Last month’s announcement that former President Donald Trump’s newly formed media company, Trump Media & Technology Group (TMTG), planned to go public through a merger with the publicly-traded special purpose acquisition company, or SPAC, (SPAC) Digital World captured the attention of securities lawyers, finance industry participants, and Trump supporters. Immediately, the details as to how this happened, when this happened, and whether this new company will perform pervaded the popular press, and got the general American public focused on SPACs.

SPACs, or special purpose acquisition companies, are “blank check” public companies formed to merge with or acquire an existing private company for the purpose of taking it public. When a SPAC business combination—or de-SPAC transaction—is announced, the SPAC’s original shareholders, typically sponsors and other institutional investors, have the opportunity to redeem, i.e., get their shares repurchased. The merger of a SPAC with a target company also triggers certain challenges that go along with a company having to rapidly get ready to operate as a public company, such as meeting an accelerated public company readiness timeline, as well as complex accounting and financial reporting/registration requirements, including the filing of a prospectus with fulsome disclosures relating to the target company. While SPACs are not new, they have gained popularity over the past 18 months, in part because they do not present onerous regulatory hurdles and disclosure requirements as other avenues for taking a company public, most commonly, the initial public offering (IPO). Earlier this year, the SEC has signaled a crackdown of SPAC regulation and telegraphed a need for reform in this space, particularly relating to disclosure requirements.