WASHINGTONCompanies that go public through mergers with blank-check companies, also known as special-purpose acquisition vehicles, arent free to tout misleading or questionable projections of future growth, a senior regulator said Thursday.
The statement by John Coates, an acting director at the Securities and Exchange Commission, addresses the frenzy over SPACs and how their growth has enabled many startups to go public at an early stage of their lives. Some of the public companies that result from the merger, including some electric-vehicle startups, have then touted plans to reach billions of dollars in annual sales within a few years.
Any simple claim about reduced liability exposure for SPAC participants is overstated at best, and potentially seriously misleading at worst, Mr. Coates said. Indeed, in some ways, liability risks for those involved are higher, not lower, than in conventional IPOs, due in particular to the potential conflicts of interest in the SPAC structure.