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Comment by cj | Hacker News Reader

While I'm not a fan of SPACs, I think this is going to far

> way for investors to dump a company with no real business model, yet, onto the unsuspecting public.

The "unsuspecting public" are people who bought a stock with full knowledge that they don't know what they'll end up owning. The "unsuspecting public" is a mischaracterization, people who invest in SPACs aren't doing so unknowingly.

SPACs aren't automatically part of the typical portfolio (like, say, the S&P 500). People who own SPACs went out of their way to buy them.

I completely agree with your other points, but we have to acknowledge that the victims of a poorly executed SPAC merger isn't your blue collar worker, it's people who sought out a highly speculative asset, and that's what a SPAC is.

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There is still a simple solution to the "SPAC problem" - don't let them list.

A SPAC is effectively (and I'm simplifying here for brevity) like a Private Equity fund. However, those are limited to accredited investors, and the general public can't buy into them.

SPACs could (should?) be limited in the same form. By prohibiting them from listing, it's the smallest regulatory change that solves the issue of unknowing investors buying something speculative without knowing it's true risks.

> By prohibiting them from listing,

And you've killed SPAC as a concept.

Maybe it's for the best.

I think that's what the debate is essentially about. Private equity funds are basically unlisted SPACs, and have been doing this forever.

To me this is one of the key differences between sophisticated and unsophisticated investors, and knowing how to do due diligence is really key.

> There is still a simple solution to the "SPAC problem" - don't let them list.

OK - but how are you going to discriminate between SPACs and other c-corps? I don't think a porn style "I know it when I see it" test is going to work here.

It’s actually pretty easy, no? A SPAC has requirements that it has to meet - no operating business, only nominal assets, a limited period of time in which it must transact.

But like another poster observed, not letting a SPAC list completely obviates the sole purpose of a SPAC (which I personally think would be an excellent outcome).

The SEC already does. [0]

[0] - https://www.sec.gov/corpfin/disclosure-special-purpose-acqui...

> don't let them list.

How exactly do you intend to do that? Remember the law is like code, not something you can rearrange on a whim.

There's no legal distinction of a SPAC. It's just a company like any other listing on the public markets. The better solution is to increase reporting and listing requirements for the companies they're merging with. The merger process should become exactly as it is with traditional IPOs; S-1 filings, roadshows, lockup periods, etc.

Listing requirements are managed by the Exchanges + the SEC (and Congress if needed). One example of SEC proposed rules is here: [0]

It's easy to do.

[0] - https://www.sec.gov/files/33-11048-fact-sheet.pdf

Only sophisticated investors invest in profitable SPACs, however, they suddenly become unsuspecting public when the SPAC loses money.

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