Advantages of SPACs Over Traditional IPOs
Recent SEC Pronouncements
• On April 12, the SEC's Acting Director of the Division of Corporation Finance and Acting
Chief Accountant issued a statement that caused widespread disruption for SPAC IPOS,
business combinations, and de-SPAC companies with outstanding warrants, by indicating
that two common features of warrants, one of which provides for cashless exercise of
private placement warrants unless transferred to an unaffiliated third party and the other
of which provides antidilution adjustments in connection with tender offers, may prevent
the warrants from qualifying as equity instruments and require classifying them as
liabilities for accounting purposes.
This statement led most SPACs and de-SPAC companies to restate their financial statements to account
for the warrants as liabilities. Most such restatements are now complete. However, this process led to a
slowdown in SPAC transactions in late April and May.
Accounting firms continue to assess whether changes to the form of warrant agreements used for new
SPACS would enable accounting for the warrants as equity.
Morgan Lewis
12View entire presentation