Fenwick corporate partner Mark Stevens was quoted in The Deal about the growing wave of SPAC initial public offerings in 2020.

Citing the differences between a traditional IPO and a SPAC, Stevens said, “Companies are using the SPAC process to disclose projections that they can’t disclose in an IPO.”

“In a normal IPO, the issuer doesn’t have legal protection for using projections. If a company has some unpredictability or wants to tell a story about projections that show a change in direction, it can tell that story much more easily via a SPAC than an IPO,” he added, a factor that helps explain why so many electric vehicle companies have opted for de-SPACs.

Stevens also noted there is a Securities and Exchange Commission safe harbor for forward-looking statements that applies in a SPAC transaction but not in an IPO and "therefore a strong belief that litigation and liability risk for projections is much lower in a SPAC than in an IPO." (For more insight on litigation considerations related to financial projections in SPAC transactions, see Fenwick’s recent article.)

According to Stevens, a SPAC deal also appeals to companies valued between $500 million and $1 billion that might have trouble completing an IPO but still have a compelling need to be publicly held. “Sometimes going public is the right answer, either because shareholders or employees need liquidity or the company needs a public currency to do acquisitions,” he added.

The full article is available on The Deal.


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