DD during the SPAC boom

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    Ian Smith
    Participant

    Similar to an SPV or a SPAV, SPACs (Special Purpose Acquisition Company) I see that the amount of DD required, in particular around warrants is important. It is important to look into what triggers a warrant to become and asset/liability etc.
    Has anyone had experience with a SPAC either in one, or bought by one?

    #119533


    Participant

    The growth of SPACs has been extraordinary during 2020! In terms of your specific question about classification of warrants (i.e., asset vs liability), I think the answer is yes if it’s material. By the way, assuming the target company has been “audited” (namely by one of the large national accounting firms), then the accounting, classification, and disclosure matters (related to the warrants) should have been addressed (including the related “triggers”). Perhaps the DD related to this item would be to ask for the auditors underlying workpaper (or technically it should be management’s position paper, etc.). And finally, I’ve not personally had experience with a SPAC.

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