Brown, Senate Colleagues Seek Answers on SPACs

WASHINGTON, D.C. — U.S. Sen. Sherrod Brown and three colleagues called on creators of prominent special purpose acquisition companies, including the one involved in acquiring Lordstown Motors Corp., to provide more information about how they’re used.  

In letters sent Wednesday to the six SPAC creators, Brown, D-Ohio, and three fellow Democrat senators – Elizabeth Warren of Massachusetts, Tina Smith of Minnesota and Chris Van Hollen of Maryland – call for them to provide information by Oct. 8. 

“We seek information about your use of SPACs in order to understand what sort of congressional or regulatory action may be necessary to better protect investors and market integrity and ensure a fair, orderly, and efficient marketplace,” the senators wrote to each of the SPAC creators, according to the news release from Brown’s office. “We are concerned about the misaligned incentives between SPACs’ creators and early investors on the one hand, and retail investors on the other.”

Click HERE to read the entirety of the letters, which were sent Wednesday to:

David T. Hamamoto, CEO and chairman of DiamondPeak Holdings Corp., who helped create the SPAC involved in acquiring Lordstown Motors; 

Howard W. Lutnick, chairman and CEO of Cantor Fitzgerald; 

Michael Klein, founder of M. Klein & Associates; 

Tilman Fertitta, chairman and CEO of Fertitta Entertainment Inc.; 

Chamath Palihapitiya, co-founder and CEO of The Social+Capital Partnership LLC; 

Stephen Girsky, managing partner at VectoIQ LLC. 

Brown, who is chairman of the Senate Committee on Banking, Housing and Urban Affairs, questioned U.S. Securities and Exchange Commission Chairman Gary Gensler about the investment tool’s use in the Lordstown Motors deal during a hearing last week. 

“It seems clear there were outside investors looking at this not as a long-term investment in a community with a proud manufacturing heritage and a talented workforce, but as a way to make a quick buck with no follow through,” Brown said during the Sept. 14 hearing. 

SPACs have exploded in popularity in recent years, with sponsors asserting that SPACs present a faster and cheaper alternative to traditional initial public offerings, according to the news release. As of last year, SPACs outpaced traditional IPOs as the preferred method for taking a company public.

The concern is that industry insiders may be able to take advantage of retail investors, workers and other community stakeholders throughout the SPAC process to the benefit of large institutional investors such as hedge funds, venture capital insiders and investment banks, according to the release.

The SPAC business model does not lend itself to long-term investment in communities and can lead to less certainty for workers and potential workers at the companies being acquired.

Pictured: In this file photo, U.S. Sen. Sherrod Brown addressed concerns over the impact of special purpose acquisition companies during a Senate Committee on Banking, Housing and Urban Affairs hearing.

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