SPACs In the DOJ’s Crosshairs

The DOJ and the SEC are sending a warning to the financial industry about special purpose acquisition companies (SPACs). In announcing the indictment of Trevor Milton, former CEO of Nikola, one of three electric vehicle start-ups under investigation, they made it clear that SPACs are in their crosshairs. SPACs differ from traditional IPOs because they aren’t subject to a quiet period before public trading begins. Milton spoke constantly, and allegedly falsely, about Nikola on social media during the process of going public through a reverse merger with VectoIQ in June 2020. “This case is about the obligation of corporate officers like Milton to provide complete, truthful and accurate information at all times when discussing their company’s affairs,” Securities and Exchange Commission enforcement director Gurbir Grewal told reporters. “There is no end around or exception to this obligation. It applies to all public companies, even those that have only recently entered the public markets, including through SPAC transactions.”