The SEC is considering a new set of regulations for corporate registration and listing websites like StockTwits.com, would require SPACs, companies that launch initial public offerings only to sell shares later, to disclose financial information before they hold a meeting. SPACs often cite financing concerns to support their need to keep investors from seeing their performance before they launch their IPO. “Traditionally a SPAC has had to postpone trading in order to get the shareholders to approve the SPAC’s funding,” said Steven Weiss, managing partner at MediaValley Capital in New York. “This would provide information that you don’t see at the moment.”
The SEC has made SPAC disclosures optional, which means that until July, when SPAC regulation was established, investors got no disclosure. The SEC published a proposed rule change, giving companies more information about how SPACs structure their IPOs. According to the SEC, SPACs holding IPOs must comply with SEC reporting requirements when disclosing how much money they raised prior to their IPOs. The SEC has attempted to re-instate SPAC disclosure in several ways. The SEC can require companies to disclose a new SPAC’s fundraising activities, which spurns SPAC structure. The SEC has tried to limit the shares SPACs can offer until their IPO and requires SPACs to disclose which investors they sell to, in part to determine how investors feel about SPACs. They’ve also opened up an incentive program for potential investors to invest in SPACs, and the SEC has sent letters to other funds encouraging them to let companies list on their platforms.
“The SEC is looking to streamline the process to make it easier for companies to go public,” Weiss said. The process of registering a company with the SEC has been streamlined,” he said.
There have been five SPAC IPOs so far this year, all coming within the past four months. SPACs issued 14 offerings in 2017.
And there are other reforms proposed that could benefit investors. The SEC is also considering rules that would allow stock traders to buy up stock they don’t own in an IPO. The SEC’s plan now states that it may “may apply a reverse inquiry if, based on the purchase of an investment in the issuers’ new common stock, a reverse inquiry would lead to an abuse of control situation in the issuer or its affiliates, a fraud on any security, or a misrepresentation to any person.” Right now, when companies go public, the SEC is prohibited from questioning the identity of large pre-IPO investors.
“Stricter controls will ensure that only the investors who truly want to own and trade a stock can buy it,” Weiss said.
Read the full story at Business Insider.
SEC extends deadline to review new rules for initial public offerings