New CDI Clarifies the Form S-3 Eligibility of Companies That Go Public via Merger into a SPAC

Kramer Levin Naftalis & Frankel LLP

On Sept. 21, 2020, SEC’s Division of Corporation Finance (Corp Fin) posted a Compliance and Disclosure Interpretation (CDI) regarding restrictions on Form S-3 eligibility for private companies that go public via merger into a reporting shell company (e.g., a special purpose acquisition company (SPAC)) during the 12 calendar months following the business combination. Corp Fin provided clarification with respect to the following categories of registrants:

  1. New entity following the business combination. If the registrant is a new entity following the business combination transaction with a shell company, the registrant would need 12 calendar months of Exchange Act reporting history following the business combination transaction in order to satisfy the Form S-3 eligibility requirement (General Instruction I.A.3) that an issuer have timely filed all periodic reports (Section 13(a) or 15(d) reports and Sections 14(a) and 14(c) materials) during the preceding 12 calendar months.
  2. Successor registrant. If the registrant is a “successor registrant”:
    1. General Instruction I.A.6(a) would not be available because the succession was not primarily for the purpose of changing the state of incorporation of the predecessor or forming a holding company.
    2. The private operating company or companies would not have met the registrant requirements to use Form S-3 prior to the succession under General Instruction I.A.6(b); and
  3. Not a new entity or a successor registrant. If the registrant is not a new entity or a “successor registrant,” the combined entity would have less than 12 calendar months of post-combination Exchange Act reporting history. Form S-3 is based on the “widespread dissemination to the marketplace” of an issuer’s Exchange Act reports over at least a 12-month period. Consequently, in absence of a 12-month history of Exchange Act reporting, SEC’s staff would be unlikely to be able to accelerate effectiveness under Section 8(a) of the Securities Act.

SEC’s CDI with respect to question 115.18 is available here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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