SPACs and SPAC Services
SPACs, an acronym that stands for Special Purpose Acquisition Companies, are also known as a “blank-check” companies, blind pools, IPO 2.0 and other monikers.
SPACs provide a different and ostensibly faster alternative for private companies to access public markets without the costs, time, scrutiny and uncertainty of the more traditional initial public offering (IPO).
TechCXO assists companies preparing for SPAC transactions by focusing on SEC reporting requirements and public company readiness. Our methodology is designed to prepare companies for a successful transition to the public markets and includes:
- Accounting/SEC Reporting
- Audit Readiness
- Regulation S-X and S-K Compliance
- Corporate Finance Transformation
- Close Process Optimization
- Internal and External Reporting
- Corporate Finance Organizational Design (i.e. Org structure and Identifying/Recruitment of talent)
- Technology Solutions
- Assessing and implementing Technology (i.e. ERP, Stock Option Management, SEC Reporting Software, CRM, PMO software etc.)
- SOX 404 Compliance Readiness
- Assess Internal Control Environment
- Design and Document Internal Controls
Regulatory Scrutiny for SPACs
In 2021, the SEC ended its relative silence regarding SPACs with a series of warnings and questions. These included accounting treatment for warrants and concerns about investor protections, particularly around some of the SPAC companies aggressive growth projections. The SEC also warned that it could require some SPACs to restate their financial results.
De-SPAC and Restatement of Earnings
De-SPAC is the technical term used when the SPAC finds a target company and goes through the process of becoming a publicly traded company. Again, the SPAC is a blank check entity that does not have any operations and only uses funds from investors for the purpose of identifying a target company to take public via the De-SPAC process. For those entities that have gone through a De-SPAC process and have been operating as a public company, they may need to take a number of remediation steps. One of the most common and far-reaching is a restatement of earnings. It has been reported that nearly 90% of SPACs need to restate earnings.
Restatement of Earnings
A restatement of earnings is significant. It can result in delays of several months or longer before an issuance. Restated earnings can also have a significant impact on reputation, valuation and lost momentum.
TechCXO assists companies facing or potentially facing a restatement of earnings and other issues including:
- Evaluation of accounting errors: Little R? Big R? Current period adjustment?
- Accounting Policy and Process Documentation
- Financial statement disclosures
- Audit Support and Mediation Services