S.E.C. Tightens Rules For Proposed REITs

In what could be seen as a tightening of rules for all proposed SPACs, the SEC has sent a letter to all planned REITs proposing a change to the effective registration dates for planned REITs from 18 months after the planning transaction to 18 months after the IPO. The commission is requiring a notice to be submitted to the SEC and published in the Federal Register within thirty days from receiving the letter or until 60 days thereafter.

Source: SPAC Fact Sheet

Source: SPAC Fact Sheet

What this means

The new proposed REITs will have to follow a different timeline to allow others, such as the United Venture Fund, to get their stated REIT status. Currently, from September 17, 2017, the United Venture Fund is required to file an initial registration statement with the SEC, file an application with the CFPB, and file a new Form S-1 with the SEC (in the case of the CFPB application). The proposed REITs will have to follow a different timeline and change the date of the IPO to become a REIT.

What does this mean for SPACs

The SEC is changing its timing and registration rules for REITs. This means that S.E.C. SPACs with pending LP registration applications that have a “soon to be filed” is not indicative of pending LP applications or within the applicable time limit. Based on our research with the SPAC data, SPACs that have not filed for LP registration are typically postponed, but not necessarily abandoned.

Potential changes for SPACs:

Extend registration to 18 months from an initial public offering (IPO). SPACs with LP registration application remain valid under the amended rule for registration and generally adhere to the SEC’s listing rules.

SPACs with LP registration application remain valid under the amended rule for registration and generally adhere to the SEC’s listing rules. Smaller requirements for 2013 SPACs or those entering the market in the future. SPACs with 2013 LP registration applications remain valid under the amended rule for registration and generally adhere to the SEC’s listing rules.

SPACs with 2013 LP registration applications remain valid under the amended rule for registration and generally adhere to the SEC’s listing rules. Early filing requirements. Spokespersons from SPACs that have filed for registration have indicated that they are considering these changes.

Preparing for these possible changes

When SPACs, LP or joint venture applicants are confident that their plans are pending regulatory approval, they have a limited number of options. Typically, SPACs postpone offering, postpone issue and issue new RSAs. Spokespersons from SPACs that have filed for registration have indicated that they are considering these changes.

Our conclusion: If SPACs do not plan to provide DTA- and historical cumulative, dividend and distribution history, they can use their rights to postpone issue and issue new RSAs, follow the amended time line and continue with a launch in the future.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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