On April 29, 2021, Sen. John Kennedy (R) introduced the Sponsor Promote and Compensation (SPAC) Act (the "bill"), which would require the SEC to issue rules requiring enhanced disclosures for blank check companies, including SPACs, during the IPO and pre-merger stages.

Specifically, the SPAC Act calls for rules requiring the disclosure of:

  1. the amount of cash per share expected to be held by the blank check company immediately prior to the merger under various redemption scenarios;
  2. any side payments or agreements to pay sponsors, blank check company investors, or private investors in public equity for their participation in the merger, including any rights or warrants to be issued post-merger and the dilutive impact of those rights or warrants; and
  3. any fees or other payments to the sponsor, underwriter, and any other party, including the dilutive impact of any warrant that remains outstanding after blank check company investors redeem shares pre-merger.

Further, the bill would require the SEC's rules provide for more explicit disclosure for the benefit of retail investors. The bill would compel the SEC to take action within 120 days of the bill's passage.

The introduction of the SPAC Act follows an increased regulatory scrutiny surrounding the IPO alternatives, which has included the SEC's Investor Alert cautioning investors against celebrity-sponsored SPACs, the SEC Staff's statement on accounting and reporting considerations for warrants issued by SPACs, and additional SEC Staff statements concerning SPACs.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe - Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.