The SEC’s new SPAC disclosure rules went into effect yesterday. Although many people assumed that the rules would be the last nail in the coffin for SPAC deals, this Institutional Investor article says that the SPAC market is actually perking up a bit:
More than two years after they were first proposed, the Securities and Exchange Commission’s new rules governing special purpose acquisition companies, or SPACs, finally are set to go into effect on July 1. The expectation of tougher requirements, along with the disastrous stock market performance of most SPACS, has already led this market to sink — but it hasn’t killed it. In fact, 2024 is on pace to outdo 2023, which was the worst year for SPACs since 2016, in terms of dollars raised through the IPO market, according to SPAC Insider.
Halfway through this year, SPACs have already raised $2.5 billion, compared with $3.8 billion for the entirety of 2023, according to SPAC Insider. It calculates that are 34 SPACS that have either filed to go public, are searching for a merger partner or have completed a deal, compared with 42 for all of 2023, The average size of the SPAC IPO is slightly bigger, too, at $156.5 million compared with $124.1 million in 2023.
The article also highlights the significant headwinds that SPACs are facing, including the difficulties many SPACs have experienced in finding a merger partner and the shortened timeframe they have to complete a deSPAC under the SEC’s new rules. Still, while SPACs are certainly ailing, it does appear that they would be right to claim, like the old man in Monty Python and the Holy Grail, that “I’m not dead yet!”
– John Jenkins
In James River Group Holdings v. Fleming Group Holdings, (NY Sup. 4/24), the New York Supreme Court’s Commercial Division recently addressed a seller’s claim for specific performance of the buyer’s obligation to close under the terms of a stock purchase agreement. The Court rejected the buyer’s allegations that the seller had breached various provisions of a stock purchase agreement and granted the seller’s request for specific performance.
In reaching this conclusion, the Court pointed to provisions of the agreement entitling the seller to specific performance (Section 8.4) and providing a post-closing “true up” process to address the monetary issues raised by the buyer (Section 1.4):
In §8.4, the SPA provides for specific performance because the parties agree that there is irreparable harm if the contract is breached, and damages would be difficult to calculate. Courts enforce such provisions when negotiated by sophisticated counsel, as is true here. [Citations omitted]. The court is inclined to accept the parties’ agreement in the SPA where the parties crafted the SPA to prevent this precise situation with SPA §8.4 and §1.4.
The Court also agreed that the seller was suffering irreparable harm as a result of the buyer’s refusal to close the transaction. In particular, it pointed to the reputational harm that the seller, a public company which had announced the sale of this subsidiary as part of a long-term strategic plan to focus on core business, had suffered when the buyer’s refusal to close became public.
Specifically, the Court noted that the seller’s share price immediately dropped to an all-time low after the buyer balked, and that an analyst opined that the refusal to close potentially impacted the seller’s core value, interfered with its employees and operations, and distracted it from its strategic plan because of the need to maintain the subsidiary’s operations.
– John Jenkins