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Chewy’s co-founder is set to become GameStop’s chairman. Ryan Cohen’s investment in GameStop last year was one of the factors driving its torrid run as the “meme stock” of choice. Mr. Cohen and several others with connections to the online pet retailer are expected to be elected to GameStop’s board in June, pledging to turn GameStop retailer into the “Chewy of gaming.”

John Coates, the acting director of the corporate finance division at the S.E.C., issued a lengthy statement yesterday about how securities laws apply to blank-check firms. In particular, he is interested in a crucial (and controversial) difference between SPACs and traditional I.P.O.s: blank-check firms are allowed to publish often-rosy financial forecasts when merging with an acquisition target, while companies going public in an I.P.O. are not.

“With the unprecedented surge has come unprecedented scrutiny,” Mr. Coates wrote of the recent boom in blank-check deals. Investors raise money for SPACs via an I.P.O., and those funds are used to merge with an unspecified company in the future, thereby taking it public. Because the so-called “de-SPAC” deal is technically a merger, it’s given the same “safe harbor” legal protections for its financial forecasts as a typical M.&A. deal. With traditional I.P.O.s, companies can’t issue such projections to prospective investors, because regulators consider it too risky for firms as yet untested by the public markets.

The S.E.C. thinks financial forecasts for SPACs might be a problem. They can be “untested, speculative, misleading or even fraudulent,” Mr. Coates wrote. At the end of his statement, he suggested a major rethink of how the “full panoply” of securities laws apply to SPACs, which could upend the blank-check business model:

If we do not treat the de-SPAC transaction as the “real I.P.O.,” our attention may be focused on the wrong place, and potentially problematic forward-looking information may be disseminated without appropriate safeguards.

The letter serves as a warning. Unless the S.E.C. issues new rules (as it did for penny stocks) or Congress passes legislation, SPAC projections will continue. But this strongly worded statement could moderate or even mute them. “The S.E.C has now put them on notice,” Lynn Turner, a former chief accountant of the agency, said.


Leon Black’s announcement that he was stepping down from Apollo sooner than expected came just days after directors learned of sexual harassment allegations against him, The New York Post reports. Mr. Black denied the claims, which the woman, Guzel Ganieva, tweeted about in mid-March.

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