Analysis

Public Benefit Corporations and the SPAC Surge

As Special Purpose Acquisition Companies (“SPACs”) reemerge as an alternative to initial public offerings (“IPOs”), Public Benefit Corporations (“PBCs”) would start going public through the SPAC process. Not surprisingly, two PBCs have recently done just that, and it seems certain that more PBCs will follow. It is important to note, however, that regulators like the U.S. Securities and Exchange Commission (the “SEC”) are increasingly focused on SPAC oversight, which may slow the frequency of SPAC transactions as regulators issue new guidance and enforcement measures.

A PBC is a legal corporate form created by the state of Delaware in 2013 that, among other things, codifies a company’s social mission.[1] A PBC allows a board of directors to make business decisions based not just on the economic interest of the corporation’s shareholders (as required by the traditional C-Corporation corporate form), but based also on the PBC’s mission, which may focus on the interests of those materially affected by the corporation’s conduct, including employees, customers, communities and the environment. PBCs are gaining mainstream acceptance as societies and markets increasingly insist that corporations generate positive social impact alongside profits.

PBCs have begun to fill the demand for mission-driven companies in the public markets by engaging in SPAC IPOs and de-SPAC transactions. For example, according to ImpactAlpha, as of mid-March 2021, 31% of outstanding SPACs (based on deal value) pursue business strategies that are aligned either partially or entirely with sustainable investing strategies that include (1) social and environmental themes; (2) the achievement of impact; and (3) the integration of environmental, social, and corporate governance (“ESG”).

While there may be challenges and risks associated with SPAC transactions and evolving regulatory oversight, there are also exciting opportunities for PBCs that go public through SPACs.

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