The Securities and Exchange Commission rejected a New York Stock Exchange proposal to make it easier to list special purpose acquisition companies on the exchange.
In October, the NYSE proposed a rule for SPACs to reduce the minimum number of public holders required for continued listing — to 100 from 300. It also proposed enabling the NYSE to exercise discretion to allow SPACs a reasonable time period following a business combination to demonstrate compliance with the applicable quantitative listing standards.
A SPAC's business plan is to raise capital in an initial public offering and, within a specific period of time, engage in a merger or acquisition with one or more unidentified companies, the SEC noted in its June 14 order.
The SEC said it did not have sufficient information to determine that the proposed rule change would enable the NYSE to uphold its legal requirement to "prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest."
In its proposal, the NYSE said that SPACs often have difficulty demonstrating compliance with the minimum number of holders requirements because there is limited retail investor interest in them, and that this requirement is less relevant for SPACs because they historically trade close to the value of the funds held in trust, and without distorted prices, even when they have few shareholders, according to the SEC order.
But the NYSE provided no evidence to corroborate that point, the SEC said.
The NYSE declined comment Tuesday on the SEC's order.