Do the Securities Laws Actually Protect Investors (and How)? Lessons from SPACs

54 Pages Posted: 25 May 2023 Last revised: 11 Apr 2024

Date Written: May 24, 2023


Some have criticized mandatory securities regulation based on the claim that market competition alone adequately constrains exploitation of public investors in securities offerings. Other scholars support a mandatory regime. To date, empirical studies have been unable to resolve whether the securities laws actually provide meaningful protection to investors.

This Article identifies transactional innovation in public offering markets as a case study of how going-public transactions would work if issuers could choose to relax some of the investor protections provided under the securities laws. In recent years, private companies that wanted to go public had a meaningful choice between a traditional initial public offering and a merger with a special purpose acquisition corporation (SPAC). Most of the direct and indirect investor protections that ordinarily apply in the initial public offering context are relaxed in the SPAC context.

The Article argues that outcomes in SPAC markets, where investors have systematically received a bad bargain, provide powerful market evidence consistent with the premises underlying the investor protection rationale of the federal securities laws: public investors cannot fend for themselves in new issues of equity securities and need mandatory protections to avoid systematically overpaying.

The design of the SPAC transactional structure is explained as a rational market response to a market in which public investors are vulnerable to systematically overvaluing new issues in the absence of mandatory investor protections. Regulators should address SPAC regulatory arbitrage by applying the public offering rules in the securities laws to all combinations between listed shell companies and private entities.

Keywords: securities regulation, securities law, initial public offerings, IPOs, special purpose acquisition corporations, SPACs, public offerings, behavioral law and economics

JEL Classification: K22, G02

Suggested Citation

Corrigan, Patrick, Do the Securities Laws Actually Protect Investors (and How)? Lessons from SPACs (May 24, 2023). Washington University Law Review, Vol. 101, No. 4, 2024, Available at SSRN:

Patrick Corrigan (Contact Author)

Notre Dame Law School ( email )

Eck Hall of Law
Notre Dame, IN 46556
United States

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

Paper statistics

Abstract Views
PlumX Metrics