Yep, you read that correctly; the SEC’s Office of Investor Education and Advocacy (OIEA) has cautioned investors not to make investment decisions on SPACs "based solely on celebrity involvement".
Damn, I thought my man Chamath always told the truth 😪.
"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," the SEC stated.
There's my investment methodology out the window.
There have been hundreds of SPACs already in 2021, nearing the total for the whole of 2020...
SPACs have become extremely popular for moving a private company into a publicly-traded one as businesses prefer the easier route to a listing.
The SEC warned that "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."
Unfortunately, I doubt this will deter many people.
However, a change to the NYSE's direct listing rules could impact the IPO market.
In December, the SEC approved the NYSE's new direct listing rules to allow companies engaging in a direct listing to raise capital through a primary sale of shares, in addition to or instead of only facilitating sales of shares by existing shareholders.
The new rules mean that companies will now have the option to go public without engaging in a traditional initial public offering process.
In December 2020, the Nasdaq proposed updated rule changes that were described as virtually identical to the NYSE...
Although they are yet to be approved.
So, for now, the SPACs will continue to flow.
You can read the full SEC statement on celebrity involvement in SPACs here...
Or the SEC order approving the direct listing rules here.
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