SPACs and Forward-Looking Disclosure: Hype or Information?

In 2021, 359 SPACs have raised $95 billion, surpassing the $74 billion raised by 254 SPACs in 2020. The growth in this market might mean that sophisticated investors are using a regulatory loophole to avoid IPO disclosure regulations in taking firms public and hyping their shares. It could also mean that IPO disclosure regulations are preventing small companies with scant performance history from raising money in public markets. Either way, it’s time to reconsider disclosure regulations related to IPO. With that in mind, we examine the extent of forecasting by SPACs and its relation to transaction outcomes.

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