Going Public Without an IPO – de-SPAC Transactions

Anthony, Linder & Cacomanolis provides lead legal counsel for De-SPAC transactions. We guide boards and management through the business combination process, navigating the 2024 SEC final rules including related to projections, disclosures, and co-registrant liability.

De-SPAC Transactions: Navigating the Evolution of Blank Check Mergers

The business combination between a private operating company and a Special Purpose Acquisition Company (SPAC)—commonly known as a de-SPAC transaction—remains a sophisticated alternative to the traditional IPO. At Anthony, Linder & Cacomanolis, we serve as lead counsel for private targets and SPAC sponsors, providing the regulatory precision required to execute these complex mergers.

Our approach anticipates the heightened scrutiny of the current regulatory environment. We focus on the “white-label” compliant path to closing, particularly in light of the SEC’s recent implementation of more rigorous standards for blank check companies.

Understanding the SPAC Structure

A SPAC is a “blank check” company that raises capital through an initial public offering for the sole purpose of identifying and acquiring an existing private operating company. Until a business combination is completed, the proceeds from the IPO are held in a trust account.

Following the SEC’s January 2024 final rules, the regulatory distinction between a SPAC and a traditional IPO has narrowed significantly. The January 2024 rules closely align the de-SPAC process with a traditional IPO. These rules, which address SPACs, shell companies, and the use of a reverse merger into a SPAC or shell company, have redefined the legal landscape. Our firm assists clients in navigating these mandates, ensuring that the transition from a shell to an operating entity is handled with institutional-grade compliance.

The Mechanics of the De-SPAC Process

The de-SPAC transaction is a multi-phased business combination that requires disciplined and proactive coordination between legal, financial, and management teams. Anthony, Linder & Cacomanolis manages the critical legal workstreams of this process:

• Target Identification and Letter of Intent: We advise on the initial structuring of the deal, including earn-out provisions and the initial due diligence of the SPAC’s capital structure. We also provide guidance on the necessary third-party valuation process required to support the transaction.
• The Business Combination Agreement: Our firm leads the negotiation of the merger agreement, focusing on representations, warranties, and closing conditions that protect the interests of the board and shareholders.
• Proxy Statement and Registration (Form S-4/F-4): We draft the comprehensive disclosure documents required for shareholder approval and the registration of the shares issued in the de-SPAC transaction. This includes detailed information on the target company’s business, financial health, and the specific terms of the transaction.
• Exchange Listing and Approval: We manage the complex application process with national exchanges, such as Nasdaq or the NYSE, to seek approval for the continued listing of the post-business combination entity. This includes confirming the combined company meets all initial listing requirements regarding liquidity standards such as stockholder equity and market value of publicly held shares, and corporate governance standards such as independent board members and audit committees.
• Redemption Management and PIPE Financing: We coordinate the legal aspects of the shareholder redemption process and assist in securing “Private Investment in Public Equity” (PIPE) financing to confirm the combined entity has sufficient capital at closing.

Navigating the 2024 SEC Final Rules

The SEC’s adoption of final rules in early 2024 fundamentally altered the de-SPAC roadmap. Anthony, Linder & Cacomanolis provides the strategic guidance necessary to comply with these new requirements:

• Projections and Safe Harbor Limitations: The new rules have effectively eliminated the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward-looking statements in de-SPAC transactions. We provide legal guidance on the requirement that financial projections have a reasonable basis and are presented with the required cautionary language and historical comparisons, in coordination with the company’s financial advisors and independent auditors.
• Target Company as Co-Registrant: The target company is now required to sign the registration statement, assuming the same federal securities law liability as a traditional IPO issuer. We advise target boards on the legal implications of this “co-registrant” status.
• Enhanced Disclosures: We ensure compliance with new disclosure mandates regarding conflicts of interest, potential dilution, and the “fairness” of the transaction to non-affiliated shareholders.
• Underwriter Liability: We assist in navigating the evolving standards for underwriter liability, ensuring that all parties involved in the distribution of SPAC securities are aligned with current regulatory expectations.

For a drilled down discussion on the 2024 de-SPAC and shell company rules, see

• https://securities-law-blog.com/2024/02/27/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-1/
• https://securities-law-blog.com/2024/03/05/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-2/
• https://securities-law-blog.com/2024/03/12/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-3/
• https://securities-law-blog.com/2024/03/19/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-4/
• https://securities-law-blog.com/2024/03/26/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-5/
• https://securities-law-blog.com/2024/04/02/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-6/
• https://securities-law-blog.com/2024/04/16/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-8/
• https://securities-law-blog.com/2024/04/23/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-9/ and
• https://securities-law-blog.com/2024/04/30/sec-adopts-final-rules-on-spacs-shell-companies-and-the-use-of-projections-part-10/

Cross-Border Execution and Global Growth

While our firm handles transactions globally, we are uniquely positioned to manage complex De-SPAC transactions involving multi-jurisdictional stakeholders and cross-border regulatory frameworks. For Japanese issuers seeking to merge with a U.S.-listed SPAC, we bridge the gap between foreign corporate structures and SEC reporting requirements. Our South Florida headquarters serves as a strategic base for domestic and international entities seeking a compliant and efficient entry into the U.S. capital markets.

Execution Through Expertise

The de-SPAC landscape is governed by a complex web of SEC guidance, exchange listing rules, and state corporate law. Anthony, Linder & Cacomanolis draws upon our extensive library of prior insights to guide our clients through the “deal-breaker” pitfalls of shell company mergers. We provide the legal framework necessary for a successful transition to public status.

Strategic Consultation for C-Suite and Boards

The decision to pursue a de-SPAC transaction requires a sophisticated understanding of both the market opportunity and the regulatory risks. Anthony, Linder & Cacomanolis invites CEOs, CFOs, and Board Directors to engage in a high-level strategy consultation to evaluate your readiness for a business combination in the current environment.

Schedule an executive strategy consultation with our senior partners to discuss your securities law needs by calling 877-541-3263 or visiting our contact page.