An existential question for SPACsPershing Square Tontine Holdings, the special purpose acquisition company run by the billionaire hedge-fund investor Bill Ackman, got sued this morning in a novel case that could have far-reaching implications for the SPAC industry. commissioner, and John Morley, a law professor at Yale, contends that Ackman’s SPAC isn’t an operating company, but is actually an investment company like Ackman’s funds, which should be regulated by the Investment Company Act of 1940. To recap, a SPAC is a public shell company formed to acquire and operate a private company. This lets a private company go public with less scrutiny than a traditional I.P.O. Many SPACs are started by professional investors with investment businesses that contribute services to the SPAC, like Ackman and his hedge fund, Pershing Square Capital Management.

Source: New York Times August 17, 2021 12:11 UTC