Help Wanted: Someone With Money and Connections

Yet until that point, the SPAC itself has to make sure it doesn’t run afoul of any Securities and Exchange Commission requirements. And for directors, that requires a different way of thinking.

For one, the competition among SPACs to acquire a company is fierce. So far this year, nearly 300 SPACs have been created and taken public, more than the 248 offerings in all of last year and up from 59 in 2019. There has been some talk of the ardor cooling for SPACs, but they remain a way for the wealthy to make returns they can’t get elsewhere.

The increase in companies going public through SPACs was initially driven by companies’ inability during the pandemic to travel for the traditional roadshow associated with an initial public offering. The number of SPACs has continued to grow because they offer a means for mature companies to go public without the traditional filings for an I.P.O. (though the process of being acquired by a SPAC is certainly not without paperwork and legal counsel).

But given the proliferation of SPACs, the S.E.C. has tightened the rules, particularly those relating to the forecasts the SPACs make about their progress toward merging with a company and how certain classes of shares in the SPAC are treated for accounting purposes. These tighter rules are good for some SPACs and their directors, and not so good for others.

“The S.E.C. is getting a bit nervous,” said Jennifer Ceran, who is on the board of Plum Acquisition, a SPAC focused on finding a technology company, and was previously the chief financial officer of Smartsheet and Coupons.com, two technology companies she helped take public. “Your forecasts have to be based on sound data. As operators, I’ve lived my career giving multiyear forecasts and given reports to our company.”

Directors of a SPAC are not joining an existing public company or a private company with plans to go public. They’re joining an entity with ideas, aspirations and money — but no cash flow.

The directors are expected to use their own industry knowledge and connections to help find a company to merge with. “One of the important elements of being a director is not just industry experience but also really good networks,” Ms. Ceran said. “You want the management team and the board to have connections. You need to have people involved in your SPAC who have been operators at companies and are not just transaction folks.”

Article source: https://www.nytimes.com/2021/05/07/your-money/spacs-directors.html