The S.E.C. Takes Aim at SPACs

Rewriting blank checks

The S.E.C. voted yesterday to propose new rules for special purpose acquisition companies, casting an even bigger shadow over the once-booming market. If adopted, these public shell companies — formed to acquire a business and take it public without the fuss of the traditional I.P.O. process — would have to provide more investor disclosures, especially about their ownership and performance forecasts. In some cases, SPACs may have to register as investment companies, subjecting them to stricter rules.

More than 600 SPACs raised some $160 billion last year, according to SPAC Research, but activity has since cooled: About 50 SPACs have raised $10 billion in the first quarter of this year. A fund that tracks hundreds of SPACs has lost about half its value since its peak in early 2021, as investors sour on many of the companies that have gone public this way.

The rules would give SPAC and I.P.O. investors a similar level of protection. “A few years ago, people would say, well, you could maybe use a SPAC transaction because it might be a more efficient way to bring a company public,” Gary Gensler, the agency’s chair, told reporters after yesterday’s meeting. “Study after study has shown us that, in fact, these are very costly mechanisms.” (Here is one of those studies.)

For SPAC advisers, this could require a business model revamp, given that they would facegreater liability for due diligence and the credibility of often rosy financial projections. At smaller banks, SPACs may become too onerous to arrange. Larger banks might have to limit the number of transactions they take on, but could potentially charge more for them, one banker told DealBook. (They already charge a lot for SPAC work.) The reaction to the S.E.C.’s proposal in financial circles — we hear there were many client calls about it — was more curiosity than panic. There is a 60-day comment period before any more steps are taken.

The proposal was approved along party lines. The lone dissenter, the Republican commissioner Hester Peirce, said that the move “seems designed to damn, diminish and discourage SPACs.” The typical SPAC would not meet the new parameters without significant changes, she said.

The proposed registration requirement could limit who can run a SPAC. Last summer, a SPAC created by the billionaire investor Bill Ackman was sued in a novel case, which argued that some SPACs aren’t operating companies but investment firms. That set off a legal brouhaha, with opponents arguing that it would make it harder for anyone in the investment business to participate in a SPAC. When DealBook asked whether the case was a consideration for the S.E.C., Gensler said only that “the current crop of SPACs implicate and raise questions about investment companies.”

HERE’S WHAT’S HAPPENING

President Biden may release a million barrels of oil a day from U.S. reserves. The White House could announce the plan to lower prices at the pump, which would run for 180 days, as soon as today. OPEC, which meets today, appears unlikely to increase global oil supplies.

The S.E.C. threatens to delist China’s search giant from U.S. markets. Baidu, one of the biggest Chinese tech companies, was added to a watchlist of foreign businesses that haven’t given American authorities access to their books. The S.E.C. has warned of mass delistings in the near future.

Expensive diesel poses a big problem for global business. The fuel’s price has risen sharply since the invasion of Ukraine, given that Russia is a major supplier. That has rippled through industries including construction and shipping, and has hit Europe especially hard.

Biden calls on Congress to approve more Covid aid. He urged lawmakers to quickly approve billions in funding or risk undoing U.S. progress in combating the pandemic. A bipartisan group of senators said a deal could be reached by next week, but how to pay for it remains unclear.

Apple is reportedly building its own financial infrastructure. The iPhone maker is developing systems like payments processing, credit checks and customer dispute resolution, according to Bloomberg. The plan is meant to reduce Apple’s reliance on partners like CoreCard and Goldman Sachs.

Exclusive: A billion-dollar network for women in business

Chief, the women’s networking group, has raised $100 million in an investment round that values the company at $1.1 billion, DealBook is first to report. Alphabet’s growth fund, CapitalG, led the Series B round, alongside existing investors that include General Catalyst, GGV Capital and Inspired.

The fund-raising comes amid steady but slow progress for women in senior leadership positions. There are more women in C.E.O. roles at Fortune 500 companies than ever before, but they still only account for 15 percent of leaders at America’s largest firms.

The back story: Chief was launched in 2019 by Carolyn Childers, the former senior vice president of operations at Handy, and Lindsay Kaplan, the former vice president of communications at Casper.“We were getting more senior in our careers and spending all of our time managing our teams and mentoring others,” Childers told DealBook, “and actually no longer had a real community in place for ourselves.” Chief now has 12,000 members, with another 60,000 on a waiting list.

How it works: Membership costs on average $6,500 a year, with most members sponsored by employers like Accenture, IBM, LVMH, L’Oréal, Morgan Stanley and Twitter. Hiring a one-on-one executive coach is more expensive than a Chief membership, Childers said, pitching her company as a way for members to “tap into a powerful network and coaching all at once through their companies.” Chief, which is not yet profitable, will use the new funds to invest in technology that, among other things, will help its members better network online.

The business case: Chief says that what separates it from other women-oriented networking groups, like The Wing, is its focus on senior executives and building a community rather than a physical space. “We believe the market for professional women is massive,” said CapitalG’s Laela Sturdy, who is joining Chief’s board. “There are senior executive women really hungry for ways to connect and for ways to grow.”

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“I don’t think anybody really understands how high prices are going to go everywhere, in restaurants, in cars and everything. It’s going to outrun the consumer. And I think we’re going to be in some tricky space.”

— Gary Friedman, the C.E.O. of Restoration Hardware, in a frank assessment of the economic situation on the company’s earnings call. He also said the Fed was out of touch, fretted about shipping costs, compared the current moment to a pivotal scene in “The Big Short” and, finally, said that he “didn’t want to scare everybody.”

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Exclusive: A meaty deal is sealed

D’Artagnan, the food distributor that pioneered organic “farm to table” fare and serves restaurants operated by Daniel Boulud, Barbara Lynch and Danny Meyer, is selling itself to Fortune International, the parent company of Fortune Fish & Gourmet, DealBook is first to report.

The deal values D’Artagnan, which was founded in 1985, at more than $100 million, a company spokesman said. Fortune, a high-end food distributor, plans to bring D’Artagnan into new markets like Florida, the Carolinas and the West Coast. D’Artagnan’s founder, Ariane Daguin, will stay on as C.E.O. She spoke with DealBook from her office in New Jersey.

On how the pandemic hit D’Artagnan’s business:

“It was a big, big crisis,” Daguin said. “Bigger than anything else — bigger than Sept. 11, bigger than 2009, bigger than when I separated from my partner 20 years ago.”

D’Artagnan responded by investing in e-commerce as its restaurant clients closed their doors. Now, sales and profit in the current fiscal year are on track to beat the company’s previous record.

On the threat of plant-based food to the meat business:

“We’re eating too much meat in America today,” Daguin said. “But the too much meat that we’re eating is bad meat.”

Plant-based alternatives are welcome, Daguin said, but they don’t always address the environmental concerns that are helping to drive their popularity. “I don’t eat burgers in fast food joints,” she said, and wouldn’t eat plant-based ones there either.

On legislative attempts to ban foie gras:

Foie gras is a specialty of D’Artagnan’s, and there is a ban set to take effect in New York later this year. “We never sold so much foie gras than when it was forbidden,” Daguin said of the two-year ban in Chicago. (Restaurants could not sell it but they could serve it free.)

On deciding to sell D’Artagnan:

“I’m not a spring chicken anymore,” Daguin said, and she plans to travel. (“I’ve never been to Asia and never been to Africa,” she said.) She also wants to spend more time on her foundation.

THE SPEED READ

Russia-Ukraine war

• Russia reportedly plans to repay foreign investors in a $2 billion bond in dollars, staving off worries about a default or switch to rubles. (Bloomberg)

• Lawmakers want the S.E.C. to require hedge funds and private equity firms to do more to verify the identities of their investors, to root out Russian oligarch money. (NYT)

• The ruble has regained most of its value since Russia’s invasion, though experts say the recovery may be artificial. (NYT)

Deals

• Apollo Global Management dropped its efforts to buy the publisher Pearson after its £7 billion ($9.2 billion) bid was rejected. (FT)

• SoftBank will reportedly slow the pace of its investments as it seeks to raise cash amid a drop in tech stocks. (FT)

• More than half of 393 block trades between 2018 and 2021 were preceded by drops in the companies’ stock price, suggesting word of a big sale leaked. (WSJ)

Policy

• “Covid, Russia and Economy Put the ‘China Model’ to the Test” (NYT)

• Apple and Meta reportedly gave some customer data to hackers pretending to be law enforcement officials. (Bloomberg)

• A lobby group funded by Amazon and Google listed thousands of small businesses as members, but many have never heard of it. (Politico)

Best of the rest

• About 39 percent of eligible employees at an Amazon warehouse in Alabama voted in a recent unionization election, far lower than in a previous one. (CNBC)

• The Academy of Motion Picture Arts and Sciences said that Will Smith refused to leave the Oscars after slapping Chris Rock onstage; it has started disciplinary proceedings. Relatedly, could Smith’s career suffer? (NYT, Variety)

• “Can Home Prices and Interest Rates Soar at the Same Time?” (NYT)

• Bruce Willis is retiring from acting after being diagnosed with aphasia, a disorder that affects speech. (NYT)

• “Does the End of Cash Mean the End of Privacy?” (Times Opinion)

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