Goldman Sachs is exiting work on most SPACs because of liability concerns as regulators tighten guidelines, report says

• Goldman Sachs is pulling out of work with most special acquisition purpose companies it took public, Bloomberg reported on Monday. 
• The changes come as the SEC embraces a plan for tightening oversight of SPACs, including exposing underwriters to greater liability risk.
• But Goldman may change course if the SEC scales back its guidelines. 

Goldman Sachs is pulling out of working with most SPACs it took public following new liability guidelines from regulators, according to a Bloomberg report on Monday. 

The move by the second-biggest underwriter of special purpose acquisition companies in 2021 throws into doubt what’s next for the billions of dollars raised for blank-check vehicles. The investment bank has been telling SPAC sponsors it will be ending its involvement while also pausing new SPAC issuance in the US, sources told Bloomberg. 

SPACs serve as a faster alternative to the traditional IPO route, and they boomed in 2020 and 2021. Last year alone, 613 blank-check companies filed to go public via a SPAC, but activity has slowed in 2022 with the number of filings so far at 63, according to data from SPACInsider.

The Securities and Exchange Commission has embraced a plan for tightening oversight of SPACs, including exposing underwriters to greater liability risk. The SEC proposed rules in March that would require SPACs to disclose more information about potential conflicts of interest. The rules would also make it easier for investors to sue over false projections.

“We are reducing our involvement in the SPAC business in response to the changed regulatory environment,” Goldman Sachs spokeswoman Maeve DuVally told Bloomberg. Its policy could change if the SEC scales back guidelines. 

A SPAC works with its adviser after going public to complete its merger with a target firm in a so-called de-SPAC process, or it would be forced to return capital to investors. Goldman will fulfill its role in cases where the public company is very close to completing the de-SPAC process, two sources told Bloomberg.