Last month, the SEC threw a monkey wrench into the SPAC market when the Corporate Finance Director and the Chief Accountant issued a joint statement on accounting for SPAC warrants. The Staff’s position is that a lot of SPACs may have been incorrectly classifying certain warrants as equity instead of as a liability. As Lynn suggested when she blogged about the joint statement last month, the Staff’s position has led to a wave of restatements.
But a wave of restatements might not even have been the biggest problem arising out of this guidance for SPACs. That’s because SPAC IPOs have essentially come to a halt due to uncertainties about what tweaks to warrant terms would satisfy the SEC. Now, according to a CFO Dive article, a fix may be in the works:
A form of warrant that isn’t accounted for as a liability for special purpose acquisition companies (SPACs) is under development, but until that process is completed and gets an okay by the Securities and Exchange Commission, sponsors and others with an interest in the market face uncertain terrain, Gerry Spedale said in a Gibson, Dunn Crutcher webcast last week.
“You have accounting firms and law firms working together on that form, and that needs to get blessed by the SEC before everyone’s going to be comfortable moving forward with that approach,” said Spedale, a Gibson, Dunn & Crutcher partner.
The article says that this process is going to take several weeks, which means the SPAC IPO market is going to continue to face significant uncertainty for a while longer. Then again, maybe that’s not such a bad thing.
-John Jenkins, TheCorporateCounsel.net May 21, 2021
