Chewy’s co-founder becomes GameStops chairman. Ryan Cohen’s investment in GameStop last year was one of the factors that made it the “meme stick” of choice. Mr. Cohen and several others with ties to the online pet dealer are expected to be elected to GameStop’s board of directors in June to make the GameStop dealer the “Chewy of Gaming”.
The SEC says it may be time to reconsider the rules for SPACs
John Coates, the SEC’s acting director of corporate finance, yesterday made a detailed statement on how securities laws apply to blank check companies. He is particularly interested in one crucial (and controversial) difference between SPACs and traditional IPOs: blank check companies are often allowed to publish rosy financial forecasts when merging with an acquisition target, while IPO companies are not.
“Associated with the unprecedented increase is an unprecedented test.” Mr Coates wrote about the recent boom in blank check deals. Investors raise money for SPACs through an IPO and those funds will be used to merge with an unspecified company in the future and take it public. Since the so-called “de-SPAC” deal is technically a merger, the same “Safe Harbor” legal protection is granted for its financial forecasts as for a typical M&A. Deal. In traditional IPOs, companies cannot provide such projections to potential investors because regulators consider it too risky for companies that have not yet been tested by the public markets.
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The SEC believes that financial projections could pose a problem for SPACs. They can be “untested, speculative, misleading, or even fraudulent,” wrote Coates. At the end of his statement, he proposed a major rethink on how the “full range” of securities laws apply to SPACs, which could turn the blank check business model on its head:
If we do not treat the De-SPAC transaction as a “real IPO”, our attention may be focused in the wrong place and potentially problematic forward-looking information may be disseminated without adequate safeguards.
The letter serves as a warning. Unless the SEC issues new rules (as it did with penny stocks) or Congress passes laws, the SPAC projections will continue. But this strongly worded statement could moderate or even mute it. “The SEC has now notified you,” said Lynn Turner, a former chief accountant for the agency.
A new twist in Leon Black’s departure from Apollo
Leon Black’s announcement that he would be stepping down from Apollo earlier than expected came just days after directors learned of allegations of sexual harassment against him, the New York Post reports. Mr. Black denied the allegations Ms. Guzel Ganieva tweeted about in mid-March.
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