What is a De-SPAC Transaction?

Since 2020, a rising number of companies have chosen to go public through the de-SPAC process rather than a traditional IPO. This means a private company combines with a Special Purpose Acquisition Company (SPAC), which is essentially a shell company formed for the express purpose of acquiring targets and taking them public. Over the last few years, this process has received a higher level of regulatory scrutiny, making it important for private companies to understand how the De-SPAC process works, what type of reporting is required, and how to avoid many of the most common issues it presents.  

De-SPAC Transaction Explained 

SPACs raise capital from public investors (usually $10 per unit) in an initial public offering (IPO) and place the proceeds in a trust. After raising capital in its IPO, the SPAC enters a search phase (usually 18–24 months) to find a suitable private company to merge with. Once the target is identified, they'll begin the acquisition process through a formal letter of intent, which is followed by a due diligence phase and the execution of a merger agreement. Often times, Private Investment in Public Equity (PIPE) funding is used to ensure sufficient cash for closing and investor confidence. 

The due diligence phase typically includes a legal review of the company, a tax and accounting review, and a business valuation done by an independent third party. The SPAC undertakes the due diligence to verify that the company is presenting itself accurately; there are also target valuation considerations from the NASDAQ and NYSE. The de-SPAC transition process officially begins once the formal merger is announced, which may occur alongside or shortly after the due diligence phase.

Post-deal, they are prohibited from taking certain actions by security law. For example, they are generally required to retain their equity for at least 12 months after the deal. Due to the heightened SEC scrutiny and rule modernization that has come about since 2023, these rules and responsibilities have taken on added importance.  

De-SPAC Timeline and Process

Once a merger agreement is signed, the de-SPAC deal is announced publicly and investors are notified. The SPAC must now file with the SEC an S-4 or F-4 registration statement , which serves as both a proxy statement and a prospectus.  The registration statement must contain audited financial statements from both the SPAC and the target company, as well as: 

• Managerial discussion about the SPAC and target company
• Historical financial data about both parties
• Cost-per-share information
• Description of the structure of the company, post-acquisition
• Any debt financing agreements related to de-SPAC

Following this filing, the SEC will review the documentation presented and may ask for comments from the company. It has become more common for multiple rounds of comments to be requested. The SPAC will need to retain a proxy solicitor to handle the shareholder vote that is required for the de-SPAC transaction. The company will need to set a date for the vote and have proxy materials sent to all shareholders.  After the SEC declares the S‑4 effective, shareholders must be given at least 20 calendar days to review the materials before voting on the business combination.   

The final phase of the SPAC process includes the shareholder vote, which is a major milestone in a SPAC transaction, but it’s not the finish line. Once shareholders approve the business combination, typically, approval is based on a simple majority of shares voted, then several critical steps follow before the deal officially closes, and the new public company begins trading. 

• SEC Clearance: The Form S‑4 must be declared effective, and all SEC comments resolved. 

• Finalize Financing: Close PIPE investments and any debt facilities. 

• Satisfy Closing Conditions: Obtain regulatory approvals, third-party consents, and complete any remaining diligence. 

• Redemption Processing: Handle SPAC shareholder redemptions and adjust available cash accordingly. 

While terminations have decreased over the past year, a SPAC deal can fall apart. If this occurs, parties have the option to renegotiate the terms of the deal or terminate the agreement. 

Key SEC Filings in a De-SPAC Transaction

Under the current framework, these are the primary filings required by the SEC for a de-SPAC transition:  

• S-4 or F-4 Registration Statement: Co-Registrant Requirement-The target company must co-sign the S-4 or F-4 assuming full Securities Act Liability   

  • Includes Prospectus/Proxy necessary for shareholder vote 

• Super 8-K: Must be filed within four days post-closing and requires “Form 10-level” disclosures 

• Form S-1 Shelf Registration: To accommodate PIPE investors and control-person shares, a resale shelf (Form S‑1) is typically filed post‑closing; 

• Form 8-A: Required when listing on an exchange 

• PIPE-related filings: If applicable 

Risks, Challenges and Recent Regulatory Changes 

In the years following the 2020-2022 SPAC surge, regulations have clamped down on these transactions. This means there is increased scrutiny from the SEC as well as recent regulatory changes such as enhanced disclosure requirements, new requirements for projections, and liability alignment with SPAC IPOs for underwriters and targets. This means companies going through this process need stronger internal controls and have to work within limitations on forecasts and revenue projections.

Ensuring a Successful De-SPAC Transaction

Between the due diligence phase and the SEC reporting requirements, there is a lot of documentation within a de-SPAC transaction. The target company needs to be IPO & public company ready. They need to have financial controls, governance, and reporting infrastructure in place to meet SEC requirements and operate confidently as a listed company. 

Leverage technology to stay organized, compliant, and investor-ready. With a Virtual Data Room like Venue for diligence and financing, and ActiveDisclosure^℠ for SEC filings and ongoing reporting, you can confidently navigate the path to becoming a public company whether it’s through an IPO or de-SPAC.

Virtual Data Room: Streamlining Diligence and Financing 

A secure Virtual Data Room (VDR) is essential for organizing and sharing sensitive information before and during the transaction. It enables: 

• Target Company Diligence: Centralized access to financials, contracts, and governance documents for auditors, legal teams, and advisors. 

• Financing Support: PIPE investors and lenders can review key materials quickly and securely. 

• Compliance Confidence: Version control and audit trails ensure transparency throughout the process. 

ActiveDisclosure^℠: Simplifying SEC Filings and Ongoing Compliance 

ActiveDisclosure^℠ is designed expressly for SEC filing and financial reporting. With this solution, businesses can: 

• Prepare the Form S-1/S‑4 Efficiently: Draw upon a single source of truth, such as an Excel spreadsheet, to create accurate documents. 

• Ensure Accuracy: Use health checks that verify completeness before SEC transmission. 

• Collaborate Seamlessly: Assign tasks, update teams, and make edits with a track changes feature—keeping everyone aligned. 

• Post-Deal Compliance: Manage quarterly and annual filings, proxy statements, and certifications with ease. 

The de-SPAC approval process requires accuracy and attention to detail. Not only can ActiveDisclosure^℠ streamline the needed reporting, but DFIN also offers 24/7/365 service from regional experts who can help you through any part of the process. Get the deal done without stressing about the little things. DFIN can be your partner for compliance, filing support, and deal execution, so make sure you have the expertise needed for precise disclosures.