SPACInsider Logo
Senate Bill to De-List Chinese Companies – Are SPACs at Risk?
by Kristi Marvin on 2020-05-22 at 2:43pm

Most people have probably already seen a few of the headlines surrounding the U.S. Senate passing a bill that could result in Chinese companies being de-listed from U.S. exchanges. However, what is still unclear is which companies are truly at risk.

What we currently do know is that the bill would require Chinese companies that are listed in the U.S. (or would like to list), establish that they are not owned or controlled by a foreign government. Additionally, they must be audited by an accredited firm and their audits must be monitored by the Public Company Accounting Oversight Board (PCAOB), which oversees audits of all U.S. companies that seek to raise money in public markets.

Keep in mind that while this bill has passed the Senate, it still needs to pass the House of Representatives before it can go before the President to be signed into law.  However, it appears many are speculating that this is likely to pass the House since this bill has bipartisan support.

If the Bill is signed into law, it’s unclear how the SEC would confirm whether a company was owned or controlled by a foreign government, but presumably, the SEC would issue guidance.

As for how this affects SPACs, clearly we have a number of Asia-focused SPACs looking for target companies, but since a SPAC is not beholden to any sector, industry, and most importantly, geography, it would be fairly easy to pivot to search for companies outside of China.  However, what about the SPACs with a currently announced combination or even a SPAC itself with its headquarters listed in China?

After speaking with an auditor, who said his firm is currently working on this, while it’s still not 100% clear which companies would fall under this umbrella, the current thinking is the following:  If the auditor provided the Auditor’s Opinion from a U.S. office address, it’s probably safe.  To be more specific, if you review a SPAC’s proxy or IPO filing and look up the Auditors Opinion and it lists a firm with a U.S. address, it’s probably compliant.  Meaning, if the company IS owned or controlled by a foreign government, and specifically China, a U.S. based Audit would NOT be allowed to occur in the first place. It’s just an easy way to check.

However, there is still the issue of whether the majority of the company’s business is conducted in China. Further to that, the thinking is that “China” includes companies based in Hong Kong since the PCAOB is currently blocked from reviewing companies headquartered there as well.

Finally, even if a company is deemed non-compliant, the Bill (linked HERE) would only de-list a company if it doesn’t comply within three years.  That’s a long time to gain compliance for currently listed companies.

In summary, this is not a law yet, but it’s something to keep an eye on to see what develops.

 

 

Recent Posts
by Marlena Haddad on 2022-12-01 at 10:02am

InterPrivate II Acquisition Corp. (NYSE:IPVA) disclosed this morning that it has restructured its bonus share agreement in connection to its proposed merger with carsharing marketplace Getaround. The parties previously agreed to reserve and set aside the bonus shares, consisting of 9,333,333 shares, to be allocated to the non-redeeming public stockholders, the designees of EarlyBirdCapital and the...

by Nicholas Alan Clayton on 2022-12-01 at 9:31am

Iris Acquisition Corp. (NASDAQ:IRAA) has entered into a definitive agreement to combine with biotech firm Liminatus at an enterprise value of $334 million. La Palma, California-based Liminatus is a clinical-stage drug developer working on a range of cancer treatments utilizing both preventative vaccines and CAR-T therapies. The combined company is expected to trade on the...

by Marlena Haddad on 2022-12-01 at 9:22am

Lakeshore Acquisition Corp. I (NASDAQ:LAAA) announced this morning that it has entered into a non-redemption agreement and amended its purchaser support agreement with initial shareholders in connection to its proposed merger with medical device company ProSomnus. The SPAC entered into non-redemption agreements with certain institutional investors for an aggregate of 200,339 shares of the purchaser. These investors...

by Nicholas Alan Clayton on 2022-11-30 at 6:01pm

The companies and sponsors of six SPAC deals are set to see their lock-ups expire before the end of the year. This is a relatively small monthly total as the wave of deals from 2020 and 2021 are still hitting this milestone. The list nonetheless includes some major names starting with Forafric (NASDAQ:AFRI), which is...

by Marlena Haddad on 2022-11-30 at 5:29pm

Pacifico Acquisition Corp. (NASDAQ:PAFO) disclosed this afternoon that its shareholders have approved its business combination with sustainable shipping company Caravelle during a special meeting held earlier today. At today’s special meeting, 6,194,813 shares voted by proxy or in person, representing 82.65% of the total outstanding shares. The business combination was overwhelmingly approved as it received a...

Privacy Policy|Terms Of Use
Copyright © 2022 SPACInsider, Inc. All Rights Reserved