A Win for Big Tech at the Supreme Court

June 01, 2022
Business

The head of a top German investment firm resigns amid “greenwashing” accusations. Hours after the police raided the offices of DWS and its majority owner Deutsche Bank in Frankfurt, DWS said Asoka Wöhrmann would resign. A former executive has said the firm misled investors about its use of environmental, social and governance criteria in investing.

Tech experts urge Congress to resist crypto lobbying. A group of 26 computer scientists and academics sent a letter criticizing crypto investments and the industry’s claims about security and decentralization.

Another whack for SPACs

A crackdown on the public shell firms known as special purpose acquisition companies that began at the S.E.C. has reached Congress, and new legislation is in progress. The companies, SPACs, are formed to acquire a business and list it with less fuss than a traditional 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,” Senator Elizabeth Warren, Democrat of Massachusetts, argues in a report released yesterday. 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.

Warren and the S.E.C. are focusing on “evening the playing field” between SPACs and I.P.O.s. Her report points to several major issues with SPACs, including:

The “promote”: SPAC sponsors pay a fraction of market value for a 20 percent share in the company, ensuring a profit regardless of deal quality.

Shortcuts: Institutional investors get early information and discounted stock.

Hidden costs: SPAC transaction fees outstrip those of a traditional I.P.O.

Information gaps: Claims made in SPAC disclosures can be misleading because the requirements surrounding them are lax.

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.

Who supports a new law? A spokeswoman for Warren told DealBook that it was too early to name potential co-sponsors, and that guarding against SPAC abuses is 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/2022/06/01/business/dealbook/free-spech-texas-supreme-court.html