Editorial Board
New Rules Will Force SPACs to Sober Up
With the right guardrails and investor protections, special purpose acquisition companies can be more than a bubble-market phenomenon.
Investors can use help.
Photographer: Spencer Platt/Getty Images
Special purpose acquisition companies have for too long existed in a regulatory gray area. With new rules approved last month, the Securities and Exchange Commission has provided needed clarity for these entities and their investors.
SPACs, sometimes called blank-check companies, tend to thrive in periods of market euphoria — think 2007 and 2021. Sponsors, often hedge funds or private equity companies, raise money on the public markets with a promise to use the funds to take over an as-yet-unidentified private company, typically within two years.