Download Production-Quality Video to the Full Exchange Here

WASHINGTON, DC — In Case You Missed It: Today, during a Senate Banking, Housing, and Urban Affairs Committee hearing, U.S. Sen. Sherrod Brown (D-OH) questioned Securities and Exchange Commission (SEC) Chair, Gary Gensler, about Special Purpose Acquisition Companies (SPACs) and how they affect the market, referencing the case of Lordstown Motor Company (LMC) as one example in a broader trend. In July, following news of an investigation by the SEC, Brown wrote to Angela Strand, the then-newly appointed Executive Chairwoman of LMC, asking the company to develop and share a detailed plan for the company’s reform, and to work with area labor unions with historic expertise in automotive manufacturing.

“It seems clear there were some outside investors looking at this not as a long-term investment in a community with a proud manufacturing heritage and a talented workforce, but as a way to make a quick buck with no follow-through,” said Brown, referencing the case of Lordstown Motors. “Of course there will always be people like that – but that doesn’t mean we need to encourage risky financial mechanisms to encourage speculation over long-term investment.”

More from Brown’s hearing exchange is included below and video is available HERE:

Sen. Brown: We’ve talked before about how Wall Street has treated the markets as a game for decades – a game they always seem to win, at the expense of pretty much everyone else, including communities in Wyoming, and Louisiana, and Rhode Island, and Ohio, and Pennsylvania. SPACs, for instance, draw in companies that want to please Wall Street, and sometimes make promises that they can’t deliver on. Look at Youngstown, Ohio – there is a lot to unpack with what is happening at Lordstown Motors. Whether or not the company is ultimately able to succeed – and I hope it does – it seems clear there were some outside investors looking at this not as a long-term investment in a community with a proud manufacturing heritage and a talented workforce, but as a way to make a quick buck with no follow-through. Of course there will always be people like that – but that doesn’t mean we need to encourage risky financial mechanisms to encourage speculation over long-term investment. In a situation like that, when those investors make their money and pull out, companies break promises and workers and communities pay the price. Chair Gensler, what are the risks that the SPAC market has highlighted over the last year and what can we do about it?

Mr. Gensler: I think the Special Purpose Acquisition Companies, these blank check companies, the risks are to investors and the disclosure to the investors. I’ve asked staff to serve up recommendations that we can consider as a commission, but in essence, there’s a lot of cost in these and secondly, they usually have a two year fuse. And in the two year fuse, they try to go out and buy something. And a lot of the institutional investors, when that happens, sell – it’s called a redemption right – and retail investors are often left holding the dilution or the significant cost of the bankers and the promoters. So we are looking at greater disclosures and also looking at if there are inherent conflicts along the way and then again put this out to notice, and comment, and rule making. 

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