By: Allison N. Swecker
PDF: To SPAC or Not to SPAC: Liberalizing the Regulation of Capital Markets
The merger and acquisition world has experienced an uptick in deal flow since 2016, reaching unprecedented levels in 2020 due to enhanced private equity funding and market volatility. While the market volatility spurred by COVID-19 halted traditional initial public offerings (IPOs), the special purpose acquisition company (SPAC) market exploded. The flurry of SPAC activity in the United States triggered the development of SPAC markets worldwide. Unfortunately, SPACs’ great rise to fame in the past few years has come at a cost—fraud. As such, the US Securities and Exchange Commission (SEC) is left grappling with how to best regulate the market moving forward, avoiding a return to rampant fraud that plagued the market in the 1980s.
This Note assesses the current SPAC regulatory framework in the United States and abroad. The solution suggests that capital markets should impose modest preventative measures that enable SPACs to occupy their own sphere in capital markets while also affording greater investor protections.