SPACs Are Evolving – and Getting even Worse for Long-Term Investors

Stanford Law and Economics Olin Working Paper No. 570

NYU Law and Economics Research Paper No. 22-18

Posted: 5 Mar 2022 Last revised: 7 Jun 2022

See all articles by Michael Klausner

Michael Klausner

Stanford Law School; European Corporate Governance Institute (ECGI)

Michael Ohlrogge

New York University School of Law

Date Written: March 1, 2022

Abstract

SPACs have been evolving recently in ways that make them even more expensive vehicles to take companies public, and thus in ways that will likely lead to even worse returns for shareholders who hold their shares through SPAC mergers. Each of the changes is designed to allow sponsors to continue to launch new SPAC IPOs, or to complete new SPAC mergers, even when market confidence in those sponsors grows increasingly dim. Yet, as with much else in the SPAC structure, these changes serve to divert even more value to parties in the SPAC transaction other than non-redeeming SPAC shareholders. As such, they are likely to lead to even larger losses for non-redeeming SPAC shareholders going forward. These developments highlight the fact that SPAC costs remain subtle, opaque, and poorly understood by a great many investors. Thus, these developments emphasize the need for new regulations to more clearly disclose to SPAC shareholders the costs they bear in SPAC transactions. Such disclosures may help facilitate SPAC evolution that actually serves to benefit long-term shareholders in SPACs.

Keywords: SPAC, Securities Law

JEL Classification: G00, G30, G34, K2, K22

Suggested Citation

Klausner, Michael D. and Ohlrogge, Michael, SPACs Are Evolving – and Getting even Worse for Long-Term Investors (March 1, 2022). Stanford Law and Economics Olin Working Paper No. 570, NYU Law and Economics Research Paper No. 22-18, Available at SSRN: https://ssrn.com/abstract=4047024 or http://dx.doi.org/10.2139/ssrn.4047024

Michael D. Klausner

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-6433 (Phone)
650-725-0253 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Michael Ohlrogge (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
939
PlumX Metrics