SEC: Investors may indeed need protection for SPACs

Special-purpose acquisition companies, or SPACs, are experiencing an upward trend. Because of this positive trend, the Securities and Exchange Commission, or SEC, is looking into beefing up protection against them, notes Scott Tominaga, PartnersAdmin LLC head.

Gary Gensler, SEC Chairman, informed the House Appropriations Committee that the agency is currently developing ways to address problems coming from SPACs and the initial public offering processes that are traditional. The SEC will be channeling its resources to many innovative ideas and newer suggestions centered on SPACs and the protection of investors in the retail field who are also looking to invest.

The problem may lie in the lack of transparency as many people have no idea of who exactly is benefitting from SPACs, and the absence of protection for investors, explains SEC Chairman Gensler. With over 320 SPACs raising more than a hundred billion dollars in 2021 alone and more than 240 SPACs raising over $80 billion, the spike is quite alarming, explains Scott Tominaga.

SPACs, which are also considered blank-check companies, allow capital to be raised through initial public offerings even in the absence of a company. After that, the IPO seeks out a private company with which to merge and take it public. The whole process takes an average of two years.

Investors who buy into SPACs profit when the stock market goes up. The problem with secondary investors, who are normally from the retail crowd, is entering the investment too late and losing a lot of their money in the process.

Scott Tominaga, PartnersAdmin LLC Chief Operating Officer. A seasoned executive, proficient in various financial service areas including middle and back office, accounting, and compliance. For more updates, visit this page.