This morning the treasury department finally issued guidance around the issue of share buybacks, which has been haunting the capital markets since August when the 1% excise tax was first introduced. And in the nick of time too, since the tax goes into effect in less than week.
To be clear, the purpose of the excise tax was never about SPACs, they just got caught in its crosshairs thanks to the SPAC’s redemption feature. However, for some context around the situation, the 1% excise tax came about as part of the Inflation Reduction Bill that was passed this summer. Senator Kyrsten Sinema, in a last minute change, insisted the tax increase on carried interest for private equity be removed and instead, as a concession, the 1% excise tax on stock buybacks was put in.
On its surface, it appeared to be specifically meant for the typical share buyback you think of when corporations literally buy back their stock. However, all sorts of asset classes were caught up in it and affected such as redeemable preferreds and SPACs since a “redemption” is considered a buyback as well. There was quite a bit of confusion as to its interpretation and so, here we are today with the Treasury Department putting out some much needed guidance for how companies should proceed. However, in typical government fashion, it’s about as clear as a foggy windshield in blizzard.
Nonetheless, it appears that SPACs undergoing a “complete liquidation” will be spared the excise tax. To wit:
Terms Tracker for the Week Ending February 7, 2025 Welcome to our weekly column where we discuss the findings from our IPO terms tracker based on the previous week’s pricings. This past week saw one new SPAC IPO price, bringing the year-to-date total to nine. K&F Growth Acquisition Corp. II successfully debuted and managed to...
Retail enthusiasm has been a lifeblood of many SPAC transactions through to the combined companies’ ongoing lives as public companies, and several have taken to buying up Bitcoin as a way of keeping sometimes fickle retail investors engaged. Enterprise software MicroStrategy (NASDAQ:MSTR) pioneered this tactic before spot Bitcoin ETFs were available to the general public....
At the SPAC of Dawn The markets may still be figuring out their way in careening the early decisions of the new presidential administration, but one de-SPAC decided to cash in on at least one of them yesterday. Rare earth miner Critical Metals (NASDAQ:CRML) raised $22.5 million in a private placement taking advantage of a...
At the SPAC of Dawn The market may have sighed in relief with the postponement of tariffs, but they may not have gone too far into the background as the US also reported a record high $98.4 billion trade deficit for December yesterday, which came in more than $2 billion deeper than expected. More signals...
At the SPAC of Dawn Commentators may still spar over the level of positive impact SPACs have had in some sectors, but Peter Beck, CEO of Rocket Lab (NASDAQ:RKLB), believes the vehicles have been particularly positive for the space industry. Although he described the period as a “crazy, crazy time” when speaking at the Smallsat...