In 2025, the SPAC market is seeing another surge. The SPAC market had its best quarter since 2022, as it recovers from the recent lull which followed the previous surge in 2021 and 2022. The SEC adopted a final rule in response to the volatile nature of the SPAC market and offerings. In my previous blog, I discussed the highlights of the rule and impact of Inline XBRL tagging beginning June 30, 2025. SPAC filers need to prepare for the upcoming tagging mandate.
The SEC’s new requirements
Key highlights:
- Compliance date: The new prospectus disclosure requirements under the final rule were required to begin on July 1, 2024. The SEC provided a one-year delay in tagging to help filers prepare. Inline XBRL tagging is required for filings submitted on or after June 30, 2025. The SEC has confirmed that tagging is only required for new IPOs and business combinations on or after June 30, 2025. Offerings already in progress are not required to begin tagging.
- Scope: Applies to:
- SPAC IPOs (Forms S-1 and F-1) and,
- de-SPAC transactions.
- New disclosure requirement: Under the final rule includes detailed information regarding:
- Specific Prospectus cover page
- Conflicts of Interest
- Sponsors compensation
- Board of Directors
- Timeline to complete an acquisition
- Dilution risks of the SPAC value, such as fees and compensation
- Warrants
- Redemptions
- Financial projections
- Investment risks to investors
- Target company responsibilities in de-SPAC transactions
Inline XBRL tagging highlights
Inline XBRL tagging combines human and machine-readable data within a single HTML submission. It provides filers with a more efficient tagging process and allows improved data analysis. iXBRL tagging is required in the two separate phases of the SPAC lifecycle:
- SPAC IPO
- De-SPAC process (business combination)
The SEC adopted new Item 1600 of Regulation S-K tailored specifically for SPAC transactions. The specific prospectus and disclosure items required are different for the SPAC Initial Public Offering (IPO) and for a de-SPAC transaction. SPAC IPOs filed on Form S-1 and F-1 require specific prospectus items disclosures:
- Item 1602: Registered offerings by special purpose acquisition companies.
- Item 1603: SPAC sponsor; conflicts of interest.
De-SPAC transaction filings on Form S-1 (resale), S-4, and F-1 (resale) and F-4 require specific prospectus and disclosure items, including:
- Item 1604: De-SPAC transactions
- Item 1605: Background of and reasons for the de-SPAC transaction; terms of the de-SPAC transaction; effects
- Item 1606: Board determination about the de-SPAC transaction
- Item 1607: Reports, opinions, appraisals, and negotiations
- Item 1609: Projections in de-SPAC transactions
- New Exhibit 98: “Reports, opinions, or appraisals in de-SPAC transactions” will be required in applicable filings and is required to be iXBRL tagged.
Tagging includes an array of filing types submitted during the SPAC IPO and de-SPAC process, including registration statements, proxies, reports and tender offers. On March 17, 2025, the SEC implemented the SPAC taxonomy. The tagging is primary text block tagging for the narrative disclosures, with a few tables and numeric values tagged within the narrative disclosures.
Additionally, SPAC transactions have special XBRL financial tagging considerations. The private target is considered a co-registrant with the SPAC during the acquisition process until the business combination is complete, at which point the target becomes the filer and the new reporting entity. This means that the resale S-1 requires tagging of both the SPAC and the target’s financial statements.
Why this matters
The SEC’s move aligns SPAC transactions more closely with traditional IPOs, aiming to close regulatory gaps that have raised concerns in recent years. By requiring iXBRL tagging, the SEC enhances the accessibility, accuracy, and comparability of SPAC disclosures, making it easier for investors to assess risks and make informed decisions.
Compliance timing
- Rule effective: January 24, 2024.
- Beginning July 1, 2024, SPAC prospectus disclosures are required in applicable filings.
- Inline XBRL tagging is required beginning June 30, 2025.
Resources
- Final Taxonomy guide: https://xbrl.sec.gov/spac/2025/spactaxonomyguide-2025-03-17.pdf
- SEC Fact Sheet: https://www.sec.gov/files/33-11265-fact-sheet.pdf
- SEC Press Release: https://www.sec.gov/news/press-release/2024-8
- SEC Final rule: https://www.federalregister.gov/documents/2024/02/26/2024-01853/special-purpose-acquisition-companies-shell-companies-and-projections
- Law firm post: https://www.mintz.com/insights-center/viewpoints/2901/2024-05-13-recent-sec-rules-and-guidance-impose-new-obligations
- Previous blog: https://www.toppanmerrill.com/blog/sec-mandates-inline-xbrl-for-spac-ipos-and-de-spac-transactions/
