Document Type

Article

Publication Title

William & Mary Law Review

Publication Date

2023

ISSN

0043-5589

Page Number

1757

Keywords

regulatory arbitrage, SPAC mergers, IPOs, Safe Harbor

Disciplines

Antitrust and Trade Regulation | Law | Securities Law

Abstract

Communications in connection with an initial public offering (IPO) are excluded from the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 (PSLRA). Unsurprisingly, IPO issuers do not share projections publicly-—the liability risk is too great. By contrast, communications in connection with a merger are not excluded from the safe harbor, and special purpose acquisition companies (SPACs) routinely share their merger targets’ projections publicly. Does the divergent application of the PSLRA’s safe harbor in traditional IPOs and SPAC mergers create an opportunity for “regulatory arbitrage” and, if so, what should be done about it? This Article offers a framework for evaluating these timely questions and for evaluating claims of regulatory arbitrage more broadly. The analysis brings into sharp focus the contestable policy choices that undergird the IPO exclusion to the PSLRA’s safe harbor.

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