![]() ![]() There’s a separate issue with forward-looking statements made by SPACs, which, like warrants, can drum up investor interest. The SEC has paused approvals, with some 260 would-be SPACs already backed up in line to go public.Īnd that’s not even the only sobering news SPACs have received. For SPACs waiting to go public, the party is at least temporarily over. For one thing, existing SPACs might have to restate their financials, at least if any necessary correction of their accounting treatment of warrants is material. The SEC delicately noted that certain terms are “ common across many entities.” Regarding the latter, apparently pretty common. ![]() With regard to the former, we’ll let the legal types at Cooley explain them in detail, but they have to do with the indexing of warrants to the stock (a prerequisite for classifying the warrants as equity) and tender offers. The obvious questions, of course, are what exactly those certain conditions are and how common are they. SPACs have always accounted for those warrants as equity, but no longer.Īs the SEC’s acting chief accountant Paul Munter and acting director of the division of corporation finance John Coates declared in their April statement, under certain conditions warrants should be treated instead as liabilities. To entice investors in their IPOs, SPACs typically bundle their stock with “warrants,” which function much like stock options and allow early investors to cash in big if the SPAC proves successful. Before they identify and merge with a target company, SPACs are little more than empty shells – great on the seashore, no doubt, but not terribly attractive investments. The issue deals with the accounting treatment of warrants. Alas, the SPAC fever may have been broken, at least in part, by an April 12 statement from the SEC that slaps a cold washcloth onto the financial statements of SPACs. It’s only April, and both of those numbers surpass annual records that were set just last year. SPACs have already raised $100 billion this year, and 550 of them have filed to go public. But when it did the right thing and posed an accounting question to the Securities and Exchange Commission, according to the Wall Street Journal, its query led to a regulatory response that has put the entire SPAC craze on pause.Ĭraze is not overstating it. Like so many other companies in recent years, it went public through a SPAC merger. If you need proof that no good deed goes unpunished, look at Luminar Technologies.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |