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The US Securities and Exchange Commission (SEC) announced new instructions, according to which warrants * received by early investors of SPACs ** may for accounting purposes be considered not equity instruments, but debt instruments (i.e., in exchange for the money invested the investor does not receive a share in the company, but the right to claim – approx.ProFinance.ru). Bloomberg writes about it.
A security that gives the holder the right to buy a proportional number of shares at a specified price within a specified period of time, usually at a lower price than the current market price
SPAC, a company created specifically to merge with another private company that wishes to go public without going through an IPO
Last week, the SEC began informing accountants of the new warrant regulations, Bloomberg writes, citing informed sources. The introduction of such an accounting innovation is another attempt by the SEC to cool the rapid growth of SPACs. This news may interfere with the registration of new SPACs until the situation is cleared up.
and the above problem will not be definitively resolved.
The US authorities have been expressing concern for several months that investors do not fully understand the risks associated with SPACs.
“Have you heard about SPACs? Remember that it is always a bad idea to invest in a SPAK just because there is a celebrity behind it. or some celebrity invests in it or says that it is a good investment, “- said in message, posted on the SEC’s Twitter account on April 8.
“The SEC has indicated that it will not issue registration approvals until the new regulations are implemented in regarding warrants, “Bloomberg writes with reference to the letter that the accounting company Marcum sent to its clients.
Early investors in SPAKs usually receive its shares, as well as warrants giving the right to buy additional shares in the future.
It is believed that a warrant is a kind of bonus for investors, and until now, from an accounting point of view, these securities were considered equity securities.
It is not yet clear how many SPACs will be affected by the new SEC regulations, and whether they apply to all warrants, Bloomberg writes.
Last Wednesday, Goldman Sachs reported that only 5 SPACs have gone public over the past two weeks, up from about 20 per week in the first quarter.