SEC Guidance a Serious Threat to SPACs, Law Firms Say

New guidance from the Securities and Exchange Commission on special purpose acquisition companies (SPACs) is already causing a huge slowdown in the market, according to several prominent law firms.

The SEC said recently that SPAC warrants, financial instruments that give investors the right to purchase stock at a certain price, must be classified as liabilities instead of equity instruments.

This could result in existing SPACs having to restate their financial statements, according to the law firm Davis Polk & Wardwell. The SEC also recently said that it is going to very carefully scrutinize financial projections from companies going public through SPACs.

Source Fool.com