Republican Senator Introduces Bill to Boost Disclosure on SPACs
(Bloomberg) -- A Republican Senator has introduced legislation that would require stepped up disclosures for founders of booming blank check companies.
Senator John Kennedy’s bill takes aim at the so-called sponsors of SPACs, often celebrities or well-known Wall Street executives who are given special shares in the investment vehicles. The legislation calls for more transparency into those deals, which Kennedy said in a statement can dilute the holdings of regular investors.
“While we can all recognize that celebrities don’t tend to be paragons of sound financial planning, they’re often the public face of companies selling shares to hardworking Americans,” the Louisiana Republican said. “It’s right and fair that a SPAC should disclose how its sponsors get paid.”
The explosive growth of SPACs is an issue that Securities and Exchange Commission Chairman Gary Gensler is poised to confront as he begins his tenure at the agency. Kennedy’s bill would require the SEC to write the new disclosure rules.
SPACs attracted a record $80 billion last year, with everyone from billionaire investor Bill Ackman to basketball legend Shaquille O’Neal and former baseball star Alex Rodriguez getting in on the action. SPACs raise money by selling shares with the proceeds eventually used to buy a company, though investors don’t know what the acquisition will be at the time they purchase stock.
Regulators and some market participants have raised concerns that with so many SPACs coming to market, there will be too many blank check companies chasing too few attractive acquisition targets. That could cause share prices to crater, triggering big losses for investors.
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