Coffee & Conversation - The SPAC Boom Through an Investigator's Lens, Part 1

Jessica Magee: Good morning everybody, and welcome to another episode of Coffee & Conversation. Today we're going to be talking about the SPAC boom from an investigator's perspective. And I'm joined, as I often am, by my partner Michael Stockham here at TK, and really excited to welcome two subject matter experts and big deals in their respective industries. Todd Ranta, a partner with PwC, and Scott Mascianica, who is an assistant director in the SEC's Division of Enforcement, And he works out of the agency's Fort Worth regional office. So I'm going to jump right in to our topic because we want to cover a lot today, and we're giving two sessions to this topic, and I can think of no better way to celebrate what is apparently our one year anniversary for Coffee and Conversation than talking about SPACs, which is pretty exciting for lawyers and maybe non-lawyers alike. But it certainly is a hot topic and you can't really get in and out of a day without hearing somebody talk about SPACs, write about SPACs, speculate about SPACs. They have been hot, hot, hot. And then we've seen a real slowdown in April, maybe due to some pronouncements, people wondering what certain statements might mean or the impact and plans going forward for SPACs. So we could spend days on this topic. Certainly an intense CLE would take longer than the time we have today. So I'm really going to ask the group to focus on SPACs, how they differ from traditional IPO companies and what that might mean in terms of risk areas for potentially heightened scrutiny, whether the same old rules apply, and what we think of from an investigator's perspective and how others should be thinking in terms of mitigating, identifying, preventing or addressing risk in connection with SPACs, the de-SPAC transaction and the life of being a public company going forward. So without further ado, I'm going to throw it to Scott Mascianica, SEC Division of Enforcement Assistant Director. Scott, this is a big question and probably unfair, but would you take just a few minutes to level set our audience? I bet they know a little bit about SPACs, but help us really set the playing field of what we mean when we say "SPAC" and some of the big hallmarks that make a SPAC a little different from other companies that people might be more familiar with.

What Is a SPAC, and What Makes It Different from a Traditional IPO?

Scott Mascianica: Thanks, Jessica. And that is a very weighty question. We could probably suck all the air out of this podcast just trying to answer that, but maybe best to orient ourselves with just a 30,000-foot flyover in terms of what a SPAC is and some of the parties and how a de-SPACing transaction, as most people have probably heard it, ultimately comes about. So in terms of the first part of your question, what is a SPAC? So a SPAC is a special purpose acquisition company. And what that means is it's a blank check company that does not have any operations but engages in an IPO, raising funds from institutional and retail investors with the aim of ultimately engaging within a certain timeframe a business combination transaction, meaning a merger/acquisition with a private target company. That timeframe is typically set forth in the SPAC's charter. Anywhere from 18 to 24 months is what you will typically see. There are some additional timeframes that may exist in terms of Nasdaq listing requirements, but typically the 18- to 24-month window is what we would look at for a timeframe for a transaction. Now, in terms of the formation of a SPAC, a SPAC is formed by what is termed a sponsor, which is typically an individual or an entity that has usually robust experience in the public company issuer space. And because a SPAC doesn't have any operations — it's a blank check company — the primary marketing tool, or an allure, to investors is the expertise and experience of the SPAC sponsor and then the SPAC's directors and officers. So really, investors are putting their trust and literally entrusting their funds to the SPAC sponsor and SPAC management, with an eye towards management and the SPAC sponsor, along with other participants in the SPAC such as underwriters, identifying a viable target and then ultimately engaging in that business combination I mentioned earlier. So after investors invest their funds, those funds are typically held in trust, and those funds will stay in trust until typically one of two things happens. The first would be that business combination. So there is in fact a de-SPACing transaction, as it's referred to, and we'll certainly talk a lot about that, I imagine, here today. The second would be if the SPAC liquidates, and the SPAC would liquidate if, by the terms of its charter, the SPAC does not engage in that business combination transaction within that timeframe set forth, that typically 18 to 24 months as I mentioned. There are certain exceptions to that timeframe, and we can get into the nitty gritty, I'm sure, about it in terms of extensions that shareholders could vote on and so forth. But those are typically the ways that the funds are going to come out of the trust account. Now, we're already getting into the exceptions to the general rule because one aspect of SPAC operations is that shareholders at different points in time within the SPAC may have the right to redeem their shares. And what that means is that if they want to vote to receive their pro rata share of the funds in a SPAC's trust account, they can vote for that redemption, meaning they can get their investment back out. Again, very, very 30,000-foot fly over, and I'm sure we'll unpack this year a little bit more in the coming minutes. But at that point, if these shareholders vote for a business combination, which is typically the way SPACs operate, providing the shareholders the right to vote in favor or against that transaction, then the business combination will proceed. And then the previously private entity will become a public issuer under the SEC rules and will be subject to all the formal SEC reporting requirements thereafter. So in a couple minutes, that's from SPAC formation to the de-SPACing transaction. And again, I'm sure we'll talk a lot more about each of those phases in more detail. I'm going to take a beat there before getting to the second part of your question, because I don't know if there's anything else that you or Michael want to drill into there.

Jessica Magee: I just want to ask one quick follow up, and I know the answer, but it's just always something that, it's to a layperson, I think, surprising. So a SPAC public transaction, they go through an IPO, there's an S-1 that's filed. But if a person were to go read that document, they're not going to see a lot of the language and sort of that meaty substance that they might typically see if they were to go read a traditional company's IPO registration statement, right?

Scott Mascianica: That's correct.

Jessica Magee: So I think it's really important, your point, I think was really well said, that you're really entrusting not only because the money is going into trusts, but structurally who's behind the company, who the sponsor is. So I think that's a really good theme to just carry through our talk today.

Scott Mascianica: Absolutely. And I think as we delve into some more detailed discussion around healthy and balanced disclosures, I think on that particular point, we're going to get into some of the division guidance that's come out recently that will touch on that exact topic. So definitely a good one to flag. In terms of the differences between the traditional IPO route and the SPAC route, I actually think it's best to start with the similarities because there are some. And namely for a SPAC and the company that is going through what we would all refer to as the traditional IPO route, they are both going to file typically an S-1 registration statement to register their shares with the commission. They are both going to be subject to the SEC comment process. So both entities are going to be subject to that same process from the SEC side. Now, the differences really show based on the differences in operations at the time of those filings. So for a traditional company, they will typically have historical operations. There will be sales, there will be revenue, there will be expenses. And so therefore, the entire process of going through that filing is going to necessarily require audited financial statements, discussion of the operations, and that's going to make the comment process typically on average a little bit longer and more detailed. In comparison, the SPAC doesn't have operations. There are not much in the way of transactions. They may have limited investments, but it's mostly going to be cash held in a trust account. And so therefore, that comment process is going to be a little bit more streamlined. And so therefore, when we're looking at the timeline that's coming out of that, for a traditional IPO, it can be much longer. I've seen anywhere from six to 12 months on average, depending on what you're looking at. Obviously, it's going to depend on the facts and circumstances. But from an average perspective, when you compare that to a SPAC, I've seen anywhere from two to four months on average. So for a SPAC, it will definitely be a lot quicker. But there's other differences as well. When you're looking at the pricing of an IPO, the pricing for the traditional route, it's going to be subject to market risk. That pricing is going to be determined by the very basic fundamentals of supply and demand that happen at the time of the IPO, whereas for a SPAC, because there aren't operations, there's typically going to be a flat established rate per price per share — usually $10 per share is what you'll see — that's established at the time of the IPO. There are a lot of other differences. I mean, if we want to hyper nerd out, we can talk about WKSI differences and ineligible issuers. But I think we don't want to get that nitty gritty right now. But the point being, there are differences, starting with the same similarities, but coming out of those similarities, you start to see some divergence.

Jessica Magee: I don't know whether to credit 10 points or ding you 10 points for the use of WKSI and just sliding in there. For those that are not as sophisticated as Scott, that's a well-known seasoned issuer. I'm going to ding myself 10 points for feeling like I needed to come in hot like I knew what that was, too. So good for us.

Scott Mascianica: I feel like I was a little bit of a dig there, Magee. Come on.

Jessica Magee: Not all, but I also, you know, dug myself a little bit. Anyway, Michael, chime in. What are you thinking hearing that? For me, that was a good level set, and I think that's the right sort of baseline for what we want to talk about today. What do you think, Michael?

Perspectives from an Auditor: Shortened Timeline, Sponsors and Management, Level of Scrutiny

Michael Stockham: Yeah, excellent. Nice sort of postage stamp explanation there on SPAC and where it goes, give the audience a good idea of what we're talking about here. Todd, I want to turn a little bit to you. SPACs are certainly not anything new. I mean, they seem to be all the rage and all the craze right now. Frothy market, some people might say, and maybe they've been slowed down or put on their heels. But from an auditor, an outside observer in your forensic department, PwC, etc., what do you see in the SPAC market? What are some of the concerns forensics has? What are some of the touchpoints you might want to share with the audience?

Todd Ranta: Yeah, great question. I mean, I think when you get to it, SPACs have been around a long time. We're talking about it today because it is the craze, right? You're reading about it on the front page of many different newspapers. And it's really, why is that, right? And I think Scott did a great job of laying out what they are. But why? Why the craze? And I think when you get down to it, as opposed to the traditional IPO process, private companies can merge with a SPAC, and they can become a public company much faster and also with more certainty and, depending on who the SPAC sponsor is, potentially a more experienced management team. So in 2020, there are so far more, there were 300 SPACs were launched, raised $80 billion, and that activity has just increased in 2021. And so it's really, hey, why is that the case? And I think when we look at that, I'd say number one, it's speed and timing. And I think, Scott, you touched on this as well. You know, the SPAC merger process can take place in two months to maybe six months, where if you look at a traditional IPO and the full readiness process around that, that may be a year to two years. And so for a company who's looking for fast access to the capital markets, this could be viewed as a big positive and maybe a potential shortcut to getting to the capital markets faster. However, when I when I wear my forensics hat, I look at that short timeline as a risk and thinking about all the IPO readiness tasks that need to still be accomplished. Whichever method you choose in a SPAC, it just has to be completed on a compressed timeline. And so I think there's less room for error. You don't have many quarters to really practice your filing process and assessing that and making adjustments. So I think speed is the reason, but I think there's a risk there that you really need to think about. Probably one of the areas that's probably most attractive is the certainty in that a traditional IPO, there's volatility relative to pricing and missing that right pricing window. You could have a depressed stock price at the time of the IPO. And I think what's attractive in a SPAC deal is that price is negotiated in a merger like other mergers are, and I think this provides a level of protection from that initial short-term market volatility. There's also uncertainty going back to the timeframe in that longer IPO readiness process, you may discover things that need to be remediated, and I think one of the questions you have to ask is, in that short window, does the SPAC have, is the same level of scrutiny able to be applied, find issues that get remediated to help it operate as an effective public company? And then I think the last item — and it's very important, I think, Jessica, it's kind of what you were talking about at the end — is, who is that SPAC sponsor? And who are you partnering with, and what is the experience of that management team? And so hopefully they're focused, they've got an area of expertise that private company wants to tap into and take advantage of that experience and knowledge to have a better, a better public company and a smooth process. But I think when you look at the timeframe of a SPAC and trying to get a transaction done, really looking at that governance and the expertise of the team is going to be a critical element in evaluating it to say, hey, do they really know this market that the target company is in, and are they going to help bring out, hopefully, more value as a combined entity because they have that experience?

Michael Stockham: Todd, just one follow up. As I understand it, there's not really an underwriter involved in a SPAC process. So is that a whole 'nother layer, that sort of scrubbing of a company that's missing in this particular avenue? And does that sort of leave these companies, these SPACs, after the de-SPACing transaction, sort of vulnerable to a whole restatement problem? Are they a little bit more risk there, or no, in your opinion?

Todd Ranta: Yeah. I mean, I guess I look at it more generally as to who are the different sets of eyes that are going to take a look at this before it goes public. And usually the more sets of eyes you have, I think the better off you're going to be, so underwriter is just one part of that process. But I think who your accountants are, who your lawyers are, there's a lot of different people involved in the process, and I think they all bring some skills and experience to the table. So if you're if you don't have as many eyes looking, there may be more, more risk.

Michael Stockham: Makes sense to me. Jessica, you had a, you have a question or a follow up, maybe for Todd or Scott now that we're kind of in the meat of this with the overall umbrella?

Jessica Magee: I mean, I'm just thinking about Todd's point about what eyes you have on it, and it makes me think about who are the stakeholders, who really needs to care. And I think short answer — and certainly I'm putting my SEC old hat on right now — is everyone involved? We've all worked either in companies, with companies, advised companies as they were considering IPOing or even SPACing, or helped, advised or investigated companies on the other side of transactions, be they merger transactions or otherwise. And I think a universal maxim is, to Todd's point, it's not necessarily more eyes or less eyes, but it's the right eyes. Who do you have involved in the decision-making, and are they appropriately empowered and calibrated to identify risk and to leverage expertise? And when a lawyer says that, it sounds like, well, you're just wanting to bloat a bunch of people into a process and it's going to slow us down and we've got to get in the window and the market's frothy but the window is closing and all of these other considerations, which I think has contributed to, rightfully so, to the appeal of SPACs because of the sort of nimble traits that they offer. But there are really important stakeholders that need to be involved or future stakeholders you need to be thinking about all along the way, especially where retail investors are coming in. And so to me, that was just a really important point that you made, Todd. And I don't think it has to lead to analysis paralysis, to use an overused term. I just think it requires some planning and thoughtfulness on the front end because if you're deciding to go in on formation of a SPAC and targeting a de-SPAC on that short timeline, what's your plan, who are your people, what's the execution? Because you're going to have an abridged timeline to stick very, several important landings, and each landing you either don't stick or if you have to extend timelines, go out for votes, things like that, I think those things just create more risk. And I think that's what regulators are going to be looking at. In any investigation, whether it's a SPAC, a traditional offering issue, it really doesn't matter. Whether you're an internal investigator or a regulatory investigator, you're just trying to unpack the facts, and you're looking at what were the humans doing, why were they doing it, when were they doing it and who were they doing it with. And so those things can just be really amplified, I think, in a SPAC timeline to get to the de-SPAC transaction. So I think that was an important point.

Todd Ranta: To add to your point on the right set of eyes, what I always worry about any time you're in a boom market is, the level of activity picks up, but do you have enough experienced professionals out there to keep up with that demand to really give that right level of scrutiny? Or are people sold out and the people getting involved, the market maybe grows of people doing it, but you run out of experienced people to help you through that process. And it's always one of the risks relative to any kind of boom market.

Disclosure Considerations and SEC Guidance

Jessica Magee: It's a fair point. And in a boom market, you also see people tagging on. So if you have objective expertise in SPAC A, and they're experienced, they're qualified, they've got a great network of colleagues across the relevant industries to be able to do the work that needs to be done. And then maybe you have SPAC B where people have maybe different expertise or you could question the expertise. Scott, I know the SEC has sort of reminded market participants lately, don't jump into a SPAC just because a celebrity is involved or a celebrity is sponsoring. A celebrity may have all the qualifications and expertise in the world or may surround him or herself with the right people. It's not a reason necessarily not to do a thing, but it's certainly a factor that should be considered as who's driving the bus and what are the decisions those bus drivers are making? So, Scott, if you sort of address that point and then talk a little bit about this — again, I'm giving you these really unfair questions — disclosure. You know, it's a disclosure regime that we live and die by in the United States with issuers of securities. And again, we could talk about disclosure until we're blue in the face. I want to break it down a little bit. Talk about disclosure considerations, if there are any, if they're any different, very early on, when you're really IPOing the SPAC itself. We're going to get to the de-SPAC transaction proxies, but just the expert sponsors, hopefully. They formed the SPAC. They're taking it public. Are there disclosure considerations?

Scott Mascianica: I thought you were going to ask me a hard question like defining love or something like that.

Jessica Magee: That's coming later.

Scott Mascianica: Yeah, great. Part two. So maybe just to take your first point, though, just about celebrity sponsors. I just don't want that to sort of hang out there. I think the important point that the Office of Investor Education was trying to highlight there was it's just important for investors to be thoughtful about who management is and the expertise they have to ensure that when you're entrusting your money to these individuals, that it is a thoughtful consideration beyond publicity. And I don't think that's a real novel statement in and of itself, but I think, just given the craze around here, around this area, I should say, was something that certainly they felt was important to highlight and I would agree with. And again, I noticed this, we jumped right into the questions. I just want to make sure that I'm kind of highlighting this from the start that all the opinions I'm saying today, they're my own. I'm not speaking for the commission. I wish I could sometimes, but unfortunately, I don't have that authority. So anything I'm saying here is solely my own view. But I wanted to make sure we talked about the celebrity piece a little bit. On the disclosure side, I think it's best to kind of break this down. Otherwise it's just too significant of a chunk. So first, let's look at the SPAC IPO side. And there had been some sentiment out there. I think a lot of this before a number of SEC divisions issued some statements in recent weeks that the SPAC IPO process itself was safer or less risky from a disclosure perspective than a traditional IPO. And I understand where some of those sentiments are coming from, but I think we've seen over the last few months a number of really thoughtful pronouncements from various divisions within the SEC on this topic to highlight various areas where SPAC participants need to be thoughtful when it comes to balanced and healthy disclosure. And one that I want to highlight is the Division of Corporation Finances Disclosure from December of 2020 that actually went through a number of different considerations for SPAC participants when it comes to disclosure around the IPO. I would encourage everybody to read that document in full. It's not very long, but there are a number of areas in there that are extremely important in things that investigators within the Division of Enforcement think about. And I just want to highlight a couple very quickly. The first just relates to conflicts of interest. When you have sponsors or directors or officers, do they have obligations to other entities, whether it be contractual or fiduciary, that may in some way limit or impair their ability to act in the best interests or solely in the best interest of SPAC shareholders and investors? The second relates to financial incentives. Sponsors and other insiders within a SPAC have significant financial incentives to execute a de-SPAC transaction. Have those been disclosed? Do investors appreciate these incentives that exist? And Michael had mentioned just in terms of the lack of an underwriter. Well, if there is an underwriter that was involved within the SPAC IPO or serving and more of a capacity as an advisor or even in a traditional underwriting capacity, has disclosure been full and complete around the compensation that they receive? In a traditional IPO, you're going to see a flat fee that would exist, 5 percent, 6 percent, in terms of any sort of discount, whereas for a SPAC, it's usually split, whereby a portion of the fee is actually deferred and held in the trust account until the time of a de-SPAC transaction. And if a de-SPAC transaction doesn't happen, that deferred comp is actually used in part to pay back the SPAC shareholders if the SPAC liquidates. So has that been disclosed? That may be an important consideration for investors. So again, the financial incentives are another area to consider when it comes to disclosure. Third point, we talked about the prior experience or the experience of management generally, but I think more specifically, it's the prior experience of the sponsor and management in the SPAC space. And there's one line from the Corp Fin guidance. I want to read it because I haven't seen a lot written on this, and I think it's incredibly important. The guidance notes, "If the sponsors, directors, officers or their affiliates have prior SPAC experience, have you provided disclosure about the prior experience and the outcome of presented and completed business combination transactions and liquidations?" To Todd's point earlier, from a supply and demand perspective of looking at the number of qualified individuals to participate in SPACs, where we're starting to see a number of SPACs where there are repeat participants, has there been balanced disclosure about how those prior SPACs have gone? Just another important consideration. Fourth point, pre-selecting targets. And this is an interesting area to unpack, but from design perspective, high level, a SPAC is a blank check company. It has no operations. It is designed with the idea of engaging in future acquisitions. If there has been a pre-identified target or even a pre-selected target, that then runs the risk of there being some false and misleading, potentially materially, disclosures within any of the SPAC IPO documents. Typically, you'll see in a SPAC prospectus a representation to the effect that they have not identified a target, that they haven't engaged in any discussions with target entities. If that's in fact happened, that could present a problem. And you can even get more granular, and if they've actually already pre-selected a target, the target's financial statements need to be incorporated within the S-1 under Reg SX. So it's not as simple as some sort of blank form, we don't have operations, just be able to do it real quick. There needs to be thoughtful consideration about what needs to be disclosed at the time of the SPAC IPO. So again, very high level buzz through on that part of it before shifting to what it looks like later in the lifecycle. Take a beat to see if you guys got any thoughts you want to add.

Jessica Magee: There's a lot to unpack there. I need to throw a couple of questions to the group. I wonder if you guys are going to have different views on this. In really thinking about it in terms of like an IPO readiness, and this, I think, highlights the differences between companies that do traditional IPO and a SPAC IPO because we're saying, OK, you need to think about whether you've got actual or potential conflicts and what's your disclosure analysis, what are you disclosing, who tells you, what makes those decisions, who's writing that disclosure? I mean, it's not like an operating company with this, all these policies and procedures, a disclosure committee, and here's how we do all that. Do you just wing it and hope for the best? Are you, is it your outside counsel that's writing that disclosure for you? Maybe it's a case-by-case determination, but any of the three of you have views on that? Or maybe there's a clear answer, and I just don't know it. Todd, you look like maybe you have a have a feeling about this.

Todd Ranta: Yeah, I mean, I would hope you have very good SEC disclosure counsel to walk you through it. And I really, I think Scott outlined it very well, and to me, it's about transparency. And when I put my investigator's hat on, who knew what, where, when and how? Who's involved, how did the money flow, and is all that really going into what's being disclosed or not? Because I think that's what they're trying to get at. Is there a prior track record? If so, what is it? So do investors have the right information they need, and what we always see in investigations is, well, what was going on that was not disclosed that may have changed right an investor's viewpoint of the transaction. And so Scott's description was just great relative to laying out all those points.

Jessica Magee: So, Michael, I, Todd, I completely agree. You've got to have outside securities counsel that's stewarding you through this situational awareness of how disclosure works, how other people are disclosing things, what's specific and different about your people, your company. And then I think you don't do that once, you have to build in time to make sure you're doing that and that you're doing the human thing of sitting back, reading it with fresh eyes, reading it from the perspective of reasonable potential retail investor and the whole, the old adage of what does an investor care about and the total mix of information. Michael, I'm curious about your thoughts on the line that Scott read. I think that is a really important feature of that statement, which is, hey, sponsors, hey, officers, consider your prior track record. And then when you're doing that, what would a reasonable investor want to know and the total mix of information about successes, failures, timelines, etc.? What do you think about that, Michael?

Michael Stockham: Well, any sort of track record is going to be extremely important for anybody. I mean, from a defense counsel standpoint, if the sponsor has flopped and they decide not to tell that, that would be what we call in trial law a "bad fact." We would want to be able to get that out. You think about the overlay too and some of the minefields we've been talking about — regulators disclosures, things that are done by the SEC — but there's another set of eyes that are watching all this, and that's going to be the plaintiff's bar. And they're going to be watching in a number of different places, and in fact, in this particular area, I think they're watching pretty heavily state law, fiduciary duty obligations of candor and loyalty and what in the SPAC process is actually being candid. And then as we get closer to the confluence of going from SPAC to de-SPAC, exactly what are the directors explaining? Are they being candid to their current shareholders? I can see it being a very thorny period of time if you had a SPAC that had originally picked out a target and was going for something specific and sort of, in a way, the transaction was already baked in to the momentum of the deal. That's a period of time of shifting loyalties, perhaps, a period of time of trying to figure out when you say what to whom when, which can be, if you don't game it out exactly along pieces on a chessboard, if you will, you could really accidentally trip a wire and end up with some substantial liability to a merger dispute suit or an injunction. Most of those suits, I think, in my opinion, are sort of seeking a mootness fee, and maybe most of the, in the de-SPACing process those lawyers that are filing those suits may not ultimately come away with material information. But if it is material, if it is significant, you've got to think about on the timeline did we, is that going to lead to a significant slowdown of this process, can it unravel the whole de-SPAC transaction, or is it really going to end up to be a large cost in the long run because you're going to have to pay a significant level of attorney's fees because those plaintiffs' attorneys did do a good job of pointing out that material information was not out there for individuals? So there's a number of people that are coming at this transaction all at once, and then when you think about it from the folks that are trying to consummate the transaction, they're doing it in an extremely compressed timeframe. So I think all of that leads to a risk that something, even not meaningful to you, but something can go wrong, and all those risks need to be laid out for the transaction teams on all sides and the management teams on all sides, so they don't get taken by surprise, that they take it seriously and at a measured pace.

Target Companies and Disclosure

Jessica Magee: Scott, can you talk a little bit more about pre-selected or pre-identified targets? Do you mean actually knowing specifically the company that you're going to combine with or we think we've got a soft circle around these three or four companies, but we've not made contact with them? How specific are you talking about in terms of pre-selection? Because to me, that creates a whole host of potential risk areas, disclosure areas, conflict issues.

Scott Mascianica: We got really far into this without me needing to pull the facts and circumstances parachute. But you know, I think for here, it really does depend. And I think more where the guidance is on this topic, and where I'm coming from, is there's a sliding scale between we haven't talked to anybody, we have maybe identified an industry and that's about it, to we have selected a definitive target and we are going after this particular item. To work backwards from that end, if you've identified the target, then it's hard, with the investigator hats that we've all talked about today — I think I want one, I don't have one — but with all of them that we talked about, if that's on, then you have to look at that and say, this is a seemingly an end-around behind a traditional IPO and not providing full and accurate disclosure to the SPAC investors. And that becomes problematic, and certainly that's where I was referencing the potential need to incorporate the actual target financials within the SPAC's financials as any part of filings. As you work backward from there, you do get into the proverbial gray area. What are the facts show? How extensive have those discussions been? Has it been thoughts internal or discussions internal between the SPAC management team, the sponsor, underwriters, just spit balling, "Hey, these are targets that we think about or have thought about but haven't made any contact." Has there been contact? What does that contact look like? How robust have those discussions been? I think all of those facts, whether they rise to liability or not, that's not really what we're talking about because that's going to be dependent upon, again, the facts and circumstances of each scenario. More the point I'm making, and I think why there have been some discussions about this, certainly from the division side, relates to, there could be liability, there could be exposure. And I think that simply by the very fact of the possibility of exposure, that means that it's an area that individuals in this process need to be extremely thoughtful, diligent and thinking about what they need to disclose. So hopefully that answers the question a little bit and unpacks it more for you.

Jessica Magee: Yeah, it does. I mean, Todd, aren't we saying here what we would say in any conversation about investigation, SPACs completely irrelevant? Know thyself. Tell the truth, which means what is the truth, what do people care about. And build in enough time and put in the right people to the conversation to make sure you're doing that to the best of your ability. Perfection an aspirational goal, but reasonableness, good faith and candor, really the rules of the road. Right, Todd? We're saying things we've always said, right?

Todd Ranta: That's absolutely right. And really, you know, when I listen to this, it makes me start thinking about if I was involved in a SPAC, is getting that good legal advice relative to how that process should go relative to disclosures. Because, what do we see on an investigative standpoint? We're reading emails. We're looking backwards at text messages as to who knew what when. And I think if people don't really fully understand what's required and what they know and what they're talking about, you accidentally get yourself into trouble. Relative to like, hey, what were you really thinking at that time, as opposed to making sure you have a very measured approach to doing this. Scott said facts and circumstances on each one of these, but I think you really need to be thinking about the process and have a very good process as to what you know, what you're doing at different points and what you're disclosing at that point to ensure there's transparency. Because when you listen to all of this, at the end of the day it's about public trust, it's about transparency and it's about confidence in the capital markets and making sure the right information is out there. And I think keeping that in mind and making sure that transparency is there at the appropriate times in any of these transactions.

Jessica Magee: I agree completely and need to make the important point that my mug is running empty. So I am going to take a minute to refill my coffee cup, and we will be back with our beloved audience for part two of our Coffee & Conversation on the SPAC boom from an investigator's perspective, where we will hear from Scott Mascianica of the SEC and Todd Ranta of PwC on disclosure and other issues in connection with the de-SPAC transaction. Auditor and forensics perspectives about the merger or business combination and the life of a public company day to day after you've gotten through the process of getting public and what the SEC's actions to date can tell us and final thoughts. So thanks for tuning in today, and we will be back with you soon with part two.