SEC inquires into Wall Street's blank-check IPO frenzy - Reuters

Mar. 25, 2021 4:55 AM ETBy: Mamta Mayani, SA News Editor5 Comments
  • The U.S. SEC has opened an inquiry into Wall Street’s blank check acquisition frenzy - Reuters, citing sources.
  • The U.S. securities regulator has sent letters to Wall Street banks seeking information on their SPAC, dealings, and how underwriters are managing the risks involved.
  • The SEC has asked to provide the information voluntarily, thereby, not rising to the level of a formal investigation.
  • The U.S. regulator seeks details on SPAC deal fees, volumes, internal controls and compliance.
  • Also, the SEC may be worried about the depth of due diligence, full disclosure of huge payouts to investors and risk of insider trading.
  • As per the Refinitiv data, Global blank-check deal volumes, or mergers through SPACs have surged to a record $170B this year, surpassing last year’s total of $157B.
  • The record number of deals comes as SPACs are emerging as a popular IPO alternative, providing startups with a path to going public with less regulatory scrutiny and easy monetary conditions.
  • SPACs have gained popularity in recent months, with investors increasingly looking to growth stocks for higher returns, and as the COVID-19 pandemic disrupted the traditional IPO process.
  • U.S. SPACs have raised $64.2B through IPOs so far this year, or 76% of the total equity raised by IPOs in the market. However, the shares of SPAC companies fell recently on concerns over inflated valuations amid a rise in U.S. Treasury yields.

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