Wall Street’s watchdog on Wednesday unveiled a draft new rule to enhance blank-cheque company investor disclosures and to strip them of a legal protection critics argue has allowed the shell companies to issue overly optimistic earnings projections.
The move by the United States Securities and Exchange Commission (SEC) is part of a broader crackdown on special purpose acquisition companies (SPACs) after a frenzy of deals in 2020 and early 2021 sparked concerns that some investors are getting a raw deal.
Wall Street’s biggest gold rush of recent years, SPACs are shell companies that raise funds through a listing to acquire a private company and take it public, allowing the target to sidestep the stiffer regulatory scrutiny of a traditional initial public offering (IPO).
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