23 ISRAEL HAS 2020 VISION There has been an unprecedented run of initial public offerings by special purpose acquisition companies that raised nearly a quarter trillion dollars in the last two years, including a number that subsequently merged with Israeli companies to take them public. On March 30, 2022, the SEC proposed a sweeping set of rules in a 3-1 vote that the majority indicated would ensure “greater transparency and more robust investor protections” that “could assist investors inevaluatingandmaking investment,voting,and redemption decisions with respect to these transactions.” In contrast, the lone dissenting Commissioner indicated that the proposal “seems designed to stop SPACs in their tracks,” noting that while there are legitimate disclosure concerns, she would have supported “sensible disclosures around SPACs and de-SPACs.” We tend to agree with the dissent that if the rules are adopted as proposed, SPAC activity will be significantly reduced, making that exit opportunity less useful for Israeli companies. The proposals are in significant part motivated by Chair Gensler’s view that de-SPAC transactions in which a private target operating company completes a business combination with a SPAC are functionally the equivalent of a traditional IPO by that private operating company. He has regularly stated that the SEC needs to treat like cases alike, and investors in de-SPAC transactions deserve the same protections of traditional IPOs. But, the proposal goes further than treating “like cases alike” and, instead, extends the SEC’s regulatory authority by imposing a set of substantive requirements with respect to SPAC business combinations that go beyond what would be required in a traditional IPO. The proposal is open for public comment through at least May 31, 2022, reflecting another recent SEC trend of shrinking comment periods for major rulemaking. We plan to submit a comment letter on the proposal and hope that the SEC will be open to a dialogue with market participants. When a SPAC merges with a private company, that transaction is typically referred to as a “de-SPAC transaction.” The SPAC and private company must file a registration statement with the SEC that is similar to an IPO SEC proposes new SPAC rules that are expected to significantly reduce SPAC activity By Michael Kaplan and Lee Hochbaum of Davis Polk & Wardwell LLP
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