Special Purpose Acquisition Companies, Shell Companies, and Projections

SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 210, 229, 230, 232, 239, 240, and 249 [Release Nos. 33–11265; 34–99418; IC– 35096; File No. S7–13–22] RIN 3235–AM90 Special Purpose Acquisition Companies, Shell Companies, and Projections AGENCY: Securities and Exchange Commission. ACTION: Final rules; guidance. SUMMARY: The Securities and Exchange Commission (‘‘Commission’’) is adopting rules intended to enhance investor protections in initial public offerings by special purpose acquisition companies (commonly known as SPACs) and in subsequent business combination transactions between SPACs and private operating companies (commonly known as de-SPAC transactions). Specifically, we are adopting disclosure requirements with respect to, among other things, compensation paid to sponsors, conflicts of interest, dilution, and the determination, if any, of the board of directors (or similar governing body) of a SPAC regarding whether a de-SPAC transaction is advisable and in the best interests of the SPAC and its security holders. We are adopting rules that require a minimum dissemination period for the distribution of security holder communication materials in connection with de-SPAC transactions. We are adopting rules that require the re-determination of smaller reporting company (‘‘SRC’’) status in connection with de-SPAC transactions. We are also adopting rules that address the scope of the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995. Further, we are adopting a rule that would deem any business combination transaction involving a reporting shell company, including a SPAC, to be a sale of securities to the reporting shell company’s shareholders and are adopting amendments to a number of financial statement requirements applicable to transactions involving shell companies. In addition, we are providing guidance on the status of potential underwriters in de-SPAC transactions and adopting updates to our guidance regarding the use of projections in Commission filings as well as requiring additional disclosure regarding projections when used in connection with business combination transactions involving SPACs. Finally, we are providing guidance for SPACs to consider when analyzing their status under the Investment Company Act of 1940. DATES: Effective date: The final rules are effective on July 1, 2024. Compliance date: The compliance date for the final rules, other than 17 CFR 229.1610, is July 1, 2024. The compliance date for 17 CFR 229.1610 is June 30, 2025. FOR FURTHER INFORMATION CONTACT:
Mark Saltzburg, Office of Rulemaking, Division of Corporation Finance, at (202) 551–3430; with respect to 17 CFR 230.145a (Rule 145a under the Securities Act of 1933), the Office of Chief Counsel, Division of Corporation Finance, at (202) 551–3500; with respect to 17 CFR 210.15–01 (Rule 15–01 of Regulation S–X), Ryan Milne, Office of Chief Accountant, Division of Corporation Finance, at (202) 551–3400; with respect to amendments relating to projections disclosure and tender offer rules, Daniel Duchovny, Office of Mergers & Acquisitions, Division of Corporation Finance, at (202) 551–3440; and with respect to guidance under the Investment Company Act of 1940, Rochelle Kauffman Plesset, Seth Davis, or Taylor Evenson, Senior Counsels; or Lisa Reid Ragen, Branch Chief, Chief Counsel’s Office, Division of Investment Management, at (202) 551–6825; U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission is adopting new 17 CFR 210.15–01, new 17 CFR 229.1601 through 229.1610 (Item 1600 series of Regulation S–K), and new 17 CFR 230.145a. We are also adopting amendments to:
Commission reference CFR citation (17 CFR) Securities Act of 1933 Rule 405 .................. § 230.405. Form S–1 ................. § 239.11. Form F–1 ................. § 239.31. Form S–4 ................. § 239.25. Form F–4 ................. § 239.34. Securities Exchange Act of 1934 Rule 12b–2 .............. § 240.12b–2. Rule 14a–6 .............. § 240.14a–6. Rule 14c–2 .............. § 240.14c–2.
Schedule 14A .......... § 240.14a–101.
Schedule TO ........... § 240.14d–100.
Form 20–F ............... § 249.220f. Form 8–K ................. § 249.308. Regulation S–K ............... §§ 229.10 through 229.1406. Item 10 .................... § 229.10. Item 601 .................. § 229.601. Regulation S–T ............... §§ 232.10 through 232.903. Rule 405 .................. § 232.405. Regulation S–X ............... §§ 210.1–01 through 210.13–02. Rule 1–02 ................ § 210.1–02. Commission reference CFR citation (17 CFR) Rule 3–01 ................ § 210.3–01. Rule 3–05 ................ § 210.3–05. Rule 3–14 ................ § 210.3–14. Rule 8–02 ................ § 210.8–02. Rule 10–01 .............. § 210.10–01.
Table of Contents
I. Introduction
II. New Subpart 1600 of Regulation
S–K
A. Definitions

1. Proposed Definition: ‘‘De-SPAC
   Transaction’’
2. Comments: Definition of ‘‘De-SPAC
   Transaction’’
3. Final Definition: ‘‘De-SPAC
   Transaction’’
4. Proposed Definition: ‘‘Special Purpose
   Acquisition Company (SPAC)’’
5. Comments: Definition of ‘‘Special
   Purpose Acquisition Company (SPAC)’’
6. Final Definition: ‘‘Special Purpose
   Acquisition Company (SPAC)’’
7. Proposed Definition: ‘‘SPAC Sponsor’’
8. Comments: Definition of ‘‘SPAC
   Sponsor’’
9. Final Definition: ‘‘SPAC Sponsor’’
10. Proposed Definition: ‘‘Target
    Company’’
11. Comments: Definition of ‘‘Target
    Company’’
12. Final Definition: ‘‘Target Company’’
    B. Sponsors
13. Proposed Rules
14. Comments
15. Final Rules
    C. Conflicts of Interest
16. Proposed Rules
17. Comments
18. Final Rules
    D. Dilution
19. Proposed Rules
20. Comments
21. Final Rules
    E. Prospectus Cover Page and Prospectus Summary Disclosure
22. Proposed Rules
23. Comments
24. Final Rules
    F. De-SPAC Transactions: Background, Reasons, Terms, and Effects
25. Proposed Item 1605
26. Comments: Item 1605
27. Final Item 1605
    G. Board Determination About the De￾SPAC Transaction; Reports, Opinions, Appraisals, and Negotiations
28. Proposed Item 1606(a)
29. Comments: Item 1606(a)
30. Final Item 1606(a)
31. Proposed Item 1606(b)
32. Comments: Item 1606(b)
33. Final Item 1606(b)
34. Proposed Items 1606(c) Through (e)
35. Comments: Items 1606(c) Through (e)
36. Final Items 1606(c) Through (e)
37. Proposed Item 1607
38. Comments: Item 1607
39. Final Item 1607
    H. Tender Offer Filing Obligations
40. Proposed Item 1608
41. Comments: Item 1608
42. Final Item 1608

I. Structured Data Requirement

1. Proposed Item 1610
2. Comments
3. Final Item 1610 and Tagging Compliance
   Date
   III. Disclosures and Liability in De-SPAC
   Transactions
   A. Non-Financial Disclosures in De-SPAC Disclosure Documents
4. Proposed Rules
5. Comments
6. Final Rules
   B. Minimum Dissemination Period
7. Proposed Rules
8. Comments
9. Final Rules
   C. Private Operating Company as Co￾Registrant
10. Proposed Rules
11. Comments
12. Final Rules
    D. Re-Determination of Smaller Reporting Company (SRC) Status
13. Proposed Rules
14. Comments
15. Final Rules and Guidance
    E. PSLRA Safe Harbor
16. Proposed Rules
17. Comments
18. Final Rules
    F. Underwriter Status and Liability in Securities Transactions
19. Proposed Rule
20. Comments
21. Declining To Adopt Proposed Rule 140a;
    Commission Guidance on Underwriter Status in De-SPAC Transactions
    IV. Business Combinations Involving Shell
    Companies
    A. Shell Company Business Combinations and the Securities Act of 1933
22. Proposed Rule
23. Comments
24. Final Rule
    B. Financial Statement Requirements in Business Combination Transactions Involving Shell Companies
25. Proposed Rule 15–01(a), Rule 1–02(d),
    and Form Instructions: Audit Requirements
26. Comments: Rule 15–01(a), Rule 1–02(d),
    and Form Instructions: Audit Requirements
27. Final Rule 15–01(a), Rule 1–02(d), and
    Form Instructions: Audit Requirements
28. Proposed Rule 15–01(b): Number of
    Years of Financial Statements
29. Comments: Rule 15–01(b): Number of
    Years of Financial Statements
30. Final Rule 15–01(b): Number of Years of
    Financial Statements
31. Proposed Rule 15–01(c): Age of
    Financial Statements
32. Comments: Rule 15–01(c): Age of
    Financial Statements
33. Final Rule 15–01(c): Age of Financial
    Statements
34. Proposed Rules: 15–01(d), 1–02(w)(1),
    3–05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition of a Business or Real Estate Operation by a Predecessor
35. Comments: Rules 15–01(d), 1–02(w)(1),
    3–05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition of a Business or Real Estate Operation by a Predecessor
36. Final Rules 15–01(d), 1–02(w)(1), 3–
    05(b)(4)(ii), 3–14(b)(3)(ii): Acquisition of a Business or Real Estate Operation by a Predecessor
37. Proposed Rule 15–01(e): Financial
    Statements of a Shell Company Registrant After the Combination With Predecessor
38. Comments: Rule 15–01(e): Financial
    Statements of a Shell Company Registrant After the Combination With Predecessor
39. Final Rule 15–01(e): Financial
    Statements of a Shell Company Registrant After the Combination With Predecessor
40. Proposed Rule 11–01(d)
41. Comments: Rule 11–01(d)
42. Decline to Adopt Rule 11–01(d)
43. Proposed Item 2.01(f) of Form 8–K
44. Comments: Item 2.01(f) of Form 8–K
45. Final Item 2.01(f) of Form 8–K
46. Proposed Rules 3–01, 8–02, 10–
    01(a)(1): Balance Sheets of Predecessors
47. Comments: Rules 3–01, 8–02, 10–
    01(a)(1): Balance Sheets of Predecessors
48. Final Rules 3–01, 8–02, 10–01(a)(1):
    Balance Sheets of Predecessors
49. Other Shell Company Matters
    V. Enhanced Projections Disclosure
    A. Proposed Items 10(b) and 1609 of Regulation S–K
50. Proposed Rules
51. Comments
52. Final Rules
    VI. The Status of SPACs Under the
    Investment Company Act
    A. Background
    B. SPAC Activities
53. The Nature of SPAC Assets and Income
54. Management Activities
55. Duration
56. Holding Out
57. Merging With an Investment Company
    C. Conclusion
    VII. Other Matters
    VIII. Economic Analysis
    A. Baseline and Affected Parties
58. SPAC Initial Public Offerings
59. De-SPAC Transactions
60. Blank Check Companies
61. Shell Company Business Combinations
    B. Benefits and Costs of the Adopted Rules
62. Disclosure-Related Rules
63. Liability-Related Rules
64. Shell Company-Related Rules
65. Enhanced Projections Disclosure
    (Amendments to Item 10(b) of Regulation S–K)
    C. Effects on Efficiency, Competition, and
    Capital Formation
66. Efficiency
67. Competition
68. Capital Formation
    D. Reasonable Alternatives
69. Disclosure-Related Rules
70. PSLRA Safe Harbor Guidance
71. Expanding Disclosure in Reporting Shell
    Company Business Combinations
72. Enhanced Projections Disclosure
    IX. Paperwork Reduction Act
    A. Summary of the Collections of Information B. Estimates of the Effects of the Final Rules on the Collections of Information
    C. Incremental and Aggregate Burden and
    Cost Estimates
73. Current Inventory Update To Reflect
    $600 Per Hour Rather Than $400 Per Hour Outside Professional Costs Rate
74. PRA Burden and Cost Estimates
    Resulting From the Final Rules
    X. Final Regulatory Flexibility Analysis
    A. Need for, and Objectives of, the Final Rules B. Significant Issues Raised by Public Comments
    C. Small Entities Subject to the Final Rules
    D. Projected Reporting, Recordkeeping, and Other Compliance Requirements E. Duplicative, Overlapping or Conflicting Federal Rules F. Agency Action To Minimize Effect on Small Entities Statutory Authority

1The regulation at 17 CFR 230.419(a)(2) defines the term ‘‘blank check company’’ as a development stage company that has no specific business plan or purpose or that has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies and that is issuing ‘‘penny stock,’’ as defined in 17 CFR 240.3a51–1 (‘‘Rule 3a51–1’’ under the Securities Exchange Act of 1934). 2 15 U.S.C. 77a et seq. 3Public Law 101–429, 104 Stat. 931 (Oct. 15, 1990). See Blank Check Offerings, Release No. 33– 6932 (Apr. 13, 1992) [57 FR 18037 (Apr. 28, 1992)]. A SPAC is not a ‘‘blank check company’’ because, given that it raises more than $5 million in a firm commitment underwritten initial public offering, it is not selling ‘‘penny stock.’’ See Penny Stock Definition for Purposes of Blank Check Rule, Release No. 33–7024 (Oct. 25, 1993) [58 FR 58099 (Oct. 29, 1993)]. To that end, SPACs often have provisions in their governing instruments that prohibit them from being ‘‘penny stock’’ issuers. 4The term ‘‘shell company’’ is defined in Securities Act Rule 405 and Exchange Act Rule 12b–2 as a registrant, other than an asset-backed issuer, that has: (1) no or nominal operations; and (2) either: (i) no or nominal assets; (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets. 5The descriptions included in this release of common features and fees currently seen in SPACs and SPAC transaction structures are based, in part, on reviews by the Commission staff of SPAC filings with the Commission. Based on review by the Commission staff of SPAC filings, in the majority of transactions, SPACs typically combine with private operating companies. In some cases, however, SPACs may combine with other public companies. See, e.g., Bailey Lipschultz, Re-SPACs Gain Steam as Arrival Finds New Sponsor, Bloomberg News (Apr. 10, 2023), available at https://news.bloomberglaw.com/mergers-and￾acquisitions/re-spacs-gain-steam-as-arrival-shares￾sink-new-sponsor-steps-up. 6We use the terms ‘‘initial public offering’’ or ‘‘IPO’’ to refer to a securities offering registered under the Securities Act by an issuer that was not subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934 immediately prior to the registration. 7Special Purpose Acquisition Companies, Shell Companies, and Projections, Release No. 33–11048 (Mar. 30, 2022) [87 FR 29458 (May 13, 2022)] (‘‘Proposing Release’’), at 29461, nn.22–25 and accompanying text. See infra section VIII.A.1.ii. 8See infra section VIII.A.1.iii. 9The sponsor’s compensation usually amounts to around 20% of the total shares of a SPAC after its IPO. 10 15 U.S.C. 78a et seq. 11The shares and warrants usually begin trading as a unit, with a unit frequently consisting of a common share and a fraction of a warrant, and are traded separately after a certain period. The warrants often become
exercisable at a price that is higher (often $11.50) than the IPO price for common shares (which is often $10) upon the later of the passage of a certain time period following the SPAC’s IPO (often one year) or a certain time period following the completion of a de-SPAC transaction (often 30 days). Many warrants have limitations on their potential upside as a result of the right of the issuer to call the warrant under certain conditions, which commonly include a condition that the underlying common stock have traded at or above a certain price (often $18) for a specified period of time. The redemption price in those call situations can vary based on the specific warrant agreement provisions, so investors commonly pay close attention to those pricing provisions. 12The governing documents often provide for a time frame of 24 months, but it can be as long as 36 months. Exchange listing rules generally require a SPAC to complete a business combination within three years (or such shorter period specified in its registration statement or applicable governing documents). See, e.g., NYSE Listed Company Manual Section 102.06 and Nasdaq Listing Rule IM–5101–2. 13SPAC shareholders typically also have a redemption right in connection with any votes to extend the duration of the SPAC. 14See definition of ‘‘foreign private issuer,’’ infra note 442. 15A SPAC is required to file a Form 8–K that provides certain disclosures regarding the business combination agreement if the agreement is a material definitive agreement not made in the ordinary course of business. See Item 1.01 of Form 8–K. 16Three examples of common de-SPAC transaction structures are: (i) the SPAC is the surviving company in a merger and the target company merges into the SPAC, (ii) the target company is the surviving company in a merger and the SPAC merges into the target company, and (iii) a new holding company is created and the SPAC and target company merge into that new holding company. The holding company structure referred to in (iii) above includes ‘‘double-dummy’’ structure transactions.
I. Introduction
Special purpose acquisition companies, or SPACs, first began to emerge in the 1990s as an alternative to blank check companies after blank check companies began to be regulated more strictly pursuant to 17 CFR
230.419 (‘‘Rule 419’’ 1 under the
Securities Act of 1933 (‘‘Securities Act’’)),2 a rule the Commission adopted following the enactment of the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (‘‘Penny Stock Reform Act’’).3 SPACs are shell companies 4 organized and managed by a sponsor for the purpose of merging with or acquiring one or more unidentified private operating companies, commonly known as a de￾SPAC transaction, within a certain time frame.5 The de-SPAC transaction is a hybrid transaction that contains elements of both an initial public offering (‘‘IPO’’) and a merger and acquisition (‘‘M&A’’) transaction.6 While structured as an M&A transaction, the de-SPAC transaction also is the functional equivalent of the private target company’s IPO, because it results in the target company becoming
part of a combined company that is a
reporting company and provides the private target company with access to cash proceeds that the SPAC had previously raised from the public. As
part of this process, the shareholders of
the SPAC go from owning shares in a shell company to owning shares in a combined company that conducts the business of the private target. As a result, the de-SPAC transaction implicates disclosure and liability concerns associated with both IPOs and M&A transactions. Additionally, parties involved in the SPAC process, such as the SPAC sponsor, may have incentives to consummate a de-SPAC transaction that are not present in a traditional IPO or M&A transaction. Further, as discussed in the Proposing Release,7 the shareholders and management of a private operating company may believe there to be certain advantages of combining with a SPAC compared with conducting an underwritten IPO. To have the necessary context for the concerns unique to SPACs and de-SPAC transactions, it is critical to understand the structure and lifecycle of a SPAC. Once formed, a SPAC will conduct its IPO in the form of a firm commitment underwritten IPO of $5 million or more in units consisting of redeemable shares and of warrants. The underwriting fees for a SPAC IPO typically approximate 5% to 5.5% of the offering proceeds, and a significant portion of those fees (around 3% of the IPO proceeds) are conditioned on the completion of a de￾SPAC transaction.8 The SPAC sponsor is usually compensated through a ‘‘promote’’ or ‘‘founder’s shares’’—i.e., discounted SPAC shares received prior to the SPAC’s IPO that generally only have value if a de-SPAC transaction occurs.9 Following its IPO, a SPAC places all or substantially all of the IPO proceeds into a trust or escrow account. The SPAC typically registers its shares and warrants under section 12(b) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 10 and lists the units (typically consisting of a common share and a fraction of a warrant) for trading on a national securities exchange.11 Next, the SPAC seeks to identify a target company for a de-SPAC transaction within the time frame specified in its governing documents.12 If the SPAC does not complete a de￾SPAC transaction within that time frame, it may seek an extension (often requiring approval from its shareholders) or dissolve and liquidate.13 If the SPAC enters into a business combination agreement with a target company, the SPAC files a Form 8–K (or Form 6–K if the SPAC is a foreign private issuer (‘‘FPI’’) that reports on Form 20–F) 14 announcing the transaction that includes certain information on the material terms of the business combination agreement.15 The parties structure the de-SPAC transaction in different forms that may have tax or other regulatory advantages.16 Prior to the closing of the de-SPAC transaction, the shareholders of the SPAC typically have the

17Until they become exercisable, warrants issued by the SPAC do not typically provide a right to require the redemption of the warrant by any party. 18 De-SPAC transactions often result in the former SPAC shareholders owning a minority interest in the combined company. According to one study of the 47 de-SPAC transactions that occurred between Jan. 2019 and June 2020, SPAC shareholders, including the SPAC sponsor, held a median of 35% of the combined company after a de-SPAC transaction and the sponsor alone held a median of 12% of the combined company. Michael Klausner, Michael Ohlrogge & Emily Ruan, A Sober Look at SPACs, 39 Yale J. Reg., 228, 239–240 (2022). 19The parties to a de-SPAC transaction often negotiate a minimum cash condition pursuant to which a SPAC must have a specified minimum amount of cash at the closing of the de-SPAC transaction, which could include funds in the trust or escrow account, the proceeds from PIPE transactions, and other sources. When a SPAC conducts a PIPE transaction in connection with a de-SPAC transaction, the post-business combination company generally files a Securities Act registration statement following the de-SPAC transaction to register the resale of the securities purchased in the PIPE transaction. 20 17 CFR 240.14a–2; Exchange Act Rule 14c–2. The regulation at 17 CFR 240.3a12–3(b) provides an exemption from the proxy and information statement rules for FPIs, providing that ‘‘[s]ecurities registered by a foreign private issuer, as defined in Rule 3b–4. . ., shall be exempt from sections 14(a), 14(b), 14(c), 14(f) and 16 of the Act.’’ 21 In certain de-SPAC structures, a holding company is formed to acquire both the private operating company and the SPAC. 22As noted above, SPACs currently use a variety of legal structures to effect de-SPAC transactions, and the particular transaction structure and the consideration used can affect (1) the Commission filings required for the transaction, (2) the entity that will have a continuing Exchange Act reporting obligation following the transaction, and (3) the disclosures provided in connection with the transaction. 23The Commission has promulgated rules under the Exchange Act setting forth filing, disclosure, and dissemination requirements in connection with tender offers. See, e.g., 17 CFR 240.14d–1 through 240.14d–103, 17 CFR 240.14e–1 through 240.14e– 8 (‘‘Regulation 14E’’ under the Exchange Act), and 17 CFR 240.13e–4 (‘‘Rule 13e–4’’ under the Exchange Act). When an issuer conducts a tender offer, the issuer may be required to file and disseminate a Schedule TO pursuant to Rule 13e–
4. Because the redemption rights in a SPAC context
generally have indicia of a tender offer, such as a limited period of time for the SPAC security holders to request redemption of their securities, SPACs will generally file a Schedule TO in circumstances where, in connection with a de-SPAC transaction, the parties are neither soliciting votes or consents nor registering the offer or sale of securities. The Commission staff has not objected if a SPAC does not comply with the tender offer rules when the SPAC files a required Schedule 14A or 14C in connection with the approval of a de-SPAC transaction or an extension of the timeframe to complete a de-SPAC transaction and conducts the solicitation in accordance with 17 CFR 240.14a–1 through 240.14b–2 (‘‘Regulation 14A’’ under the Exchange Act) or 240.14c–1 through 240.14c–101 (‘‘Regulation 14C’’ under the Exchange Act), as the Federal proxy rules mandate substantially similar disclosures and applicable procedural protections as required by the tender offer rules. However, this staff position does not apply to a SPAC that does not file a required Schedule 14A or 14C in connection with the de-SPAC transaction or an extension. In these circumstances, SPACs have generally filed and disseminated Schedules TO, and the staff has taken the position that the Schedule TO should include the same financial and other information as is required in Schedule 14A or 14C for a de-SPAC transaction. See infra section II.H for a discussion of 17 CFR 229.1608 (‘‘Item 1608’’ of Regulation S–K) that we are adopting in this release and section IV.A for a discussion of Rule 145a under the Securities Act that we are adopting in this release, which will affect when a SPAC may be required to file a registration statement in connection with a de-SPAC transaction. For exchange-listed SPACs, exchange rules may require a SPAC to file tender offer documents with the Commission in some circumstances. See, e.g., Nasdaq Listing Rule IM–5101–2; NYSE Listed Company Manual Section 102.06. The staff position discussed in this footnote and any other staff guidance or statements referenced in this release, including staff legal bulletins, staff compliance and disclosure interpretations, and the Division of Corporation Finance’s Financial Reporting Manual (‘‘FRM’’), represent the views of Commission staff and are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved the views reflected in these staff positions or the content of these staff statements and, like all staff positions or statements, they have no legal force or effect, do not alter or amend applicable law, and create no new or additional obligations for any person. 24Form 10 is the long-form registration statement to register a class of securities under section 12(b) or 12(g) of the Exchange Act. See Items 2.01(f), 5.01(a)(8), and 9.01(c) of Form 8–K. If the shell company is an FPI then a Form 20–F should be filed no later than four business days after the consummation of the
acquisition that includes all of the information for the target company that Form 20–F requires for registration of securities. By the time the Form 8–K with Form 10 information is filed, the securities of the combined company have often already begun trading on a national securities exchange with a new ticker symbol because the securities of the SPAC generally trade on an exchange until the consummation of the de-SPAC transaction and the securities of the combined company generally commence trading on the following business day. 25Estimates of SPAC IPO and IPO data in Table 1 are based on SPAC Analytics, SPAC and US IPO Activity, available at https:// www.spacanalytics.com. Estimates of de-SPAC transactions in Table 1 are based on data from Dealogic for SPACs registered with the Commission and where year is based on M&A Completion Date. opportunity to either: (1) require the SPAC to redeem their shares prior to the de-SPAC transaction 17 and receive a pro rata share of the amount in the IPO proceeds and related assets subject to the trust or escrow arrangements (including interest thereon and commonly less amounts released to pay income and franchise taxes), or (2) remain a shareholder of the surviving company after the business combination.18 To offset shareholder redemptions or to fund larger de-SPAC transactions, SPACs often conduct additional private capital-raising transactions, typically in the form of private investment in public equity (PIPE) transactions.19 Regardless of its form, a de-SPAC transaction often is accompanied by the need to attain shareholder approval for certain items (e.g., amendments to the governing documents of the SPAC, or authorization of additional securities for issuance), and, in such cases, a SPAC provides its shareholders with a proxy statement on Schedule 14A or an information statement on Schedule 14C.20 If the SPAC, the target company, or a holding company 21 must register the offer and sale of its securities to be issued in the de-SPAC transaction, the entity typically files a registration statement on Form S–4 or F–4 to do so.22 If no registration statement or proxy or information statement is required, the SPAC may disseminate a tender offer statement (i.e., a Schedule TO) for the redemption offer to its security holders with information about the target company.23 Finally, after the completion of the de-SPAC transaction, the combined company must file a Form 8–K within four business days that includes information about the target company equivalent to the information that a new reporting company would be required to provide when filing a Form 10 under the Exchange Act.24 In recent years, the U.S. securities market experienced a significant increase in the number of SPAC IPOs, as shown in Table 1 25 below.
TABLE 1—NUMBER OF SPAC IPOS IN THE U.S. SECURITIES MARKET FROM 2012–2023
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Number of Offerings SPAC IPOs ............................................................................... 9 10 12 20 13 34 46 59 248 613 86 31 IPOs (including SPAC IPOs) .................................................... 147 220 258 173 111 189 225 213 450 968 118 72 Percentage from SPACs ........................................................... 6% 5% 5% 12% 12% 18% 20% 28% 55% 63% 73% 43% Total Proceeds (in billions of dollars) SPAC IPOs ............................................................................... 0.5 1.4 1.8 3.9 3.5 10.0 10.8 13.6 83.4 162.5 13.4 3.8 IPOs (including SPAC IPOs) .................................................... 50.1 70.8 93.0 39.2 25.8 50.3 63.9 72.2 179.4 334.7 22.9 25.1 I

26 Id.
27 Id.
28For example, in May 2021, the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets of the House Financial Services Committee held a hearing on ‘‘Going Public: SPACs, Direct Listings, Public Offerings, and the Need for Investor Protections,’’ which included testimony on, among other things, misaligned incentives in the SPAC structure, disclosure issues with respect to SPACs, and the use of projections in de-SPAC transactions. A webcast of the hearing is available at https://financialservices.house.gov/events/ eventsingle.aspx?EventID=407753. In addition, as discussed in the Proposing Release, the Commission’s Investor Advisory Committee issued recommendations and expressed certain concerns regarding SPACs. See Proposing Release, supra note 7, at 29462, nn.36–38 and accompanying text. 29See Testimony of Stephen Deane, CFA Institute, before the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee of the U.S. House Committee on Financial Services, May 24, 2021 (‘‘Deane Testimony’’), https://financialservices.house.gov/ uploadedfiles/hhrg-117-ba16-wstate-deanes￾20210524.pdf; see also Amrith Ramkumar, SPAC Insiders Can Make Millions Even When the Company They Take Public Struggles, Wall St. J. (Apr. 25, 2021). 30See, e.g., Klausner, Ohlrogge & Ruan, supra note 18; Usha Rodrigues & Michael A. Stegemoller, Redeeming SPACs (2021), U. of Ga. Sch. of L. Legal Stud. Res. Paper No. 2021–09, available at https:// ssrn.com/abstract=3906196 or http://dx.doi.org/ 10.2139/ssrn.3906196 (in the Proposing Release, a working paper of this article was cited as Usha R. Rodrigues and Michael Stegemoller, SPACs: Insider IPOs (SSRN Working Paper, 2021), with the short form citation ‘‘Rodrigues and Stegemoller’’); Minmo Gahng, Jay R. Ritter & Donghang Zhang, SPACs, 36 The Rev. of Financial Stu. 3463 (2023), available at https://doi.org/10.1093/rfs/hhad019; letter dated Feb. 16, 2021, from Americans for Financial Reform and Consumer Federation of America to the House Financial Services Committee (‘‘AFR Letter’’); Deane Testimony; Testimony of Andrew Park, Americans for Financial Reform, before the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee of the U.S. House Committee on Financial Services, May 24, 2021 (‘‘Park Testimony’’), https://financialservices.house.gov/ uploadedfiles/hhrg-117-ba16-wstate-parka￾20210524.pdf. 31See Mira Ganor, The Case for Non-Binary, Contingent, Shareholder Action, 23 U. Pa. J. Bus. L. 390 (2021); Rodrigues & Stegemoller, supra note 30. We note that exchange listing rules only explicitly require that, when a shareholder vote on a business combination is held, the public shareholders voting against a business combination have a right to redeem shares. See, e.g., Nasdaq Listing Rule IM– 5101–2 (stating, in part, that ‘‘public Shareholders voting against a business combination must have the right to convert their shares of common stock into a pro rata share of the aggregate amount
then in the deposit account (net of taxes payable and amounts distributed to management for working capital purposes) if the business combination is approved and consummated’’). In April 2022, the Commission’s Investor Advocate issued a recommendation to the NYSE and Nasdaq that their respective listing standards should prohibit consummation of a business combination when public SPAC shareholders exercise their conversion rights for a majority of the shares. See Memorandum, dated April 21, 2022, from Rick A. Fleming, Investor Advocate, U.S. Securities and Exchange Commission, to Adena T. Friedman, President & Chief Executive Officer, and John Zecca, EVP & Global Chief Legal and Regulatory Officer, Nasdaq, Inc., available at https:// www.sec.gov/about/offices/investorad/ recommendation-of-the-investor-advocate-nasdaq￾spac-listing-standards-042122.pdf; and Memorandum, dated April 21, 2022, from Rick A. Fleming, Investor Advocate, U.S. Securities and Exchange Commission, to Lynn Martin, President, and Jaime L. Klima, Chief Regulatory Officer, The NYSE Group, Inc., available at https://www.sec.gov/ about/offices/investorad/recommendation-of-the￾investor-advocate-nyse-spac-listing-standards￾042122.pdf. 32Throughout this release, when we discuss ‘‘SPAC transactions,’’ we are referencing both SPAC IPOs and de-SPAC transactions. 33See, e.g., AFR Letter; Testimony of Professor Usha R. Rodrigues, University of Georgia School of Law, before the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee of the U.S. House Committee on Financial Services, May 24, 2021 (‘‘Rodrigues Testimony’’), https://financialservices.house.gov/ uploadedfiles/hhrg-117-ba16-wstate-rodriguesu￾20210524.pdf. A number of recent Commission actions have highlighted disclosures about the private operating company that are allegedly materially misleading, among other things. See, e.g., In the Matter of Momentus, Inc., Stable Road Acquisition Corp., SRC–NI Holdings, LLC, and Brian Kabot, Release No. 33–10955, 34–92391 (July 13, 2021) (settled order); In the Matter of Nikola Corp., Release No. 33–11018, 34–93838 (Dec. 21,
2021) (settled order); SEC v. Akazoo S.A., Case No.
1:20–cv–e08101 (S.D.N.Y. filed Sept. 30, 2020); SEC
v. Hurgin, et al., Case No. 1:19–cv–05705 (S.D.N.Y.
filed June 18, 2019).
34For example, a traditional IPO requires a more comprehensive description of the business of a prospective registrant than is required of a private target operating company in an M&A transaction. Compare Item 11(a) of Form S–1, with Item 17(b)(1) of Form S–4, and Item 14(b)(3) of Schedule 14A. Additionally, a description of property and material legal proceedings is required for a prospective registrant in a traditional IPO, but these disclosure requirements do not apply to a private target operating company in an M&A transaction. See Item 11(b)–(c) of Form S–1.
TABLE 1—NUMBER OF SPAC IPOS IN THE U.S. SECURITIES MARKET FROM 2012–2023—Continued
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Percentage from SPACs ........................................................... 1% 2% 2% 10% 14% 20% 17% 19% 46% 49% 59% 15% Number of Completed De-SPAC Transactions ........................ 6 11 5 10 9 13 23 28 64 199 101 89 As shown above in Table 1, SPAC IPOs represent a significant share of the U.S. IPO market in recent years. While we recognize that, like overall IPO activity, the SPAC IPO market has declined recently, SPAC IPOs nonetheless constituted over half of all U.S. IPOs respectively in 2020, 2021, and 2022, and constituted 43% of all U.S. IPOs in 2023.26 The number of de￾SPAC transactions has also been significant relative to the number of non-SPAC U.S. IPOs. A similar trend has occurred when considering total proceeds for SPAC IPOs as a percentage of total proceeds raised in all U.S. IPOs over this period. SPAC IPO proceeds represented 46%, 49%, and 59% of total proceeds raised in all U.S. IPOs respectively in 2020, 2021, and 2022. This percentage declined to 15% in 2023.27 During the years of increase in SPAC IPOs, many market observers raised concerns about various aspects of the SPAC structure and the hybrid nature of the de-SPAC transaction.28 Among other things, commentators expressed concerns about SPAC sponsor compensation and other costs that can have a dilutive effect on a SPAC’s shareholders,29 potential conflicts of interest in the SPAC structure and de￾SPAC transactions (e.g., the SPAC sponsors’ compensation being contingent on the completion of the de￾SPAC transaction could lead sponsors to enter into de-SPAC transactions that are unfavorable to unaffiliated shareholders),30 and SPAC governing documents and stock exchange listing rules under which SPAC shareholders can vote in favor of a proposed de-SPAC transaction yet redeem their shares prior to the closing of the transaction.31 Some commentators have expressed concerns regarding the adequacy of the disclosures provided to investors in SPAC IPOs and de-SPAC transactions 32 in terms of explaining the potential risks and effects for investors related to these transactions and the potential benefits for the SPAC sponsor and other affiliates of the SPAC.33 For example, even though the de-SPAC transaction essentially serves as the IPO of the target company in the form of an M&A transaction, investors may not receive the same information about the target company as they would in a registration statement for a traditional IPO, because a filing for an M&A transaction has different disclosure requirements.34 There are also additional disclosure and liability concerns that stem from the hybrid nature of the de-SPAC transaction. For example, some commentators have criticized the use of projections in de-SPAC transactions that, in their view, have appeared to be unreasonable, unfounded, or potentially misleading, particularly where the target company is an early stage company with no or limited sales, products,
and/or operations and have expressed concern that some SPACs have taken the I

35Public Law 104–67, 109 Stat. 737 (1995). 36See, e.g., Michael Dambra, Omri Even-Tov & Kimberlyn George, Should SPAC Forecasts Be Sacked? (SSRN Working Paper, 2022), available at https://www.utah-wac.org/2022/Papers/even-tov_ UWAC.pdf; AFR Letter; Park Testimony; Rodrigues & Stegemoller, supra note 30; see also Heather Somerville & Eliot Brown, SPAC Startups Made Lofty Promises. They Aren’t Working Out., Wall St. J., Feb. 25, 2022. 37See AFR Letter; Deane Testimony; Rodrigues Testimony. For a general discussion of the role of gatekeepers in securities markets, see also John C. Coffee Jr., Gatekeeper Failure and Reform: The Challenge of Fashioning Relevant Reforms, 84 B. U.
L. Rev. 301 (2004); John C. Coffee, Jr., Gatekeepers:
The Professions and Corporate Governance (2006). 38See CF Disclosure Guidance: Topic No. 11— Special Purpose Acquisition Companies (Division of Corporation Finance, Dec. 22, 2020); Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies (Division of Corporation Finance, Mar. 31, 2021); Public Statement on Financial Reporting and Auditing Considerations of Companies Merging with SPACs (Office of Chief Accountant, Mar. 31, 2021); Public Statement on SPACs, IPOs and Liability Risk under the Securities Laws (Division of Corporation Finance, Apr. 8, 2021); Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (‘‘SPACs’’) (Division of Corporation Finance and Office of Chief Accountant, Apr. 12, 2021). 39 In this release, unless otherwise indicated, comment letters cited refer to comment letters received in response to the Proposing Release, and are available at https://www.sec.gov/comments/s7- 13-22/s71322.htm. On March 30, 2022, the Commission published the Proposing Release on its website. The comment period for the Proposing Release was open for 30 days from publication in the Federal Register and ended on June 13, 2022. Four commenters stated that the comment period was inadequate and/or recommended extending the comment period. See letters from Christopher Iacovella, Chief Executive Officer, American Securities Association (June 7, 2022) (‘‘American Securities Association’’); Jennifer Schulp, Director of Financial Regulation Studies, Center for Monetary and Financial Alternatives, Cato Institute (June 13, 2022) (‘‘Cato Institute’’); Bobby Franklin, President & CEO, National Venture Capital Association (June 13, 2022); Rod Miller, Chair, Securities Regulation Committee, New York City Bar Association (June 13, 2022) (‘‘NYC Bar’’). In Oct. 2022, the Commission reopened the comment period for the Proposing Release and other rulemakings because certain comments on the Proposing Release and other rulemakings were potentially affected by a technological error in the Commission’s internet comment form. See Resubmission of Comments and Reopening of Comment Periods for Several Rulemaking Releases Due to a Technological Error in Receiving Certain Comments, Release No. 33–11117 (Oct. 7, 2022) [87 FR 63016 (Oct. 18, 2022)] (‘‘Reopening Release’’). The Reopening Release was published on the Commission’s website on Oct. 7, 2022, and in the Federal Register on Oct. 18, 2022, and the reopened comment period ended on Nov. 1, 2022. We have considered all comments received since Mar. 30, 2022, and do not believe an additional extension of the comment period is necessary. 40The Small Business Capital Formation Advisory Committee recommendations on the Proposing Release are available at https:// www.sec.gov/spotlight/sbcfac/sbcfac-spac￾recommendation-050622.pdf. The Small Business Capital Formation Advisory Committee made the following five recommendations, in summary: (1)
SPACs should remain a viable path for companies to pursue as a means of getting access to public market capital and the committee is concerned the proposed rules, as written, might render SPACs unusable as an alternative to IPOs, (2) the committee is generally supportive of improving disclosures for SPACs, particularly in the period of time between the announcement of the merger and the closing of the de-SPAC transaction, (3) the Commission should clearly identify which participants would have underwriter liability and participants should be held accountable to the same extent they would be in traditional IPOs, (4) projections in de-SPAC transactions should be covered by the liability safe harbor provisions of the PSLRA, because management projections are an important part of the rationale for companies in determining whether to engage in a merger with a SPAC and they are necessary when financial intermediaries provide fairness opinions related to de-SPAC transactions, and (5) the Commission should expand or eliminate the 18-month and 24- month timelines provided in the Investment Company Act safe harbor for SPACs, because the requirement to engage in a de-SPAC transaction within 18 months after a SPAC IPO and complete a de-SPAC transaction within 24 months could incentivize SPAC sponsors to engage in riskier acquisitions to complete the merger process within artificially short periods. With respect to the Small Business Capital Formation Advisory Committee’s first recommendation—that SPACs remain a viable path to access public market capital—we do not believe the final rules will vitiate this access or render SPACs unusable as an alternative to IPOs. On the contrary, we believe the final rules will support the SPAC market by enhancing SPAC disclosures and enhancing investor protection in ways that help investor decision-making and increase investor confidence that they have the necessary information to invest in the SPAC market. With respect to the Small Business Capital Formation Advisory Committee’s second recommendation—supporting improved disclosures for SPACs, particularly in the period of time between the announcement of the merger and the closing of the de-SPAC transaction—we believe the final rules collectively will enhance such disclosure. We address the other specific recommendations of the Small Business Capital Formation Advisory Committee in the specific sections of this release related to those recommendations. position that the Private Securities Litigation Reform Act of 1995 (‘‘PSLRA’’) 35 safe harbor applies to forward-looking statements made by SPACs in connection with de-SPAC transactions.36 The target company also is often not required to sign a registration statement filed for a de￾SPAC transaction (except in transaction structures where the target company survives the de-SPAC transaction) and, by extension, would not take on section 11 liability even though, similar to a traditional IPO, reliable information about the
business of the target company is critical to investors when deciding whether to approve the transaction and to invest in the combined company through their redemption decision. Finally, commentators have noted that, unlike a traditional IPO, a registered de-SPAC transaction lacks a named underwriter that would typically perform traditional gatekeeping functions, such as due diligence on the target company, and would be subject to liability under
section 11 of the Securities Act for the
registration statement.37 In response to a number of these and other concerns, the Commission staff provided guidance relating to SPACs on five occasions between December 2020 and April 2021.38 Then, in March 2022, the Commission proposed new rules and rule amendments to enhance existing disclosure requirements and investor protections in SPAC IPOs and in de-SPAC transactions.39 On July 13, 2022, the U.S. Securities and Exchange Commission Small Business Capital Formation Advisory Committee (‘‘Small Business Capital Formation Advisory Committee’’) issued recommendations related to this proposal.40 While we recognize that the number of SPAC IPOs has declined since 2021, the investor protection concerns regarding SPACs and the hybrid nature of the de-SPAC transaction identified in the Proposing Release do not depend on market fluctuations. In addition, as noted above, notwithstanding the recent decline, SPAC transactions have become a much larger part of the U.S. securities markets over the last decade and could continue to grow as macroeconomic and other factors change. Accordingly, after considering comments received on the proposal, we are adopting final rules that will provide for greater transparency and more robust investor protections in SPAC IPOs and de-SPAC transactions. The final rules will enhance the completeness, usefulness, and comparability of the disclosures provided by SPACs and target companies at the SPAC IPO and de￾SPAC transaction stages and will provide other important protections for investors in this market, all of which may promote market efficiency. Further, given that the de-SPAC transaction essentially is an IPO of the target company in the form of an M&A transaction, the final rules also will ensure that investors receive similar information about the target company and similar protections as in a traditional IPO in connection with the de-SPAC transaction. The final rules also will provide investors with information about, and protections with respect to, the M&A elements of de￾SPAC transactions, particularly regarding the transaction approval process and conflicts of interest. To these ends, we are adopting new subpart 229.1600 of 17 CFR part 229 (‘‘subpart 1600’’ of Regulation S–K) that sets forth specialized disclosure requirements for SPAC IPOs and de￾SPAC transactions. New subpart 1600 contains provisions that, among other things:

41Throughout this release, for readability, we use ‘‘shell company’’ in lieu of the phrase ‘‘shell company, other than a business combination related shell company.’’ The term ‘‘business combination related shell company’’ is defined in Securities Act Rule 405 and Exchange Act Rule 12b–2. We similarly use ‘‘reporting shell company’’ in lieu of the phrase ‘‘reporting shell company, other than a business combination related shell company’’ throughout this release. 42Some commenters indicated that some or all of the new rules should not apply to existing SPACs and/or should apply only prospectively. See, e.g., letters from American Securities Association; Cato Institute; Freshfields Bruckhaus Deringer US LLP (June 13, 2022) (‘‘Freshfields’’); Don Nguyen (Apr. 20, 2022); Nicholas Wilson (June 9, 2022). 43 15 U.S.C. 80a–1 et seq. 44The requirements in new subpart 1600 will codify and standardize some of the disclosures already commonly provided by SPACs. 45See the amendments to Forms S–1, F–1, S–4, F–4 and 8–K and Schedules 14A and TO. While the Commission did not propose amendments to
Schedule 14C, the disclosure required by subpart
1600 will be required in Schedule 14C pursuant to Item 1 of Schedule 14C, which states that a
Schedule 14C must include the information called
for by all of the items of Schedule 14A, with limited exceptions, to the extent each item would be applicable to any matter to be acted upon at a shareholder meeting if proxies were to be solicited in connection with the meeting. If the securities to be issued in a de-SPAC transaction are registered on a form other than Form S–4 or F–4, such as Form S–1 or F–1 the requirements of Form S–4 or F–4 that the Commission is adopting, as applicable, in regard to de-SPAC transactions would apply in that context. Also, in both Form S–4 and Form F–4, we made technical changes from the proposal to clarify that the new Regulation S–K Item 1600 series of disclosures should be located in the prospectus part of these forms. As a result Form S–4 provides: ‘‘If securities to be registered on this Form will be issued in a de-SPAC transaction, as defined in Item 1601(a) of Regulation S–K (17 CFR 229.1601(a)), then the disclosure provisions of Items 1603 through 1607 and 1609 of Regulation S–K (17 CFR
229.1603 through 229.1607 and 229.1609) apply in
addition to the provisions of this Form and disclosure thereunder must be provided in the prospectus, and the structured data provisions of Item 1610 of Regulation S–K (17 CFR 229.1610) apply to those disclosures.’’ We made similar changes to Form F–4. For purposes of consistency across forms and schedules, we made similar changes as well to Schedule 14A and Schedule TO, although there is no requirement in these forms to locate the disclosure in the prospectus portion of these schedules. In both Schedule 14A and
Schedule TO, we made technical changes from the
proposal to clarify that Item 1604(a) does not apply since these disclosure documents do not include an outside front cover page similar to a prospectus and Item 1604(b) disclosure should be included in the front part of the disclosure document instead of the prospectus summary referred to in Item 1604(b). 46 General Instruction L.1. to Form S–4; General Instruction I.1. to Form F–4; Item 14(f)(1) to

• Require additional disclosures
  about the SPAC sponsor, potential conflicts of interest, and dilution;
• Require certain disclosures on the
  prospectus outside front cover page and in the prospectus summary of registration statements filed in connection with SPAC IPOs and de￾SPAC transactions; and
• Require additional disclosures
  regarding de-SPAC transactions, including (1) if the law of the jurisdiction in which the SPAC is organized requires its board of directors (or similar governing body) to determine whether the de-SPAC transaction is advisable and in the best interests of the SPAC and its shareholders, or otherwise make any comparable determination, disclosure of that determination, and (2) if the SPAC or SPAC sponsor has received any outside report, opinion, or appraisal materially relating to the de￾SPAC transaction, certain disclosures concerning the report, opinion, or appraisal. In addition, we are adopting amendments to provide procedural protections and to align the disclosures provided to investors, as well as the legal obligations of companies, in de￾SPAC transactions more closely with those in traditional IPOs. Specifically, we are adopting final rules that:
• Amend the registration statement
  forms and schedules filed in connection with de-SPAC transactions to require additional disclosures about the target company;
• Provide that a target company in a
  registered de-SPAC transaction is a co￾registrant on the registration statement used for the de-SPAC transaction such that the target company will be subject to liability under section 11 of the Securities Act;
• Make the PSLRA safe harbor
  unavailable to SPACs (including with respect to projections of target companies seeking to access the public markets through a de-SPAC transaction), by defining ‘‘blank check company’’ to encompass SPACs (and other companies that would be blank check companies but for the fact that they do not sell penny stock); and
• Require re-determination of SRC
  status following a de-SPAC transaction. We also are providing guidance regarding potential underwriter status under section 2(a)(11) of the Securities Act in de-SPAC transactions. In addition, to provide reporting shell company shareholders, including SPAC shareholders, with more consistent Securities Act liability protections regardless of transaction structure, we are adopting new Rule 145a that specifies that any business combination of a reporting shell company, other than a business combination related shell company, involving another entity that is not a shell company involves a sale of securities to the reporting shell company’s shareholders.41 We are also adopting new 17 CFR 210.15–01 (‘‘Article 15’’ of Regulation S–X), as well as related amendments, to more closely align the financial statement reporting requirements in business combinations involving a shell company and a target company with those in traditional IPOs. With respect to effectiveness and compliance with the final rules, in response to commenters,42 we have set an extended effective date for the new rules (i.e., July 1, 2024, which is 125 days after the date of publication of this release in the Federal Register). This extended period before the final rules are effective will provide sufficient time for an initial public filing to be made under the existing rules for any transactions that are currently pending or planned. Any filings made on or after the effective date must comply with the final rules. We are also issuing guidance regarding the status of SPACs under the Investment Company Act of 1940 (‘‘Investment Company Act’’).43 We have decided not to adopt proposed 17 CFR 270.3a–10 (‘‘Rule 3a–10’’ under the Investment Company Act) which would have provided a safe harbor from the definition of investment company under
  section 3(a)(1)(A) to SPACs that
  complied with the rule’s conditions.
  Whether a SPAC is an investment company as defined in the Investment Company Act is a question of facts and circumstances. Given the individualized nature of this analysis, and because, depending on the facts and circumstances, a SPAC could be an investment company at any stage of its operations such that a specific duration limitation may not be appropriate, we have decided not to adopt proposed Rule 3a–10. We are, however, providing guidance as to the type of activities that would likely raise serious questions about a SPAC’s status as an investment company under the Investment Company Act.
  II. New Subpart 1600 of Regulation S–
  K
  The Commission is adopting final rules to add new subpart 1600 to Regulation S–K. The new subpart sets forth disclosure requirements applicable to SPACs regarding, among other things, the sponsor, potential conflicts of interest, and dilution and requires certain disclosures on the prospectus cover page and in the prospectus summary.44 The Commission is also adopting final rules to amend a number of forms and schedules used by SPACs for IPOs and de-SPAC transactions to require the information set forth in subpart 1600.45 To the extent that the disclosure requirements in subpart 1600 address the same subject matter as the existing disclosure requirements of the forms or schedules, the requirements of subpart 1600 are controlling.46

Schedule 14A; General Instruction L to Schedule
TO.
47Proposed Item 1601(a).
48Letter from Jay Knight, Chair of the Committee on Federal Regulation of Securities of the Section of Business Law of the American Bar Association (June 17, 2022) (‘‘ABA’’). 49Letter from ABA. 50Letter from Kirkland & Ellis LLP (June 15, 2022) (‘‘Kirkland & Ellis’’). 51Proposing Release, supra note 7, at 29466 (request for comment number 2) (‘‘Should we define ‘de-SPAC transaction’ as proposed? Should the scope of the proposed definition instead be tied to de-SPAC transactions that are permitted under exchange listing standards?’’). 52Letter from Vinson & Elkins (June 13, 2022) (‘‘Vinson & Elkins’’). 53 Item 1601(a) of Regulation S–K. 54Letter from ABA. 55Letters from ABA, Kirkland & Ellis. 56Letter from ABA. 57See also infra note 94 and accompanying text concerning SPAC status after a de-SPAC transaction. 58Letter from Vinson & Elkins. 59Proposing Release, supra note 7, at 29466. 60 In adopting this definition of de-SPAC transaction, we do not intend to indicate that such transactions are or should be permitted under the exchanges’ SPAC listing rules or that exchange listing requirements should not apply to SPACs seeking an exchange listing. 61Blank check companies subject to Rule 419 must comply with a comprehensive set of disclosure and investor protection requirements under the rule and were not proposed to be subject to the requirements applicable to SPACs under the proposed rules. 62Proposed Item 1601(b). 63Letter from Vinson & Elkins (noting that ‘‘as proposed, a special purpose acquisition company has a business plan to complete a de-SPAC transaction, and a de-SPAC transaction involves a special purpose acquisition company.’’). 64Letters from ABA, Vinson & Elkins. 65Letter from Vinson & Elkins. A. Definitions

1. Proposed Definition: ‘‘De-SPAC
   Transaction’’
   The Commission proposed to define the term ‘‘de-SPAC transaction’’ as a business combination such as a merger, consolidation, exchange of securities, acquisition of assets, or similar transaction involving a SPAC and one or more target companies (contemporaneously, in the case of more than one target company).47
2. Comments: Definition of ‘‘De-SPAC
   Transaction’’
   One commenter recommended we add the term ‘‘reorganization’’ to the non-exhaustive list of transactions set out in the proposed definition of de￾SPAC transaction.48 One commenter recommended the definition of de-SPAC transaction refer to ‘‘initial business combination’’ not ‘‘business combination.’’ 49 Another commenter recommended the definition be named ‘‘initial business combination’’ instead of ‘‘de-SPAC transaction.’’ 50 In response to a request for comment,51 one commenter said there was no need to tie the definition of de￾SPAC transaction to transactions that are permitted under exchange listing standards, particularly if the definition of SPAC includes non-listed shell companies.52
3. Final Definition: ‘‘De-SPAC
   Transaction’’
   After considering the comments received, we are adopting the definition of de-SPAC transaction as proposed with a modification discussed below.53 Under the final rules, the term de-SPAC transaction means a business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, involving a special purpose acquisition company and one or more target companies (contemporaneously, in the case of more than one target company). We agree with one commenter’s recommendation 54 to add the term ‘‘reorganization’’ to the non-exhaustive list of transactions set out in the definition of de-SPAC transaction. It is our understanding some transactions commonly considered to be de-SPAC transactions may be considered reorganizations. Hence, we have added the suggested term to the final definition. A few commenters suggested the definition of de-SPAC transaction should use the phrase ‘‘initial business combination.’’ 55 We recognize the phrase ‘‘initial business combination’’ may be used interchangeably with ‘‘business combination’’ or ‘‘de-SPAC transaction’’ in the marketplace today, but we believe the simpler proposed term ‘‘business combination’’ used in the body of the de-SPAC transaction definition will be clearer to market participants. One of these commenters suggested the term ‘‘initial business combination’’ should be used because ‘‘[s]ubsequent acquisitions by the former SPAC after Closing should not be considered a De-SPAC Transaction.’’ 56 We note that a company that is no longer a SPAC would not be subject to the disclosure items in subpart 1600 of Regulation S–K.57 We agree with the commenter who said there was no need to tie the definition of de-SPAC transaction to transactions that are permitted under exchange listing standards, particularly if the definition of SPAC includes non￾listed shell companies.58 A narrower definition may inappropriately exclude transactions that should be included, such as those involving over-the￾counter-traded SPACs. We continue to believe, as indicated in the Proposing Release,59 that the definition of de￾SPAC transaction should include less common transactions that may or may not be permitted under exchange listing rules but for which the enhanced disclosure and procedural requirements in the final rules may be appropriate because they raise the same investor protection concerns.60
4. Proposed Definition: ‘‘Special
   Purpose Acquisition Company (SPAC)’’ The Commission proposed Item 1601 to define the term ‘‘special purpose acquisition company (SPAC)’’ to mean a company that has indicated that its business plan is to (1) register a primary offering of securities that is not subject to the requirements of Rule 419; 61 (2) complete a de-SPAC transaction within a specified time frame; and (3) return all remaining proceeds from the registered offering and any concurrent offerings to its shareholders if the company does not complete a de-SPAC transaction within the specified time frame.62
5. Comments: Definition of ‘‘Special
   Purpose Acquisition Company (SPAC)’’ One commenter indicated they saw no need for a definition of the term ‘‘SPAC,’’ as the commenter saw ‘‘no reason why the Proposed Rules should not apply to all shell companies, other than business combination shell companies, inclusive of blank check companies’’ and also indicated the proposed definitions of ‘‘SPAC’’ and ‘‘de-SPAC transaction’’ were circular, stating, ‘‘The proposed definition of ‘de￾SPAC transaction’ should be revised to eliminate the reference to ‘a special purpose acquisition company’ in order to eliminate circularity.’’ 63 A few commenters did not support including the requirement that a SPAC ‘‘return all remaining proceeds from the registered offering and any concurrent offerings to its shareholders’’ in the proposed SPAC definition.64 One of these commenters said this aspect of the definition is ‘‘unnecessary and should be eliminated or revised to only refer to the plan to return proceeds from the registered offering’’ because ‘‘SPACs often hold a modest amount of working capital outside of their trust accounts that they use to fund operating expenses.’’ 65 According to the commenter, ‘‘[i]f a shell company had such cash remaining at the point when the public shareholders exercise their redemption rights, it would be inappropriate to exclude such shell company from the [p]roposed [r]ules

66 Id.
67Letter from ABA.
68Letter from ABA.
69Letter from Vinson & Elkins.
70 Id.
71 Id.
72Proposing Release, supra note 7, at 29466 (request for comment number 6) (‘‘For example, should we amend Form S–1, Form F–1, Form S– 4, and/or Form F–4 to add to the registration statement cover page of these forms a check box for issuers to indicate whether they are special purpose acquisition companies?’’). 73Letter from Vinson & Elkins. 74 Item 1601(b) of Regulation S–K. 75Letter from Vinson & Elkins. See supra note 63 and accompanying text. 76Letter from Vinson & Elkins. 77See Rule 145a and definitions of ‘‘blank check company’’ in Securities Act Rule 405 and Exchange Act Rule 12b–2. 78According to data provided by The Deal during the years when it tracked this data, the number of reverse mergers not involving SPACs was as follows by year: (a) 48 in 2017, (b) 48 in 2018, (c) 28 in 2019, and (d) 17 in 2020. The Deal staff indicated to the Commission staff they stopped tracking the data after 2020 because of the small number of reverse mergers. 79Letter from Vinson & Elkins. See supra note 63 and accompanying text. 80Letters from ABA, Vinson & Elkins. See supra notes 64, 65, and 66 and accompanying text. 81See, e.g., letters from ABA (‘‘In addition, SPACs are permitted to withdraw interest to pay income and franchise taxes, and, upon liquidation, pay certain liquidation costs. . . .’’); Goodwin Procter LLP (June 14, 2022) (‘‘Goodwin’’) (‘‘SPACs are permitted to withdraw interest to pay income and franchise taxes and, upon liquidation, pay certain liquidation costs. . . .’’); White & Case LLP (June 17, 2022) (‘‘White & Case’’) (‘‘In addition, SPACs are permitted to withdraw interest to pay income and franchise taxes, and, upon liquidation, pay certain liquidation costs, which would reduce overall returns.’’). 82See NYSE Listed Company Manual Section
102.06 and Nasdaq Listing Rule IM–5101–2
(providing for the placement of concurrent offering proceeds in trust). based solely on retaining such cash.’’ 66 Another commenter recommended that we change this aspect of the definition to use the phrase ‘‘redeem the equity securities issued in the registered offering if the company does not complete a de-SPAC transaction within the specified time frame.’’ 67 One commenter recommended we narrow the definition of SPAC to only ‘‘a blank check company as defined in § 230.419(a)(2).’’ 68 Another commenter, who opposed defining ‘‘SPAC,’’ noted that the proposed definition ‘‘is not limited to companies listed on a national securities exchange’’ and ‘‘would include shell companies traded in over-the-counter markets, which are not what would generally be considered to be ‘SPACs.’ ’’ 69 That commenter noted that a ‘‘logical distinction could be drawn based on exchange listing, rather than on whether the offering is by a blank check company and therefor subject to Rule 419.’’ 70 The same commenter recommended that, if we adopt a new definition, we clarify that a company ‘‘ceases to be a SPAC for purposes of the rules after consummation of a de-SPAC transaction.’’ 71 In response to requests for comment,72 one commenter said that ‘‘it is clear what entities are SPACs, without the need for additional boxes to check.’’ 73
6. Final Definition: ‘‘Special Purpose
Acquisition Company (SPAC)’’ After considering the comments received, we are adopting the definition of special purpose acquisition company (or SPAC) as proposed, with certain modifications discussed below.74 Under the final rules, the term special purpose acquisition company (SPAC) means a company that has: (1) indicated that its business plan is to: (i) conduct a primary offering of securities that is not subject to the requirements of § 230.419 (Rule 419 under the Securities Act); (ii) complete a business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, with one or more target companies within a specified time frame; and (iii) return proceeds from the offering and any concurrent offering (if such offering or concurrent offering intends to raise proceeds) to its security holders if the company does not complete a business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, with one or more target companies within the specified time frame; or (2) represented that it pursues or will pursue a special purpose acquisition company strategy. One commenter did not see a need for a new defined term ‘‘SPAC,’’ 75 because, in the commenter’s view, enhanced disclosures should apply to all shell companies (other than business combination shell companies) and not only to those companies defined as SPACs.76 Several of the rules being adopted in this release will enhance disclosures for investors in non-SPAC shell companies.77 However, the proposed individual disclosure items in the Item 1600 series of Regulation S–K were largely tailored to SPAC transactions. For the reasons we discuss in this release below in connection with the specific rules we are adopting, we believe it is appropriate at this time to apply enhanced disclosure in connection with companies meeting the definition of SPAC. However, we will continue to consider whether enhanced disclosure in other shell company transactions, such as reverse mergers with public shell companies, would be appropriate or necessary in the future.78 This commenter further observed there was circularity in the proposed definitions of ‘‘SPAC’’ and ‘‘de-SPAC transaction.’’ 79 We agree the final rules should eliminate this circularity. Although the commenter made the suggestion to revise the definition of ‘‘de-SPAC transaction’’ rather than addressing the issue by revising the definition of ‘‘SPAC,’’ we believe it would be clearer to avoid circularity by revising the definition of ‘‘SPAC.’’ We have replaced the term ‘‘de-SPAC transaction’’ in the definition of ‘‘SPAC’’ with ‘‘business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, with one or more target companies.’’ Several comments focused on the aspect of the proposed SPAC definition regarding the return of proceeds and
suggested that special purpose acquisition companies may not return ‘‘all remaining proceeds.’’ 80 We agree with commenters that the proposed term ‘‘return all remaining proceeds’’ could inappropriately exclude companies that take some portion of cash out of trust for anticipated expenses and therefore do not return ‘‘all’’ proceeds at the time of redemption.81 To avoid excluding such companies, we have revised the definition to use the term ‘‘return proceeds’’ instead of ‘‘return all remaining proceeds.’’ We have also added a parenthetical reference ‘‘(if such offering or concurrent offering intends to raise proceeds)’’ that qualifies the term ‘‘offering and any concurrent offering’’ to account for the fact there may be some SPAC offerings that do not raise proceeds. We do not believe it is necessary to revise the definition to refer only to the plan to return proceeds from the primary offering, rather than the primary offering and any concurrent offering. We understand SPACs typically place proceeds of concurrent offerings in trust and return these proceeds if the SPAC does not complete a de-SPAC transaction within the specified time frame.82 We are not adopting the recommendation that we should replace the terms related to the return of proceeds with alternative terms related to the redemption of equity securities. We continue to believe, as the Commission indicated in the Proposing Release, that the definition should not include certain criteria, including the issuance of redeemable securities, that

83Proposing Release, supra note 7, at 29466. 84Letter from ABA. 85See supra notes 1 and 61 (discussion of Securities Act Rule 419). As discussed in section III.E infra, in the final rules, we are not amending the definition of ‘‘blank check company’’ in Rule 419 as proposed but are adopting a definition of ‘‘blank check company’’ in Securities Act Rule 405 that is exclusively for purposes of the safe harbor created by the PSLRA for forward-looking statements. 86Proposing Release, supra note 7, at 29465. 87Letter from Vinson & Elkins. 88See, e.g., Table 2 in section VIII (Economic Analysis) (statistics on over-the-counter SPACs for over a three-decade period). 89Prior to exchange rule changes permitting listing, shells commonly referred to as SPACs were not exchange-listed. See Securities Exchange Act Release Nos. 58228 (July 25, 2008) [73 FR 44794 (July 31, 2008)] (Order Granting Approval to Proposed Rule Change, as modified by Amendment No. 1, to Adopt Additional Initial Listing Standards to list Securities of Special Purpose Acquisition Companies) (NASDAQ–2008–013); 57785 (May 6,
2008) [73 FR 27597 (May 13, 2008)] (Order
Approving Proposed Rule Change to Adopt New Initial and Continued Listing Standards to List Securities of Special Purpose Acquisition Companies) (SR–NYSE–2008–17). According to data from SPACInsider, in the years 2020 through 2022, there were zero SPAC IPOs in the over-the￾counter market (i.e., that were not listed on an exchange in connection with the IPO). 90As a result of this change, the three prongs contained in the proposed definition (that had paragraph numbers (1), (2), and (3)) will be renumbered as paragraphs (1)(i), (ii), and (iii) and the clause regarding pursuit of a SPAC strategy will be numbered as paragraph (2). We have also added a parenthetical reference to the acronym ‘‘(SPAC)’’ in the body of the definition in the final rule as well as in the name of the defined term ‘‘special purpose acquisition company (SPAC)’’ to add incremental clarity that the acronym also refers to the defined term. 91Proposing Release, supra note 7, at 29466 (request for comment number 1). 92Proposing Release, supra note 7, at 29490 (request for comment number 102). 93Proposing Release, supra note 7, at 29465. 94Letter from Vinson & Elkins. 95See also section III.C (discussing co-registration on Forms S–4 and F–4 and the requirement to identify the target company as a registrant on the registration statement cover page). could result in an overly narrow definition by including transactional terms that have not applied to every SPAC offering in the past or that could change as the SPAC market continues to evolve.83 One commenter recommended we narrow the definition of SPAC to only ‘‘a blank check company as defined in § 230.419(a)(2).’’ 84 The Rule 419 definition of ‘‘blank check company’’ includes a requirement that the company is issuing penny stock.85 The proposed definition of SPAC reflects the fact that special purpose acquisition company structures often are designed to avoid issuing penny stock but continue to pose disclosure and other investor protection concerns.86 Special purpose acquisition companies frequently do not issue penny stock and, therefore, would not meet the definition in § 230.419(a)(2). Thus, the inclusion of the suggested criterion would inappropriately exclude many or all special purpose acquisition companies from the SPAC definition. Another commenter indicated the SPAC definition should draw a distinction based on exchange listing, which would exclude shell companies traded in over-the-counter markets. In the commenter’s view, shell companies traded in over-the-counter markets are not generally considered to be SPACs.87 While companies commonly considered to be SPACs often list on a national securities exchange, we do not believe the SPAC definition should be limited to such listed entities. While carving out companies traded over-the-counter might leave out only a few (or zero) companies today, prevailing structures may further evolve over time just as they have evolved over time in the past,88 and we believe investors in
those over-the-counter companies engaged in the same kinds of business as exchange￾traded companies should have the same investor protections provided by the rules we are adopting.89 Furthermore, we are adding a new clause to the definition that provides that the term special purpose acquisition company also includes a company that has represented it pursues or will pursue a special purpose acquisition company strategy.90 In the Proposing Release, the Commission asked if the proposed definition provides a workable approach to determining which issuers would be subject to the requirements of proposed subpart 1600.91 In addition, the Commission asked whether there were any potential opportunities for regulatory arbitrage in shell company or SPAC transactions that the Commission should consider addressing.92 After further consideration of these regulatory arbitrage concerns, we have revised the final rule to include new paragraph (b)(2) to Item 1601 concerning pursuit of a special purpose acquisition company strategy. Variations on common SPAC structures could cause some companies to fall technically outside one of the three prongs of paragraph (1) of the final SPAC definition. When companies make representations they pursue or will pursue a special purpose acquisition company strategy, they may be indistinguishable to investors from companies that meet the other components of the definition. As a result, we believe investors in such companies should benefit from the enhanced disclosures applicable to SPACs. Therefore, even where a company technically does not meet one of the three prongs in paragraph (1) of the final definition of SPAC, if it represents, directly or indirectly, that it pursues or will pursue a SPAC strategy, then pursuant to paragraph (2) of the final definition of SPAC, the company would meet the definition of a SPAC. Similarly, to avoid the risk that certain varieties of SPACs may fall outside the definition because of minor technical distinctions from the prongs of the definition, we have changed the proposed term ‘‘register a primary offering’’ to ‘‘conduct a primary offering’’ to account for evolving SPAC structures that may not conduct a registered offering. We do not believe it would be appropriate for companies in de-SPAC transactions to avoid the disclosure (or any other) requirements of these final rules only because the initial SPAC transaction was not registered. As noted in the Proposing Release,93 we intend this definition to be sufficiently broad to take into account potential variations in the SPAC structure and the possibility that SPACs may continue to evolve. This adjustment to the definition will ensure that appropriate disclosures are provided at the de-SPAC stage regardless of the structure of the initial SPAC transaction. In the final definition, we have also made a corresponding revision to change the proposed term ‘‘registered offering’’ to ‘‘offering.’’ One commenter recommended we clarify that a company
ceases to be a SPAC upon consummation of a de￾SPAC transaction.94 For the avoidance of doubt, we are providing guidance that, if a company that meets the SPAC definition has completed a de-SPAC transaction or, in the case of one or more target companies, contemporaneous de-SPAC transactions, then the company no longer meets the definition of a SPAC and that such companies are not required to comply with the enhanced disclosures under Regulation S–K applicable to SPACs in registration statements they file in later periods after the completion of such de￾SPAC transactions. We are not requiring a check box on form cover pages indicating SPAC status as the enhanced disclosure provided by registrants pursuant to the Item 1600 series of Regulation S–K will make clear the registrant is a SPAC.95
7. Proposed Definition: ‘‘SPAC
Sponsor’’
The Commission proposed to define the term ‘‘SPAC sponsor’’ as the entity and/or person(s) primarily responsible

96Proposed Item 1601(c).
97Letter from Vinson & Elkins.
98Letter from ABA.
99Letter from ABA.
100 Item 1601(c) of Regulation S–K.
101See, e.g., Item 1603 (regarding SPAC sponsors). 102See Proposing Release, supra note 7, at 29466, n.58 (‘‘In regard to natural persons, we are proposing to exclude from the scope of the definition of ‘SPAC sponsor’ the activities performed by natural persons in their capacities as directors and/or officers of the SPAC to avoid overlap with existing disclosure requirements relating to directors and officers.’’). 103See, e.g., DGCL Section 141(a) (‘‘The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation.’’). 104Letter from ABA. See supra note 98 and accompanying text. 105 Id. 106Letter from ABA. See supra note 98 and accompanying text. for organizing, directing or managing the business and affairs of a SPAC, other than in their capacities as directors or officers of the SPAC as applicable.96
8. Comments: Definition of ‘‘SPAC
Sponsor’’
One commenter said the proposal ‘‘should be revised to eliminate the need for a defined term ‘SPAC sponsor’ ’’ and, ‘‘[i]nstead, the rules should require disclosure regarding the SPAC’s directors, officers and affiliates.’’ 97 This commenter also said ‘‘the definition’s exclusion of directors and officers in their capacities as such would result in there being no ‘sponsor’ for many SPACs.’’ This commenter also said the proposal ‘‘blur[red] the lines between the roles and responsibilities of the SPAC sponsor and that of the SPAC board and officers.’’ Another commenter recommended an alternative definition of ‘‘SPAC sponsor’’: ‘‘the entity and/or person(s) that (1) own all or a portion of the privately placed common equity securities of the special purpose acquisition company and (2) are primarily responsible for directing and managing the business and affairs of a special purpose acquisition company other than in their capacities as (i) directors or officers of the special purpose acquisition company or (ii) third-party service providers to the special purpose acquisition company, as applicable.’’ 98 The commenter said that ‘‘the ‘SPAC sponsor’ should be the entity or persons who have both ownership of [s]ponsor shares and responsibility for directing and managing the SPAC.’’ The commenter said that their suggested definition will ‘‘identify the entity or persons that are currently identified as [s]ponsors in registration statements for the SPAC.’’ 99
9. Final Definition: ‘‘SPAC Sponsor’’
After considering the comments received, we are adopting the definition of SPAC sponsor as proposed with certain modifications discussed below.100 Under the final rules, the term SPAC sponsor means any entity and/or person primarily responsible for organizing, directing, or managing the business and affairs of a special purpose acquisition company, excluding, if an entity is a SPAC sponsor, officers and directors of the special purpose acquisition company who are not affiliates of any such entity that is a SPAC sponsor. The definition is designed to be sufficiently broad that appropriate entities or persons will be subject to the enhanced disclosure requirements applicable to SPAC sponsors.101 Although a sponsor of a SPAC may perform a variety of functions within the SPAC’s structure, we intend for the SPAC sponsor definition to encompass activities that, based on the staff’s experience reviewing SPAC filings and public commentary, are commonly understood to be sponsors of SPACs or with persons referred to as sponsors in current registration statements. We do not believe it would provide investors with adequate information to tie the SPAC sponsor definition to persons with particular titles, because the definition and corresponding disclosure requirements are intended to capture all parties who perform certain activities that result in such parties having key substantive influence over the SPAC. The suggestion to replace ‘‘SPAC sponsor’’ with ‘‘directors, officers, and affiliates of the SPAC’’ would require disclosure from directors and officers not commonly considered to be sponsors today and, as indicated by the Commission in the Proposing Release, would overlap unnecessarily with current required disclosure concerning directors and officers.102 Also, ‘‘directors, officers, and affiliates of the SPAC’’ may not include external management companies and their principals that should be included in the definition on the basis of their activities. While State law may provide that directors manage the business and affairs of a corporation and may not provide that any one director has any more authority than any other director,103 the phrase ‘‘primarily responsible’’ in the definition of SPAC sponsor is not limited to solely directors or solely directors and officers. Other persons, such as third-party management companies and their affiliates, frequently are primarily responsible for the organization, direction, or management of the business and affairs of SPACs today and would be SPAC sponsors under the definition we are adopting. One commenter recommended an alternative definition of SPAC sponsor that featured, among other things, carve￾outs from that alternative definition for directors and officers of the SPAC and for third-party service providers.104 This commenter also suggested that the proposed definition’s exclusion of directors and officers in their capacities as such would result in a null set of SPAC sponsors.105 Having considered this
comment, we have made changes to the final definition. We are not adopting the proposed term ‘‘other than in their capacities as directors or officers,’’ because it could be unclear under the proposed definition whether any action taken on behalf of the SPAC by a director or officer of a SPAC is ‘‘other than in that person’s capacity as an officer or director.’’ As the commenter noted, this could result in no such persons being considered SPAC sponsors. To address such potential ambiguities, in the final rule, we have changed the term ‘‘other than in their capacities as directors or officers of the special purpose acquisition company as applicable’’ to ‘‘excluding, if an entity is a SPAC sponsor, officers and directors of the special purpose acquisition company who are not affiliates of any such entity that is a SPAC sponsor.’’ Based on the staff’s experience, we understand that a SPAC sponsor entity is typically involved in the SPAC. However, if the SPAC sponsor is not an entity, then we want to make sure the appropriate persons are captured within the SPAC sponsor definition. An officer or director of the SPAC that is an affiliate of an entity that is a SPAC sponsor would also be a SPAC sponsor under the final definition. For example, in the case of a hypothetical SPAC where a third-party management company is a SPAC sponsor and a person is a director of both the SPAC and this third-party management company, then this person would also be a SPAC sponsor. We are not adopting the suggestion to exclude ‘‘third-party service providers’’ from the definition of SPAC sponsor.106 As discussed above, some third-party service providers will be ‘‘SPAC sponsors’’ under the definition where they are ‘‘primarily responsible for organizing, directing, or managing the business and affairs’’ of the SPAC. Other

107 Item 1601(c). 108Proposed Item 1601(d). 109Letter from Vinson & Elkins. 110Letter from Freshfields (‘‘We believe there are circumstances where a SPAC may acquire some assets (such as cash) but would not yet have completed its acquisition of a target company.’’). 111 Item 1601(d) of Regulation S–K. 112Letters from Freshfields, Vinson & Elkins. See supra notes 65 and 66 and accompanying text. 113See infra section III.C. 114The term ‘‘promoter’’ is defined in Securities Act Rule 405 and Exchange Act Rule 12b–2. 115See (a) proposed General Instruction VIII to Form S–1, (b) proposed General Instruction I.1 to Form S–4, (c) proposed General Instruction VII to Form F–1, (d) proposed General Instruction I.1 to Form F–4. (e) proposed Item 14(f)(1) of Schedule 14A, and (f) proposed General Instruction K to
Schedule TO.
116 In the Proposing Release, the Commission stated that this would include, for example, fees and reimbursements in connection with lease, consulting, support services, and management agreements with entities affiliated with the sponsor, as well as reimbursements for out-of-pocket expenses incurred in performing due diligence or in identifying potential business combination candidates. Proposing Release, supra note 7, at 29467, n.64. 117Letters from ABA; Stephen W. Hall, Legal Director and Securities Specialist, and Scott Farnin, Legal Counsel, Better Markets (June 13, 2022) (‘‘Better Markets); Michael Ryan, Chief Executive Officer, Bullet Point Network, LP (June 13, 2022) (‘‘Bullet Point Network’’); Charles Pieper (May 13,
2022) (‘‘Charles Pieper’’); John L. Thornton, Co￾Chair, Hal S. Scott, President, and R. Glenn
Hubbard, Committee on Capital Markets Regulation (June 13, 2022) (‘‘Committee on Capital Markets Regulation’’); Paul Andrews, Managing Director, Research, Advocacy and Standards, CFA Institute (May 31, 2022) (‘‘CFA Institute’’); Glenn Davis, Deputy Director, Council of Institutional Investors (June 9, 2022) (‘‘CII’’); Dylan Bruce, Financial Services Counsel, Consumer Federation of America (June 13, 2022) (‘‘Consumer Federation’’); Elizabeth Warren, United States Senator (July 8, 2022) (‘‘Senator Elizabeth Warren’’); Kerrie Waring, Chief Executive Officer, International Corporate Governance Network (June 13, 2022) (‘‘ICGN’’); Melanie Senter Lubin, President, North American Securities Administrators Association, Inc. (June 13, 2022) (‘‘NASAA’’); Paul A. Swegle, Kinsel Law Offices (Apr. 9, 2022) (‘‘Paul Swegle’’). 118Letter from Committee on Capital Markets Regulation. 119Letter from CII. 120Letter from Consumer Federation. third-party service providers, however, will not fall within the definition of SPAC sponsor where they are not ‘‘primarily responsible’’ for organizing, directing, or managing the business and affairs of a SPAC. For example, external legal counsel that only assists in the formation of a SPAC by drafting its certificate of incorporation and bylaws on behalf of a client would not be ‘‘primarily responsible’’ for ‘‘organizing . . . the business and affairs of a SPAC.’’ 107 Other third-party service providers may perform similar administrative or ministerial activities for a SPAC or provide outside legal or accounting advice neither of which would cause them to be ‘‘primarily responsible’’ for organizing, directing, or managing the business and affairs of the SPAC and thus they would not be SPAC sponsors.
10. Proposed Definition: ‘‘Target
Company’’
The Commission proposed to define the term ‘‘target company’’ as an operating company, business, or assets.108
11. Comments: Definition of ‘‘Target
Company’’
One commenter asserted that ‘‘the concept of ‘assets’ being a ‘target company’ yields anomalous results under certain proposed rules (such as requiring assets to sign a registration statement) and the concept of a ‘business’ may be vague (as a business may be a product line, rather than an entity that could sign a registration statement).’’ 109 Another commenter suggested ‘‘deleting the term ‘assets’ from the definition or clarifying that a target company includes assets where the acquisition of such assets is intended to constitute the SPAC’s initial business combination.’’ 110
12. Final Definition: ‘‘Target Company’’
After considering the comments received, we are adopting the definition of target company as proposed.111 Under the final rules, the term target company means an operating company, business or assets. To address commenters’ concerns about the use of the terms ‘‘assets’’ and ‘‘business’’ in the definition of target company,112 we have revised certain registration statement form instructions, as discussed in more detail below.113 We believe these changes address the commenters’ concerns. Therefore, we do not believe it is necessary to make changes to the proposed definition of ‘‘target company.’’ In addition, although an asset purchase transaction may be a different form of transaction for the purposes of other legal requirements, including State law, we do not believe a SPAC combination with a target company taking the form of an asset purchase should be excluded from the definition of de-SPAC transaction merely for this reason. B. Sponsors

1. Proposed Rules
   The Commission proposed Item 1603(a) to require additional disclosure about the SPAC sponsor, its affiliates, and promoters 114 in registration statements and schedules filed in connection with SPAC registered offerings and de-SPAC transactions,115 including disclosure of the following:

• The experience, material roles, and
  responsibilities of these parties, as well as any agreement, arrangement, or understanding (1) between the SPAC sponsor and the SPAC, its executive officers, directors, or affiliates, with respect to determining whether to proceed with a de-SPAC transaction and (2) between the SPAC sponsor and unaffiliated security holders of the SPAC regarding the redemption of outstanding securities;
• The controlling persons of the
  SPAC sponsor and any persons who have direct and indirect material interests in the SPAC sponsor and the nature and amount of their interests, as well as an organizational chart that shows the relationship between the SPAC, the SPAC sponsor, and the SPAC sponsor’s affiliates;
• Tabular disclosure of the material
  terms of any lock-up agreements with the SPAC sponsor and its affiliates; and
• The nature and amounts of all
  compensation that has or will be awarded to, earned by, or paid to the SPAC sponsor, its affiliates, and any promoters for all services rendered in all capacities to the SPAC and its affiliates, as well as the nature and amounts of any reimbursements to be paid to the SPAC sponsor, its affiliates, and any promoters upon the completion of a de￾SPAC transaction.116

2. Comments
   Broadly categorized, commenters on proposed Item 1603(a) or generally on the types of SPAC sponsor issues covered by proposed Item 1603(a) focused on six areas: (1) general comments that expressed support for the proposals, (2) promoter requirements, (3) compensation, (4) transfers of SPAC ownership, (5) interests in the SPAC sponsor and the organizational chart requirement, and (6) agreements.
   i. General Comments
   A number of commenters generally supported the proposed enhanced disclosure requirements regarding SPAC sponsors.117 Commenters cited a number of benefits to investors as the reasons for their support, including the following five benefits: (a) placing investors in a better position to evaluate the merits of SPAC and de-SPAC transactions,118 (b) illuminating financial incentives of SPAC sponsors that may affect de-SPAC transaction outcomes,119 (c) providing compensation information that may promote more informed investment decisions,120 (d) providing SPAC

121Letter from ICGN.
122Letters from ICGN, NASAA.
123Letters from ABA, NASAA, Vinson & Elkins. 124Letters from Freshfields, Vinson & Elkins. 125Letter from Freshfields (stating that ‘‘the proposed rules also already require disclosure of all persons who have direct and indirect material interests in the SPAC sponsor and the amount and nature of their interests’’ and that ‘‘this should encompass the most relevant entities and persons’’). 126Letter from Vinson & Elkins. 127Letters from Better Markets, Charles Pieper, Committee on Capital Markets Regulation, CFA Institute, Consumer Federation, Senator Elizabeth Warren, ICGN, NASAA. 128Letters from Samir Kapadia, Director, and Bobby Cunningham, Director, SPAC Association (June 13, 2022) (‘‘SPAC Association’’); Vinson & Elkins (expressing the view that sponsor compensation and reimbursement is already disclosed under existing disclosure requirements and the material terms of lock-up agreements are already sufficiently disclosed as a matter of industry practice). 129Letter from SPAC Association. We understand that the term SPAC sponsor ‘‘promote’’ typically refers to the acquisition by the SPAC sponsor of a significant percentage of the shares of the SPAC, typically 20%. We observe the term used to connote a meaning of ‘‘special compensation,’’ but it does not involve a preferred return, such as in real estate private equity investment structures that also use this terminology. 130Letter from Vinson & Elkins. 131Letter from Vinson & Elkins. 132Letter from Loeb & Loeb LLP (June 13, 2022) (‘‘Loeb & Loeb’’). 133Letter from ABA. 134Proposing Release, supra note 7, at 29467 (request for comment number 9) (‘‘Should we require more or less information about the sponsor’s compensation and reimbursements?’’). 135Letter from Michael Klausner, Stanford Law School, and Michael Ohlrogge, NYU School of Law (June 13, 2022) (‘‘Michael Klausner and Michael Ohlrogge’’), included as an attachment to a letter from Michael Ohlrogge, NYU School of Law (June 13, 2022). 136 Id. 137Letter from Paul Swegle. 138Letter from NASAA. 139Letter from ABA. 140Letter from Vinson & Elkins. sponsor ownership interest information that may affect investor ability to vote on de-SPAC transactions,121 and (e) providing information about SPAC sponsor experience that may help investors assess the SPAC sponsor’s ability to find a target company.122 Also, several commenters suggested that proposed Item 1603(a) would codify, to an extent, existing disclosure practices.123
ii. Promoters
Some commenters said Item 1603 should not apply to ‘‘promoters.’’ 124 One commenter asserted that application to the SPAC sponsor and its affiliates would include all significant participants in the SPAC and thus the ‘‘promoter’’ provision would not significantly benefit investors.125 Another commenter said that ‘‘disclosure regarding a promoter of the SPAC’s initial public offering that will have no involvement with the de-SPAC transaction would be immaterial to investors.’’ 126
iii. Compensation
A number of commenters suggested that the proposed disclosure requirements regarding sponsor compensation would provide useful information to investors.127 A few commenters expressed the view that sponsor compensation is already sufficiently disclosed.128 One commenter said the SPAC sponsor ‘‘20 percent promote is fully and fairly disclosed and has been for decades.’’ 129 Another commenter said they ‘‘believe the sponsor’s compensation and reimbursement are already sufficiently disclosed in response to existing disclosure requirements and that incremental disclosure requirements are thus not merited.’’ 130 One commenter that did not support the additional proposed disclosure requirements stated that, if the Commission were nonetheless to impose new requirements, ‘‘the reference to ‘compensation’ should be revised to refer instead to all equity and rights to cash held by the SPAC directors and officers and their affiliates, as certain equity interests may be purchased for value (i.e., not be ‘compensation’) and reimbursement of advances or repayment of loans would not be compensation.’’ 131 Another commenter said ‘‘sponsor compensation comes almost entirely in the form of capital gains associated with securities issued in the ‘promote’ resulting from stock price increases after the de-SPAC transaction, and quantifying such compensation may involve speculation or be subject to criticism as incomplete.’’ 132 Another commenter said that, ‘‘in addressing non-equity compensation and reimbursements, proposed Item 1603(a)(6) should explain its requirement to identify other compensation and reimbursements that are material, individually or in the aggregate and that the required disclosure may be qualitative and not quantitative, except where amounts are above a specified de minimis threshold, similar to the approach taken in certain respects under the existing compensation disclosure framework in Item 402 of Regulation S–K [17 CFR 229.402].’’ 133
iv. Transfer of SPAC Ownership
Several commenters recommended we adopt requirements to disclose transfers of SPAC securities by the SPAC sponsor and others. One commenter recommended, in response to request for comment,134 adding a sentence at the end of Item 1603(a)(6) that states: ‘‘Disclose any arrangements under which the SPAC sponsor, its affiliates and any promoters have transferred ownership of any securities in the SPAC to other parties in exchange for compensation or other benefit to the sponsor, its affiliates, any promoters, or to the SPAC.’’ 135 The commenter said that ‘‘SPAC sponsors at times sell off a portion of their promote or other securities to a ‘risk-capital syndicate’ as a way of cashing out early on a portion of the compensation they receive for their work on the SPAC’’ and that ‘‘the amount of interest that a sponsor retains in securities of the SPAC is material for investors seeking to evaluate the incentive of the sponsor in pursuing a SPAC merger.’’ 136 Another commenter suggested expanding current Forms 3 and 4 director and officer reporting requirements to cover SPAC sponsors and their transactions in SPAC securities after the de-SPAC transaction.137 Similarly, another commenter recommended disclosure of post-de-SPAC transaction transfers, noting ‘‘this reporting could be time limited, for example to two years’’ following the de-SPAC transaction.138
v. Interest in SPAC Sponsor and
Organizational Chart
One commenter said that the proposed approach departs from the traditional approach to beneficial ownership reporting and recommended that this item should clarify that ‘‘an indirect economic interest in less than 10% of a SPAC’s founder shares or warrants through ownership of equity interests in a [SPAC] [s]ponsor should not, in and of itself and absent other factors, be considered a direct or indirect material interest in the [SPAC] [s]ponsor.’’ 139 Another commenter said the identity of natural persons controlling the sponsor is already disclosed in response to existing 17 CFR
229.403 (‘‘Item 403’’ of Regulation S–
K).140
vi. Agreements
One commenter recommended that the Commission should revise proposed Item 1603(a)(8) to ‘‘specify that if a SPAC, the SPAC sponsor, or any affiliated party enters into an agreement regarding the redemption of outstanding securities of the SPAC after the date of the merger registration statement or proxy, that the SPAC be required to issue a proxy amendment or similar

141Letter from Michael Klausner and Michael Ohlrogge. 142Letter from Vinson & Elkins. 143Letter from Freshfields (‘‘Exceptions to lockups that are customary and not significant or material [include]: transfers to affiliates, transfers to family members, gifts and other charitable donations, transfers by will or inheritance, transfers upon dissolution of a marriage, and in-kind distributions to an entity’s members and partners’’). 144Letter from Freshfields. 145 Item 1603(a) will operate in addition to existing disclosure requirements that may be applicable to a SPAC’s arrangements with SPAC sponsors such as 17 CFR 229.701 (‘‘Item 701’’ of Regulation S–K), which requires disclosure about, among other things, the terms of any private securities transactions between a SPAC and SPAC sponsors within the past three years, and 17 CFR
229.404 (‘‘Item 404’’ of Regulation S–K), which
requires disclosure about certain related party transactions. 146See, e.g., Chen Lin, Fangzhou Lu, Roni Michaely & Shihua Qin, SPAC IPOs and Sponsor Network Centrality (SSRN Working Paper, 2021); Andrea Pawliczek, A. Nicole Skinner, and Sarah L.C. Zechman, Signing Blank Checks: The Roles of Reputation and Disclosure in the Face of Limited Information (SSRN Working Paper, 2021). 147Letters from ABA, NASAA, Vinson & Elkins. 148The proposal’s disclosure requirements related to ‘‘promoters’’ included the following proposed items: (1) Item 1603(a)(3) (promoter’s experience), (2) Item 1603(a)(4) (promoter’s role), (3) 17 CFR 229.1602(b)(6) (‘‘Item 1602(b)(6)’’) and Items 1603(a)(6), and 1604(a)(3) (promoter’s compensation), and (4) Items 1602(a)(5), 1602(b)(7), 1603(b)(1), 1604(a)(4), and 1604(b)(3) (promoter conflicts of interest). 149Letters from Freshfields, Vinson & Elkins. See supra notes 124, 125, and 126 and accompanying text. 150Securities Act Rule 405 provides: The term promoter includes: (i) Any person who, acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of an issuer; or (ii) Any person who, in connection with the founding and organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services or property, or both services and property, 10 percent or more of any class of securities of the issuer or 10 percent or more of the proceeds from the sale of any class of such securities. However, a person who receives such securities or proceeds either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter within the meaning of this paragraph if such person does not otherwise take part in founding and organizing the enterprise. Exchange Act Rule 12b–2 contains similar provisions. 151 Item 1603 also applies to disclosure in de￾SPAC transactions. See, e.g., instructions to Form S–4 and F–4. 152See Items 1602(a)(3) (adding term ‘‘promoter’’ in cover page requirements to be consistent with Item 1602(b)(6) prospectus summary requirements) and (b)(6), 1603(a)(6), and 1604(a)(3), (b)(4) (adding the term ‘‘promoter’’ to summary prospectus requirements to be consistent with cover page requirements in Item 1604(a)(3)), and (c)(1) (adding the terms ‘‘its affiliates, and promoters’’ to prospectus body requirements to be consistent with cover page and summary requirements in Item 1604(a)(3) and (b)(4)). filing prior to the redemption deadline to inform SPAC shareholders of the new agreement.’’ 141 Another commenter said the material terms of lock-up agreements are already disclosed as a matter of industry practice and that requiring additional disclosure would ‘‘go beyond the disclosure requirements applicable to lock-up agreements that are entered into in connection with a traditional IPO.’’ 142 Regarding proposed requirements to disclose any exceptions to
relevant lock-up agreements, one commenter recommended excluding exceptions that are not material or are customary.143 This commenter noted that frequently these exceptions provide that the transferee agree to the lock-up agreement as a condition of the transfer.144
3. Final Rules
After considering the comments received, we are adopting Item 1603(a) as proposed with certain modifications we discuss below. Additionally, for clarity and consistency throughout Item 1603, we have replaced the term ‘‘executive officers’’ with the term ‘‘officers.’’
i. General Discussion
Item 1603(a)’s disclosure requirements will provide a SPAC’s prospective investors and existing shareholders with detailed information relating to the SPAC sponsor that could be important in understanding and analyzing a SPAC, including how the rights and interests of the SPAC sponsor, its affiliates, and any promoters may differ from, or may conflict with, those of public shareholders.145 Given that a SPAC does not conduct an operating business, information about the background and experience of the SPAC sponsor is important in assessing a SPAC’s prospects for success and may be a relevant factor in the market value of a SPAC’s securities.146 Corresponding disclosure with respect to SPAC sponsor affiliates and promoters will also provide investors with important information, because the SPAC sponsor’s affiliates and any promoters of the SPAC may also carry out activities similar to those of a SPAC sponsor. Furthermore, the enhanced disclosure regarding the SPAC sponsor’s compensation and the SPAC sponsor’s agreements, arrangements, or understandings may be helpful to a SPAC’s prospective investors and existing shareholders in considering whether to acquire or redeem the SPAC’s securities and in evaluating the potential risks and merits of a proposed de-SPAC transaction, because it could highlight additional motivations for completing a de-SPAC transaction. Several commenters suggested that proposed Item 1603(a) would codify, to an extent, existing disclosure practices.147 We agree that the requirements in Item 1603 to provide detailed disclosure about the SPAC sponsor, the SPAC sponsor’s experience, and its rights and interests will codify existing disclosure practices. This will help ensure that issuers provide consistent and comprehensive information across transactions, so that investors can make more informed investment and voting decisions.
i. Promoters
We are retaining the applicability of Item 1603 to promoters.148 We disagree with the commenters who asserted that Item 1603 should not apply to ‘‘promoters’’ and that the disclosure regarding a promoter would not significantly benefit investors or would be immaterial to investors.149 Certain persons are explicitly included as a ‘‘promoter’’ under Securities Act Rule 405 and Exchange Act Rule 12b–2.150 There may be facts and circumstances involving a SPAC where a person may be considered either a ‘‘promoter,’’ ‘‘SPAC sponsor,’’ ‘‘officer,’’ or ‘‘director’’ or may be more than one of these. As with a SPAC sponsor, the promoter’s background and experience, compensation, and conflicts of interest are material information for investors in the SPAC IPO (particularly given the absence of an operating business) and any de-SPAC transaction. Such information will enable investors to better understand promoter incentives and activities.151 A registrant is not required to repeat the same disclosure twice merely because a person fits in two categories (for example, both a ‘‘promoter’’ and a ‘‘SPAC sponsor’’). Additionally, in the final rules, we have made technical changes to ensure consistent reference to ‘‘SPAC sponsor, its affiliates, and promoters’’ among disclosure requirements relating to the cover page, summary, and body sections of the prospectus.152
ii. Compensation
We are adopting the SPAC sponsor compensation disclosure largely as proposed with certain modifications in response to comments. We disagree with the commenter who suggested that—because sponsor compensation and reimbursement are already disclosed under existing disclosure requirements and current market practice provides for similar disclosure as to the material terms of lock-up agreements—the proposed additional disclosure requirements should not be

153Letter from Vinson & Elkins. See also letter from SPAC Association (asserting that ‘‘the SPAC 20% promote is fully and fairly disclosed and has been for decades’’). See supra notes 128, 129, and 130 and accompanying text. 154Letters from Loeb & Loeb, Vinson & Elkins. See supra notes 131 and 132 and accompanying text. 155See Items 1602(a)(3) and (b)(6), 1603(a)(6), and 1604(a)(3), (b)(4), and (c)(1). For the avoidance of doubt, in Items 1602(a)(3) and (b)(6), 1603(a)(6), and 1604(a)(3), disclosure should be provided with respect to each person who is one of the types of named persons in those items; registrants may provide totals of those individual disclosures but the disclosure of a single lump sum covering all types of persons named in those items would be insufficient by itself. 156See, e.g., Clifford Chance, Guide to Special Purpose Acquisition Companies 5 (Sept. 2021), available at https://www.cliffordchance.com/ content/dam/cliffordchance/briefings/2021/09/ guide-to-special-purpose-acquisition-companies.pdf (‘‘However, if additional public shares or equity￾linked securities are issued in connection with the de-SPAC transaction, the exchange ratio for the founder shares will typically be adjusted to maintain the 20% promote for the sponsors.’’); Michael Klausner, Michael Ohlrogge & Harald Halbhuber, Net Cash Per Share: The Key to Disclosing SPAC Dilution, 40 Yale J. on Reg. 18, 28 (2022) (stating that ‘‘[s]ome SPACs also provide ‘anti-dilution’ protection to sponsors by giving them the right to an additional 20% of newly raised PIPE equity at the time of a merger’’ and stating that typically ‘‘sponsors waive their right to some or all these additional shares, though in some cases they do so in exchange for additional shares.’’). 157Letter from Loeb & Loeb. See supra note 132 and accompanying text. 158Letter from Vinson & Elkins. See supra note 131 and accompanying text. 159Letter from ABA. See supra note 133 and accompanying text. 160Letters from Michael Klausner and Michael Ohlrogge, NASAA, Paul Swegle. See supra notes 135, 136, 137, and 138 and accompanying text. 161Certain earn-out provisions entered into in connection with a de-SPAC transaction may involve cancellation of securities if certain targets are not met. 162 In addition, in final Item 1603(a)(6) we replaced ‘‘has or will be’’ with ‘‘has been or will be,’’ and replaced ‘‘rendered’’ with ‘‘rendered or to be rendered,’’ for clarity. 163See 17 CFR 240.16a–2 under the Exchange Act (Among others, any person who is the beneficial owner, directly or indirectly, of more than 10% of any class of equity securities registered pursuant to Exchange Act section 12 and any director or officer of the issuer of such securities shall be subject to the provisions of Exchange Act section 16); Exchange Act section 16(a). SPAC sponsors also may have beneficial ownership reporting obligations pursuant to sections 13(d) and 13(g) of the Exchange Act and rules thereunder. adopted.153 On the contrary,
we believe compliance with the final rules will be minimally burdensome where disclosure of this information is already market practice and will create a uniform and transparent regime across￾the-board, maintaining a minimum standard of disclosure across transactions, even if market practice were to change in the future. We agree with comments that returns based on the price appreciation from the ‘‘promote’’ stake owned by the SPAC sponsor may be a significant source of potential remuneration to the SPAC sponsor that investors would want to know about in making their investment and voting decisions.154 As a result, we have added terms explicitly requiring disclosure of the amount of securities issued or to be issued by the SPAC to the SPAC sponsor, its affiliates, and promoters and the price paid or to be paid for such securities.155 For example, where a SPAC sponsor purchased a 20 percent ownership interest in the SPAC, this interest and the purchase price would be required to be disclosed under the revised provision and would not be excluded on the basis of not being ‘‘compensation.’’ Pursuant to these changes, any mechanisms, such as an anti-dilution provision,156 to keep the SPAC sponsor ownership at a certain level (or similar mechanisms for affiliates or promoters) and any potential cancellation of shares issued or to be issued to the SPAC sponsor (or its affiliates or promoters) or increase in shares issued to the SPAC sponsor (or its affiliates or promoters) will be required to be disclosed since these features would affect shares issued or to be issued to those parties. The approach taken in the final rules will address the concerns over speculation related to quantifying compensation expressed by one commenter,157 because these contractual terms are known at the time of the IPO and therefore do not require any speculation about possible stock price changes after the de-SPAC transaction. Regarding the comments concerning reimbursement of advances and repayment of loans,158 we do not believe it is necessary to modify the proposed term ‘‘reimbursement.’’ The term is not limited to specific types of reimbursements. Any funds outlaid by the SPAC sponsor that are later returned to the SPAC sponsor would constitute a ‘‘reimbursement’’ under the rule, notwithstanding that the return of the funds to the SPAC sponsor may also include other amounts (such as accrued interest). We are not adopting another commenter’s recommendation that required disclosure be qualitative rather than quantitative unless the amounts are above a specified de minimis threshold.159 Because de minimis thresholds for several categories of compensation could be significant on an aggregate basis, if quantitative disclosure were only required above a certain de minimis threshold, investors may not receive the complete set of compensation information they need to evaluate the structure of the SPAC in which they may invest. We would not object, however, to the registrant
disclosing de minimis reimbursements (such as for perquisites that are de minimis) by providing an aggregate total of those de minimis reimbursements by category rather than on an item-by-item basis. We view such disclosure as consistent with the requirement in Item 1603(a)(6) to disclose the reimbursements’ ‘‘nature.’’
iii. Transfer of SPAC Ownership
In response to several commenters’ recommendation to disclose transfers of SPAC securities by the SPAC sponsor and others, we are modifying Item 1603(a)(6) to require such disclosure.160 We agree that disclosure of share transfers by a SPAC sponsor, its affiliates, and promoters would provide important information to investors seeking to evaluate the incentives of these parties. We believe it would also be important for investors to know if the SPAC ownership level of these parties has changed because of cancellation of the securities.161 Accordingly, in the final rule, we have revised proposed Item 1603(a)(6) to add the requirement:
‘‘Disclose any circumstances or arrangements under which the SPAC sponsor, its affiliates, and promoters, directly or indirectly, have transferred or could transfer ownership of securities of the SPAC, or that have resulted or could result in the surrender or cancellation of such securities.’’ With respect to indirect transfers, for example, if there was a transfer of ownership interests in the SPAC sponsor or ownership interests in a holding company that owns interests in the SPAC sponsor, then disclosure would be required under this item.162 At this time, we are not making any changes to add requirements to disclose transfers after the de-SPAC transaction occurs, because we believe, for most SPACs, SPAC sponsors will already have Form 3 and 4 reporting obligations.163
iv. Interest in SPAC Sponsor and
Organizational Chart
We are adopting Item 1603(a)(7) as proposed except that we are not adopting the proposal to provide an organizational chart. One commenter said that ‘‘proposed Item 1603(a)(7) should clarify that . . . an indirect economic interest in less than 10% of a SPAC’s founder shares or warrants through ownership of equity interests in a Sponsor should not, in and of itself and absent other factors, be considered a direct or indirect material

164Letter from ABA.
165See, e.g., definition of ‘‘control’’ in Rule 405 (The term control . . . means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.). 166Letter from Vinson & Elkins. 167Letter from Michael Klausner and Michael Ohlrogge. 168See 17 CFR 240.14a–9 (‘‘Rule 14a–9’’). See also 17 CFR 240.14a–6(h). 169Letter from Vinson & Elkins. See supra note 142 and accompanying text. 170See, e.g., Connie Loizos, The Year of the Disappearing Lock-up, TechCrunch (Jan. 4, 2022) (‘‘many related deals contain language that restricts sponsors from selling shares for a year from the day the deal is completed, but there are much faster ways out. According to one popular provision, if a SPAC’s shares trade slightly above their initial pricing for more than 20 days in a 30-day period, the lockup provision vanishes.’’), available at https://techcrunch.com/2022/01/04/the-year-of-the￾disappearing-lock-up/; Lock-Up Periods: Regular IPOS V/S SPACS IPOS, Legal Scale (Sept. 21, 2022), available at https://www.legalscale.com/lock-up￾periods-regular-ipos-v-s-spacs-ipos/; Ran Ben-Tzur, Itka Safir, Terms of IPO Lock-Up Agreements for Technology Companies Shift as Direct Listings and SPACs Gain Traction (2020), available at https:// www.fenwick.com/insights/publications/terms-of￾ipo-lock-up-agreements-for-technology-companies￾shift-as-direct-listings-and-spacs-gain-traction (out of 80 traditional IPO-companies surveyed, four (i.e., 5%) used Price-based lock-up releases). interest in the Sponsor.’’ 164 We do not believe that the disclosures of material interests in the SPAC sponsor should be based on a bright-line absolute percentage of ownership, whether based on percentage ownership of shares of the SPAC or based on percentage ownership of shares of the SPAC sponsor. As a general matter, we note that registrants regularly apply materiality standards that are not tied to absolute percentages in connection with their disclosure under the Federal securities laws. We believe a bright-line standard would not be appropriate here because the percentage of ownership of a SPAC sponsor that is material could differ from SPAC sponsor to SPAC sponsor. Also, we note that percentage ownership is not the only way in which a material interest in the SPAC sponsor may be present.165 For example, where a person has a voting interest but no economic interest in the SPAC sponsor, the required disclosure would need to be provided with respect to such voting interest. Related to our consideration of this comment, however, we have determined not to adopt the proposed organizational chart requirement in Item 1603(a)(7). The proposed organizational chart requirement would have required graphical display of levels of ownership that are above the level of direct ownership of the SPAC sponsor (i.e., tracing ‘‘upstream’’ through layers of interest-holders to the
ultimate interest￾holder). It also would have required graphical display of levels of ownership of companies other than the SPAC sponsor (but that would be under common control with the SPAC sponsor) that are below these interest￾holders (i.e., tracing ‘‘downstream’’ through layers of affiliated controlled persons). We believe, in this context at this time, particularly with respect to institutions with an interest in the SPAC sponsor that may have complex company organizational structures, the complexity of the upstream and downstream tiers of ownership discussed above may be difficult to prepare graphically. As a result, we are not adopting the organizational chart requirement. Another commenter said the identity of natural persons controlling the sponsor is already disclosed in response to existing Item 403 of Regulation S– K.166 Item 403 requires security ownership information concerning certain beneficial owners and management, but new Item 1603(a) will elicit additional information because of its requirements concerning background, experience, and roles, among other things. Also, while current Item 403(a) requires identifying any person who is known to be the beneficial owner of more than five percent of any class of the SPAC’s voting securities, new Item 1603(a)(7) adds a requirement to name controlling persons of the SPAC sponsor. Furthermore, to the extent portions of Item 1603(a) may overlap with Item 403 as they may pertain to specific registrant facts and circumstances, registrants are not required to provide duplicative disclosure. Therefore, we do not expect that any partial overlap—depending on specific registrant facts and circumstances—in disclosure that could be required under the final rule with disclosure required under Item 403 would impose significant additional burdens on registrants.
v. Agreements
We are adopting Item 1603(a)(8) and (9), concerning agreements, as proposed. Final Item 1603(a)(8) provides that the registrant must describe any agreement, arrangement, or understanding, including any payments, between the SPAC sponsor and unaffiliated security holders of the special purpose acquisition company regarding the redemption of outstanding securities of the special purpose acquisition company. One commenter recommended that the Commission should revise proposed Item 1603(a)(8) to ‘‘specify that if a SPAC, the SPAC sponsor, or any affiliated party enters into an agreement regarding the redemption of outstanding securities of the SPAC after the date of the merger registration statement or proxy, that the SPAC be required to issue a proxy amendment or similar filing prior to the redemption deadline to inform SPAC shareholders of the new agreement.’’ 167 We do not believe it is necessary to revise the item in the manner suggested to capture events that follow the filing of a proxy statement in connection with a de-SPAC transaction, as we believe registrant obligations to amend such filings under current law, including to ensure disclosure are not misleading, are sufficient.168 Final Item 1603(a)(9) provides that the registrant must disclose, in a tabular format to the extent practicable, the material terms of any agreement, arrangement, or understanding regarding restrictions on whether and when the SPAC sponsor and its affiliates may sell securities of the special purpose acquisition company, including: the date(s) on which the agreement, arrangement, or understanding may expire; the natural persons and entities subject to such an agreement, arrangement, or understanding; any exceptions under such an agreement, arrangement, or understanding; and any terms that would result in an earlier expiration of such an agreement, arrangement, or understanding. In response to the commenter who stated that the required additional disclosure would go beyond the disclosure requirements applicable to lock-up agreements entered into in connection with a traditional IPO,169 we believe that, based on Commission staff experience reviewing filings, registrants in IPOs currently provide information that is analogous to the Item 1603(a)(9) required information. To the extent Item 1603(a)(9) may incrementally require more disclosure compared to IPOs, we believe this is appropriate because investors in SPACs often focus heavily on the nature of the SPAC sponsor’s interest in the SPAC and because agreements, arrangements, or understandings regarding restrictions on whether and when the SPAC sponsor and its affiliates may sell securities of the SPAC often can be more complex than lock-up agreements in IPOs. For example, SPAC lock-up agreements often include provisions that depend on certain levels of stock price appreciation.170

171Letter from Freshfields. See supra notes 143 and 144 and accompanying text. 172See 17 CFR 229.601(a) and (b)(10)(ii)(A) (requiring the filing of any contract to which directors, officers, promoters, voting trustees, security holders named in the registration statement or report are parties, with certain exceptions). See also requirements for registrant to furnish exhibits required by Item 601 of Regulation S–K in: Form S–1, Item 16; Form F–1, Item 8; Form S–4, Item 21(a); Form F–4, Item 21. 173When we use the term ‘‘narrative’’ disclosure here, we do not mean that solely qualitative information should be provided. Depending on the facts and circumstances, quantitative information may be required in connection with these lock-up disclosures. Depending on the facts and circumstances, one example of such quantitative disclosure could be where the exception to the lock￾up depends on application of a formula involving a financial measure. 174See, e.g., Cooley LLP, Blog: 10 Key Considerations for Going Public with a SPAC (Aug. 3, 2020), available at https://www.jdsupra.com/ legalnews/blog-10-key-considerations-for-going￾80315/ (‘‘Most SPAC sponsors will be subject to a 1-year lock-up, which can create staggered releases of shares into the market after the combination and may at times try to push the target company holders to also have a 1-year lockup to align interests. Companies should be thoughtful, in discussions with their financial advisors, on how additional shares will come into the market and implications for the public company’s trading volatility.’’). 175With respect to lock-up agreements generally, see Alon Brav & Paul Gompers, The Role of Lockups in Initial Public Offerings, 16 The Rev. of Fin. Stud. 1 (2003), available at https://doi.org/10.1093/rfs/
16.1.0001 (finding lockup agreements serve as a
commitment device to address moral hazard concerns). 176Letter from Freshfields. See supra note 144 and accompanying text. 177See also proposed General Instruction VIII to Form S–1, proposed General Instruction VII to Form F–1. 178See also proposed General Instruction I.1 to Form S–4, proposed General Instruction I.1 to Form F–4, proposed Item 14(f)(1) of Schedule 14A, and proposed General Instruction K to Schedule TO. 179See (a) proposed General Instruction VIII to Form S–1, (b) proposed General Instruction I.1 to Form S–4, (c) proposed General Instruction VII to Form F–1, (d) proposed General Instruction I.1 to Form F–4. (e) proposed Item 14(f)(1) of Schedule 14A, and (f) proposed General Instruction K to
Schedule TO.
With respect to the suggestion to exclude from this disclosure customary exceptions to lock-up agreements,171 we are concerned that almost all, if not all, exceptions found in any lock-up agreement could be determined to be customary by a registrant, which would mean they would not be disclosed to investors under the suggested approach. Further, even where lock-up agreements are filed as an exhibit,172 exceptions to SPAC lock-up agreements considered ‘‘customary’’ by industry participants may be difficult for a reasonable investor to understand, and therefore narrative disclosure in the body of the filing may help investors understand these terms.173 In addition, we believe each such exception to a lock-up agreement is important to investors because exceptions to restrictions on transfer in lock-up agreements can result in the sale of a significant amount of shares that could affect the trading price of the SPAC or of the post-de-SPAC transaction combined company.174 In addition, in connection with disclosure in a SPAC IPO, to the extent that an investor may have invested in the SPAC based in part on the experience and expertise of the SPAC sponsor and its affiliates, we believe the disclosure about exceptions to lock-up agreements could be important to these investors in understanding the extent to which the interests of the SPAC sponsor and investor are aligned.175 Similarly, this information is important in connection with disclosure in a de-SPAC transaction. For example, this information remains important in connection with a de-SPAC transaction where the SPAC sponsor will have a continuing management role at the post￾de-SPAC transaction combined company. Also, for example, even where the SPAC sponsor may not have a continuing management role, this information is important where the SPAC sponsor may have the ability to express views that influence the current management of the post-de-SPAC transaction combined company— potentially due to the size of the SPAC sponsor’s ownership stake in the combined company or the value of the SPAC sponsor’s ongoing counsel based on the SPAC sponsor’s expertise. In each of these examples, we believe the disclosure about exceptions to lock-up agreements will be important because it will help the investor understand the extent to which the interests of the SPAC sponsor and investor are aligned. While one commenter suggested that current market practice is for transferees who receive shares pursuant to an exception from a lock-up to agree to the lock-up as a condition of the transfer,176 we do not believe this means information about exceptions to lock-up agreements will not be important to investors. If the SPAC sponsor or affiliates may divest their ownership of the SPAC, this may affect investor evaluation of the SPAC and the incentives of the SPAC sponsor, regardless of whether a transferee is also subject to transfer restrictions. Investors may consider the potential amounts of shares that could be
transferred to be an important factor that could affect the market valuation of the issuer. Moreover, based on the Commission staff’s experience, some registrants today already discuss each exception in detail, while others discuss the exceptions in general terms.
C. Conflicts of Interest

1. Proposed Rules
   SPAC sponsors and others may have material potential or actual conflicts with the interests of investors that could have adverse effects on those investors. The Commission proposed conflicts of interest disclosure requirements in certain items in proposed Item 1602, 1603, 1604, and 1605 in connection with SPAC registered offerings other than de-SPAC transactions, such as IPO transactions, and in connection with de￾SPAC transactions, described in more detail below. The Commission proposed Item 1602(a)(5) and (b)(7), which apply to registered offerings other than de-SPAC transactions, to require that some of these conflicts of interest disclosure requirements appear on the prospectus front cover page and in the prospectus summary, respectively.177 The Commission also proposed prospectus cover page and prospectus summary conflict of interest disclosure requirements in connection with de￾SPAC transactions in proposed Item 1604(a)(4) and (b)(3).178 The Commission proposed that Item 1603 (including 1603(b) regarding conflicts of interest) apply to de-SPAC transactions, as well as other registered offerings, including SPAC IPOs.179 Proposed Item 1603(b) would require disclosure of any actual or potential material conflict of interest between (1) the SPAC sponsor or its affiliates or the SPAC’s officers, directors, or promoters, and (2) unaffiliated security holders. This proposed item included any conflict of interest with respect to determining whether to proceed with a de-SPAC transaction and any conflict of interest arising from the manner in which a SPAC compensates the SPAC sponsor or the SPAC’s executive officers and directors or the manner in which the SPAC sponsor compensates its own executive officers and directors. In addition, the Commission proposed Item 1603(c) to require disclosure regarding the fiduciary duties each officer and director of a SPAC owes to other companies. Furthermore, in connection with de￾SPAC transactions, the Commission proposed Item 1605(d) to require disclosure of any material interests in the de-SPAC transaction or any related financing transaction held by the SPAC sponsor and the SPAC’s officers and directors, including fiduciary or contractual obligations to other entities

180See also proposed General Instruction I.1 to Form S–4, proposed General Instruction I.1 to Form F–4, proposed Item 14(f)(1) of Schedule 14A, and proposed General Instruction K to Schedule TO. 181Letters from ABA, Better Markets, Bullet Point Network, CFA Institute, CII, Committee on Capital Markets Regulation, Consumer Federation, ICGN, NASAA, Paul Swegle, Public Citizen (June 10,
2022) (‘‘Public Citizen’’).
182Letters from ABA, NASAA, Vinson & Elkins. 183Letters from Better Markets, CFA Institute, CII, Committee on Capital Markets Regulation, Consumer Federation, ICGN, NASAA. 184Letter from ABA. 185Letter from ICGN. 186Letters from ABA, CII. 187Letter from CII. 188Letter from ABA. 189Letters from ABA, Vinson & Elkins. 190Letter from ABA. 191Letter from ABA. 192Letter from Vinson & Elkins. 193Letter from NASAA. 194Letter from Jonathan Kornblatt, CMT, Fintech Institutional Advisory (June 12, 2022) (‘‘Jonathan Kornblatt’’). 195Letter from Jonathan Kornblatt. 196Letter from Michael Klausner and Michael Ohlrogge. 197Proposing Release, supra note 7, at 29468 (request for comment number 17). 198Letter from Vinson & Elkins. 199Letter from ABA. 200Proposing Release, supra note 7, at 29468 (request for comment number 18). 201Letter from Vinson & Elkins. as well as any interest in, or affiliation with, the target company.180
2. Comments
Broadly categorized, commenters on the conflicts of interest proposals focused on five areas: (1) general comments, including those with general expressions of support for or opposition to the proposals, (2) SPAC and target company officer and director conflicts of interest, (3) de-SPAC conflicts of interest, (4) addition of disclosure of ‘‘break-even’’ thresholds, and (5) additional responses to Commission requests for comment. A number of commenters generally supported the proposed enhanced disclosure requirements in regard to conflicts of interest and fiduciary duties.181 Several commenters suggested that the proposed disclosure requirements would codify, to an extent, existing disclosure practices.182 Some commenters suggested that proposed disclosure requirements about conflicts of interest and fiduciary duties would provide useful information to investors.183 One commenter said that ‘‘in requiring disclosure of known actual or potential material conflicts of interest, proposed Item 1603(b) should clarify that a knowledge-based standard is the appropriate standard in determining whether disclosure is required under this item.’’ 184 Another commenter recommended ‘‘that disclosures should include the names of all sponsors and their financial arrangements with SPACs’’ and ‘‘information on the nature of the claims the investors have on the SPAC if no de￾SPAC transaction takes place’’ during the applicable period or they choose to exit before the de-SPAC is completed.185 A few commenters discussed issues related to potential SPAC and target company officer and director conflicts of interest.186 One of these commenters recommended that ‘‘there should be mandatory disclosures of conflicts of interest among SPAC directors, SPAC officers, target company directors and target company officers.’’ 187 Another of these commenters recommended that ‘‘proposed Item 1603(c) should be limited to those situations where the fiduciary duties of an officer or director owed to other companies might reasonably be expected to present a potential conflict with respect to a potential de-SPAC transaction or the SPAC’s ability to pursue de-SPAC transaction opportunities.’’ 188 Some commenters viewed proposed Item 1605, including proposed Item 1605(d) concerning conflicts of interest in connection with de-SPAC transactions, as redundant with current rules.189 One of these commenters said these disclosures are ‘‘duplicative of those already prescribed in the existing regulatory schemes for proxy materials and registration statements filed in connection with de-SPAC transactions.’’ 190 In lieu of adopting proposed Item 1605, the commenter recommended a ‘‘uniform methodology to address conflicts of interest arising from business combinations in general by revising Items 1004(a)(2) and 1013(b) of Regulation M–A [17 CFR 229.1004(a)(2) and 229.1013(b)] and Item 403 of Regulation S–K to incorporate the provisions of proposed Item 1605.’’ 191 The other commenter opposed the
adoption of new disclosure requirements with ‘‘respect to material interests in a prospective de-SPAC transaction or any related financing transaction held by the sponsor and the SPAC’s officers and directors,’’ because this ‘‘would be redundant with the existing requirements of Schedule 14A Item 5.’’ 192 Some commenters recommended that certain additional disclosures should be required. One commenter on the proposal said that registrants ‘‘should also provide, in an easily understandable, tabular format. . .the break-even points for non-redeeming investors under different scenarios, the break-even point for the sponsor, the ownership distribution for non￾redeeming investors, the effects of outstanding warrants and sponsor shares, and the resulting ownership of the target company for non-redeeming shareholders and alternative investors.’’ 193 Another commenter said that registrants should provide a break￾even average share price for the sponsor, which would inform investors and, in the commenter’s opinion, the target company.194 The commenter said ‘‘this will be a simple numerical representation of the effective cost basis of the sponsor and can be used to ascertain the extent to which a sponsor’s position differs from that of other investors.’’ 195 One commenter stated that ‘‘SPACs should disclose the minimum post-merger share value at which proceeding with the SPAC merger will yield a higher return to the SPAC sponsor than liquidating the SPAC.’’ 196 A few commenters responded to requests for comment in the proposal related to whether we should also require a description of any policies and procedures used to minimize potential or actual conflicts of interest.197 One commenter said that ‘‘a requirement for disclosure of policies and procedures or assessment and management of conflicts of interest would result in incremental boilerplate disclosures.’’ 198 Another commenter said it would be ‘‘superfluous to require a description of any policies and procedures used or to be used to minimize potential or actual conflicts of interest in addition to what proposed Item 1603 has already prescribed.’’ 199 One commenter responded to requests for comment related to whether SPACs should be required to provide additional disclosure regarding material conflicts of interest in Exchange Act reports following their IPOs.200 The commenter said that, ‘‘regarding disclosure in Exchange Act reports following the SPAC IPO and the Form 8–K announcing the signing of the de-SPAC transaction, additional disclosure should be required only where the conflict of interest is material and has not been previously disclosed.’’ 201
3. Final Rules
We are adopting Items 1602(a)(5) and (b)(7), 1603(b), 1604(a)(4) and (b)(3), and 1605(d) substantially as proposed, except for the changes discussed below. Having considered comments received, we are adopting the final rules to provide information to investors about the material potential or actual conflicts

202See, e.g., Usha Rodrigues & Mike Stegemoller, Exit, Voice, and Reputation: The Evolution of SPACs, 37 Del. J. Corp. L. 849, 896 (2013) (stating that ‘‘sponsors were expected to put more and more of their own money at risk (in the form of private placements), setting themselves up for substantial losses if no acquisition occurred’’ as the SPAC form evolved). 203Letter from ABA. See supra note 184 and accompanying text. 204Similarly, current Item 404 regarding conflicts of interest does not contain such knowledge qualifier. 205Letter from ICGN. See supra note 185 and accompanying text. 206See, e.g., proposed Items: 1603(a)(1) (names of sponsors) and (a)(5) through (6) (agreements and compensation) and 1602(b)(3) and (4) (redemption rights and plans in the event no de-SPAC transaction is consummated). 207Letters from ABA, CII. 208Letter from CII. See supra note 187 and accompanying text. 209We are also making related minor changes for clarity in Item 1604(a)(4) and (b) to change the term ‘‘or its affiliates’’ to ‘‘, SPAC affiliates.’’ In Item 1604(b) and in a number of other places in the final rules, we also eliminated the term ‘‘shall’’ (e.g., by replacing it with the word ‘‘must’’) consistent with relevant plain English guidance. 210See infra sections III.C and IV.A. 211 In addition, in final Item 1603(b) we replaced ‘‘with respect to’’ with ‘‘that may arise’’ (in the phrase ‘‘any material conflict of interest that may arise in determining whether to proceed with a de￾SPAC transaction’’) for clarity and consistency with Item 1602(b)(7). In final Item 1603(b) we also revised the phrase ‘‘the manner in which the special purpose acquisition company compensates a SPAC sponsor, officers, or directors’’ by replacing the term ‘‘and’’ with ‘‘or,’’ because the requirements of Item 1603(b) should apply disjunctively where any of the named persons has a relevant material conflict of interest. 212For example, if the SPAC hypothetically happened to share officers or directors with the target company, the same disclosure (that was relevant for both the SPAC and target company) for the same individual person would not need to be provided once for the person as a SPAC official and a second time for the person as a target company official. The SPAC and target should be mindful, though, that different disclosures about conflicts arising under each role may be required. that SPAC sponsors and others covered by the final rules may have with the interests of investors. These conflicts could influence the actions of the SPAC to the detriment of its unaffiliated security holders. The potential conflicts of interest of SPAC sponsors and others may be particularly relevant for investors to the extent that they arise when a SPAC and its management are deciding whether to engage in a de￾SPAC transaction. The SPAC sponsor’s compensation structure creates incentives to complete a de-SPAC transaction. These incentives may induce a SPAC sponsor and others to compel the SPAC
to complete the de￾SPAC transaction on unfavorable terms to avoid liquidation of the SPAC at the expiry of this period. There are numerous situations that could give rise to these potential conflicts. For example, SPAC sponsors or their affiliates may have a potential conflict of interest stemming from the nature of the SPAC sponsor’s compensation or security ownership (particularly where the security owned is purchased at disparate prices, often substantially lower than the price paid by public security holders). This type of potential conflict of interest may present significant financial incentives to pursue a de-SPAC transaction even in the absence of attractive target company transaction opportunities.202 SPAC sponsors and their affiliates may also sponsor multiple SPACs, which may result in decisions regarding the allocation of these persons’ time and target company acquisition opportunities that may adversely affect SPAC security holders. Alternatively (or in addition), SPAC sponsors and their affiliates may owe employment, contractual, or fiduciary duties to other companies than the SPAC, which, among other things, may affect the ability of the SPAC to execute a de￾SPAC transaction or may affect the terms to which a SPAC agrees in any ultimate de-SPAC transaction. In these situations, the SPAC sponsor and others covered by the final rules may not only be incentivized to take actions that benefit other entities, but they may be compelled by these other duties to do so, potentially at the expense of the SPAC and its security holders. In addition, SPAC sponsors and their affiliates may seek to enter a de-SPAC transaction with a target company they are affiliated with when superior target company transaction opportunities may be available. The final rules will provide investors with a more complete understanding of the conflicts of interest related to an investment in a SPAC, including in situations like the examples above. Investors will have improved information concerning interests of the SPAC sponsor and others covered by the final rule that could reduce the value of their investment or that could result in opportunities potentially available to the SPAC not being realized. In this way, the final rules will allow investors to analyze risks associated with potential conflicts of interest regarding a SPAC more accurately. We are not including a knowledge qualifier in conflicts of interest disclosure, as suggested by one commenter,203 because we expect the SPAC and its officers and directors will be in a position to know their own conflicts and that the SPAC may obtain similar information from the SPAC sponsor, its affiliates, and promoters (who will be in a position to know their own conflicts) by virtue of the relationship between the SPAC and the SPAC sponsor and between the SPAC and any promoters.204 In addition, we note that registrants can rely on 17 CFR
230.409 and 240.12b–21 with respect to
information unknown or not reasonably available. Another commenter recommended the conflicts of interest disclosures should include: names of all sponsors and their financial arrangements with SPACs; claims investors have on the SPAC if no de-SPAC transaction takes place; and claims investors have on the SPAC if investors exit before the de￾SPAC transaction.205 We note that all of those items were included in the proposal, and we are adopting them as proposed.206 A few commenters discussed issues related to potential SPAC and target company officer and director conflicts of interest.207 One of these commenters recommended the conflicts of interest disclosures cover SPAC officers, SPAC directors, target company officers, and target company directors.208 In considering the comment, we observed that proposed Item 1604 was inconsistent with proposed Items 1603(b) and 1605(d) by not covering SPAC officers and directors. We do not believe there are any special factors warranting such a difference. As a result, we have modified the language in Item 1604 to require disclosure regarding SPAC officers and directors as in the other adopted items. This change to Item 1604(a)(4) (cover page) and (b)(3) (prospectus summary) will ensure the benefits of the rule that we discuss generally above will apply to these rules as well.209 With respect to target company officers and directors, we believe that disclosure of their conflicts of interest is consistent with co￾registration requirements in connection with the final amendments to registration forms and with final Rule 145a.210 As discussed in connection with those requirements, since the de￾SPAC transaction is in substance an offering by the target company, the conflicts of interest of target company officers and directors may be important to investor investment, redemption, and voting decisions. Thus, we have amended Items 1603(b), 1604(a)(4) (prospectus cover page) and (b)(3) (prospectus summary), and 1605(d) to require this disclosure.211 We would not expect registrants to provide duplicative disclosure merely because a person falls into more than one of the categories of persons covered by the final rules.212 One commenter recommended that we limit Item 1603(c) disclosure to

213Letter from ABA. See supra note 188 and accompanying text. 214Letters from ABA, Vinson & Elkins. See supra notes 189, 190, 191, and 192 and accompanying text. 215The Commission adopted a similar approach in rules regarding limited partnership roll-up transactions. See 17 CFR 229.900 through 229.915. 216Letters from Jonathan Kornblatt, Michael Klausner and Michael Ohlrogge, NASAA. See supra notes 193, 194, 195, and 196 and accompanying text. 217Letter from Jonathan Kornblatt. 218See letter from Michael Klausner and Michael Ohlrogge (‘‘If a sponsor has committed to make no new investments in the SPAC at the time of its merger, then any post-merger share value greater than $0 will be preferable to the sponsor than receiving nothing in a liquidation. If, however, the sponsor commits to purchase new securities in the SPAC at the time of the SPAC merger, then the share value at which a merger will be a better deal for a sponsor than a liquidation will be above $0.’’). 219See letter from Vinson & Elkins, supra note 201 and accompanying text, and Proposing Release, supra note 7, at 29468 (request for comment number 18). 220 In final Item 1602(a)(5) and (b)(7), we have revised the punctuation and conjunctions compared to the proposal to clarify the two sets of persons that are to be compared in connection with the required potential or actual conflict of interest disclosure by changing the proposed phrase ‘‘between the SPAC sponsor or its affiliates or promoters and purchasers in the offering’’ to ‘‘between the SPAC sponsor, its affiliates, or promoters; and purchasers in the offering.’’ To clarify the two sets of persons to be compared in Item 1604(a)(4), we have added the words ‘‘, on one Continued those situations where officer or director fiduciary duties owed to other companies might reasonably be expected to present a potential conflict with a SPAC’s de-SPAC transaction opportunities.213 We do not agree with this recommendation, because we do not believe conflicts will only arise in situations where there are fiduciary duties owed to other companies that are expected to present a potential conflict with a SPAC’s de-SPAC transaction opportunities. For example, a director’s obligations to other companies may compete with his or her attention to the SPAC. Because we believe this information is material to investors, we are not making any changes to the proposal in this respect in the final rules we are adopting. Some commenters expressed the view that proposed Item 1605, including proposed Item 1605(d) concerning conflicts of interest in connection with de-SPAC transactions, would be redundant with current rules.214 The Commission is not making changes in the final rules we are adopting in response to these comments. Given the unique qualities of de-SPAC transactions, we believe registrants will benefit from the centralization of the SPAC-related requirements in the Item 1600 series of Regulation S–K rather than in a different location as
suggested.215 Regarding any potential for redundancy with other Commission rules, if there are facts and circumstances that may result in required disclosure under a current rule being the same as under any of the rules we are adopting, registrants will not be required to repeat disclosures (except where the applicable rule may require, such as by calling for the disclosure in a specific location such as the prospectus cover page or prospectus summary). Some commenters recommended we adopt certain requirements (in addition to those proposed) involving ‘‘break￾even’’ disclosure.216 With respect to disclosure of a SPAC sponsor’s ‘‘break￾even’’ price per share, one commenter said this would help investors ‘‘ascertain the extent to which a sponsor’s position differs from that of other investors.’’ 217 We believe that the other conflicts of interest disclosures required by the final rules will provide sufficient information to allow investors to understand the potential differences in incentives between them and a SPAC sponsor, and as a result we are not adopting the suggested ‘‘break-even’’ disclosure. We are not requiring registrants to provide ‘‘break-even’’ price per share disclosure regarding non-redeeming investors as suggested by commenters because each investor would already know the basis at which they acquired the shares of the SPAC and the SPAC may not know this information for many of its investors, who could have acquired the shares at a variety of prices through the public market. We are likewise not requiring disclosure suggested by commenters that would provide a price at which the SPAC sponsor would recoup their investments in the SPAC. We believe such disclosure could be confusing for investors, as many SPAC sponsors may consider such amounts as sunk costs, which they do not consider when deciding whether to proceed with a de-SPAC transaction. As a commenter notes,218 SPAC sponsors may be incentivized to proceed with de-SPAC transactions below the initial SPAC share price; however, that is largely because SPAC sponsors lack redemption rights. Generally, SPAC shareholders would seek de-SPAC transactions that result in share prices that exceed their redemption value. SPAC sponsor decisions to proceed with a transaction may be driven by the SPAC sponsor’s expectation of their future deal flow and potential legal or reputational concerns among other factors. The ‘‘break-even’’ disclosure suggested by commenters would not take into account these factors. Moreover, none of these factors can be easily quantified, and the ones that can be quantified would be burdensome to produce and potentially difficult for investors to analyze and assess (given the difficulty in reliably quantifying those factors) and also would not be easily comparable across different SPACs (given the SPAC￾specific and SPAC sponsor-specific nature of those factors). The rules as adopted will improve investors’ ability to understand the SPAC sponsor’s conflicts of
interest, and we are concerned that adding a disclosure that takes into account difficult-to-quantify factors like the ones discussed above would detract from the disclosures that we are adopting. In the final rules, we are not requiring a description of policies and procedures used to minimize potential or actual conflicts of interest. We believe the other disclosures we are adopting regarding conflicts of interest, including new Item 1603, will appropriately address investor protection concerns in this regard. We are also not making any changes that would expand the Series 1600 of Regulation S–K disclosures regarding conflicts of interest beyond registration statements, proxy statements, information statements, and tender offer statements as proposed to other Exchange Act reports (such as to Form 10–Q, 10–K, or 8–K).219 Finally, we are making additional minor or technical changes in the final rules. First, we are making a change to the description of persons against whose interests the conflicts must be compared against from ‘‘unaffiliated security holders’’ to ‘‘unaffiliated security holders of the SPAC’’ in Items 1603(b) and 1604(a)(4) (prospectus cover page) and (b)(3) (prospectus summary). This change will avoid any potential ambiguity or confusion regarding whether target company officers and directors must compare their interests to security holders of the target company or security holders of the SPAC. Second, we are making a technical change in final Item 1605(d) to use ‘‘or’’ instead of ‘‘and’’ each time in the phrase ‘‘held by the SPAC sponsor and the special purpose acquisition company’s officers . . . and directors.’’ This change makes clear the disclosure should apply with respect to each named person and not only where all such persons share the same interest. Third, we have made certain technical changes in some of the final rules regarding conflicts of interest to clarify the sets of persons being compared.220

hand,’’ before the first set of persons and the words ‘‘, on the other hand,’’ before the second set of persons. For clarity and consistency throughout Item 1603, we have also revised the term ‘‘executive officer(s)’’ in each place where it is used in Item 1603(b) and (c) to refer to ‘‘officer(s).’’ 221See 17 CFR 229.506 (‘‘Item 506’’ of Regulation S–K). Under Item 506, a company is required to provide disclosure regarding dilution when (1) the company is not subject to the reporting requirements of the Exchange Act and is registering an offering of common equity securities where there is substantial disparity between the public offering price and the effective cash cost to officers, directors, promoters, and affiliated persons of common equity acquired by them in transactions during the past five years, or which they have the right to acquire; or (2) the company is registering an offering of common equity securities and the company has had losses in each of its last three fiscal years and there is a material dilution of the purchasers’ equity interest. In the first instance, a company must provide a comparison of the public contribution under the proposed public offering and the effective cash contribution of such persons. In both instances, Item 506 requires disclosure of the net tangible book value per share before and after the distribution; the amount of the increase in such net tangible book value per share attributable to the cash payments made by purchasers of the shares being offered; and the amount of the immediate dilution from the public offering price which will be absorbed by such purchasers. 222See proposed Items 1602(a)(3) and (4), (b)(6), and (c) and 1604(a)(3), (b)(4), (5), and (6), and (c) of Regulation S–K. 223See proposed General Instruction VIII to Form S–1 and proposed General Instruction VII to Form F–1. 224See (a) proposed General Instruction VIII to Form S–1, (b) proposed General Instruction I.1 to Form S–4, (c) proposed General Instruction VII to Form F–1, (d) proposed General Instruction I.1 to Form F–4, (e) proposed Item 14(f)(1) of Schedule 14A, and (f) proposed General Instruction K to
Schedule TO.
225 In this context, the Commission considers the term over-allotment option to be interchangeable with the term ‘‘greenshoe option.’’ For a general description of the nature of a ‘‘greenshoe’’ or ‘‘over￾allotment option,’’ see, e.g., Patrick M. Corrigan, Footloose with Green Shoes: Can Underwriters Profit from IPO Underpricing?, 38 Yale J. on Reg. 908, 917–918 (2021) (‘‘Underwriting agreements in firm commitment offerings also give underwriters the right, but not the obligation, to purchase an additional amount of shares [(‘Option Shares’)] at the same price as the underwriter is obligated to purchase the [specified number of shares set out in the underwriting agreement (‘Firm Shares’)]. . . . Underwriters typically have 30 days following the execution of the underwriting agreement to exercise their option. The closing for the Option Shares may occur on the same closing date as for the Firm Shares, or on a later date. In modern IPOs, the size of the green shoe option is virtually always 15% of the Firm Shares, an amount that constitutes the maximum permissible under FINRA rules.’’) (Footnotes omitted). Fourth, in final Item 1603(b), we are changing each reference to ‘‘the SPAC sponsor’’ to ‘‘any SPAC sponsor’’ because there can be more than one such sponsor. Fifth, we have revised the phrase ‘‘State whether there may be actual or potential conflicts of interest . . .’’ in proposed Item 1602(a)(5) to add a materiality qualifier such that the phrase in final Item 1602(a)(5) provides ‘‘State whether there may be actual or potential material conflicts of interest. . . .’’ This change makes prospectus cover page disclosure requirements under Item 1602(a)(5) consistent with the similar provisions of Item 1603(b), which require disclosure in the body of the disclosure document. We believe both provisions should contain the same materiality qualifier, because the provisions are related since Item 1602(a)(5) requires the registrant to provide a cross-reference to related disclosures in the prospectus, which includes disclosures made under Item 1603(b). D. Dilution

1. Proposed Rules
   Information about dilution conveys important information to investors about factors that may affect the value of a security holder’s interest in a SPAC. Dilution in current Commission filings is typically measured by calculating changes in net tangible book value per share.221 There are a number of potential sources of dilution in common SPAC structures, including: (a) shareholder redemptions, (b) SPAC sponsor compensation, (c) underwriting fees, (d) warrants, (e) convertible securities, and (f) PIPE financings. The Commission proposed several new rules that would require additional information about SPAC dilution in connection with registered offerings by SPACs, including IPOs, and in connection with de-SPAC transactions.222 With respect to registered offerings by SPACs (including IPOs) other than de-SPAC transactions, the Commission proposed Item 1602(a)(3) and (4), (b)(6), and (c).223 With respect to de-SPAC transactions, the Commission proposed Item 1604(a)(3), (b)(4), (5), and (6), and (c).224 Each of these proposed disclosure requirements is addressed in more detail below. First, with respect to SPAC IPOs, in Item 1602(a)(3), the Commission proposed that the prospectus outside front cover page include, among other things, disclosure of whether compensation of the SPAC sponsor and its affiliates may result in a material dilution of the purchasers’ equity interests. Also, the Commission proposed Item 1602(a)(4) to require on the outside front cover page of the prospectus, disclosure in the tabular format specified below the ‘‘estimated remaining pro forma net tangible book value per share at quartile intervals up to the maximum redemption threshold,’’ consistent with the methodologies and assumptions used in the disclosure provided pursuant to Item 506 of Regulation S–K:
   REMAINING PRO FORMA NET TANGIBLE BOOK VALUE PER SHARE Offering Price of __ 25% of maximum redemption 50% of maximum redemption 75% of maximum redemption Maximum redemption Instruction 1 to Item 1602(a)(4) provided that, if the offering includes an over-allotment option, separate rows must be included in the tabular disclosure showing remaining pro forma net tangible book value per share with and without the exercise of the over￾allotment option.225 In addition, in Item 1602(b)(6) the Commission proposed that for SPAC IPOs, the summary prospectus include, among other things, disclosure of the extent to which compensation of the SPAC sponsor, its affiliates, and promoters may result in a material dilution of the purchasers’ equity interests. In addition to the prospectus cover page and prospectus summary requirements for SPAC IPOs, the Commission also proposed Item 1602(c) regarding dilution. This proposed item would require, in addition to the disclosure required by § 229.506 (Item 506 of Regulation S–K), a description of material potential sources of future dilution following the registered offering by the special purpose acquisition company. This proposed item also would require disclosure in tabular format of the amount of future dilution from the public offering price that will be absorbed by purchasers of the securities being offered, to the extent known and quantifiable. The other dilution provisions proposed by the Commission related to de-SPAC transactions. The Commission proposed Item 1604(a)(3) to require on

226Letters from Better Markets (‘‘The disclosures should assist shareholders in understanding . . . potential sources of dilution of their shares. . . .’’), Bullet Point Network (‘‘We also agree with the SEC’s proposal to add sensitivity tables to show the dilution across a range of redemption scenarios. . . .’’), CFA Institute (‘‘we encourage a rapid implementation of the Proposed Rules on improving disclosures, transparency of dilution. . . .’’), CII (‘‘We generally agree . . . on the need to . . . bring greater clarity to dilution under various SPAC share redemption scenarios. . . .’’), Committee on Capital Markets Regulation (‘‘In particular, the Committee supports the proposed enhanced disclosures regarding . . . dilution. . . .’’), Consumer Federation, ICGN (‘‘Finally, the disclosure around dilution concerns . . . are also critical components for investor decision-making.’’), PricewaterhouseCoopers LLP (June 10, 2022) (‘‘PwC’’) (‘‘We believe the proposed disclosure changes will lead to greater transparency and clarity in important areas (e.g., actual or potential conflicts/misalignments of interests or actual or potential sources of dilution).’’). 227See, e.g., Consumer Federation (‘‘more detailed information on the potential impact of dilution on the value of SPAC shares could help investors better understand the various sources of dilution and the extent to which their investments might drop in value, which they could then factor into their decision making.’’), NASAA (‘‘NASAA believes that some of the most important de-SPAC disclosures proposed are those concerning the potential for dilution and the potential impacts to returns from sponsor compensation, ‘promote’ shares, underwriting fees and warrants.’’). 228Letters from ABA; Freshfields; Loeb & Loeb; Michael Klausner, Stanford Law School, Michael Ohlrogge, NYU School of Law, and Harald Halbhuber, NYU School of Law (June 13, 2022) (‘‘Michael Klausner, Michael Ohlrogge, and Harald Halbhuber’’); Letter from Christopher J. Capuzzi, Daniel L. Forman, Adam M. Harris, David B. Hennes, Carl P. Marcellino, and Paul D. Tropp, Ropes & Gray LLP (June 13, 2022) (‘‘Ropes & Gray’’); White & Case. 229See, e.g., Letters from ABA (‘‘Generally, proposed Items 1602(a)(4), 1602(c) and 1604(c) require disclosures and the application of financial analysis tools that we do not believe are grounded in methodologies used by investors or financial experts in valuing a common share. . . .’’), Ropes & Gray (‘‘We respectfully submit that the information called for by these proposed rules would not provide investors or analysts with meaningful information in valuing SPAC shares at the time of a SPAC IPO.’’), White & Case (‘‘We submit that proposed Items 1602(a)(4) and 1602(c) of Regulation S–K should not be adopted . . . such proposed disclosure would not provide any useful information to investors and would produce inherently misleading disclosure.’’). 230Letter from Vinson & Elkins. 231Letter from White & Case.
232 Id. 233 Id. the outside front cover page of the prospectus, among other things, disclosure of whether compensation of the SPAC sponsor, its affiliates, and promoters may result in a material dilution of the equity interests of non￾redeeming shareholders who hold the securities until the consummation of the de-SPAC transaction. Proposed Item 1604(a)(3) also required the provision of a cross-reference, highlighted by prominent type or in another manner, to the locations of related disclosures in the prospectus. Three additional proposed rules with respect to de-SPAC transactions, Item 1604(b)(4) through (6), each required prospectus summary disclosure. First, proposed Item 1604(b)(4) required, among other things, tabular disclosure of whether compensation of the SPAC sponsor and its affiliates has resulted or may result in a material dilution of the equity interests of unaffiliated security holders of the special purpose acquisition company. Second, proposed Item 1605(b)(5) required, among other things, disclosure of the dilutive impact, if any, of any financing transactions that have occurred or will occur in connection with the consummation of the de-SPAC transaction on unaffiliated security holders. Third, proposed Item 1604(b)(6) required disclosure of the rights of security holders to redeem the outstanding securities of the special purpose acquisition company and the potential impact of redemptions on the value of the securities owned by non￾redeeming shareholders. For de-SPAC transactions, the Commission also proposed Item 1604(c) to require a description of each material potential source of future dilution that non-redeeming shareholders may experience by electing not to tender their shares in connection with the de￾SPAC transaction. Under Item 1604(c), proposed Item 1604(c)(1) required the provision of a sensitivity analysis disclosure in tabular format that expresses the amount of potential dilution under a range of reasonably likely redemption levels. Proposed Item 1604(c)(1) also required, at each redemption level in the sensitivity analysis, quantification of the dilutive impact on non-redeeming shareholders of each source of dilution, such as the amount of compensation paid or to be paid to the SPAC sponsor, the terms of outstanding warrants and convertible securities, and underwriting and other fees. Additionally, proposed Item 1602(c)(2) required a description of the model, methods, assumptions, estimates, and parameters necessary to understand the sensitivity analysis disclosure.
2. Comments
A number of commenters generally supported some or all of the proposed enhanced dilution disclosure requirements.226 Several of these commenters suggested that proposed dilution disclosure requirements would provide useful information to investors.227 Other commenters, however, generally opposed or raised concerns regarding some or all of the proposed enhanced dilution disclosure requirements.228 Several of these commenters expressed views that the proposed disclosure requirements regarding dilution would not be helpful to investors.229 Specific comments on various aspects of the proposal are described below. Several commenters addressed issues related to levels of redemption in connection with proposed SPAC dilution disclosure. One commenter said that the ‘‘quantitative disclosure currently required under S–K Item 506 at IPO is not helpful for investors, as the output is largely driven by the maximum redemption scenario which can differ based on (i) different provisions of the SPAC’s constituent documents. . .and (ii) the interpretation of those constituent documents.’’ 230 In lieu of disclosure using the methodology in existing Item 506 as was proposed, this commenter said that ‘‘SPACs should present the per share amount of cash (or securities) in trust, under a range of hypothetical redemption scenarios and after giving effect to sponsor equity, underwriter compensation and IPO expenses.’’ To promote comparability, this commenter also suggested that ‘‘the hypothetical redemption scenarios include a maximum of 100% of the public shares (regardless of any provisions of the SPAC’s constituent documents that might theoretically limit redemptions) less any shares subject to a binding commitment to not be redeemed.’’ Another commenter, who expressed the general view that ‘‘proposed Items 1602(a)(4) and 1602(c) of Regulation S– K should not be adopted,’’ said that ‘‘it is unclear whether a maximum redemption threshold for purposes of proposed Item 1602(a)(4) should require or call for anything other than the redemption of 100% of the SPAC’s public shares.’’ 231 This commenter also said that ‘‘a maximum redemption scenario for a SPAC would vary across different de-SPAC transactions’’ because of the various ways the redemption level is impacted, including by the SPACs’ governing documents, listing requirements, and negotiated conditions in the de-SPAC transaction.232 The commenter observed that ‘‘some de￾SPAC transactions are structured such that certain funding mechanisms, such as backstop, forward purchase or PIPE arrangements, apply only in the event of certain redemption thresholds, further complicating the ability to make the assumptions required by proposed Item 1602(a)(4).’’ 233 As a result, this commenter asserted that ‘‘any purported maximum redemption scenario disclosed at the time of IPO cannot be based on reasonable assumptions given

234 Id.
235Letter from White & Case.
236Letter from CII, citing Joanna Makris, SPAC Market Review 2022 as ‘‘finding February 2022 redemption rate of 89%’’ available at https:// www.boardroomalpha.com/spac-market-review￾march-2022/. 237Letters from Freshfields, Vinson & Elkins, White & Case. 238Letter from White & Case. 239Letter from White & Case. 240Letters from Freshfields, Vinson & Elkins (stating that the specifics of the transaction that are unknown include: ‘‘will there be a PIPE financing, at what per share valuation, will the PIPE issuance include warrants, will there be convertible equity or debt issued, what will transaction expenses be, are there convertible or derivative securities of the target that will be assumed,’’ and ‘‘Most importantly, the value of the target company is not known at the time of the IPO.’’). 241Letter from Freshfields (stating that they did not think the dilution table on the cover of the SPAC’s IPO prospectus ‘‘will be meaningful because the SPAC does not yet know the amount of equity to be issued in a PIPE (if any) or to the target company’s stockholders (if any) or the extent to which the SPAC sponsor’s promote will be renegotiated in connection with the actual de-SPAC transaction.’’). 242Letter from Vinson & Elkins. 243Letters from ABA, Ropes & Gray (‘‘information called for by the proposed rules would not provide investors or analysts with meaningful information in valuing SPAC shares at the time of a SPAC IPO.’’), Vinson & Elkins, White & Case. 244Letter from ABA. 245Letter from Loeb & Loeb. 246Letter from Vinson & Elkins. 247Letter from White & Case. 248 Id. 249Letter from Ernst & Young LLP (June 13, 2023) (‘‘Ernst & Young’’). 250 Id. 251Letter from PwC. 252Letter from Bullet Point Network. 253Letter from Vinson & Elkins. 254See Proposing Release, supra note 7, at 29470 (request for comment number 20) (‘‘Should we require other information either in addition to, or in lieu of, the proposed dilution disclosure, such as disclosure of the cumulative amount of dilution that non-redeeming shareholders may experience or the amount of net cash underlying each share at the time of a de-SPAC transaction? If so, should we require that this disclosure be presented in a tabular format?’’). 255Letters from CII; Michael Klausner, Michael Ohlrogge, and Harald Halbhuber; NASAA; Vinson & Elkins. the inherent lack of specifics available at the time of the IPO for a prospective de-SPAC transaction.’’ 234 The same commenter said that ‘‘a SPAC may actually become subject to a maximum redemption scenario that is lower than the quartile intervals required to be presented by proposed Item 1602(a)(4).’’ 235 One commenter recommended the Commission require dilution disclosure at a 90% redemption level, stating it ‘‘could be particularly useful to investors if recent redemption activity is indicative of future activity.’’ 236 Commenters raised concerns that dilution disclosure would be characterized by uncertainty, be based on hypothetical assumptions, or depend on
unknown variables.237 One commenter said that the proposed disclosure under Item 1602(a)(4) and (c) would require ‘‘dilution disclosure informed by purely hypothetical assumptions’’ and that ‘‘lengthy and detailed caveats regarding the assumptions would be needed.’’ 238 As a result of these concerns, the commenter concluded that ‘‘proposed Items 1602(a)(4) and 1602(c) of Regulation S– K would only confuse and mislead investors.’’ 239 Other commenters noted that dilution disclosure at the IPO stage would depend on unknown variables,240 which one of these commenters said will mean the disclosure is not meaningful.241 One of these commenters suggested that ‘‘tabular disclosure and sensitivity analyses in SPAC IPO registration statements should be limited to the sources of dilution in existence or contracted at the time of the IPO.’’ 242 Several commenters expressed concerns that the proposed dilution disclosure would not provide meaningful information to investors.243 One of these commenters said that ‘‘proposed Items 1602(c) and 1604(c) are ambiguous as to what is required to be considered as dilution and how that dilution is to be measured and presented.’’ 244 This commenter said they do not believe current Item 506 disclosures are useful to investors and do not believe investors will find the similar disclosures proposed to be required by Items 1602(a)(4) and (c) and 1604(c) to be any more useful. One commenter said, ‘‘the proposed additional dilution disclosure to be included in an IPO prospectus (proposed Item 1602) would just capture in one place information already being disclosed with perhaps some new caveats about potential for dilutive financings and accordingly not result in a better informed investor.’’ 245 The Commission proposed that the calculation of pro forma net tangible book value be done consistent with the methodologies and assumptions used in the disclosure provided pursuant to Item 506 of Regulation S–K. One commenter said that ‘‘[Item 506] presentation is not meaningful to investors and in some instances the presentation may actually show that there is a decrease in net tangible book value from the offering after giving effect to the redeemable shares.’’ 246 Another commenter said that, without an identified de-SPAC target or structured de-SPAC transaction, the limited information at the time of the SPAC IPO used to calculate the proposed Item 1602(a)(4) disclosures would produce ‘‘an absurd result.’’ 247 The commenter expressed the view that the disclosure provided based on this limited information would not be useful because ‘‘all of a SPAC’s shares sold to public investors in the SPAC’s IPO (the public shares) are required to be classified as temporary equity upon the completion of the IPO,’’ which would mean that ‘‘the calculation of pro forma net tangible book value per share in accordance with U.S. GAAP [Generally Accepted Accounting Principles] inevitably produces a deficit and remains the same constant figure across
any assumed redemption thresholds.’’ 248 Another commenter said that ‘‘proposed Item 1602(a)(4) would require disclosure of the estimated remaining pro forma net tangible book value per share at specified redemption levels consistent with the methodologies in Item 506 of Regulation S–K’’ but noted that ‘‘Item 506 does not provide a definition for net tangible book value,’’ and, as a result, the commenter has ‘‘observed diversity in such calculations.’’ 249 The commenter recommended ‘‘that the Commission include a definition of net tangible book value in the final rule to enhance the usefulness and comparability of the dilution disclosures for investors in SPAC transactions and other registered securities offerings as applicable.’’ 250 One commenter recommended that the Commission give ‘‘illustrative examples and calculations’’ of the dilution disclosure to ensure ‘‘robust, transparent, and consistent dilution disclosures.’’ 251 Another commenter said they ‘‘agree with the proposal to add sensitivity tables to show the dilution across a range of redemption scenarios and would suggest the SEC provide a format to standardize that disclosure.’’ 252 One commenter recommended that ‘‘sensitivity analyses should only be required for sources of dilution, such as warrants, where the dilutive impact varies based on changing equity values or other variables.’’ 253 In response to a request for comment asking whether we should require disclosure of net cash per share (in addition to, or in lieu of the proposed dilution disclosures),254 several commenters recommended we require net cash per share disclosure.255 One commenter said that, in lieu of the proposed dilution disclosure, ‘‘SPACs should present the per share amount of

256Letters from Vinson & Elkins.
257Letter from NASAA.
258Letter from CII.
259 Id.
260 Id.
261Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber (providing that net cash per share should include: ‘‘each material source of future dilution and dissipation of cash that non-redeeming shareholders may experience by electing not to tender their shares in connection with the de-SPAC transactions and quantify its impact on the net cash underlying a share’’). 262Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber, citing Klausner, Ohlrogge & Halhubber, Net Cash Per Share: The Key to Disclosing SPAC Dilution (NYU Law and Economics Research Paper No. 22–14, Mar. 28, 2022, last revised Sept. 17, 2022), available at https://ssrn.com/abstract=4047180 (retrieved from SSRN Elsevier database) (see supra note 156). For treatment of warrants in connection with this net cash per share formula, see id. at 27 (‘‘All warrants should be valued using standard accounting methodologies as of the day before the merger’s announcement, and their aggregate value should be subtracted from total cash. This is consistent with most SPACs’ accounting treatment of warrants as a liability. To ensure comparability across different SPACs, however, we propose subtracting the value of the warrants even when they are structured to avoid liability treatment under GAAP.’’ (Footnotes omitted)); id. at 27, n.32 (‘‘Alternatively, SPACs could be required to disclose the value of warrants at the time their proxy statement is filed. This would reflect the market’s valuation of the warrants’ dilution.’’); but see Klausner, Ohlrogge & Ruan, supra note 18 at 233, n.11 (2022) (‘‘The concept of net cash per share is central to our analysis. We define that term to be cash in the SPAC minus underwriting fees and other fees incurred in connection with a SPAC’s merger minus the value of warrants as of the day before the announcement of the merger, divided by shares issued in the SPAC’s IPO plus shares issued to shares issued to PIPE investors. We follow the SEC’s treatment of warrants as liabilities. If we treat warrants as equity of the same value in the denominator of net cash per share, the results would not be significantly different. For the few SPACs that have convertible debt, we treat the conversion feature as a warrant.’’ (Emphasis added)). 263 Id. 264Letter from CII. 265Letter from Loeb & Loeb. 266 Id. 267 Id. 268Letter from Vinson & Elkins. 269Letter from Vinson & Elkins. Regarding the treasury stock method for warrants, see, e.g., Donald E. Kieso, Jerry J. Weygandt & Terry D. Warfield, Intermediate Accounting, Volume 2, 17 (2019) (‘‘The treasury stock method applies to written call options and equivalents and assumes that: 1. the options and warrants or equivalents are exercised at the beginning of the year (or on the date of issue if it is later), and 2. the proceeds are used to purchase common shares for the treasury at the average market price during the year. If the exercise price is lower than the average market price, then the proceeds from
exercise are not sufficient to buy back all the shares. This would result in more shares being issued than purchased and will therefore be dilutive. The excess number of the shares (incremental number) to be issued over the number of shares that would be purchased is added to the weighted average number of shares outstanding in calculating [per share ratios]. Note that no adjustment is made to the numerator.’’). 270Letter from CFA Institute. cash (or securities) in trust, under a range of hypothetical redemption scenarios and after giving effect to sponsor equity, underwriter compensation and IPO expenses.’’ 256 Another commenter said that ‘‘the actual net cash per share for non￾redeeming shareholders under different redemption scenarios should be displayed in an easily understandable, tabular format.’’ 257 A different commenter said they ‘‘support clear disclosure of net cash per share after taking into account all sources of dilution and dissipation of cash, under various redemption scenarios.’’ 258 This commenter said that reductions in net cash may be attributable to a variety of sources, including: (a) sponsor compensation and investment terms, (b) share redemption, (c) exercise of warrants, fractional warrants and convertible securities, (d) PIPE financing, and (e) underwriting fees.259 The commenter also said that ‘‘[g]iven the complexity and contingencies involved in the de￾SPAC process, investors . . . need clear information about potential consequences to inform their understanding of the true cost of the business combination.’’ 260 One group of commenters said that ‘‘the final rules for SPAC mergers should require SPACs to prominently disclose the amount of net cash underlying each share at the time of a de-SPAC transaction,’’ including on the cover page of the registration statement.261 These commenters also said, with respect to the proposed Item 1604(c) requirement to describe ‘‘each material potential source of future dilution’’ for non-redeeming SPAC shareholders, that the dilution concept included in the provision reflects a concept of dilution that is focused on ‘‘ownership dilution,’’ not the kind of dilution (and dissipation of cash) that reduces the net cash underlying a SPAC share.262 These commenters concluded that, as proposed, none of the disclosures in Item 1604(c) of Regulation S–K would inform investors about the net cash underlying a SPAC share. These commenters also provided a formula for the calculation of net cash per share: (a) total cash (consisting of the sum of cash from SPAC public shareholders plus cash from PIPEs or forward purchase agreements minus cash expenses minus the value of warrants minus the value of other equity derivatives), divided by (b) total shares (consisting of public shares plus founder shares plus PIPE or forward purchase agreement shares plus other shares plus shares issuable under rights).263 Another commenter supported using this calculation of net cash per share after taking into
account all sources of dilution and dissipated cash under 25%, 50%, 75%, 90%, and 100% redemption scenarios.264 One commenter said they ‘‘read proposed Item 1604(c)(1) as requiring a determination of the enterprise valuation that will result in a stockholder’s ‘interest per share’ (calculated by reference to a pro forma closing date balance sheet. . .). . .being at least equal to the $10 price per share paid in the IPO.’’ 265 The commenter said ‘‘this is the equivalent of requiring a traditional IPO to include in its Item 506 dilution section alternative price ranges, the midpoint of which would not result in dilution to IPO investors,’’ which the commenter said ‘‘we can safely assume would be materially different from the proposed cover page range due to the significant disconnect between market prices and net book value per share.’’ 266 The commenter said ‘‘if misunderstood by the reader, this proposed disclosure also has the dangerous potential to lead a SPAC shareholder to view the disclosure as a guarantee that the stock will not trade down in the aftermarket.’’ 267 One commenter on the proposal said that ‘‘[f]or de-SPAC transactions, the most meaningful information would be the expected value per share, using the agreed equity value of the target company plus net cash proceeds from the de-SPAC transaction under a range of hypothetical redemption scenarios.’’ 268 The commenter said, ‘‘Given that SPAC warrants are almost uniformly out of the money at the agreed per share equity value used in the de-SPAC transaction (typically the $10 IPO per unit price), conveying the potential dilutive effect of the warrants can be handled in many different ways.’’ The commenter suggested disclosing ‘‘the percentage ownership of the surviving company at various hypothetical share increments above $10 per share, utilizing the treasury share method.’’ 269 One commenter recommended that the Commission should consider requiring that intermediaries provide information about ‘‘the sponsor, actual and potential conflicts of interest, [and] how much a non-redeeming SPAC investor’s interest will be diluted’’ in a separate ‘‘Key Risks and Conflicts form’’ that is detached from the prospectus, so that the disclosure receives more investor attention and focus.270 One commenter said that disclosures about ‘‘any lock-up periods or earnout provisions for sponsors or underwriters

271Letter from NASAA. 272See letters from PwC, Ernst & Young, supra notes 249 and 251. would be of significant interest to investors and should be required if part of the SPAC offering.’’ 271
3. Final Rules
i. Overview of Final Rules and Changes
From Proposal
After considering the comments received, regarding dilution disclosure in SPAC registered offerings (such as SPAC IPOs) other than de-SPAC transactions, we are adopting Item 1602(a)(3) and (4), (b)(6), and (c) as proposed, except for certain modifications we discuss below. Regarding de-SPAC transactions, we are also adopting Item 1604(a)(3), (b)(4), (5), and (6), and (c) as proposed, except for certain modifications we discuss below. Each of these provisions is discussed in detail below. a. Overview of Final Item 1602 Dilution Disclosure (IPOs and Non-De-SPAC Transaction Registered Offerings) and Changes From Proposal

1. Item 1602(a)
   Final Item 1602(a)(3) requires, on the outside front cover page of the prospectus in plain English, a statement of the amount of the compensation received or to be received by the SPAC sponsor, its affiliates, and promoters, the amount of securities issued or to be issued by the SPAC to the SPAC sponsor, its affiliates, and promoters and the price paid or to be paid for such securities, and whether this compensation and securities issuance may result in a material dilution of the purchasers’ equity interests. Final Item 1602(a)(3) also requires the provision of a cross-reference, highlighted by prominent type or in another manner, to the locations of related disclosures in the prospectus. Final Item 1602(a)(3) is different from the proposal only with respect to changes made regarding SPAC sponsors and securities issuances discussed above in section II.B. Final Item 1602(a)(4) requires, with respect to SPAC IPOs, on the outside front cover page of the prospectus in plain English, disclosure in the tabular format specified at quartile intervals based on percentages of the maximum redemption threshold: the offering price; as of the most recent balance sheet date filed, the net tangible book value per share, as adjusted, as if the offering and assumed redemption levels have occurred and to give effect to material probable or consummated transactions (other than the completion of a de-SPAC transaction); and the difference between the offering price and such net tangible book value per share, as adjusted. Final Table 1 to Paragraph (a)(4) provides:
   REMAINING PRO FORMA NET TANGIBLE BOOK VALUE PER SHARE Offering price of __ 25% of maximum redemption 50% of maximum redemption 75% of maximum redemption Maximum redemption Final Instruction 1 to Item 1602(a)(4) provides, if the offering includes an over-allotment option, separate rows in the tabular disclosure must be included showing the information required by paragraph (a)(4) with and without the exercise of the over-allotment option. Final Item 1602(a)(4) includes several changes compared to the proposal. First, we have clarified in the final rule how to calculate the required dilution information. In response to the proposal, some commenters generally sought clarification, such as illustrative examples, calculations, or definitions, in connection with the dilution calculation.272 We believe the changes in the final rules will be simpler for registrants to follow and comply with because they provide clear steps regarding how the dilution disclosure should be determined. In addition, we have deleted proposed references to calculating dilution ‘‘consistent with the methodologies and assumptions used in the disclosure provided pursuant to § 229.506 (Item 506 of Regulation S–K).’’ These references to Item 506 are not necessary given the changes made to clarify how to calculate the required dilution information. This change also ensures that redeemable common stock is not treated as temporary equity for purposes of the calculation in a way that could undermine the meaningfulness of the dilution disclosure as we discuss in more detail below in response to comments. Relatedly, we are revising Item 6 of Form S–1 to state that the registrant must ‘‘Provide the information required by Item 506 of Regulation S–K (§ 229.506 of this
   chapter), unless the registrant is a
   special purpose acquisition company (as defined in Item 1601 of Regulation S– K),’’ because the requirements of Item 1602(a)(4) are intended to supplant the requirements of Item 506 for SPACs. In addition, we have deleted proposed references in Item 1602(a)(4) to ‘‘estimated remaining pro forma net tangible book value per share’’ as the name for the dilution measurement and instead refer to ‘‘net tangible book value per share, as adjusted.’’ We were concerned that references to ‘‘estimated remaining pro forma net tangible book value per share’’ could be ambiguous and that registrants could misinterpret the term to require estimation of what the net tangible assets of a combined company might be in any ultimate de￾SPAC transaction. The deletion of this term and its replacement with the new term helps clarify that registrants should not include any estimates of the assets of any ultimate target company in this calculation. In addition, in final Item 1602(a)(4), we have replaced the proposed phrase ‘‘at quartile intervals up to the maximum redemption threshold’’ with ‘‘at quartile intervals based on percentages of the maximum redemption threshold.’’ We believe registrants could mistakenly interpret the proposed terms to require quartile intervals based on the total number of shares issued in the offering for the three redemption levels in the table other than the maximum redemption level. We believe this change will eliminate that potential for misinterpretation.
2. Item 1602(b)
   Final Item 1602(b)(6) requires the prospectus summary to include in plain English in a tabular format, the nature and amount of the compensation received or to be received by the SPAC sponsor, its affiliates, and promoters, the amount of securities issued or to be issued by the SPAC to the SPAC sponsor, its affiliates, and promoters and the price paid or to be paid for such

273 Depending on the facts and circumstances, both qualitative and quantitative information may be required in the disclosures made outside of the
table.
securities, and, outside of the table, the extent to which this compensation and securities issuance may result in a material dilution of the purchasers’ equity interests. Final Item 1602(b)(6) is different from the proposal only with respect to changes made regarding SPAC sponsors and securities issuances discussed above in section II.B.
3. Item 1602(c)
Final Item 1602(c) requires disclosure in a tabular format for the same quartile intervals as in Item 1602(a)(4): the offering price; net tangible book value per share, as adjusted, determined in the same manner as in Item 1602(a)(4); and the difference between the offering price and such net tangible book value per share, as adjusted. Final Item 1602(c) also requires that the tabular disclosure must show: the nature and amounts of each source of dilution used to determine net tangible book value per share, as adjusted; and the number of shares used to determine net tangible book value per share, as adjusted; and any adjustments to the number of shares used to determine the per share component of net tangible book value per share, as adjusted. Final Item 1602(c) also requires a description of each material potential source of future dilution following the registered offering by the special purpose acquisition company, including sources not included in the table with respect to the determination of net tangible book value per share, as adjusted. Final Item 1602(c) also requires a description of the model, methods, assumptions, estimates, and parameters necessary to understand the tabular disclosure. Final Item 1602(c) contains several changes from the proposal. We have clarified in the final rule that Item 1602(c) dilution should be calculated in the same way as in Item 1602(a)(4) and have deleted references in proposed Item 1602(c) to Item 506 of Regulation S–K, consistent with changes discussed above made to final Item 1602(a)(4) in this respect. In addition, we have clarified that the table in Item 1602(c) should show the nature and amounts of each source of dilution and the number of shares used in the calculation in order to eliminate any ambiguity and the potential that registrants could misinterpret the item to mean that the
table merely needs to show the final
dilution information and not the line items that went into its calculation. With respect to the proposed requirement to describe material potential sources of future dilution, the final rules specify that the description should be located outside the table. The final rules also state that the description of each material potential source of future dilution outside of the table should include ‘‘sources not included in the table with respect to the determination of net tangible book value per share, as adjusted.’’ We are making this change to clarify that the disclosure outside of the table is not to be merely duplicative of the sources of dilution used for the calculation of the measure of dilution within the table. Without these changes, the item could have been misinterpreted by registrants to require only disclosure of the same sources of dilution used in the tabular calculation of dilution, only in a non-tabular format. Depending on a SPAC’s specific facts and circumstances, the non-tabular disclosure of ‘‘each material potential source of future dilution’’ under Item 1602(c) may need to discuss a broader set of items than ‘‘material probable or consummated transactions’’ that are included for purposes of calculating the tabular dilution measure.273 We have also clarified that underlying factors such as assumptions that are necessary to understand the table must be described in order to eliminate any ambiguity under the proposal that no such information is required beyond the numbers in the dilution table. This clarification also makes final Item 1602(c) consistent with final Item 1604(c), which contained a proposed provision to this effect (that we are adopting as discussed in detail below). b. Overview of Final Item 1604 Dilution Disclosure (De-SPAC Transactions) and Changes From Proposal

1. Item 1604(a)
   Final Item 1604(a)(3) requires, on the outside front cover page of the prospectus in plain English, a statement of the amount of the compensation received or to be received by the SPAC sponsor, its affiliates, and promoters in connection with the de-SPAC transaction or any related financing transaction; the amount of securities issued or to be issued by the SPAC to the SPAC sponsor, its affiliates, and promoters and the price paid or to be paid for such securities in connection with the de-SPAC transaction or any related financing transaction; and whether this compensation and securities issuance may result in a material dilution of the equity interests of non-redeeming shareholders who hold the securities until the consummation of the de-SPAC transaction. Final Item 1604(a)(3) also requires the provision of a cross￾reference, highlighted by prominent type or in another manner, to the locations of related disclosures in the prospectus. Final Item 1604(a)(3) is different from the proposal only with respect to changes made regarding SPAC sponsors and securities issuances discussed above in section II.B.
2. Item 1604(b)
   Final Item 1604(b)(4) requires that the prospectus summary must include in plain English, in a tabular format, the terms and amount of the compensation received or to be received by the SPAC sponsor, its affiliates, and promoters in connection with the de-SPAC transaction or any related financing transaction, the amount of securities issued or to be issued by the SPAC to the SPAC sponsor, its affiliates, and promoters and the price paid or to be paid for such securities in connection with the de-SPAC transaction or any related financing transaction; and, outside of the table, the extent to which that compensation and securities issuance has resulted or may result in a material dilution of the equity interests of non-redeeming shareholders of the special purpose acquisition company. In final Item 1604(b)(4), we revised to clarify that certain disclosure should appear outside of the table (rather than within it). It also makes the item consistent with Item 1602(b)(6) in requiring disclosure of the extent of the material dilution not merely whether or not there is such material dilution. Also, in the final rule, we have replaced the term ‘‘unaffiliated security holders’’ with ‘‘non-redeeming shareholders’’ to ensure consistency of usage throughout Item 1604. In addition, this change eliminates any ambiguity that might have caused some registrants to believe they need to subtract affiliated shares from the denominator of the net tangible book value per share calculation, which the proposal did not intend. We also made changes to final Item 1604(b)(4) as compared to the proposal with respect to SPAC sponsors, promoters, and securities issuances discussed above in
   section II.B.
   Final Item 1604(b)(5) requires the prospectus summary to include a brief description in plain English of the material terms of any material financing transactions that have occurred or will occur in connection with the consummation of the de-SPAC transaction, the anticipated use of proceeds from these financing transactions and the dilutive impact, if any, of these financing transactions on non-redeeming shareholders. The sole change from the proposal is that, in final

274 In addition, in final Item 1603(b)(5) we added the word ‘‘material’’ before the words ‘‘financing transactions’’ for consistency with final Item 1604(a)(2). 275See letters from PwC, Ernst & Young, supra notes 249 and 251. 276 In final Item 1604(c) we moved the phrase ‘‘that non-redeeming shareholders may experience by electing not to tender their shares in connection with the de-SPAC transaction’’ from the end of the relevant sentence to instead follow the words ‘‘future dilution’’ for clarity. 277While there may be exceptions depending on specific facts and circumstances, the presentation of fewer than four levels of redemption is unlikely to constitute a sufficient range of outcomes to inform investors. As discussed above, there is no requirement in Item 1604(c) to select four redemption levels as there is in Item 1602(a)(4) and (c), but registrants who seek to provide less than four redemption levels pursuant to Item 1604(c) should ensure such presentation is appropriate and tailored to the unique circumstances of the relevant Item 1604(b)(5), we have revised the term ‘‘unaffiliated security holders’’ to ‘‘non-redeeming shareholders’’ for the same reasons as discussed above regarding Item 1604(b)(4).274 Final Item 1604(b)(6) requires the prospectus summary to include a brief description in plain English of the rights of security holders to redeem the outstanding securities of the special purpose acquisition company and the potential dilutive impact of redemptions on non-redeeming shareholders. We made one change to final Item 1604(b)(6) compared to the proposal to clarify the disclosure required. Final 1604(b)(6) contains the phrase ‘‘potential dilutive impact of redemptions on non-redeeming shareholders’’ instead of the proposed phrase ‘‘impact of redemptions on the value of the securities owned by non￾redeeming shareholders.’’ We believe this clarification will eliminate ambiguity and the potential that registrants could misinterpret the item to require undertaking valuations under different scenarios of the securities owned by non-redeeming shareholders.
3. Item 1604(c)
We received comments that indicated that we should provide a definition of net tangible book value or provide examples to enhance the comparability of the disclosures.275 In consideration of these comments, we have revised Item 1604(c) to more clearly set forth the dilution disclosures and calculations it requires and to align this dilution calculation with the dilution calculation under Item 1602(a)(4) and (c), although, as we discuss herein, there are technical differences between the adjustments under Item 1602(a)(4) and (c) versus adjustments under Item 1604(c). Final Item 1604(c) requires disclosure in a tabular format that includes intervals representing selected potential redemption levels that may occur across a reasonably likely range of outcomes of:
the offering price disclosed pursuant to Item 1602(a)(4) in the initial registered offering by the SPAC; as of the most recent balance sheet date filed, the net tangible book value per share, as adjusted, as if the selected redemption levels have occurred and to give effect to, while excluding the de-SPAC transaction itself, material probable or consummated transactions, and other material effects on the SPAC’s net tangible book value per share from the de-SPAC transaction; and the difference between such offering price and such net tangible book value per share, as adjusted. Final Item 1604(c) also requires that the tabular disclosure must show: the nature and amounts of each source of dilution used to determine net tangible book value per share, as adjusted; the number of shares used to determine net tangible book value per share, as adjusted; and any adjustments to the number of shares used to determine the per share component of net tangible book value per share, as adjusted. Final Item 1604(c) also requires, outside of the table, a description of each material potential source of future dilution that non-redeeming shareholders may experience by electing not to tender their shares in connection with the de-SPAC transaction, including sources not included in the table with respect to the determination of net tangible book value per share, as adjusted.276 Final Rule 1604(c)(1) requires, with respect to each redemption level, a statement of the company valuation at or above which the potential dilution results in the amount of the non-redeeming shareholders’ interest per share being at least the IPO price per share of common stock. Final Item 1604(c)(2) requires the provision of a description of the model, methods, assumptions, estimates, and parameters necessary to understand the tabular disclosure. Final Item 1604(c) introductory text and (c)(1) and (2) contain certain changes from the proposal. We believe the changes in the final rules will be simpler for registrants to follow and comply with because they provide clear steps regarding how the dilution disclosure should be determined. In addition, in clarifying how to calculate the required dilution, final Item 1604(c) also ensures that redeemable common stock is not treated as temporary equity for purpose of the calculation in a way that could undermine the meaningfulness of the dilution disclosure. As part of these clarifications, we have deleted the proposed provision in Item 1604(c)(1) that would have required ‘‘sensitivity analysis disclosure in tabular format that expresses the amount of potential dilution under a range of reasonably likely redemption levels.’’ We were concerned the meaning of that proposed provision could be unclear to registrants, particularly its references to ‘‘sensitivity analysis.’’ We believe there was potential for some registrants to interpret the proposed provision merely to mean a range of redemption levels must be analyzed, while other registrants could
interpret the provision to mean that a range of redemption levels must be analyzed and also that a sensitivity analysis must be conducted that reflects a range of assumptions for the range of redemption levels. We also have deleted the following language of proposed Item 1604(c)(1):
‘‘At each redemption level in the sensitivity analysis, quantify the dilutive impact on non-redeeming shareholders of each source of dilution, such as the amount of compensation paid or to be paid to the SPAC sponsor, the terms of outstanding warrants and convertible securities, and underwriting and other fees.’’ We were concerned that the references in that proposed provision to certain sources of potential dilution could confuse registrants about how to calculate dilution and could produce inconsistent interpretations across different registrants. Final Item 1604(c) accomplishes the same goal as these deleted provisions in proposed Item 1604(c)(1) by requiring disclosure ‘‘in a tabular format that includes intervals representing selected potential redemption levels that may occur across a reasonably likely range of outcomes.’’ We believe the final rule will make it clear that the item does not prescribe the redemption levels for which dilution information must be provided (in contrast to Item 1602(a)(4) and (c)). Under Item 1604(c), registrants should not select redemption levels that are not possible. For example, registrants should not select levels that, combined with any other funding (such as PIPEs) in connection with the de-SPAC transaction, would result in the SPAC having cash that is lower than any minimum cash condition in the agreements related to the de-SPAC transaction. Registrants are not required to select exactly four levels for Item 1604(c) (which they are required to do in Item 1602(a)(4) and (c)) but should ensure the redemption levels reasonably inform investors of a range of potential outcomes.277

de-SPAC transaction warranting such a presentation. 278 In this regard, we note that the initial purchasers in SPAC IPOs often resell or redeem their shares prior to the completion of the de-SPAC transaction. See, e.g., Benjamin Mullin & Amrith Ramkumar, BuzzFeed Suffers Wave of SPAC Investor Withdrawals Before Going Public, Wall St. J., Dec. 2, 2021. See also Klausner, Ohlrogge & Ruan, supra note 18. 279See Guides for Preparation and Filing of Registration Statements, Release No. 33–4666 (Feb. 7, 1964) [29 FR 2490, 2492 (Feb. 15, 1964)]; Guides for the Preparation and Filing of Registration Statements, Release No. 33–4936 (Dec. 9, 1968) [33 FR 18617, 18619 (Dec. 17, 1968)]; Contents of Prospectuses and to Guides for Preparation and Filing of Registration Statements, Release No. 33– 5278 (Aug. 8, 1972) [37 FR 15985, 15986 (Aug. 9, 1972)]; Proposed Revision of Regulation S–K and Guides for the Preparation and Filing of Registration Statements and Reports, Release No. 33–6276 (Dec. 23, 1980) [46 FR 78, 82–83 (Jan. 2, 1981)]; Adoption of an Integrated Disclosure System, Release No. 33–6383 (Mar. 19, 1982) [47 FR 11380, 11390 (Mar. 16, 1982)]. 280Letters from ABA, Ropes & Gray, Vinson & Elkins, White & Case. See supra notes 243 and 244 and accompanying text. 281See, e.g., Klausner, Ohlrogge & Halbhuber, supra note 156 at 19 (2022) (‘‘Disclosure of net cash per share at the time of a SPAC’s merger is necessary to allow shareholders to make an informed decision as to whether to redeem their shares (for roughly $10 per share) or to invest in a proposed merger. . . . One would expect the amount of net cash invested in a target to be closely related to the value of post-merger shares that SPAC shareholders receive in exchange. Our research bears this relationship out empirically, showing that the lower the net cash per share that a SPAC delivers, the lower the post-merger share price will be.’’ (Footnotes omitted)). As discussed below in the section ‘‘Net Cash Per Share Disclosure Recommendations,’’ we agree with comments that suggested net cash per share information is important to investors, but we believe the net tangible book value per share calculation, which we discuss in more detail below, would substantially convey such information. Furthermore, we have clarified that the table in final Item 1604(c) should show the nature and amounts of each source of dilution and the number of shares used in the calculation in order to eliminate any ambiguity and the potential that registrants could misinterpret the item to mean that the
table needs to show only the final
dilution information and not the line items that went into its calculation. In addition, with respect to the proposed requirement to describe material potential sources of future dilution, the final rule specifies that the description should be located outside of the table. The final rule also states that each material potential source of future dilution outside of the table should include ‘‘sources not included in the
table with respect to the determination
of net tangible book value per share, as adjusted.’’ We are making this change to clarify that the disclosure outside of the
table is not merely duplicative of the
sources of dilution used for the calculation of the measure of dilution within the table. Without these changes, the item could have been misinterpreted by registrants to require disclosure of the same sources of dilution used in the tabular calculation of dilution, only in a non-tabular format. Depending on a SPAC’s specific facts and circumstances, the non-tabular disclosure of ‘‘each material potential source of future dilution’’ under Item 1604(c) may need to discuss a broader set of items than ‘‘material probable or consummated transactions’’ that are included for purposes of calculating the tabular dilution measure. Finally, to reflect the deletion discussed above of the proposed provision in Item 1604(c)(1) regarding ‘‘sensitivity analysis,’’ we have inserted in final Item 1604(c)(2) the words ‘‘necessary to understand the tabular disclosure’’ instead of the proposed words ‘‘necessary to understand the sensitivity analysis disclosure.’’
ii. Value of SPAC Dilution Information
to Investors as a General Matter and Under the Final Rules In adopting the final rules, we agree with the commenters that expressed the view that the dilution disclosures will provide helpful information to investors. There are a number of potential sources of dilution in common SPAC structures, including: (a) shareholder redemptions, (b) SPAC sponsor compensation, (c) underwriting fees, (d) warrants, (e) convertible securities, and (f) PIPE financings. The enhanced dilution disclosure required by the final rules will enable investors in a SPAC IPO and subsequent purchasers of SPAC shares to better understand the potential impact upon them of the various dilutive events that may occur over the lifespan of the SPAC.278 Dilution disclosure in Commission filings has evolved over time.279 Today, Commission dilution disclosure requirements remain important, including with respect to SPACs. The Commission disagrees with the views expressed by some commenters that dilution disclosure would not be meaningful for investors’ investment decision-making or for valuation purposes at the IPO stage or de-SPAC transaction stage.280 Investors may use dilution information differently depending on the type of registrant, such as whether the issuer is an operating company or a shell company, such as a SPAC. For example, with an operating company some ‘‘value investors’’ may compare the offering price to net tangible book value.281 For a SPAC, however, this specific comparison may be less meaningful than with an operating company because SPACs typically have limited assets at the time of the IPO and the offering price is typically fixed at $10 per share. In addition, with an operating company, some ‘‘value investors’’ may compare the debt of the issuer to the net tangible book value. For a SPAC, however, this specific comparison may be less meaningful than with an operating company, because SPACs typically have limited debt at the time of the IPO and have limited assets. Furthermore, with an operating company, some investors may seek to determine a value for the issuer taking into account return on net tangible assets or by using a value calculated by multiplying a market average price-to￾net-tangible-book-value-per-share ratio times the issuer’s net tangible book value per share. For a SPAC, however, these specific methods may be less meaningful than with an operating company because of the limited assets of the SPAC and limited, if any, net income at the time of the IPO. Dilution disclosure is important to SPAC investors for two reasons at both the IPO and de-SPAC transaction stages:
(1) it provides investors a way of understanding the impact of the disparity in price paid by insiders and the price paid by investors for shares, and (2) it enables investor comparisons to other SPACs. Additionally, at the de￾SPAC transaction stage, dilution disclosure is important to SPAC investors for a third reason: it helps investors evaluate the economics of the de-SPAC transaction, which can inform their investing and voting decisions. We discuss these three reasons in more detail as follows. First, the difference in per share net tangible book value, as adjusted, as compared to the $10 offering price, demonstrates to investors how the typically lower-priced SPAC sponsor promote stake affects these investors’ claims on the tangible assets of the company. Similarly, at the de-SPAC transaction stage, when certain other transactions may become probable, the net tangible book value per share, as adjusted, will convey to investors a better understanding of the dilution that these other transactions may produce. Relatedly, net tangible book value per share, as adjusted, provides information to investors on dilution (in the sense of diminution in percentage ownership) resulting from the SPAC sponsor promote, because an increase in common shares in the denominator reduces net tangible book value per share, as adjusted.

282See, e.g., Klausner, Ohlrogge & Halbhuber, supra note 156 at 19 (2022) (‘‘Disclosure of net cash per share at the time of a SPAC’s merger is necessary to allow shareholders to make an informed decision as to whether to redeem their shares (for roughly $10 per share) or to invest in a proposed merger. . . . One would expect the amount of net cash invested in a target to be closely related to the value of post-merger shares that SPAC shareholders receive in exchange. Our research bears this relationship out empirically, showing that the lower the net cash per share that a SPAC delivers, the lower the post-merger share price will be.’’ (Footnotes omitted)). As discussed below in the section ‘‘Net Cash Per Share Disclosure Recommendations,’’ we agree with comments that suggested net cash per share information is important to investors, but we believe the net tangible book value per share calculation, which we discuss in more detail below, would substantially convey such information. 283See, e.g., Richard Phalon, Forbes Greatest Investment Stories 3 (2004) (‘‘In his last years, Ben Graham,’’ the co-author with David Dodd of Security Analysis (1934), ‘‘distilled six decades of experience into ten criteria that would help the intelligent investor pick value stocks . . . The Ten:
. . . [4.] A stock price down to two-thirds of tangible book value per share.’’). 284See, e.g., ibid. (‘‘Ben Graham distilled six decades of experience into ten criteria . . . [6.] Total debt less than tangible book value.’’). 285See, e.g., Todd A. Finkle, Warren Buffett, Investor and Entrepreneur, (2023) (‘‘To assess a company’s potential as an investment vehicle,’’ the investors discussed in the book ‘‘are looking for a set of specific ratios that indicate potential for yielding high returns . . . Most of [these investors’] investments are in companies that earn ‘more than 20 percent’ of what [one of the investors] calls the ‘net tangible equity capital or net tangible assets’ required to run their businesses . . . The formula for returns on a company’s net tangible assets is as follows: Return on Net Tangible Assets = Net Income/Net Tangible Assets.’’). 286See, e.g., Mario Massari, Gianfranco Gianfrate & Laura Zanetti, The Valuation of Financial Companies: Tools and Techniques, Section 5.3.1 Market Multiples 126–127 (2014), David Frykman, Jakob Tolleryd, The Financial Times Guide to Corporate Valuation 58–59 (2012) (book-value based multiples work ‘‘best with a company with a lot of tangible assets like factories, hardware commodities, mines, etc. and that derives its revenue and cash flow from those assets. Examples of such companies today are banks, real estate and investment companies. . ..When calculating the P/ BV ratio for a company in distress, usually intangible assets are removed from the book value since they most probably have no resale value. That ratio is sometimes referred to as price/tangible book value . . . .’’). 287Letter from Loeb & Loeb. See supra note 245 and accompanying text. 288Letters from Ernst & Young, Vinson & Elkins, White & Case. See supra notes 246, 247, 248, 249, and 250 and accompanying text. Second, investors may focus on the relative dilution in a particular SPAC offering as compared to other SPAC offerings. For example, some types of investors may be more focused on finding SPACs with the highest net tangible book values per share compared to the $10 offering price and less focused on other qualitative factors about the SPAC. Third, as discussed above, SPAC shares can be redeemed at an agreed upon price. Some commentators have emphasized that it is important for investors to have information at the de￾SPAC transaction stage that enables investors to value these shares on a basis other than the stated agreement price.282 The dilution information will help investors to evaluate the economics of the business combination transaction, assisting their investment and voting decision-making. Investors’ redemption decisions are also likely informed by the market price of the SPAC shares, just as owners of stock options base their exercise decisions, in part, on the value of the underlying stock. While dilution information is important to SPAC investors for the reasons discussed above, we acknowledge that SPAC
investors may use dilution information differently than investors in an operating company. For example, with an operating company some ‘‘value investors’’ may compare the offering price to net tangible book value.283 For a SPAC, however, this specific comparison may be less meaningful than with an operating company because SPACs typically have limited assets at the time of the IPO and the offering price is typically fixed at $10 per share. In addition, with an operating company, some ‘‘value investors’’ may compare the debt of the issuer to the net tangible book value.284 For a SPAC, however, this specific comparison may be less meaningful than with an operating company, because SPACs typically have limited debt at the time of the IPO and have limited assets. Furthermore, with an operating company, some investors may seek to determine a value for the issuer that takes into account return on net tangible assets 285 or by using a value calculated by multiplying a market average price-to-net-tangible￾book-value-per-share ratio times the issuer’s net tangible book value per share. For a SPAC, however, these specific methods may be less meaningful than with an operating company because of the limited assets of the SPAC and limited, if any, net income at the time of the IPO.286 We disagree with comments that suggested market practice of disclosing dilution information obviates the need for the proposed rules regarding dilution.287 The final rules will help standardize dilution disclosures across registrants and provide a minimum transparent floor for disclosure, even if market practices change. To the extent potential future registrants may otherwise have provided these disclosures based on market convention or other reasons, such registrants are not likely to incur additional costs in preparing this disclosure. Some commenters suggested current dilution disclosure under Item 506 produces—and the proposed dilution disclosure would produce—results that are flawed or are calculated using varying methods by registrants.288 We acknowledge the concerns expressed by these commenters that using a method of calculating Item 506’s measure of net tangible book value that substantively excludes the redeemable common stock classified as temporary equity may result in dilution disclosure that is less meaningful to an investor. For example, in a SPAC IPO, this calculation could produce negative net tangible book value per share despite the proceeds raised in the offering.
iii. Discussion and Examples Regarding
the Calculation of Net Tangible Book Value Per Share, As Adjusted, in SPAC IPOs (Item 1602(a)(4) and (c)) and in De￾SPAC Transactions (Item 1604(c)) a. Dilution Disclosure Under Items 1602(a)(4) and (c) and 1604(c) Generally After considering the comments, we have made changes (as described above) in the final rules to clarify the calculation of net tangible book value per share, as adjusted, as the measure of dilution in Items 1602(a)(4) and (c) and 1604(c). Without these revisions, there would be a risk that some disclosure, even under the new rules, could present results that are not meaningful to investors, such as negative net tangible book value per share in some transactions. In addition, we believe the changes in the final rules will be simpler for registrants to follow and comply with because they provide clear steps regarding how to determine dilution. b. SPAC IPO Dilution Disclosure:
Comparison of Item 1602(a)(4) and (c) Final Item 1602(a)(4) and (c) are similar in that they require the disclosure of net tangible book value per share, as adjusted, shown in a tabular format. These items, however, have four key differences. First, Item 1602(a)(4) tabular disclosure must be provided on the prospectus cover, while Item 1602(c) disclosure must be provided in the prospectus body. Second, unlike Item 1602(c), registrants providing the Item 1602(a)(4) tabular disclosure do not need to show individual line-items for each source of dilution used to determine net tangible book value per share, as adjusted, in the table; for Item 1602(a)(4), they may simply show net tangible book value per share, as adjusted, in the table for the required quartiles. Third, Item 1602(c) also

289See accord Klausner, Ohlrogge & Halbhuber, supra note 156 at 21, n.10 (‘‘A post-merger calculation, which we explain below is an incorrect way to measure dilution, would include all shares outstanding of the combined post-merger company, including shares issued to shareholders of the target.’’). In addition, inclusion of these shares in the denominator is inconsistent with the numerator calculation as it excludes the de-SPAC transaction itself. 290While we expect ‘‘probable or consummated transactions’’ to generally be applied similarly between the net tangible book value per share, as adjusted, calculation and Article 11 of Regulation S–X, we observe that the contexts of each disclosure are different and do not foreclose the possibility that different treatments of a transaction may arise depending on the particular circumstances. 291See, e.g., 17 CFR 210.11–01(a)(8) (‘‘Consummation of other transactions has occurred or is probable for which disclosure of pro forma financial information would be material to investors.’’) Notwithstanding this similarity with
Article 11 of Regulation S–X, a company should not
title or describe ‘‘net tangible book value per share, as adjusted’’ as a ‘‘pro forma’’ measure, which could mislead investors since target company assets are not included in the calculation. 292See accord Klausner, Ohlrogge & Halbhuber, supra note 156 at 21, n.10 (‘‘A post-merger calculation, which we explain below is an incorrect way to measure dilution, would include all shares outstanding of the combined post-merger company, including shares issued to shareholders of the target.’’). In addition, inclusion of these shares in the denominator is inconsistent with the numerator calculation as it excludes the de-SPAC transaction itself. Also, as a result of our approach of excluding target company assets, we have not adopted a commenter suggestion that would have included the value of the target company. See letter from Vinson & Elkins, supra note 268 and accompanying text (expressing the view that the most meaningful information would be a per share value of the target company plus net cash). 293Letter from Vinson & Elkins. See supra note 269 and accompanying text. 294See Kieso, Weygandt & Warfield (discussing the treasury stock method), supra note 269. 295 Id. 296See, e.g., final Item 1604(c), Item 1602(b)(3), Item 1603(a)(6), and Item 1604(b)(5) and (c). 297Letter from Vinson & Elkins. contains the following requirement that Item 1602(a)(4) does not contain—to describe, outside of the table, each material potential source of future dilution following the registered offering by the special purpose acquisition company, including sources not included in the table with respect to the determination of net tangible book value per share, as adjusted. Fourth, unlike Item 1602(a)(4), Item 1602(c) requires the provision of a description of the model, methods, assumptions, estimates, and parameters necessary to understand the tabular disclosure. With respect to the requirement in final Item 1602(c) to describe each material potential source of future dilution (including those not shown in the table), these material potential sources of future dilution under final Item 1602(c) are to be disclosed outside of the table. These sources may not be the same as transactions that must be shown in the dilution table required by Item 1602(c). This non-tabular disclosure of ‘‘each material potential source of future dilution’’ in Item 1602(c) potentially may need to discuss a broader set of items than ‘‘material probable or consummated transactions,’’ although this would depend on a SPAC’s specific facts and circumstances.
c. De-SPAC Dilution Disclosure Under
Item 1604(c), Including Examples of Adjustments Dilution disclosure is also required in final Item 1604(c) in connection with de-SPAC transactions. An objective of the dilution disclosure required by Item 1604(c) is to depict the amount of net assets that the SPAC will contribute to the post-combination entity, as also noted by some commenters.289 In order to accomplish this objective of depicting the amount of net assets that the SPAC will contribute to the post-combination entity, final Item 1604(c) requires three adjustments of the SPAC’s net tangible book value per share as of the most recent balance sheet filed. The first adjustment is for the redemption of the SPAC’s shares. This adjustment is important because both the amount of net tangible assets in the numerator (for example, cash or securities held through the trust account) and the number of shares in the denominator will vary, depending on the redemption level. The second adjustment is to give effect to material probable or consummated transactions other than consummation of the de-SPAC transaction itself. This adjustment is also important because these transactions may affect the amount of net tangible assets in the numerator and the number of shares in the denominator. Examples of transactions that could be material probable or consummated transactions include funding backstops, forward purchases, or PIPE financings. We generally expect the term ‘‘probable or consummated transactions’’ to be applied in the net tangible book value per share, as adjusted, calculation, similar to its application in 17 CFR 210.11–01 through 210.11–03 (‘‘Article 11’’ of Regulation S–X),290 which requires pro forma financial information that incorporates the effects of ‘‘probable or consummated transactions.’’ 291 The third adjustment is for inclusion of other material effects of the de-SPAC transaction on the SPAC’s net tangible book value per share but not the de-SPAC transaction itself. A consummation of the de-SPAC transaction could have material effects on the amount of net tangible book value that the SPAC contributes to the post-combination entity that do not stem from the types of transactions identified in the second adjustment discussed above. Two examples of such other effects would be the issuance of shares contingent on consummation of the de-SPAC transaction as compensation to a SPAC sponsor and the expected incurrence of transaction expenses to consummate the de-SPAC transaction. Further, to ensure ‘‘net tangible book value per share, as adjusted’’ depicts the amount of net assets that the SPAC will contribute to the post-combination entity, calculation of the measure excludes the effect of the consummation of the de-SPAC transaction itself. Thus, target company assets should not be included in net tangible book value per share, as adjusted and, in de-SPAC transactions where the consideration paid for the target company is securities of the SPAC, the SPAC should not include those
securities paid as consideration in the denominator of the net tangible book value per share, as adjusted, calculation.292
iv. Discussion of Comments
a. Warrants
We are not adopting one commenter’s recommendation that dilution from warrants should be conveyed using the treasury share method.293 A treasury share method approach would involve calculating the difference between the strike price of a warrant and the trading price of the shares of the post-de-SPAC transaction combined company.294 At the time of the dilution disclosure, those trading prices are not known. The commenter suggested using ‘‘various hypothetical share increments above $10 per share,’’ which is the typical SPAC IPO offering price.295 We do not believe that conveying the dilutive effect of warrants using that approach would be appropriate in connection with the dilution disclosure requirements we are adopting, because the hypothetical prices used in the calculation may not be realistic. Further, we believe there is sufficient disclosure about the terms of the warrants 296 that would enable an investor to conduct such analysis on the strike price of a warrant using assumptions of trading prices of shares. The same commenter recommended that ‘‘sensitivity analyses should only be required for sources of dilution, such as warrants, where the dilutive impact varies based on changing equity values or other variables.’’ 297 As discussed above, final Item 1604(c) does not include the proposed provisions related

298See Financial Accounting Standards Board Accounting Standards Codification 815–40 and International Financial Reporting Standard IAS 32, Financial Instruments: Presentation. 299Letter from Vinson & Elkins. See supra note 230 and accompanying text. 300 Item 1604(c) allows more discretion over issuer-specific dilution information by requiring a range of reasonably likely redemption levels rather than the fixed percentages established by the table in Item 1602(a)(4). 301 If the offering sizes across the SPACs being compared are similar and the restrictions on maximum redemptions in the governing documents of the SPACs being compared are similar, the percentages presented in the table may be close to identical across the relevant set of SPACs examined. Also, where the size of the offering is large and the restriction on redemption is small by comparison, the various 25, 50, and 75 percentages of maximum redemption may closely approximate 25, 50, and 75 absolute percentages of securities sold in the offering. For example, if the offering raises $1 billion and the redemption restriction is $5 million, then the maximum redemption level would be 99.5% ($995 million divided by $1 billion) and 75% of the maximum redemption level would be 74.625% (.75 times .995). See also Table 1 (Number of SPAC IPOs in the U.S. Securities Market from 2012–2023) in section I (providing data, including total capital raised per year and the number of offerings per year, from which an average offering size per year may be calculated). 302Letter from Vinson & Elkins. See supra note 230 and accompanying text. 303See Rule 419 (Offerings by blank check companies); Rule 3a51–1 (definition of ‘‘penny stock’’). 304Letter from White & Case. to sensitivity analysis that concerned the commenter. For Item 1602(a)(4) and (c) and 1604(c), with respect to classification of warrants on an unadjusted basis, as either a liability or equity, registrants should follow applicable GAAP.298 This classification may affect the calculation of net tangible book value per share, as adjusted, because a liability-classified warrant would increase liabilities thereby reducing net tangible book value, while an equity-classified warrant would not do so, unless the effect of its exercise is included in the calculation. Whether to adjust net tangible book value per share to give effect to the exercise of a warrant is a judgment based on facts and circumstances, including whether the effect of the exercise would be consistent with the objective of the disclosure—to depict the amount of net assets the SPAC will contribute to the post-combination entity. When the exercise of the warrant is not contingent on the consummation of the de-SPAC transaction, then adjustment that includes the effect of the warrant’s exercise in net tangible book value per share, as adjusted, generally would not be appropriate because those warrants will remain outstanding after the de￾SPAC transaction. As discussed above, the
non-tabular disclosure of ‘‘each material potential source of future dilution’’ under Item 1604(c) potentially may need to discuss a broader set of items than ‘‘material probable or consummated transactions,’’ although this would depend on a SPAC’s specific facts and circumstances. Thus, whether or not a registrant has made an adjustment for warrants in net tangible book value per share, as adjusted, the registrant may need to describe how the warrants are a material potential source of future dilution. b. Redemptions We are not adopting a commenter’s suggestion to include a redemption scenario that would reflect ‘‘100% of the public shares (regardless of any provisions in the SPAC’s governing documents that might theoretically limit redemptions).’’ 299 While we acknowledge that the suggested approach would permit an identical comparison across SPACs at the 100% redemption level, as the commenter noted, we believe that suggested approach would be less meaningful to investors than the maximum redemption level approach we are adopting in the final rules, because that suggested approach would not take into account the governing documents and so would present a scenario that may not in fact occur in practice. We agree that comparability is an important goal as there may be certain investors who focus on the relative dilution in a particular SPAC offering as compared to other SPAC offerings. However, that comparability across SPACs should be balanced with the need to disclose information tailored to the registrant. The requirement in Item 1602(a)(4) and (c) of the final rules to provide a maximum redemption level (instead of redemption based on 100% of securities sold) and other redemption levels as a percentage of this maximum will provide more issuer-specific information than absolute 25%, 50%, 75%, and 100% levels.300 While the rules we are adopting will not necessarily provide comparability at identical percentages across SPACs, we believe investors nevertheless may make valuable comparisons across SPACs when looking at the dilution information supplied at each of the prescribed intervals in the rule.301 The same commenter expressed the view that current dilution disclosure under Item 506 of Regulation S–K is unhelpful for IPO-stage investors, as the output is driven by the maximum redemption scenario which can differ based on (i) different provisions of the SPAC’s constituent documents and (ii) the interpretation of those constituent documents.302 We believe the dilution information requirements related to IPOs in Item 1602 that we are adopting will provide more helpful information to investors than current market practice under Item 506 with respect to SPACs, where, in the experience of the Commission staff, some registrants have focused solely on a maximum redemption scenario. Item 1602 as adopted will provide a greater range of redemption scenario dilution information to investors. Further, the Commission does not believe that different
interpretations of a SPAC’s governing documents will make a SPAC unable to provide the required dilution information at the maximum redemption level for two reasons. First, a SPAC will know how to interpret its own governance documents. In addition, in the experience of the Commission staff, many SPACs use similar, well-established governing document provisions that set their maximum redemption level at a level to avoid the SPAC being an issuer of penny stock.303 We do not anticipate these standardized provisions will involve difficult interpretive issues. One commenter said that ‘‘a SPAC may actually become subject to a maximum redemption scenario that is lower than the quartile intervals required to be presented by proposed Item 1602(a)(4).’’ 304 As discussed above in the description of the dilution rules we proposed, the redemption levels required by Item 1602(a)(4) are ‘‘25% of maximum redemption,’’ ‘‘50% of maximum redemption,’’ and ‘‘75% of maximum redemption’’ and thus are relative to the maximum redemption level and are not an absolute percentage. To clarify for investors the percentage used, registrants may add information to the table headers. For example, where the maximum redemption is 97.5%, a registrant could add ‘‘25% of Maximum Redemption (24.375%).’’ For greater clarity, in final Item 1602(a)(4), we have replaced the proposed terms ‘‘at quartile intervals up to the maximum redemption threshold’’ with the terms ‘‘at quartile intervals based on percentages of the maximum redemption threshold,’’ because we believe registrants could mistakenly interpret the proposed terms to require quartile intervals based on the total number of shares issued in the offering for the three redemption levels in the
table other than the maximum
redemption level.
One commenter recommended the Commission require dilution disclosure

305Letter from CII. See supra note 236 and accompanying text. 306Letters from Freshfields, Vinson & Elkins, White & Case. See supra notes 237, 238, and 240 and accompanying text. 307Letter from White & Case. See supra note 238 and accompanying text. 308See final Items 1602(c) and 1604(c)(2). 309 In this respect, as noted above, we disagree with the comment that ‘‘lengthy and detailed caveats’’ would be ‘‘need[ed].’’ See letter from White & Case, supra note 238 and accompanying text. 310Letters from CII; Michael Klausner, Michael Ohlrogge, and Harald Halbhuber; NASAA; Vinson & Elkins. See supra notes 254 through 264 and accompanying text. 311Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. See supra note 261 and accompanying text. 312Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. See supra note 262 and accompanying text. These commenters also provided a formula for the calculation of net cash per share: (a) Total cash (consisting of the sum of cash from SPAC public shareholders plus cash from PIPEs or forward purchase agreements minus cash expenses minus the value of warrants minus the value of other equity derivatives), divided by (b) Total shares (consisting of public shares plus founder shares plus PIPE or forward purchase agreement shares plus other shares plus shares issuable under rights). See id. 313When calculating return on net tangible book value per share, some investors may exclude non￾operating assets, such as cash among others, in order limit the measure to those returns on net tangible book value per share that are sustainable. See, e.g., Gary R. Trugman, Understanding Business Valuation (2018) (recommending an analyst calculating return on net tangible assets ‘‘remove any items on the balance sheet that may be attributable to non-operating assets or liabilities.’’). However, for the avoidance of doubt on the part of registrants, this is not appropriate for a registrant with respect to the calculation on net tangible book value per share, as adjusted, in connection with dilution disclosure, which should include non￾operating tangible assets such as cash among others. 314The calculations of net tangible book value per share, as adjusted, in final Item 1602(a)(4) and (c) and 1604(c), take into account similar elements as the cash component of net cash per share, such as the inclusion of cash held by the SPAC and securities purchased by the SPAC, as well as the removal of expenses and warrant liabilities. Net cash per share has aspects that make it less useful for investors than net tangible book value per share, as adjusted. First, with respect to the net cash per share calculation, ‘‘net cash’’ in the numerator is reduced by the value of the equity-classified awards, which would be inconsistent with GAAP. We do not believe this is appropriate and have not taken this approach with respect to net tangible book value per share, as adjusted (as discussed above). Second, the net cash per share
calculation includes all shares issuable by rights, regardless of any conditions on such issuance, whereas net tangible book value per share, as adjusted, would only make an adjustment to include such shares where a criterion for making an adjustment is met (as discussed above). 315Letter from Michael Klausner, Michael Ohlrogge, and Harald Halbhuber. 316As discussed above, in combined proxy statements and registration statements in connection with de-SPAC transactions, the cover
page of the prospectus may be further back in the
document. at a 90% redemption level.305 We do not believe it is necessary to make such changes to the final rules. We believe the four redemption thresholds proposed will give investors a reasonable picture of the potential range of dilution outcomes pursuant to Item 1602(a)(4) and (c). For Item 1604(c) in connection with de-SPAC transactions, we believe providing a prescriptive level of 90% would be inconsistent with the requirement to provide SPAC￾specific reasonably likely redemption levels.
c. Assumptions
Commenters raised concerns that dilution disclosure would be characterized by uncertainty, be based on hypothetical assumptions, or depend on unknown variables.306 As discussed above, we have made changes to final Items 1602(a)(4) and (c) and 1604(c) to clarify how registrants should calculate dilution. Where registrants are making adjustments consistent with ‘‘net tangible book value per share, as adjusted’’ or are making assumptions in connection with other dilution disclosures required under the final rules, we believe registrants should be able to provide the required dilution information based on reasonable assumptions. We do not believe that dilution disclosure would mislead investors, as suggested by one commenter, or that such assumptions would need to be presented with lengthy and detailed caveats.307 On the contrary, we believe investors will understand that assumptions being made in connection with required dilution disclosure do not mean the dilution has occurred or is certain to occur. The final rules require a description of the assumptions necessary to understand the tabular disclosure,308 and, in providing that disclosure, registrants may highlight that these are assumptions in order to make that point clearer for investors. While we do not believe that the assumptions necessarily need lengthy and detailed caveats,309 if there are facts and circumstances in which a registrant believes a lengthy or detailed discussion is needed, we believe that would be appropriate to allow investors to understand the accompanying tabular disclosure. d. Net Cash Per Share Disclosure We are not adding an explicit net cash per share disclosure requirement as several commenters recommended that we require.310 One group of commenters said net cash per share disclosure should be provided on the cover page of the registration statement.311 These commenters expressed the view that the dilution concept included in the proposal reflects a concept of dilution that is focused on ‘‘ownership dilution,’’ not the kind of dilution (and dissipation of cash) that reduces the net cash underlying a SPAC share.312 We do not agree with that group of commenters that the proposal was limited to dilution focused solely on reduction in the percentage ownership of a shareholder out of total shares deemed to be issued and outstanding. We agree this form of dilution described by commenters is an element of the denominator in the net tangible book value per share, as adjusted, calculation, but the numerator of the net tangible book value per share, as adjusted, calculation will capture and convey other information—such as existing cash (prior to the relevant transaction, e.g., IPO or de-SPAC transaction), cash raised in securities issuances, and cash paid out to holders of redeemable securities—of the same type that these commenters focus on in recommending disclosure of net cash per share.313 Because we believe substantially all the information that would be conveyed to an
investor by a net cash per share measure will be conveyed by the required ‘‘net tangible book value per share, as adjusted,’’ we are not adding an explicit net cash per share disclosure requirement.314 But shareholders who seek to calculate ‘‘net cash per share’’ at different levels of redemption should have the information to perform this calculation based on the disclosure provided in connection with net tangible book value per share, as adjusted. e. Cover Page Regarding comments that recommended that de-SPAC transaction dilution information be presented on the prospectus cover page,315 the Commission believes it is sufficient to require the tabular disclosure in the prospectus body in Item 1604(c).316 At the de-SPAC stage, there will be more registrant-specific information included in the dilution disclosure, as the registrant will have more information about potential causes of dilution (such as expected redemption levels and financings that will accompany the de￾SPAC transaction). Due to this, these disclosures may not be as easily presentable in a straightforward way on the cover page. Item 1604(a)(3), however, will require the registrant to state on the prospectus cover page whether SPAC sponsor compensation and ownership may result in a material dilution of the equity interests of non￾redeeming shareholders who hold the securities until the consummation of the

317Letter from Loeb & Loeb, supra notes 265, 266, and 267 and accompanying text. See also proposed Item 1604(c)(1) (‘‘For each redemption level in the sensitivity analysis, state the company valuation at or above which the potential dilution results in the amount of the non-redeeming shareholders’ interest per share being at least the initial public offering price per share of common stock.’’). 318See, e.g., Jeffrey C. Hooke, Security Analysis on Wall Street: A Comprehensive Guide to Today’s Valuation Methods 234 (1998) (showing key valuation data of publicly traded stocks using enterprise value defined as (1) market value of equity, plus (2) outstanding debt, minus (3) cash on hand). 319Letter from Loeb & Loeb. See supra note 267 and accompanying text. 320Letter from CFA Institute. 321Letter from NASAA. 322See Item 8 of Form S–1 (incorporating 17 CFR
229.508 (Item 508 of Regulation S–K) (Plan of
Distribution)) and Item 4 of Form F–1 (requiring the furnishing of information pursuant to Part 1, Item 9.B (Plan of Distribution) of Form 20–F). de-SPAC transaction and to provide a cross-reference highlighted by prominent type to the location of related disclosures in the prospectus. f. Interest Per Share Disclosure We disagree in part with the commenter who suggested that the final sentence of proposed Item 1604(c)(1) required a determination of the enterprise valuation that will result in a shareholder’s ‘‘interest per share’’ calculated by reference to a pro forma closing date balance sheet being at least equal to the $10 price per share paid in the IPO.317 The use of the term ‘‘valuation’’ in Item 1604(c)(1) would not require, as suggested by the commenter, an ‘‘enterprise valuation’’ (which typically values the sum of the equity and debt of a company minus cash).318 We agree, however, with the general point suggested by the commenter that a registrant’s preparation of Item 1604(c)(1) disclosure could be assisted by reference to, among other potential sources, a pro forma balance sheet. But we believe this would be the case only where such pro forma balance sheet contains the number of total shares (calculated consistent with Item 1604(c)), because the amount of shares is a critical component of the calculation required to provide disclosure under this item. The pro forma balance sheet may not be capable of serving as the sole source of this information, because it may show total shares only for certain redemption levels, such as zero redemptions and maximum redemptions; hence, it may not provide the total share number ‘‘with respect to each redemption level’’ as required by Item 1604(c)(1). To further clarify, we provide the following basic example of disclosure under Item 1604(c)(1). A hypothetical SPAC issued shares in an IPO at $10 per share. After giving effect to the IPO, the issued and outstanding shares of the SPAC are 20,000,000, for a total market capitalization of $200,000,000. In connection with the de-SPAC transaction, the SPAC issues 65,000,000 shares to the target company’s shareholders and issues 15,000,000 shares in a private placement for a total of 100,000,000 outstanding shares. Two (out of several) redemption levels the SPAC has chosen to use for the disclosure required by Item 1604(c) are zero redemptions and 5,000,000 shares redeemed (5% of the total shares). Where redemptions are zero, for purposes of Item 1604(c)(1), the SPAC would have 100,000,000 total shares after giving effect to the de-SPAC transaction and related financing. Where redemptions are zero, the company valuation at or above which the non-redeeming shareholders’ interest per share would be at least the IPO price per share ($10 in this example) would be calculated as: $10 (per share IPO price) times 100,000,000 shares, or $1,000,000,000. Where 5,000,000 shares are redeemed (5% of the total shares), the SPAC would have 95,000,000 total shares after
giving effect to the de-SPAC transaction and related financing. At this redemption level, the company valuation at or above which the non-redeeming shareholders’ interest per share would be at least the IPO price per share ($10 in this example) would be calculated as: $10 (per share IPO price) times 95,000,000 shares, or $950,000,000. For the remaining redemption levels, the registrant would provide the required disclosure in a similar manner. With respect to the commenter’s concern that some investors may misunderstand disclosure under the item and view it as a guarantee that the stock will not trade down in the aftermarket,319 we do not believe investors are likely to misunderstand disclosure under Item 1604(c)(1) in that manner. As discussed above, we believe it will be clear to investors that the various valuation figures provided at each of the redemption levels are not guarantees about movements in or levels of future market trading prices of the post-de-SPAC transaction combined company. In addition, to the extent a registrant has a concern about investor confusion regarding the disclosure required under Item 1604(c)(1), such a registrant could provide additional disclosure discussing this issue, such as, for example, explicitly stating that the required disclosure is not a guarantee that the trading price of the combined company will not be below the IPO price nor is the disclosure a guarantee the company valuation will attain one of the stated levels of valuation. Another commenter recommended that the Commission consider requiring that intermediaries provide information about ‘‘the sponsor, actual and potential conflicts of interest, [and] how much a non-redeeming SPAC investor’s interest will be diluted’’ in a separate ‘‘Key Risks and Conflicts form’’ that is detached from the prospectus, so that the disclosure receives more investor attention and focus.320 We believe that the disclosure we are requiring in this release will receive an appropriate level of investor attention and focus and that no further amendments are needed in this regard. g. Lock-Up and Earnout Provisions One commenter said that ‘‘any lock￾up periods or earnout provisions for sponsors or underwriters would be of significant interest to investors and should be required if part of the SPAC offering.’’ 321 We are not making any changes in response to this comment because the final rules already will require such disclosure. Where there are earnout provisions for SPAC sponsors, the registrant would need to disclose these pursuant to Items 1602 and 1604 regarding compensation of SPAC sponsors and ownership of SPAC securities by SPAC sponsors. Also, where there are lock-ups for SPAC sponsors, the registrant would need to disclose these pursuant to Item 1603(a)(9) regarding the material terms of any agreement, arrangement, or understanding regarding restrictions on whether and when the SPAC sponsor and its affiliates may sell securities of the SPAC. In connection with
underwriters, plan of distribution information is required by Forms S–1 and F–1.322 E. Prospectus Cover Page and Prospectus Summary Disclosure

1. Proposed Rules
   i. Proposed Prospectus Cover Page
   Disclosure
   For registered offerings (including IPOs) by SPACs other than de-SPAC transactions, the Commission proposed Item 1602(a) to require information on the prospectus outside front cover page in plain English about, among other things: (1) the time frame for the SPAC to consummate a de-SPAC transaction, (2) redemptions, (3) SPAC sponsor compensation, (4) dilution (including simplified tabular disclosure), and (5) conflicts of interest.

323Letters from ABA (expressing support for proposed Items 1602 and 1604 but also expressing concern regarding the length and density of prospectus cover page and determining fairness in de-SPAC transactions), Better Markets, CFA Institute. 324Letter from Better Markets. 325See, e.g., letters from ABA, Loeb & Loeb, Ropes & Gray, Vinson & Elkins. See also 17 CFR
229.501 (‘‘Item 501’’ of Regulation S–K) (one-page
limit for prospectus cover page).
326Letter from Vinson & Elkins.
327 Id.
328 Id.
329 Id.
330 In certain rules, a cover page requirement may be similar to but not identical with a prospectus summary requirement. We note that the cover page disclosure for Item 1602(a)(3) (exclusive of securities issuance disclosure) is not required to contain the same level of detail as required in the tabular disclosure in the prospectus summary under Item 1603(b)(6), which should contain line items for each compensation item. Disclosure under Item 1603(a)(6) should provide a similar level of detail as under Item 1602(b)(6), except in non-tabular format. 331Letter from Better Markets. See supra note 324 and accompanying text. For de-SPAC transactions, the Commission proposed Item 1604(a) to require that SPACs include information on the prospectus outside front cover
page in plain English about, among
other things: (1) the fairness of the de￾SPAC transaction, (2) material financing transactions, (3) SPAC sponsor compensation and dilution, and (4) conflicts of interest.
ii. Proposed Prospectus Summary
Disclosure
For registered offerings (including IPOs) by SPACs other than de-SPAC transactions, the Commission proposed Item 1602(b) to require in the prospectus summary a brief description in plain English about, among other things: (1) how the SPAC will identify and evaluate potential business combination candidates and whether it will solicit shareholder approval for the de-SPAC transaction, (2) the material terms of the trust or escrow account and the amount or percentage of the gross offering proceeds that the special purpose acquisition company will place in the trust or escrow account, (3) the material terms of the securities being offered, including redemption rights, and whether the securities are the same class as those held by the SPAC sponsor and its affiliates, (4) the period of time in which the SPAC intends to consummate a de-SPAC transaction, (5) any plans to seek additional financings and how the terms of additional financings may impact unaffiliated security holders, (6) in a tabular format, compensation of the SPAC sponsor, its affiliates, and promoters, and the extent to which this compensation may result in a material dilution of the purchasers’ equity interests, and (7) any material actual or potential conflicts of interest between the SPAC sponsor or its affiliates or promoters and purchasers in the offering, including those that may arise in determining whether to pursue a de-SPAC transaction. For de-SPAC transactions, the Commission proposed Item 1604(b) to require in the prospectus summary a brief description in plain English about, among other things: (1) the background and material terms of the de-SPAC transaction, (2) whether the SPAC reasonably believes that the de-SPAC transaction is fair or unfair to unaffiliated security holders, the bases for such belief, and whether the SPAC or the SPAC sponsor has received any report, opinion, or appraisal from an outside party concerning the fairness of the de-SPAC transaction, (3) any material actual or potential conflicts of interest between the SPAC sponsor or its affiliates or promoters and unaffiliated security holders in connection with the de-SPAC transaction, (4) in a tabular format, the terms and amount of the compensation received or to be received by the SPAC sponsor and its affiliates in connection with the de-SPAC transaction or any related financing transaction, and whether that compensation has resulted or may result in a material dilution of the equity interests of unaffiliated security holders of the special purpose acquisition company, (5) the material terms of any financing transactions that have occurred or will occur in connection with the consummation of the de-SPAC transaction, the anticipated use of proceeds from these financing transactions and the dilutive impact, if any, of these financing transactions on unaffiliated security holders, and (6) the rights of security holders to redeem the outstanding securities of the SPAC and the potential impact of redemptions
on the value of the securities owned by non-redeeming shareholders.
2. Comments
Several commenters generally supported the proposed prospectus cover page and prospectus summary disclosure requirements.323 One of these commenters expressed the view that these requirements would assist shareholders in understanding: (a) the compensation structures for SPAC sponsors, (b) conflicts in the relationship between SPAC sponsor, underwriter, and shareholder, (c) potential sources of dilution, and (d) whether or not any fairness opinions were obtained from third parties in connection with the de-SPAC transaction.324 The commenter suggested this understanding would better equip investors to evaluate the wisdom of placing their money at risk in a SPAC, would closely align the information provided in SPAC IPOs with the information provided to investors in traditional IPOs, and would help to narrow the information asymmetries in the SPAC IPO model. Several commenters suggested the proposed prospectus cover page requirements would produce cover page disclosure that will be dense and longer than one page.325 One commenter said ‘‘requiring disclosure to be included at least three times in the document (e.g., on the cover page, in the summary, and in the body of the document where the same information often appears multiple times) seems excessive and potentially distracting to investors.’’ 326 This commenter also expressed the view that the Commission should not require disclosure of ‘‘ ‘any plans to seek additional financing and how such additional financing might impact shareholders’ in IPO registration statements.’’ 327 The commenter said that, at the time of the IPO, this disclosure would be ‘‘purely hypothetical,’’ and would lead to ‘‘boilerplate’’ disclosures that would ‘‘distract’’ investors from other more useful and material information.328 The commenter, however, said that, ‘‘if the SPAC already has commitments for additional financing at the time of the IPO (e.g., a forward purchase agreement or a backstop commitment), the material terms of such financings and potential impact on shareholders or on the de￾SPAC transaction should be disclosed.’’ 329
3. Final Rules
After considering the comments received, we are adopting Items 1602(a) and (b) and 1604(a) and (b) as proposed with certain modifications discussed below.330 We agree with the commenter who expressed the view that investors will benefit from these provisions, including by better understanding factors including compensation, conflicts of interest, and dilution.331 Under the final rules, the key disclosures concerning SPAC offerings and de-SPAC transactions will be highlighted on the cover page and in the prospectus summary in an easily readable and understandable form. The disclosure under these items also will enable investors to better parse complex aspects of SPAC transactions. As a result, we believe investors will be

332 Item 501(b) of Regulation S–K sets forth disclosure requirements for the outside front cover
page of prospectuses, such as the name of the
registrant, title and amount of securities being offered, and the offering price of the securities. 333See, e.g., letters from ABA, Loeb & Loeb, Ropes & Gray, Vinson & Elkins. See also Item 501 of Regulation S–K (one-page limit for prospectus cover page). 334Letter from Vinson & Elkins. See supra note 326 and accompanying text. 335Staff experience in reviewing current SPAC filings is that some SPACs repeat disclosure numerous times in current registration statements even where not required by current rules; we infer from this market practice that some issuers may believe such repetition is helpful to investors in understanding important facts that may not be well understood through an isolated reference. The final rules we are adopting are not inconsistent with that current market practice. 336Letter from Vinson & Elkins. See supra notes 328 and 329 and accompanying text. 337Final Item 1602(b) provides that the disclosure required thereunder in the prospectus summary must be in the form of a ‘‘brief description.’’ We expect that the level of detail of the disclosure under final Item 1602(b)(5) of ‘‘[a]ny plans to seek additional financings’’ will reflect the level of development of such plans. A registrant is only required to disclose plans that are known to the registrant to be ‘‘plans to seek additional financings.’’ 338 In connection with similar issues in the context of Item 1602(c) disclosure of ‘‘each material potential source of future dilution,’’ we discuss above in section II.D.3.iii that registrants may warn investors that the disclosure about such potential sources should not be misconstrued as indications certain events are certain to occur in the future. 339 In addition, in final Items 1602(b)(7) and 1604(a)(4) and (b)(3) we moved ‘‘material’’ after ‘‘actual or potential’’ for consistency throughout new subpart 1600. better able to identify and assess important aspects of the transactions that may affect their investment and voting decisions. Although in current market practice, many SPACs already disclose similar information on prospectus cover pages,332 the final rules we are adopting will standardize this information across all registration statements filed by SPACs for IPOs and for de-SPAC transactions. In addition, investors may benefit from comparing this information not only across other SPAC transactions but by comparing it to investments contemplated in securities of non-SPACs where those registrants provide similar disclosure under current market practice. Several commenters suggested the proposed prospectus cover page requirements would produce cover page disclosure that will be dense and longer than one page.333 While we recognize that the new cover page requirements will increase the amount of information included on the prospectus outside front cover page, we believe these requirements will be a limited incremental increase compared to current prospectus outside front cover
page disclosure and we do not believe
that this incremental increase will undermine the overall clarity of the cover page disclosure. Also, we continue to believe outside front cover
page prominence of the required
information serves the key purpose of alerting investors to the importance of the information. We believe registrants will be able to fit the required dilution information in tabular form on the outside front cover page just as they currently fit required information on the securities offering price, underwriting fees, and net proceeds in tabular form on the outside front cover page. Based on Commission staff’s experience with current outside front cover page disclosure and staff’s consideration of how outside front cover page disclosure will appear under the final rules, we believe there will be space to add this additional table and other new disclosure required by the final rules without making the outside front cover
page cramped or difficult to read. We
also do not believe these requirements will compel registrants to abandon non￾required elements that often appear on the outside front cover page such as company artwork and logos, use of large fonts for service provider names, and aesthetic use of empty space. One commenter on the proposal said requiring cover page, prospectus summary, and body of the document disclosures seems excessive and potentially distracting to investors.334 We disagree and believe the enhanced disclosures in each of the three locations will serve a valuable purpose for investors.335 The cover page provides the first alerts to investors about information that is important for their investment and voting decisions. In the prospectus summary, we believe the additional disclosures will reduce information processing costs, including for less financially sophisticated investors or investors with limited time to analyze the prospectus, by providing information in plain English about important SPAC features in a concise format. Finally, the prospectus body contains the detailed information needed for more comprehensive investor understanding. One commenter expressed the view that prospectus summary disclosure related to additional financings (other than committed financings) at the IPO stage would be hypothetical and boilerplate and would distract investors from more useful information.336 We agree that, if financing agreements have been entered into, then they must be disclosed. To this end, Item 1602(b)(5) requires disclosure of these agreements and how their terms may impact unaffiliated security holders. However, under final Item 1602(b)(5), as proposed, even if no such agreements have been entered at the time that Item 1602(b)(5) is applicable, registrants are required to generally describe any plans to seek additional financings and how the terms of additional financings may affect unaffiliated security holders even if the actual, specific terms of any financing agreements (should they ultimately be entered) may not be known.337 The disclosure of these plans will alert investors to the potential aspects of the overall de-SPAC transaction structure, including those that impact future dilution, which will help investors make informed investment and voting decisions. As with dilution disclosure in SPAC IPOs that we discuss in section II.D.3 above (where commenters raised similar concerns), even where a registrant has not committed to a transaction or will not have consummated a transaction, registrants should be able to use reasonable assumptions about potential financing needs to provide the required disclosure. We disagree with the view that this prospectus summary information would be a distraction to investors from other important information. On the contrary, as we discuss generally above, we believe the prospectus summary disclosure regarding additional financing plans will highlight key issues for investors and the summary format will help them process the information,
particularly when comparing potential investments in different SPACs. We do not believe investors will misconstrue this information to mean the additional financing is certain to occur. Registrants may highlight this lack of certainty in their disclosure if they have concerns their investors will misconstrue the information.338 We do not expect the additional financing prospectus summary disclosures will be boilerplate, as the additional financing disclosure will need to be tailored to the plans of the SPAC. In final Item 1602(a)(5), we replaced the proposed term ‘‘SPAC sponsor or its affiliates or promoters and purchasers in the offering’’ with the term ‘‘SPAC sponsor, its affiliates, or promoters; and purchasers in the offering.’’ We made the same changes to final Item 1602(b)(7).339 Both the changes to Item 1602(a)(5) and (b)(7) were made to clarify that the interests of each of the listed persons should be assessed

340 In addition, in final Item 1602(b)(5) we replaced the proposed term ‘‘impact’’ with the term ‘‘affect’’ for clarity. 341See final Item 1604(a)(1) and (b)(2). 342See (a) section II.B (Sponsors) discussion of final Items 1602(a)(3) and (b)(6) and 1604(a)(3) and (b)(4) and (5); (b) section II.C (Conflicts of Interest) discussion of final Items 1602(a)(5), 1604(a)(4) and (b)(3), and 1602(b)(7); and (c) section II.D (Dilution) discussion of final Items 1602(a)(4) and 1604(b)(4) and (5). In addition to the changes to final Item 1604(b)(3) discussed in other sections of this release, we have moved the language ‘‘in connection with the de-SPAC transaction’’ from the end of the item to the beginning of the item and made punctuation and paragraph numbering changes to clarify the comparison of interests must be between each of ‘‘the SPAC sponsor, SPAC officers, SPAC directors, SPAC affiliates or promoters, target company officers, or target company directors’’ and ‘‘unaffiliated security holders of the SPAC.’’ 343Letter from Committee on Capital Markets Regulation. 344Letters from ABA (‘‘To eliminate duplication, we recommend against adoption of Item 1605’’), Vinson & Elkins (‘‘The SEC should not adopt a new disclosure requirement with respect to material interests in a prospective de-SPAC transaction or any related financing transaction held by the sponsor and the SPAC’s officers and directors, as proposed’’). 345Letter from ABA (specifically suggesting ‘‘revising Items 1004(a)(2) and 1013(b) of Regulation M–A and Item 403 of Regulation S–K to incorporate the provisions of proposed Item 1605 taking into consideration that many issues addressed in proposed Item 1605 may arise and be applicable to business combinations that are not effected by a SPAC or a blind pool’’). 346Letter from Michael Klausner and Michael Ohlrogge. 347 Id. (‘‘For instance, if a PIPE investor buys a share for $10, but also receives a free warrant worth $1.50, then the PIPE investor is in effect paying $8.50 for the share.’’). 348 Id. against the interests of ‘‘purchasers in the offering.’’ 340 In final Item 1604(a)(1) and (b)(2), we made revisions to reflect changes we are making to Items 1606 and 1607 that are discussed in section II.G.341 In final Item 1604(a)(4), following the phrase ‘‘State whether, in connection with the de-SPAC transaction, there may be any actual or potential material conflict of interest,’’ we added the phrase ‘‘including any material conflict of interest that may arise in determining whether to proceed with a de-SPAC transaction and any material conflict of interest arising from the manner in which the special purpose acquisition company compensates a SPAC sponsor, officers, and directors or the manner in which a SPAC sponsor compensates its officers and directors.’’ This change makes Item 1604(a)(4) required cover
page disclosure congruent with Item
1603(b) (non-cover page) disclosure. In de-SPAC transactions, the cover page disclosure under Item 1604(a)(4) should provide a cross reference to, among other things, the description of these actual or potential material conflicts of interest under Item 1603(b). We also made a number of other changes to the final rules related to prospectus cover page and prospectus summary disclosure that are discussed above in other sections of this release.342 F. De-SPAC Transactions: Background, Reasons, Terms, and Effects

1. Proposed Item 1605
   The Commission proposed Item 1605 of Regulation S–K to require disclosure of the background, material terms, and effects of the de-SPAC transaction, including:

• A summary of the background of
  the de-SPAC transaction, including, but not limited to, a description of any contacts, negotiations, or transactions that have occurred concerning the de￾SPAC transaction;
• A brief description of any related
  financing transaction, including any payments from the SPAC sponsor to investors in connection with the financing transaction;
• The reasons for engaging in the
  particular de-SPAC transaction and for the structure and timing of the de-SPAC transaction and any related financing transaction;
• An explanation of any material
  differences in the rights of security holders of the post-business combination company as a result of the de-SPAC transaction;
• Disclosure regarding the accounting
  treatment and the Federal income tax consequences of the de-SPAC transaction, if material;
• Any material interests in the de￾SPAC transaction or any related
  financing transaction held by the SPAC sponsor and the special purpose acquisition company’s officers and directors, including fiduciary or contractual obligations to other entities as well as any interest in, or affiliation with, the target company; and
• A statement whether or not security
  holders are entitled to any redemption or appraisal rights, a summary of such redemption or appraisal rights, and, if there are no redemption or appraisal rights available for security holders who object to the de-SPAC transaction, a brief outline of any other rights that may be available to security holders.

2. Comments: Item 1605
   One commenter stated that proposed Item 1605 would provide useful information to investors.343 Some commenters, however, opposed proposed Item 1605, stating it would be duplicative of existing disclosure requirements.344 One of these commenters said that, in lieu of adopting Item 1605, they ‘‘recommend a more uniform methodology to address conflicts of interest arising from business combinations in general by revising Items 1004(a)(2) and 1013(b) of Regulation M–A and Item 403 of Regulation S–K to incorporate the provisions of proposed Item 1605 taking into consideration that many issues addressed in proposed Item 1605 may arise and be applicable to business combinations that are not effected by a SPAC or a blind pool.’’ 345 One commenter recommended that we revise proposed Item 1605(b)(2), with respect to descriptions of related financings.346 The commenter said, ‘‘PIPE investors often buy into SPAC deals on discounted terms compared to the terms offered to public shareholders in a SPAC.’’ The commenter said ‘‘the discount that PIPE investors receive is in the form of additional derivative securities, guarantees, or other complex financial arrangements and it is difficult for public investors to know the effective price per share at which PIPE investors are buying.’’ 347 The commenter recommended that we revise proposed Item 1605(b)(2) to state: ‘‘A brief description of related financing transactions, including the effective price per share at which investors are buying, after accounting for the value of any securities or guarantees they receive from the SPAC, SPAC sponsor or affiliate of either in connection with the financing transaction.’’ 348
3. Final Item 1605
   After considering the comments received, we are adopting Item 1605 as proposed, with several modifications discussed below. By providing a specialized disclosure rule tailored to de-SPAC transactions, the Item 1605 disclosure requirements will provide investors with information necessary to evaluate the reasons for a de-SPAC transaction and for choosing a particular structure and financing for the transaction. These requirements will also help promote consistent disclosure, allowing for greater comparability of these disclosures across de-SPAC transactions. Given the unique qualities of de￾SPAC transactions, we believe registrants will benefit from the centralization of the SPAC-related requirements in the Item 1600 series of Regulation S–K. If there are facts and circumstances that may result in required disclosure under a current rule being the same as under any of the rules we are adopting, registrants are not

349Letter from ABA. See supra note 345 and accompanying text. 350Letter from Michael Klausner and Michael Ohlrogge. See supra notes 347 and 348 and accompanying text. 351See disclosure requirements in (a)(5) and (a)(6) under Item 4 of Form S–4. 352 In addition, in final Item 1605(b)(4) we deleted the phrase ‘‘after the completion of the de-SPAC transaction’’ for clarity and to avoid redundancy with the immediately preceding words ‘‘as a result of the de-SPAC transaction.’’ 353Letters from Better Markets; Marcie Frost, Chief Executive Officer, California Public Employees’ Retirement System (June 9, 2022) (‘‘CalPERS’’); Committee on Capital Markets Regulation; Consumer Federation; Professor Holger Spamann (June 12, 2022) (‘‘Holger Spamann’’); NASAA; Public Citizen. 354Letters from ABA; Andrew Tuch, Professor of Law, Washington University in St. Louis (June 13,
2022) (‘‘Andrew Tuch’’); Cato Institute; CFA
Institute; Davis Polk & Wardwell LLP (June 13,
2022) (‘‘Davis Polk’’); Freshfields; Goodwin; Alfredo
Ortiz, President & CEO, Job Creators Network (June 13, 2022) (‘‘Job Creators Network’’); Jonathan Kornblatt; Kirkland & Ellis; Loeb & Loeb; NYC Bar; Paul Swegle; Ropes & Gray; Skadden Arps Slate Meagher & Flom LLP (June 13, 2022) (‘‘Skadden’’); White & Case. required to repeat disclosures, except where the applicable rule may so require (such as by calling for the disclosure in a specific location such as the prospectus cover page or prospectus summary). We are not adopting the recommendation that we adopt a more uniform methodology to address conflicts of interest arising from business combinations in general,349 because it is beyond the scope of our proposals concerning conflicts of interest and Item 1605, both of which are focused on SPACs. We are not revising Item 1605(b)(2) to provide more specificity on the types of securities or guarantees received from the SPAC, as suggested by one commenter. We are adopting Item 1605(b)(2) as proposed to require the disclosure of material terms of the de￾SPAC transaction, including a brief description of any related financing transaction, including any payments from the SPAC sponsor to investors in connection with the financing transaction. In most, if not all, cases, Item 1605(b)(2) will require the registrant to disclose the price paid by PIPE investors and other benefits such as derivative securities that are acquired by PIPE purchasers (in addition to SPAC shares), because these are likely to be material terms. One commenter recommended we require ‘‘A brief description of related financing transactions, including the effective price per share at which investors are buying, after accounting for the value of any securities or guarantees they receive from the SPAC, SPAC sponsor or affiliate of either in connection with the financing transaction.’’ 350 We are not revising the item to adopt this recommendation because we believe it would be difficult for registrants to calculate accurately or would result in inconsistent methodologies among registrants, or both, with respect to how registrants would convert various features, rights, or contractual provisions attendant to related financing transactions into amounts used to adjust actual transaction values to achieve the suggested effective price; we believe the resulting disclosure characterized by these issues could mislead investors or undermine the ability of investors to make comparisons across SPACs or both. We have made a number of modifications in final Item 1605 as compared to the proposal. First, in Item 1605(a), we have replaced the term ‘‘Furnish’’ with the term ‘‘Provide’’ in the sentence ‘‘Furnish a summary of the background of the de-SPAC transaction’’ to make it clear that we intend this disclosure to be filed. This change will also make Item 1605(a) consistent with the other items in Item 1605 in this respect. Second, in Item 1605(b)(5) and (6), we have deleted the phrase ‘‘, if material’’ to align the phrasing with the existing disclosure
requirements in Item 4 of Form S–4 351 as it was our intent to capture the same information at the same threshold and we did not intend for the phrasing to imply that the accounting treatment or Federal income tax consequences may not be material disclosure in a business combination transaction.352 Third, as discussed above in section II.C of this release regarding conflicts of interest, we are revising Item 1605(d) to address interests of target company officers and directors. Thus, in final Item 1605(d), we have added the phrase ‘‘; or held by the target company’s officers or directors that consist of any interest in, or affiliation with, the SPAC sponsor or the special purpose acquisition company.’’ Fourth, in final Item 1605(d), we have revised the phrase ‘‘held by the SPAC sponsor and the special purpose acquisition company’s officers and directors’’ by replacing the term ‘‘and’’ with ‘‘or’’ in each instance, because the requirements of Item 1605(d) should apply disjunctively where any of the named persons has a material interest in the de-SPAC transaction or any related financing (and not be limited to only those situations where every named person has such an interest). Fifth, we revised Item 1605(b)(3), (4), and (6) to clarify that these requirements will require disclosure with respect to the SPAC, target company, and/or security holders of the SPAC or target company. These changes eliminate potential ambiguity that could have caused registrants to inappropriately interpret the items as not including disclosure with respect to those persons in connection with de-SPAC transactions. Accordingly, as adopted:

• final Item 1605(b)(3) requires: ‘‘A
  reasonably detailed discussion of the reasons of the SPAC and the target company for engaging in the de-SPAC transaction and reasons of the SPAC for the structure and timing of the de-SPAC transaction and any related financing transaction;’’
• final Item 1605(b)(4) requires: ‘‘An
  explanation of any material differences in the rights of SPAC and target company security holders as compared with security holders of the combined company as a result of the de-SPAC transaction;’’ and
• final Item 1605(b)(6) requires: ‘‘The
  Federal income tax consequences of the de-SPAC transaction to the SPAC, the target company, and their respective security holders.’’ G. Board Determination About the De￾SPAC Transaction; Reports, Opinions, Appraisals, and Negotiations

1. Proposed Item 1606(a)
   The Commission proposed Item 1606(a) to address concerns regarding potential conflicts of interest and misaligned incentives in connection with the SPAC’s decision to proceed with a particular de-SPAC transaction and to assist investors in assessing the fairness of a particular de-SPAC transaction to unaffiliated investors. Specifically, the Commission proposed Item 1606(a) to require a statement from a SPAC as to whether it reasonably believes that the de-SPAC transaction and any related financing transactions are fair or unfair to the SPAC’s unaffiliated security holders, as well as disclosures regarding whether any director voted against or abstained from voting on, approval of the de-SPAC transaction or any related financing transaction.
2. Comments: Item 1606(a)
   Commenters expressed differing views on proposed Item 1606(a). Some commenters supported the proposed requirement.353 Other commenters opposed proposed Item 1606(a).354 Some of these commenters expressed the view that modeling rules applicable to de-SPAC transactions after the going private rules is inappropriate because the underlying

355Letters from Andrew Tuch, Freshfields, Kirkland & Ellis, Loeb & Loeb, Skadden. 356Letters from ABA, Cato Institute, CFA Institute, Davis Polk, Freshfields, Kirkland & Ellis, NYC Bar, Ropes & Gray, Skadden, White & Case. 357Letter from Ropes & Gray. 358 Id. 359Letters from Cato Institute, CFA Institute, Freshfields, Goodwin, Jonathan Kornblatt, White & Case. 360Letters from Davis Polk, Goodwin, Job Creators Network, Jonathan Kornblatt, Skadden, White & Case. 361Letters from ABA, Goodwin. 362Letters from ABA, Goodwin, NYC Bar, White & Case. 363Letter from NYC Bar. 364Letter from Vinson & Elkins. 365Letters from ABA, Andrew Tuch, Cato Institute, Davis Polk, Freshfields, Job Creators Network, Jonathan Kornblatt, Paul Swegle. 366Letters from ABA, Cato Institute, Davis Polk, Freshfields, Goodwin, Jonathan Kornblatt, Paul Swegle, Ropes & Gray, Skadden. 367Letter from Cato Institute (indicating that disclosure of projections would raise potential liability for SPACs as a result of the amendments to the PSLRA safe harbor). 368Letter from Andrew Tuch (‘‘In short, the Proposed Rules would subject de-SPACs to more onerous regulation than either going-private transactions subject to Rule 13e–3 [17 CFR 270.13e– 3] or traditional IPOs. A way to address this is to apply Items 1606 and 1607 more selectively, to those de-SPACs raising heightened risks of self￾dealing by SPAC fiduciaries, or perhaps not to apply these particular provisions at all.’’). 369Letters from ABA, Davis Polk, Freshfields, Goodwin, Ropes & Gray, Skadden, White & Case. 370Letters from ABA, Goodwin. 371Letter from Davis Polk. 372Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, Holger Spamann, NASAA, Public Citizen. See supra note 353 and accompanying text. 373Letters from ABA, Andrew Touch, Cato Institute, CFA Institute, Davis Polk, Freshfields, Goodwin, Job Creators Network, Jonathan Kornblatt, Kirkland & Ellis, Loeb & Loeb, NYC Bar, Paul Swegle, Ropes & Gray, Skadden, White & Case. See supra note 354 and accompanying text. 374Letters from ABA, Andrew Tuch, Cato Institute, Davis Polk, Freshfields, Job Creators Network, Jonathan Kornblatt, Paul Swegle. See supra note 365 and accompanying text. 375Letters from ABA, Cato Institute, Davis Polk, Freshfields, Goodwin, Jonathan Kornblatt, Paul Swegle, Ropes & Gray, Skadden. See supra note 366 and accompanying text. 376Letters from ABA, Andrew Tuch, Cato Institute, CFA Institute, Davis Polk, Freshfields, Kirkland & Ellis, Loeb & Loeb, NYC Bar, Ropes & Gray, Skadden, White & Case. See supra notes 355 and 356 and accompanying text. affiliate relationships present in a going private transaction are not present in a de-SPAC transaction.355 Some commenters observed that a fairness determination is not required or provided in an IPO and thus should not be required in a de-SPAC transaction.356 One commenter said proposed Items 1606 and 1607 would represent a ‘‘dramatic shift to de-SPAC transactions
processes and disclosures,’’ because, in
part, SPAC boards have not historically
made a recommendation to shareholders regarding whether or not to redeem shares at the time of the business combination and fairness opinions obtained in connection with de-SPAC transactions are typically limited to whether the transaction is fair to the SPAC, not whether the transaction is fair to any particular class of shareholders.357 This commenter observed, ‘‘By opining on whether the de-SPAC transaction and related financings are fair to unaffiliated stockholders, as opposed to the SPAC itself, the SPAC board and any fairness opinion provider would essentially be making a recommendation regarding whether or not to redeem shares.’’ 358 Several commenters expressed the view that requiring disclosure of a fairness determination would result in increased liability and litigation risk in de-SPAC transactions 359 and in fewer de-SPAC transactions.360 A few commenters indicated that financial advisors may refuse to provide fairness opinions due to concerns about the potential liability related to delivery of a fairness opinion, in which case the SPAC board of directors would decide not to proceed with an otherwise favorable de-SPAC transaction due to the board’s concerns about its own liability.361 Other commenters expressed the view that proposed Items 1606 and 1607 would effectively require de-SPAC transactions to be ‘‘substantively fair,’’ which, in the view of these commenters, would exceed the Commission’s authority.362 One of these commenters expressed that imposing a substantive obligation on the SPAC board of directors to undertake an analysis of the fairness of the de-SPAC transaction is an issue that is the exclusive province of State law.363 One commenter stated that, while the disclosure in proposed Item 1606(a) would be new, ‘‘in light of the fiduciary duties applicable to SPACs and their directors and officers,’’ the disclosure in proposed Item 1606(a) and (b) ‘‘would likely be redundant with the standard disclosure of the SPAC board’s reasons for approval of the de-SPAC transaction.’’ 364 Several commenters expressed concern that the proposed fairness determination disclosure requirement would likely or effectively require a SPAC to obtain a fairness opinion from a financial advisor 365 and raised concern about the cost of obtaining a fairness opinion.366 One of those commenters also expressed concern that the perceived requirement, under proposed Items 1606(a) and 1607, to obtain a fairness opinion could increase the need to include projections in the de-SPAC transaction disclosure documents in support of a SPAC sponsor’s fairness determination.367 Another commenter indicated that proposed Item 1606 (and Item 1607) would be burdensome and, to address that burden, suggested that proposed Item 1606 should not apply to de-SPAC transactions generally but only to those de-SPAC transactions that raise risks of ‘‘severe conflicts of interest.’’ 368 Some commenters also said they prefer that any fairness determination be made as to the
de-SPAC transaction as a whole (instead of the de-SPAC transaction and any related financing transaction separately) 369 and with respect to all of a SPAC’s shareholders (instead of to its unaffiliated shareholders).370 One of those commenters also suggested that a fairness determination should not include related financings because financial advisors providing a fairness opinion do not traditionally include such financing within the scope of the opinion.371
3. Final Item 1606(a)
We continue to believe that SPACs and the hybrid nature of de-SPAC transactions present potential conflicts of interest and misaligned incentives that are not present in other types of business combination transactions. As a result, we believe that it is appropriate for shareholders to have more complete information regarding the SPAC’s decision to proceed with a particular de￾SPAC transaction. Many commenters that supported proposed Item 1606(a) expressed similar views.372 At the same time, we acknowledge that many commenters raised significant concerns with the proposed disclosure requirement.373 Some commenters expressed concerns that the proposed rule could be interpreted to require a fairness opinion,374 even if not explicitly required, and concerns about the cost to obtain such an opinion.375 Some commenters also expressed concerns about imposing requirements in connection with the de-SPAC transaction process of going public that do not exist in the traditional IPO process, such as requiring a fairness determination.376 Regarding these concerns, while we acknowledge that disclosures regarding the board’s determination to proceed with a particular transaction are more typically associated with merger transactions, as discussed above, the de-SPAC transaction is a hybrid capital raising transaction that marks the introduction of the target company to the U.S. public

377See generally Section 251(b) of the Delaware General Corporation Law (‘‘The board of directors . . . shall adopt a resolution approving an agreement of merger or consolidation and declaring its advisability.’’). 378This revision also addresses the comments questioning the Commission’s authority to require a fairness determination and the comment expressing the view that imposing an obligation on a board to undertake an analysis of the fairness of the de-SPAC transaction is an issue that is the exclusive province of State law. See supra notes 362 and 363, respectively, and accompanying text. 379This provision allows for the possibility that a SPAC’s governing body may be other than a ‘‘board of directors,’’ whether as a result of a SPAC being organized as an entity other than a corporation or being a corporation organized in a jurisdiction where the governing body is different than a ‘‘board of directors.’’ 380See supra note 377 and accompanying text. 381The approach taken in final Item 1606(a) also addresses a related commenter’s concern that disclosure arising from a fairness determination would be redundant in light of the fiduciary duties applicable to SPACs and their officers and directors. See letter from Vinson & Elkins. See also supra note 364 and accompanying text. 382Letters from Cato Institute, CFA Institute, Davis Polk, Freshfields, Goodwin, Job Creators Network, Jonathan Kornblatt, Skadden, White & Case. See supra notes 359 and 360 and accompanying text. 383Because final Item 1606(a) will require disclosure when a determination is required to be made under the law of the SPAC’s jurisdiction of organization, rather than imposing a separate fairness determination that would be more burdensome, we do not believe there is a need to limit Item 1606(a) to instances of ‘‘severe conflicts of interest,’’ as one commenter suggested. See letter from Andrew Tuch. See also supra note 368 and accompanying text. 384Letters from Cato Institute, CFA Institute, Freshfields, Goodwin, Jonathan Kornblatt, White & Case. See supra note 359 and accompanying text. 385Letters from ABA, Goodwin. See supra note 361 and accompanying text. 386See infra section II.G.10–12. 387Letter from Ropes & Gray. See supra notes 357 and 358 and accompanying text. 388Letter from ABA, Goodwin. See supra note 370 and accompanying text. 389Letter from Cato Institute. See supra note 367 and accompanying text. 390Letters from ABA, Davis Polk, Freshfields, Goodwin, Ropes & Gray, Skadden, White & Case. See supra notes 369–371 and accompanying text. securities markets (similar to an IPO), and such introduction is done by way of a business combination or similar transaction. As a result, while we believe that the similarity to an IPO is a reason that the de-SPAC transaction regulatory framework generally should be similar to the IPO regulatory framework, the business combination element of de-SPAC transactions makes certain differences in the final rules that apply to de-SPAC
transactions appropriate. In response to commenters’ concerns, we are revising Item 1606(a) to focus on situations in which a determination as to the advisability of the de-SPAC transaction is required by the law of the jurisdiction in which the SPAC is organized.377 Doing so will make clear that Item 1606(a) does not require the de-SPAC transaction to be substantively fair or the SPAC to make a fairness determination when it is not otherwise required to do so under applicable State or foreign corporate law.378 Instead, under final Item 1606(a), if the law of the jurisdiction of the SPAC’s organization requires the SPAC’s board of directors (or similar governing body) 379 to determine whether the de￾SPAC transaction is advisable and in the best interests of the SPAC and its shareholders, or otherwise make any comparable determination, the SPAC will be required to disclose that determination. Under Delaware General Corporation Law, a board of directors of a corporation that seeks to enter a merger or consolidation is required to adopt a resolution approving the transaction agreement and declaring its advisability.380 In the experience of the Commission staff, many SPACs governed by Delaware law provide a statement in registration statements or proxy statements filed for de-SPAC transactions that the transaction agreement the board approved is advisable and in the best interests of shareholders. Comparable requirements may apply to registrants organized under the laws of other jurisdictions. The final rule would codify existing disclosure practices in this regard and serve to standardize the disclosure across a variety of State or foreign law requirements. We believe that the approach taken in final Item 1606(a) represents an appropriate balance between our goal of providing more transparency around the SPAC’s decision to proceed with a particular de-SPAC transaction and the concerns raised by commenters that the proposed rule would create a new substantive corporate law requirement 381 as well as other concerns raised by commenters, including increased liability and risks of litigation and decreased de-SPAC transactions.382 The new disclosure requirement will help achieve the same goal sought by the proposed fairness determination requirement—enhancing SPAC security holders’ ability to assess the SPAC’s decision to proceed with a particular de-SPAC transaction— without imposing new procedural obligations regarding how such a decision is made. While the final rule will not require a SPAC to make a determination regarding the fairness or suitability of the de-SPAC transaction, if such a determination is required by applicable corporate law, we believe investors should be informed of that fact and receive appropriate disclosure (as described below) regarding the considerations that went into such a determination.383 The fact that many registrants already provide such disclosure supports our view that the factual disclosures required by the final rule
should not impose undue costs or create excessive exposure to new liability or litigation risk. In addition, these changes from the proposal should avoid any misimpression that Item 1606(a) creates a requirement, implicit or explicit, or expectation that a fairness opinion must be obtained to comply with its requirements. We are mindful of commenters’ concerns about increased liability and litigation risk associated with such opinions.384 We are also mindful of comments indicating that financial advisors may refuse to provide fairness opinions due to concerns about the potential liability related to delivery of a fairness opinion and that a SPAC’s board of directors may decide not to proceed with an otherwise favorable de￾SPAC transaction because it cannot obtain a fairness opinion.385 Cognizant of these concerns, we reiterate that nothing in the final rule requires a SPAC to obtain a fairness opinion in connection with a de-SPAC transaction. The changes to Items 1606(a) and (b) and 1607 386 should also address one commenter’s concern that the new requirements would represent ‘‘a dramatic shift to de-SPAC transactions processes and disclosures’’ by requiring more limited disclosure aligned with requirements already applicable to a SPAC by the law of its jurisdiction of incorporation.387 We agree with commenters who stated that any rule addressing the board’s decision to proceed with a de￾SPAC transaction should focus on all of a SPAC’s security holders rather than only its unaffiliated security holders.388 In response to these comments, we have revised the final rule to reference security holders of the SPAC generally, in contrast to the proposed rule, which addressed only unaffiliated security holders. The changes to Item 1606(a) address one commenter’s concern that the perceived requirement to obtain a fairness opinion could increase the need to include projections in the de-SPAC transaction disclosure documents in support of such fairness determination.389 Finally, in response to commenters’ recommendations that proposed Item 1606(a) be required with respect to the de-SPAC transaction and related financing as a whole,390 we are revising

391 Id.
392Letters from Better Markets, CalPERS, Holger Spamann. 393Letters from Committee on Capital Markets Regulation, Consumer Federation. 394Letters from ABA, Goodwin, White & Case. 395Letters from ABA, Goodwin. 396 Id. 397Letter from White & Case. 398Letters from ABA, Goodwin, Ropes & Gray. 399Letter from Skadden. 400Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, Holger Spamann, NASAA, Public Citizen. See supra note 393 and accompanying text. 401Letters from ABA, Goodwin, White & Case. See supra notes 394–396 and accompanying text. 402This revision also addresses the comments questioning the Commission’s authority to mandate the factors that a SPAC must discuss under Item 1606(b). See supra notes 362, 363, and 397 and accompanying text. Item 1606(a) to remove any reference to related financing. While the proposed rule was intended to result in the disclosure of a fairness determination with respect to a de-SPAC transaction as a whole, we were persuaded by commenters’ concerns that including ‘‘any related financing’’ in the rule could have signaled a separate determination should be made with respect to the related financing.391 We continue to believe that related financing is usually fundamental to the success of the de-SPAC transaction but have adopted a final rule that simplifies the disclosure about the determinations made by a SPAC’s board of directors (or similar governing body) with respect to the de-SPAC transaction. On the other hand, given the continued importance to a SPAC’s shareholders of the related financing, we are moving the reference to related financing to final Item 1606(b), which requires discussions of the factors considered by the SPAC board of directors (or similar governing body) in making the determination disclosed in response to Item 1606(a). This change is discussed further below.
4. Proposed Item 1606(b)
The Commission proposed Item 1606(b) to supplement the fairness determination disclosure required by proposed Item 1606(a). Specifically, proposed Item 1606(b) would require a SPAC to discuss the material factors upon which the reasonable belief regarding the fairness of a de-SPAC transaction and any related financing transaction is based and, to the extent practicable, the weight assigned to each factor.
5. Comments: Item 1606(b)
Commenters expressed differing views on proposed Item 1606(b). Some commenters supported the proposed requirement generally 392 and some commenters specifically indicated the requirement would allow investors to conduct a better evaluation of the merits of a de-SPAC transaction and incentivize sponsors to avoid transactions that could potentially be viewed as unfair.393 Other commenters stated that the inclusion of a mandatory list of factors to be addressed in disclosure under proposed Item 1606(b) may force the SPAC to disclose information not actually considered by the SPAC in making its fairness determination.394 Some commenters also stated that the mandatory list of factors in proposed Item 1606(b) is at odds with the Commission’s history of implementing a principles-based disclosure regime and does not account for the fact that the factors relevant to making a fairness determination will vary from company to company and that different fairness assessors may also have different views on which factors are appropriate for the same company.395 These commenters proposed that the Commission modify proposed Item 1606(b) to provide that the factors should be discussed to the extent they were considered.396 One commenter said that it is ‘‘not within the Commission’s authority to require SPAC boards of directors to conform their deliberative processes to the Commission’s rules and that Item 1606(b) impermissibly encroaches upon the discretion of a board to evaluate whatever information it deems appropriate in deciding to proceed with a transaction.’’ 397 Some commenters stated that the factors the proposal required to be discussed should not be assigned weight because it would not be practical or workable to do so, such weighting could result in investors placing too much or not enough emphasis on the factors described by the SPAC, and various members of the SPAC board will likely assign differing weights to differing factors.398 Another commenter stated that a weighting of factors would require a high degree of professional subjectivity, which may expose boards and financial institutions to liability which would ultimately discourage them from pursuing de-SPAC transactions.399
6. Final Item 1606(b)
We are adopting Item 1606(b) as proposed, with certain modifications discussed below. We continue to believe that disclosure of the factors considered by a SPAC’s board of directors (or similar governing body) in making the decision to proceed with a de-SPAC transaction, to the extent they were considered, would provide shareholders with important information to allow those shareholders to make informed voting or investment decisions. While several commenters supported proposed Item 1606(b),400 as discussed above, some commenters expressed the view that only factors actually considered should be required to be discussed.401 This was the intent of the language in the proposed rule requiring a discussion of ‘‘factors upon which the belief stated in paragraph (a) . . . is based.’’ In light of the comments received, however, to clarify our intent in the final rule, we have added the terms ‘‘To the extent considered’’ to qualify the factors and the analysis of those factors required to be discussed. This change will avoid any potential for ambiguity or misinterpretation that the rule requires a discussion of factors not considered or a more extensive analysis of any factor considered than would otherwise have taken place in the absence of the final rule.402 As a result, final Item 1606(b) requires a discussion of a non-exclusive list of factors the board of directors (or similar governing body) considered in making any determination disclosed in response to Item 1606(a) to the extent such factors were considered. These factors would include, but not be limited to, the valuation of the target company, financial projections relied upon by the board of directors (or similar governing body), the terms of financing materially related to the de-SPAC transaction, any report, opinion, or appraisal referred to in Item 1607(a), and the dilution described in Item 1604(c). We believe these factors are generally matters that a board of directors (or similar governing body) is likely to consider in determining whether a transaction is advisable and in the best interests of the SPAC and its security holders (or in making a comparable determination). At the same time, by revising the disclosure requirement to make clear that the listed factors must be disclosed to the extent considered, the final rule reflects our understanding that the fiduciary duties and discussions of boards of directors (or similar governing bodies) are not uniform across companies or jurisdictions. Moreover, this change makes clear that final Item 1606(b) does not require boards of directors (or similar governing bodies) to specifically consider the listed factors or, if considering them, dictate how thoroughly to consider them, when determining whether a transaction is advisable and in the best interests of the

403Letters from ABA, Goodwin, Ropes & Gray. See supra note 398 and accompanying text. 404Letter from Skadden. See supra note 399 and accompanying text. 405Letters from Better Markets, CalPERS, Committee on Capital Markets Regulation, Consumer Federation, Holger Spamann, NASAA, Public Citizen. 406Letter from Vinson & Elkins. 407Letters from Freshfields, Vinson & Elkins. 408Letter from Freshfields. 409We have moved this requirement from proposed Item 1606(a) to final Item 1606(e). Thus, we are including comments relating to that portion of proposed Item 1606(a) in this section. 410Letter from Davis Polk. 411Letter from Freshfields. 412 Id. 413 Id. 414Letter from Vinson & Elkins. See supra note 406 and accompanying text. SPAC and its security holders (or in making a comparable determination). Some commenters expressed concern with the practicability of assigning weight to factors, the possibility that shareholders would emphasize those weights too much or too little,403 and that a weighting of factors, which may require a high degree of professional subjectivity, may expose boards and financial institutions to liability which would ultimately discourage them from pursuing de-SPAC transactions.404 Although proposed Item 1606(b) was never intended to force disclosure of the weight of each factor where the SPAC board did not, or could not, conduct such a weighting (proposed Item 1606(b) required a discussion of such weighting only ‘‘to the extent practicable’’), we nevertheless recognize commenters’ concerns and the possibility that the proposed item requirement could be misunderstood. Based on commenters’ suggestions, we have removed references to the weighting of factors from final Item 1606(b) to eliminate such potential misinterpretation and in recognition of the potential practical challenges to assigning a weight to various factors or discussing such weighting. To reduce potential redundancy in the disclosure requirement, we have also removed the terms ‘‘in reasonable detail’’ from the first sentence of Item 1606(b). Any disclosure responsive to Item 1606(b) is already required to be complete, and the deleted terms are not necessary to confirm that such a principle applies here. Further, as discussed above, we are revising Item 1606(b) to include any financing materially related to the de￾SPAC transaction in the non-exclusive list of factors to be discussed because PIPE offerings and other financings are a common feature of a de-SPAC transaction and, in some instances, the success of the de-SPAC transaction and of the post-de-SPAC company is dependent on the existence of related financing. Given the importance of such financing, we have revised final Item 1606(b) to include financing materially related to the de-SPAC transaction in the non-exclusive list of factors that a board of directors (or similar governing body) would be required to discuss, to the extent the board of directors (or similar governing body) considered such financing. By
moving the reference to related financing from Item 1606(a) to Item 1606(b), we are also eliminating any potential confusion that the board of directors (or similar governing body) would need to make a separate Item 1606(a) determination for financing materially related to the de-SPAC transaction.
7. Proposed Item 1606(c) Through (e)
The Commission proposed Item 1606(c) through (e) to provide additional information about the de￾SPAC transaction and any related financing transaction, including whether a majority of unaffiliated security holders is required to approve the transaction(s), the involvement of any unaffiliated representative acting on behalf of unaffiliated security holders, and whether the transaction(s) were approved by a majority of directors of the SPAC who are not employees of the SPAC.
8. Comments: Item 1606(c) Through (e)
Commenters expressed differing views on proposed Item 1606(c) through (e). Some commenters supported the proposed requirements.405 With respect to proposed Item 1606(c), one commenter indicated that disclosure about whether the de-SPAC or related financing transaction was structured to require approval of at least a majority of unaffiliated security holders would be redundant due to the requirement of Item 21 of Schedule 14A to disclose similar information.406 With respect to proposed Item 1606(d), a few commenters expressed the view that retention of a representative to act solely on behalf of unaffiliated security holders in the negotiation of the de-SPAC transaction is rare and that, as a result, such a requirement will not result in meaningful additional disclosure.407 One of the commenters also indicated that the disclosure requirement would not result in a change in the use of unaffiliated representatives.408 One commenter supported the proposed requirement to disclose whether any non-executive director voted against, or abstained from voting on, the approval of the de-SPAC transaction 409 and said it is consistent with current market practice.410 Another commenter stated that a requirement to identify any director that voted against or abstained from voting on the approval of the de-SPAC transaction would ‘‘prejudice[ ] companies against de-SPAC transactions’’ and could inhibit board discussions.411 This commenter said that this proposed requirement would make it more difficult and less likely that individual directors would oppose a transaction if they know that their objection will be made public.412 This commenter also recommended that the proposed rule be more precise about its applicability being only to directors of the SPAC.413
9. Final Item 1606(c) Through (e)
We continue to believe that the new disclosures under Item 1606(c) through (e) will provide investors with important information and a better understanding of the process by which a SPAC determined to proceed with a particular de-SPAC transaction. We are adopting Item 1606(c), (d), and (e) as proposed, with some modifications and minor technical changes discussed below. In the final rules, we moved the requirement to identify any director who voted against, or abstained from voting on, approval of the de-SPAC transaction from proposed Item 1606(a) to final Item 1606(e), because, as Item 1606(e) is generally related to issues involving approval of the de-SPAC transaction by the board of directors (or similar governing body), we considered this a more appropriate place for this requirement. We disagree with the assertion made by a commenter that the disclosure required under proposed Item 1606(c) would be redundant given the existing requirement in Item 21 of Schedule 14A, which requires disclosure of the vote required for approval (among other things) of the matter by shareholders.414
Schedule 14A does not expressly
differentiate among affiliated and unaffiliated security holders as with Item 1606(c). Also, a Schedule 14A may not be filed in connection with some de￾SPAC transactions. Thus, we believe the information provided to investors under Item 1606(c) is not redundant and will benefit investors by improving their understanding of the SPAC’s governance procedures followed in connection with approving the de-SPAC transaction. We expect this improved understanding will enhance investor voting, redemption, and other

415Letters from Freshfields, Vinson & Elkins. See supra notes 407 and 408 and accompanying text. 416Letter from Vinson & Elkins. See supra note 408 and accompanying text. 417Letter from Freshfields. See supra notes 411 and 412 and accompanying text. 418Letters from Committee on Capital Markets Regulation; Consumer Federation; ICGN; Michael Dambra, Ph.D., CPA, University at Buffalo, SUNY, Omri Even-Tov, Ph.D., University of California, Berkeley, Kimberlyn George, University of California, Berkeley (June 3, 2022) (‘‘Michael Dambra, Omri Even-Tov, and Kimberlyn George’’). 419Letters from ABA (‘‘with respect to proposed Item 1607, we believe it is unnecessary and unrealistic to require the filing of board books and other written materials presented to the board in connection with the reports, opinions or appraisals, as in the case with going-private transactions’’), Andrew Tuch, Ernst & Young, Goodwin, Ropes & Gray, Vinson & Elkins. 420Letters from ABA, Goodwin, NYC Bar, White & Case. See supra note 362 and accompanying text. 421Letters from ABA, Goodwin. 422 Id. 423 Id. 424 Id. 425Letter from Ernst & Young. 426Letter from Andrew Tuch. 427Letter from Ernst & Young. investment decisions. We have revised Item 1606(c) to clarify that the shareholder approval relates to shareholders of the SPAC. A few commenters said the use of unaffiliated representatives in negotiations is rare.415 One of those commenters also said the disclosure requirement in proposed Item 1606(d) would not lead to a change in market practices.416 We note that the proposed rule was not intended and the final rule is not intended to change market practices relating to the retention of any such unaffiliated representative. As is the case with final Item 1606(c) and (e), final Item 1606(d) is a disclosure requirement intended to provide investors with important information and a better understanding of the process by which a SPAC determined to proceed with a particular de-SPAC transaction and does not require SPACs to change their processes in connection with de-SPAC transaction approval. One commenter said directors will be more reluctant to vote against a de￾SPAC transaction if they know that their objection will be made public.417 We decline to revise Item 1606(e) in response to the commenter’s concern. Directors are generally subject to fiduciary duties imposed by State or foreign law. We expect that directors will generally seek to make voting decisions consistent with their duties to security holders or the company irrespective of whether that decision is publicly disclosed. We have also made conforming changes to Item 1606(c) through (e) to be consistent with final Item 1606(a), as discussed above.
10. Proposed Item 1607
The Commission proposed Item 1607(a) to require disclosure about whether or not the SPAC or SPAC sponsor received any report, opinion, or appraisal from an outside party relating to the consideration or the fairness of the consideration to be offered to security holders or the fairness of the de-SPAC transaction or any related financing transaction to the SPAC, SPAC sponsor or unaffiliated security holders. The Commission proposed Item 1607(b) to require disclosure of certain information about any such report, opinion, or appraisal from an outside party as well as any negotiation or report by an unaffiliated representative, including the identity of the outside party or unaffiliated representative, the qualifications of the outside party or unaffiliated representative, any material relationship between the outside party, its affiliates, or unaffiliated representative and the SPAC, SPAC sponsor, or their respective affiliates, whether the SPAC or SPAC sponsor determined the amount of consideration to be paid or the valuation of the target company, or whether the outside party recommended the amount of consideration to be paid or the valuation of the target company. Proposed Item 1607(b) would also require a summary of the negotiation, report, opinion, or appraisal, including a description of the procedures followed, the findings and recommendations, the bases for and methods used to arrive at such findings and recommendations, any instructions received from the SPAC or SPAC sponsor, and any limitation imposed by the SPAC or SPAC sponsor on the scope of the investigation. The Commission proposed Item 1607(c) to require all such reports, opinions or appraisals to be filed as exhibits to the Form S–4, Form F–4, and
Schedule TO for the de-SPAC
transaction or included in the Schedule 14A or 14C for the transaction.
11. Comments: Item 1607
We received differing views from commenters. Some commenters generally supported proposed Item
1607.418 Other commenters generally
opposed, or expressed concerns regarding specific aspects of, proposed Item 1607.419 We discuss these specific concerns in more detail below. As discussed above in the comments on proposed Item 1606, several commenters stated that proposed Items 1606 and 1607 exceed the Commission’s authority because they effectively require de-SPAC transactions to be ‘‘substantively fair.’’ 420 Some of these commenters suggested that the filing of board materials required under Item 1607(c) is inappropriate because it will ‘‘inevitably’’ result in a reduction of information presented to, and considered by, a SPAC’s board of directors, which may affect the board’s ability to fulfill its fiduciary duties.421 Given that board materials are typically not prepared with a view that they will be included in public filings and subject to liability, these commenters also expressed the view that filing such materials may expose their preparers to liability under the Securities Act and the Exchange Act and that the proposed requirement would be ‘‘impractical and unworkable’’ because the preparers are not trained to prepare any such materials to withstand scrutiny under the Federal securities laws.422 Also, the commenters indicated that some preparers will not consent to the use of their materials in a public filing.423 Finally, these commenters stated that some information included in such reports may be immaterial, speculative, or ultimately determined to be unreliable.424 One commenter indicated that the requirement in proposed Item 1607(c) to file as an exhibit (or include) any such report, opinion, or appraisal related to the fairness determination in addition to the requirement in proposed Item 1607(b) to disclose a summary of the report, opinion, or appraisal could limit any incremental benefit an investor would receive from the filing of such reports, opinions, or appraisals.425 Another commenter stated that proposed Item 1607 should not apply to de-SPAC transactions generally but only to those de-SPAC transactions that raise risks of ‘‘severe conflicts of interest.’’ 426 Yet another commenter suggested that the Commission consider whether the incremental cost and liabilities related to filing the reports would have the unintended consequence of discouraging SPACs from obtaining the reports because SPACs would not be required to obtain the reports as a basis for their fairness determination under proposed Item 1606(a).427 One commenter also proposed that we more narrowly tailor Item 1607(b)(6) to de￾SPAC transactions and modify Item 4(b) of Forms S–4 and F–4 to direct filers to comply with the requirements of Item 1607(b)(6), rather than 17 CFR 229.1015(b) (‘‘Item 1015(b)’’ of

428Letter from Vinson & Elkins.
429Letters from ABA, Goodwin. See supra note 424 and accompanying text. 430Letters from ABA, Goodwin, NYC Bar, White & Case. See supra note 420 and accompanying text. 431Letter from Vinson & Elkins. See supra note 428 and accompanying text. 432 Item 14(b)(6) of Schedule 14A directs filers to comply with Item 1015(b) of 17 CFR 229.1000 through 229.1016 (‘‘Regulation M–A’’) in the same manner as Form S–4 and F–4. But see the potential registration requirements for de-SPAC transactions, in the absence of an exemption, as a result of the adoption of Rule 145a. 433See General Instruction L.1 to Form S–4; General Instruction VIII to Form S–1; General Instruction I.1 to Form F–4; General Instruction VII to Form F–1; General Instruction K to Schedule TO. 434Letters from ABA, Goodwin. See supra note 421 and accompanying text. 435Letter from Ernst & Young. See supra note 427 and accompanying text. 436See discussion of Item 1607, infra section VIII.B.1.iii.f. 437Letter from Andrew Tuch. See supra note 426 and accompanying text. 438Letter from Ernst & Young. See supra note 425 and the accompanying text. Regulation M–A), for de-SPAC transactions.428
12. Final Item 1607
We are adopting Item 1607(a) as proposed with the modifications discussed below. Final Item 1607(a) only requires the disclosure specified in Item 1607(b) if the SPAC or SPAC sponsor received any report, opinion (other than an opinion of counsel), or appraisal from an outside party or unaffiliated representative materially relating to a determination disclosed in response to Item 1606(a), the approval of the de-SPAC transaction, the consideration or the fairness of the consideration to be offered to security holders of the target company in the de￾SPAC transaction, or the fairness of the de-SPAC transaction to the SPAC, its security holders, or SPAC sponsor. Thus, if such a report, opinion, or appraisal from an outside party or unaffiliated representative was not received, then no disclosure will be required under Item 1607. The final rule includes some clarifying revisions to Item 1607(a). We added a reference to an ‘‘unaffiliated representative’’ to avoid any confusion arising out of references to an ‘‘unaffiliated representative’’ in Item 1607(b) without a corresponding reference in Item 1607(a). We also added the parenthetical terms ‘‘other than an opinion of counsel’’ to clarify that an opinion of counsel is outside of the rule’s scope. In addition, we included a reference to the target company in final Item 1607(a)(3) to specify which security holders are being offered the consideration. Finally, we reversed the order of ‘‘SPAC sponsor’’ and ‘‘security holders’’ in final Item 1607(a)(4) to avoid the implication that the rule also applies to security holders of SPAC sponsor. To address commenters’ concerns regarding the possible disclosure of immaterial, speculative, or unreliable materials,429 we are revising Item 1607(a) to limit the scope of the final rule to only reports, opinions, or appraisals that are materially related to any Item 1606(a) determination of the board of directors (or similar governing body) or the other matters listed in final Item 1607(a)(2) through (4). As they already do now in other filings relating to de-SPAC transactions, SPACs may continue to add any supplemental, explanatory discussion so that investors can properly understand the context and purpose of the disclosed reports, opinions, or appraisals and assess these reports, opinions, or appraisals appropriately. In addition, by revising Item 1606 to remove the requirement to disclose a fairness determination in the context of a de-SPAC transaction and making corresponding revisions to Item 1607, the final rule should address commenters’ concerns that proposed Item 1607 would exceed the Commission’s authority.430 We believe adopting final Item 1607 is more consistent with the remaining rules applicable to SPACs and de-SPAC transactions than the alternative suggested by a commenter to instead update similar existing requirements in Form S–4 and F–4.431 Item 1607(a) is limited to a specific set of events and determinations, unlike Item 4(b) in Form S–4 and F–4,
which more generally refer to reports, opinions, or appraisals materially relating to the subject transaction. Also, under the alternative suggested by the commenter, the Item 1607(b) disclosure would not be required to the extent a de-SPAC transaction is not registered on Form S– 4 or F–4.432 Finally, we believe registrants will benefit from the centralization of the SPAC-related requirements in the Item 1600 series of Regulation S–K, which are primarily applied to de-SPAC transactions through new general instructions in the relevant forms and schedules,433 rather than through revisions to specific item requirements within each relevant form or schedule as suggested. Several commenters expressed concern that compliance with Item 1607(c) will result in a reduction of information presented to the SPAC’s board of directors, which could negatively affect the ability of those directors to fulfill their fiduciary duties.434 Another commenter suggested that the incremental cost and liability of filing such materials would discourage a SPAC from obtaining those materials.435 While we recognize these concerns and acknowledge that the final rule could impact the information provided to the SPAC’s board of directors,436 we believe there remain significant incentives (e.g., conducting due diligence on the target company or receiving an independent evaluation of the proposed de-SPAC transaction) for boards to seek and use this information as part of their decision-making process so we do not find this a persuasive reason to withhold such disclosure from investors. Directors are generally subject to fiduciary duties imposed by State or foreign law. We expect directors to seek to fulfill those duties by continuing to inform themselves of the potential merits of a de-SPAC transaction with the assistance of outside parties despite the potential public nature, added cost, or risk of liability associated with the filing of any report, opinion, or appraisal. Furthermore, we believe that it would be impractical to require disclosure under Item 1607 only in instances of ‘‘severe conflicts of interest’’ as one commenter suggested 437 because quantifying or classifying the extent of a conflict of interest is difficult given the wide variety of facts and circumstances in each de-SPAC transaction. We are adopting Item 1607(b) and (c) as proposed, with two technical modifications. We revised Item 1607(b)(5) to specify that the related disclosure is only required for reports, opinions, or appraisals related to the fairness of the consideration to be offered to security holders of the target company in the de-SPAC transaction. We also revised Item 1607(c) to specify that the reports, opinions, or appraisals required to be filed are those referred to in Items 1607(a) and (b). We disagree with the comments that the filing of reports, opinions, or appraisals pursuant to Item 1607(c) would have limited incremental benefit to investors.438 Although the summary required by Item
1607(b)(6) provides investors with useful information regarding the preparation and findings or recommendations of the report, opinion, or appraisal, we believe that it is important for investors to be able to review the actual report, opinion, or appraisal being summarized and, in many cases, being relied upon by the board when considering the transaction. We also disagree with the comments that the filing of reports, opinions, or

439Letters from ABA, Goodwin. See supra notes 422 and 423 and accompanying text. 440For example, in a going-private transaction subject to Rule 13e–3, any report, opinion (other than an opinion of counsel) or appraisal from an outside party that is materially related to the transaction is required to be filed as an exhibit to the Schedule 13E–3. See Item 16 of Schedule 13E– 3 and 17 CFR 229.1016(c) (Item 1016(c) of Regulation M–A). Additionally, in other public company mergers and business combinations, Item 21(c) of Forms S–4 and F–4 requires that any report, opinion or appraisal materially relating to the subject transaction and referred to in the prospectus be furnished as an exhibit to such form. 441See supra note 23. 442 ‘‘Foreign private issuer’’ is defined in Securities Act Rule 405 and 17 CFR 240.3b–4(c). The term ‘‘foreign private issuer’’ means any foreign issuer other than a foreign government except for an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter: (1) More than 50% of the issuer’s outstanding voting securities are directly or indirectly held of record by residents of the United States; and (2) Any of the following: (i) The majority of the executive officers or directors are United States citizens or residents; (ii) More than 50% of the assets of the issuer are located in the United States; or (iii) The business of the issuer is administered principally in the United States. 443The staff has historically expressed the view that the same information about the target company that would be required in a Schedule 14A should be included in such a Schedule TO, in view of the requirements of Item 11 of Schedule TO and 17 CFR 229.1011(c) (‘‘Item 1011(c)’’ of Regulation M–A) and the importance of this information in making a redemption decision. Item 11 of Schedule TO states ‘‘Furnish the information required by Item 1011(a) and (c) of Regulation M–A.’’ Item 1011(c) of Regulation M–A states ‘‘Furnish such additional material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not materially misleading.’’ 444Letters from ABA, Vinson & Elkins. 445Letter from ABA. 446 Id. 447 Id. 448 Id. 449Letter from Vinson & Elkins. 450 Id. 451Letter from ABA. See supra note 445 and accompanying text. appraisals pursuant to Item 1607(c) would present their preparers with an ‘‘impractical and unworkable’’ task or that the preparers would not consent to the public use of such materials.439 While the requirements of Item 1607(c) may affect how preparers price their services as well as the types of information included in their reports and opinions, such materials have historically and routinely been included with filings relating to transactions other than de-SPAC transactions,440 and in those cases, registrants and preparers have been able to navigate the preparation, filing, and evaluation of such
materials. We are not aware of any reason (and commenters have not provided any specific reason) why materials used in de-SPAC transactions would be any different. We are also amending Item 601 of Regulation S–K, Schedule 14A, and
Schedule TO to implement the final
Item 1607(c) exhibit filing requirement. For Forms S–1, S–4, F–1, and F–4, which refer to the exhibit requirements in Item 601 of Regulation S–K, the Item 1607(c) exhibit filing requirement will be incorporated through new 17 CFR 229.601(b)(98) (Item 601(b)(98) of Regulation S–K). Schedule 14A and
Schedule TO will incorporate the Item
1607(c) exhibit filing requirement through new Item 25(b) of Schedule 14A and new Item 12(b) of Schedule TO, respectively. Because Item 1 of
Schedule 14C generally requires
compliance with the relevant items of
Schedule 14A, the Item 1607(c) exhibit
filing requirement will be incorporated into Schedule 14C through new Item 25(b) of Schedule 14A. H. Tender Offer Filing Obligations

1. Proposed Item 1608
   The Commission proposed Item 1608 to codify a staff position that a Schedule TO filed in connection with a de-SPAC transaction should contain substantially the same information about a target private operating company that is required under the proxy rules and that a SPAC must comply with the procedural requirements of the tender offer rules when conducting the transaction for which the Schedule TO is filed, such as a redemption of the SPAC securities. Redemption rights offered by a SPAC to its security holders in connection with the de-SPAC transaction or an extension of the timeframe to complete a de-SPAC transaction generally have indicia of being a tender offer, but the Commission staff has not objected if a SPAC does not comply with the tender offer rules when the SPAC files a Schedule 14A or 14C in connection with a de-SPAC transaction or an extension and complies with Regulation 14A or 14C, because the Federal proxy rules would generally mandate substantially similar disclosures and applicable procedural protections as required by the tender offer rules.441 Proposed Item 1608 would not affect the staff position for those SPACs that file Schedule 14A or 14C for their de-SPAC transactions or extensions. SPACs that do not file a
   Schedule 14A or 14C (such as FPIs) in
   connection with the de-SPAC transaction (or an extension of time to complete a de-SPAC transaction),442 however, would be subject to the requirements of proposed Item 1608.443
2. Comments: Item 1608
   A few commenters generally supported the proposed rule but suggested certain changes.444 One of these commenters recommended the Commission codify and clarify that a SPAC filing a
   Schedule 14A or 14C in connection
   with a de-SPAC transaction (or seeking an extension of time to complete a de￾SPAC transaction) would neither need to file a Schedule TO nor comply with the tender offer rules.445 While expressing support for proposed Item 1608, the same commenter stated that a SPAC stockholder’s ability to redeem its shares at its option does not result in the existence of a tender offer.446 The same commenter stated that SPACs that are FPIs and that elect to report generally on domestic forms and whose de-SPAC transaction disclosure document is nearly ‘‘identical’’ to a proxy or information statement filed by a domestic filer pursuant to Regulation 14A or 14C should not have to file a
   Schedule TO.447 Finally, the commenter
   stated that such a SPAC’s investors are confused when presented with a proxy statement and a tender offer document that proceed as parallel but different processes while not having any added protection.448 Another commenter suggested that proposed Item 1608 is too broad because it would apply to tender offers conducted by SPACs but not related to a de-SPAC transaction.449 The same commenter stated that the adoption of proposed Securities Act Rule 145a would effectively require the use of Form S–4 or F–4 for all de-SPAC transactions, thus rendering Item 1608 unnecessary.450
3. Final Item 1608
   After considering the comments, we are adopting Item 1608 as proposed. We decline to revise the final item to clarify that a SPAC filing a Schedule 14A or 14C in connection with a de￾SPAC transaction (or seeking an extension of time to complete a de￾SPAC transaction) would neither need to file a Schedule TO nor comply with the tender offer rules, as recommended by a commenter.451 We do not believe the codification of the commenter’s view is necessary because Item 1608, as adopted, is a more precise way to address an exception to the standard de￾SPAC transaction structures that have been used historically. We also note that Item 1608 applies only if a SPAC files a Schedule TO for the redemption of securities offered to security holders (e.g., in connection with a de-SPAC transaction or an extension of the timeframe to complete a de-SPAC transaction). We have revised General Instruction K to Schedule TO to

452Letter from ABA. See supra note 446 and accompanying text. 453Letter from ABA. See supra note 447 and accompanying text. 454Letter from ABA. See supra note 448 and accompanying text. 455Letter from Vinson & Elkins. See supra note 449 and accompanying text. 456 If a SPAC files a Schedule TO for any redemption of securities offered to security holders, final Item 1608 requires a Schedule TO to provide the information required by General Instruction L.2. to Form S–4, General Instruction I.2. to Form F–4, and Item 14(f)(2) of Schedule 14A (§ 240.14a–101), as applicable, in addition to the information otherwise required by Schedule TO. If the Schedule TO relates to an extension of the timeframe to complete a de-SPAC transaction and a target company has not been identified by the SPAC, we would not expect this information required by Item 1608 regarding a target private operating company to be known or disclosed. 457 Id. 458For example, the redemption of securities offered by a foreign private issuer or in connection with an extension of the timeframe to complete a de-SPAC transaction where a Schedule 14A or 14C is not filed. 459Letters from ABA; Crowe LLP (June 13, 2022) (‘‘Crowe’’); ICGN; PwC; Campbell Pryde, President and CEO, XBRL US (June 13, 2022) (‘‘XBRL US’’). 460Letter from ICGN. 461Letter from PwC. 462Letters from ICGN, XBRL US. See Proposing Release, supra note 7, at 29476 (request for comment number 55) (requesting comment on structured data with respect to FPIs, SRCs, and EGCs). 463Letter from ICGN. 464Letter from XBRL US. 465Letter from Vinson & Elkins. 466Letter from PwC. 467Letter from XBRL US. 468Letter from Stephan Wolf, CEO, Global Legal Entity Identifier Foundation (June 13, 2022) (‘‘Global Legal Entity Identifier Foundation’’) (‘‘The LEI itself is a 20-digit, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO).’’). separately address the requirements for a filing that relates to a redemption of securities offered to security holders other than in connection with a de￾SPAC transaction (e.g., the redemption of securities in connection with an extension of the timeframe to complete a de-SPAC transaction). With respect to the comment that the redemption of a SPAC’s shares at the option of a stockholder is not a tender offer,452 as noted above, the Commission has expressed the view that SPAC redemptions conducted pursuant to a SPAC’s organizational documents generally have indicia of being a tender offer. However, as discussed above, the Commission staff has not objected if a SPAC does not comply with the tender offer rules when the SPAC files a
Schedule 14A or 14C in connection
with a de-SPAC transaction or an extension and complies with Regulation 14A or 14C. Item 1608 does not affect this staff position for those SPACs that file a Schedule 14A or 14C for their de￾SPAC transactions or extensions. Regarding the comment that FPIs whose de-SPAC transaction disclosure document is ‘‘identical’’ to a proxy or information statement filed by a domestic filer pursuant to Regulation 14A or 14C should not have to file a
Schedule TO,453 we note that an FPI is
not required to comply with Regulations 14A or 14C and, thus, any filing the FPI considers to be a proxy or information statement would not be subject to compliance with those regulations and would not be subject to the liability provisions associated with filings required to comply with those regulations (although the filing would be subject to the liability provisions associated with the specific filing made). Finally, with respect to the same commenter’s statement that investors in a SPAC that is an FPI and which delivers both a disclosure document similar to a proxy statement and a tender offer document will be confused without any additional protection,454 we believe the SPAC should be able to provide enough clarity and investor support regarding the purposes of each such document to surmount these concerns. We also received a suggestion to expressly state that Item 1608 is applicable only to tender offers conducted by SPACs related to a de￾SPAC transaction.455 We decline to revise Item 1608 as suggested because Item 1608 is intended to apply to
Schedule TO filings by SPACs for any
redemption of securities offered to security holders, which would include the redemption of securities offered in connection with an extension of the timeframe to complete a de-SPAC transaction.456 In response to a commenter’s view that the adoption of proposed Rule 145a may result in the requirement to use Form S–4 or F–4 for all de-SPAC transactions, thus rendering Item 1608 unnecessary,457 we note that there are certain situations today,458 and there could be situations under future SPAC structures, in which Item 1608 would still be applicable and provide security holders with important disclosure to use in making their investment decision.
I. Structured Data Requirement

1. Proposed Item 1610
   The Commission proposed Item 1610 to require SPACs to tag all information disclosed pursuant to subpart 1600 of Regulation S–K in Inline XBRL in accordance with Rule 405 of Regulation S–T and the EDGAR Filer Manual.
2. Comments
   A number of commenters supported proposed Item 1610.459 One of those commenters said that tagging the quantitative and narrative disclosures would provide investors with searchable formats to access the information they would like to review, including potential conflicts of interests and potential risks.460 Another commenter said the provision of structured data will make subpart 1600 of Regulation S–K information more easily accessible for purposes of aggregation, comparison, filtering, and other analysis.461 Some commenters addressed whether the Commission should provide exemptions or different requirements for FPIs, SRCs, or emerging growth companies (‘‘EGCs’’).462 One commenter said there was not a compelling reason to provide for such exemptions or different requirements.463 Another commenter said that ‘‘[u]ltimately requirements should be the same’’ across issuers ‘‘to ensure the availability of a complete dataset for investors,’’ but that ‘‘the Commission may wish to offer a phase-in period for smaller companies and [foreign private issuers] that have more limited resources.’’ 464 One commenter indicated they believe there is no need for structured data tagging for SPAC IPOs because SPAC IPOs are considerably simpler and easier to understand for investors than traditional IPOs and the redemption rights make an investment in a SPAC IPO considerably less risky.465 Another commenter recommended that the Commission evaluate responses from the issuer community regarding the costs of tagging this information.466 One commenter said the Commission should provide detailed technical guidance prior to the rule implementation, taking account of all possible use cases for reporting, and an EDGAR Beta testing environment with voluntary early filing allowed 12 to 15 months prior to the first mandatory compliance date.467 One commenter suggested the Commission consider use of Legal Entity Identifiers (LEIs) within the registration process and enhanced disclosures of IPOs by SPACs and in de￾SPAC transactions.468
3. Final Item 1610 and Tagging
   Compliance Date
   After considering the comments received, we are adopting Item 1610 as

469The tagging requirements we are adopting are implemented by inclusion of a cross-reference to Rule 405 of Regulation S–T in Item 1610 of Regulation S–K and by revising 17 CFR 232.405(b) to include the proposed SPAC-related disclosures. We are also adopting amendments that add a corresponding Instruction to Schedule TO. 470Letter from ICGN. See supra note 460 and accompanying text. 471Letter from PwC. See supra note 461 and accompanying text. 472These considerations are generally consistent with objectives of the recently enacted Financial Data Transparency Act of 2022, which directs the establishment by the Commission and other financial regulators of data standards for collections of information. Such data standards must meet specified criteria relating to openness and machine￾readability and promote interoperability of financial regulatory data across members of the Financial Stability Oversight Council. See James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law 117–263, tit. LVIII, 136 Stat. 2395, 3421–39 (2022). 473Letter from XBRL US. See supra note 464 and accompanying text. 474Furthermore, SRCs and FPIs are subject to Inline XBRL requirements for other filings, which minimizes the burden reduction associated with any tagging phase-in for those entities. See infra note 477. 475Letter from Vinson & Elkins. See supra note 465 and accompanying text. 476SPACs are currently not obligated to tag any disclosures until they file their first post-IPO periodic report on Form 10–Q, Form 20–F, or Form 40–F. See 17 CFR 229.601(b)(101)(i)(A). 477See 17 CFR 229.601(b)(101). 478Letter from XBRL US. See supra note 467 and accompanying text. 479 Id. 480Letter from Global Legal Entity Identifier Foundation. See supra note 468 and accompanying text. 481See supra note 472 (regarding the Financial Data Transparency Act of 2022). 482Proposing Release, supra note 7, at 29477. proposed,469 but we are providing a one year phased-in compliance date for the tagging requirements. We agree with the commenter who said that tagging the quantitative and narrative disclosures would provide investors with searchable formats to access the information they would like to review, including potential conflicts of interests and potential risks.470 We also agree with the commenter who said that the provision of structured data will make subpart 1600 of Regulation S–K information more easily accessible for purposes of aggregation, comparison, filtering, and other analysis.471 We believe that the structured data requirements will enhance the usability of the SPAC disclosures. The requirements we are adopting include detail tagging of the quantitative disclosures and block text tagging of the narrative disclosures required under subpart 1600. These structured data requirements will make SPAC disclosures more readily available and easily accessible to investors and other market participants for aggregation, comparison, filtering, and other analysis.472
One commenter suggested that the Commission may wish to ‘‘offer a phase￾in period for smaller companies and [foreign private issuers] that have more limited resources.’’ 473 To address these concerns, we have determined to provide a one-year phase in for the tagging requirements. We believe the additional one-year period for tagging compliance will help lessen burdens associated with the tagging requirements under the final rules for all registrants.474 We disagree with one commenter’s view that there is no need for structured data tagging for SPAC IPOs because SPAC IPOs are considerably simpler and easier to understand for investors than traditional IPOs and the redemption rights make an investment in a SPAC IPO considerably less risky.475 On the contrary, we believe structured data is useful to investors in the SPAC IPO setting (as well as the de￾SPAC transaction setting), particularly by enabling comparison and the extraction and analysis of information, as discussed above. In addition, as discussed above, special risks such as conflicts of interest and dilution in SPAC IPOs and de-SPAC transactions may be complex and enhancing investor ability to use, compare, and analyze the data will help investors assess such risks. We have not received any responses from the issuer community regarding the costs of the data tagging requirements, but we nonetheless do not believe the structured data requirements will unduly add to companies’ burden in preparing their filings based on our extensive experience with existing tagging requirements. We believe such incremental costs are appropriate given the significant benefits to investors, as described above. As a result of the requirement to tag SPAC IPO disclosures, SPACs will incur tagging compliance costs at an earlier stage of their lifecycle, because SPACs do not have to tag IPO registration statements under current Commission rules.476 While the tagging requirements for SPAC disclosures will impose additional compliance costs on registrants, we expect such costs will be modest and largely the final rules will simply shift the timing of such costs because under the current rules such registrants are subject to data tagging requirements in their first post-IPO periodic report on Form 10–Q, 20–F, or 40–F,477 as discussed in greater detail in
section VIII (Economic Analysis) below.
One commenter recommended that the Commission provide an EDGAR beta-testing environment with voluntary early filing allowed 12 to 15 months prior to the first mandatory compliance date.478 In lieu of the suggested beta￾testing environment, we have determined to provide a one year phased-in compliance date for the tagging requirements, as noted above. This approach will provide additional time for registrants to prepare for the new requirements. It will also provide sufficient time for the adoption of a final taxonomy that will take into consideration initial disclosures that will be provided in response to the final rules, which should help lessen the compliance burden for registrants and improve data quality for investors by reducing the need for extensive custom tagging. The commenter also said the Commission should provide detailed technical guidance prior to the rule implementation, ‘‘taking account of all possible use cases for reporting’’ to ensure consistency of reported data.479 Consistent with the Commission’s common practice, a draft taxonomy will be made available for public comment, and the Commission will incorporate a final taxonomy into an updated version of the EDGAR system before the tagging requirements take effect. One commenter suggested the Commission consider use of Legal Entity Identifiers (LEIs) within the registration process and enhanced disclosures of IPOs by SPACs and in de￾SPAC transactions.480 The Commission is not adopting requirements regarding LEIs in this rulemaking but will take the comment under advisement.481
III. Disclosures and Liability in De￾SPAC Transactions
In light of the reliance on de-SPAC transactions as a vehicle for private operating companies to access the U.S. public securities markets with greater relative frequency than in the past, the Commission proposed a number of new rules and amendments to existing rules to more closely align the treatment of private operating companies entering the public markets through de-SPAC transactions with that of companies conducting traditional IPOs. In connection with these proposals, the Commission expressed the view in the Proposing Release that a private operating company’s method of becoming a public company should not negatively impact investor protection.482

483See (a) proposed Item 14(f)(2) of Schedule 14A; (b) proposed General Instruction L.2. to Form S–4; and (c) proposed General Instruction I.2 to Form F–4. See also proposed Item 1608 of Regulation S–K (incorporating into Schedule TO applicable information required by Item 14(f)(2) of
Schedule 14A, General Instruction L.2. to Form S–
4, and General Instruction I.2 to Form F–4). Proposed Item 14(f)(2)(vii) of Schedule 14A would have required additional disclosure for any directors appointed without action by the security holders of the SPAC. 484 Item 18(a)(5) of Form S–4 currently requires disclosure pursuant to Item 403 regarding the target company and a SPAC’s principal shareholders, through Item 6 of Schedule 14A, in a Form S–4 that includes a proxy seeking shareholder approval of the de-SPAC transaction. 485The proposed changes to Forms S–4 and F– 4 regarding disclosure pursuant to Item 701 of Regulation S–K were proposed to be required in
Part I (information required in the prospectus) of
Form S–4 and Form F–4, whereas in Form S–1, the Item 701 disclosure requirement appears under Part II (information not required in prospectus) of the form. 486Proposed General Instruction L.2 to Form S– 4; proposed General Instruction I.2 to Form F–4. 487See proposed General Instruction VIII to Form S–1 (‘‘If the securities to be registered on this Form will be issued in a de-SPAC transaction, attention is directed to the requirements of Form S–4 applicable to de-SPAC transactions, including, but not limited to, General Instruction L.’’); proposed General Instruction VII to Form F–1 (‘‘If the securities to be registered on this Form will be issued in a de-SPAC transaction, attention is directed to the requirements of Form F–4 applicable to de-SPAC transactions, including, but not limited to, General Instruction I.’’). 488Letters from ABA, CalPERS, Davis Polk, Ernst & Young, ICGN, NASAA, PwC. 489See letters from ABA, PwC. 490Letters from ABA, PwC. 491Letter from ABA. 492Letter from Vinson & Elkins. This commenter also said, ‘‘We do not believe Item 701 disclosure with respect to the target company, as opposed to the registrant, would be consistent with IPO disclosure or provide meaningful information to investors.’’ 493Letter from Vinson & Elkins. 494Letter from Grant Thornton LLP (June 13,
2022) (‘‘Grant Thornton’’).
495The regulatory text section of the Proposing Release inadvertently omitted Item 304 of Regulation S–K from proposed General Instruction I.2 to Form F–4. We have corrected that oversight in this adopting release. Additionally, the cross￾references to the applicable Items from Form 20– F in the case where the target is a foreign private issuer have been corrected from those proposed to align with the requirements applicable to domestic targets, that is Items 4, 6.E, 7.A, 8.A.7, and 16F of Form 20–F. In addition, in Form F–4, we have added the term ‘‘applicable’’ to modify ‘‘disclosure requirements’’ in the following sentence in General Instruction I in order to be consistent with similar language in Form S–4: ‘‘To the extent that the applicable disclosure requirements of Subpart
229.1600 are inconsistent with the disclosure
requirements of this Form, the requirements of Subpart 229.1600 are controlling.’’ We made similar changes to add the term ‘‘applicable’’ to Schedule 14A and Schedule TO for the same reason. 496Under the final rules, with respect to the requirements to provide Item 403 of Regulation S– K (security ownership of certain beneficial owners and management) information assuming the completion of the de-SPAC transaction and any related financing transaction, the Item 403 information that must be provided is with respect to certain beneficial owners, directors, named executive officers, and directors and executive officers as a group (i.e., the persons identified in Item 403) of the post-de-SPAC transaction combined company and not for the target company as a separate entity. A. Non-Financial Disclosures in De￾SPAC Disclosure Documents

1. Proposed Rules
   The Commission proposed to require certain non-financial statement disclosures in connection with de-SPAC transactions. The Commission proposed that, if the target company in a de-SPAC transaction is not subject to the reporting requirements of section 13(a) or 15(d) of the Exchange Act, disclosure with respect to the target company pursuant to the following items in Regulation S–K would be required in the registration statement or
   schedule 483 filed in connection with the
   de-SPAC transaction: (1) §§ 229.101 (‘‘Item 101’’) (description of business); (2) 229.102 (‘‘Item 102’’) (description of property); (3) 229.103 (‘‘Item 103’’) (legal proceedings); (4) 229.304 (‘‘Item 304’’) (changes in and disagreements with accountants on accounting and financial disclosure); (5) 229.403 (‘‘Item 403’’) (security ownership of certain beneficial owners and management, assuming the completion of the de￾SPAC transaction and any related financing transaction); 484 and (6)
   229.701 (‘‘Item 701’’) (recent sales of
   unregistered securities).485 Where the private operating company is an FPI, the proposed amended registration forms included the option of providing disclosure relating to the private operating company in accordance with Items 3.C, 4, 6.E, 7.A, 8.A.7, and 9.E of Form 20–F, consistent with disclosure provided by FPIs in IPOs.486 Also, the Commission proposed amendments to Forms S–1 and F–1 to provide that where these forms are used to register securities in connection with a de-SPAC transaction, these forms must include the information required in Forms S–4 (in the case of Form S–1) and F–4 (in the case of Form F–1).487 Finally, the Commission proposed General Instruction K to Schedule TO and new Item 14(f)(1) to Schedule 14A to incorporate into each of those forms, if the filing relates to a de-SPAC transaction, the disclosure provisions of Items 1603 through 1609 of Regulation S–K, as well as the structured data provision of Item 1610 of Regulation S– K.
2. Comments
   Commenters generally supported the Commission’s proposal to align non￾financial disclosures for de-SPAC transactions with the requirements in a traditional IPO.488 A few commenters suggested the proposed disclosure requirements are consistent with current practice.489 These commenters said the proposed disclosure requirements would otherwise be required in a Form 8–K filing following the closing of the de-SPAC transaction.490 One commenter said the proposed requirements reflect ‘‘current best practice’’ and would not create a ‘‘significant burden’’ for targets.491 One commenter said that the proposed requirements, other than Item 701, would require information ‘‘already disclosed with respect to target companies.’’ 492 In the commenter’s view, the proposed disclosures, including Item 701, ‘‘would not provide meaningful information or benefits to investors.’’ 493 Regarding the proposed amendment to Form S–1 to require the information required by Form S–4, one commenter recommended ‘‘the final rule include explicit language that such Form S–1 should include all information for the private operating company that would have been required in a Form S–4.’’ 494
3. Final Rules
   Except for the modifications we discuss below, we are adopting as proposed: (a) General Instruction L.2 to Form S–4, (b) General Instruction I.2 to Form F–4,495 (c) Item 14(f)(2) of
   Schedule 14A, (d) General Instruction K
   to Schedule TO, (e) General Instruction VIII to Form S–1, and (f) General Instruction VII to Form F–1.496 We believe there will be two main benefits to investors from these requirements. First, the inclusion of these disclosures in a Form S–4 or Form F–4 registration statement will mean that any material misstatements or omissions contained therein would subject the issuers and other parties to liability under sections 11 and 12 of the Securities Act, which would align with the protections afforded to investors under the Securities Act for disclosures provided in a Form S–1 or F–1 for an IPO. Second, as a result of these new requirements, this information will be available to investors prior to the inception of trading of the post-business combination company’s securities on a national securities exchange, rather than the earliest instance of such requirement being the requirement to set this information out in a Form 8–K due within four business days of the completion of the de-SPAC

497We note registrants should already be preparing this information in anticipation of making a Form 8–K filing (or a Form 20–F for an FPI) in connection with a de-SPAC transaction. See supra note 489 (letters from ABA, PwC). 498Letter from Vinson & Elkins. See supra notes 492 and 493 and accompanying text. 499Letter from Grant Thornton. See supra note 494 and accompanying text. 500We made a similar change to Form F–1. We added new Item 9.E.4 to Form F–1 that provides:
Where the registrant is a special purpose acquisition company (as defined in Item 1601 of Regulation S–K), in lieu of providing the information required under Item 9.E.1 and Item 9.E.2, provide the disclosure required pursuant to Item 1602(a)(4) and (c) of Regulation S–K in an offering other than a de-SPAC transaction (as defined in Item 1601 of Regulation S–K) and provide the disclosure required under Item 1604(c) of Regulation S–K in connection with a de-SPAC transaction. 501 In Form S–4 and Form F–4, however, there is a requirement to send a prospectus to security holders a minimum of 20 business days prior to a security holder meeting, or, if no meeting is held, other action, that is applicable when a registrant incorporates by reference information about the registrant or the company being acquired into the form. General Instruction A.2 of Form S–4 and General Instruction A.2 of Form F–4. 502The 20-calendar day period is the same length of time as the 20-day advance disclosure period in 17 CFR 240.13e–3(f)(1). In adopting a 20-day advance disclosure requirement for dissemination of documents in connection with going private transactions, the Commission stated this requirement was intended to provide reasonable assurance that the information required to be disclosed to security holders would be disseminated sufficiently far in advance of the transactions to permit security holders to make ‘‘an unhurried and informed’’ decision. Going Private Transactions by Public Companies or Their Affiliates, Release No. 33–6100 (Aug. 2, 1979) [44 FR 46736 (Aug. 8, 1979)]. 503Letters from ABA, Better Markets (supporting the 20-day dissemination period, stating that ‘‘[t]o make meaningful decisions, investors in a SPAC need the information regarding the proposed transaction in a timely manner’’ and that ‘‘[i]n the absence of a federally mandated minimum time period to disseminate information regarding the transaction, the potential for abuse is clear’’); CalPERS; CFA Institute (‘‘CFA Institute supports as much lead time as possible for dissemination of disclosure documents regarding the de-SPAC transaction and agrees with the proposed minimum of twenty (20) calendar days in advance merger approval vote’’); Davis Polk (‘‘the minimum dissemination period proposed in the amendments to Exchange Act rules 14a–6 and [14c–2] is a welcome modification to improve public confidence by providing a minimum period to review the disclosures provided in connection with a de-SPAC transaction.’’); ICGN (‘‘For investors, after a SPAC has searched for a potential business candidate for up to two years, time may be running out. Investors should be able to receive proxy and prospectus statements within a reasonable time frame that provides them with the ability to assess the de-SPAC business transaction and vote accordingly.’’); NASAA. 504Letter from CFA Institute. transaction.497 As a result, shareholders will be able to consider this information when they make voting,
investment, or redemption decisions in connection with a de-SPAC transaction. One commenter suggested that disclosure under the proposed requirements is already provided with respect to target companies and would not provide meaningful benefits to investors.498 We disagree with this view that the requirements would not provide meaningful benefits to investors. Also, we believe compliance with these requirements will be minimally burdensome where disclosure of this information is already market practice and codifying this practice will create a uniform, transparent, minimum floor standard of disclosure across transactions, even if market practice were to change in the future. In response to the comment recommending that Form S–1 should include explicit language that Form S– 1 should include all information for the private operating company that would have been required in a Form S–4,499 we have revised General Instruction VIII of Form S–1 to clarify that, if the securities to be registered on Form S–1 will be issued in a de-SPAC transaction, the requirements of Form S–4 apply to Form S–1, including, but not limited to, Item 17 and General Instruction L. Similarly, in the final rules, we have revised General Instruction VII of Form F–1 to clarify that, if the securities to be registered on Form F–1 will be issued in a de-SPAC transaction, the requirements of Form F–4 apply to Form F–1, including, but not limited to, Item 17 and General Instruction I. With respect to instructions in both General Instruction L.2 to Form S–4 and General Instruction I.2 to Form F–4 that apply with respect to the target company ‘‘[i]f the target company is a foreign private issuer,’’ we made several corrections from the proposal. First, we deleted the requirement to provide target company information pursuant to Item 3.C of Form 20–F (reasons for the offer and use of proceeds), because there is not a similar analog in the list of disclosure items to be provided with respect to the target company when the target company is not an FPI in the same instructions. Second, we deleted the requirement to provide target company information pursuant to Item 9.E of Form 20–F (dilution) because dilution information will already be required through the application of Item 1604 in the forms in connection with a de-SPAC transaction.500 Third, we added a requirement to provide target company information pursuant to Item 16F of Form 20–F (change in registrant’s certifying accountant), because the intent of the proposal was that there should be an analog for FPI target companies to Item 304 of Regulation S– K (changes in and disagreements with accountants on accounting and financial disclosure) in the list of disclosure items to be provided with respect to the target company when the target company is not an FPI in the same instructions and the reference to Item 16F of Form 20– F was inadvertently omitted from the proposal. In the final rules, we have also revised Item 14(f)(2) of
Schedule 14A to remove the additional disclosure required for any directors appointed without action by the security holders of the SPAC to align the disclosure required under Item 14(f)(2) of Schedule 14A with that required under General Instruction L.2 to Form S–4 and General Instruction I.2 to Form F–4. B. Minimum Dissemination Period

1. Proposed Rules
   Historically, in business combination transactions, there has been no requirement under Commission rules to provide security holders with a minimum amount of time to consider proxy statement or other disclosures.501 In view of the unique circumstances surrounding de-SPAC transactions, the Commission proposed to amend Exchange Act Rule 14a–6 and Rule 14c– 2, as well as to add instructions to Forms S–4 (General Instruction L.3) and F–4 (General Instruction I.3), to require that prospectuses and proxy and information statements filed in connection with de-SPAC transactions be distributed to security holders at least 20 calendar days in advance of a security holder meeting or the earliest date of action by consent, or the maximum period for disseminating such disclosure documents permitted under the applicable laws of the SPAC’s jurisdiction of incorporation or organization if such period is less than 20 calendar days.502
2. Comments
   A number of commenters generally supported the proposed minimum dissemination periods for disclosure documents in de-SPAC transactions.503 One commenter on the proposal supported ‘‘as much lead time as possible for dissemination’’ and suggested the Commission ‘‘consider whether federal securities laws should override the laws of the jurisdiction of incorporation or organization if such jurisdictions allow less than 20 calendar days advance dissemination for de￾SPAC merger/proxy vote documentation where such de-SPAC will be trading on SEC regulated markets.’’ 504 Another commenter said that the period of 20 calendar days ‘‘is consistent with current market practice

505Letter from Davis Polk.
506Letter from Davis Polk.
507Letter from Vinson & Elkins.
508Letter from Loeb & Loeb.
509See, e.g., Del. Code Ann. tit. 8, sec. 222; Del. Code Ann. tit. 8, sec. 251(c) (stating, in part, that ‘‘[d]ue notice of the time, place and purpose of the meeting shall be given to each holder of stock, whether voting or nonvoting, of the corporation at the stockholder’s address as it appears on the records of the corporation, at least 20 days prior to the date of the meeting [to vote on an agreement of merger or consolidation]’’). 510See R. Franklin Balotti, Jesse A. Finkelstein, John Mark Zeberkiewicz & Blake Rohrbacher, Delaware Law of Corporations and Business Organizations, sec. 9.16 (4th ed. 2022 & Supp. 2022) (‘‘[t]he only statutory requirements for the notice of the meeting are that it state the time, place and purpose of the meeting and that the notice contain a copy of the merger agreement or a summary of the agreement . . . [i]n practice, of course, many such meetings will be governed by the federal proxy rules, which require that a full proxy statement be submitted to the stockholders.’’). 511See, e.g., NYSE Listed Company Manual
Section 401.03 which ‘‘recommends that a
minimum of 30 days be allowed between the record and meeting dates so as to give ample time for the solicitation of proxies’’ and 402.05 which ‘‘recommends the [proxy soliciting] material be provided 30 days prior to the meeting date in order to allow the firms ample time to mail the material to beneficial owners and receive replies from them.’’ 512The requirements to ‘‘distribute’’ the various security holder materials under the minimum dissemination time periods in the rules we are adopting are satisfied when the materials are sent and not when they are received by the security holder. Thus, where the registrant is mailing a full set of hard copy materials to security holders, the requirement would be met when the materials are placed in the mail. 513Letter from CFA Institute. See supra note 117 and accompanying text. 514A review, in June 2023, by the Commission staff of the corporation laws of each of the 50 U.S. States found there are currently no U.S. States with a maximum period of notice for a stockholder meeting that is less than 20 days. We acknowledge that there remains the possibility a U.S. State could change its law to provide for a maximum period of notice less than 20 days or foreign law could contain such a provision. 515Letter from Davis Polk. See supra note 506 and accompanying text. 516Letter from Vinson & Elkins. See supra note 507 and accompanying text. for the solicitation period in de-SPAC transactions.’’ 505 The commenter said that, if the safe harbor from the Investment Company Act is adopted as proposed, the Commission should ‘‘consider an exception to the minimum dissemination period in the event necessary to stay within the safe harbor.’’ 506 Another commenter said, ‘‘The SEC’s proposed solution does not align with the treatment of IPOs. An IPO prospectus is substantially final at launch of the IPO roadshow; however, since there is no required length for a roadshow, investors in an IPO may only have access to a substantially final version of the prospectus for a few days prior to making their investment decision.’’ 507 The commenter said that stockholder meeting notices required to be provided certain numbers of days prior to a stockholder meeting are typically included in proxy statements and stated that, ‘‘Under the current framework, the final registration statement or proxy statement in a de￾SPAC transaction is available for at least 10 days and a preliminary version is typically publicly available for up to several months longer than in an IPO.’’ This commenter also stated, ‘‘The SEC justifies this differential treatment by citing the complexity of the SPAC structure, the conflicts of interest that are often present in this structure and the effects of dilution on non-redeeming shareholders, but it fails to appreciate that many of these same considerations can be present in IPO transactions and that this proposed rule is decidedly contrary to the SEC’s stated intention of aligning de-SPAC transactions with IPOs.’’
Another commenter appeared to suggest that the minimum dissemination period for purposes of proposed General Instruction L.3 to Form S–4 should be the same as the IPO ‘‘48 hour’’ rule of 17 CFR 240.15c2–8 (‘‘Rule 15c2–8’’).508
3. Final Rules
We are adopting the amendments to Rules 14a–6 and 14c–2 and Forms S–4 (General Instruction L.3) and F–4 (General Instruction I.3) as proposed, except for clarifying changes discussed below. In addition to the need for enhanced disclosure in de-SPAC transactions, we continue to believe that it is important to ensure that SPAC security holders have adequate time to analyze the information presented in these transactions. Although the laws of a SPAC’s jurisdiction of incorporation or organization may require the SPAC to send a notice to its security holders at least a specified number of days before the security holder meeting to approve a proposed business combination transaction, the information in such notices is often limited.509 These laws do not generally require a minimum period of time for dissemination of other information about the transaction (including any proxy statements or other materials required by the Federal securities laws) to security holders.510 Exchange listing standards also do not impose such requirements.511 Without a minimum period for dissemination of prospectuses, proxy statements, and other materials before a security holder meeting (or action by consent), SPACs and SPAC sponsors may provide prospectuses or proxy or information statements for a de-SPAC transaction to the SPAC’s security holders within an abbreviated time frame, leaving the security holders with relatively little time to review what are often complex disclosure documents for these transactions. We recognize that SPACs are often required under their governing instruments and applicable exchange listing rules to complete de-SPAC transactions within a certain time frame. Nevertheless, given the complexity of the structure of SPACs, the conflicts of interest that are often present in this structure and the effects of dilution on non-redeeming shareholders, the 20- calendar day minimum dissemination periods we are adopting will provide an important investor protection by establishing a minimum time period for security holders to review prospectuses and proxy and information statements in de-SPAC transactions.512 In order to account for the prospect that the laws of a SPAC’s jurisdiction of incorporation or organization may have a maximum advance time period provision applicable to the dissemination of materials to security holders, the rules we are adopting include provisions that would require a registrant to satisfy the maximum dissemination period permitted under the applicable law of such jurisdiction when this period is less than 20 calendar days to avoid conflicting with such a requirement. One commenter suggested that the Commission should override the laws of the jurisdiction of incorporation or organization of the SPAC where such jurisdictions provide a maximum period for dissemination of less than 20 days.513 We are not adopting such suggestion because we believe the instances where there is a maximum period of less than 20 days will be limited.514
Another commenter said that the Commission should consider an exception to the minimum dissemination period where necessary to stay within the Investment Company Act safe harbor.515 As discussed below in section VI, we are not adopting the proposed Investment Company Act safe harbor. One commenter suggested that the proposed minimum dissemination period is contrary to the Commission’s stated purpose of aligning de-SPAC transactions with IPOs because investors in IPOs typically have only short periods of time to review prospectuses.516 While we acknowledge that, under the final rules, investors may

517Letter from Davis Polk.
518Letter from Vinson & Elkins. See supra note 507 and accompanying text. 519Letter from Loeb & Loeb. See supra note 508 and accompanying text. 520As discussed in sections III.C and IV.A, the Commission is adopting Rule 145a and amendments to registration statement forms that are related to certain co-registration obligations. As a result, in connection with de-SPAC transactions, Rule 15c2–8 may apply and require the delivery of the preliminary prospectus to any person who is expected to receive a confirmation of sale pursuant to the terms of that rule, because the target company is typically not such a reporting company before the transaction. We will continue to consider the effect of Rule 15c2–8 on de-SPAC transactions. At the present time, however, we are not making any changes to Rule 15c2–8. 521The Securities Act broadly defines the term ‘‘issuer’’ to include every person who issues or proposes to issue any securities. See section 2(a)(4) of the Securities Act [15 U.S.C. 77b]. 522 In addition, section 6(a) requires the issuer’s principal executive officer or officers, principal financial officer, comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or persons performing similar functions, by the majority of the persons or board having the power of management of the issuer) to sign a registration statement. When the issuer is a foreign entity, the registration statement must also be signed by the issuer’s duly authorized representative in the United States. 523Proposing Release, supra note 7, at 29479. 524Proposing Release, supra note 7, at 29479. 525See section 2(a)(4) of the Securities Act. 526See Proposed Instruction 1 to the Signatures
section of Form S–4 and Form F–4. Securities Act
registration statement forms use the term ‘‘registrant’’ throughout rather than the term ‘‘issuer.’’ See, e.g., Form S–4. A ‘‘registrant’’ is a type of ‘‘issuer.’’ Rule 405 defines the term ‘‘registrant’’ as ‘‘the issuer of the securities for which the registration statement is filed.’’ For the purposes of this release, we are using the terms ‘‘co￾registrant’’ and ‘‘co-registration’’ to describe the situation where the target company must be included as a registrant on a registration statement for a de-SPAC transaction given that the target company is an ‘‘issuer’’ of securities in a de-SPAC transaction regardless of transaction structure. Moreover, the Commission has previously specified who constitutes the ‘‘registrant’’ for purposes of signing a Securities Act registration statement in certain contexts. For example, an instruction in Forms S–4 and F–4 requires two or more existing corporations to be deemed co-registrants when they will be parties to a consolidation and the securities to be offered are those of a corporation not yet in existence at the time of filing. See Instruction 3 to the signature page for Form S–4 and Form F–4. 527Proposed General Instruction L.1 to Form S– 4; proposed General Instruction I.1 to Form F–4. 528Letters from Andrew Tuch; Americans for Financial Reform Education Fund (June 13, 2022) (‘‘Americans for Financial Reform Education Fund’’); Better Markets; CalPERS; CFA Institute; CII; Senator Elizabeth Warren; ICGN; KPMG LLP (June 13, 2022) (‘‘KPMG’’); Loeb & Loeb; NASAA; Paul Swegle. have more time to review prospectuses in a de-SPAC transaction than in an IPO, we believe this is appropriate because in the Commission staff’s experience, due to the hybrid nature of SPAC transactions, registration statements in de-SPAC transactions in some cases are substantially lengthier than both the earlier IPO registration statement for the specific SPAC (that is involved in the de-SPAC transaction) and registration statements for IPOs of traditional operating companies, as the registration statements contain both IPO-like information about the target company and M&A-like information about the de-SPAC (and other related) transactions. Further, as noted by a different commenter 517 and as observed by Commission staff, current market practice appears to be that many SPACs deliver these disclosures to investors earlier than 20 calendar days prior to the meeting date, meaning the final rules we are adopting should impose minimal burdens in such instances and would provide a uniform and transparent minimum floor standard for the dissemination of such disclosure should market practices change. One commenter also said that a preliminary version of the final registration statement may be available for months prior to the security holder meeting date related to the de-SPAC transaction.518 We do not believe this fact provides a basis for not adopting the proposed rules regarding minimum dissemination periods. These preliminary filings may
be amended prior to their becoming effective and, in the case of a combined registration and proxy statement that has not yet become effective, this disclosure would not yet have been delivered to security holders. To the extent one commenter appeared to suggest that the minimum dissemination period should be the same as the IPO ‘‘48 hour’’ rule of Exchange Act Rule 15c2–8,519 we do not believe a 48-hour period would provide investors sufficient time to review the disclosure, particularly given the complex hybrid nature of de-SPAC transactions. Moreover, providing only 48 hours before the shareholder meeting will not provide enough time for certain shareholders’ votes to be considered as a practical matter, given that many shares are held through securities intermediaries such as broker-dealers and such intermediaries often require voting instruction forms to be submitted to them at least 48 hours prior to the shareholder meeting.520 We are making minor changes in the final rules compared to the proposals for purposes of clarity and to make the registration forms congruent with the amendments to Rules 14a–6 and 14c–2 that we are adopting. The final rules provide that each of Rules 14a–6 and 14c–2 and Forms S–4 and F–4 will contain the language ‘‘must be distributed to security holders no later than the lesser of 20 calendar days prior to the date on which the meeting of security holders is to be held or action is to be taken in connection with the de￾SPAC transaction.’’ Where the proposed amendments to Forms S–4 and F–4 referred to the ‘‘date on which action is to be taken,’’ these revisions eliminate any potential for misinterpretation that the proposed language only referred to action by consent and not at a meeting of security holders. In addition, the terms ‘‘to be held’’ and ‘‘to be taken’’ are intended to clarify these rules since these events are in the future when viewed from the point in time at which the security holder materials are distributed.
C. Private Operating Company as Co￾Registrant

1. Proposed Rules
   Under section 6(a) of the Securities Act, each ‘‘issuer’’ 521 must sign a Securities Act registration statement.522 In the Proposing Release, the Commission stated that a de-SPAC transaction marks the introduction of a private operating company to the U.S. public securities markets, and investors look to the business and prospects of the private operating company in evaluating an investment in the combined company.523 The Commission stated that, accordingly, it is the private operating company that, in substance, issues or proposes to issue its securities, as securities of the newly combined public company.524 Given that the target company therefore is, in substance, an ‘‘issuer’’ of securities in a de-SPAC transaction regardless of transaction structure,525 the Commission proposed to amend Instruction 1 to the signatures section of both Form S–4 and Form F–4 to require that, when the SPAC would be the issuer filing the registration statement for a de-SPAC transaction, the term ‘‘registrant’’ would mean not only the SPAC but also the target company.526 The Commission also proposed to amend the general instructions to Forms S–4 and F–4 to provide that, if the securities to be registered on the form will be issued by a SPAC in a de-SPAC transaction, the term ‘‘registrant’’ for purposes of the disclosure requirements of the form means the SPAC.527
2. Comments
   A number of commenters generally supported the proposal.528 These commenters indicated that the co￾registration proposal would better align liability and disclosure in de-SPAC transactions with IPOs. One stated that ‘‘the proposed changes that would treat

529Letter from KPMG.
530Letter from Andrew Tuch.
531Letter from CII.
532Letter from Better Markets.
533Letter from NASAA.
534Letters from ABA, Davis Polk, Freshfields, Job Creators Network, NYC Bar, Skadden, Vinson & Elkins. 535Letter from Davis Polk. 536Letter from ABA. 537Letters from ABA (‘‘It is unclear if the Co￾Registrant Amendment would meaningfully enhance disclosures and protections for investors in practice’’), Davis Polk (‘‘we do not expect that the disclosure practice will be improved by such amendments’’), Job Creators Network. 538Letters from ABA (stating that ‘‘the Target and its affiliates—while not signatories of the Merger Registration Statement—may nonetheless still be subject to liability for disclosures in the Merger Registration Statement under Rule 10b–5 of the Exchange Act and potential enforcement actions by the Commission under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and under the proxy rules as participants in the proxy solicitation by the SPAC.’’), Davis Polk (‘‘the private operating target company and its affiliates are already subject to enforcement actions by the Commission irrespective of these amendments . . . .’’), Kirkland & Ellis (noting that ‘‘alternative statutory liability schemes cover various aspects of the de-SPAC transaction, including Section 11 where appropriate.’’), NYC Bar, Skadden, Vinson & Elkins, Winston & Strawn LLP (June 13, 2022) (‘‘Winston & Strawn’’) (‘‘In connection with the stockholder vote to approve the business combination and the repurchase of shares from redeeming SPAC stockholders, a SPAC already has liability under Section 14(a) of the Exchange Act and the antifraud provisions of Rule 10b–5.’’). 539Letters from ABA (noting that under current law ‘‘the Target’s directors and officers will ‘own’ the disclosures going forward . . . so there is already a strong incentive for the Target’s directors and officers to ensure the accuracy and completeness of the initial Merger Registration Statement disclosures’’), NYC Bar (‘‘it is unnecessary to impose additional liability on the Target’s directors and management in connection with the registration statement because those parties, by virtue of inheriting the disclosures of the registration statement and the ongoing disclosure obligations of the combined public company, will have Exchange Act liability going forward and with respect to historical disclosures as a result of the business combination.’’). 540Letters from ABA (‘‘Inasmuch as a De-SPAC Transaction is fundamentally an M&A transaction, and no different than business combinations in other contexts, the Commission has never required targets in other business combinations in these circumstances to be added as co-registrants of a merger registration statement.’’), CFA Institute (‘‘As to the need to amend the merger registration statement forms and schedules filed in connection with de-SPAC mergers involving a private operating company target, but not other mergers, creates regulatory uncertainty and confusion.’’), Skadden (‘‘Moreover, the proposed co-registrant changes may
occasion inconsistent treatment of de-SPAC transactions compared to other business combination transactions that are substantively similar and where the Commission’s concerns about the adequacy of target company disclosure also could exist.’’). See also letter from Nicholas Pappas, King & Wood Mallesons (June 13, 2022) (‘‘King & Wood Mallesons’’) (‘‘An example of the species of transaction in respect of which the Proposed Rules require qualification is where a seller is proposing to sell a subsidiary/target company. . . . At the time of running the sale process there is generally no intention on the part of the seller to IPO the target company.’’). 541Letter from Bullet Point Network. 542Letters from ABA, Freshfields. See also definitions of ‘‘issuer’’ and ‘‘registrant,’’ supra notes 521 and 526. 543Letter from Freshfields. 544Letter from ABA. registrant at the time a Form S–4 or F– 4 is filed would contribute to the Commission achieving its objective to better align de-SPAC transactions with traditional IPOs and afford investors with consistent protections.’’ 529 Another stated that, ‘‘By making target companies co-registrants, the Proposed Rules ensure that target operating companies and their directors and officers have strong incentives under
section 11 to deter disclosure errors and
other misconduct, even in conventionally structured de￾SPACs.’’ 530 Yet another stated, ‘‘We believe that treating both the SPAC and the target as an issuer under Section 6(a) of the Securities Act would help to align investor protections with those of a traditional IPO.’’ 531 Several of these commenters also indicated that the rule proposal would benefit investors by increasing the quality and reliability of the disclosure provided in de-SPAC transaction registration statements. One argued that the disclosures provided in de-SPAC registration statements should be ‘‘enhanced’’ due to the fact that ‘‘both parties to the de-SPAC transaction [would be] liable for material misstatements and omissions to investors and shareholders,’’ 532 while another stated ‘‘the proposed co￾registrant requirements, and attendant liabilities for misstatements or omissions, would ensure that target company directors, boards and managements make accurate representations regarding the status of the pre-merger entity.’’ 533 Other commenters generally opposed or had concerns regarding the proposal,534 generally characterizing the proposal as ‘‘not necessary’’ 535 or ‘‘inappropriate.’’ 536 Several commenters stated that the rule proposal would not benefit investors or that the benefit would be uncertain.537 A number of commenters indicated that there are already strong incentives under the existing framework to ensure that disclosures in registration statements for de-SPAC transactions are accurate and complete, pointing to the existing liability frameworks that they state apply to de-SPAC transactions, such as sections 11 and 17(a) of the Securities Act, sections 10(b) and 14(a) of the Exchange Act, and 17 CFR 240.10b–5 (‘‘Rule 10b–5’’), and the Commission’s ability to bring enforcement actions.538 A few of these commenters suggested it is unnecessary to impose additional liability because target company officers and directors, by virtue of their roles in the combined company, will effectively ‘‘own’’ any Exchange Act liabilities related to the disclosure in the de-SPAC transaction registration statement inherited by the combined company.539 Several commenters suggested the co￾registrant proposal would create a disparity compared to traditional M&A business combination transactions where a target is not a co-registrant.540 In contrast, another commenter stated that de-SPAC transactions involve ‘‘clearly different facts and circumstances than a non-SPAC merger because the SPAC board is not making a decision about the benefits of changing its operating business model via merger but rather is offering its shareholders the alternative of investing in the surviving company if they prefer that to $10 in cash.’’ 541 Other commenters suggested the co￾registration proposal is inconsistent with existing definitions of registrant and issuer because, they asserted, the target in a de-SPAC transaction is not issuing or proposing to issue any securities pursuant to the de-SPAC
registration statement.542 One commenter opposed the co￾registration proposal and expressed the view that: ‘‘[i]n most de-SPAC transactions the shares being registered on the SPAC’s registration statement are being issued only to the target’s shareholders and are not being issued or sold by the target company. Adding the target company as a co-registrant means that, in most cases, the target company will have potential Section 11 liability with respect to its own shareholders, but this is not logical or intuitive and is not consistent with the structure of a traditional IPO. In a traditional IPO, a company’s existing shareholders at the time of the IPO do not receive registered shares and would not have potential
Section 11 claims against the company
due to the disclosures in the IPO registration statement.’’ 543 Another commenter suggested the co￾registration proposal is inconsistent with 17 CFR 230.140 (‘‘Rule 140’’).544 The commenter said the purpose of Rule 140—to ‘‘ensure[ ] that the requisite information about the underlying issuer is adequately disclosed so new investors are fully informed of the attendant risks and returns relating to a potential investment’’—is ‘‘not a concern in de￾SPAC transactions,’’ because ‘‘full Form 10-type information’’ is already provided under current rules about the

545 Id.
546 Id.
547Letter from CFA Institute (‘‘For example, could such liability extend to various SPAC ‘insiders’ who may claim they are unaffiliated and do not redeem, even though they have conducted detailed due diligence and have negotiated special deal terms with the SPAC such as anchor and PIPE investors. Moreover, would this provision extend the target company liability to its own, private company shareowners.’’). 548Letter from KPMG (specifically noting that ‘‘SPACs may acquire more than one operating company as part of a de-SPAC transaction’’). 549Letter from Vinson & Elkins. 550Letter from Vinson & Elkins. See also supra note 526 (describing Instruction 3 to the Signatures sections of Forms S–4 and F–4). 551Letter from Vinson & Elkins. 552Letter from Freshfields (‘‘This would be consistent with the obligations in a traditional IPO, where the registrant identifies in the prospectus who will be its directors following the IPO’’). 553Letter from Vinson & Elkins (‘‘Putting aside the signatory/registrant distinction, we believe that the SEC should not make the target company sign the registration statement or be a full co￾registrant’’). 554Letter from NASAA (‘‘With this in mind, [the commenter] supports the attachment of Section 11 responsibilities to the managers and directors of target companies.’’). 555Letter from ABA (‘‘in many (if not substantially all) De-SPAC Transactions, given the minimum 20-day gap period between the Merger Registration Statement’s effectiveness and Closing, and significant Closing uncertainty at the time of registration statement effectiveness, additional directors (such as ‘outside’ independent directors or Sponsor designees) will join the Combined Company board just prior to or concurrent with Closing.’’). 556Letter from ABA (‘‘In many De-SPAC Transactions, certain legacy Target directors (and sometimes officers) will resign immediately prior to Closing. So the group of individuals to whom Securities Act liability attaches (i.e., the persons signing the Merger Registration Statement) under the Co-Registrant Amendment is at the same time both under-inclusive and over-inclusive.’’). 557Letter from Vinson & Elkins. 558Letters from ABA (noting that, in the time between effectiveness and closing of the merger, ‘‘there is a risk that the parties may terminate a De￾SPAC Transaction subsequent to the Merger Registration Statement effectiveness date, including (among other reasons) for failure to obtain stockholder approval, failure to satisfy a ‘minimum cash’ or ‘maximum redemption’ closing condition, or failure to obtain a required regulatory or third￾party approval. However, once the Merger Registration Statement has been declared effective, under the Co-Registrant Amendment, the Target would nonetheless be subject to ongoing Exchange Act reporting obligations for at least 12 months, even if a De-SPAC Transaction is terminated.’’), Crowe, Davis Polk, Freshfields (‘‘[I]f the Form S–4 or Form F–4 is declared effective by the SEC, but
the de-SPAC transaction does not close, the target, previously a private company, would be burdened with disclosure obligations as if it was a public company for at least the remainder of the year but would have no securities trading in the public markets.’’), Grant Thornton, KPMG. 559Letters from ABA (‘‘The Co-Registrant Amendment, if adopted as proposed, would subject Targets to reporting obligations pursuant to Section 15(d) of the Exchange Act following effectiveness of the Merger Registration Statement. Given the proposed 20-day minimum solicitation period prior to the SPAC stockholders’ meeting, it is entirely possible that the SPAC acquirer and the Target could each be required to file a quarterly report on Form 10–Q or annual report on Form 10–K prior to the Closing date.’’), KPMG (‘‘The Proposed Rules indicate that the target operating company would be an issuer, therefore subjecting it to the reporting obligations of a public company and requiring it to file a periodic report for that recently ended reporting period. This would create circumstances where multiple periodic filings, such as Forms 10– K or 10–Q, are required to be filed for the same period for multiple entities involved in the transaction.’’), PwC. 560Letter from Davis Polk. SPAC and the target company.545 This commenter also said that in a de-SPAC transaction ‘‘no new proceeds are being received by the Combined Company,’’ which is a ‘‘notable difference’’ from Rule 140.546 Other commenters on the co￾registration proposal requested certain clarifications. One commenter supported the co-registration requirement but suggested the Commission clarify whether ‘‘liability correctly or mistakenly extends to anyone other than unaffiliated, non￾redeeming SPAC shareholder[s].’’ 547 A different commenter asked the Commission to clarify ‘‘which entities would be considered co-registrants in these types of transactions and therefore subject to the applicable requirements under the securities laws.’’ 548 Several commenters addressed issues related to the scope of section 11 liability that may stem from the co￾registration proposal. One commenter suggested that, as drafted, the proposal would make the target company a signer but not a co-registrant.549 Specifically, this commenter said that the proposed change to Instruction 1 to the Signatures
section of the forms purports to make
the target company a registrant ‘‘for purposes of this instruction’’ but that ‘‘the change would solely require that the target company, along with its specified officers and directors, sign the registration statement,’’ citing for purposes of comparison ‘‘existing Instruction 3 to the Signatures section of the forms, which the commenter said is not limited solely to the Signatures
section.’’ 550 The commenter opposed
the proposed co-registration requirements and said that, ‘‘if the regulatory goal is exposing the target company and its officers and directors, as signatories, to Section 11 liability for material misstatements or omissions in the registration statement, the proposed amendment to Instruction 1 of the forms accomplishes that.’’ 551 Other commenters expressed views on which entity and which officers and directors should be required to sign the de-SPAC transaction registration statement. One commenter said that the Commission should ‘‘clarify that directors and executive officers of the target company, who will not be directors or executive officers of the target company following the consummation of the de-SPAC transaction, are not required to sign the registration statement used for the de￾SPAC transaction and are not deemed to be directors or executive officers of the target company for purposes of the liability provisions of the securities laws.’’ 552 Another commenter stated that the ‘‘required signatories should be the surviving company, which might be a new registrant and the directors and officers of that entity.’’ 553 In contrast, another commenter expressed the view that ‘‘[t]arget company managers and directors are responsible for providing the information necessary for investor approval of a de-SPAC merger, and must provide accounting information as well as current operations and forecasts,’’ because they ‘‘also profit significantly from selling private shares and/or receiving significant ownership positions in the post-SPAC entity.’’ 554 A different commenter suggested that liability under the co-registration proposal would be both over-inclusive and under-inclusive, because new officers or directors may be appointed 555 and because target company officers or directors may resign.556 Finally, one commenter pointed out that in a de-SPAC transaction structured as an acquisition of assets, the assets acquired could not sign a registration statement.557 A number of commenters addressed Exchange Act reporting company obligations of the target company as a result of proposed co-registration requirements. Several commenters raised concerns that if the target company is a co-registrant on a de-SPAC registration statement, the target company would become an Exchange Act reporting company at the time of effectiveness.558 Specifically, commenters raised concerns about the target company being required to file Exchange Act reports during the interim period between when the registration statement for the de-SPAC transaction becomes effective and the closing of the de-SPAC transaction.559 A different commenter said ‘‘the proposed rules should clarify that a target company that will ultimately not be the public company parent following the de-SPAC transaction does not become subject to the periodic reporting requirements of Section 13 of the Exchange Act as a result of being a co￾registrant in the registration statement for the de-SPAC transaction.’’
560 If a

561Letters from Crowe, Grant Thornton. See also KPMG (‘‘It is also possible that a SPAC merger is terminated after the effective date of a Form S–4 or F–4 registration statement, due to the vote from shareholders or for other reasons. In this situation, the Proposal indicates that the target operating company is a registrant, with ongoing filing obligations, but without having completed the merger. We recommend the Commission consider clarifying the reporting obligations of target operating companies in such circumstances.’’). See Staff Legal Bulletin No. 18 (CF) (Mar. 15, 2010). 562Letters from ABA; Anonymous (Apr. 7, 2022) (‘‘Anonymous (Apr. 7, 2022)’’); Skadden (‘‘Given the potential for increased risk of liability to boards, we also expect D&O liability insurance premiums to increase significantly, further diluting the value of the transaction to stockholders.’’). See also letters from ABA, Goodwin, White & Case (each discussing directors and officers insurance premium costs in connection proposed Item 1606(a)) and Job Creators Network (noting that costs generally will increase, as ‘‘SPACs and target companies should expect extensive diligence requests from financial institutions, advisors, and their counsel in connection with a de-SPAC transaction’’ (citations omitted)). 563Letter from ABA. 564Letter from Vinson & Elkins. 565Letter from Vinson & Elkins. 566Letter from PwC. 567Letter from Bullet Point Network. 568 Id. 569 Id. 570Although target companies’ Federal securities law liability is not currently aligned with the liability of a company in a traditional IPO, they may be exposed to other liability (as are companies in a traditional IPO) from Commission enforcement actions or potentially to investors under anti-fraud statutory provisions and rules that require scienter or negligence to the extent the elements of the relevant cause of action are met. See, e.g., Exchange Act section 10(b) and Rule 10b–5 thereunder (imposing liability for false or misleading statements made in connection with a purchase or sale of securities) and, where applicable, Rule 14a– 9 (for false and misleading statements made in connection with the solicitation of proxies). target company that does not become the public company parent does become subject to periodic reporting, the commenter said that ‘‘upon effectiveness of such registration statement, the target company would, as a result of Section 15(d) of the Exchange Act, automatically be required to begin filing 10–Ks, 10–Qs and other periodic reports required by the Exchange Act, and this would be an Exchange Act reporting obligation that is separate from the public company Exchange Act reporting obligation. These reports would be essentially the same reports as filed by its public parent company and would create significant additional compliance costs while resulting in no substantive additional public disclosure.’’ The commenter expressed the view that this was not an intended consequence of the rule
proposal and said the Commission should clarify this aspect of the co-registration proposal. Some commenters suggested the Commission should clarify in any final rules whether, in a situation where the de-SPAC transaction is not ultimately consummated, a target company that is a co-registrant for a de-SPAC registration statement that has been declared effective may suspend its periodic reporting obligations under procedures similar to those set out in Staff Legal Bulletin 18 regarding abandoned IPOs and acquired issuers.561 A number of commenters raised concerns about costs for target companies as co-registrants, particularly with respect to the cost of directors and officers insurance.562 One commenter stated, ‘‘Targets will be forced to substantially enhance their D&O [directors and officers] liability insurance coverage . . . [and], if the De￾SPAC Transaction is never completed for some reason, Targets would likely not be able to ‘ratchet down’ their coverage to more typical private company levels until the next policy renewal date.’’ 563 One commenter stated that co-registration would result in disclosure requirements that are inconsistent with the proposed revisions to Regulation S–X, raising the issue of whether, if there were multiple target companies, if each company would be required to provide financials audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) (‘‘PCAOB’’), rather than solely the predecessor pursuant to proposed Rule 15–01(a) of Regulation S–X.564 This commenter indicated that co￾registration would result in inconsistencies with IPOs where there are multiple target companies and queried whether all target companies ‘‘should be required to sign the registration statement or just the accounting predecessor or acquiror, the one whose shareholders own the largest amount of the surviving company, etc.’’ 565 A different commenter asked for guidance regarding a target company’s section 15(d) reporting obligation in the case where there are multiple targets.566 One commenter suggested the Commission create a new form for de￾SPAC transactions.567 The commenter, who supported ‘‘the SEC’s stance that SPAC business combinations should be treated as de facto IPOs,’’ suggested the Commission align SPAC disclosures with Form S–1 by creating a SPAC￾specific form that would ‘‘closely resemble a traditional IPO S–1, rather than the traditional S–4 used for merger transactions.’’ 568 The commenter proposed that, in this new SPAC￾specific form, ‘‘management projections should not be disclosed to public SPAC shareholders . . . even if management projections have been reviewed by the SPAC board of directors in their role as shareholder fiduciaries.’’ 569
3. Final Rules
After considering the comments received, we are adopting the co￾registration proposal substantially as proposed, with some modifications. Under existing rules, when a SPAC or a holding company offers and sells its securities in a registered de-SPAC transaction, staff observed a majority of the relevant disclosure in the de-SPAC transaction registration statement is about the target company, but only the SPAC or holding company, its principal executive officer or officers, its principal financial officer, its controller or principal accounting officer, and at least a majority of its board of directors (or persons performing similar functions) are required to sign the registration statement for the de-SPAC transaction. These signers are subject to liability under section 11 of the Securities Act (along with other persons who have liability under section 11). In these situations, the private operating company and its officers and directors may therefore not incur liability as signatories to the registration statement under section 11 of the Securities Act, even though information about the target company is highly significant to investors and this result is unlike if the target company had conducted a traditional IPO registered on Form S–1 or Form F–1. As discussed in more detail below, it is our view that in a de￾SPAC transaction the target company is an issuer of securities under section 2(a)(4) of the Securities Act, and, therefore, the target company along with its required officers and directors must sign a registration statement filed by a SPAC or another shell company for the de-SPAC transaction, because both in substance and by operation of new Securities Act Rule 145a, the target company is issuing or proposing to issue securities in a de-SPAC transaction, regardless of the transaction structure. In addition, the business operations of the target company will be those that are carried on by the combined company going forward. The co-registration requirements will therefore enhance investor protection by aligning Federal securities law liability with the entity that is the primary source of the information disclosed about the new public operating company.570
Section 2(a)(4) of the Securities Act
broadly defines the term ‘‘issuer’’ to include every person who issues or proposes to issue securities. The

571See, e.g., H.R. Rep. 73–85, 12 (‘‘Special provisions govern the definition of ‘issuer’ in connection with security issues of an unusual character. . . . [For example, in the case of an investment trust], although the actual issuer is the trustee, the depositor is the person responsible for the flotation of the issue. Consequently, information relative to the depositor and to the basic securities is what chiefly concerns the investor—information respecting the assets and liabilities of the trust rather than of the trustee.’’). 572Letter from ABA. 573See infra section IV.A. 574See section 6(a) of the Securities Act [15 U.S.C 77f]. 575 In this regard, we note that the target company’s officers and directors are the parties most similarly situated to the officers and directors of a private company conducting a traditional IPO, in terms of their knowledge of, and background in, the company going public through a de-SPAC transaction. 576Letters from ABA, Kirkland & Ellis, NYC Bar, Skadden, Vinson & Elkins, Winston & Strawn. See supra note 538. 577See supra note 539. 578The discussion, with respect to SPACs filing a registration statement, applies equally to de-SPAC transaction structures where a holding company is created and files a registration statement. 579See supra note 570. 580Under section 6(a) of the Securities Act, each ‘‘issuer’’ must sign the registration statement, and ‘‘every person who signed the registration statement’’ has liability under section 11(a) of the Securities Act. See 15 U.S.C. 72(a) and 77k(a). The provisions of section 11(b) of the Securities Act provide limited situations where no liability under
section 11(a) will attach but exclude issuers from
applying that provision. See 15 U.S.C. 77k(b) (‘‘Notwithstanding the provisions of subsection (a) no person, other than the issuer, shall be liable as provided therein who shall sustain the burden of proof. . . .’’ (Emphasis added)). 581See William O. Douglas & George E. Bates, The Federal Securities Act of 1933, 43 Yale L.J. 171, 173 (1933) (‘‘The civil liabilities imposed by the Act are not only compensatory in nature but also in terrorem. They have been set high to guarantee that the risk of their invocation will be effective in assuring that the ‘truth about securities’ will be told.’’). See also supra note 850 and accompanying text (noting the importance of private rights of action in addition to Commission enforcement mechanisms as part of the Federal securities law statutory scheme, which provides for several private rights of action). legislative history of this broad definition suggests that the identification of the ‘‘issuer’’ of a security should be based on the economic reality of a transaction to ensure that, in service of the disclosure purpose of the Securities Act, the person(s) that have access to the information most relevant to investors are responsible as an ‘‘issuer’’ for providing such information.571 However, certain commenters asserted that a target company cannot fall within the definition of issuer in a de-SPAC transaction because ‘‘[t]he [t]arget in a De-SPAC Transaction ordinarily is not issuing or proposing to issue any securities pursuant to the Merger Registration Statement—it is the SPAC’s securities to be issued.’’ 572 We disagree. As explained below, even in transaction structures where a target company does not issue its own securities in the course of the de-SPAC transaction, it will always be proposing to issue the securities of the combined company in connection with the Rule 145a transaction that is occurring when the SPAC conducts a business combination that changes it from a shell company to an operating company.573 The final rules will ensure that, when a registration statement is filed for a de￾SPAC transaction, a target company, its principal executive officer or officers, its principal financial officer, its comptroller or principal accounting officer, and a majority of its board of directors or persons performing similar functions sign the registration statement.574 These signatories, among others, will be liable under section 11, for any material misstatements or omissions in the registration statement (subject to a due diligence defense for all parties other than an issuer) and will thereby be held accountable to investors for the accuracy of the disclosures in the registration statement that previously would have been signed only by the SPAC or a holding company and its officers and directors.575 We continue to believe such liability, and the corresponding accountability to investors, is appropriate given that it is the private operating company that, in substance, issues or proposes to issue its
securities, as securities of the newly combined public company. We expect that this requirement will improve the reliability of the disclosure provided to investors in connection with de-SPAC transactions by creating strong incentives for such additional signing persons (among others who would have liability under section 11 as a result of these requirements, such as non-signing directors) to conduct thorough diligence in connection with the de-SPAC transaction and review more closely the disclosure about the target company. As noted above, the final rules reflect certain modifications to the proposed rules. First, we are requiring that the names of all co-registrants appear on the cover page. Second, we are clarifying that the target company is a registrant and not merely a signatory to the registration statement, as suggested by some commenters. Third, we are addressing scenarios where the target company is a business or assets. Finally, we are expanding the instructions to Forms S–4 and F–4 to also require that the target company and its related
section 6(a) signatories sign a
registration statement for a de-SPAC transaction filed by a holding company. This change is intended to ensure that the target company signs the registration statement in a transaction structure involving a holding company given that, as noted above, the target company is an ‘‘issuer’’ of the securities in any registered de-SPAC transaction. We have also added the same requirements to Form S–1 and Form F–1. We discuss these changes to the final rules and the comments received on the proposal in more detail below. Several commenters suggested that there are already strong incentives under the existing framework to ensure that disclosures in registration statements for de-SPAC transactions are accurate and complete.576 A few of these commenters suggested it is unnecessary to impose additional liability because target company officers and directors, by virtue of their roles in the combined company, will effectively ‘‘own’’ any Exchange Act liabilities related to the disclosure in the de-SPAC transaction registration statement inherited by the combined company.577 As commenters noted, currently when a SPAC578 files a registration statement in connection with a de-SPAC transaction that becomes effective, the SPAC is exposed to strict liability for material misstatements regarding all disclosures in the registration statement, including the disclosures related to the target company. In addition, the SPAC and/or target company may be exposed to liability from Commission enforcement actions or potentially to investors under anti-fraud statutory provisions and rules that require scienter or negligence.579 We disagree with the commenters who suggested that existing liability protections make it unnecessary for the target company to have strict liability for statements in the de-SPAC registration statement. In the Securities Act, Congress determined that an issuer that offers and sells its securities to the public using a registration statement should be strictly liable to investors for any material misstatements and omissions in the effective registration statement.580 Furthermore, strong private liability in registered transactions is one of the central tenets of the Securities Act.581 As discussed throughout this release, in a de-SPAC transaction, the target company is an issuer because it, in substance, issues or proposes to issue its securities, as securities of the newly combined public company. As an issuer and the primary source of information disclosed about the combined operating company in registered de-SPAC transactions, the

582Letters from ABA, Skadden. See supra note 540. 583Letter from Bullet Point Network. 584Letter from Freshfields. 585See supra section I. 586Less commonly, the target company may be a public company or may be a previously public company that went private. 587Letter from ABA. See Rule 140. 588Letter from CFA Institute. 589Letter from KPMG (specifically noting that ‘‘SPACs may acquire more than one operating company as part of a de-SPAC transaction’’). target company and its officers and directors are best situated to ensure the accuracy and completeness of such disclosures. Accordingly, investors in de-SPAC transactions are entitled to the protections arising from having the target company and other issuers sign the de-SPAC registration statement, including strict liability for statements in the effective registration statement, regardless of any other liabilities that may apply. With respect to commenters’ argument that the target company, and its officers and directors, will ‘‘own’’ liability for statements made in the de￾SPAC registration statement going forward, we acknowledge that, under the existing framework, in specific situations where the target company survives and/or the officers and directors of the target company are officers and directors of the surviving company, they would potentially have liability, including strict liability, for statements in the de-SPAC registration statement. However, that assumption of liability under current regulations does not change the fact that in other transaction structures, the target company and its officers and directors may not be strictly liable for the statements made in any registration statement filed in connection with the de-SPAC transaction, notwithstanding that the target company is, in substance, an issuer in these transaction structures for the reasons discussed above. So that target company liability is consistent across de-SPAC transaction structures, we are adopting the co-registration proposal as proposed, subject to the changes discussed herein. A few commenters suggested the co￾registrant proposal would create a disparity compared to traditional business combination transactions, because the target company is not a co￾registrant in those transactions.582 In contrast, another commenter said, ‘‘These are clearly different facts and circumstances than a non-SPAC merger’’ because the SPAC board is not deciding whether to change its operating business model via merger but rather is offering its shareholders the opportunity to invest in the surviving company.583 One commenter suggested that requiring the target company to sign a registration statement for a de-SPAC transaction would be inconsistent with how section 11 liability applies in a traditional IPO because, under the co￾registrant proposal, the target company could be liable to its existing shareholders for information about the target company included in the de￾SPAC registration statement.584 As discussed above,585 the hybrid
nature of de-SPAC transactions makes them distinguishable from other business combinations or traditional IPOs, because the transaction simultaneously:
(i) functions as a form of public capital raising for the target company, (ii) transforms a shell company, that is not a business combination related shell company, into an operating company, and (iii) commonly represents the introduction of a formerly private company to the public markets for the first time. In a de-SPAC transaction, the target company is, in substance, acting as issuer of securities and therefore should incur section 11 liability for the disclosures about its business and its financial results and condition, which constitute critical information for investors making investment, redemption, and voting decisions. As noted above, the de-SPAC transaction commonly marks the introduction of the target company to the U.S. public securities markets, and investors look to the business and prospects of the target company in evaluating an investment in the combined company.586 Moreover, new Rule 145a recognizes that a de-SPAC transaction involves a sale of the securities of the combined company to the SPAC’s shareholders. Information relating to the target company is the most significant factor in investor decisions to participate in the de-SPAC transaction because the target company will become the operating business of the combined company upon consummation of the de-SPAC transaction. In addition, the target company is the principal beneficiary of the capital that the SPAC has previously raised and is contributing to the combined company. Co-registration is necessary in these circumstances so that appropriate levels of liability for the related disclosures attaches to the entity that is the primary source of the information disclosed—information that relates to and ultimately benefits the target company itself. Requiring the target company and its officers and directors to sign the registration statement will help to ensure that the information provided to investors in connection with a de-SPAC transaction is accurate, complete, and reliable by incentivizing such parties to exercise more care in the preparation of that information. One commenter suggested the co￾registration proposal is inconsistent with Securities Act Rule 140, which according to the commenter ‘‘ensures that the requisite information about the underlying issuer is adequately disclosed,’’ and does not apply to de￾SPAC transactions, because de-SPAC registration statements already provide registrants with disclosures about the target company, and the target company already may be subject to some liability for disclosures contained therein.587 While Rule 140 and these new co￾registration requirements both expose parties to liability, they do so in different factual situations and for different purposes, and therefore are not inconsistent. As discussed above, we acknowledge that disclosure about target companies is already included in de-SPAC registration statements and target companies may have liability under de-SPAC registration statements in some situations. However,
target companies do not have liability as issuers in all transaction structures, notwithstanding the fact that a de-SPAC transaction marks the introduction of the target company to the U.S. public securities markets and investors look to the business and prospects of the target company in evaluating an investment in the combined company. One commenter supported the proposal but suggested that the Commission clarify whether ‘‘liability correctly or mistakenly extends to anyone other than unaffiliated, non￾redeeming SPAC shareholder[s].’’ 588 Under the final rules, the target company, its section 6(a) signing persons, and its directors will be subject to the same liability as any other issuer (including to affiliated shareholders). A different commenter recommended that the Commission clarify ‘‘which entities would be considered co￾registrants in these types of transactions and therefore subject to the applicable requirements under the securities laws.’’ 589 We have provided additional clarification regarding which entities would be a co-registrant in connection with changes to the instructions to registration forms compared to the proposed instructions that we discuss below. As noted above, one commenter suggested the proposal would make the

590Letter from Vinson & Elkins.
591See Proposing Release, supra note 7, at 29480 (request for comment number 69) (‘‘Should we also adopt corresponding amendments to Form S–1 and Form F–1 in the event that these forms are used by a SPAC for a de-SPAC transaction?’’). 592See letters from Freshfields, Vinson & Elkins. 593 15 U.S.C. 77f(a). 594 15 U.S.C. 77k(a)(2). 595See also 15 U.S.C. 77(k)(b)(1) (allowing for the potential removal of section 11 liability from persons who ‘‘before the effective date . . . had resigned from or had taken such steps as are permitted by law to resign from, or ceased or refused to act in, every office, capacity, or relationship in which he was described in the registration statement as acting or agreeing to act, and . . . had advised the Commission and the issuer in writing that he had taken such action’’). 596 15 U.S.C. 77f(a). 597See supra note 557 and accompanying text. registrant on Forms S–4 and F–4.590 We do not agree with this assessment because, as an ‘‘issuer’’ of the securities in a registered de-SPAC transaction, the target company is both a required signatory of the registration statement pursuant to section 6(a) and a ‘‘registrant’’ under Rule 405. To that end, Rule 405 states that a ‘‘registrant’’ is a type of ‘‘issuer’’—i.e., ‘‘the issuer of the securities for which the registration statement is filed.’’ The proposed instruction that the term ‘‘registrant’’ means the SPAC for purposes of the disclosure obligations of the form was not intended to mean that a target company would not also be considered a registrant. The purpose of that instruction was to make clear that the defined term ‘‘registrant’’ on the form refers to the ‘‘SPAC’’ and to allow for a different defined term to be used on the form when specialized disclosure with respect to the ‘‘target company’’ is required. The proposed instruction to the Signatures section was intended to clarify that both the SPAC and target company and their required officers and directors must sign the form but would not have made the target company a ‘‘signer not a registrant.’’ Nevertheless, to clarify this point, in the final rules, we are making technical changes to the instructions to the forms. In connection with the request by a commenter to compare the proposed instructions to current Instruction 3 to the Signatures section, we are revising the instructions to Forms S–4 and F–4 to require that the names of each co￾registrant appear on the cover page consistent with current Instruction 3. We are also revising the instructions to require that the target company and its related section 6(a) signatories sign a registration statement for a de-SPAC transaction filed by a holding company, to account for the fact that the target company is an ‘‘issuer’’ of the securities in any registered de-SPAC transaction. As a result, in the final rules, the last sentence of General Instruction L.1 of Form S–4 provides: ‘‘If the securities to be registered on this Form will be issued by a special purpose
acquisition company (as such term is defined in Item 1601 of Regulation S–K) or another shell company in connection with a de￾SPAC transaction, the registrants also include the target company (as such term is defined in Item 1601 of Regulation S–K), and it must be so designated on the cover page of this Form. In such a de-SPAC transaction, where the target company consists of a business or assets, the seller of the business or assets is deemed to be a registrant instead of the business or assets and must be so designated on the cover page of this Form. Further, in such a de-SPAC transaction, the term ‘registrant’ for purposes of the disclosure requirements of this Form means the special purpose acquisition company, and the term ‘company being acquired’ for the purposes of the disclosure requirements of this Form means the target company.’’ Similarly, we are revising the last sentence of Instruction 1 of the Signatures section and revising proposed General Instruction I.1 to Form F–4 and the last sentence of Instruction 1 of the Signatures section of Form F–4 in the same manner as with Form S–4. Also with respect to changes in the forms to implement the co-registration requirements, in the Proposing Release, the Commission solicited comment on whether Form S–1 and Form F–1 should be amended to include instructions as to signatures which, when used for a de￾SPAC transaction, would align the signature requirements of these forms to Form S–4 and Form F–4.591 Because Form S–1 and, where issuers are eligible, Form F–1, remain available for de-SPAC transactions, it is consistent with the protection of investors to include equivalent instructions as to signatures to ensure consistent liability for de-SPAC transactions regardless of which Securities Act form is used for registration. Accordingly, we are adopting amendments to the instructions to signatures in Form S–1 and Form F–1 that correspond to those in Form S–4 and Form F–4. A number of commenters stated that liability under the co-registration proposal would be over and/or under￾inclusive with respect to the target company’s officers and directors. As discussed above, the final rules make clear that the target company is a co￾registrant (and not merely a signer) with respect to the de-SPAC transaction. Therefore, as with any registrant, the target company will be required to have its principal executive officer or officers, principal financial officer and controller or principal accounting officer, and at least a majority of its board of directors or persons performing similar functions sign the registration statement. With respect to commenter suggestions that only continuing target company officers and directors should sign the registration statement,592 we do not believe it would be necessary or appropriate to adopt such a requirement for several reasons. First, to require signatures only from continuing target company officers and directors would be inconsistent with the statutory signature
requirements under Securities Act section 6(a), which requires each issuer’s ‘‘principal executive officer or officers, its principal financial officer, its comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions’’ to sign the registration statement.593 Moreover, non-continuing directors who did not sign the registration statement nonetheless may be liable under section 11, because
section 11(a)(2) provides that the
persons with liability to persons who acquired securities include ‘‘[e]very person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted.’’ 594 Second, if a target company officer or director will not be a continuing officer or director in the combined company, it is within the control of the target company officer or director to resign prior to the effectiveness of the de-SPAC registration statement.595 Finally, we note that Securities Act section 6 requires only the issuer’s ‘‘principal executive officer or officers, its principal financial officer, [and] its comptroller or principal accounting officer,’’ but not other officers, to sign the registration statement.596 Accordingly, if the non￾continuing target company officers are not one of these officers, they are not required to sign the registration statement. The proposed definition of target company included a ‘‘business’’ or ‘‘assets’’ and the proposed definition of ‘‘de-SPAC transaction’’ included an ‘‘acquisition of assets.’’ One commenter pointed out that in a de-SPAC transaction structured as an acquisition of assets, the assets acquired could not sign a registration statement.597 We are not making any changes in the final definitions of those terms. However, to align the signature requirements for the

598This is consistent with the functional approach taken in the language of section 6(a) of the Securities Act, whereby the signatories of a registration statement, who incur section 11 liability, must include ‘‘the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or persons performing similar functions, by the majority of the persons or board having the power of management of the issuer).’’ 599 17 CFR 210.11–01(d) (‘‘Rule 11–01(d)’’ of Regulation S–X). 600 In the unusual event that the assets do not meet the definition of a business, registrants may wish to contact the Division of Corporation Finance about the reporting of historical financial information for the assets. 601The disclosure provided as to the assets acquired that constitute a business would be that which is required for 17 CFR 210.3–05(e), as applicable. 602Letters from ABA, KPMG, PwC (also noting this would be the case in de-SPAC transactions involving multiple target companies). See supra note 559. 603Letters from ABA, Crowe, Davis Polk, Freshfields, Grant Thornton, KPMG. See supra note 558. 604Letter from Davis Polk. 605Letters from Crowe, Grant Thornton. See supra note 561. See also KPMG, supra note 561. 606The term ‘‘predecessor’’ when used in this
section has the same meaning as applied under
Regulation S–X and the determination of financial statement requirements. To have a target company that is not the predecessor, the de-SPAC transaction must include multiple targets. We note that the overwhelming majority of de-SPAC transactions only involve one target. See infra discussion at note 1226 (indicating that approximately 97% of de￾SPAC transactions involve only one target). 607For example, a Form 10–K would require the financial statements of a non-predecessor target company to be audited in accordance with the standards of the PCAOB (17 CFR 210.1–02(d)) as well as disclosure of certain information specified in Regulation S–K, such as executive compensation (17 CFR 229.402). 608See supra note 561. 609Letters from ABA, Anonymous (Apr. 7, 2022), Skadden. See supra note 562. See also ABA, Job Creators Network, Goodwin, White & Case. See supra note 562. 610 De-SPAC transaction agreements (such as merger agreements) commonly contain a target company covenant, representation, or similar provision that the target company will maintain its directors and officers insurance or contain a representation or warranty that the target company’s directors and officers insurance listed on the target company’s disclosure schedules to the agreement is in force and effect. acquisition of a business or assets as closely as possible to the signature requirements being adopted for all other target companies, we are revising the instructions to Forms S–4 and F–4 to provide that, in de-SPAC transactions involving the purchase of assets or a business, the term ‘‘registrant’’ includes the seller of the business or assets. As with target companies in non-asset deals, the signatories of the asset purchase agreement (or similar transaction agreement) would be the sellers required to sign the registration statement.598 When a de-SPAC transaction involves the sale of assets that meet the definition of a business in
Article 11 of Regulation S–X,599 the
seller of the assets must provide the historical financial information regarding the acquisition in the registration statement.600 Thus, such seller of assets and its officers and directors are similarly situated to the target company and its officers and directors (i.e., the seller of a business that will continue as the combined company) in a de-SPAC transaction not structured as an asset sale.601 Several commenters raised concerns that, if the target company is a co￾registrant on a de-SPAC registration statement, then the target company would become an Exchange Act reporting company at the time of effectiveness and would be required to file reports during the interim period between when the registration statement for the de-SPAC transaction becomes effective and the closing of the de-SPAC transaction.602 Relatedly, several commenters noted that the target company would incur this reporting obligation even if the de-SPAC transaction does not ultimately close.603 In response to these concerns, some commenters suggested the final rules should either clarify that a target company that is a co-registrant on a de￾SPAC registration statement does not become subject to periodic reporting requirements,604 or, in a situation where the de-SPAC transaction is not ultimately consummated, a target company that is a co-registrant for a de￾SPAC registration statement may suspend its periodic reporting obligations under procedures similar to those set out in Staff Legal Bulletin 18 regarding abandoned IPOs and acquired issuers.605 As ‘‘registrants’’ and ‘‘issuers,’’ target companies will be required by applicable Exchange Act provisions to file periodic reports after the effectiveness of the de-SPAC registration statement and until the target company terminates and/or suspends its Exchange Act report obligations. We do not believe an exemption from the Exchange Act’s reporting requirements is necessary or appropriate in the public interest or consistent with the protection of investors because, during the pendency of the de-SPAC transaction, SPAC investors will benefit from receiving updated information about the target company that, in substance and as reflected in Rule 145a, proposes to issue securities of the newly combined public company, through which the formerly private company will operate its business. In the event that a target company that is not the predecessor 606 to the shell company is required to file a periodic report such as a Form 10–K or 10–Q as a standalone issuer, the periodic report would be required to comply with the form requirements and doing so could require the disclosure of updated information about the target company that is not the predecessor that would not have been required in the registration statement.607 We agree with commenters,608 however, that a target company (that became a reporting company by virtue of being a co-registrant for a de-SPAC transaction registration statement that has been declared effective) may look to
17 CFR 240.12h–3 (Exchange Act Rule 12h–3) and Staff Legal Bulletin 18 for guidance regarding how it can suspend its reporting obligations under section 15(d) of the Exchange Act in situations in which: (1) the de-SPAC transaction does not close, or (2) at the closing of the de-SPAC transaction, the target company is acquired and another company has become a public reporting company with respect to the combined business created by the de-SPAC transaction. A number of commenters raised concerns about costs for target companies as co-registrants, particularly with respect to the cost of directors and officers insurance.609 We recognize that the final rules, in particular the co￾registration requirements, could result in increased costs for target companies. Based on Commission staff’s experience, target companies that enter de-SPAC transactions may have directors and officers insurance, and business combination agreements in connection with de-SPAC transactions may contain provisions regarding the provision of directors and officers insurance to target company officials.610 As a result, any increased costs incurred by target companies in connection with de-SPAC transactions with respect to directors and officers insurance under the final rules will be incremental to those already incurred. Furthermore, we believe these incremental costs are justified by the enhanced investor protections that will be realized by the co-registration requirements. We discuss our analysis of the costs and benefits of the final rules in more detail in section VIII below. One commenter said that co￾registration would result in disclosure requirements that are inconsistent with the proposed revisions to Regulation S– X, raising the issue of whether, if there were multiple target companies, each company would be required to provide

611Letter from Vinson & Elkins.
612See Item 1601(d) of Regulation S–K, adopted herein. 613Public Law 107–204, Sec. 404(b) 116 Stat. 745 (2002). 614See Rule 15–01 of Regulation S–X, adopted herein. 615 In an IPO where a shell company acquires multiple businesses in a ‘‘put together’’ transaction, only the predecessor(s) (in some transactions, there may be more than one predecessor) would be required to provide historical financial statements audited in accordance with PCAOB standards. See Rule 1–02(d) of Regulation S–X for the audit requirements and Rule 3–02(a) of Regulation S–X which incorporates a predecessor into these requirements. 616Entities for which their financial statements are included in the Form S–4 or F–4 through application of Rule 3–05 of Regulation S–X, Rule 3–14 of Regulation S–X, or 17 CFR 210.8–04 (‘‘Rule 8–04’’ of Regulation S–X) that are not target companies would not be considered a registrant to the Form S–4 or F–4. 617See supra note 606. 618See Rule 1–02(d) of Regulation S–X, adopted herein. 619 In the event a non-predecessor issuer is required to file a Form 10–K on a standalone basis, the financial statements would be required to be audited under PCAOB standards, pursuant to Rule 1–02(d) of Regulation S–X because the entity is filing an Exchange Act report for itself and not as a non-predecessor issuer under Rule 15–01(a). 620See Rule 15–01(a) of Regulation S–X, adopted herein. An issuer that is not a predecessor that is already registered under Exchange Act sections 13(a) or 15(d) would be required to file financial statements audited in accordance with PCAOB standards pursuant to Rule 1–02(d) of Regulation S– X. 621See Proposing Release at section IV.B. 622 In addition, section 6(a) requires the issuer’s principal executive officer or officers, principal financial officer, comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or persons performing similar functions, by the majority of the persons or board having the power of management of the issuer) to sign a registration statement. When the issuer is a foreign entity, the registration statement must also be signed by the issuer’s duly authorized representative in the United States. financial statements audited in accordance with PCAOB standards in the de-SPAC registration statement, rather than solely the predecessor pursuant to proposed Rule 15–01(a) of Regulation S–X.611 This commenter indicated that co-registration would result in inconsistencies with IPOs where there are multiple target companies. As the commenter notes, in the case of multiple companies being acquired by the SPAC, if each of those companies meets the definition of ‘‘target company’’ being adopted,612 then each would be required to be a co-registrant on the de-SPAC registration statement. Under the final rules all target companies are issuers, as defined by
section 2(a)(7) of the Sarbanes-Oxley
Act of 2002 (‘‘Sarbanes-Oxley Act’’),613 and therefore, under current 17 CFR 210.1–02(d) (‘‘Rule 1–02(d)’’ of Regulation S–X), any audit of the target’s financial statements would be required to be performed in accordance with PCAOB standards by a PCAOB￾registered audit firm. However, also as noted by the commenter, proposed Rule 15–01(a) provided that only target companies that would constitute the predecessor for financial reporting purposes would be required to comply with Rule 15–01 of Regulation S–X in connection with a de-SPAC transaction and provide financial statements audited in accordance with PCAOB standards.614 We continue to believe this is the appropriate outcome given the hybrid nature of de-SPAC transactions, as it aligns the de-SPAC transaction financial reporting to that of an IPO that includes multiple companies.615 All target companies provide information that is included in the registration statement and therefore should face Securities Act liability as co-registrants and issuers on the de￾SPAC registration statement.616 In order to address the tension identified by the commenter, and to clarify that all target companies are co￾registrants and issuers but only target companies that are predecessors 617 must provide financial statements audited in accordance with PCAOB standards, we are modifying the proposed revisions to the definition of ‘‘audit (or examination)’’ in Rule 1– 02(d) to clarify that Rule 15–01(a) governs the audit requirements for all issuers (both predecessors and non￾predecessors) that combine with a shell company.618 We have also added language to Rule 15–01(a) to clarify that for non-predecessor issuers—in the context of a registration statement or proxy statement filed for the combination with an issuer that is a shell company 619 (e.g., in a de-SPAC transaction, non-predecessor co￾registrant target companies)—the term ‘‘audit (or examination)’’ is defined as ‘‘an examination of the financial statements by an independent accountant in accordance with either the standards of the PCAOB or U.S. generally accepted auditing standards (‘‘U.S. GAAS’’) as specified or permitted in the regulations and forms applicable to those entities for the purpose of expressing an opinion thereon.’’ 620 In addition to adopting the proposed changes to Item 17 of Form S–4 or Form F–4 that direct companies to Article 15 for the financial statements required in a de-SPAC transaction, we have revised the proposed Instruction L to Form S– 4 and Instruction I to Form F–4 to clarify that for purposes of the disclosure requirements in those forms, the target company is the ‘‘company being acquired.’’ As stated in the proposal,621 the proposed financial reporting requirements were intended to more closely align the de-SPAC transaction disclosures to the disclosures made where a shell company acquires multiple businesses in a ‘‘put together’’ transaction before an IPO. This approach recognizes the hybrid nature of the de-SPAC transaction
and the fact that the historical financial statements of the predecessor(s), and in some circumstances the SPAC, would be the historical financial information that would be presented in the combined company’s Exchange Act reporting. The Commission proposed Article 15 of Regulation S–X instead of proposing a requirement that all target companies provide audited financial statements under the registrant disclosure requirements of Item 14 of Form S–4 and Form F–4, which apply to the information required to be provided by registrants other than Form S–3 and Form F–3 eligible registrants, respectively. To illustrate application of the final rules, assume a SPAC files a Form S–4 to register the issuance of shares to acquire two unrelated businesses and only one of the businesses will be the predecessor for financial reporting purposes. Under the final rules, each ‘‘issuer’’ (the SPAC and the two unrelated businesses) must sign the registration statement.622 The pro forma financial statements included in the Form S–4 depict a reverse recapitalization with the predecessor and an acquisition of the other business. Subsequent Exchange Act reports, such as the next Form 10–K, will include the historical financial statements of the predecessor. In this scenario, the Form S–4 would require two to three years of historical financial statements for the business that will be the predecessor audited in accordance with PCAOB standards. By contrast, the non￾predecessor business will be a company being acquired under Item 17 of Form S–4 and its financial statements may be audited in accordance with either PCAOB standards or U.S. GAAS standards, despite it being an issuer. We recognize that predecessor determinations in de-SPAC transactions may include scenarios that differ from the above illustrative example. For example, a transaction with two target companies could instead result in a determination that there are two predecessors. In that example, the financial statements of both target

623 Determination of the predecessor(s) in a de￾SPAC transaction, as in any other transaction, is a facts and circumstances driven determination made by the registrant(s). 624See 15 U.S.C. 7212(a). 625See PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants, available at https:// pcaobus.org/about/rules-rulemaking/rules/section_ 3/section-3-auditing-and-related-professional￾practice-standards-rule-3211-amended. Note 2 to PCAOB Rule 3211 states that the rule requires the filing of a report on Form AP regarding an audit report only the first time the audit report is included in a document filed with the Commission. Subsequent inclusion of precisely the same audit report in other documents filed with the Commission does not give rise to a requirement to file another Form AP. See id. 626Letters from Crowe, Grant Thornton. 627Letter from Bullet Point Network. 628See infra section III.E discussion of PSLRA Safe Harbor. 629See infra discussion in section III.E proximate to notes 836 and 858. 630See, e.g., 17 CFR 229.10(f) (‘‘Item 10(f)’’ of Regulation S–K); 17 CFR 210.8–01 (‘‘Rule 8–01’’ of Regulation S–X), 17 CFR 210.8–02 (‘‘Rule 8–02’’ of Regulation S–X), 17 CFR 210.8–03, 17 CFR 210.8– 07, and 17 CFR 210.8–08 (‘‘Rule 8–08’’ of Regulation S–X); Item 1A of Form 10 and Form 10– K; Item 3.02 of Form 8–K. An FPI is not eligible to use the scaled disclosure requirements for SRCs unless it uses the forms and rules designated for domestic issuers and provides financial statements prepared in accordance with U.S. GAAP. Instruction 2 to Item 10(f) of Regulation S–K; Instruction 2 to definition of ‘‘smaller reporting company’’ in Securities Act Rule 405 and Exchange Act Rule 12b–2. 631 17 CFR 229.305(e) (Item 305(e) of Regulation S–K). 632The definition of ‘‘smaller reporting company’’ is set forth in Securities Act Rule 405, Exchange Act Rule 12b–2, and Item 10(f) of Regulation S–K. 633See 17 CFR 229.10(f)(2)(i) and (f)(2)(ii) (‘‘Item 10(f)(2)(ii)’’ of Regulation S–K). In re-determining SRC status annually, a registrant is required to measure its public float as of the last business day of its most recently completed second fiscal quarter. 634See 17 CFR 229.10(f)(2)(iii); Securities Act Rule 405; Exchange Act Rule 12b–2. 635A Form 8–K with Form 10 information is filed pursuant to Items 2.01(f), 5.01(a)(8), and/or 9.01(c) of the form. 636Proposed Item 10(f)(2)(iv) of Regulation S–K; proposed paragraph (3)(iv) in the definition of ‘‘smaller reporting company’’ in Securities Act Rule 405; proposed paragraph (3)(iv) in the definition of ‘‘smaller reporting company’’ in Exchange Act Rule 12b–2. 637Proposed Item 10(f)(2)(iv)(A) of Regulation S– K; proposed paragraph (3)(iv)(A) in the definition of ‘‘smaller reporting company’’ in Securities Act Rule 405; proposed paragraph (3)(iv)(A) in the definition of ‘‘smaller reporting company’’ in Exchange Act Rule 12b–2. 638Proposed Item 10(f)(2)(iv)(B) of Regulation S– K; proposed paragraph (3)(iv)(B) in the
definition of ‘‘smaller reporting company’’ in Securities Act Rule 405; proposed paragraph (3)(iv)(B) in the definition of ‘‘smaller reporting company’’ in Exchange Act Rule 12b–2. companies must be audited in accordance with PCAOB standards.623
Section 102 of the Sarbanes-Oxley Act
makes it ‘‘unlawful for any person that is not a registered public accounting firm to prepare or issue . . . any audit report with respect to any issuer.’’ 624 The final rules do not change this requirement for issuers to engage PCAOB-registered accounting firms, and therefore all issuers, including non￾predecessor target companies, will need to engage a PCAOB-registered audit firm when the de-SPAC transaction requires audited historical financial statements (but, as discussed above, the PCAOB￾registered firm could audit the financial statements of non-predecessor target companies either under the standards of the PCAOB or U.S. GAAS). We acknowledge commenter concerns that, because PCAOB Rule 3211 requires a registered audit firm to file a Form AP with the PCAOB when its audit report for an issuer is included in a filing with the Commission,625 multiple Forms AP may be required for a single transaction where the related registration statement requires audit reports for multiple issuers and when more than one registered audit firm was involved.626 To the extent that the PCAOB deems it necessary to provide guidance or take other action in response to the final rules, the Commission and its staff will work with the PCAOB, as appropriate. Regarding a commenter’s suggestion that the Commission create a new S–1- like form for de-SPAC transactions, which should not include management projections,627 we do not believe that is necessary. The amendments to existing registration statement forms that we are adopting in this release accomplish our enhanced disclosure goals, including addressing similarities between IPOs and de-SPAC transactions, and appropriately take into account the business combination context of de￾SPAC transactions. With respect to projections in registration statements, as we discuss in detail below, our final definitions of ‘‘blank check company’’ should address the commenter’s concerns regarding the use of projections in de-SPAC transaction registration statements.628 In addition, as noted below, there is no prohibition under current rules on including projections in registration statements on Form S–1 or F–1.629 D. Re-Determination of Smaller Reporting Company (SRC) Status

1. Proposed Rules
   SRCs constitute a category of registrants that are eligible for scaled disclosure requirements in Regulation S–K and Regulation S–X and in various forms under the Securities Act and the Exchange Act.630 For example, SRCs are not required to provide quantitative and qualitative information about market risk pursuant to 17 CFR 229.305 (Item 305 of Regulation S–K).631 In general, an SRC is a company that is not an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent that is not an SRC and (1) had a public float of less than $250 million, or (2) had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available and either had no public float or a public float of less than $700 million.632 SRC status is determined at the time of filing an initial registration statement under the Securities Act or Exchange Act for shares of common equity and is re￾determined on an annual basis.633 Once a company determines that it is not an SRC, it will retain this non-SRC status unless it determines, when making its annual determination, that its public float was less than $200 million or, alternatively, that its public float and annual revenues fell under certain thresholds.634 The Commission proposed to require a re-determination of SRC status following the consummation of a de￾SPAC transaction through proposed amendments to the definition of ‘‘smaller reporting company’’ in each of Securities Act Rule 405, Exchange Act Rule 12b–2, and Item 10(f) of Regulation S–K. Specifically, the Commission proposed that the post-de-SPAC transaction registrant must re-determine its SRC status prior to the time it makes its first Commission filing, other than the Form 8–K filed with Form 10 information,635 and reflect this re￾determination in the issuer’s next periodic report.636 The Commission also proposed, in connection with this re-determination:
   (a) that public float be measured as of a date within four business days after the consummation of the de-SPAC transaction; 637 and (b) that annual revenues be measured using the annual revenues of the target company as of the most recently completed fiscal year reported in the Form 8–K filed with Form 10 information.638 The Commission did not propose any changes to the float and revenue thresholds in the current definitions of ‘‘smaller reporting company.’’
2. Comments
   Broadly categorized, commenters on the SRC re-determination proposal focused on four areas: (1) general comments, including those with general expressions of support for or opposition to the proposals, (2) timing and re￾determination of public float, (3) ramifications of loss of SRC status, and (4) requests for guidance. In addition, in response to a request for comment from

639Letters from KPMG, PwC. 640Letter from KPMG. 641Letter from PwC. 642Letters from Ernst & Young, Vinson & Elkins. 643Letter from Ernst & Young. 644Letter from Vinson & Elkins. 645Letter from ABA. 646Letter from Vinson & Elkins. 647Letter from Vinson & Elkins. 648Letter from Vinson & Elkins. 649Letters from Ernst & Young (‘‘For example, the proposed redetermination timing could result in a post-business combination company losing its SRC status and having to provide an additional year of audited financial statements (i.e., for the year preceding the earliest period included in the Form S–4/proxy) in a follow-on registration statement. . . .’’), Grant Thornton (‘‘the proposed rule would preclude the post-combination entity to use scaled disclosure alternatives in registration statements filed after it files the first periodic report on Form 10–Q but before it files its first annual report on Form 10–K.’’), Vinson & Elkins (‘‘If the post-closing public float exceeds $700 million, the post-closing company would be required to include three years of audited financial statements in its annual report and any registration statement, which may be more than what was included in the Form S–4 or proxy statement filed in connection with the de-SPAC transaction.’’). 650Letter from Ernst & Young. 651Letter from Ernst & Young. 652Letter from Grant Thornton (‘‘We note that while the provision in Section 7(a)(2)(A) of the Securities Act for providing only two years of audited financial statements is limited to initial registration statements, the SEC staff does not object if emerging growth companies (EGCs) do not present, in other registration statements, audited financial statements for any periods prior to the earliest audited period presented in its initial registration statement,’’ citing Generally Applicable Questions on Title I of the JOBS Act, Question 12). 653Letter from Grant Thornton. 654Letter from BDO USA, LLP (June 13, 2022) (‘‘BDO’’). See CDI 215.02 Division of Corporation Finance, Compliance and Disclosure Interpretations: Regulation S–K, Section 215.02, available at https://www.sec.gov/divisions/corpfin/ guidance/regs-kinterp.htm. 655The Commission views this comment from BDO, which discussed considering the amended ‘‘super 8–K’’ as the first annual report following the de-SPAC transaction, as a different comment than the one from Grant Thornton, supra note 653, which discussed considering the amended ‘‘super 8–K’’ as the first periodic report following the de￾SPAC transaction. the Commission in the Proposing Release, several commenters addressed issues of re-determination of the following: accelerated filer and large accelerated filer status, EGC status, and FPI status. A few commenters generally supported the proposed re￾determination of SRC status following a de-SPAC transaction.639 One commenter noted that such re-determination would ‘‘generally align that determination with that of an IPO.’’ 640 Another commenter noted that such
re-determination was a signal that ‘‘the Commission appears to be forestalling a situation in which a company that would not have been eligible to use the scaled disclosures and other accommodations available to a smaller reporting company if it had become public through a traditional initial public offering would, nonetheless, be eligible to take advantage of those accommodations based on the smaller reporting company status of the pre-merger SPAC.’’ 641 Others opposed, or raised concerns regarding, the proposed re￾determination of SRC status following a de-SPAC transaction.642 One commenter stated that such a re-determination immediately after the de-SPAC transaction is inconsistent with the Commission’s objective of aligning the requirements with those of IPOs.643 Another commenter indicated that the change could be problematic for certain transactions, such as ‘‘where (1) the SPAC is an SRC and the legal acquirer, (2) the target company was an SRC prior to the closing of the de-SPAC transaction and filed two years of audited financial statements and (3) the post-closing public float exceeds $700 million.’’ 644 One commenter stated they did not object to re-determination based on public float within a short time following closing of the de-SPAC transaction.645 Another commenter recommended an alternative approach to re-determining SRC status similar to the determination of SRC status used by an IPO company filing its initial registration statement under Item 10(f)(2)(ii) of Regulation S– K but based on ‘‘the revenues and public float of the target company that will be the predecessor for financial reporting purposes.’’ 646 This commenter proposed the public float should be calculated ‘‘as the agreed value of the equity consideration payable to the owners of the target company, plus the total outstanding shares of the SPAC (valued at $10 per share, or whatever the agreed per-share valuation of the equity consideration is), plus any common equity to be issued to finance the de-SPAC transaction.’’ 647 The commenter further stated, ‘‘The surviving company should have the option to redetermine its status based on the number of shares outstanding after the closing of the de-SPAC transaction (i.e., reflecting redemptions and any equity not issued in the financing transaction or as equity consideration), consistent with the last sentence of S– K Item 10(f)(2)(ii)(C).’’ 648 Several commenters addressed the ramifications of the loss of SRC status. Commenters observed that one such ramification is that a registration statement filed after the point at which non-SRC status must be reflected could require incremental disclosure for a non-SRC, such as an additional year of financial statements beyond what was provided in the Form S–4 in connection with a de-SPAC transaction.649 One of these commenters suggested, ‘‘An alternative approach would be for a company, upon completion of a de￾SPAC transaction, to transition into or out of SRC status in conjunction
with the annual report to be filed for the year of the transaction based upon the public float as of the later of four business days after the merger transactions or the end of the second fiscal quarter.’’ 650 The commenter also added, ‘‘Such a revision could still result in an SRC merging with a public shell exiting SRC status more quickly than under current rules while mitigating the burden and inconsistency of providing incremental information not previously required for companies accessing the public market shortly after the de-SPAC transaction.’’ 651 Another commenter recommended that the Commission consider whether ‘‘accommodations may be warranted to the post-combination entity regarding presentation of audited financial statements and related information (such as MD&A or separate financial statements of significant equity method investees) for periods prior to those presented in the Form S–4 or F–4 for the private operating company.’’ 652 One commenter recommended that the Commission clarify whether an amendment to a Form 8–K with Form 10 information (often referred to as a ‘‘super 8–K’’) to include pre-acquisition annual financial statements of the private operating company ‘‘will be deemed to be the first periodic report for the purposes of effectiveness of the SRC status in connection with a de-SPAC transaction’’ in circumstances where a de-SPAC transaction is consummated shortly after the fiscal year-end of the private operating company but before its financial statements for that annual period are required in a Form 10 registration statement.653 Another commenter recommended, for purposes of determining whether the post-de-SPAC registrant may exclude management’s assessment of internal control over financial reporting in the Form 10–K covering the fiscal year in which the transaction was consummated, that the Commission codify the staff’s view 654 that a SPAC’s need to file an amended super 8–K to update the target company’s financial statements for its most recent year-end is the equivalent to the first annual report.655 Another commenter stated that the Commission ‘‘should revisit and revise

656Letter from Vinson & Elkins.
657Proposing Release, supra note 7, at 29481 (request for comment number 74) (‘‘Should we similarly require a re-determination of emerging growth company status, accelerated filer status, large accelerated filer status and/or foreign private issuer status upon the completion of a de-SPAC transaction?’’). 658See letters from BDO (‘‘If a de-SPAC transaction is considered the equivalent of an IPO, it is not clear why the post-merger filer status would be treated differently for a company that chooses one going-public transaction over the other.’’), Ernst & Young (‘‘We recommend aligning the determination of EGC status, filer status and foreign private issuer status for the post-business combination company with the requirements that apply to a traditional IPO. We believe that, if the post-business combination company is not eligible to file a Form S–3 shelf registration statement, it would be consistent to disregard the SPAC’s reporting history for purposes of determining filer status (i.e., a post-business combination company would generally be a non-accelerated filer). Such entities should also be permitted to ‘reset’ the EGC clock of five years for considering their status as an EGC. We have observed an evolution in the structuring of SPAC transactions (e.g., use of a double-dummy structure) that can achieve certain financial reporting results (e.g., filer status and foreign private issuer status). Therefore, we support aligning the redetermination requirements so that the transaction structure would not result in financial reporting differences.’’), Fenwick & West LLP (June 7, 2022) (‘‘Fenwick’’) (‘‘The de-SPAC Issuer should benefit from the transition, grace periods and other accommodations following the Closing Date that IPO Issuers benefit from following the Effective Date (for example, the de-SPAC Issuer should benefit from the same exemption from Sarbanes-Oxley Act Section 404(a) compliance under Item 308 of Regulation S–K [17 CFR 229.308] in respect of its first Annual Report on Form 10– K filed after the Closing Date.’’), Vinson & Elkins. 659Letters from KPMG (‘‘we recommend the Commission consider clarifying the determination of the combined company’s filer status upon consummation of the de-SPAC transaction.’’), PwC (‘‘We believe that the underlying policy objectives associated with each type of filer status should be evaluated to determine whether the goals would be furthered by re-determination. . . .For instance, in proposing that the post-business combination company re-determine its smaller reporting company status shortly after consummating the de￾SPAC transaction. . . .We support the proposal to require timely re-determination in this circumstance. We believe a similar analysis should be undertaken with respect to other statuses.’’). 660Letters from Ernst & Young (‘‘We recommend aligning the determination of EGC status, filer status and foreign private issuer status for the post￾business combination company with the requirements
that apply to a traditional IPO. . . . Such entities should also be permitted to ‘reset’ the EGC clock of five years for considering their status as an EGC.’’), KPMG (recommending the Commission consider clarifying the determination of a combined company’s filer status, including EGC status, upon consummation of a de-SPAC transaction), PwC (supporting SRC re-determination proposal and stating that ‘‘We support the proposal to require timely re-determination in this circumstance. . . . We believe a similar analysis should be undertaken with respect to other statuses.’’), Vinson & Elkins. 661Letters from Ernst & Young, KPMG, Vinson & Elkins. 662Letter from Ernst & Young. 663Letter from Vinson & Elkins. 664See letter from Freshfields. 665Based on data from SPACInsider (using fields ‘‘IPO Date’’ (2021) and ‘‘SPAC Status’’ (Searching)), the Commission staff observed that out of 163 SPACs that had an IPO in 2021 and had not found a target company by the end of 2021, only two SPACs had outstanding shares of more than 70,000,000. Assuming a per share price of $10 at the time of the IPO and no changes in outstanding shares since the time of the IPO, the Commission staff views this data as indicating that the 161 other SPACs among that cohort did not have a float at the time of IPO of more than $700 million, the threshold under paragraph (2)(ii) of the definition of ‘‘smaller reporting company’’ in Rule 12b–2. (In an actual public float calculation for purposes of the ‘‘smaller reporting company’’ definition, affiliate shares would be subtracted from total outstanding shares used in this example, resulting in a lower value than produced in this example, because the applicable value would be multiplied by fewer shares.) With respect to the $100 million revenue test under paragraph (2) of the definition of ‘‘smaller reporting company’’ in Rule 12b–2, income statement items such as ‘‘Interest earned on marketable securities held in trust account’’ and ‘‘Unrealized gain on marketable securities held in trust account’’ are generally not revenue for SPACs and SPACs typically do not record revenue. 666See Item 10(f)(2) of Regulation S–K; Securities Act Rule 405; Exchange Act Rule 12b–2. its guidance in 5230.1 of the Division of Corporation Finance’s Financial Reporting Manual, which could result in more information being required in a Super 8–K . . . than would be required in a Form S–1 for the target company.’’ 656 In response to a request for comment in the Commission in the Proposing Release,657 several commenters addressed issues of re-determination of filer status, EGC status, and FPI status. Some commenters recommended that the Commission should put post-de￾SPAC transaction registrants on the same footing with respect to filer status as a company that has recently undertaken an IPO, because, otherwise, where a post-de-SPAC transaction registrant inherits the SPAC’s reporting history, this could impact the timing of when the post-de-SPAC transaction
registrant becomes subject to accelerated filing obligations.658 Other commenters suggested the Commission should further analyze or consider the issue.659 A few commenters recommended that the EGC status of the combined company following a de-SPAC transaction should be re-determined upon consummation of the de-SPAC transaction.660 Several commenters, including some who made recommendations regarding EGC status, recommended that the Commission provide for re￾determination of FPI status in connection with the de-SPAC transaction.661 One commenter noted that they have ‘‘observed an evolution in the structuring of SPAC transactions (e.g., use of a double-dummy structure) that can achieve certain financial reporting results (e.g., filer status and foreign private issuer status)’’ and expressed support for ‘‘aligning the redetermination requirements so that the transaction structure would not result in financial reporting differences.’’ 662 Another commenter stated: ‘‘Allowing redetermination of foreign private issuer status would result in disclosure requirements and filer status determinations that are consistent with what would apply if the target company went public via an IPO, without regard to the de-SPAC transaction structure. A de-SPAC transaction may be structured so that an entity other than the SPAC is the acquiror for tax reasons, due to the domicile of the surviving company, or due to required consents and approvals applicable to the target company. Aligning the disclosure requirements so that, for example, a target company that would have qualified as a foreign private issuer could be acquired by a domestic SPAC and then the surviving company could be immediately eligible for foreign private issuer status would allow de-SPAC transactions to be structured in the best interests of shareholders.’’ 663 Similar views were expressed by another commenter.664
3. Final Rules and Guidance
After considering the comments received, we are adopting amendments regarding SRC re-determination as proposed with certain modifications discussed below. We are not adopting requirements, as suggested by several commenters, to re-determine filer status, EGC status, or FPI status upon the completion of a de-SPAC transaction. We are providing guidance, however, concerning FPI status, as discussed further below. Currently, most SPACs qualify as SRCs,665 and Commission rules permit a post-business combination company after a de-SPAC transaction 666 to retain this status until its next annual determination date in cases where the legal entity that was the SPAC is the legal entity that is the combined company in connection with the de￾SPAC transaction. Under current rules, the absence of a re-determination of SRC status upon the completion of these de￾SPAC transactions has permitted certain post-business combination companies to avail themselves of scaled disclosure and other accommodations when they otherwise would not have qualified as a SRC had they become public companies through a traditional IPO. The final rules will help level the playing field with a traditional IPO in this respect and reduce information asymmetries that result when a target company

667 In the Proposing Release, the Commission said, if a SPAC qualified as an SRC before a de￾SPAC transaction and was the legal acquirer in the de-SPAC transaction, the post-business combination company would continue to be able to rely on the scaled disclosure accommodations for SRCs when filing a registration statement between the re-determination date and the post-business combination company’s first periodic report. Proposing Release, supra note 7, at 29480. For the avoidance of any doubt on the part of registrants related to the references to ‘‘legal acquirer’’ in the Proposing Release, the Commission is clarifying that the final rules we are adopting—that provide re-determined SRC status be reflected in filings 45 days after consummation of the de-SPAC transaction—are not strictly limited to that particular transaction structure for the de-SPAC transaction and apply to any post-de-SPAC transaction combined company registrant that is the same legal entity as the legal entity that was a SPAC (prior to the de-SPAC transaction) regardless of the structure of the de-SPAC transaction. 668Letter from Vinson & Elkins. See supra notes 646, 647, and 648 and accompanying text. 669See id. 670Letters from Ernst & Young, Grant Thornton, Vinson & Elkins. See supra note 649. 671See letters from Vinson & Elkins (indicating that the issue is particularly acute ‘‘if the post￾closing company’s first annual report is due shortly after closing or the company is required to file a registration statement after the company’s first periodic report,’’ and advocating for a redetermination based on Item 10(f)(2)(ii) (as discussed above), but stating that ‘‘longer periods or accommodations could ameliorate the issues with the proposed amendments to S–K Item 10(f)’’), Ernst & Young (indicating that ‘‘companies [could be] required to provide additional information in a follow-on registration statement as soon as four days after the de-SPAC transaction’’). 672Section 230.401(a) of title 17 of the CFR states that a registration statement shall conform to the applicable rules and forms in effect on the initial filing date of such registration statement, and the rule would apply to SRC status. Accordingly, if the registrant is an SRC at the initial public filing date of the resale registration statement, then it may comply with rules for an SRC in subsequent amendments of that registration statement. 673Letter from Grant Thornton. See supra note 652 and accompanying text. chooses to go public through a de-SPAC transaction.667 As adopted, a post-de-SPAC transaction registrant must re-determine its SRC status prior to the time it makes its first Commission filing, other than the Form 8–K filed with Form 10 information, with public float measured as of a date within four business days after the consummation of the de-SPAC transaction and annual revenues measured using the annual revenues of the target company as of the most recently completed fiscal year reported in such Form
8–K. We disagree with the commenter who recommended an alternative approach similar to the SRC determination for IPO companies under Item 10(f)(2)(ii) of Regulation S–K but based on the revenues and public float of the target company that will be the predecessor for financial reporting purposes.668 In an IPO, with respect to public float, Item 10(f)(2)(ii) looks to: the estimated offering price per share at the time of filing of the registration statement; the number of shares of common stock outstanding that are held by non￾affiliates before the offering; and the number of shares of common stock to be sold at the estimated offering price. Item 10(f)(2) of Regulation S–K also gives the registrant the option to recalculate its public float at the time the company completes the IPO. As described above, under the commenter’s suggested approach, the SRC determination would be made prior to the filing of the de￾SPAC registration statement or proxy statement using an ‘‘agreed value’’ method.669 Although Item 10(f)(2)(ii) does allow for the use of estimations in the IPO context, we believe that the approach we are adopting, which focuses on a determination of SRC status based on actual post-transaction public float, is a more effective measure of the registrant’s size in the context of a de-SPAC transaction. While in many cases the commenter’s suggested recalculation after closing to capture the actual number of shares outstanding would result in the same determination of SRC status post-transaction, the adopted approach helps to ensure the appropriate level of disclosures to investors both before and after the closing of the transaction. Pursuant to the final rules, the four￾business-day window to calculate the public float threshold following a de￾SPAC transaction would begin the first business day after the day of closing of the de-SPAC transaction and end four business days later (on the due date for the Form 8–K with Form 10 information that the post-de-SPAC transaction combined company registrant is required to file after the completion of a de-SPAC transaction). Each of the number of shares outstanding that are held by non-affiliates and the price per share would be determined on the same day within the four-business-day window. This window will provide some flexibility for issuers to measure public float compared to the annual re￾determination of SRC status (which is determined based on a single business day, the last business day of the most recently completed second fiscal quarter). This four-business-day window will allow for a more accurate reflection of a post-business combination company’s public float in view of the limited trading history of the common equity securities of the post￾business combination company following a de-SPAC transaction. Under the proposed rule, a post-de￾SPAC transaction registrant would be required to reflect its re-determined SRC status in its next periodic report after the filing of the Form 8–K with Form 10
information (often referred to as a ‘‘super 8–K’’). We are aware that, if a registrant loses SRC status upon re￾determination, there may be certain ramifications. Several commenters observed that one such ramification is that a registration statement filed after the point at which non-SRC status must be reflected could require incremental disclosure for a non-SRC, such as an additional year of financial statements beyond what was provided in the Form S–4 in connection with a de-SPAC transaction.670 Inclusion of such incremental disclosure as a result of losing SRC status might present challenges for some registrants in situations where a periodic report becomes due shortly after the closing of the de-SPAC transaction.671 In response to these comments, in a change from the proposal, the final rules provide that a registrant does not need to reflect non-SRC status in any filing that is due in the 45-day period following the consummation of the de￾SPAC transaction; the registrant would begin to reflect non-SRC status in filings made no later than after the end of this 45-day period. In contrast, under the proposal, a registrant would have needed to reflect non-SRC status in its next periodic report that could be due as soon as one day after the filing of the ‘‘super 8–K,’’ which is due a maximum of four days after the consummation of the de-SPAC transaction. We believe the final rule represents a reasonable compromise between the proposed rule’s transition period (until the next periodic report, which could be as soon as one day after the de-SPAC transaction) and a commenter’s recommended transition period (until filing of the next Form 10–K, which could be as long as nearly 15 months). Another benefit of affording this additional time to registrants that lose SRC status upon re-determination is that, where the registrant intends to file a resale registration statement shortly after the de-SPAC transaction, the registrant will retain its SRC status for purposes of any such resale registration statement filed during this additional time period.672 We are not adopting the commenter’s recommendation to exclude, in post-de￾SPAC transaction filings, any financial statements that predate the financial statements presented in the Form S–
4.673 In our view a registrant that is re￾determined to be a non-SRC should not
be able to avail itself of the scaled-down requirements applicable to SRCs.

674We understand that most post-de-SPAC registrants would be EGCs and would not be required to file the additional year of financial statements in reliance on the EGC accommodations. 675Letter from Grant Thornton. See supra note 653. 676Letter from BDO that references Division of Corporation Finance, Compliance and Disclosure Interpretations: Regulation S–K, Section 215.02, which discusses the application of management’s assessment of internal control over financial reporting (ICFR) in Item 308(a) of Regulation S–K when there has been a reverse acquisition between an issuer and a private operating company. See further discussion of the application of ICFR at infra note 685. 677Letter from Vinson & Elkins. 678The four existing conditions for qualifying as an accelerated filer are that an issuer: (i) had an aggregate worldwide public float of $75 million or more, but less than $700 million, as of the last business day of the issuer’s most recently completed second fiscal quarter; (ii) has been subject to the requirements of 15 U.S.C. 78m (Exchange Act section 13(a)) or 15 U.S.C. 78o(d) (Exchange Act section 15(d)) for a period of at least twelve calendar months; (iii) has filed at least one annual report pursuant to those sections; and (iv) the issuer is not eligible to use the requirements for SRCs under the revenue test in paragraph (2) or (3)(iii)(B) of the ‘‘smaller reporting company’’ definition in Rule 12b–2, as applicable. For a large accelerated filer, conditions (ii) through (iv) are the same, but condition (i) is that an issuer had an aggregate worldwide public float of $700 million or more, as of the last business day of the issuer’s most recently completed second fiscal quarter. See paragraphs (1) and (2) in the definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b–2. 679See paragraphs (1), (2), and (3) in the definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b–2. 680See paragraph (1)(ii) in the definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b–2 (‘‘The issuer has been subject to the requirements of section 13(a) or 15(d) of the Act (15 U.S.C. 78m or 78o(d)) for a period of at least twelve calendar months;’’) and paragraph (2) in the definition. 681 If a new holding company is created to effect the de-SPAC transaction and the new holding company is the post-de-SPAC transaction combined company that will continue to be an Exchange Act reporting company, the same logic applies because the holding company would be the Exchange Act reporting successor to the SPAC. See definition of ‘‘Succession’’ in Exchange Act Rule 12b–2, 17 CFR 240.12g–3. 682See Form 10–Q, General Instruction A.1; Form 10–K, General Instruction A(2). 683 17 CFR 229.308(b). A registrant’s status as an accelerated filer or a large accelerated filer triggers the requirement contained in section 404(b) of the Sarbanes-Oxley Act to have the auditor provide an attestation report on internal control over
financial reporting. 684See letters from BDO, Ernst & Young, Fenwick, Vinson & Elkins. Furthermore, we believe the adopted approach will provide registrants with sufficient time to prepare the additional incremental information that may be required in a situation where the registrant has lost its SRC status. We further note that a registrant that loses SRC eligibility may continue to be an EGC, which includes certain scaled reporting accommodations. In light of new Rule 15–01(b), which requires a business combining with a shell company to comply with Regulation S– X as if the transaction were an IPO of common equity securities, we believe that if the registrant retained its EGC status after the transaction, then the registrant would not be required to present audited financial statements for any period prior to the earliest audited period presented in connection with the de-SPAC transaction. We evaluated whether a minimum transition period should be longer or shorter than 45 days. We concluded that 45 days provided an appropriate balance between providing investors with the scaled-up information as soon as reasonably possible and providing registrants with time to prepare for compliance and the ability, in a limited number of instances,674 to avoid the costs of preparing an additional year of audited financial statements beyond what was required in the Form S–4. Commenters also requested guidance on certain issues. One commenter recommended that the Commission clarify whether an amendment to a ‘‘super 8–K’’ could be the first periodic report for the purposes of effectiveness of the SRC status.675 Under the final rules, any filing made 45 days after the consummation of the de-SPAC transaction must reflect re-determined SRC status, including a filing to amend a ‘‘super 8–K.’’ Unrelated to SRC re-determination, other commenters recommended codification of, or revisions to, staff guidance relating to the position that a SPAC’s need to file an amended Form 8–K to update the target company’s financial statements for its most recent year-end is the equivalent to the first annual report 676 and, separately, the guidance in FRM 5230.1, which summarizes the Commission’s basis for requiring Form 10 information under Item 2.01(f) of Form 8–K and how the staff looks to the accounting acquirer’s SRC-eligibility at the time of the transaction for purposes of the disclosure in the Form 8–K.677 We do not believe that such codification or revisiting of the referenced staff guidance is necessary in connection with the final amendments. We believe the guidance in FRM 5230.1 is consistent with the final rules because the final rules look to the target company’s SRC-eligibility in all shell company transactions, including where the target company is the accounting acquirer. Rule 12b–2 provides the definitions of accelerated filer and large accelerated filer, including requisite conditions.678 Accelerated filer and large accelerated filer status are re-determined
annually as of the end of the issuer’s fiscal year.679 For a new registrant that just completed an IPO, however, a period of at least twelve months would need to elapse before it would be required to comply with rules as an accelerated filer or a large accelerated filer.680 In contrast, after consummation of the de￾SPAC transaction, depending on the timing of the SPAC IPO and the de￾SPAC transaction, because of the SPAC’s reporting history, where the legal entity that was the SPAC is the same legal entity that is the post-de￾SPAC transaction combined company, the post-de SPAC transaction combined company may not have the same period until it must make filings pursuant to accelerated filer or large accelerated filer status as compared to a registrant that just completed an IPO.681 By virtue of being an accelerated or large accelerated filer, among other differences compared to a non-accelerated or non-large accelerated filer, the post-de-SPAC transaction combined registrant would be required to: (a) file its periodic reports sooner than otherwise required; 682 and (b) subject its management’s assessment of internal controls over financial reporting to auditor attestation.683 As noted above, several commenters recommended that the Commission put post-de-SPAC transaction registrants on the same footing with respect to filer status as a company that has recently undertaken an IPO.684 One of the main consequences of the approach suggested by these comments—that the reporting history of the SPAC should be disregarded such that the post-de-SPAC transaction combined company could recommence the 12-month period that must elapse (pursuant to paragraphs (1)(ii) and (2)(ii) in the definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b–
2) before it is possible to acquire
accelerated or large accelerated filer status—would be to delay management’s assessment of internal control over financial reporting and outside auditor attestation of management’s assessment for companies that are not EGCs. We do not believe it is necessary or appropriate to amend the filer status requirements for this reason; however, we note that the Commission staff has taken the position that under certain conditions, the Commission staff would not object if the post-combination registrant were to exclude management’s assessment of internal control over financial reporting in the Form 10–K covering the fiscal

685See Division of Corporation Finance, Compliance and Disclosure Interpretations:
Regulation S–K, Section 215.02, available at https:// www.sec.gov/divisions/corpfin/guidance/regs￾kinterp.htm, which states that the staff would not object if a surviving issuer in a reverse acquisition were to exclude management’s assessment of internal control over financial reporting (ICFR) in the Form 10–K covering the fiscal year in which the reverse acquisition was consummated when it is not possible to conduct an assessment of the private operating company’s ICFR in the period between the consummation date of the reverse acquisition and the date of management’s assessment of ICFR required by Item 308(a) of Regulation S–K and when the internal controls of the shell company may be insignificant when compared to the consolidated entity. 686Section 101(a) of the JOBS Act amended the Securities Act and the Exchange Act to provide in
section 2(a)(19) of the Securities Act (15 U.S.C.
77b(a)(19)) and section 3(a)(80) of the Exchange Act (15 U.S.C. 78c(a)(80)) a definition of ‘‘emerging growth company.’’ These statutes provided as follows. An ‘‘emerging growth company’’ is an issuer that had total annual gross revenues of less than $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) during its most recently completed fiscal year. An issuer that is an emerging growth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of—(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; (B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this subchapter; (C) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (D) the date on which such issuer is deemed to be a ‘‘large accelerated filer’’, as defined in 17 CFR 240.12b–2, or any successor thereto. 687Pursuant to Securities Act Rule 405 and Exchange Act Rule 12b–2, the term ‘‘emerging growth company’’ means an issuer that had total annual gross revenues of less than $1.235 billion during its most recently completed fiscal year. Pursuant to these rules, if an issuer qualifies as an ‘‘emerging growth company’’ on the first day of its fiscal year, it maintains that status until the earliest of: (i) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.235 billion or more; (ii) the last day of its fiscal year following the fifth anniversary of the first sale of its common equity securities pursuant to an effective registration statement under the Securities Act; (iii) the date on which the issuer has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; or (iv) the date on which the issuer is deemed to be a ‘‘large accelerated filer’’ (as defined in Exchange Act Rule 12b–2). 688 In 2017, the Commission changed the $1 billion revenue threshold in these rules to $1.07 billion to account for inflation and, effective Sept. 20, 2022, the Commission further changed this $1.07 billon threshold to account for inflation to $1.235 billion. See Inflation Adjustments and Other Technical Amendments Under Titles I and III of the Jobs Act, Release No. 33–10332 (Mar. 31, 2017) [82 FR 17545 (Apr. 12, 2017)]; Inflation Adjustments
under Titles I and III of the JOBS Act, Release No. 33–11098 (Sept. 9, 2022) [87 FR 57394 (Sept. 20, 2022)]. 689With respect to the $1.235 billion revenue threshold in the definition of ‘‘emerging growth company’’ under Securities Act Rule 405 and Exchange Act Rule 12b–2, a pre-IPO SPAC may have limited or no revenue and post-IPO SPACs typically do not record revenue (because income statement items such as ‘‘Interest earned on marketable securities held in trust account’’ and ‘‘Unrealized gain on marketable securities held in trust account’’ are generally not revenue). With respect to the large accelerated filer provision in these rules: (a) paragraph (2)(ii) in the definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b–2 requires that the issuer has been subject to the requirements of Exchange Act section 13(a) or 15(d) for a period of at least twelve calendar months, a period that generally would not yet have elapsed for a newly public SPAC after an IPO and (b) paragraph (2)(i) in the definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b–2 requires aggregate worldwide market value of the voting and non-voting common equity held by non￾affiliates be $700 million or more, as of the last business day of the issuer’s most recently completed second fiscal quarter, a value threshold that many SPACs may be below. See supra note 665 (discussing frequency of SPACs with a market capitalization of greater than $700 million). 690Paragraph (2)(ii) of the definition of ‘‘emerging growth company’’ under Securities Act Rule 405 and Exchange Act Rule 12b–2. For example, in a case where the legal entity that is the SPAC becomes the post-de-SPAC transaction combined company, the five-year reference period would run from the date of the IPO of the SPAC and not the date of the de-SPAC transaction. 691Paragraphs (2)(i) and (iii) of the definition of ‘‘emerging growth company’’ under Securities Act Rule 405 and Exchange Act Rule 12b–2. 692Paragraph (2)(iv) of the definition of ‘‘emerging growth company’’ under Securities Act Rule 405 and Exchange Act Rule 12b–2. 693See letters from Ernst & Young, KPMG, PwC, Vinson & Elkins, supra note 660. 694Proposing Release, supra note 7, at 29481 (request for comment number 74). See letters from Ernst & Young, KPMG, Vinson & Elkins. 695See supra note 442. 696Paragraph (2) of the definition of ‘‘foreign private issuer’’ in Securities Act Rule 405. 697Paragraph (3) of the definition of ‘‘foreign private issuer’’ in Securities Act Rule 405. 698Paragraph (3) of the definition of ‘‘foreign private issuer’’ in Securities Act Rule 405. 699See definitions of ‘‘foreign issuer’’ and ‘‘foreign private issuer’’ in Securities Act Rule 405. 700As the target will be the predecessor to the SPAC and will report as a domestic registrant after the de-SPAC transaction, including reporting its financial statements on an Item 2.01 Form 8–K within four business days after the transaction, the target should
comply with Regulation S–X and provide financial statements in accordance with U.S. GAAP. year in which the transaction was consummated.685 Since the staff position about management’s assessment of internal control over financial reporting is broader than the transactions covered by this rulemaking, as it applies to reverse acquisitions between an issuer and a private operating company, we did not codify it as part of this rulemaking. In 2012, the Jumpstart Our Business Startups Act amended the Securities Act and Exchange Act to add provisions regarding and to define an ‘‘emerging growth company.’’ 686 Commission rules also define an ‘‘emerging growth company.’’ 687 The Commission has amended the definition of ‘‘emerging growth company’’ in the past to adjust the total annual revenue threshold in these rules for inflation.688 A SPAC typically qualifies as an EGC.689 A post-de-SPAC transaction combined company would lose EGC status on the last day of its fiscal year following the fifth anniversary of the first sale of its common equity securities pursuant to an effective Securities Act registration statement.690 A post-de￾SPAC transaction combined company may also lose EGC status on the last day of a fiscal year during which it had total annual gross revenues of $1.235 billion or on the date on which it has issued more than $1 billion in nonconvertible debt during the previous three-year period.691 Finally, a post-de-SPAC transaction combined company may also lose EGC status on the date on which it is deemed to be a ‘‘large accelerated filer’’ (as defined in Exchange Act Rule 12b–2).692 Several commenters recommended that the EGC status of the combined company following a de-SPAC transaction should be re-determined upon consummation of the de-SPAC transaction.693 As with filer status, we are not adopting any amendments concerning EGC status at this time but will consider whether future adjustments are appropriate. Several commenters addressed determination of FPI status issues raised in a request for comment.694 A new registrant, such as a SPAC in an IPO, makes the determination of its FPI status 695 as of a date within 30 days prior to filing its initial registration statement.696 A reporting registrant that seeks to file as an FPI is required to determine its FPI status once a year on the last business day of its second fiscal quarter.697 A registrant that qualifies as an FPI upon such determination is immediately able to use the forms and rules designated for FPIs.698 A domestic SPAC (e.g., incorporated in a U.S. State) that intends to enter a de-SPAC transaction with a foreign target company would be required to file a Form S–4 (and not a Form F–4), because a domestic issuer cannot qualify as an FPI.699 Accordingly, where a domestic SPAC combines with a target company that is an FPI, the financial statements of the foreign target company would have to be presented in accordance with U.S. GAAP in Form S– 4,700 among other differences that exist

701 Item 17 of Form S–4.
702Letters from Ernst & Young, Freshfields, KPMG, Vinson & Elkins. See supra notes 662, 663, and 664 and accompanying text. 703Letters from Freshfields, Vinson & Elkins. See supra notes 663 and 664 and accompanying text. 704Section 27A of the Securities Act and section 21E of the Exchange Act. The PSLRA does not impact the Commission’s ability to bring enforcement actions relating to forward-looking statements. 705Section 27A(b) of the Securities Act and
section 21E(b) of the Exchange Act. The
Commission has defined the term ‘‘blank check company’’ for purposes of and in Rule 419 as a development stage company that is issuing ‘‘penny stock,’’ as defined in Exchange Act Rule 3a51–1, and that has no specific business plan or purpose, or has indicated that its business plan is to merge with or acquire an unidentified company or companies, or other entity or person. SPACs that raise more than $5 million in a firm commitment underwritten IPO may be excluded from this definition of ‘‘blank check company’’ because they are not selling ‘‘penny stock.’’ See Penny Stock Definition for Purposes of Blank Check Rule, Release No. 33–7024 (Oct. 25, 1993) [58 FR 58099 (Oct. 29, 1993)]. The Commission’s definition of ‘‘blank check company’’ in Rule 419 was adopted in 1992 to implement provisions of the Penny Stock Reform Act relating to registration statements filed by blank check companies offering penny stock. This definition predates the PSLRA (which was enacted in 1995) and has not been amended since it was adopted by the Commission. 706Proposing Release, supra note 7, at 29482. 707Proposing Release, supra note 7, at 29482, n.162 and preceding text, citing, see, e.g., Matt Levine, Money Stuff: Maybe SPACs Are Really IPOs, Bloomberg, Apr. 12, 2021; Eliot Brown, Electric￾Vehicle Startups Promise Record-Setting Revenue Growth, Wall St. J., Mar. 15, 2021; Public Statement on SPACs, IPOs and Liability Risk under the Securities Laws (Division of Corporation Finance, Apr. 8, 2021). 708Proposing Release, supra note 7, at 29482, n.163 and preceding text, citing, see, e.g., Dambra, Even-Tov & George, supra note 36; AFR Letter, supra note 30; Park Testimony, supra note 30; Usha R. Rodrigues & Michael Stegemoller, SPACs: Insider IPOs (SSRN Working Paper, 2021). 709Proposing Release, supra note 7, at 29482. 710See, e.g., Securities Act section 27A(b)(7) (‘‘The terms ‘blank check company’, ‘rollup transaction’, ‘partnership’, ‘limited liability company’, ‘executive officer of an entity’ and ‘direct participation investment program’, have the meanings given those terms by rule or regulation of the Commission.’’). 711The target company typically cannot rely on the PSLRA safe harbor because at the time the statement is made it is not subject to the reporting requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 and thus does not meet the requirements of section 27A(a)(1) of the Securities Act. 712The Commission also proposed to amend the definition to remove the reference to ‘‘development stage company’’ on the basis that the reference was unnecessary for purposes of the proposed definition. between the requirements of Form S–4 and Form F–4.701 If such a domestic SPAC registrant were to reincorporate under the laws of a foreign country prior to the filing of the registration statement in connection with a de-SPAC transaction, that reincorporation may require the foreign SPAC, as a new entity, to file an initial registration
statement. The new entity’s FPI status would be determined as of a date within 30 days prior to the filing of the initial registration statement, as described above. If the new foreign entity were to qualify as an FPI, it may be eligible to file a Form F–4 registration statement in connection with the de￾SPAC transaction. Currently, the FPI status of the post-de-SPAC transaction combined company would not affect the registration form to be filed in connection with the de-SPAC transaction, regardless of whether the SPAC was an existing registrant or a new foreign entity. Also, currently, where the legal entity that was the SPAC is not an FPI and is the legal entity that is the combined company following the de-SPAC transaction, even where the combined company may meet the definition of an FPI after the de￾SPAC transaction, the combined company would need to wait until the end of the next second fiscal quarter to re-determine its status as an FPI. Several commenters recommended that we should provide for re￾determination of FPI status in connection with a de-SPAC transaction.702 We have considered these comments and recognize that, depending on the structure of a specific de-SPAC transaction, there may be some fact￾specific circumstances in which an FPI registration statement may be used. For example, a SPAC’s use of an FPI registration statement (e.g., Form F–4) and compliance with FPI rules in connection with the de-SPAC transaction may be appropriate when, as of a date within 30 days prior to the filing of the de-SPAC transaction registration statement, the SPAC is a foreign issuer that is entering a de-SPAC transaction with a target company that is an FPI but is not a shell company, the legal entity that is the SPAC will be the legal entity that is the combined company registrant following the de￾SPAC transaction, and the combined company registrant created in connection with the de-SPAC transaction is expected to be an FPI at the time of consummation of the de￾SPAC transaction. Contrary to the suggestion of some commenters,703 we believe that earlier re-determination of FPI status would be inappropriate when a SPAC is a domestic SPAC (and therefore not a foreign issuer) prior to the de-SPAC transaction but enters a de-SPAC transaction with an FPI target company. If the legal entity that is the SPAC is a domestic entity, the combined company following the de-SPAC transaction would also be a domestic entity, in which case use of FPI forms would not be appropriate. E. PSLRA Safe Harbor

1. Proposed Rules
   The PSLRA provides a safe harbor for forward-looking statements under the Securities Act and the Exchange Act, under which a company is protected from liability for forward-looking statements in any private right of action under the Securities Act or Exchange Act when, among other conditions, the forward-looking statement is identified as such and is accompanied by meaningful cautionary statements.704 Under the PSLRA, the safe harbor is not available, however, when a forward￾looking statement is made in connection with, among other things, an offering by a blank check company, an offering by an issuer of penny stock, or an IPO.705 The Proposing Release discussed the Commission’s concerns about the use of forward-looking statements, such as projections, in connection with de￾SPAC transactions.706 The Commission stated that some market participants in de-SPAC transactions may not exercise the same level of care in preparing forward-looking statements, such as projections, as in a traditional IPO.707 The Commission also noted that a number of commentators had raised concerns about the use of projections that they believe to be unreasonable in de-SPAC transactions.708 In addition, the Commission stated that it saw no reason to treat blank check companies differently for purposes of the PSLRA safe harbor depending on whether they raise more than $5 million in a firm commitment underwritten IPO and thus are not selling penny stock.709 To address these concerns, the Commission proposed using its statutory authority under the PSLRA to amend the definition of ‘‘blank check company’’ 710 to include companies that would otherwise meet the Securities Act Rule 419 definition of ‘‘blank check company,’’ except that they are not issuers of penny stock (such as a SPAC in a de-SPAC transaction).711 Specifically, the Commission proposed a revised definition of ‘‘blank check company’’ to be located in Securities Act Rule 405 that would, for purposes of the PSLRA, remove the ‘‘penny stock’’ condition from the rule and define the term as ‘‘a company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person.’’ 712

713Proposed amendments to 17 CFR 230.137 (‘‘Rule 137’’), 230.138 (‘‘Rule 138’’), 230.139 (‘‘Rule 139’’), 230.163A (‘‘Rule 163A’’), 230.164 (‘‘Rule 164’’), 230.174 (‘‘Rule 174’’), 230.430B (‘‘Rule 430B’’), and 230.437a (‘‘Rule 437a’’). The Commission proposed that the term ‘‘blank check company issuing penny stock’’ be defined as a company that is subject to Rule 419. Due to current Federal Register formatting requirements, the Commission also proposed technical changes to Rules 163A and 164 to move the Preliminary Note(s) in these rules to introductory paragraphs of the respective rules. 714Letters from Andrew Tuch, Americans for Financial Reform Education Fund (‘‘Amending the definition of a ‘blank check company’ and ensuring that the forward-looking projections of SPACs are subject to the same level of legal liability that currently exists for IPOs is an important step to protect investors.’’), Better Markets (‘‘Perhaps one of the most important provisions in the Proposal is the provision clarifying that the statutory safe harbor in the PSLRA does not apply to forward-looking statements made in connection with a de-SPAC transaction.’’), CFA Institute, CII, Consumer Federation, Senator Elizabeth Warren, ICGN, NASAA. 715Letter from CFA Institute. 716Letter from NASAA. 717Letters from Consumer Federation, NASAA. 718Letter from Senator Elizabeth Warren. 719Letter from Better Markets. 720Letter from Senator Elizabeth Warren. 721Letter from Consumer Federation. 722Letters from Americans for Financial Reform Education Fund, Better Markets, CFA Institute, CII, Senator Elizabeth Warren. 723Letter from Americans for Financial Reform Education Fund. 724Letter from Better Markets. 725Letter from CFA Institute. 726Letter from CII. 727Letter from Senator Elizabeth Warren. 728Letters from Better Markets, CII, Consumer Federation, Senator Elizabeth Warren. See also letter from Anonymous (Oct. 11, 2022) (‘‘Please do not permit SPAC sponsors, their CEO or their board members to engage with the public in such a way that could create a false representation of . . . [p]rojections of value. . . .’’). 729Letter from CII. 730Letter from Consumer Federation. The Commission proposed corresponding technical changes to Rule 419, the rule the Commission adopted to implement provisions of the Penny Stock Reform Act relating to registration statements filed by blank check companies offering penny stock, that were intended to maintain consistency with that rule’s historic scope which is limited to blank check companies that issue penny stock. Similarly, the Commission proposed a new definition in Rule 405, ‘‘Blank check company issuing penny stock,’’ and proposed conforming amendments to existing references to ‘‘blank check company’’ as defined in Rule 419 in various Securities Act rules in order to maintain the scope of those rules.713
2. Comments
A number of commenters expressed general support for the proposal.714 One of these commenters said, ‘‘Both the regular IPO and de-SPAC approaches for taking a new, emerging company public should be treated similarly in this critical area for market integrity—the legitimacy of forward-looking projections.’’ 715 Other commenters said they did not see a reason SPACs should be treated differently than traditional IPO participants 716 or companies that issue penny stock 717 with respect to forward-looking statements. One commenter focused on the benefits of mitigating the risk of harm to investors, stating that the proposal ‘‘would significantly curb SPAC sponsors’ abilities to make overblown and false projections, and increase their liability when this fraud occurs.’’ 718 Another commenter said that ‘‘[t]his safe harbor enables SPAC sponsors and underwriters to make future projections of the performance of the SPAC to investors with relative impunity. This legal loophole enables SPAC sponsors to sell investors on bold projections that have little basis in reality. These legal loopholes, including the PSLRA safe harbor, among others, have created a regulatory arbitraged race-to-the-bottom IPO model. . . .’’ 719 This commenter further said, ‘‘It is clear that far too many SPAC sponsors have utilized the PSLRA safe harbor to paint bold and enticing pictures of the financial outlook of their post-merger companies that were divorced from reality. . . . The safe harbor from the PSLRA for forward-looking statements in de-SPAC transactions has fueled this trend, undermined public confidence in our capital markets, and harmed investors by enabling SPAC sponsors to make reckless projections about future financial performance. In any final rule, the Proposal must retain the clarification that the PSLRA safe harbor does not apply in connection with de￾SPAC transactions.’’ A separate commenter similarly said that ‘‘amending the definition of a ‘blank check’ company in The Private Securities Litigation Reform Act of 1995 would prevent SPACs from exploiting the safe harbor provision to make overblown and fraudulent projections.’’ 720 Another commenter said the proposal ‘‘would resolve ambiguities about how the law applies in this context and promote accountability for SPAC market participants.’’ 721 A number of commenters suggested that unreasonably optimistic or inflated projections are prevalent in de-SPAC transactions.722 One of these commenters said that SPACs sometimes make ‘‘utterly absurd forward-looking projections.’’ 723 This commenter also said, ‘‘Post-merger investors in SPACs, who are predominantly retail investors, are often lured by ambitious projections of growth—made with the protection of the safe harbor—and unfortunately have already lost significant amounts of money as a result.’’ A different commenter said, ‘‘In fact, it is nearly impossible to ignore the research and findings of the wild and indiscriminate use of projections in de-SPAC
transactions by sponsors with seemingly little care given to the accuracy or reality of those projections.’’ 724 Another of these commenters said that ‘‘too many of these de-SPAC forward-looking statements are an exercise in creative writing, baseless hype and embellishment.’’ 725 Another commenter said, ‘‘We believe historical uncertainty surrounding the availability of the safe harbor may have contributed to the proliferation of unreasonably optimistic forward projections that would not have been made if liability had more clearly paralleled the traditional IPO regime.’’ 726 Finally, one commenter said that ‘‘SPACs are rife with disclosures that border on or cross into outright fraud’’ and that ‘‘there have been multiple cases where companies used inflated information about their financials, their future business, or even their underlying technology.’’ 727 Several commenters expressed support for the proposal because they believed it would curb the use of unrealistic and potentially misleading projections that harm investors.728 One of these commenters said, ‘‘We support the proposal’s revision to the definition of ‘blank check company’ to ensure that the safe harbor against a private right of action for forward-looking statements under the PSLRA is not available. We believe this clarification may reduce the inclusion of unreasonably optimistic forward projections in SEC filings, which may in turn help SPAC investors avoid overestimating future revenues and other measures of future company performance.’’ 729 Another of these commenters said that ‘‘the proposal’s approach to amend the definition of blank check company for purposes of the PSLRA safe harbor for forward￾looking statements’’ would ‘‘strengthen incentives for SPACs to avoid potentially unrealistic and potentially misleading forward-looking statements and to expend more effort or care in the preparation and review of forward￾looking statements.’’ 730 Another commenter said, ‘‘The Commission’s proposal to amend the definition of ‘blank check company’ to remove the safe harbor in the Private Securities Litigation Reform Act of 1995 for

731Letter from Senator Elizabeth Warren. 732Letters from ABA; Amanda M. Rose, Professor of Law, Vanderbilt University Law School (June 16,
2022) (‘‘Amanda Rose’’); American Securities
Association; Bullet Point Network; Cato Institute; Cowen; Goodwin; Job Creators Network; Loeb & Loeb; Michael Dambra, Omri Even-Tov, and Kimberlyn George; Jennifer W. Han, Executive Vice President, Chief Counsel & Head of Regulatory Affairs, Managed Funds Association (June 13, 2022) (‘‘Managed Funds Association’’); NYC Bar; Paul Swegle; SPAC Association; Kristi Marvin, SPACInsider (June 13, 2022) (‘‘SPACInsider’’); Vinson & Elkins; Winston & Strawn. Also, the Small Business Capital Formation Advisory Committee recommended that projections in de-SPAC transactions should be covered by the liability safe harbor provisions of the PSLRA, supra note 40. 733Letter from Cato Institute. 734Letter from SPAC Association. 735Letter from Goodwin. 736Letter from Cowen. 737Letters from ABA, Cato Institute, Paul Swegle, Winston & Strawn. 738Letter from American Securities Association. 739Letter from Cato Institute. 740Letter from Paul Swegle. 741Letter from Winston & Strawn. 742Letter from ABA. See also letter from Goodwin. 743Letters from ABA, Job Creators Network, Kirkland & Ellis. Section 508 of the Penny Stock Reform Act amended Securities Act section 7 to provide for new section 7(b)(3) that provides: ‘‘For purposes of paragraph (1) of this subsection, the term ‘blank check company’ means any development stage company that is issuing a penny stock (within the meaning of section 3(a)(51) of the Securities Exchange Act of 1934) and that—(A) has no specific business plan or purpose; or (B) has indicated that its business plan is to merge with an unidentified company or companies.’’ 744Letter from ABA. forward-looking statements would significantly curb SPAC sponsors’ abilities to make overblown and false projections, and increase their liability when this fraud occurs.’’ 731 Other commenters were generally opposed to the proposal.732 Some commenters who expressed general opposition to the proposal discussed the value of forward-looking information to investors. One of these commenters said, ‘‘This safe harbor incentivizes the disclosure of potentially valuable information as to a company’s future outlook.’’ 733 Another of these commenters said, ‘‘By removing the safe harbor provisions from SPAC mergers, the proposed rules would replicate the biggest flaw of IPOs, hindering investor visibility toward management expectations and related future prospects.’’ 734 A number of commenters focused on comparing de-SPAC transactions to other kinds of transactions in their comments. One of the commenters who expressed general opposition to the proposal said, ‘‘We believe there are important distinctions between a De-SPAC Transaction and a traditional IPO that justify maintaining the PSLRA safe harbor in the form enacted by Congress.’’ This commenter said, ‘‘The PSLRA safe harbor . . . does not cover all forward-looking statements. It contains a number of exclusions. . . . [One] category of exclusions cover[s] situations—like tender offers, roll-up and going-private
transactions—where companies are compelled by law to share projections with investors. In such situations, there is less risk that liability will chill disclosure and the safe harbor exclusion can be understood as an effort to increase the accuracy of disclosures.’’ Further, this commenter said, ‘‘Projections disclosure in De-SPAC Transactions fall under this . . . category.’’ 735 Another commenter who generally opposed the proposal questioned whether it would benefit investors, stating that ‘‘the Commission’s proposal to remove the PSLRA safe-harbor for de-SPAC transactions is unnecessarily broad with no real benefit to investors.’’ 736 A number of commenters on the proposal provided views related to the statutory authority of the Commission to amend the definition of blank check company as proposed. These comments fell into two main categories. First, some of these commenters suggested the Commission does not have discretion to adopt or amend a definition of blank check company for purposes of the PSLRA that differs from the current Rule 419 definition (which includes the qualification the relevant company is issuing penny stock).737 One of these commenters said, ‘‘The elimination of the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act (PSLRA) is unlawful. The Proposal would—without any authorization by Congress—amend the definition of a ‘blank check’ company under the PSLRA to prevent SPACs from utilizing the PSLRA safe harbor for forward-looking statements. Given that de-SPAC transactions necessarily involve making a good deal of projections, there has been an underlying assumption that the PSLRA safe harbor applies to such projections. . . . The SEC should drop this idea and recognize that it has no legal authority under law to change Congressional statutes on its own.’’ 738 Another of these commenters said that ‘‘this change alters the scope and effect of the PSLRA by substantially revising the definition that Congress relied on when it wrote the statute. Such an alteration to the statute’s scope should be made by Congress, not the Commission.’’ 739 Another of these commenters said, ‘‘I believe the SEC would be overreaching its authority in eliminating the availability of the PSLRA safe harbor for forward-looking statements in de-SPAC transactions. The Projection Proposal would change the existing definition of ‘blank check company’ for purposes of the PSLRA by removing the ‘penny stock’ condition. That was the definition Congress specifically relied upon when it wrote the PSLRA. I believe it would be improper for the SEC to willfully ignore statutory language in this manner.’’ 740 Another commenter said that ‘‘de-SPAC transactions were not within the scope of issuers and transactions excluded from the PSLRA by Congress. The PSLRA excludes from the safe harbor, among other things, forward-looking statements made in connection with an IPO, and an offering of securities by a blank check company or
by an issuer that issues penny stock.’’ 741 This commenter also said that SPACs are not blank check companies subject to Rule 419 nor do SPACs issue penny stock. This commenter also stated, ‘‘In transactions where the de-SPAC transaction is structured with the SPAC as the surviving company, the transaction is not an IPO of the SPAC. As a result, we believe the proposed expansion of the exclusions from the PSLRA that were legislated by Congress are not merely clarifying or interpretive in nature; rather, they go beyond the Commission’s rulemaking authority and should be addressed by statute.’’ Finally, one commenter said the proposed changes regarding the definition of blank check company ‘‘appears inconsistent with the exemptive authority found in Section 27A(g) and (h), which makes clear the Commission’s ability to extend the scope of the safe harbor protections rather than narrow them.’’ 742 Second, some commenters suggested that the Commission’s proposed definition of blank check company is inconsistent with the Penny Stock Reform Act’s statutory definition of blank check company, which includes the qualification that the relevant company is issuing penny stock and which predated the PSLRA.743 One of these commenters stated, ‘‘As the Commission noted, the current definition of ‘blank check company’ predates the enactment of the PSLRA in 1995 and evidences a clear intent to exclude from that definition SPACs that raise more than $5 million in a firm commitment underwritten IPO for not selling ‘penny stock.’ ’’ 744 Another of these commenters said that ‘‘the SPAC Proposal’s proposed elimination of the PSLRA safe harbor . . . is illegal for

745Letter from Job Creators Network, citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 844 (1984) (statutory citations have been omitted from the quotation). 746 Id., citing see, e.g., Van Hollen, Jr. v. FEC, 811 F.3d 486, 492 (D.C. Cir. 2016) (for the principle, according to the commenter, that ‘‘[at] Chevron step two, courts look at how Congress ‘elsewhere defines’ the specific term at issue’’). 747 Id. (statutory citation omitted). 748 Id., citing Chem. Mfrs. Ass’n v. EPA, 919 F.2d 158, 163 (D.C. Cir. 1990) (footnotes omitted). 749Letter from Kirkland & Ellis. 750 5 U.S.C. 551 et seq. 751Letter from American Securities Association. 752Letter from Job Creators Network. 753Letters from Bullet Point Network, CFA Institute (‘‘both the regular IPO and de-SPAC approaches for taking a new, emerging company public should be treated similarly in this critical area for market integrity—the legitimacy of forward￾looking projections.’’), NASAA (‘‘We see no reason why de-SPAC transactions should be treated differently than penny stock issuers or traditional IPO participants with respect to forward looking statements.’’). 754Letters from Bullet Point Network (expressing the view that the inapplicability of the PSLRA safe harbor to traditional IPOs ‘‘effectively prohibit[s] management projections from S–1 filings’’ and that ‘‘[t]his relegates the topic to the game of ‘20 questions’ privileged investors play. Asking the right questions in the right way allows these investors to get valuable information others don’t get, while technically staying on the right side of the published rules. Issuers can essentially transmit projections by helping research analysts employed by their underwriters develop financial estimates, the substance of which are communicated verbally to privileged investors in private meetings ahead of an IPO.’’); SPACInsider (‘‘It’s quite common for a company that is going through the traditional IPO process to talk to a bank’s research analyst, discuss their forward earnings, at which point, the analyst then models out the company into the future and then . . . ONLY distributes that information to the bank’s key and favored clients (which usually pay the bank a lot of money in trading fees). This is a far less democratic and equitable process to the investing public, and in particular, retail investors . . . . This is in contrast to the SPAC process in which all investors get a free look at projections by filing them publicly, not just the wealthiest investors.’’ (Emphasis in the original)); Ropes & Gray (‘‘a key challenge of the traditional IPO market is that it ends up depriving retail investors from participating in IPOs through an IPO allocation, and such investors are often unable to purchase at the same price as institutional investors. Retail investors in companies that access the public markets through traditional IPOs also do not have the same access to third-party analysis as larger institutional investors
who have ready access to the research analyst community. SPAC transactions have served to democratize the process in enabling prospective investors to have the ability to participate on equal footing with initial investors . . . by way of . . . access to information.’’); SPAC Association (‘‘we believe that an opposite result may take place if these proposed rules were to be promulgated: the public may be deprived of potentially helpful information and that same information will only be made available to institutional investors in private settings, like what happens in the IPO market . . . . ’’); Vinson & Elkins (‘‘Projections are used in IPOs—they are just customarily not included in the registration statement and prospectus. Instead, they are disclosed to analysts at the investment banks, who use them to assist in pricing the securities and in building the analysts’ models for disclosure to institutional investors.’’); White & Case (‘‘issuers in IPOs indirectly provide investors with financial projections by sharing their financial models, including projections, with research analysts, who then provide their models to their institutional investor clients considering whether to participate in the IPO.’’). 755Letter from Bullet Point Network. See also letter from Ropes & Gray (‘‘if these proposed rules were to be promulgated: the public may be deprived of potentially helpful information and that same information will only be made available to institutional investors in private settings, like what happens in the IPO market’’). 756Letters from Bullet Point Network (recommending that the PSLRA safe harbors Continued [the] reason [that]: it proposes an unreasonable definition of ‘blank check company.’ The PSLRA generally provides a safe harbor for forward￾looking statements, but the safe harbor is not available for ‘blank check companies.’ The PSLRA states that the term ‘blank check company’ has ‘the meaning[ ] given . . . by rule or regulation of the Commission,’ but of course the SEC does not have carte blanche to define the term however it wants—its proposal must be ‘reasonable.’ ’’ 745 The commenter also said, ‘‘The SEC’s discretion in defining blank check company is accordingly cabined and informed by other relevant statutory provisions.’’ 746 This commenter also said, ‘‘In particular, Congress has already defined a blank check company in the Securities Act, and the only absolute requirement in that definition is that the company issue ‘penny stocks.’ ’’ 747 This commenter further stated that ‘‘the SPAC Proposal would eliminate the penny stock requirement, even though Congress has made clear that that requirement is the core aspect that defines a blank check company. The SPAC Proposal’s definition of blank check company is hardly ‘reasonable’ when it eliminates the core of Congress’s definition of that term within the same statutory regime, nor is it ‘consistent with the statute’s purpose’ to allow the SEC to relabel any entity it chooses as a
blank check company by disregarding the core aspect of what makes a blank check company.’’ 748 Another of these commenters said, ‘‘The Proposal to redefine ‘blank check company’ is not a clarification of existing law. We disagree with the Commission that the proposed amendment to the definition of ‘blank check company’ is a clarification that the statutory safe harbor of the PSLRA is not available for forward-looking statements made in connection with offerings by SPACs. As noted by the Commission, the current definition of a ‘blank check company’ predates the enactment of the PSLRA and this amendment changes the applicability of the PSLRA safe harbor.’’ 749 Finally, in addition to these two main groups of comments related to statutory authority issues, one commenter expressed the view that the proposed changes to the definition of ‘‘blank check company’’ are contrary to the Administrative Procedure Act of 1946 750 because ‘‘the SEC is seeking to amend the PSLRA on its own without any explicit statutory authority or directive from Congress.’’ 751 A different commenter argued that the proposal was ‘‘unlawful, arbitrary, and capricious’’ because Congress already defined blank check company in the Securities Act and ‘‘the only absolute requirement in that definition is that the company issue ‘‘ ‘penny stocks.’ ’’ 752 A number of commenters focused on comparing de-SPAC transactions to two categories of other kinds of transactions:
(1) traditional IPOs and (2) other business combinations. Some commenters supported the proposal with respect to rules related to the PSLRA safe harbor on the basis that it would level the playing field with IPOs.753 Other commenters, however, expressed concerns regarding how the playing field for traditional IPOs operates with respect to the interaction of issuers who provide projections, research analysts, and investors. These commenters generally observed that, in traditional IPOs, issuers often provide projections to securities analysts who often share these projections with certain institutional investors (on a private and informal basis, i.e., not in the form of published research reports) but these issuers do not make this information available to other investors, particularly retail investors.754 One commenter said, ‘‘The [PSLRA] Safe Harbor, and subsequently Regulation FD, . . . had the desirable effect of leveling the playing field so that certain investors with access to management meetings and sell-side research analysts do not have an information advantage over less well-resourced retail investors.’’ 755 But the commenter indicated that, because ‘‘IPOs . . . are expressly excluded from the [PSLRA] Safe Harbor and Regulation FD is only applicable to companies that are already public, . . . companies do not provide any projections or forward-looking statements in the S–1s relating to their IPOs but generally do hold private meetings with qualified institutional investors.’’ Some commenters suggested that, instead of the proposed rule changes, IPO regulation should be put on a level playing field with de-SPAC transactions by Commission rule amendments or through statutory amendment to extend the PSLRA safe harbor to IPOs.756

‘‘should be available for IPOs of all Types [defined by the commenter as traditional IPOs, SPAC business combinations and Direct Listings], but should only be available for projections that serve the public interest by clearly communicating the risk and uncertainty associated with the projections in a standardized format.’’), Loeb & Loeb, Kirkland & Ellis, SPACInsider. See also letter from ABA (‘‘This also appears inconsistent with the exemptive authority found in Section 27A(g) and (h), which makes clear the Commission’s ability to extend the scope of the safe harbor protections rather than narrow them.’’), Amanda Rose (discussing ‘‘serious questions about the wisdom of the existing exclusion for communications made in connection with an IPO, which has the practical effect of silencing nearly all public disclosure of management projections in connection with IPOs to the detriment of reasonable investors’’), SPAC Association (‘‘By removing the safe harbor provisions from SPAC mergers, the proposed rules would replicate the biggest flaw of IPOs, hindering investor visibility toward management expectations and related future prospects.’’). 757Letters from ABA, Amanda Rose, Cato Institute, Cowen, Goodwin, Vinson & Elkins, NYC Bar. Also, the Small Business Capital Formation Advisory Committee recommended that projections in de-SPAC transactions should be covered by the liability safe harbor provisions of the PSLRA, because management projections are an important
part of the rationale for companies in determining
whether to engage in a merger with a SPAC and they are necessary when financial intermediaries provide fairness opinions related to de-SPAC transactions. See supra note 40. 758Letter from ABA. 759Letter from Cato Institute (footnotes omitted). 760Letter from Vinson & Elkins. 761Letter from NYC Bar. 762Letter from Cowen. 763Letters from American Securities Association; CFA Institute; Cowen (‘‘if the SPAC receives a fairness opinion from a financial advisor (as the proposing release suggests will be required) that fairness opinion will be based on projections, which will have to be disclosed to investors.’’). 764Letter from American Securities Association. 765Letter from CFA Institute. 766Letters from Cowen, SPAC Association, Winston & Strawn. 767Letter from Winston & Strawn. 768Letters from ABA, Amanda Rose, Cato Institute, CFA Institute, Goodwin, Kirkland & Ellis, Managed Funds Association, NYC Bar, SPAC Other commenters, however, suggested de-SPAC transactions should be treated differently than IPOs because de-SPAC transactions involve business combinations, which may be subject to disclosure obligations under State law.757 One of these commenters said that ‘‘unlike companies undertaking a traditional IPO, SPACs are compelled by a combination of federal securities regulation and state corporate law to share Target projections with stockholders.’’ 758 This commenter also said, ‘‘To truly place De-SPAC Transactions on a ‘level playing field’ with traditional IPOs in connection with forward-looking statements, the Commission would have to change its disclosure requirements in connection with De-SPAC Transactions and somehow override the state fiduciary obligations that compel disclosure of projections.’’ Another of these commenters said that ‘‘SPACs will not be able to avoid liability by refraining from speaking, as many traditional IPOs do. SPAC sponsors generally must provide forward-looking information in connection with the de-SPAC transaction to satisfy state fiduciary requirements in connection with mergers.’’ 759 Another of these commenters said, ‘‘With respect to forward looking statements, the SEC’s ‘de-SPAC transactions are merely IPOs of the target company’ theory has flaws. Specifically, the SPAC is a publicly traded company . . . and the directors and officers of the SPAC have fiduciary duties. They are required to conduct substantial diligence (arguably more than underwriters in an IPO), and are required to disclose the material reasons for approving and proposing the de￾SPAC transactions to the SPAC’s shareholders, which frequently include projections provided to the directors in connection with their evaluation of the de-SPAC transaction.’’ 760 Another of these commenters said that ‘‘traditional IPOs and de-SPAC transactions are fundamentally different transactions. Financial projections are not required to be included, and are rarely included, in IPO registration statements. On the other hand, both Delaware jurisprudence and the
Commission’s staff now require inclusion of management projections in proxy statements and registration statements on Form S–4/F–4 where such projections were relied upon by a board of directors in approving a transaction.’’ 761 This commenter also said, ‘‘The projections included in the de-SPAC transaction registration statement or proxy statement are not included in order to promote capital formation. In fact, such projections are generally only current as of the date a board of directors approved the execution of the acquisition agreement. Such projections are not typically updated because they are being provided to SPAC shareholders to evaluate the board of directors’ recommendation to approve the de￾SPAC transaction, rather than to solicit a new investment. As such, projections are often out of date, or ‘stale’, by the time the SPAC’s shareholders receive them. Issuers generally include disclosure to the effect that investors should not consider projections to be financial guidance, and investors are generally cautioned not to place undue reliance on such projections.’’ Another commenter said, ‘‘Under Delaware case law, the Board has a fiduciary duty to disclose to investors in a merger proxy (often in an S–4 registration statement) the projections it utilized in making its decision. Moreover, if the SPAC receives a fairness opinion from a financial advisor (as the proposing release suggests will be required) that fairness opinion will be based on projections, which will have to be disclosed to investors. Therefore, unlike a typical IPO, in the vast majority of de￾SPAC transactions, projections will have to be disclosed, which further underscores the reasonableness of giving such statements PSLRA safe harbor protection, just as they would have in a typical M&A transaction that was not a de-SPAC.’’ 762 Furthermore, other commenters suggested de-SPAC transactions should be treated differently than IPOs, because of concerns about the interaction of the proposed changes regarding availability of the PSLRA safe harbor with other proposals in the Proposing Release.763 One of these commenters said, ‘‘This aspect of the Proposal is in direct opposition to the provisions of the Proposal that require the SPAC to disclose the material reasons for which the SPAC believes its proposed de￾SPAC transaction is fair to its public shareholders.’’ 764 Another of these commenters said, ‘‘The combination of removing the safe harbor while adding amendments to Item 10(b) of Regulation S–K and Item 1609 of Regulation [S–K] essentially mandating some level of [forward-looking statement] projections, goes beyond leveling de-SPACs with IPOs.’’ 765 Some commenters suggested the proposal would create inconsistency by making the PSLRA safe harbor unavailable for one kind of business combination transaction (de-SPAC transactions) but not for other kinds of business combination transactions.766 One of these commenters said, ‘‘The Commission stated that the proposed change
to the PSLRA definition is necessary to align traditional IPOs more closely with de-SPAC transactions. However, the Commission’s position is inconsistent with the provisions of Regulation M–A, which actually require disclosure of target company projections if the SPAC’s board relied on such projections when approving the de￾SPAC transaction. There is no similar requirement in the IPO context. We can see no justification for treating a de￾SPAC transaction differently from any other stock-for-stock merger for this purpose.’’ 767 A number of commenters suggested the proposal would have a chilling effect on the use of projections that investors find useful.768 One of the

Association, Vinson & Elkins, Winston & Strawn. See also letter from Davis Polk (stating that the absence of the safe harbor will not ‘‘have a substantial impact’’ but may ‘‘be an additional factor that will cause many investment banks to refuse to participate in de-SPAC transactions to avoid liability’’). 769Letter from ABA. 770Letter from Cato Institute. 771Letter from Kirkland & Ellis. 772Letter from Amanda Rose, including attachment of a forthcoming article that was published as: Amanda M. Rose, SPAC Mergers, IPOs, and the PSLRA’s Safe Harbor: Unpacking Claims of Regulatory Arbitrage, 64 William & Mary
L. Rev. 1757, 1806 (2023), available at https://
scholarship.law.wm.edu/cgi/ viewcontent.cgi?article=3995&context=wmlr (emphasis in original). 773 Id. at 1806. 774Letters from ABA, Kirkland & Ellis, NYC Bar. See also letter from Vinson & Elkins (‘‘However, the expansion of underwriter liability to cover de-SPAC transactions may cause an increased focus on projections, and more thorough discussion regarding the assumptions and considerations underlying the projections, as well as material risks that could cause such projections to not be satisfied. Where projections are not a material consideration for a SPAC board, under the Proposed Rules that SPAC will be less likely to disclose projections.’’). 775Letter from ABA. 776Letter from Kirkland & Ellis. 777Letter from NYC Bar. 778Letters from Andrew Tuch, Davis Polk, Kirkland & Ellis. See also letter from Jeffrey M. Solomon, Chair and Chief Executive Officer, Cowen Inc. (June 8, 2022) (‘‘Cowen’’) (‘‘If the perceived ‘problem’ is unreasonable projections or projections not being made in good faith, it should be noted that such unreasonable, bad-faith projections would not qualify for PSLRA (or any other) safe harbor protection in the first instance, irrespective of the stay of discovery. . . .’’). 779Letter from Andrew Tuch. 780Letter from Davis Polk. 781Letter from Kirkland & Ellis. 782Letters from ABA, Cowen, Winston & Strawn. 783Letter from ABA. 784Letter from Cowen. Securities Act Rule 175 and Exchange Act Rule 3b–6 were adopted in 1979. See Safe Harbor for Projections, Release No. 33– 6084 (June 25, 1979) [44 FR 38810 (July 2, 1979)]. The PSLRA was enacted in 1995. 785Letter from Winston & Strawn. commenters said that ‘‘we believe the removal of the PSLRA safe harbor would have a significant chilling effect on De-SPAC Transactions’’ and that this ‘‘chilling effect is also demonstrated by the fact that IPO issuers rarely publicly include projections in the registration statement.’’ 769 One of these commenters said the proposal ‘‘undoubtedly will’’ reduce ‘‘the amount of potentially relevant information presented to investors’’ and suggested this would negatively affect investor ability to accurately value combined companies in de-SPAC transactions.770 Another of the commenters said that ‘‘the proposed amendment may discourage the disclosure of projections—especially given the Commission’s broad statements on potential underwriter liability.’’ 771 A different commenter referred to an article that said, ‘‘Offering [mandated forward-looking] disclosures safe harbor protection may decrease their accuracy relative to a world in which safe harbor protection were not available, if companies emboldened by the liability shield approach the preparation of such disclosures with less care or honesty than they otherwise would. But it could also increase the quality of the disclosures by reducing an incentive that might otherwise exist to negatively bias projections or obfuscate them, which has the twin effects of making them less vulnerable to attack in
litigation and less useful to investors.’’ 772 The same article also said allowing a safe harbor to apply to forward-looking statements in de-SPAC transactions ‘‘might also work to lower liability insurance premiums.’’ 773 Commenters also expressed concerns about the combined effect of the proposed change in PSLRA safe harbor availability and proposed 17 CFR 230.140a (‘‘Rule 140a’’) concerning underwriters.774 One of these commenters said, ‘‘In particular, when coupled with other proposed amendments that would require disclosure of a fairness determination (effectively mandating the provision of projections) as well as impose underwriter liability in a De-SPAC Transaction, we believe removal of the PSLRA safe harbor protections would have a chilling effect on De-SPAC Transactions and significantly disadvantage a De-SPAC Transaction compared to a traditional IPO.’’ 775 Another of these commenters said, ‘‘We do have a concern that the proposed amendment may discourage the disclosure of projections—especially given the Commission’s broad statements on potential underwriter liability.’’ 776 Another of these commenters said, ‘‘The elimination of the PSLRA safe harbor, combined with the Commission’s proposed Rule 140a, may have a chilling effect on the use of projections in de-SPAC transactions, which may preclude investors from receiving information that sponsors and boards of directors rely in part on in connection with valuation determination.’’ 777 Other commenters, however, expressed the view that PSLRA safe harbor availability does not meaningfully affect existing disclosure practices.778 One of these commenters said that ‘‘the availability of the PSLRA safe harbor may not be a significant factor in determining the use of forward￾looking statements in de-SPACs.’’ 779 Another of these commenters said that ‘‘the safe harbor has never provided a meaningful shield from liability’’ and that ‘‘we do not expect that the absence of the safe harbor will have a substantial impact on current market disclosure practices and we do not object to the disapplication of the safe harbor to de￾SPAC transactions.’’ 780 Another of these commenters said, ‘‘In our experience, the availability of the PSLRA safe harbor for forward-looking statements in certain de-SPAC transactions does not alter the decision on the presentation of projections. Conversely, where the safe harbor is clearly available, such as for follow-on offerings by existing public companies, it remains rare to see the inclusion of projections in the actual offering documents.’’ 781 Several commenters observed that other safe harbors in Commission rules and legal doctrines protecting against liability under common law would continue to be available with respect to forward-looking statements notwithstanding the proposed changes regarding the availability of the PSLRA safe harbor.782 One of these commenters said, ‘‘An issuer’s ability to rely on the judicial ‘bespeaks caution’ doctrine may mitigate to some
extent liability concerns associated with providing projections.’’ 783 Another of these commenters said that 17 CFR 230.175 (‘‘Rule 175’’ under the Securities Act) and 17 CFR 240.3b–6 (‘‘Rule 3b–6’’ under the Exchange Act), which were ‘‘adopted . . . prior to the PSLRA . . . provide safe harbor protection similar to that of the PSLRA safe harbor.’’ 784 This commenter also said that under the ‘‘judicially-created ‘bespeaks caution’ doctrine . . . now accepted in 11 federal judicial circuits . . . forward￾looking statements accompanied by sufficient cautionary language’’ are rendered ‘‘non-actionable under securities laws if such statements are proved incorrect in the future.’’ Under the bespeaks caution doctrine, this commenter said, ‘‘Essentially, the same requirements apply as would under the PSLRA to obtain protection—that the forward-looking statements be accompanied by ‘meaningful cautionary language.’ ’’ Another of these commenters said that ‘‘even if the proposed amendment is adopted, under the so-called ‘bespeaks caution’ doctrine, SPACs should still be able to make forward-looking statements in the absence of the PSLRA safe harbor.’’ 785 A different commenter stated that the main difference between the PSLRA and the other safe harbors is that ‘‘the PSLRA safe harbor provides a stay of discovery while a motion to dismiss based upon the safe harbor protections is under review by the court,’’ and that

786Letter from Cowen.
787Letter from Winston & Strawn.
788Letters from Cato Institute, Jonathan Kornblatt (‘‘It is arguably much better to have a responsible party issuing projections rather than have a void of such filled by bloggers or posters on social media. Individual investors may be far better served by having the C-suite as an accountable source of information instead of an anonymous chat room. I hope the Commission will keep in mind that the purpose of the PSLRA safe harbor was to encourage companies to share their forecasts with investors, and that shielding the liability risk was necessary to encourage such disclosure.’’), Kirkland & Ellis, Paul Swegle. 789Letter from Cato Institute. 790Letter from Kirkland & Ellis. 791Letter from Paul Swegle. 792Letters from Kirkland & Ellis, Winston & Strawn. 793Letter from Kirkland & Ellis. 794Letter from Kirkland & Ellis. 795Letter from Winston & Strawn. 796Letters from American Securities Association, Anonymous (Apr. 7, 2022). In addition, one commenter discussed generally the occurrence of litigation as a check against ‘‘inaccurate projections’’ already under the status quo. See letter from Vinson & Elkins (stating, ‘‘We do not believe an amendment (and the proposed change is not a ‘clarification’) would improve the quality of projections in connection with de-SPAC transactions. SPACs and target companies already have strong incentives to make sure that the projections are as reasonable as possible. They may face suits over inaccurate projections . . .,’’ and noting in a footnote, ‘‘The PSLRA safe harbor only protects against civil suits, and in a civil case it is not a shield against a fraud claim.’’) (Other footnotes omitted). 797Letter from American Securities Association. 798Letter from NASAA. 799Letters from Managed Funds Association; Michael Dambra, Omri Even-Tov, and Kimberlyn George. 800Letter from Managed Funds Association. 801Letter from Michael Dambra, Omri Even-Tov, and Kimberlyn George. 802Letter from SPAC Association. 803Letters from Jonathan Kornblatt, Vinson & Elkins. 804Letter from Cowen. ‘‘[t]he Commission’s proposal, in stripping away the protection of the PSLRA safe harbor for projections in de￾SPAC transactions, has in actuality not increased anyone’s exposure for the projections—it has simply increased the cost of defense.’’ 786 Another of these commenters expressed the view that the proposal ‘‘would only increase transaction costs and administrative burdens on de-SPAC transactions.’’ 787 Some commenters questioned the need for the amendments, expressing the view that investors are well-capable of assessing the reasonableness of projections used by SPACs.788 One of these commenters said, ‘‘The Commission is concerned that investors are misled by forward-looking statements, but some researchers have found that hype, if present, does not sway investors and that forecasts are often related to positive outcomes. These types of findings should lead the Commission to question whether an effective prohibition on forward-looking
disclosure in traditional IPOs is itself a good policy idea where it may inhibit price discovery and capital formation.’’ 789 Another commenter said that ‘‘the proposed amendment with respect to the PSLRA will not meaningfully affect the quality of projections made available for the review of the SPAC’s board of directors and PIPE investors, if any’’ and that, ‘‘the proposed revisions to Item 10(b) and Item 1609(a) will assist in the comparability of projections included in the disclosure of materials reviewed by the board of directors of a SPAC. In this way, investors will be able to assess for themselves whether underlying assumptions are reasonable rather than rely on the assertions of commentators in the market.’’ 790 Another of these commenters said, ‘‘It is also already standard practice to disclose key underlying risks and assumptions regarding projections and I find it hard to believe that investors are incapable of thoughtfully weighing projections together with a company’s other disclosures in their decision-making processes.’’ 791 Some commenters suggested that the need to alter the availability of the PSLRA safe harbor is overstated.792 One of these commenters said that, because target companies may register securities in a de-SPAC transaction, in that situation, the PSLRA safe harbor is already not available to them.793 This commenter also suggested the need to alter the availability of the PSLRA is overstated because boards of directors of SPACs review projections, including related assumptions and cautionary language, consistent with their fiduciary duty of care.794 A different commenter suggested the need to alter the availability of the PSLRA safe harbor is overstated because the PSLRA safe harbor only affects private litigation and does not prevent the Commission from pursuing claims for misleading disclosure.795 Several commenters suggested that the proposal would invite litigation against SPACs.796 One commenter said, ‘‘The intent of removing the safe harbor for de-SPAC transactions is undeniable—it would open SPACs to a flood of private litigation that, when added to other provisions of the Proposal, would effectively kill the existing SPAC market.’’ 797 Other commenters suggested alternative policy approaches and other recommendations in connection with projection disclosure. One commenter suggested the Commission should restrict the use of projections because ‘‘[a]s written, the Proposal would leave the door open for projections for which there are little to no reasonable basis, when an issuer has no historical operations, and when the company or asset acquisition is speculative in nature without any disclosure’’ and because ‘‘[s]ponsors, target companies and underwriters that would become liable under the Proposal may attempt to evade liability by combining boilerplate risk factors with forward looking cautionary information that prefaces claims of unreasonable upside potential to investors.’’ 798 Other commenters
suggested the Commission should mandate qualifying language or additional disclosure around the use of projections.799 One of these commenters said, ‘‘Rather than barring forward￾looking projections entirely, we recommend that the Commission instead consider requiring any such projections to include appropriate qualifying language, including the background and assumptions underlying such projections, along with any downside case analysis that was done in preparation of such projections.’’ 800 This commenter said, ‘‘We believe that such an approach would be consistent with the disclosure￾based approach the Commission has used in similar circumstances, including in the case of Regulation G [12 CFR part 244] with respect to the regulation of the use of financial measures that vary from those included within generally accepted accounting principles.’’ Another of these commenters said that ‘‘rather than barring such young growth firms from providing forward looking information, we feel that additional disclosure should be provided around these forecasts.’’ 801 One commenter suggested that, instead of adopting the PSLRA proposal, the Commission should require that earnings statements include a comparison of past projections in earning statements to actual results in order to enhance issuer accountability.802 Other commenters suggested that market forces would hold accountable issuers with unmet projections by preventing future capital access.803 Two other alternative policy approaches suggested by commenters were that: (a) the safe harbor should be made unavailable only to the ‘‘maker’’ of the statement but that others such as ‘‘underwriters (or sellers) could continue to enjoy the full protection of the PSLRA;’’ 804 and (b) the safe harbor

805Letter from Charles Pieper.
806Letter from CFA Institute.
807Letter from Vinson & Elkins (footnotes omitted). 808The final rules and concomitant unavailability of the PSLRA safe harbor for forward-looking statements are not intended to have any retroactive effect related to forward-looking statements made prior to the effective date of the final rules. 809 In this subsection III.E.3, where we refer to ‘‘blank check companies’’ in connection with our discussion of the final rules, unless otherwise indicated, we are referring to blank check companies that are not limited by any qualification that the company is an issuer of penny stock. 810 Depending on specific facts and circumstances, protections other than the PSLRA safe harbors may apply in connection with forward￾looking statements. See letters from ABA, Cowen, Winston & Strawn, supra notes 782, 783, 784, and 785 and accompanying text, and discussion below proximate to note 840. 811For example, the definition of ‘‘forward￾looking statement’’ in the PSLRA is similar to the content of Securities Act Rule 175 (which pre-dated the PSLRA). Compare Securities Act section 27A(i)(1) (15 U.S.C. 77z–2(i)(1)), with 17 CFR 230.175(c). 812See infra note 818 and accompanying text. should be unavailable for longer-term projections (where the commenter provided the example of a statement ‘‘we will penetrate 50% of [total addressable market] in 10 years’’) but available for short-term projections (where the commenter provided the example of a statement ‘‘we expect to make revenue in 1 year or have positive [free cash flow] in 2 years’’).805 One commenter said the Commission should ‘‘monitor the effects of the safe harbor removal for de-SPACs on the availability and quality of forward￾looking information critical for SPAC investor decisions on merger approval votes and exercising redemption rights.’’ 806 Finally, one commenter said, ‘‘While some de-SPAC transactions are in form ‘initial public offering[s]’ (e.g., where the target or a new company is formed to acquire the SPAC), it is inappropriate to deem a de-SPAC transaction where an existing public company stays public (e.g., where the SPAC survives the de-SPAC transaction as the publicly traded company) as an ‘initial public offering.’ ’’ This commenter suggested the Commission should provide an interpretation that de-SPAC transactions are ‘‘tender offers’’ which would make the PSLRA safe harbor unavailable.807
3. Final Rules
After considering the comments received, we are adopting a new definition of ‘‘blank check company’’ in Securities Act Rule 405 and Exchange Act Rule 12b–2 under the PSLRA. The new definition of ‘‘blank check company’’ in Rule 405 provides that for purposes of section 27A of the Securities Act of 1933 (15 U.S.C. 77z– 2), the term blank check company means a company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person. The new definition of ‘‘blank check company’’ in Rule 12b–2 provides that for purposes of
section 21E of the Securities and
Exchange Act of 1934 (15 U.S.C. 78u– 5), the term blank check company means a company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person. We are not amending Securities Act Rule 419 as proposed. Instead, as discussed in detail below, we are adopting a definition of ‘‘blank check company’’ under the PSLRA in Securities Act Rule 405 and Exchange Act Rule 12b–2 to clarify that such definitions are solely for purposes of the PSLRA and not for purposes of any other rules (including rules the Commission adopted pursuant to mandates under the Penny Stock Reform Act, such as Securities Act Rule 419). The final rules have the same substantive effect as the proposal, notwithstanding the different approach taken.808 We also are not adopting any amendments as proposed to Securities Act Rules 137, 138, 139, 163A, 164, 174, 405, 430B, and 437a, because the definition of blank check company in Rule 419 that these rules cross-reference will not be changed as a result of the final rules. In addition, we also are not adopting a definition of ‘‘blank check company issuing penny stock’’ in Securities Act Rule 405 as proposed. This proposed amendment is also unnecessary since the definition of ‘‘blank check company’’ in Rule 419 will not change. Having considered the comments received, we continue to believe that it is appropriate that forward-looking statements made in connection with de￾SPAC transactions should be treated similarly with forward-looking statements made in traditional IPOs, because the de-SPAC transaction results in public shareholders acquiring a formerly private company, similar to an IPO. In both IPOs and de-SPAC transactions, similar informational asymmetries exist between issuers (and their insiders and early investors) and public investors and there are similar risks of generating unfounded interest on the part of investors. In both IPOs and de-SPAC transactions, there is no track record of public disclosure to help investors evaluate projections. Moreover, these risks do not disappear merely because a blank check company raised more than $5 million in a firm commitment underwritten IPO (and therefore may not be issuing penny stock). The definitions of ‘‘blank check company’’ we are adopting and the concomitant changes to the availability of the PSLRA will help protect investors because blank check companies 809 may take more care in avoiding the use of forward-looking statements that are unreasonable. As we discuss in detail below, we are not barring the use of forward-looking statements and recognize that forward-looking statements can provide useful and necessary disclosure.810 We disagree, based on the text of the PSLRA, with the commenters who expressed the view that the PSLRA does not give the Commission authority to amend the Commission’s definition of ‘‘blank check company’’ that existed at the
time the PSLRA was adopted. On the contrary, in providing in the PSLRA that definitions, including blank check company, ‘‘have the meanings given those terms by rule or regulation of the Commission,’’ Congress expressly provided the Commission the authority to define these terms and to amend those definitions, consistent with the text, structure, and purpose of the PSLRA. The text of the PSLRA demonstrates in other ways as well that the Commission has the authority to define, and amend its definition of, ‘‘blank check company.’’ For example, Congress did not use tracking language in the PSLRA to define blank check companies, such as by a statutory definition of blank check company that closely resembles or mirrors the definition in the rules of the Commission at the time of the legislation. In contrast, with respect to other defined terms in the PSLRA, Congress did provide long-form definitions (rather than cross￾referencing by citation an existing Commission rule) that closely resemble the content of definitions in Commission rules.811 Congress also did not define the term blank check company in the PSLRA by referencing the statutory definition in section 7(b)(3) of the Securities Act, as Congress did elsewhere in the PSLRA where it defined terms related to forward-looking statement safe harbors by cross￾referencing to those terms.812 The absence in the PSLRA of such a

813 15 U.S.C. 77z–2(b)(1)(C); 15 U.S.C. 78u– 5(b)(1)(C). 814See, e.g., S. Rep. No. 104–98 (1995); H.R. Rep. No. 104–369 (1995) (Conf. Rep.). 815Letter from ABA. See also letter from Goodwin. Securities Act section 27A(g) (15 U.S.C. 77z(g)) provides: ‘‘In addition to the exemptions provided for in this section, the Commission may, by rule or regulation, provide exemptions from or under any provision of this title, including with respect to liability that is based on a statement or that is based on projections or other forward￾looking information, if and to the extent that any such exemption is consistent with the public interest and the protection of investors, as determined by the Commission.’’ Securities Act
section 27A(h) (15 U.S.C. 77z(h)) provides:
‘‘Nothing in this section limits, either expressly or by implication, the authority of the Commission to exercise similar authority or to adopt similar rules and regulations with respect to forward-looking statements under any other statute under which the Commission exercises rulemaking authority.’’ 816Regarding Securities Act section 27A(b)(7), see supra note 710. 817See supra note 710. 818For example, Congress defined the terms ‘‘penny stock’’ and ‘‘investment company’’ in the PSLRA by cross-referencing existing statutory provisions providing definitions of those terms. The PSLRA added Securities Act section 27A(i)(2) (15 U.S.C. 77z–2(i)(2)) (‘‘The term ‘investment company’ has the same meaning as in section 3(a) of the Investment Company Act of 1940.’’) and
section 27A(i)(3) (15 U.S.C. 77z–2(i)(3)) (‘‘The term
‘penny stock’ has the same meaning as in section 3(a)(51) of the Securities Exchange Act of 1934, and the rules and regulations, or orders issued pursuant to that section.’’). 819H.R. Rep. No. 101–617, at 23 (1990) (‘‘The bill thus mandates that the Commission adopt new blank check rules which the Committee expects will contain at least three critical elements: (1) information regarding the company to be acquired by the blank check company prior to or after the date the registration becomes effective; (2) limitations on the use of proceeds of blank check offerings and the distribution of the securities of the issuer until such time as adequate disclosure has been made; and (3) a right of rescission for shareholders who disapprove of the disclosed acquisition.’’); Penny Stock Reform Act of 1990, H.R. 4497, 101st Cong., sec. 9(a)(2) (1990). 820H.R. Rep. No. 101–617, at 22 (1990) (‘‘nearly 70 percent of all penny stock issues offered in 1988 and through the third quarter of 1989 were blank checks; money raised with no purpose stated for its use.’’); Penny Stock Market Fraud (Part 2): Hearing on H.R. 4497 Before the Subcomm. on Telecomm. and Fin. of the Comm. on Energy and Com., 101st Cong. 31 (1990) (Statement of Hon. Richard C. Breeden, Chairman, Securities and Exchange Commission) (‘‘The Commission recognizes that blank check offerings have been used extensively for abusive and fraudulent practices in the penny stock market. We empathize with the desire to ban these types of offerings.’’); The Securities Law Enforcement Remedies Act of 1989: Hearing on S. 647 Before the Subcomm. on Sec. of the Comm. On Banking, Housing, and Urban Aff., 101st Cong. 351 (1990) (testimony of Joseph Goldstein, Associate statutory cross-reference to define the term blank check company is consistent with Congress’s express grant of authority to the Commission, as discussed above, to define these terms and amend them consistent with the text, structure, and purpose of the PSLRA. In addition, the PSLRA safe harbors provide that they are unavailable to issuers that issue ‘‘penny stock.’’ 813 The 1995 version of the definition of blank check company in Securities Act Rule 419 contained (and still contains) a restriction that it applies only to companies issuing penny stock. This suggests that Congress did not intend to permanently fix the Commission’s definition of ‘‘blank check company’’ to the 1995 version of that definition in Securities Act Rule 419, because it would have been redundant for Congress to include a carve-out for blank check companies that are penny stock issuers and also carve out penny stock issuers. Furthermore, we also do not agree, based on the legislative history of the PSLRA, with commenters that asserted that Congress fixed the definition of ‘‘blank check company’’ to the Commission’s rules as they existed in 1995, when the PSLRA was enacted. Commission staff reviewed the complete legislative history of the PSLRA and found no evidence of any intent
on the
part of Congress to fix the definition of
‘‘blank check company’’ as the term was defined in Securities Act Rule 419 at the time of the adoption of the PSLRA in
1995.814 The staff also found no
evidence in the legislative history of the PSLRA of any intent on the part of Congress to restrict the authority of the Commission to amend the definition of this term. One commenter said the proposed change regarding the definition of blank check company ‘‘appears inconsistent with the exemptive authority found in
section 27A(g) and (h), which makes
clear the Commission’s ability to extend the scope of the safe harbor protections rather than narrow them.’’ 815 We disagree. While Securities Act sections 27A(g) and 27A(h) and Exchange Act sections 21E(g) and 21E(h) provide the Commission with authority to create new exemptions, subject to the conditions that they are in the public interest and protect investors, and clarify that the PSLRA did not limit the ability of the Commission to create new safe harbors for forward-looking statements, there is no limitation in these provisions on the express authority provided under Securities Act
section 27A(i)(7) and Exchange Act
section 21E(i)(5) to define ‘‘blank check
company.’’ 816
With respect to the commenters who expressed the view that the Commission’s definition of ‘‘blank check company’’ under the PSLRA may not be broader than the statutory definition of this term in the Penny Stock Reform Act, nothing in the text of either statute limits the Commission’s definition for the term ‘‘blank check company’’ for purposes of the PSLRA to be no broader (i.e., not contain a qualification that the issuer issue penny stock) than how this term is defined in the Penny Stock Reform Act (i.e., containing a qualification that the issuer issue penny stock). Congress did not define ‘‘blank check company’’ in the PSLRA with language that tracks the definition of ‘‘blank check company’’ under the Penny Stock Reform Act.817 In contrast, with respect to other defined terms in the PSLRA, Congress did define terms using language that closely tracks existing definitions in other sources, such as the definition of ‘‘forward-looking statement’’ in the PSLRA which is similar to Securities Act Rule 175 and Exchange Act Rule 3b–6 (which both pre-dated the PSLRA). Also, Congress did not define ‘‘blank check company’’ in the PSLRA by cross￾referencing the definition of ‘‘blank check company’’ in Securities Act
section 7(b)(3) that was added by the
Penny Stock Reform Act, but, instead, Congress defined ‘‘blank check company’’ and other defined terms in the PSLRA as having ‘‘the meanings given those terms by rule or regulation of the Commission.’’ In contrast, with respect to other defined terms in the PSLRA, Congress did cross-reference existing statutes as a means of supplying definitions for those terms.818 Furthermore, the PSLRA legislative history does not evidence an intent by Congress to require the Commission’s PSLRA ‘‘blank check company’’ definition to be fixed to a specific definition (e.g., to be no broader than the Penny Stock Reform Act definition). In contrast, Congress did fix the definition in the Penny Stock Reform Act. The legislative history of the Penny Stock Reform Act documents Congress’s concerns that overbroad restrictions on ‘‘blank check company’’ issuances, with respect to penny stock abuses, could interfere with legitimate capital raising in connection with that statute. The legislative history of the Penny Stock Reform Act—which mandated the Commission to adopt restrictions on blank check companies and ultimately led the Commission to adopt Rule 419 819—documents that Congress was concerned about blank check companies in connection with penny stock abuses (the focus of the legislation) because blank check companies were viewed as providing a large inventory of securities that fed into the market for penny stocks.820 The legislative history of the

Director, Division of Enforcement, Securities and Exchange Commission, stating that ‘‘from the enforcement side, we have seen widespread abuse with blank checks. They are a very popular vehicle for committing penny stock fraud.’’). 821Penny Stock Market Fraud (Part 2): Hearing on H.R. 4497 Before the Subcomm. on Telecomm. and Fin. of the Comm. on Energy and Com., 101st Cong. 31–32 (1990) (Statement of Hon. Richard C. Breeden, Chairman, Securities and Exchange Commission) (‘‘If blank checks were outlawed, it would be relatively easy for promoters to specify a particular field of investment, essentially turning what had been a blank check offering into a blind pool. While these, too, could be barred, the blind pool financing approach has been used for years by legitimate issuers in venture capital, real estate, oil and gas exploration, and equipment leasing programs. Thus, a proven mechanism for raising capital for productive uses could be eliminated or, at least, subjected to costs and additional regulation. While the bill grants the Commission powers to define which issuers could be subject to regulation we are concerned that, at least as it is currently written, any such definition would most likely be circumvented by unethical issuers.’’); Penny Stock Market Fraud (Part 2): Hearing on H.R. 4497 Before the Subcomm. on Telecomm. and Fin. of the Comm. on Energy and Com., 101st Cong. 47– 48 (1990) (Testimony of Richard C. Breeden, Chairman, U.S. Securities and Exchange Commission) (‘‘H.R. 4497 would prohibit both blank check and certain blind pool offerings. However, blind pool financings have been used for years by issuers in venture capital, real estate, oil and gas exploration programs, equipment leasing and other areas. Thus, substantial costs and burdens could be imposed on this kind of financing technique for which disclosure regulation has been adequate in the past, and which has been an important source of producing capital.’’) Penny Stock Market Fraud (Part 2): Hearing on H.R. 4497 Before the Subcomm. on Telecomm. and Fin. of the Comm. on Energy and Com., 101st Cong. 189 (1990) (Statement of John Guion, President, National Association of Publicly Traded Companies) (‘‘There has been much said about blank check and blind pools. Our comment here is that they have been used legitimately by some organizations, particularly in gas and oil exploration, and I would assume that the subcommittee would take that into consideration in resolving that particular area.’’). The U.S. House of Representatives documented these concerns in House Report No. 101–617 (1990) to accompany H.R. 4497. See H.R. Rep. No. 101– 617, at 22 (1990) (‘‘While Commission Chairman Richard Breeden and NASD enforcement director John Pinto agreed that blank check offerings were a source of problems, they were also of the view that blank check offerings could be and were used in legitimate business transactions outside of the penny stock arena. Accordingly, they opposed an
outright ban of all blank check offerings.’’). Ultimately H.R. 4497 was not approved by the House of Representatives. The House of Representatives and the Senate approved the same versions of S. 647, which became law when it was signed by the President. See govtrack (regarding H.R. 4497 and S. 647 in the 101st Congress), available at https://www.govtrack.us/congress/bills/ 101/s647 and https://www.govtrack.us/congress/ bills/101/hr4497. 822Letter from American Securities Association, supra note 751. See also letter from Job Creators Network, supra note 751. 823Proposing Release, supra note 7, at 29481– 29482. 824The Proposing Release requested comment on the following: ‘‘Should we consider retaining a separate definition of ‘‘blank check company’’ for purposes of Rule 419?’’ See Proposing Release, supra note 7, at 29482 (request for comment number 78). 825Notwithstanding several references to section 21E of the Exchange Act in the Proposing Release, we did not propose an Exchange Act rules definition of ‘‘blank check company’’ in the Proposing Release to accompany the proposed amendments to the Securities Act rules and Regulation S–K. We are adopting an Exchange Act rule definition of ‘‘blank check company’’ as well as a Securities Act rule definition, because this approach should be clearer for registrants and other relevant parties and is more consistent with how the Commission has traditionally exercised its authority to define terms in the acts. 826Letters from ABA, Job Creators Network. See supra notes 743, 744, 745, 746, 747, and 748 and accompanying text. See also letter from Kirkland & Ellis, supra note 749 and accompanying text. 827Letter from Cato Institute, supra note 759 and accompanying text; letter from NYC Bar, supra note 761 and accompanying text. Penny Stock Reform Act indicates that members of Congress were aware of concerns expressed by hearing witnesses that, if regulation of blank check companies were unduly restrictive, this could disrupt funding for investment vehicles such as private equity investment entities, particularly in real estate, hydrocarbons and technology sectors.821 Some commenters suggested that the proposed changes to the definition of ‘‘blank check company’’ are contrary to the Administrative Procedure Act of 1946, because the Commission does not have explicit statutory authority to make the changes.822 The final rules are consistent with the express statutory authority of the Commission as discussed above. Notwithstanding the foregoing, the final rules include technical changes from the proposal to clarify that the definitions of ‘‘blank check company’’ that we are adopting are solely for purposes of the PSLRA and not for purposes of any rules the Commission adopted pursuant to mandates under the Penny Stock Reform Act, such as Rule
419. In the Proposing Release, the
Commission proposed moving the definition of blank check company out of Rule 419 (into Rule 405) and amending Rule 419 to use the proposed blank check company definition with a qualification in Rule 419 (that would be outside of that definition) limiting the applicability of Rule 419 to issuers of penny stocks.823 We are adopting a definition of ‘‘blank check company’’ that will be located in Securities Act Rule 405, as proposed, but that includes revised language stating that the definition is ‘‘For purposes of section 27A of the Securities Act of 1933 (15 U.S.C. 77z–2).’’ As a result, we are not amending Rule 419 as the Commission proposed; thus, the existing definition of ‘‘blank check company’’ in Rule 419 will remain unchanged.824 We are also adding to Exchange Act Rule 12b–2 a nearly identical definition of ‘‘blank check company’’ as with the final Securities Act Rule 405 definition, except that it provides that the definition is ‘‘For purposes of section 21E of the Securities and Exchange Act of 1934 (15 U.S.C. 78u–5).’’ 825 As discussed above, some commenters did not support the proposal or expressed a view it is inappropriate to adopt the proposal because of concerns related to the definition of ‘‘blank check company’’ in the Penny Stock Reform Act.826 We do not agree with the commenters that suggested we could not adopt the proposed definition of blank check company on these grounds. However, in order to make clear that we are using our authority to define terms under the PSLRA and not under the Penny Stock Reform Act, we are not amending Rule 419 as proposed. Rather, we are amending Securities Act Rule 405 and Exchange Act Rule 12b–2, as discussed above. The final rules have the same substantive effect as the proposal notwithstanding the different approach taken. As discussed above, some commenters suggested that projections are rarely used in traditional IPOs.827 Traditional IPOs, however, may include projections. IPO issuers commonly provide certain disclosures about the future in their registration statements, including estimates in historical financial statements and disclosure provided pursuant to 17 CFR 229.303 (‘‘Item 303’’ of Regulation S–K) (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Items 5 and 9 of Form 20–F. In an IPO, disclosures under Item 303 of Regulation S–K (for example, which may include statements about the effects of changing prices and future economic performance) are outside the bounds of the PSLRA safe harbor (which is not applicable to IPOs pursuant to Securities Act section 27A(b)(2)(D)). In any offering, including an IPO, estimates in financial statements prepared in accordance with generally accepted accounting principles are outside the bounds of the PSLRA safe harbor pursuant to Securities Act
section 27A(b)(2)(A).
Issuers in certain types of IPOs also often include industry- or offering￾specific projections. For example, Commission staff has observed that real estate investment trusts may disclose dividend distribution plans and anticipated cash available for distribution (sometimes referred to by industry participants as the ‘‘Magic
Page’’). One commenter also noted that
‘‘while it may not be common in certain