Disclosure Requirements Are a First Step to SPACs Rating Criteria

No blank check for SPACs.

Special purpose acquisition companies (SPACs) are shell companies that are admitted to trading on a trading venue with the intention to acquire a business and are often referred to as “blank check companies”. The European Securities and Markets Authority (ESMA) encourages National Competent Authorities (NCAs) to focus their scrutiny of SPACs prospectuses on a number of disclosure requirements.

ESMA counts the following among these requirements:

Risk factors, strategy and objectives, escrow accounts and the reinvstement of the proceeds, relevant experience and principal activities of the administrateive, management and supversiory bodies, conflicts of interest and sponsors,shares, warrants and shareholder rights, major shareholder, related party transactions, material interests, information on the proceeds of the offer, information on the intention of certian persons to subscribe in the offer, information on the offer price, and additional disclosure likely to be required to satisfy the Prospectus Regulation.

In practice, this provides a grid to which SPAC rating criteria can be linked. In fact, however, a large number of additional criteria are necessary in order to assess the risk of investing in SPACs. Therefore, compliance with disclosure requirements under this list must not be equated with an investment recommendation.