In September 2020, the U.S. Securities and Exchange Commission (SEC) attempted to clarify the extent to which a special purpose acquisition company (SPAC) can use the short-form Form S-3 to register securities after completing the acquisition of one or more private operating companies. The SEC’s new Securities Act Forms Compliance and Disclosure Interpretation (C&DI), Question 115.18, may be found here.
The SEC’s forms for abbreviated registration, Forms S-3 and F-3, are attractive to registrants that effect public offerings. They are shorter documents that are quicker and less costly to prepare and file, and can incorporate by reference many of the disclosures in the registrant’s periodic Exchange Act filings. In addition, a short-form registration statement is generally more likely to be selected for review by the SEC staff than a long-form registration statement, such as Form S-1 or Form F-1. A SPAC will often seek to file a registration statement after its IPO, for example:
- to register the issuance of its common stock that underlies warrants that it has previously issued in connection with its IPO;
- to register for resale shares of common stock that it may have issued in a prior PIPE transaction; or
- to register for resale shares of common stock held by its stakeholders, such as members of its management team and/or the sponsor of the SPAC.
One of the key conditions to the use of these registration statements is that the issuer must have at least 12 months of public reporting history. The C&DI discusses the extent to which a SPAC’s reporting history can be used to satisfy this requirement.
The C&DI states:
- If the registrant is a new entity after the business combination transaction with a SPAC (for example, if a new holding company is formed to effect the business combination), the registrant would need 12 full calendar months of timely Exchange Act reporting history after the business combination transaction.
- Similarly, if the post-acquisition entity is not a new entity, the SEC’s staff is unlikely to consider that there is adequate public information about the issuer until it has a 12-month history of Exchange Act reporting on a combined basis. Prior to that time, the SEC would not deem the company to be eligible for short-form registration.
- In addition, General Instruction I.A.6(a) of Form S-3 (which relates to certain reincorporation transactions) would not be available to a post-transaction SPAC that is a “successor registrant,” because the succession was not primarily for the purpose of changing the state of incorporation of the predecessor or forming a holding company.
The C&DI creates an outcome that may surprise some – prior to effecting an acquisition transaction, the SPAC may be Form S-3 eligible, in that it can use its reporting history to satisfy the one-year reporting requirement. However, after completing an acquisition, the registrant will likely lose its eligibility for short-form registration and, accordingly, will need to revert to filing registration statements using Form S-1 or Form F-1.
The SEC’s position places a post-acquisition SPAC in a comparable position to a post-IPO operating company. The combined issuer will need to be have its own 12-month reporting history prior to being eligible for use of the short-form registration statement. In this sense, the result of the C&DI is to place post-acquisition SPACs and IPO companies in a somewhat similar position for determining short-form eligibility.
 For a more detailed discussion of shelf registration statements, please see our FAQ, which may be found here.