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Ridge Barker comments on the SEC's latest guidance on special purpose acquisition companies (SPACs)

15 April 2021 | Applicable law: US

Ridge Barker, a partner on Withers corporate team, was featured in the article, ‘SEC’s Latest Guidance To Further Slow SPAC Market,’ published by Law360. The article discusses the U.S. Securities and Exchange Commission’s latest guidance on special purpose acquisition companies and the need to refile financial statements to account for warrants, as there might be a need to classify them as liabilities rather than equity for many SPAC transactions.

Ridge comments, “You have a lot of SPACs who are going to be trying to get through what could be a bit of a bottleneck.” He also points out that “SPACs may have to decide whether to recategorize warrants as liabilities, which could hurt their balance sheets as they seek to complete acquisitions. Companies can also change the terms of warrants to reduce liabilities, though that may not sit well with investors.” Ridge adds that a slowdown in SPAC activity could last two months given the agency’s latest accounting advice. But he notes that it could be beneficial in the long run if market participants revisit SPAC structures and make improvements. “I don’t think this is an issue that materially ends the SPAC boom.”

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