As the SPAC (Special Purpose Acquisition Company) market evolves, so too does the legal and regulatory complexity facing companies pursuing this path to the public markets. To better understand the most pressing legal considerations surrounding the de-SPAC process, SMA sat down with Mike Blankenship, Co-Chair, Capital Markets Practice at Winston & Strawn, for a wide-ranging conversation. Mike shares insights on regulatory pitfalls, disclosure requirements, and what separates successful de-SPAC transactions from the rest.
SMA: Thanks for joining us Mike. Starting right at the beginning—what are some of the most common legal pitfalls or missteps you see companies make during the de-SPAC process?
Mike Blankenship: The biggest pitfall I see is inadequate due diligence—failing to fully understand the target company’s financial, operational, and legal risks. If you don’t conduct proper diligence, it can lead to post-merger litigation and valuation disputes. Another major misstep is misalignment on projections—being overly optimistic with financial forecasts can create big problems down the line.
SMA: How has the regulatory environment for SPACs evolved in recent years, particularly after the post-Covid SPAC boom and subsequent bust?
Mike: In April 2022, the SEC proposed new rules that sent shockwaves through the market. Those rules were finalized—with some modifications—and became effective in July 2023. We now have stricter guidelines on financial projections, more detailed disclosures about SPAC sponsor compensation, potential conflicts, and dilution risks. One of the biggest changes was narrowing the safe harbor for forward-looking statements, which increases potential liability for overly ambitious projections.
SMA: What are the most important disclosure obligations that private companies should understand when going public via a SPAC?
Mike: The biggest are financial disclosures. Companies need to determine whether they must present two or three years of audited financials under SEC rules. Preparing the Management’s Discussion and Analysis (MD&A) section also takes significant time. Beyond that, companies must ensure their business description is accurate, risk factors are comprehensive, and all material contracts are properly filed—potentially with redactions for sensitive terms.
SMA: How does Regulation Fair Disclosure (Reg FD) come into play when marketing to PIPE investors and communicating with the broader market during the de-SPAC process?
Mike: When companies are marketing to PIPE investors, they must avoid disclosing material information unless those investors are “wall-crossed”—meaning they’ve signed a confidentiality agreement. Before the transaction closes, those wall-crossed investors must be “cleansed” through the disclosure by the company of material information that was previously shared confidentially. This is typically done by 8K, and the timing and content of disclosures are critical in this context.
SMA: What guidance would you offer around drafting investor decks and marketing materials during the de-SPAC process?
Mike: The key is consistency with the registration statement—typically the S-4 or F-4. Projections should be grounded in reality, and supported by reasonable assumptions, historical data, and market analysis. Companies must clearly disclose risks and uncertainties around projections, and ensure that all messaging aligns with SEC filings. Risk factors should be prominently featured, and nothing in the deck should contradict or go beyond what’s in the registration statement.
SMA: Where have you seen communications go wrong during a de-SPAC process?
Mike: Overly aggressive projections are a common issue. We’ve seen some companies—particularly in sectors like electric vehicles—present unrealistic, hockey-stick growth projections that ultimately hurt credibility. Another issue is premature announcement of deals before terms are finalized, often due to leaks. And of course, inconsistent messaging between public statements and filings can create problems, especially if it confuses investors or raises regulatory red flags.
SMA: What IR-related issues tend to surprise private companies as they transition to life as a public company via SPAC?
Mike: The heightened scrutiny. As a public company, everything is out in the open—performance, governance, and executive decisions. If the stock doesn’t perform well, shareholder activists may come knocking. On a practical level, many companies are caught off guard by the demands of quarterly and annual reporting. Without a strong internal audit function, you risk delays, missed deadlines, and credibility issues with investors.
SMA: From a governance perspective, what best practices do you recommend to prepare for public company life?
Mike: You need independent directors, especially those with experience in your industry. Proper committee structures—audit, compensation, nominating and governance—are essential. We’re also seeing more companies form AI or cybersecurity committees. It’s important to manage and disclose any conflicts of interest involving the SPAC sponsor early on. Succession planning is also key for long-term governance stability.
SMA: What kinds of conflicts do you see between SPAC sponsors and targets?
Mike: Control is the big one. Sponsors often want board seats or retain significant influence post-merger. It’s essential to be transparent about any equity stakes, past relationships, or potential conflicts so those can be addressed proactively and disclosed appropriately.
SMA: Any examples—good or bad—that offer lessons for companies considering a SPAC?
Mike: Successful SPACs usually involve strong fundamentals, a compelling story, and a well-structured PIPE raise to weather redemptions. Those that struggle tend to be overly reliant on unrealistic projections and enter the public markets before they are operationally ready. The key takeaway is to be grounded in reality, transparent in disclosure, and prepared with the right legal and financial infrastructure.
SMA: Finally, let’s close with your number one piece of advice for a CFO or General Counsel preparing for a SPAC transaction.
Mike: Surround yourself with experienced advisors. Get the right team in place early, prioritize diligence, and prepare your organization for the demands of public company life. You’ll be wearing two hats—running the business and executing the transaction—so be ready for that dual responsibility.
Thank you to Mike Blankenship for sharing his insights on the SPAC process. Mike can be contacted at mblankenship@winston.com
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