Goldman Sachs Pauses New SPAC Offerings Amid Regulatory Pressures

Goldman Sachs has paused new special purpose acquisition company (SPAC) offerings, which has added more complications to the lagging market as regulators turn a more critical eye on it, the Financial Times reported Monday (May 9).

Goldman will also reportedly quit working with many of the SPACs it helped to take public in the past. This shows a retreat from the market, as last year Goldman was the second-biggest underwriter for the SPACs. The bank helped sponsors raise close to $16 billion, per data from Refinitiv.

The SPAC market was hot during the early part of the pandemic and much of 2021, but lately it’s been going colder, and regulators have become skeptical.

The FT wrote that the U.S. Securities and Exchange Commission has proposed reforms on SPACs, looking at adding more transparency and make the rules more like those of regular initial public offerings (IPOs). That proposal is open for public comment.

It would work on boosting the liability for underwriters, making it so banks working on SPAC IPOs would also have to work on the merger after that. Banks would also reportedly be liable for misstatements related to the merger.

The report noted Goldman’s status in the SPAC world has been a big one, with lucrative fees because of the SPAC IPOs and the mergers that come after. However, the bank has been pulling back because of the lessening interest from investors.

PYMNTS wrote recently that the CFA Institute, an organization for investment professionals, has advised regulators to tighten disclosure requirements for SPAC sponsors, in a bid to help out with transparency.

See also: CFA Institute Tells SEC to Tighten Disclosure Regs for SPAC Sponsors

The CFA has recommended that SPAC sponsors fully disclose any affiliations with investors and other target companies, along with any side deals with anchor or pipe investors.

The CFA also thinks there should be more detailed information from SPAC executives, with the tougher disclosures being important because of the “opacity” of many SPACs, and the likeliness of conflicts of interest.