The SEC Is Not a Fan of SPACs

The era of SPAC Attacks has officially turned to the ‘Attack on SPACs.’ 💀 🗡️ The SEC just announced its interest in passing legislation which would force SPACs to publish important financial information prior to a public listing. 

SPAC stands for Special Purpose Acquisition Company. A SPAC IPO is unlike your traditional public offering: when a SPAC launches, it asks people to invest money with the promise that the SPAC will acquire a promising, up-and-coming company. One advantage to SPACs is that a privately-owned company could go public without having to file extensive paperwork.

However, given a number of high-profile failures and dishonest reports from the SPAC world, the SEC wants to regulate the disclosure process. They think it’s wrong that traditional IPOs require extensive reporting for prospective shareholders while SPACs get to avoid much of this process. 

Generally, the SEC wants to implement investor protections that prevent SPAC directors from hoodwinking shareholders into voting for undesirable deals. Here’s a brief summary of the SEC’s proposed attack on SPACs: 

• SPACs will have to publish information about their sponsors’ compensation from the investment vehicle. 
• SPACs must disclose the dilution of shareholders’ equity after an M&A deal to prevent an unfair reduction in stake. 
• Executives of companies acquired by SPACs will be held accountable for any wrongdoings of the SPAC’s directors or sponsors. 
• Any information related to a potential M&A deal must be disclosed to SPAC shareholders 20 days prior to a shareholder vote. 
• SPAC sponsors and directors will have guidelines around the language they use to “sell” deals to their investors. In other words, the SEC wants to be sure that investors aren’t bullied or tricked into voting for a deal.

SPAC listings generated a record $160 billion in 2021, but many SPAC darlings from the pandemic era are suffering in 2022. It should be interesting to see the results of the SEC’s crackdown on blank check companies. 👀

Brokerage giant Robinhood announced new extended trading hours yesterday, sending the company’s stock +20%. $HOOD also trended on Stocktwits.

The company’s new trading hours will be from 7:00 AM to 8:00 PM ET, expanding the existing pre-market and post-market trading hours which were previously offered from 9:00 AM to 6:00 PM. Robinhood indicated that this change in hours is an “important step towards 24/7 equities investing.”

The controversial broker, now more than a year out from the GameStop/AMC short squeeze, is looking forward to lackluster YoY comps for the coming reporting quarter. 👎 It will be hard to mimic the success of Robinhood’s pandemic-era explosion in popularity, but the company is now faced with the threat of losing active and engaged users. Naturally, this loss would degrade its stock even further, turning Robinhood into a potential acquisition target.

This decline might explain why the company is pulling out stops to excite investors and build its product. In recent weeks, Robinhood launched a new Cash Card in an effort to offer users a Stash-like “roundup” alongside rewards and bonuses. 🎁 However, the $12 billion company has lagged on some of its more anticipated features, like a long-awaited crypto wallet, the addition of more crypto assets, and others.

We’ll be covering developments with Robinhood (and other fintech companies, which are expected to take similar YoY comp hits) in the coming weeks. ⏳