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    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
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.
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    \335\ Proposed Rule 3a-10(a)(5)(iv).
    \336\ See 17 CFR 270.3a-2 (Rule 3a-2 under the Investment
Company Act); Rule 3a-8 under the Investment Company Act.
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    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? 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\
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    \337\ See generally Rule 3a-7 under the Investment Company Act.
---------------------------------------------------------------------------

    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
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\
---------------------------------------------------------------------------

    \338\ Id.
---------------------------------------------------------------------------

    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 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\
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    \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 SEC. 1145 (Feb. 12, 1942).
---------------------------------------------------------------------------

    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 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.
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    \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.
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    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.
---------------------------------------------------------------------------

    \341\ Proposed Rule 3a-10(a)(4).
---------------------------------------------------------------------------

    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 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\
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    \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)].
    \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).
---------------------------------------------------------------------------

    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
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.
---------------------------------------------------------------------------

    \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.
    \348\ These additional agreements would need to be evidenced by
the filing of a Form 8-K.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \352\ Proposed Rule 3a-10(a)(4)(i).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \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).
    \358\ See Proposing Release to Rule 3a-2, supra note 343.
---------------------------------------------------------------------------

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.
    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 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.
    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?
    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?
---------------------------------------------------------------------------

    \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.
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    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?
     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?
---------------------------------------------------------------------------

    \360\ See Rodrigues and Stegemoller, supra note 17.
---------------------------------------------------------------------------

    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 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?
---------------------------------------------------------------------------

    \361\ See Securities Act Rule 164(e)(1).
    \362\ See General Instruction A.1 to Form S-8.
    \363\ See Securities Act Rule 139(a)(1)(ii)(B).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \364\ See supra note 35.
---------------------------------------------------------------------------

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.

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.
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    \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.
---------------------------------------------------------------------------

    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.
    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 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
company target at the time of a transaction, and would further align
the protections afforded to investors with those of an initial public
offering.
---------------------------------------------------------------------------

    \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 Br[uuml]ggemann, 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/.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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 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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \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 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 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\
---------------------------------------------------------------------------

    \377\ For a detailed description of the SPAC process, see
Section 1.
    \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.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \382\ See infra Section IX.B.1.a.
    \383\ See supra note 67 and accompanying text.
---------------------------------------------------------------------------

    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 statement. However, as discussed above, there are
potential gaps or inconsistencies in these protections that the
proposed amendments are intended to address.\384\
---------------------------------------------------------------------------

    \384\ See supra Sections III.C & III.F.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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
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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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
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\
---------------------------------------------------------------------------

    \388\ See also supra Sections I-IV for further discussion of
existing regulatory framework and market practices.
---------------------------------------------------------------------------

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 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.
---------------------------------------------------------------------------

    \389\ See Jessica Bai, Angela Ma, and Miles Zheng, Reaching for
Yield in the Going-Public Market: Evidence from SPACs (SSRN Working
Paper, 2021).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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 FR27597 (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)] (SRNYSEAMEX-2010-103) (notice of filing and
immediate effectiveness of proposed rule change to adopt additional
criteria for the listing of SPACs).
[GRAPHIC] [TIFF OMITTED] TP13MY22.000

    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 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\
---------------------------------------------------------------------------

    \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).
    \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).
---------------------------------------------------------------------------

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 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.
---------------------------------------------------------------------------

    \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.'').
[GRAPHIC] [TIFF OMITTED] TP13MY22.001

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 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.
---------------------------------------------------------------------------

    \399\ This estimate is based on staff analysis of data as
described in Table 1, note a.
    \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.
---------------------------------------------------------------------------

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. G[uuml]l 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).
[GRAPHIC] [TIFF OMITTED] TP13MY22.002

    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 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.
---------------------------------------------------------------------------

    \410\ See infra Section IX.B.2.c.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
    [GRAPHIC] [TIFF OMITTED] TP13MY22.003

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\
---------------------------------------------------------------------------

    \413\ See, e.g., Luisa Beltran, SPACs Are Scrambling to Find
Mergers. What That Means for Investors, Barrons, Feb. 24, 2022.
---------------------------------------------------------------------------

    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, 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 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).
---------------------------------------------------------------------------

    \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.
[GRAPHIC] [TIFF OMITTED] TP13MY22.004

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 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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 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.
---------------------------------------------------------------------------

    \418\ See supra Section III A.
    \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).

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP13MY22.005

    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 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 investors, providing a
meaningful indicator of the expected future financial performance of a
proposed de-SPAC transaction.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
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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.
BILLING CODE 8011-01-P

[GRAPHIC] [TIFF OMITTED] TP13MY22.006

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.
    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.

[GRAPHIC] [TIFF OMITTED] TP13MY22.007

BILLING CODE 8011-01-C

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 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.
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    \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.
    \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.
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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 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.
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    \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.
[GRAPHIC] [TIFF OMITTED] TP13MY22.008

    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 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\
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    \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).
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    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.
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    \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.
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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.
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    \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.)
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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 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\
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    \448\ See supra Sections IX.B.1 and IX.B.2
    \449\ See supra Section VI.A.1.
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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.
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    \450\ See supra note 392 and accompanying text.
    [GRAPHIC] [TIFF OMITTED] TP13MY22.009

    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.
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    \451\ See, e.g., Rodrigues & Stegemoller, supra note 17.

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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-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.
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    \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).
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    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\
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    \455\ Based on data from Dealogic M&A module as of Jan. 2022.
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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\
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    \456\ See supra note 393 and accompanying text.
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    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\
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    \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