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June 13, 2022

After Years of Ripping Off Investors, SEC Proposal Takes Away SPAC’s License to Lie

WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ Comment Letter to the Securities and Exchange Commission (SEC) in response to the agency’s proposed rule that enhances investor protections and brings “Special Purpose Acquisition Companies” (“SPACs”) into closer regulatory alignment with traditional IPOs:

“90 percent of SPACs are trading below their initial offering price and merely a third of them meet or beat their financial projections.  That’s because SPACs overpromise and underdeliver due to wildly inflated financial projections that have no basis in reality because the sponsors don’t have liability due to gaping loopholes in the law. This is in effect a license to lie.  The SEC’s proposal will revoke that license to lie and increase transparency to protect investors and our capital markets.

“The sordid story of SPACs since 2020 includes jazzy celebrity endorsements, high-profile sponsors, promises of exorbitant returns, and retail investors left holding the bag.  This has proven doubly harmful because investors lose money and capital is diverted away from worthy IPOs that might grow the economy and create jobs and wealth.

“SPACs are really little more than Wall Street’s latest vehicle to extract wealth from investors and enrich themselves.  A SPAC is a short cut to bringing a company public in two steps:  Investors put their trust in a public shell entity whose sole purpose is to search for a private company to acquire and operate.  During the past two years, there was a huge surge in the use of SPACs to access the public equity markets, raising more than $240 billion between 2020 and 2021 and accounted for more than 60% of all IPOs during that time. Incentivized by huge compensation packages, Wall Street’s SPAC sponsors and underwriters promised investors terrific returns, but as history has borne out, dreams of big returns quickly turned into nightmares for a majority of retail investors.

“The reforms included in the SEC’s proposal correct many deficiencies in the SPAC IPO model, including strengthening disclosure, increasing accountability, and leveling the playing field between traditional IPOs and SPACs. For example, by clarifying that the PSLRA (Private Securities Litigation Reform Act) safe harbor for forward-looking statements does not apply, SPAC sponsors will no longer be able to tout wildly optimistic projections about the future financial performance of the company with relative impunity. However, the SEC could and should make the proposal even stronger by including a conversion threshold that will help ensure SPAC sponsors don’t rush into bad deals just to lock in their own compensation. We also urge the SEC to eliminate the safe harbor for SPACs from compliance with the Investment Company Advisers Act because that is inconsistent with the law.”

Read our full comment letter here or click the button below.


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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