January 4, 2022
Dear SEC,
I would like to voice my support for SR-NYSE-2021-45. As a retail investor, I believe this rule would be of great benefit. I encourage the commission to approve this proposal.
Whilst I understand the commission's concerns as written in their issued order, the vast majority of these concerns can be applied to SPACs. My primary counterargument to most of the commission's concerns is that the risk profile of an investment in subscription warrants is essentially identical to existing SPACs. It is subject to the same market forces and the same drawbacks to SPACs. Thus, concerns of fraudulent sponsors and market manipulation are still present, but most investors (like me) view the proposed subscriptions warrants with their opt-in nature are a net improvement over SPACs even though they are still subject to some of the same pitfalls. If the commission is okay with current SPAC rules, then I see no basis for why the commission should reject this proposal.
For example, the commission lists some of the concerns in their letter:
1. Has concerns about whether the proposal is sufficiently designed to prevent fraudulent and manipulative acts and practices.
2. The value of a subscription warrant, if any, would appear to derive primarily from expectations that the sponsor ultimately will offer holders the ability to exercise the warrant on attractive terms.
3. Does not explain how it would effectively address the risk the price of subscription warrants could be manipulated.
4. The price of subscription warrants would appear to be particularly susceptible to rumors.
These concerns, although valid, are not unique to subscription warrants and are very much present in existing SPACs. There are many examples of current SPACs facing the above issues. Subscription warrants would be an improvement over the existing SPAC structure but of course, would not be a panacea to these issues. It would be unfair to view them as such, but rather as incremental opt-in alternative improvements over current SPACs which aim to address the time-crunch and tied-up capital requirement problems with traditional SPACs.
However, I do agree with some of the commissions comments. Firstly, I do agree the exchange needs to provide some rationale for some of the numerical standards in the proposal. Secondly, I agree that the exchange needs to address the risk of warrants delisting very quickly due to warrants trading at a very low price. One possible quick fix around this would be to have issuers of the warrants deposit a small cash value (for example $2/share) to give the warrants a minimal cash value NAV.
Overall, I strongly support SR-NYSE-2021-45 and hope the commission eventually approves it. Its a net improvement over the existing SPAC structure and would be a valuable asset for many investors.