Skip Navigation
Better Together | Risk Strategies to Join Brown & Brown  Learn More
  • Careers
  • Report a Claim
  • Contact Us
Risk Strategies Logo
  • Industries

    • Agriculture
    • Architects & Engineers
    • Aviation
    • Cannabis
    • Construction
    • Dental
    • Education
    • Entertainment
    • Financial Services
    • Fine Art
    • Healthcare
    • Law Firms
    • Marine & Yacht
    • Nonprofit & Human Services
    • Private Equity
    • Public Sector
    • Real Estate
    • Relocation
    • Transportation
    • Waste & Recycling
    • Wineries
  • Solutions

      • Captives
      • Casualty
      • Cyber
      • Environmental
      • International
      • Executive Risk Solutions
      • Property
      • Surety
      • Employee Benefits Overview
      • Benefit Administration and Technology
      • Benefits Compliance Support
      • Data & Analytics
      • Human Capital Advisory Services
      • International Benefits
      • Absence Management & Ancillary Programs
      • Voluntary & Lifestyle Benefits
      • Medicare
      • Financial & Wealth Overview
      • Retirement Plan Services
      • Executive Benefits
      • Life Insurance
      • Private Client Services Overview
      • Homeowners
      • Flood
      • Collections
      • Umbrella & Excess Liability
      • Auto
      • Collector & Exotic Car
      • Boat & Yacht
      • Travel Medical & Trip Insurance
      • Family Office
      • Cyber Insurance - Family Office
      • Cyber Insurance - Individuals
      • Life Insurance
      • Specialty Coverages
      • Private Client Risk Resource Center
    • Reinsurance
      • Risk Management Services Overview
      • Analytics
      • Claims Management & Advocacy
      • Loss Control
      • Safety Consulting Services
      • Pro Safety Training Courses
      • Workers’ Comp: Premium Review & Recovery
  • Consulting

    • Consulting Overview
    • Actuarial Services
    • Healthcare Claim Audit Services
    • Health and Welfare
    • Mergers and Acquisitions
    • Pharmacy Consulting
    • Retirement Benefits
  • News and Insights

    • All Insights
    • Blog
    • Emergency Resource Centers
    • Employee Benefits Compliance Center
    • Events
    • Media Coverage
    • State of the Market Reports
    • Press Releases
    • Private Client Resources
    • Webinars
  • Company

    • About Us
    • Annual Report
    • Careers
    • Culture and Values
    • Diversity, Equity & Inclusion
    • Environmental, Social, & Governance
    • General Terms of Business
    • Leaders
    • Local Expertise
    • Mergers & Acquisitions
    • Recognition & Awards
    • Risk Strategies Foundation
    • Transparency and Disclosures
  • Join Us
    • Careers
    • Mergers & Acquisitions
  • Industries
    • Agriculture
    • Architects & Engineers
    • Aviation
      • Aviation Business Insurance - Manned Risk
      • Non-Owned Aviation
      • Unmanned Aerial System and Drones
    • Cannabis
    • Construction
      • Alternative Solutions
      • Financing & Pre-Construction
      • Insurance Solutions
      • Risk Management
      • Surety
    • Dental
      • Insurance for Dental Professionals
      • Dental Malpractice Insurance
      • BOP Insurance - Dental Practices & DSOs
      • Dental School Graduates
      • Dental Associates & Hygienists
      • Dental Practice Owners
      • Dental Service Organizations (DSOs)
    • Education
      • Employee Benefits for Education
      • Property, Casualty & Liability for Education
      • Student Health & Wellness
        • Student Health Brokerage and Consulting
        • Student Health Plan Administration
        • Student Health Insurance Plans
        • Solutions for Student Athletes
        • Student Health & Wellness Tools
        • Special Risk Insurance
    • Entertainment
      • Film & Television
      • Advertising Production Wrap Ups
      • Advertising/PR
      • Event Cancellation & Non-Appearance
      • Music & Touring
      • Theatrical Production & Live Performance 
      • Venue Insurance
    • Financial Services
      • Asset Managers
      • Banks & Non-Bank Lending
      • Collections
      • Consumer Financial Services
      • Financial Tech
      • Insurance Companies
    • Fine Art
      • Dealers and Auction Houses
        • Galleries
        • Private Art Dealers
      • Collections
        • Private Collectors
        • Coins, Paper Money & Numismatics Collections
        • Gold, Bullion & Precious Metal Collections
      • Artists
      • Museums and Foundations
        • Museums
      • Fine Art Packers / Shippers / Warehouses
    • Healthcare
      • Employee Benefits - Healthcare
      • Managed Care / Stop Loss
      • Medical Malpractice
      • Property & Casualty - Healthcare
      • Reinsurance
    • Law Firms
    • Marine & Yacht
      • Yacht Insurance For Individuals
        • Mega Yachts
        • Cruiser Insurance - Jackline
        • One-Design Insurance Program
        • Sailors Health Insurance Program
        • US Sailing Insurance Solutions
      • Commercial Marine Insurance
        • Aquaculture
        • Cargo & Transit Insurance Solutions
        • Crew Medical Insurance
        • Hull & Machinery
        • Marine Claims Service
        • Marine Construction
        • Marine Liability
        • Ports & Terminals
        • Protection & Indemnity
        • Recreational Marine Businesses
        • Sailing Organizations – Burgee Program
    • Nonprofit & Human Services
    • Private Equity
      • Crypto Companies
    • Public Sector
      • Public Safety Organizations & Municipalities
    • Real Estate
      • Commercial
      • Community Associations
      • Hospitality
      • Residential / Habitational
      • REITs
      • Retail
      • Specialty Programs
    • Relocation
      • Domestic Household Goods
      • Expat Renters & Living Insurance
      • Relocation Claims Service
      • International Household Goods
      • Supplemental Movers Coverage
      • Temporary Living Insurance
      • Vacant Home
    • Transportation
      • Business Auto Insurance
      • Last Mile Delivery
      • While Under Dispatch Insurance
      • Forwarding & Brokering
      • Workers' Compensation
    • Waste & Recycling
    • Wineries
  • Solutions
    • Commercial Insurance
      • Captives
      • Casualty
        • Analytics
        • Auto Liability & Physical Damage
        • Captives & Alternative Risk Financing
        • Claims Advocacy & Loss Control
        • Excess Liability
        • General Liability
        • Product Recall
        • Workers' Compensation
      • Cyber
        • Cyber Resolute
        • Cyber Risk Assessment and Analytics
        • Cyber Risk Response & Claims Advocacy
        • Cyber Insurance - Family Office
        • Cyber Insurance - Individuals
      • Environmental
        • Contractors Pollution Liability
        • Environmental Excess
        • Environmental Liability Transfer
        • Environmental Liability - Healthcare
        • Environmental Liability - Higher Education
        • Pollution Legal Liability
        • Environmental Liability - Private Equity
        • Professional Environmental Liability Insurance
        • Real Estate Development
        • Remediation Cost Cap
        • Secured Creditor Protection for Lenders
        • Underground Storage Tanks
      • International
      • Executive Risk Solutions
        • Executive Risk Solutions - Entertainment
        • Executive Risk Solutions - Financial Institutions
        • Executive Risk Solutions - Healthcare
        • Executive Risk Solutions - Real Estate
      • Property
        • Builder's Risk
        • Property Claims Services
        • Inland Transit and Ocean Cargo
        • Natural Hazard Catastrophe Modeling
        • Political Violence and Terrorism
        • Property Damage & Business Interruptions Valuations
        • Property Loss Prevention and Control
      • Surety
    • Employee Benefits
      • Employee Benefits Overview
      • Benefit Administration and Technology
      • Benefits Compliance Support
      • Data & Analytics
      • Human Capital Advisory Services
      • International Benefits
      • Absence Management & Ancillary Programs
      • Voluntary & Lifestyle Benefits
      • Medicare
    • Financial & Wealth
      • Financial & Wealth Overview
      • Retirement Plan Services
      • Executive Benefits
      • Life Insurance
    • Private Client Services
      • Private Client Services Overview
      • Homeowners
      • Flood
      • Collections
      • Umbrella & Excess Liability
      • Auto
      • Collector & Exotic Car
      • Boat & Yacht
      • Travel Medical & Trip Insurance
      • Family Office
      • Cyber Insurance - Family Office
      • Cyber Insurance - Individuals
      • Life Insurance
      • Specialty Coverages
      • Private Client Risk Resource Center
    • Reinsurance
    • Risk Management Services
      • Risk Management Services Overview
      • Analytics
      • Claims Management & Advocacy
      • Loss Control
      • Safety Consulting Services
      • Pro Safety Training Courses
      • Workers’ Comp: Premium Review & Recovery
  • Consulting
    • Consulting Overview
    • Actuarial Services
    • Healthcare Claim Audit Services
    • Health and Welfare
    • Mergers and Acquisitions
    • Pharmacy Consulting
    • Retirement Benefits
  • News and Insights
    • All Insights
    • Blog
    • Emergency Resource Centers
      • Cybersecurity
      • Earthquake
      • Hurricane
      • Pandemic
      • Riot & Civil Unrest
      • Severe Storms
      • Violence & Active Shooter
      • Wildfire
      • Winter Weather
    • Employee Benefits Compliance Center
    • Events
    • Media Coverage
    • State of the Market Reports
    • Press Releases
    • Private Client Resources
    • Webinars
  • Company
    • About Us
    • Annual Report
    • Careers
    • Culture and Values
    • Diversity, Equity & Inclusion
      • BeHEARD Series
      • DE&I Structure
      • Employee Resource Groups
    • Environmental, Social, & Governance
    • General Terms of Business
    • Leaders
    • Local Expertise
    • Mergers & Acquisitions
    • Recognition & Awards
    • Risk Strategies Foundation
    • Transparency and Disclosures
      • General Terms of Business
      • Conflict of Interest Policy
      • Compensation Disclosure
      • Enterprise Risk Management
  • Join Us
    • Careers
      • Benefits & Wellness
      • Investing in Growth & Leadership
      • Life at Risk Strategies
      • Next Steps
    • Mergers & Acquisitions
      • Partnership Benefits
      • Why Join Us?
      • Onboarding & Integration
  • Careers
  • Report a Claim
  • Contact Us

You are about to leave Risk Strategies website and view the content of an external website.

You are leaving risk-strategies.com

By accessing this link, you will be leaving Risk Strategies website and entering a website hosted by another party. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Risk Strategies website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Risk Strategies.

OK
  • News and Insights
  • Blog
Subscribe

Subscribe via Email

  • News and Insights
  • Blog
April 08, 2021

Is the SPACs sparkle dimming? Not likely

Executive Risk Solutions
4 min read
Neil Krauter
  • Facebook
  • X (Twitter)
  • LinkedIn
  • Email
SPAC liability, David Nussbaum | Risk Strategies
  • Facebook
  • X (Twitter)
  • LinkedIn
  • Email
Is the SPACs sparkle dimming? Not likely

Interest in Special Purpose Acquisition Companies (aka, SPACs) has reached fever pitch as new backers jump into the market and regulators begin looking more closely at the deals and their structures. I recently hosted a wide-ranging, highly informative Risk Strategies webinar featuring EarlyBird Capital Chairman of the Board, and original SPAC innovator, David Nussbaum; former SEC lawyer and current partner at Holland and Knight, Bradley Houser; and XL Insurance Senior Vice President Justin Gilmore. The session covered a lot of ground - examining the current SPAC environment, evolving deal structures, participants, and risks, as well as important federal regulation changes.

You should definitely check out the full recording here, but here’s a quick overview of key takeaways.

The market, while slowed, is still moving fast

That hypersonic acceleration of the SPAC market has cooled in recent weeks. David Nussbaum estimated deal rates had slowed from at least 25 per week in January/February to a fifth of that figure. He said he expect the rate to move higher again in coming months, likely 7-8 per week, but not returning to the January-February highs.

Reasons for the slow down and lower are manifold, but David said a fundamental issue was the sheer volume of deals and the availability of target companies. SPAC targets, he noted, are typically private, $1b+ companies at least nominally positioned to go public and willing to do so. There are only so many of those to go around.

New, higher quality funders are entering the deal stream

Even as the market takes a breather, new funders are stepping into the picture. Early SPAC backers came largely from the hedge fund world, David explained, while newer arrivals include venture capital firms, top mutual funds, and other more mainstream investment companies. These new arrivals bring distinct benefits to the SPAC arena, including a better ability to identify and work with promising target companies that can bring stronger performance in their IPO, as well as adding higher quality expertise to the boards of these firms.

In this maturing environment, he said, backers are looking first at SPAC teams with access to proprietary, less competitive target sets. This, David explained, is driving interest in emerging markets, as well as in SPAC teams that can more easily attract capital and have public market experience to help ensure target companies will perform as needed in their IPO.

Regulators are taking a closer look at disclosure rules and deal structures

With potential for large returns, fast deal timelines, and a highly competitive market for deal making, disclosure rules are getting a revisit. Bradley outlined key aspects of Disclosure Guidance: Topic No. 11 issued by the Securities and Exchange Commission (SEC) in December of 2020, noting its emphasis on the need for fulsome disclosure of possible conflicts of interest among the sponsor team, clear explanation of sponsor investment benefits, and deal timeline pressures on the sponsors.

Bradley also noted that the SEC’s Enforcement Division recently sent letters of inquiry to a number of deal underwriters asking them to voluntarily provide the agency with information on how they are managing the risks inherent in the deals.

Insurers are evolving D&O coverages as deal structures change and lessons are learned.

Justin from XL Insurance covered important ground on coverage considerations. He explained that the biggest D&O exposure coverage can address centers on conflicts, real and perceived. The ability in SPAC deals to benefit from deals whether or not they are ultimately successful can, Justin said, create an incentive to do “any deal” and has the potential to trigger claims against management from participant who don’t benefit. Policy language can get granular, he noted, with the definition of terms like “affiliate” often crucial for determining if a claim will be covered.

He also noted that so-called “serial” SPAC sponsors, those with multiple active SPAC deals in flight simultaneously, are focus concern for underwriters. Allegations of conflict and favoritism can quickly lead to claims that spread across the portfolio of deals and involve highly detailed aspects of the deal structures.

There’s a ton more valuable information to be gleaned from the Webinar, so I highly encourage you to click in and watch it all.

If you have questions or want to connect on any issues or topics we discuss, reach out to me directly: NKrauter@krautergroup.com

 

The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client. 

Related Posts

See all posts

Executive Risk Solutions Financial Services
4 min read
February 07, 2025

How Deregulation Could Affect Your Financial Services Business

Key takeaways: The new presidential administration is likely to prioritize a deregulatory agenda. …
Read article
Executive Risk Solutions
3 min read
October 29, 2024

ESOPs: The Importance of Risk Management and Insurance Planning

Employee stock ownership plans (ESOPs) are increasingly popular, especially for smaller to …
Read article
Executive Risk Solutions Cyber
4 min read
October 02, 2024

DOJ’s Corporate Whistleblower Awards Pilot: Compliance & Risk Impact

In August 2024, the U.S. Department of Justice (DOJ) launched its Corporate Whistleblower Awards …
Read article
Risk Strategies Logo
  • Report a Claim
  • Contact
  • Terms of Use
  • Cookie Policy
  • Privacy Policy
  • Consumer Health Data Privacy Notice
  • Accessibility
  • Health Plan Transparency Compliance
  • Accessibility
  • Cookie Policy
  • Health Plan Transparency Disclosure
  • Privacy Policy
  • Terms of Use
©2025 Risk Strategies. All rights reserved.

Connect with Us

  • LinkedIn
  • X
  • Instagram
  • Facebook