Job openings declined slightly in April from a high point.
A report by Senator Elizabeth Warren calls for Congress to crack down on the public shell firms known as special purpose acquisition companies.
The companies, SPACs, are formed to acquire a business and list it with less fuss than a traditional initial public offering, or I.P.O. But some officials say the hastier and hazier SPAC process favors insiders and financial institutions, while incentivizing bad deals that leave retail investors with losses.
“SPACs and SPAC sponsors are abusing loopholes and gaps in current securities law,” Ms. Warren, Democrat of Massachusetts, said in the report, which was released on Tuesday. The report calls for a law that would codify rules proposed by the S.E.C. in March — and go further, with more disclosures and added liability for major players.
Ms. Warren and the S.E.C. are focusing on “evening the playing field” between SPACs and I.P.O.s. Her investigation points to several major issues with SPACs, including sweetheart deals for SPAC sponsors, disclosure issues and hidden fees that often make SPACs more expensive than I.P.O.s. Ms. Warren and other SPAC critics say the cut rate shares SPAC sponsors get, often called the “promote,” lead to bad incentives because they often ensure sponsors will make money on the deal regardless of whether a SPAC transaction is successful or not.
Looming scrutiny has contributed to SPACs’ fading luster. The S.E.C.’s plan is still open for public comment, but it has already chilled enthusiasm amid a wider market downturn. Forbes just scrapped its SPAC plans. Goldman Sachs is shrinking its SPAC business. More than 600 SPACs raised some $160 billion last year, according to SPAC Research, while about 50 blank-check firms raised $10 billion in the first quarter of 2022, and activity this spring is down substantially compared with the last.
A spokeswoman for Ms. Warren told the DealBook newsletter that it was too early to name potential co-sponsors, and that guarding against SPAC abuses was popular across the political spectrum. But given Republican resistance to the S.E.C. rule-making agenda, divisions in Congress and a possible reshuffling after midterm elections, SPACs seem an unlikely priority.
Article source: https://www.nytimes.com/live/2022/06/01/business/inflation-job-openings-economy