SPAC that satisfies the conditions of the 

safe harbor would not be an investment company and therefore would not be subject to 

regulation as an investment company under the Investment Company Act. 

The need for and objectives of the proposed rules and amendments are discussed in more 

detail in Sections II – VI above.  We discuss the economic impact, including the estimated costs 

and burdens, of the proposed rules and amendments on all registrants, including small entities, in 

Sections IX and X above. 

B. Legal Basis 

We are proposing the new rules and rule amendments under the authority set forth in 

Sections 6, 7, 10, 19(a), and 28 of the Securities Act; Sections 3, 12, 13, 14, 15, 23(a), and 36 of 

the Exchange Act; and Sections 6(c) and 38(a) of the Investment Company Act. 

                                                 
580  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. 
581  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.” 



309 
 

C. Regulatory Flexibility Act Certification 

Pursuant to Section 605(b) of the Regulatory Flexibility Act, the Commission hereby 

certifies that proposed Rule 3a-10 under the Investment Company Act would not, if adopted, 

have a significant economic impact on a substantial number of small entities.582  Based on 

information available to the Commission, there were 861 initial public offerings conducted by 

SPACs in 2020 and 2021, of which 6 were for SPACs that sold $50 million or less in units.583  

As a result, we believe that approximately 0.7% of SPACs directly affected by proposed Rule 

3a-10 would be small entities.584  Accordingly, the Commission believes that proposed Rule 3a-

10 would not, if adopted, have a significant economic impact on a substantial number of small 

entities. 

D. Small Entities Subject to the Proposed Rules and Amendments 

The proposed rules and amendments would apply to registrants that are small entities.  

The Regulatory Flexibility Act defines “small entity” to mean “small business,” “small 

organization,” or “small governmental jurisdiction.”585  17 CFR 230.157 (Securities Act Rule 

157) defines an issuer, other than an investment company, to be a “small business” or “small 

organization” for purposes of the Regulatory Flexibility Act 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.  17 CFR 240.0-10(a) (Exchange Act Rule 0-

10(a)) defines an issuer, other than an investment company, to be a “small business” or “small 

                                                 
582  The definition of “small entity” is set forth in Section XII.D below. 
583  Based on data from Dealogic M&A module as of Jan. 2022. 
584  While no SPAC would be required to rely on proposed Rule 3a-10, for purposes of this analysis, we assume that 
all SPACs conducting an initial public offering subsequent to adoption of the proposed rule would rely on proposed 
Rule 3a-10. 
585  5 U.S.C. 601(6). 



310 
 

organization” if it had total assets of $5 million or less on the last day of its most recent fiscal 

year.  An investment company is a small entity if, together with other investment companies in 

the same group of related investment companies, it has net assets of $50 million or less as of the 

end of its most recent fiscal year.586 

The proposed specialized disclosure and other requirements applicable to SPACs would 

not apply to issuers that raise less than $5 million at the time of their initial public offerings.587  

However, we acknowledge that there may be instances where a SPAC may be a small entity at 

the time of a subsequent registered offering or at the time of a de-SPAC transaction.588  While 

we are not aware to date of any such instances, we request comment on the number of these 

small entities.  In addition, 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;589 therefore, we request comment on the number of these small entities. 

In regard to proposed Rule 145a and the proposed amendments to Regulation S-X, we 

estimate that there are 163 reporting shell companies that are small entities.590  However, due to 

data limitations, we are unable to estimate the number of private operating companies and 

                                                 
586  See 17 CFR 270.0-10(a). 
587  See supra note 12 and the discussion of the proposed definition of “special purpose acquisition company” in 
Section II.A. 
588  As noted above, the vast majority of initial public offerings by SPACs in 2020 and 2021 raised more than $50 
million.  In 2020, the smallest amount raised in an initial public offering by a SPAC was $40 million, and, in 2021, 
the smallest amount raised in an initial public offering by a SPAC was $44 million.  When viewed over a 10-year 
period, we do not expect the outcome to be different due to how SPACs are structured to address Rule 419.  See 
supra note 12.  Further, with respect to proposed Rule 140a, we do not expect any underwriters in SPAC initial 
public offerings to be small entities. 
589  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 notes 12 and 13. 
590  This estimate does not include business combination related shell companies. 



311 
 

private shell companies that are small entities that may engage in a business combination 

transaction.591  We request comment on the number of these small entities. 

E. Reporting, Recordkeeping, and Other Compliance Requirements 

We expect that the proposed specialized disclosure and other requirements applicable to 

SPACs and target private operating companies would have an incremental effect on reporting, 

recordkeeping and other compliance burdens for registrants, including small entities.  These 

proposed requirements would increase compliance costs for registrants, and compliance with 

these proposed requirements would 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 proposed rules and amendments 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.592  The proposed rules 

and amendments are discussed in detail in Sections II – VI above.  We discuss the economic 

effect, including the estimated costs and burdens, of the proposed rules and amendments on all 

registrants, including small entities, in Section IX above. 

Proposed Rule 145a, in deeming certain business combination transactions involving a 

reporting shell company to involve a sale of securities to the reporting shell company’s 

shareholders, may impose reporting, recordkeeping, or compliance requirements and related 

                                                 
591  We believe that it is unlikely that a reporting company would engage in a business combination transaction with 
a shell company such that it would be subject to proposed Rule 145a.  Therefore, we are not estimating the number 
of reporting companies for purposes of this analysis. 
592  We do not expect the proposed re-determination of smaller reporting company status following a de-SPAC 
transaction to have any effect on small entities because we do not expect any small entities to lose smaller reporting 
company following this re-determination, based on the public float and revenue thresholds in the smaller reporting 
company definition. 



312 
 

costs on small entities that are reporting shell companies to the extent such a deemed sale of 

securities would require such a small entity to register the transaction under the Securities Act or 

comply with an exemption from registration.  These costs could also include the costs associated 

with the proposed amendments to Regulation S-X, which would require an issuer in a business 

combination transaction involving a shell company to comply with financial statement reporting 

requirements that would align with those applicable in traditional initial public offerings.  The 

proposed changes to the financial statement requirements would increase compliance costs for 

small entities when these transactions are registered under the Securities Act, although we do not 

expect the increase in incremental compliance costs resulting from the proposed amendments to 

be significant because the proposed amendments would codify existing staff guidance on 

financial statement requirements for these transactions. 

F. Duplicative, Overlapping or Conflicting Federal Rules 

The proposed disclosure requirements in Subpart 1600 may partially duplicate and 

overlap with a number of existing disclosure requirements under Regulation S-K that are 

currently applicable to SPAC registered offerings and in de-SPAC transactions.  To the extent 

that the disclosure requirements in proposed Subpart 1600 overlap with these existing disclosure 

requirements, the requirements of proposed Subpart 1600 would be controlling.  Other than these 

proposed disclosure requirements, the Commission believes that the proposed new rules and 

amendments would not duplicate, overlap or conflict with other federal rules. 

G. Significant Alternatives 

The Regulatory Flexibility Act 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: 



313 
 

• 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 proposed specialized disclosure and other requirements with respect to SPAC 

registered offerings and de-SPAC transactions are intended to improve the usefulness and clarity 

of the information provided to investors so that they can make better informed decisions as to 

whether to purchase securities in SPAC registered offerings, or in secondary trading markets, 

and in voting, investment and redemption decisions in connection with de-SPAC transactions.  

They are also intended to enhance investor protections as well as provide additional clarity 

regarding the legal obligations of target companies and others in connection with a de-SPAC 

transaction.  We believe that these proposed requirements are equally appropriate for SPACs of 

all sizes that are engaged in a registered offering and for SPACs and target private operating 

companies that are engaged in a de-SPAC transaction.  As a result, we do not believe that it is 

appropriate to propose different compliance or reporting requirements for small entities; clarify, 

consolidate or simplify compliance and reporting requirements for small entities; or to exempt 

small entities from these requirements.  As noted above, in our view, a private operating 

company’s method of becoming a public company should not negatively impact investor 

protection. 

With respect to using performance rather than design standards, these proposed 

requirements use primarily design standards in order to promote uniform compliance 



314 
 

requirements for all registrants.  Further, we believe that the proposed 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. 

 Proposed Rule 145a would deem business combinations involving a reporting shell 

company and a non-shell company to involve a sale of securities to the reporting shell 

company’s shareholders.  Given that proposed Rule 145a is intended to address potential 

disparities in the disclosure and liability protections available to reporting shell company 

shareholders, we do not believe that it is appropriate to propose different compliance or reporting 

requirements for small entities; clarify, consolidate or simplify compliance and reporting 

requirements for small entities; or to exempt small entities from the proposed rule. 

The proposed amendments to Regulation S-X 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 already report consistent with this staff guidance.  Further, the amendments are not 

expected to have any significant adverse effect on small entities (and are, in fact, expected to 

relieve burdens for some of these entities).  Accordingly, we do not believe that it is necessary to 

exempt small entities from all or part of the proposed amendments to Regulation S-X; establish 

different compliance or reporting requirements for such entities; or clarify, consolidate or 

simplify compliance and reporting requirements for small entities.  Likewise, while we primarily 

use design standards to promote consistency, we do not believe it is necessary to use 

performance standards in connection with this aspect of the proposed rules. 



315 
 

H. Request for Comment 

We encourage the submission of comments with respect to any aspect of this IRFA and 

certifications.  In particular, we request comments regarding: 

• The number of small entities that may be affected by the proposed rules and amendments; 

• The existence or nature of the potential impact of the proposed rules and amendments on 

small entities discussed in the analysis;  

• How the proposed amendments could further lower the burden on small entities; and 

• How to quantify the impact of the proposed rules and amendments. 

Commenters are asked to describe the nature of any impact and provide empirical data 

supporting the extent of the impact.  Comments will be considered in the preparation of the Final 

Regulatory Flexibility Analysis, if the proposed rules and amendments are adopted, and will be 

placed in the same public file as comments on the proposed rules and amendments themselves. 

STATUTORY AUTHORITY AND TEXT OF PROPOSED RULE AND FORM 
AMENDMENTS 
 

We are proposing 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; Sections 3, 12, 13, 14, 

15, 23(a), and 36 of the Exchange Act; and Sections 6(c) and 38(a) of the Investment Company 

Act. 

List of Subjects 

17 CFR Parts 210 

Accountants, Accounting, Banks, Banking, Employee benefit plans, Holding companies, 

Insurance companies, Investment companies, Oil and gas exploration, Reporting and 

recordkeeping requirements, Securities, Utilities. 



316 
 

17 CFR Parts 229, 230, 232, 239, 240, and 249 

Administrative practice and procedure, Reporting and recordkeeping requirements, 

Securities. 

17 CFR Part 270 

Investment companies, Reporting and recordkeeping requirements, Securities. 

In accordance with the foregoing, we are proposing to amend title 17, chapter II of the 

Code of Federal Regulations as follows: 

PART 210 – FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 

STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, 

INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, 

AND ENERGY POLICY AND CONSERVATION ACT OF 1975 

1. The authority citation for part 210 continues to read as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 

77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n, 78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-

20, 80a-29, 80a-30, 80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, and sec. 102(c), Pub. L. 

112-106, 126 Stat. 310 (2012), unless otherwise noted. 

2. Amend § 210.1-02 by revising paragraph (d) and paragraph (w)(1) introductory 

text 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 



317 
 

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 a company that will be a predecessor to 

an issuer 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, 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 the 

regulations and forms applicable to those entities for the purpose of expressing an opinion 

thereon.  The standards of the PCAOB and U.S. GAAS may be modified or supplemented by the 

Commission.  

*   *   *   *   * 

(w) *  *  * 

(1) The term significant subsidiary means a subsidiary, including its subsidiaries, which 

meets any of the conditions in paragraph (w)(1)(i), (ii), or (iii) of this section; however if the 

registrant is a registered investment company or a business development company, the tested 

subsidiary meets any of the conditions in paragraph (w)(2) of this section instead of any of the 

conditions in this paragraph (w)(1).  In either an acquisition by a shell company (other than a 

business combination related shell company) of a business that is not the predecessor or an 

acquisition by the shell company’s predecessor, use the predecessor’s financial statements 

instead of the registrant and the subsidiaries consolidated in applying the significance tests in 

paragraphs (w)(1)(i), (ii), and (iii) of this section. 

*   *   *   *   * 



318 
 

3. Amend § 210.3-01 by revising paragraph (a) to read as follows: 

§ 210.3-01 Consolidated balance sheets. 

(a) There shall 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 shall be filed an audited 

balance sheet as of a date within 135 days of the date of filing the registration statement. 

*   *   *   *   * 

4. Amend § 210.3-05 by revising paragraph (b)(4)(ii) to read as follows: 

§ 210.3-05 Financial statements of businesses acquired or to be acquired. 

*   *   *   *   * 

(b) *   *   * 

(4) *  *  * 

(ii) A registrant, other than a foreign private issuer required to file reports on Form 6-K 

(§ 249.306 of this chapter) or a shell company (other than a business combination related shell 

company), that omits from its initial registration statement financial statements of a recently 

consummated business acquisition pursuant to paragraph (b)(4)(i) of this section must file those 

financial statements and any pro forma information specified by §§ 210.11-01 through 210.11-03 

(Article 11) under cover of Form 8-K (§ 249.308 of this chapter) no later than 75 days after 

consummation of the acquisition.  A shell company (other than a business combination related 

shell company) that acquires a business, which is not or will not be its predecessor, that omits 

from a registration statement or proxy statement the financial statements of that recently 

consummated business acquisition pursuant to (b)(4)(i) of this section shall refer to § 210.15-

01(d)(2). 



319 
 

*   *   *   *   * 

5. Amend § 210.3-14 by revising paragraph (b)(3)(ii) to read as follows: 

§ 210.3-14 Special instructions for financial statements of real estate operations acquired or 

to be acquired. 

*   *   *   *   * 

(b) *  *  * 

(3) *   *   * 

(ii) A registrant, other than a foreign private issuer required to file reports on Form 6-K 

(§ 249.306 of this chapter) or shell company (other than a business combination related shell 

company), that omits from its initial registration statement financial statements of a recently 

consummated acquisition of a real estate operation pursuant to paragraph (b)(3)(i) of this section 

must file those financial statements and any pro forma information specified by §§ 210.11-01 

through 210.11-03 (Article 11) under cover of Form 8-K (§ 249.308 of this chapter) no later than 

75 days after consummation of the acquisition.  A shell company (other than a business 

combination related shell company) that acquires a real estate operation, which is not or will not 

be its predecessor that omits from a registration statement or proxy statement the financial 

statements of a recently consummated business acquisition pursuant to (b)(4)(i) of this section 

shall refer to § 210.15-01(d)(2).  

*   *   *   *   * 

6. Amend § 210.8-02 by revising it to read as follows: 

§ 210.8-02 Annual financial statements. 

Smaller reporting companies shall file an audited balance sheet for the registrant and for 

its predecessors as of the end of each of the most recent two fiscal years, or as of a date within 



320 
 

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 rule 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 regulation may be omitted. 

*   *   *   *   * 

8. Amend § 210.11-01 by revising paragraph (d) introductory text to read as follows: 

§ 210.11-01 Presentation requirements. 

*   *   *   *   * 

(d) For purposes of this rule, the term business should be evaluated in light of the facts 

and circumstances involved and whether there is sufficient continuity of the acquired entity's 

operations prior to and after the transactions so that disclosure of prior financial information is 

material to an understanding of future operations.  A presumption exists that a separate entity, a 

subsidiary, or a division is a business.  A special purpose acquisition company, as defined in 

§ 229.1601(a), is a business for purposes of this rule.  However, a lesser component of an entity 

may also constitute a business.  Among the facts and circumstances which should be considered 

in evaluating whether an acquisition of a lesser component of an entity constitutes a business are 

the following:321 
 

*   *   *   *   * 

9. Add an undesignated center heading and § 210.15-01 to read as follows: 

Acquisitions of Businesses by a Shell Company (Other Than a Business Combination 

Related Shell Company) 

§ 210.15-01 Acquisitions of businesses by a shell company (other than a business 

combination related shell company). 

(a) Audit requirements of predecessor.  The term audit (or examination), when used in 

regard to financial statements of a business 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 

PCAOB for the purpose of expressing an opinion thereon. 

(b) Financial statements.  When the registrant is a shell company (other than a business 

combination related shell company) and the financial statements of a business that will be a 

predecessor to the registrant are required in a registration statement or proxy statement, the 

registrant must file financial statements of the business in accordance with §§ 210.3-01 through 

210.3-12 and 210.10-01 (Articles 3 and 10 of Regulation S-X) as if the filing were a Securities 

Act registration statement for the initial public offering of the business's equity securities.  The 

financial statements of the business may be filed pursuant to §§ 210.8-01 through 210.8-08 

(Article 8) when that business would qualify to be a smaller reporting company based on its 

annual revenues as of the most recently completed fiscal year, if it were filing a registration 

statement itself. 

(c) Age of financial statements of the predecessor.  The financial statements of a business 

that will be a predecessor to a shell company (other than a business combination related shell 



322 
 

company) shall 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, if it were filing a registration statement itself) in determining the 

age of financial statements of the predecessor business in the registration statement or proxy 

statement of the registrant. 

(d) Acquisitions of businesses by a shell company or its predecessor that are not or will 

not be the predecessor.  Registrants shall apply § 210.3-05 (§ 210.8-04 when that business would 

qualify to be a smaller reporting company based on its annual revenues as of the most recently 

completed fiscal year if it were filing a registration statement itself) to acquisitions of businesses 

by a shell company (other than a business combination related shell company) or its predecessor 

that are not or will not be the predecessor to the registrant. 

(1) See § 210.1-02(w)(1) for rules on applying the significance tests to acquisitions of 

businesses by a shell company (other than a business combination related shell company) or its 

predecessor that are not or will not be the predecessor. 

(2) A shell company (other than a business combination related shell company) that omits 

from a registration statement or proxy statement the financial statements of a recently acquired 

business that is not or will not be its predecessor pursuant to Rule 3-05(b)(4)(i) of Regulation S-

X (§ 210.1-02(b)(4)(i)) must file those financial statements in its Form 8-K filed pursuant to Item 

2.01(f). 

(e) Financial statements of shell company.  After a shell company (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 a filing once the financial statements of the predecessor have been 



323 
 

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. 

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 

10. The authority citation for part 229 continues to read as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 

78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-

38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C. 1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 

1904 (2010); and sec. 102(c), Pub. L. 112-106, 126 Stat. 310 (2012). 

11. Amend § 229.10 by: 

a. Revising paragraph (b); and 

b. Adding paragraph (f)(2)(iv). 

The revisions and additions read as follows. 

§ 229.10 (Item 10) General 

*   *   *   *   * 

(b) Commission policy on projections.  The Commission encourages the use in 

documents specified in Rule 175 under the Securities Act (§ 230.175 of this chapter) and Rule 

3b-6 under the Exchange Act (§ 240.3b-6 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 herein represent the Commission’s views on important factors to be 

considered in formulating and disclosing such projections.  These guidelines also apply to 



324 
 

projections of future economic performance of persons other than the registrant, such as the 

target company in a business combination transaction, that are included in the registrant’s 

Commission filings. 

(1) Basis for projections.  The Commission believes that management must have the 

option to present in Commission filings its good faith assessment of a registrant’s future 

performance.  Management, however, must have a reasonable basis for such an assessment.  

Although a history of operations or experience in projecting may be among the factors providing 

a basis for management's assessment, the Commission does not believe that a registrant always 

must have had such a history or experience in order to formulate projections with a reasonable 

basis.  An outside review of management’s projections may furnish additional support for having 

a reasonable basis for a projection.  If management decides to include a report of such a review 

in a Commission filing, there also should be disclosure of the qualifications of the reviewer, the 

extent of the review, the relationship between the reviewer and the registrant, and other material 

factors concerning the process by which any outside review was sought or obtained.  Moreover, 

in the case of a registration statement under the Securities Act, the reviewer would be deemed an 

expert and an appropriate consent must be filed with the registration statement. 

(2) Format for projections.  (i) In determining the appropriate format for projections 

included in Commission filings, consideration must be given to, among other things, the 

financial items to be projected, the period to be covered, and the manner of presentation to be 

used.  Although traditionally projections have been given for three financial items generally 

considered to be of primary importance to investors (revenues, net income (loss) and earnings 

(loss) per share), projection information need not necessarily be limited to these three items.  

However, management should take care to assure that the choice of items projected is not 



325 
 

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.  The period that appropriately may be covered by a projection depends to a large extent 

on the particular circumstances of the company involved.  For certain companies in certain 

industries, a projection covering a two or three year period may be entirely reasonable.  Other 

companies may not have a reasonable basis for projections beyond the current year.  

Accordingly, management should select the period most appropriate in the circumstances.  In 

addition, management, in making a projection, should disclose what, in its opinion, is the most 

probable specific amount or the most reasonable range for each financial item projected based on 

the selected assumptions.  Ranges, however, should not be so wide as to make the disclosures 

meaningless.  Moreover, several projections based on varying assumptions may be judged by 

management to be more meaningful than a single number or range and would be permitted. 

(ii) The presentation of projected measures that are not based on historical financial 

results or operational history should be clearly distinguished from projected measures that are 

based on historical financial results or operational history. 

(iii) It generally would be misleading to present projections that are based on historical 

financial results or operational history without presenting such historical financial measure or 

operational history with equal or greater prominence. 



326 
 

(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 closely 

related, and an explanation why the non-GAAP measure was selected instead of a GAAP 

measure. 

*   *   *   *   * 

(f) *   *   * 

*   *   *   *   * 

(2) *   *   * 

(iv) Upon the consummation of a de-SPAC transaction, as defined in Item 1601(a) of 

Regulation S-K (17 CFR 229.1601(a)), 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 next periodic report. 

(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 Item 

1601(d) of Regulation S-K (17 CFR 229.1601(d)), 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. 

*   *   *   *   * 



327 
 

12. Amend § 229.601 by adding paragraph (b)(101)(i)(D) to read as follows: 

§ 229.601 (Item 601) Exhibits. 

*   *   *   *   * 

(b) *   *   * 

(101) *   *   * 

(i) *   *   * 

(D) Any filing that is subject to the exceptions listed in paragraphs (A), (B), or (C), and 

contains any disclosure required by subpart 229.1600 of this part, must include an Interactive 

Data File consisting solely of that disclosure. 

*   *   *   *   * 

13. Amend part 229 by adding 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) Fairness of the de-SPAC transaction and any related financing 

transaction. 

229.1607 (Item 1607) Reports, opinions, appraisals and negotiations. 

229.1608 (Item 1608) Tender offer filing obligations in de-SPAC transactions. 



328 
 

229.1609 (Item 1609) Financial 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 229.1600: 

(a) De-SPAC transaction.  The term de-SPAC transaction means a business combination 

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

transaction involving a special purpose acquisition company and one or more target companies 

(contemporaneously, in the case of more than one target company). 

(b) Special purpose acquisition company (SPAC).  The term special purpose acquisition 

company means 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 

§ 230.419 (Rule 419 under the Securities Act); 

(2) Complete a de-SPAC transaction within a specified time frame; and 

(3) Return all remaining proceeds from the registered offering and any concurrent 

offerings to its shareholders if the company does not complete a de-SPAC transaction within the 

specified time frame. 

(c) SPAC sponsor.  The term SPAC sponsor means the entity and/or person(s) primarily 

responsible for organizing, directing or managing the business and affairs of a special purpose 

acquisition company, other than in their capacities as directors or officers of the special purpose 

acquisition company as applicable. 

(d) Target company.  The term target company means an operating company, business or 

assets. 



329 
 

§ 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 

and its affiliates, and whether this compensation 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 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 

§ 229.506 (Item 506 of Regulation S-K), and 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) 

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 

     

 



330 
 

Instruction 1 to Item 1602(a)(4).  If the offering includes an over-allotment option, 

include separate rows in the tabular disclosure showing remaining pro forma net tangible book 

value per share with and without the exercise of the over-allotment option. 

 (5) State whether there may be actual or potential conflicts of interest between the SPAC 

sponsor or 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) shall include, but not be limited to, a brief description of the following in plain 

English as required by § 230.421(d) of this chapter: 

(1) The manner in which the special purpose acquisition company will identify and 

evaluate potential business combination candidates and whether it will solicit shareholder 

approval for the de-SPAC transaction; 

(2) The material terms of the trust or escrow account and the amount or percentage of the 

gross offering proceeds that the special purpose acquisition company will place in the trust or 

escrow account; 

(3) The material terms of the securities being offered, including redemption rights, and 

whether the securities are the same class as those held by the SPAC sponsor and its affiliates; 

(4) The period of time in which the special purpose acquisition company intends to 

consummate a de-SPAC transaction and its plans in the event that it does not consummate a de-

SPAC transaction within this time period, including whether, and if so, how, it may extend the 

time period; any limitations on extensions, including the number of times; the consequences to 



331 
 

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, and the extent to which this 

compensation may result in a material dilution of the purchasers’ equity interests; and 

(7) Any material actual or potential conflicts of interest between the SPAC sponsor or its 

affiliates or promoters and purchasers in the offering, including those that may arise in 

determining whether to pursue a de-SPAC transaction. 

(c) Dilution.  In addition to the disclosure required by § 229.506 (Item 506 of Regulation 

S-K), describe material potential sources of future dilution following the registered offering by 

the special purpose acquisition company.  Disclose in tabular format 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. 

§ 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. 



332 
 

(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 executive officers, directors or affiliates in 

determining whether to proceed with a de-SPAC transaction. 

(6) Disclose the nature (e.g., cash, shares of stock, warrants and rights) and amounts of all 

compensation that has 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 special purpose 

acquisition company and its affiliates.  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.  Provide an organizational chart that shows 

the relationship between the special purpose acquisition company, the SPAC sponsor, and the 

SPAC sponsor’s affiliates. 

(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. 



333 
 

(9) Disclose, in a tabular format to the extent practicable, the material terms of any 

agreement, arrangement or understanding regarding restrictions on whether and when the SPAC 

sponsor and its affiliates may sell securities of the special purpose acquisition company, 

including the date(s) on which the agreement, arrangement or understanding may expire; the 

natural persons and entities subject to such an agreement, arrangement or understanding; any 

exceptions under such an agreement, arrangement or understanding; and any terms that would 

result in an earlier expiration of such an agreement, arrangement or understanding. 

(b) Conflicts of interest.  Describe any actual or potential material conflict of interest, 

including any material conflict of interest 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 the SPAC sponsor, executive officers and directors or 

the manner in which the SPAC sponsor compensates its executive officers and directors, 

between: 

(1) The SPAC sponsor or its affiliates or the special purpose acquisition company’s 

officers, directors, or promoters; and 

(2) Unaffiliated security holders. 

(c) 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: 



334 
 

(1) State whether the special purpose acquisition company reasonably believes that the 

de-SPAC transaction is fair or unfair to unaffiliated security holders, and whether the special 

purpose acquisition company or the SPAC sponsor has received a report, opinion or appraisal 

from an outside party regarding the fairness of the transaction. 

(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, and whether this compensation 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 there may be 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.  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) shall include, but not be limited to, 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) Whether the special purpose acquisition company reasonably believes that the de-

SPAC transaction is fair or unfair to unaffiliated security holders, the bases for such belief, and 



335 
 

whether the special purpose acquisition company or the SPAC sponsor has received any report, 

opinion or appraisal from an outside party concerning the fairness of the de-SPAC transaction; 

(3) Any material actual or potential conflicts of interest between the SPAC sponsor or its 

affiliates or promoters and unaffiliated security holders in connection with the de-SPAC 

transaction; 

(4) In a tabular format, the terms and amount of the compensation received or to be 

received by the SPAC sponsor and its affiliates in connection with the de-SPAC transaction or 

any related financing transaction, and whether that compensation has resulted or may result in a 

material dilution of the equity interests of unaffiliated security holders of the special purpose 

acquisition company; 

(5) The material terms of any financing transactions that have occurred or will occur in 

connection with the consummation of the de-SPAC transaction, the anticipated use of proceeds 

from these financing transactions and the dilutive impact, if any, of these financing transactions 

on unaffiliated security holders; and 

(6) The rights of security holders to redeem the outstanding securities of the special 

purpose acquisition company and the potential impact of redemptions on the value of the 

securities owned by non-redeeming shareholders. 

(c) Dilution.  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. 

(1) Provide sensitivity analysis disclosure in tabular format that expresses the amount of 

potential dilution under a range of reasonably likely redemption levels.  At each redemption level 

in the sensitivity analysis, quantify the dilutive impact on non-redeeming shareholders of each 



336 
 

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.  

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. 

(2) Provide a description of the model, methods, assumptions, estimates, and parameters 

necessary to understand the sensitivity analysis disclosure. 

§ 229.1605 (Item 1605) Background of and reasons for the de-SPAC transaction; terms of 

the de-SPAC transaction; effects. 

(a) Furnish a summary of the background of the de-SPAC transaction.  Such summary 

shall include, but not be limited to, 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 for engaging in the de-SPAC 

transaction and 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 security holders of the 

combined company as a result of the de-SPAC transaction after the completion of the de-SPAC 

transaction; 



337 
 

(5) A brief statement as to the accounting treatment of the de-SPAC transaction, if 

material; and 

(6) The Federal income tax consequences of the de-SPAC transaction, if material. 

(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.  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 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. 

(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) Fairness of the de-SPAC transaction and any related financing 

transaction. 



338 
 

(a) Fairness.  State whether the special purpose acquisition company reasonably believes 

that the de-SPAC transaction and any related financing transaction are fair or unfair to 

unaffiliated security holders of the special purpose acquisition company.  If any director voted 

against, or abstained from voting on, approval of the de-SPAC transaction or any related 

financing transaction, identify the director, and indicate, if known, after making reasonable 

inquiry, the reasons for the vote against the transaction or abstention. 

(b) Factors considered in determining fairness.  Discuss in reasonable detail the material 

factors upon which the belief stated in paragraph (a) of this section is based and, to the extent 

practicable, the weight assigned to each factor.  Such factors shall include, but not be limited to, 

the valuation of the target company, the consideration of any financial projections, any report, 

opinion or appraisal described in § 229.1607 (Item 1607 of Regulation S-K), and the dilutive 

effects 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 or any 

related financing transaction is structured so that approval of at least a majority of unaffiliated 

security holders is required. 

(d) Unaffiliated representative.  State whether or not a majority of directors 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 or any related financing transaction and/or preparing a report concerning 

the fairness of the de-SPAC transaction or any related financing transaction. 

(e) Approval of directors.  State whether or not the de-SPAC transaction or any related 

financing transaction was approved by a majority of the directors of the special purpose 

acquisition company who are not employees of the special purpose acquisition company. 



339 
 

Instruction 1 to Item 1606: A statement that the special purpose acquisition company has 

no reasonable belief as to the fairness or unfairness of the de-SPAC transaction or any related 

financing transaction to unaffiliated security holders will not be considered sufficient disclosure 

in response to paragraph (a) of this section. 

§ 229.1607 (Item 1607) Reports, opinions, appraisals and negotiations. 

(a) Report, opinion or appraisal.  State whether or not the special purpose acquisition 

company or SPAC sponsor has 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 special 

purpose acquisition company, SPAC sponsor or security holders who are not affiliates. 

(b) Preparer and summary of the report, opinion or appraisal.  For each report, opinion 

or appraisal described in response to paragraph (a) of this section or any negotiation or report 

described in response to § 229.1606(d) (Item 1606(d) of Regulation S-K) concerning the terms 

of the transaction: 

(1) Identify the outside party and/or unaffiliated representative; 

(2) Briefly describe the qualifications of the outside party and/or unaffiliated 

representative; 

(3) Describe the method of selection of the outside party and/or unaffiliated 

representative; 

(4) Describe any material relationship that existed during the past two years or is 

mutually understood to be contemplated and any compensation received or to be received as a 

result of the relationship between: 

(i) The outside party, its affiliates, and/or unaffiliated representative; and 



340 
 

 (ii) The special purpose acquisition company, the SPAC sponsor and/or their respective 

affiliates, 

(5) 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 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 Item 1607(b): The information called for by paragraphs (b)(1), (2), and 

(3) of this section must be given with respect to the firm that provides the report, opinion, or 

appraisal rather than the employees of the firm that prepared the report. 

(c) All reports, opinions or appraisals referred to in paragraph (a) of this section shall 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 in de-SPAC transactions. 

If the special purpose acquisition company files a Schedule TO (§ 240.14d-100) pursuant 

to § 240.13e-4(c)(2) (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) of Schedule 14A, as applicable, in341 
 

addition to the information otherwise required by Schedule TO.  Such redemption shall be 

conducted in compliance with all other provisions of Rule 13e-4 and Regulation 14E. 

§ 229.1609 (Item 1609) Financial projections in de-SPAC transactions. 

(a) With respect to any projections disclosed in the filing, 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 factors that may impact such assumptions.  The disclosure 

referred to in this section should include 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. 

(c) If the projections relate to the performance of the special purpose acquisition 

company, state whether the projections reflect the view of the special purpose acquisition 

company’s management or board about its future performance as of the date of the filing.  If the 

projections relate to the target company, disclose whether 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 about its future performance as of the date of the filing.  If the projections 

no longer reflects the views of the special purpose acquisition company’s or the target 

company’s management or board regarding the future performance of their respective companies 

as the date of the filing, state the purpose of disclosing the projections and the reasons for any 

continued reliance by the management or board on the projections.  

§ 229.1610 (Item 1610) Structured data requirement. 

Provide the disclosure required by this subpart 229.1600 in an Interactive Data File in 

accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual. 



342 
 

PART 230–-GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933 

14. The general authority citation for part 230 continues to read as follows: 

Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 

78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 

80a-29, 80a-30, and 80a-37, and Pub. L. No. 112-106, sec. 201(a), sec. 401, 126 Stat. 313 

(2012), unless otherwise noted. 

*  *  *  *  * 

15. Revise § 230.137(d)(1) to read as follows: 

§ 230.137 Publications or distributions of research reports by brokers or dealers that are 

not participating in an issuer’s registered distribution of securities. 

*   *   *   *   * 

(d) *  *  * 

(1) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 

*   *   *   *   * 

16. Revise § 230.138(a)(4)(i) to read as follows: 

§ 230.138 Publications or distributions of research reports by brokers or dealers about 

securities other than those they are distributing. 

(a) *  *  * 

(4) *  *  * 

(i) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 

*   *   *   *   * 

17. Revise § 230.139(a)(1)(ii)(A)  to read as follows: 



343 
 

§ 230.139 Publications or distributions of research reports by brokers or dealers 

distributing securities. 

(a) *  *  * 

(1) *  *  * 

(ii) *  *  * 

(A) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 

*   *   *   *   * 

18. Add § 230.140a to read as follows: 

§ 230.140a Definition of “distribution” in section 2(a)(11) for certain parties 

A person who has acted as an underwriter of the securities of a special purpose 

acquisition company and takes steps to facilitate the de-SPAC transaction, or any related 

financing transaction, or otherwise participates (directly or indirectly) in the de-SPAC 

transaction will be deemed 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 Act.  Terms 

used in this subsection have the same definitions as in Item 1601 of Regulation S-K (17 CFR 

229.1601). 

19. 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 rule, a reporting shell company is a company 



344 
 

other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB (§ 229.1101(b) of 

this chapter), that has: 

(1) No or nominal operations;  

(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; and 

(3) 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.). 

*   *   *   *   * 

20. Amend § 230.163A by: 

a. Removing the preliminary note; 

b. Adding an introductory paragraph; and 

c. Revising paragraph (b)(3)(i). 

The revision and addition read as follows: 

§ 230.163A Exemption from section 5(c) of the Act for certain communications made by or 

on behalf of issuers more than 30 days before a registration statement is filed. 

Attempted compliance with this section does not act as an exclusive election and the 

issuer also may claim the availability of any other applicable exemption or exclusion.  Reliance 

on this section does not affect the availability of any other exemption or exclusion from the 

requirements of section 5 of the Act. 

*   *   *   *   * 



345 
 

(b) *  *  * 

(3) *  *  * 

(i) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 

*   *   *   *   * 

21. Amend § 230.164 by: 

a. Removing the preliminary notes; 

b. Adding an introductory paragraph; and 

c. Revising paragraph (e)(2)(i). 

The revision and addition read as follows: 

§ 230.164 Post-filing free writing prospectuses in connection with certain registered 

offerings. 

This section is not available for any communication that, although in technical 

compliance with this section, is part of a plan or scheme to evade the requirements of section 5 

of the Act.  Attempted compliance with this section does not act as an exclusive election and the 

person relying on this section also may claim the availability of any other applicable exemption 

or exclusion.  Reliance on this section does not affect the availability of any other exemption or 

exclusion from the requirements of section 5 of the Act. 

*   *   *   *   * 

(e) *  *  * 

(2) *  *  * 

(i) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 

*   *   *   *   * 

22. Amend § 230.174 by revising the heading and paragraph (g) to read as follows: 



346 
 

§ 230.174 Delivery of prospectus by dealers; exemptions under section 4(a)(3) of the Act. 

*   *   *   *   * 

 (g) If the registration statement relates to an offering of securities of a blank check 

company issuing penny stock, as defined in Rule 405 (§ 230.405), the statutory period for 

prospectus delivery specified in section 4(a)(3) of the Act shall not terminate until 90 days after 

the date funds and securities are released from the escrow or trust account pursuant to Rule 419 

under the Act (17 CFR 230.419). 

*   *   *   *   * 

23. Amend § 230.405 by: 

a. Adding the definition for “blank check company” in alphabetical order; 

b. Adding the definition for “blank check company issuing penny stock” in 

alphabetical order; 

c. Revising paragraph (1)(ii)(A) in the definition for “ineligible issuer”; and 

d. Adding paragraph (3)(iv) to the definition for “smaller reporting company”. 

The additions and revisions read as follows: 

§ 230.405 Definitions of terms. 

*   *   *   *   * 

Blank check company.  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. 

*   *   *   *   * 

Blank check company issuing penny stock.  The term blank check company issuing penny 

stock means a company that is subject to § 230.419 of this chapter. 



347 
 

*   *   *   *   * 

Ineligible issuer. (1) *   *   * 

 (ii) *   *   * 

(A) A blank check company issuing penny stock (as defined in § 230.405); 

*   *   *   *   * 

Smaller reporting company. *   *   * 

(3) *   *   * 

(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 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 next periodic report. 

(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. 

*   *   *   *   * 

24. Amend § 230.419 by: 

a. Revising the heading; 



348 
 

b. Revising paragraph (a)(1); 

c. Removing paragraph (a)(2); 

d. Redesignating paragraph (a)(3) as paragraph (a)(2); and 

e. Revising paragraph (b)(1)(i). 

The revisions read as follows: 

§ 230.419 Offerings by blank check companies issuing penny stock. 

(a) *  *  * 

(1) The provisions of this section shall apply to every registration statement filed under 

the Act relating to an offering by a blank check company that: 

(i) Is a development stage company; and 

(ii) Is issuing “penny stock,” as defined in § 240.3a51-1 of this chapter (Rule 3a51-1) 

under the Securities Exchange Act of 1934 (“Exchange Act”). 

*  *  *  *  *  

(b) *  *  * 

(1) *  *  * 

(i) Except as otherwise provided in this section or prohibited by other applicable law, all 

securities issued in connection with an offering by a blank check company subject to this section 

and the gross proceeds from the offering shall be deposited promptly into: 

*   *   *   *   * 

25. Revise § 230.430B(b)(2)(iv)(A) to read as follows: 

§ 230.430B Prospectus in a registration statement after effective date. 

(b) *  *  * 

(2) *  *  * 



349 
 

(iv) *  *  * 

(A) A blank check company issuing penny stock, as defined in § 230.405 (Rule 405); 

*   *   *   *   * 

26. Revise § 230.437a(a)(1) to read as follows: 

§ 230.437a Written consents. 

(a) *  *  * 

(1) Are not a blank check company issuing penny stock, as defined in § 230.405 (Rule 

405); and 

*   *   *   *   * 

PART 232 — REGULATION S-T — GENERAL RULES AND REGULATIONS FOR 

ELECTRONIC FILINGS 

27. The general authority citation for part 232 continues to read in part 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, 7201 et seq.; and 18 U.S.C. 

1350, unless otherwise noted. 

*   *   *   *   * 

28. 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)(1)(i); 

c. Removing the period and adding in its place “; and” in paragraph (b)(1)(ii); 

d. Adding paragraph (b)(1)(iii); 

e. Adding paragraph (b)(4); and 

f. Revising Note 1 to § 232.405. 



350 
 

The revisions and additions 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), paragraph (101) of Part II 

– Information Not Required to be Delivered to Offerees or Purchasers of Form F-10 (§ 239.40 of 

this chapter), Note D.5 of Exchange Act Rule 14a-101 (§ 240.14a-101 of this chapter), General 

Instruction L of Exchange Act Rule 14d-100 (240.14d-100 of this chapter), paragraph 101 of the 

Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the 

General Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General 

Instructions to Form 6-K (§ 249.306 of this chapter), 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), and General 

Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter) 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), paragraph (101) of Part II – Information Not Required to be Delivered to 

https://www.ecfr.gov/current/title-17/section-229.601?view_mode=drafting#p-229.601(b)(101)
https://www.ecfr.gov/current/title-17/section-229.601?view_mode=drafting#p-229.601(b)(101)
https://www.ecfr.gov/current/title-17/section-239.40?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.40?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.220f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.240f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.306?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.15A?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11A?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.14?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11a-1?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17a?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11c?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17c?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11d?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.128?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-232.11?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-232.11?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-229.601?view_mode=drafting#p-229.601(b)(101)


351 
 

Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter), Note D.5 of Exchange Act Rule 

14a-101 (§ 240.14a-101 of this chapter), General Instruction L of Exchange Act Rule 14d-100 

(240.14d-100 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20-F (§ 

249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40-F (§ 249.240f 

of this chapter), paragraph C.(6) of the General Instructions to Form 6-K (§ 249.306 of this 

chapter), 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), or General Instruction C.4 of Form N-CSR (§§ 249.331 

and 274.128 of this chapter), as applicable;  

*   *   *   *   * 

(4) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, Item 

601(b)(101) of Regulation S-K (§ 229.601(b)(101) of this chapter), paragraph (101) of Part II - 

Information Not Required to be Delivered to Offerees or Purchasers of Form F-10 (§ 239.40 of 

this chapter), Note D.5 of Exchange Act Rule 14a-101 (§ 240.14a-101 of this chapter), General 

Instruction L of Exchange Act Rule 14d-100 (240.14d-100 of this chapter), paragraph 101 of the 

Instructions as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the 

General Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General 

Instructions to Form 6-K (§ 249.306 of this chapter), 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), 

https://www.ecfr.gov/current/title-17/section-239.40?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.220f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.220f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.240f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.240f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.306?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.306?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.15A?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11A?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.14?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11a-1?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17a?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11c?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17c?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17c?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11d?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.128?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.128?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-229.601?view_mode=drafting#p-229.601(b)(101)
https://www.ecfr.gov/current/title-17/section-239.40?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.40?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.220f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.240f?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-249.306?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.15A?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11A?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.14?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11a-1?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17a?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-239.17b?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11c?view_mode=drafting


352 
 

General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this chapter); or General 

Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter). 

*   *   *   *   * 

(b) *   *   * 

(1) *   *   * 

(iii) The disclosure set forth in paragraph (4) of this section. 

*   *   *   *   * 

(4) The disclosure provided under Regulation S-K (17 CFR 229) and related provisions 

that is required to be tagged, including, as applicable: 

(a) The information required by Subpart 1600 of Regulation S-K (§ 229.1601 through 

§ 229.1610 of this chapter). 

*   *   *   *   * 

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 of this chapter (Form S-1), § 239.13 of this chapter (Form S-3), § 239.25 of this chapter 

(Form S-4), § 239.18 of this chapter (Form S-11), § 239.31 of this chapter (Form F-1), § 239.33 

of this chapter (Form F-3), § 239.34 of this chapter (Form F-4), § 249.310 of this chapter (Form 

10-K), § 249.308a of this chapter (Form 10-Q), and § 249.308 of this chapter (Form 8-K).  Note 

D.5 of Section 240.14a-101 of this chapter (Note D.5 of Exchange Act Rule 14a-101) specifies 

the circumstances under which an Interactive Data File must be submitted with respect to 

§ 240.14a-101 of this chapter (Schedule 14A).  General Instruction L of Section 240.14d-100 of 

this chapter (General Instruction L) of Exchange Act Rule 14d-100) specifies the circumstances 

https://www.ecfr.gov/current/title-17/section-239.17c?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.11d?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-274.128?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-230.424?view_mode=drafting
https://www.ecfr.gov/current/title-17/section-230.424?view_mode=drafting


353 
 

under which an Interactive Data File must be submitted with respect to § 240.14d-100 of this 

chapter (Schedule TO).  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 of this chapter (Form 40-F) and § 249.306 of this chapter (Form 6-K).  

Section 229.601(b)(101) (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 

17 CFR 210.6-01 through 210.6-10 (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 



354 
 

(§§ 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), 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 

29. The general authority citation for part 239 continues to read as follows: 

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, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat. 

312, unless otherwise noted. 

*  *  *  *  * 

30. Amend Form S-1 (referenced in § 239.11) by adding General Instruction VIII to 

read as follows: 

Note: The text of Form S-1 does not, and this amendment will not, appear in the Code of 

Federal Regulations. 

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 



355 
 

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, attention is 

directed to the requirements of Form S-4 applicable to de-SPAC transactions, including, but not 

limited to, General Instruction L. 

31. 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. 

The addition and revisions read as follows: 

Note: The text of Form S-4 does not, and this amendment will not, appear in the Code of 

Federal Regulations. 

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 



356 
 

of Items 1603 through 1607 and 1609 of Regulation S-K (17 CFR 229.1603 through 229.1607 

and 229.1609), as well as the structured data provision of Item 1610 of Regulation S-K (17 CFR 

229.1610), shall apply in addition to the provisions of this Form.  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 defined in Item 1601(b) of Regulation S-K (17 CFR 229.1601(b)), in a de-SPAC transaction, 

the term “registrant” for purposes of the disclosure requirements of this Form shall mean the 

special purpose acquisition 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 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. 



357 
 

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 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E 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 action is to be taken 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, provide the financial statements required by § 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 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.  If the company being acquired will 

be a predecessor to a registrant that is a shell company, see § 210.15-01(a). 



358 
 

*   *   *   *   * 

SIGNATURES 

*   *   *   *   * 

Instructions. 

1. The registration statement shall be signed by the registrant, its principal executive officer or 

officers, its principal financial officer, its controller or principal accounting officer, and by at 

least a majority of the board of directors or persons performing similar functions.  If the 

registrant is a foreign person, the registration statement shall also be signed by its authorized 

representative in the United States.  Where the registrant is a limited partnership, the registration 

statement shall be signed by a majority of the board of directors of any corporate general partner 

signing the registration statement.  If the securities to be registered on this Form will be issued by 

the special purpose acquisition company in a de-SPAC transaction, as such terms are defined in 

Items 1601(b) and (a) of Regulation S-K, the term “registrant” for purposes of this instruction 

shall mean the special purpose acquisition and the target company, as such term is defined in 

Item 1601(d) of Regulation S-K. 

*   *   *   *   * 

32. Amend Form F-1 (referenced in § 239.31) by adding General Instruction VII to 

read as follows: 

Note: The text of Form F-1 does not, and this amendment will not, appear in the Code of 

Federal Regulations. 

FORM F-1 

*   *   *   *   * 

GENERAL INSTRUCTIONS 



359 
 

*   *   *   *   * 

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, attention is 

directed to the requirements of Form F-4 applicable to de-SPAC transactions, including, but not 

limited to, General Instruction I. 

*  *  *  *  * 

33. Amend Form F-4 (referenced in § 239.34) by: 

a. Adding General Instruction I; 

b. Revising Instruction 1 to paragraph (b)(5) of Item 17; and 

c. Revising the Instructions to paragraph (b)(5) and (b)(6) of Item 17; and 

d. Revising Instruction 1 to the signature block. 

The addition and revisions read as follows: 

Note: The text of Form F-4 does not, and this amendment will not, appear in the Code of 

Federal Regulations. 

FORM F-4 

*   *   *   *   * 



360 
 

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), as well as the structured data provision of Item 1610 of Regulation S-K (17 CFR 

229.1610), shall apply in addition to the provisions of this Form.  To the extent that the 

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 defined in Item 1601(b) 

of Regulation S-K (17 CFR 229.1601(b)), in a de-SPAC transaction, the term “registrant” for 

purposes of the disclosure requirements of this Form shall mean the special purpose acquisition 

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 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;361 
 

d. 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 

e. 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 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E 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 action is to be taken 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.  If the foreign company being 

acquired will be a predecessor to a registrant that is a shell company, see § 210.15-01(a). 



362 
 

*   *   *   *   * 

Instructions to paragraph (b)(5) and (b)(6): 

If the financial statements required by paragraphs (b)(5) and (b)(6) are prepared on the basis of a 

comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to 

U.S. GAAP in accordance with Item 18 of Form 20-F (§ 249.220f of this chapter) if the foreign 

business being acquired will be a predecessor to the issuer that is a shell company or, in all other 

circumstances, with Item 17 of Form 20-F (§ 249.220f of this chapter) unless a reconciliation is 

unavailable or not obtainable without unreasonable cost or expense.  At a minimum, provide a 

narrative description of all material variations in accounting principles, practices and methods 

used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. when 

the financial statements are prepared on a basis other than U.S. GAAP. 

SIGNATURES 

*   *   *   *   * 

Instructions 

1. The registration statement 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 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 

the special purpose acquisition company in a de-SPAC transaction, as such terms are defined in 

Items 1601(b) and (a) of Regulation S-K, the term “registrant” for purposes of this instruction 



363 
 

shall mean the special purpose acquisition and the target company, as such term is defined in 

Item 1601(d) of Regulation S-K. 

*   *   *   *   * 

PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE 

ACT OF 1934 

34. The general authority citation for part 240 continues to read 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, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 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; Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and sec. 503 and 602, Pub. L. 

112-106, 126 Stat. 326 (2012), unless otherwise noted. 

*  *  *  *  * 

35. Amend § 240.12b-2 by adding paragraph (3)(iv) to the definition of “smaller 

reporting company” to read as follows: 

§ 240.12b-2 Definitions. 

*  *  *  *  * 

Smaller reporting company. *   *   * 

(3) *   *   * 

(iv) Upon the consummation of a de-SPAC transaction, as defined in Item 1601(a) of 

Regulation S-K (17 CFR 229.1601(a)), 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-



364 
 

K, following the de-SPAC transaction and reflect this re-determination in in its next periodic 

report. 

(A) Public float is measured as of a date within 4 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 Item 

1601(d) of Regulation S-K (17 CFR 229.1601(d)), 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. 

*   *   *   *   * 

36. 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 held or action is taken, or the 

maximum number of days permitted for disseminating the proxy statement under the applicable 

laws of the jurisdiction of incorporation or organization. 

37. Amend § 240.14a-101 by adding paragraph D.5 to the Notes and paragraph (f) to 

Item 14 to read as follows: 



365 
 

*   *   *   *   * 

§ 240.14a-101 Schedule 14A. Information required in proxy statement. 

*   *   *   *   * 

Notes  *   *   *   

D. *   *   *   

5. Interactive Data File.  An Interactive Data File must be included in accordance with 

§ 232.405 of this chapter (Rule 405 of Regulation S-T) and the EDGAR Filer Manual where 

applicable pursuant to Item 14(f) of this Schedule and § 229.1610 of this chapter (Item 1610 of 

Regulation S-K). 

*   *   *   *   * 

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 

through 229.1607 and 229.1609 (Items 1603 through 1607 and 1609 of Regulation S-K), as well 

as the structured data provision of § 229.1610 (Item 1610 of Regulation S-K), shall apply to the 

transaction in addition to the provisions of this schedule.  To the extent that the disclosure 

requirements of Subpart 229.1600 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 of this chapter (Item 101 of Regulation S-K), 

description of business; 



366 
 

(ii) Information required by § 229.102 of this chapter (Item 102 of Regulation S-K), 

description of property;  

(iii) Information required by § 229.103 of this chapter (Item 103 of Regulation S-K), 

legal proceedings; 

(iv) Section 229.304 of this chapter (Item 304 of Regulation S-K), changes in and 

disagreements with accountants on accounting and financial disclosure; 

(v) Information required by § 229.403 of this chapter (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; 

(vi) Information required by § 229.701 of this chapter (Item 701 of Regulation S-K), 

recent sales of unregistered securities; and 

(vii) If any directors are appointed without action by the security holders of the special 

purpose acquisition company, §§ 229.103(c)(2), 229.401, and 229.404(a) and (b) of this chapter 

(Items 103(c)(2), 401, and 404(a) and (b) of Regulation S-K). 

*   *   *   *   * 

38. 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 held or action is taken, or the maximum number of days permitted 



367 
 

for disseminating the information statement under the applicable laws of the jurisdiction of 

incorporation or organization. 

39. Amend § 240.14d-100 by: 

a. Redesignating General Instruction K as General Instruction M; and 

b. Adding new General Instructions K and L. 

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. De-SPAC Transactions.  If the filing relates to a de-SPAC transaction, as defined in 

§ 229.1601(a) of this chapter (Item 1601(a) of Regulation S-K), then the disclosure provisions of 

§§ 229.1603 through 229.1609 of this chapter (Items 1603 through 1609 of Regulation S-K), as 

well as the structured data provision of § 229.1610 of this chapter (Item 1610 of Regulation S-

K), shall apply to the transaction in addition to the provisions of this statement.  To the extent 

that the disclosure requirements of Subpart 229.1600 of this chapter are inconsistent with the 

disclosure requirements of this filing, the requirements of Subpart 229.1600 of this chapter are 

controlling. 

L. Interactive Data File.  An Interactive Data File must be included in accordance with 

§ 232.405 of this chapter (Rule 405 of Regulation S-T) and the EDGAR Filer Manual where 



368 
 

applicable pursuant to Item 14(f) of § 240.14a-101 of this chapter (Schedule 14A) and 

§ 229.1610 of this chapter (Item 1610 of Regulation S-K). 

*   *   *   *   * 

PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 

40. 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), and Sec. 72001, Pub. L. 114-94, 129 Stat. 1312 

(2015), unless otherwise noted. 

 Section 249.220f is also issued under secs. 3(a), 202, 208, 302, 306(a), 401(a), 401(b), 

406 and 407, Pub. L. 107-204, 116 Stat. 745, and secs. 2 and 3, Pub. L. 116-222, 134 Stat. 1063. 

*  *  *  *  * 

 Section 249.308 is also issued under 15 U.S.C. 80a-29 and 80a-37. 

*  *  *  *  * 

41. Amend Form 20-F (referenced in § 249.220f) by adding Instruction 4 to Item 8 to 

read as follows: 

Note: The text of Form 20-F does not, and this amendment will not, appear in the Code of 

Federal Regulations. 

FORM 20-F 

*   *   *   *   * 

Item 8. Financial Information 

*   *   *   *   * 

Instructions to Item 8: 



369 
 

*   *   *   *   * 

4. When the issuer is a shell company that will acquire a business that will be its predecessor, 

provide the information required by § 240.15-01 (Rule 15-01 of Regulation S-X). 

*   *   *   *   * 

42. Amend Form 8-K (referenced in § 249.308) by revising paragraph (f) of Item 2.01 

by removing the phrase “the registrant were filing a general form for registration of securities on 

Form 10” and adding in its place “the acquired business were filing a general form for 

registration of securities on Form 10”.  The revision reads as follows: 

Note: The text of Form 8-K does not, and this amendment will not, appear in the Code of 

Federal Regulations. 

FORM 8-K 

*   *   *   *   * 

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, disclose the 

information that would be required if the acquired business 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.  

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 



370 
 

CFR 240.12b-2), the registrant may identify the filing in which that disclosure is included instead 

of including that disclosure in this report. 

*   *   *   *   * 

Part 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940 

43. The authority citation for part 270 continues to read in part as follows: 

Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, and Pub. L. 111-203, sec. 939A, 

124 Stat. 1376, unless otherwise noted. 

44. Add § 270.3a-10 to read as follows: 

§ 270.3a-10 Special Purpose Acquisition Companies 

(a) Notwithstanding section 3(a)(1)(A) of the Act, a special purpose acquisition company 

(“SPAC”) will not be deemed to be an investment company; provided that: 

(1) The SPAC’s assets consist solely of Government securities, securities issued by 

government money market funds as defined in § 270.2a-7(a)(14), and cash items prior to 

completion of the de-SPAC transaction; 

(2) The assets set forth in paragraph (a)(1) of this section are not at any time acquired or 

disposed of for the primary purpose of recognizing gains or decreasing losses resulting from 

market value changes; 

(3) The SPAC: 

(i) Seeks to complete a single de-SPAC transaction as a result of which: 

(A) The surviving company, either directly or through a primarily controlled company, 

will be primarily engaged in the business of the target company or companies, which business is 

not that of an investment company, and 



371 
 

(B) The surviving company will have at least one class of securities listed for trading on a 

national securities exchange; 

(ii) Files a Form 8-K with the Commission, no later than 18 months after the effective date 

of its initial registration statement, disclosing an agreement to engage in the de-SPAC transaction 

with at least one target company; and 

(iii) Completes the de-SPAC transaction no later than 24 months after the effective date of 

its initial registration statement. 

(4) Any assets of the SPAC: 

(i) That are not used in connection with the de-SPAC transaction; or 

(ii) In the event of a failure of the SPAC to file a Form 8-K within the time frame set 

forth in paragraph (a)(3)(ii) of this section or complete a de-SPAC transaction within the time 

frame set forth in paragraph (a)(3)(iii) of this section 

will be distributed in cash to investors as soon as reasonably practicable thereafter; 

(5) The SPAC is primarily engaged in the business of seeking to complete a single de-

SPAC transaction, as set forth in paragraphs (a)(3) of this section and evidenced by: 

(i) The activities of its officers, directors and employees; 

(ii) Its public representations of policies; 

(iii) Its historical development; and 

(iv) An appropriate resolution of its board of directors, which resolution or action has 

been recorded contemporaneously in its minute books or comparable documents; and 

(6) The SPAC does not hold itself out as being primarily engaged in the business of 

investing, reinvesting or trading in securities. 

(b) For purposes of this section: 



372 
 

(1) Initial registration statement means the registration statement that the SPAC filed 

under the Securities Act of 1933 for its initial public offering. 

(2) Primarily controlled company means an issuer that: 

(i) Is controlled within the meaning of section 2(a)(9) of the Act by the surviving 

company following a de-SPAC transaction with a degree of control that is greater than that of 

any other person; and 

(ii) Is not an investment company. 

(3) Surviving company means the public company issuer that survives a de-SPAC 

transaction and in which the shareholders of the SPAC immediately prior to the de-SPAC 

transaction will own equity interests immediately following the de-SPAC transaction.  

(4) De-SPAC transaction has the same meaning as defined in § 229.1601(a) of this 

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

(5) Special purpose acquisition company has the same meaning as defined in 

§ 229.1601(b) of this chapter (Item 1601(b) of Regulation S-K). 

(6) Target company has the same meaning as defined in § 229.1601(d) of this chapter 

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

By the Commission. 

Dated: March 30, 2022. 

 

 

Vanessa A. Countryman, 

Secretary.