SEC Warns on Celebrity SPACs
Posted on 03/10/2021
The SEC released an investor alert on March 10, 2021, “The SEC’s Office of Investor Education and Advocacy (OIEA) cautions investors not to make investment decisions related to SPACs based solely on celebrity involvement.
Celebrities, from movie stars to professional athletes, can be found on TV, radio, and social media endorsing a wide variety of products and services. Sometimes they are even involved in investment opportunities such as special purpose acquisition companies, or SPACs, as sponsors or investors. Those celebrities may even be well-known professional investors.
However, celebrity involvement in a SPAC does not mean that the investment in a particular SPAC or SPACs generally is appropriate for all investors. Celebrities, like anyone else, can be lured into participating in a risky investment or may be better able to sustain the risk of loss. It is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it or says it is a good investment.
SPACs have become a popular vehicle for transitioning a private company to a publicly traded one. A SPAC is a blank check company with no operations that offers securities for cash through an initial public offering (IPO). SPACs then have a specified period of time—typically two years—to identify and merge with a private operating company. This business combination is often used as an alternative means of taking the acquired company public, rather than through a traditional IPO.”
Some recent celebrity SPACs include:
1. Forest Road Acquisition Corp (NYSE: FRX)
This is a TMT-focused SPAC whose board of directors includes NBA Hall of Famer Shaquille O’Neal. Forest Road Acquisition raised US$ 261 million in an upsized IPO. O’Neal sits on the board of directors of Papa John’s International, Inc. (NASDAQ: PZZA).
2. Dune Acquisition Corp (NASDAQ: DUNEU)
This SPAC is linked with Golden State Warriors star Steph Curry. The SPAC is trying to find a technology or SaaS company.
3. Jaws Spitfire Acquisition Corp (NYSE: SPFR)
Tennis legend Serena Williams is a member of the SPAC team. The SPAC is headed up by Starwood Capital CEO Barry Sternlicht.
4. Bright Lights Acquisition (NASDAQ: BLTSU)
Grammy award-winning musician Ciara is part of the SPAC team for Bright Lights Acquisition. The SPAC is targeting the consumer products, media, entertainment, and sports sectors.
5. Slam Corporation (NASDAQ:SLAMU)
Slam Corp: Former MLB star Alex Rodriguez (A-Rod) is part of the SPAC seeking to raise $500 million. The SPAC will target the sports, media, entertainment, health and wellness and consumer technology sectors.
