On December 13, a significant group of shareholders of Pershing Square Tontine Holdings, Ltd. (“PSTH”), represented by Rolnick Kramer Sadighi LLP (“RKS”), submitted an amici brief in New York federal court urging dismissal of a complaint contending that SPACs (special purpose acquisition vehicles) are subject to the 1940 Investment Company Act (“ICA”). This issue presents an existential threat to the SPAC market. If SPACs must comply with the ICA, the SPAC market will likely significantly shrink, if not disappear entirely. The SPAC investors represented by RKS desire to continue to make their own investment decisions, including by purchasing shares in SPACs when appropriate for their individual investing objectives.
PSTH raised $4 billion when it went public in 2020. A single PSTH shareholder filed the lawsuit earlier this year, advancing the theory of two law professors that SPACs are actually investment companies. On behalf of the PSTH shareholders, who collectively own more than 1.289 million PSTH shares and nearly 197,000 PSTH warrants, RKS filed an amici brief, arguing that the SEC has never suggested that SPACs are subject to the ICA, despite a steady drumbeat of recent SEC guidance and commentary related to SPACs. RKS also argued, on behalf of the PSTH shareholders, that any new SPAC regulation should properly come from the SEC (or Congress), and not through private litigation. A ruling subjecting SPACs to the ICA would effectively upend the SPAC market, resulting in fewer avenues for individuals who wish to invest in private emerging growth companies that are taken public by merging with SPACs, and usurping the proper regulatory process.
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