Capital Markets and SPACs Update

Sidley and Other U.S. Law Firms Respond to Investment Company Act Lawsuits Targeting the SPAC Industry

August 30, 2021

On Friday, August 27, Sidley Austin LLP, together with other leading U.S. law firms, issued a joint statement in response to recent lawsuits filed against a number of special purpose acquisition companies (SPACs) alleging that SPACs are investment companies within the meaning of the Investment Company Act of 1940 (the 1940 Act) and are therefore in violation of certain provisions of the 1940 Act.

The statement challenges the position taken in these lawsuits, consistent with longstanding interpretations of the 1940 Act, which such interpretations are reflected in over 1,000 SPAC IPOs that have been reviewed by the SEC staff as of the date of the statement.

An excerpt of, and a link to, the statement are below:

“The undersigned law firms view the assertion that SPACs are investment companies as without factual or legal basis and believe that a SPAC is not an investment company under the 1940 Act if it (i) follows its stated business plan of seeking to identify and engage in a business combination with one or more operating companies within a specified period of time and (ii) holds short-term treasuries and qualifying money market funds in its trust account pending completion of its initial business combination.”

Read the full statement here.

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