SPAC Settles SEC Fraud and Conflict of Interest Charges
On January 25, 2024, the Securities and Exchange Commission announced that Northern Star Investment Corp. II, a special purpose acquisition company (SPAC), agreed to settle charges that it made misleading statements in forms filed with the SEC as part of its initial public offering (IPO).
According to the SEC’s order, Northern Star represented in its SEC filings that neither the company, nor anyone acting on its behalf, had initiated any substantive discussions with any potential target companies prior to the IPO. However, the SEC’s order finds that Northern Star had engaged in discussions with a target company and that company’s controlling shareholder in connection with a potential SPAC business combination dating back to December 2020 and continuing for several weeks. Furthermore, according to the SEC’s order, after announcing a merger agreement with the target company, Northern Star did not adequately disclose conflicts of interest related to its interactions with the target company in its Form S-4 filings.
“Northern Star’s failure to disclose discussions with its merger target kept investors in the dark about its future plans, information that would have been important in deciding whether to invest in this SPAC,” said Nicholas P. Grippo, Director of the SEC’s Philadelphia Regional Office. “Given that the purpose of a SPAC is to identify and acquire an operating business, SPACs should be transparent about any pre-IPO discussions with potential acquisition targets.”
The SEC’s order finds that Northern Star violated an antifraud provision of the Securities Act of 1933. Without admitting or denying the SEC’s findings, Northern Star agreed to a cease-and-desist order and to pay a $1.5 million penalty in the event it closes a merger transaction.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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