Make Kitco Your Homepage

Senate Democrats step up scrutiny of blank-check firms

Kitco News

Sept 22 (Reuters) - U.S. Senator Elizabeth Warren and three other Senate Democrats on Wednesday sent letters to some of the most prolific SPAC dealmakers, voicing concerns over reports that SPAC insiders exploit regulatory loopholes at the expense of retail investors.

Special purpose acquisition companies, or SPACs, are shell companies that raise funds through an initial public offering to take a private company public through a merger at a later date.

The lawmakers sought information on how investments in SPACs were solicited, how these executives were compensated and if such compensation was tied to the stock performance of the merged entity created out of a deal between a SPAC and a private firm.

"We seek information about your use of SPACs in order to understand what sort of Congressional or regulatory action may be necessary to better protect investors," Senators Elizabeth Warren, Sherrod Brown, Tina Smith and Chris Van Hollen wrote in the letters.

The letters were sent to six SPAC investors, including Cantor Fitzgerald's Chief Executive Officer Howard Lutnick, former Citigroup (C.N) banker Michael Klein, casino mogul and Houston Rockets owner Tilman Fertitta and veteran investor Chamath Palihapitiya.

The letters were also sent to David Hamamoto, who led the SPAC that merged with EV maker Lordstown Motors Corp (RIDE.O), and former General Motors (GM.N) Vice Chairman Stephen Girsky.

The blank-check market, which saw dealmaking activity at a frenetic pace since last year, has somewhat fizzled out after coming under the scanner of regulators in the United States earlier this year.

The U.S. Securities and Exchange Commission is also reviewing such acquisition vehicles, seeking clearer disclosures.

Reporting by Niket Nishant in Bengaluru; Editing by Shounak Dasgupta
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.