SPAC Mergers, IPOs, and the PSLRA's Safe Harbor: Unpacking Claims of Regulatory Arbitrage

Abstract

Many are contending that communications in connection with SPAC mergers should be excluded from the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 (PSLRA). This is necessary, it is argued, to close a regulatory loophole and place SPAC mergers and IPOs on a “level playing field” with respect to management projections, as the safe harbor excludes communications in connection with IPOs. Would excluding communications in connection with SPAC mergers from the PSLRA’s safe harbor be good public policy? Is the IPO exclusion itself good public policy? This Article analyzes these surprisingly complex questions.

Keywords: Special Purpose Acquisition Companies, SPACs, initial public offerings, IPOs, forecasts, projections, liability, private securities litigation reform act, PSLRA, safe harbor, reasonable investor, materiality, gameification, retail investors, Robinhood, commercial speech, securities regulation