SEC Issues Public Statement on Accounting and Reporting Considerations for SPAC Warrants

The Securities and Exchange Commission (SEC) staff issued a public statement on April 12, 2021, expressing its view that certain terms and conditions common to Special Purpose Acquisition Company (SPAC) warrants may require the warrants to be classified as liabilities on the SPAC's balance sheet as opposed to equity. This statement led Tastemaker Acquisition Corp. to reclassify its warrants from equity to liabilities.

Key Takeaways:

• Tastemaker Acquisition Corp. consummated its initial public offering (IPO) of 27,600,000 units on January 12, 2021, with each unit consisting of one share of Class A common stock and one-half of one redeemable warrant.
• The company completed a private sale of 8,700,000 warrants to Tastemaker Sponsor LLC at a purchase price of $1.00 per warrant on January 12, 2021.
• The outstanding warrants and private placement warrants were initially accounted for as equity but were later reclassified as liabilities to align with the SEC's statement.
• The company plans to reflect this reclassification in its upcoming Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.
• The reclassification does not impact the company's cash position and cash held in the trust account.

Statistics:

• The IPO consisted of 27,600,000 units, with an additional 3,600,000 units issued as part of the underwriter's over-allotment option.
• The company sold 8,700,000 warrants to Tastemaker Sponsor LLC at a price of $1.00 per warrant.
• The warrants were initially valued at $11.50 per share and were reclassified as liabilities on the company's balance sheet.
• The company's audited balance sheet as of January 12, 2021, is no longer reliable due to the reclassification requirement.

Sources:

• SEC public statement, April 12, 2021
• Tastemaker Acquisition Corp. Form 8-K, January 19, 2021
• Audit Committee report, May 14, 2021
• COMTEX_386771063/2254/2021-05-17T15:25:15