The SPAC Boom – Our CFA Institute Advocacy Policy Engagement

Despite unprecedented economic disruption, the US IPO market hit a record $170 billion in 2020, driven in large part by the unexpected surge in the use of special purpose acquisition companies (SPACs) to take private companies public. SPACs, commonly referred to as blank-check companies, are not new but now account for the majority of US IPOs. In the first of quarter of 2021, approximately 300 US SPACs raising nearly $100 billion launched, beating levels for the entire prior year.  Not surprisingly, the SPAC boom has garnered the attention of policymakers in Washington, DC and globally. The SEC has added SPACs to its regulatory agenda and, in recent testimony before a House of Representatives panel, SEC Chair Gensler stressed, “There’s real questions about who’s benefiting and investor protection.”  Meanwhile, the SPAC phenomenon is gaining attention in other global markets. 

As regulators consider policy initiatives, CFA Institute has launched the SPAC Working Group (SWG) to examine the popularity of the SPAC model as an alternative vehicle to traditional IPOs; including its structural features, various parties’ interests, disclosures, as well as implications for investor protection, corporate governance, and market integrity. The working group comprises a range of market participants, SPAC practitioners, exchange representatives, academics, and legal experts. Its work will begin in July and culminate in a report with potential policy recommendations.

“We believe the working group will provide a valuable perspective to US and other global regulators who have already signaled increased scrutiny of the SPAC structure and related disclosures,” explained Margaret Franklin, President and CEO, CFA Institute. 

We have engaged in several SPAC related activities over the past few months. 

• On 11 March, the SEC’s Investor Advisory Committee (IAC), hosted a panel discussion regarding SPACs. Sandy Peters, Senior Head of Global Advocacy and a member of the IAC, participated in the discussion as a panelist and is leading the committee’s workstream on SPACs. 

• On 24 May, CFA Institute was invited to testify before a congressional committee hearing on Going Public: SPACs, Direct Listings, Public Offerings, and the Need for Investor Protections. Stephen Deane, Sr. Director for Capital Markets Policy, focused remarks on how SPACs operate as well as on CFA Institute concerns around market ethics and investor protection. You can catch the hearing replay here.   

• Finally, this past month, CFA Institute in partnership with CFA Society Washington DC, hosted a webinar on SPAC Attack: Examining Special Purpose Acquisition Companies, featuring an expert panel that considered the mechanics, prospects, pitfalls of the SPAC structure, and what is on the horizon for the SPAC market.  View the session, here.

We will continue to stay on top of these developments and share the net-result of our policy recommendations over the next few weeks.

Photo credit @ Getty Images / Hazal Ak