b'MERGERS & ACQUISITIONS| SPAC sThe very next day, the SEC published a statementSecurities Litigation Reform Act (the PSLRA) by Coates, in which he said: excluded initial public offerings, which term is not defined in the PSLRA or in the SECs rules, The staff at the Securities and Exchangeand posited that that phrase may include Commission are continuing to look carefully atde-SPAC transactions. This would mean that filings and disclosures by SPACs and theirprojections routinely disclosed in connection with private targets. As customary, and in keepingdeSPACing transactions could be subject to with the Division of Corporation Financesstricter standards of liability.ordinary practices, staff are reviewing these filings, seeking clearer disclosure, and providingJust a few days after the publication of the guidance to registrants and the public. They willforegoing statements, the SEC published a joint continue to be vigilant about SPAC and privatestatement by Coates and Paul Munter, Acting Chief target disclosure so that the public can makeAccountant, in which Munter suggested that the informed investment and voting decisions aboutSEC staff has concerns that the warrants issued by these transactions. many SPACs should be properly accounted for under the liability method on the SPACs balance He went on to focus on legal liability that attachessheet. Accounting for the warrants as liabilities, to disclosures in the de-SPAC transaction,while generally not viewed as material to most SPAC especially projections. He noted that some peopleinvestors, requires SPACs to revalue the warrants have claimed that an advantage of SPACs overquarterly based on a third party valuation. The need traditional IPOs is lesser securities law liabilityto obtain valuations and then obtain sign-off from exposure with respect to the use of projections.auditors on the resulting accounting changestwo mid-size accounting firms audit close to 90% of all He said:SPACseffectively shut down the SPAC market for I fear, though, that participants may not havea number of weeks.thought through all the legal implications ofThen in November 2021, the SEC informally told these statements under the circumstances ofauditors of SPACs that SPACs should account for these transactions. It is not clear that claimstheir shares of Class A common stock as temporary about the application of securities law liabilityequity rather than permanent equity, because the provisions to de-SPACs provide targets orClass A shares were redeemable upon a business anyone else with a reason to prefer SPACs overcombination. Again, while generally not viewed as traditional IPOs. Any simple claim aboutmaterial to most SPAC investors, this change in reduced liability exposure for SPAC participantsaccounting resulted in SPACs having to restate their is overstated at best, and potentially seriouslypreviously issued financial statements which again misleading at worst.slowed down some activity.He further noted that the safe harbor for forward- Finally, in December 2021, Gary Gensler, Chairman looking statements contained in the Privateof the SEC, in a speech to the Healthy Markets 26|Global Insurance Industry Year in Review 2021'