SPAC Advisory Services

The SPAC market experienced continued momentum throughout 2021 with 613 IPOs, totaling over $163 billion in gross proceeds. With just under 200 de-SPAC transactions completed in 2021 and another 267 announced, the SPAC market is primed to continue its upward trajectory in 2022. Given the proliferation of SPACs, scrutiny of this vehicle is likely to continue to increase. SPAC executives and sponsors will need to ensure they are in compliance with regulatory reporting requirements and have sufficient governance policies in place to withstand added scrutiny and potential litigation.

On April 12, 2021 the SEC issued a new Staff Statement on Accounting and Reporting Considerations for Warrants Issued by SPACs. While SPACs have typically classified warrants on their balance sheets as equity, the SEC has highlighted that under certain circumstances U.S. GAAP would require warrants to be classified as a liability that is measured at fair value every quarter, with changes in fair value reported in earnings. SPACs that have misclassified their warrants as equity may be required to restate their financial results if the impact is deemed material. As a result, the SEC has effectively halted all in progress offerings, business combinations and new IPO filings until SPACs resolve the accounting and related valuation questions with respect to their warrants issued. Read our client alert for more information.