Saturday, December 11, 2021

SEC Chair Sheds Light On SPAC Loopholes


The Security and Exchange (SEC) Commission's Chair, Gart Gensler, has made clear for months that he is worried about Risks faced by Investors in Special Purpose Acquisition Companies (SPAC), which over the past Two yearshave become a Hugely popular way to take Businesses Public.

In a Speech on Thursday, he elaborated on One of the SEC's main focus in Reducing those Risks, with Measures that could Shake-Up the Industry.

Gensler noted that SPACs are Allowed to pitch Potential Investors using Forward-Looking Business Data that isn't Allowed in Initial Public offerings. That Loophole, he said, allows the Financiers behind the Funds to Release Rosy-looking Numbers that Mask the Underlying Health of the Business they're taking Public.

The SEC has been looking into Disclosure Issues in SPAC Deals involving Nikola and Lucid.

It now looks as if the SEC may Require SPACs to provide More Complete Disclosures about their Deals, and to do so Earler: It is essential that investors receive the information they need, when they need it, without misleading hype, Gensler said.

He also suggested that the People behind SPACs should be held more Accountable for their Due Dillgence on the Companies these Funds Acquire, much as Underwriters of IPOs are. Make no mistake: When it comes to liability, SPACs do not provide a 'free pass' for gatekeepers, he said.

The Goal is to Even-Out the playing field between SPACs and IPOs. Deal Makers have expected Financial Regulators to tighten the Rules governing Blank-Check Funds, amid an Explosion in their Popularity and the Under-Performance of many Companies that have used them to go Public.

The SEC Rgulators are asking Questions about the Deal to bring Trump's New Social Media Company to the Stock Market, One that has attracted both Legions of Trump Fans, and People looking to make a Quick Profit.

The Company partnering with Trump Media & Technology Group (TMTG) acknowledged the Inquiries in a Filing it made with Regulators. It also gave some Financial Forecasts for the Company, which is hoping to Rival Twitter and other Platforms that Banned Trump, along with Netflix and other Streaming Video Services.

Digital World Acquisition (DWAC) said it is Cooperating with "the preliminary, fact-finding inquiries" by the Financial Industry Regulation Authority (FINRA) for Stock Manipulations, and the SEC. Trump's SPAC Deal for Violating Discussion Guidelines.

The Financial Industry Regulation Authority, or FINRA, asked in late October and early November, for a Review of Trading in DWAC's Stock before the Oct. 20 Merger Deal was announced. That announcement sent the Stock surging from $9.96 to $94.20 in just Two days. The Shares then pulled back to roughly $43, after Major Investors Pulled-Out.

The SEC made a Request in early November for Documents related to Trump's to Early Meetings with DWAC's Board, Trading Policies, and other things.

According to DWAC, the SEC's Request said the Commission's "investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event, or security."










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