“I am shocked, shocked”: Blank check companies and the “scandal” of the JOBS Act
A little over two months ago Usha Rodrigues suggested, in a piece in The Conglomerate blog, that Special Purpose Acquisition Companies (SPACs, or “blank check companies”) would very likely embrace the Emerging Growth Company status available to them through the JOBS Act. Why does this seem to her like a “scandal”?
Because EGC status and the exemptions it offers are supposed to spur job creation. But SPACs — “basically empty shells with almost no employees that are used in mergers or as a backdoor route to U.S. stock listings,” in Rodrigues’ phrasing – hardly fit the profile of job creators. She writes:
JOBS Act, meet the Law of Unintended Consequences. Nothing in JOBS requires that EGCs be job creators–they just have to “total annual gross revenues of less than $1 billion.” . . . But the statute doesn’t require jobs creation, so I don’t see why we care. Is the scandal that some companies that don’t create jobs are benefiting from the law? I am shocked, shocked.
Two months later, do the numbers bear out Rodrigues’ fear? Of course, it’s very hard to count how many actual jobs have been created by the JOBS Act or any of its individual provisions. However, using the Knowledge Mosaic SEC Filings page, we can count the number of SPACs that have declared EGC status. As of today, the number stands at 46.
That means about one out of every nine Emerging Growth Companies is also a blank check company.
Click here to see a Word document listing newly declaring EGCs in the month of August. We can identify the SPACs by the 6770 SIC code. There are nine already this month – about one out of every five in August.
Click here to read my previous Blogmosaic pieces on the JOBS Act. To read other blog pieces by writers like Rodrigues, go to the Knowledge Mosaic News & Spotlight Archive, select “Blogwatch” from the dropdown menu of publications, and enter relevant keywords. “Emerging Growth Company” is a good phrase to start with.