In this Essay, we propose a modified version of the SPAC designed to allow the public to participate in the world of corporate activism. Unlike existing SPACs, our version is designed for investments in public companies in order to change their course of action, not in private companies in order to make them go public, and overcomes many of the problems that pertain conventional SPACs. At present, direct investment in activism is reserved to affluent individuals and other professional investors of activist hedge funds. The public at large is barred from directly entering the activist arena. The current model comes at a triple price: first, critics argue that activism in its current form is slanted toward short-termed engagements, possibly neglecting potential profitable long-term engagements. Second, although loud, the current scope of activism is relatively modest. Activist engagements only reach 2.3 percent of the public companies traded on U.S. markets. Third, retail investors cannot directly share in the excess profits stemming from activism. The introduction of the Activist SPAC can change this reality. The Activist SPAC would allow interested retail investors to invest money in a corporation dedicated to Activist engagement. To ensure the success of the enterprise, the future target of the investment would not be made public at the time of the investment. Once the Activist SPAC buys a toehold position in the target and announce its plan, the investors would receive an opportunity to get their money back, should they choose to do so, or go along with the activist plan. As we show in the Essay, setting up Activist SPACs can transform the character of corporate activism by rendering it more attuned to long-term objectives, and is especially fit to pursue ESG goals. It would also give the public a voice in the future world of activism and allow it to share in its benefits directly as well as increase the scope of corporate activism. To enable these advantages, the current regulatory framework must change. We present a blueprint for the introduction of Activist SPACs, analyze the requisite key parameters and explore the legal and regulatory steps required to ensure their success. Innovation is the lifeblood of financial markets. The Activist SPAC may well mark their future path.
SPAC, activism, hedge fund activism, ESG
Hannes, Sharon; Libson, Adi; and Parchomovsky, Gideon, "SPACtivism" (2021). All Faculty Scholarship. 2812.
Banking and Finance Law Commons, Business Law, Public Responsibility, and Ethics Commons, Business Organizations Law Commons, Corporate Finance Commons, Finance and Financial Management Commons, Securities Law Commons