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Federal Register / Vol. 86, No. 171 / Wednesday, September 8, 2021 / Notices These additional conditions generally require, among other things, that at least 90% of the gross proceeds from the initial public offering must be deposited in a trust account, as that term is defined in the rule, and that the AC
complete within three years or such shorter period specified by the ACs constitutive documents or by contract one or more Business Combinations having an aggregate fair market value of at least 80% of the value of the trust account at the time of the agreement to enter into the initial combination.
When an AC conducts its initial public offering, it raises the amount of capital that it estimates will be necessary to finance a subsequent business combination with its ultimate target. However, because an AC cannot identify or select a specific Business Combination target at the time of its IPO, it often turns out that the amount raised is not optimal for the needs of a specific target. This has resulted in the inefficient, current practice of AC
sponsors creating multiple ACs of different sizes at the same time, with the intention to use the AC that is closest in size to the amount a particular target needs. This practice creates the potential for conflicts between the multiple ACs each of which has different shareholders and still fails to optimize the amount of capital that would benefit the ACs public shareholders and a Business Combination target. Moreover, this creates the need for repetitive action throughout the ecosystem, including the filing and SEC review of multiple registration statements and periodic reports, formation of multiple boards of directors, multiple audits and multiple company listings. This practice also can lead to confusion amongst investors.
Accordingly, the Exchange proposes to modify Section 102.06 to permit a more efficient structure whereby an AC
can raise in its initial public offering the maximum amount of capital it anticipates it may need for a Business Combination transaction and then rightsize itself by contributing any amounts not needed to a new AC the SpinCo AC, and spinning off this SpinCo AC to its shareholders. The SpinCo AC will be subject to all the existing provisions of Section 102.06 in the same manner, and subject to the same timeframes, as the original AC.
It is expected that, if approved, the new structure will be implemented in the following manner. If the listed AC
determines that it will not need all of the cash in its trust account for its initial business combination, it will designate the excess cash for a new trust account held by a SpinCo AC, which will be
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spun off to the original ACs shareholders as described below. Until the spin-off described below, the amount designated for the SpinCo trust account must continue to be held for the benefit of the shareholders of the original AC. Following the spin-off, the SpinCo trust account will be subject to the same requirements as the trust account of the original AC.
The SpinCo AC will file a registration statement under the Securities Act of 1933 for purposes of effecting the spinoff of the SpinCo AC. Prior to the effectiveness of the registration statement, the original AC will provide its public shareholders through one or more corporate transactions with the opportunity to redeem a pro rata amount of their holdings equal to the amount of the SpinCo trust account divided by the per share amount in the original ACs trust account the redemption price.5
After completing the tender offer and effectiveness of the SpinCo ACs registration statement, the original AC
will contribute the SpinCo trust account to a trust account held by the SpinCo AC in exchange for shares or units of the SpinCo AC, which the original AC will then distribute to its public shareholders on a pro rata basis through one or more corporate transactions pursuant to the SpinCo ACs effective registration statement.
The original AC will then continue to operate as an AC until it completes its business combination and will offer redemption rights to its public shareholders in connection with that business combination in the same manner as a traditional AC. The SpinCo AC will operate in the same manner as a traditional AC, except that it could effect a spin-off prior to its business combination like the original AC. If it does not elect to effect a spin-off, the SpinCo AC will either 1 proceed to complete an initial business combination and offer redemption rights in connection therewith like a traditional AC or 2 liquidate.
The Exchange proposes adopting a new subsection of Section 102.06 which will specifically permit this type of transaction by allowing the Original AC
to contribute the Contribution a portion of the amount held in the trust account to the trust account of a SpinCo AC in a spin-off or similar corporate 5 This redemption could occur, for example, through a partial cash tender offer for shares of the original AC pursuant to Rule 13e4 and Regulation 14E of the Securities Exchange Act of 1934, and the redemption may be of a separate class of shares distributed to unitholders of the original AC for the purpose of facilitating the redemption.

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transaction where all of the conditions described below are satisfied:
i In connection with the Contribution, each AC public shareholder has the right, through one or more corporate transactions, to redeem a portion of its shares of common stock or units, as applicable, for its pro rata portion of the amount of the Contribution in lieu of being entitled to receive shares or units in the SpinCo AC;
ii the requirement of Section 102.06
that the AC provide each public shareholder voting against a Business Combination with the right to convert its shares of common stock into a pro rata share of the aggregate amount then on deposit in the trust account net of taxes payable, and amounts disbursed to management for working capital purposes, provided that the Business Combination is approved and consummated, will be considered satisfied by pro rata distribution to such shareholders of the amounts in the trust account after having been reduced by the Contribution;
iii the public shareholders of the AC
receive shares or units of the SpinCo AC
on a pro rata basis, except to the extent they have elected to redeem a portion of their shares of the AC in lieu of being entitled to receive shares or units in the SpinCo AC;
iv the Contribution will remain in a trust account for the benefit of the shareholders of the SpinCo AC in the manner required for ACs listed under Section 102.06;
v the SpinCo AC meets all applicable initial listing requirements for an AC listing in connection with an initial public offering under Section 102.06; it being understood that, following such spin-off or similar corporate transaction:
A The 80% described in the first paragraph of Section 102.06 shall, in the case of the AC, be calculated based on the aggregate amount remaining in the trust account of the AC at the time of the agreement to enter into the Business Combination as reduced by the Contribution, and, in the case of the SpinCo AC, be calculated based on the aggregate amount in its trust account at the time of its agreement to enter into a Business Combination, and B the right to convert and opportunity to redeem shares of common stock on a pro rata basis required for ACs listed under this Section 102.06 shall, in the case of the AC, be deemed to apply to the aggregate amount remaining in the trust account of the AC after the Contribution to the SpinCo AC, and, in the case of the
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