Important Disclosures That A Report Should Contain During An SPAC Valuation
Going public through a traditional IPO is very slow. Therefore, if you would like to raise capital through investors, a SPAC can be an attractive alternative. However, with a SPAC, courts have ruled that the decision process has to be held to a higher standard. Therefore, a SPAC fairness opinion is required.
How a SPAC Valuation Works
To avoid the issue of a conflict of interest, the SPAC will need a third party to disclose whether any financial transactions are fair or unfair. The factors used to determine this must be described in detail. They should also include the weight that they assign to each factor that leads to the valuation.
Certain details must be included in the valuation. For example, all financing transactions should be structured in a manner in which a majority of unaffiliated security holders must approve the transaction.
Best Practices for a SPAC
For a majority of the directors who are not employees, an unaffiliated representative must be available who can act on behalf of the unaffiliated investors to negotiate the terms of the transaction. Each transaction also needs to be approved by more than half of the directors who are not employees of the SPAC.
The Opinion Must Come from Outside the Company
The opinion on the fairness of the transaction needs to come from an outside party. Then, the outside party will generate a report that the investors can then read. The outside party will need to disclose whether there are any material relationships between the SPAC and the outside party so investors can determine if there is a conflict of interest.
Other Important Disclosures
The outside party will give an opinion on how much will be paid to the private operating company and the security holders. The outside party must also disclose whether the company followed the recommendation or chose a different figure. At the very end of the report will be a summary of the findings and any recommendations. Any SPAC fairness opinions will be disclosed to the public.
Why Everyone Benefits from a SPAC Fairness Opinion
The SPAC fairness opinion can be beneficial to all parties. The investors will be more informed about the company they are investing in and can protect their rights. The company going public will also be able to avoid a legal battle that can be expensive and can draw the attention of management away from the core business.
For more information on SPAC fairness opinions, contact a professional near you.
