Gary Gensler is the SEC Chair.
Chip Somodevilla is a photographer.
Gary Gensler, the chairman of the Securities and Exchange Commission, said he was concerned that investors don't get the same protections as with traditional initial public offerings.
The SEC staff has been asked to pitch new rules about leveling the playing field for special-purpose acquisition company participants. These should be in line with other IPOs.
"I've asked staff to give recommendations about how investors can be better informed about the fees, projections, dilution, and conflicts that may exist during all stages of SPACs, and how investors can receive those disclosures at the time they're deciding whether to invest," he said.
Private companies that want to go public quicker and cheaper can use SPACs. They aim to first secure a stock-market listing and then acquire a private company.
These types of investment vehicles allow companies to make rosy projections about their revenue growth, while companies going public via an IPO cannot.
In the first quarter of 2021, SPACs raised more money than they did in the entire year of 2020. After investigations into two of the most notable deals struck this year, some see the blank-check boom cooling off.
Digital World Acquisition Corp and Trump Media & Technology Group are being investigated by the SEC. The SEC subpoena was for information about the financial projections it made when it merged with the company.
Most of the shareholders in 890 Fifth Avenue Partners withdrew all of their money before the fund's listing.
In his remarks Thursday, Gensler said he believes such vehicles have "additional conflicts inherent to their structure" and asked staff to provide recommendations that ensure SPAC investors aren't drawn into puffed-up deals.
The investing public may not be getting the same protections as traditional IPOs.
He spoke about overstated marketing practices used in a SPAC's target IPO process, which could provide incomplete information to an investor.
Gensler said that investors may be making decisions based on incomplete information. It is important for investors to receive the information they need.
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Business Insider has an original article.
