SPACs are on the chopping block thanks to the SEC’s latest proposal

The Securities and Exchange Commission proposed a sweeping new set of rules Wednesday that will effectively flatten the playing field between IPOs and a once-popular and quicker alternative, SPAC mergers.

The new rules lodged against SPACs, or special purpose acquisition companies, will help “ensure that investors in these vehicles get protections similar to those when investing in traditional initial public offerings,” SEC Chair Gary Gensler said in a statement.

Here are a few highlights of the new proposal:

• New disclosure requirements on sponsors, conflicts of interest, target companies, dilution, and other factors
• An update to align financial statement requirements for companies going public via IPO or a SPAC merger
• An amendment to the definition of a blank-check company under SEC rules, so that private investors can sue if they deem a SPAC’s financial projections of its target company are false or have omitted material details

Here’s more: Gensler said that the lawyers or bankers working on these deals “should have to stand behind and be responsible for basic aspects of their work,” and should be responsible for policing fraud and ensuring that SPAC disclosures are accurate. The proposal will make underwriters, auditors, and lawyers—which the SEC refers to as “gatekeepers”—liable to the documents they sign as part of the deal. 

The SEC’s long-awaited proposed regulation is yet another blow for what was only recently an exceedingly popular route to going public. But by now, SPACs seem all but on the brink of collapse.

In the first three months of this year, there have only been 53 SPAC offerings, raising a total of $8.8 billion—a 90% drop in proceeds from this time last year, according to IPO research and ETF company Renaissance Capital. The average deal size is down to $168 million—and that’s before institutional investors decide whether to redeem shares or not. 

As a reminder for how these mergers work, a sponsor puts forth a blank check company to list on an exchange, raises money from institutional investors, and takes it public. Those investors are given warrants that allow them to buy their shares back at the price they originally purchased, which is typically $10. After a blank check company identifies a target, institutions can opt to redeem their shares prior to the merger. 

Investors seem far less infatuated with SPACs than they were during the pandemic, when the number of SPAC deals soared to record heights. Companies that have gone public via SPAC mergers simply haven’t performed well on the exchanges in the last year, although there have been exceptions. The lack of investor activity has spawned the institutional investors who originally backed these deals to redeem shares ahead of a target company merger and get their money back.

This quarter, redemption rates are as high as 99% in some cases. One example is the SPAC merging with apartment hotel company Sonder Holdings, which said in January its investors had exchanged 96% of shares for cash. Companies like Kin Insurance or Tomorrow.io have called off their own SPAC deals and opted to stay private longer.

Somewhat ironically, Gensler says this proposal is a response to the growing number of companies that are going public via blank check mergers. But by the time that the SEC has brought its proposal to the table, there isn’t near the same demand anymore.

That being said, there still are some companies that see it as a viable option. Tokyo-based Coincheck agreed to merge with a SPAC last week. Yesterday, Axios reported that the subscription content service OnlyFans is trying to find a merger partner—though controversy over the quantity of adult content on its platform seems to be getting in the way.

But if SPACs needed a nail in the coffin, this proposal—should it be approved—will likely serve as one. If requirements between SPAC and IPO are essentially equal, and redemption rates are soaring, who will bother?

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
Submit a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Builder.ai, a London-based app development platform for people to order apps for businesses and entrepreneurs, raised $100 million in Series C funding led by Insight Partners and was joined by investors including IFC, Jeffrey Katzenberg’s WndrCo., and others.   

- Celona, a Cupertino, Calif.-based private mobile network provider, raised $60 million in Series C funding led by DigitalBridge Ventures and was joined by investors including Lightspeed Venture Partners, Norwest Venture Partners, NTTVC, Qual-comm Ventures, and Cervin Ventures. 

- Brightside Health, a San Francisco-based telemedicine platform focused on depression and anxiety treatment, raised $50 million in Series B funding led by ACME Capital and Mousse Partners

- Dispatch, a Bloomington, Minn.-based B2B delivery platform, raised $50 million in Series C funding led by PeakSpan Capital. 

- Yami, a Brea, Calif.-based marketplace for Asian food products and household goods in North America, raised $50 million in Series B funding. Altos Ventures and Balsam Bay Partners co-led the round and were joined by investors including J.P. Morgan and GGV Capital. 

- Skan.ai, a Menlo Park, Calif.-based process intelligence platform, raised $40 million in Series B funding led by Dell Technologies Capital and was joined by investors including GSR Ventures, Liberty Global Ventures, Cathay Innovation, Zetta Venture Partners, Citi Ventures, and Firebolt Ventures.

- Athennian, a Calgary-based legal entity management software, raised $33 Million in Series B funding led by Centana Growth Partners and was joined by investors including Arthur Ventures, Touchdown Ventures, and others. 

- Goodlord, a London-based rental transaction platform, raised £27 million ($30.1 million) in funding led by Highland Europe and was joined by investors including Columbia Lake Partners, Finch Capital, Latitude, and Oxx. 

- BoostUp.ai, a Santa Clara, Calif.-based revenue operations and intelligence platform, raised $29 million in Series B funding led by NGP Capital and was joined by investors including Canaan, Emergent Ventures, and BGV Ventures.

- Sales Impact Academy, a Seattle-based learning platform for sales and marketing, raised $22 million in funding led by HubSpot Ventures and MIT Investment Management Company and was joined by investors including Stage 2 Capital and Emerge Education. 

- Kooply, a Tel Aviv-based mobile gaming platform, raised $18 million in seed funding. TPY Capital, M12, and Playtika co-led the round and were joined by investors including Aleph Venture Partners, Entrée Capital, Glilot Capital Partners, and Samsung Next. 

- Bonsai, a Toronto-based e-commerce platform, raised $22 million CAD ($17.7 million) in Series A funding led by Framework Venture Partners and was joined by investors including Next Play Capital and Alumni Ventures Group.

- Garden.io, a Berlin-based development and testing platform for Kubernetes and the cloud, raised $16 million in Series A funding. 468 Capital and Sorenson Ventures led the round and were joined by investors including Crowberry Capital, Fly Ventures, and others. 

- BeamUP, a Tel Aviv-based building systems design software developer, raised $15 million in  seed funding. StageOne Ventures and Ibex Investors and were joined by investors including CEO of Workday Chano Fernandez and others.

- Altoida, a Washington D.C.-based brain health assessment and neurocognitive testing platform, raised $14 million in Series A extension funding. M Ventures and Whitecap Venture Partners led the round and were joined by investors including HonorHealth, btov Partners, Alpana Ventures, Hikma Ventures, Fyrfly, and VI Partners. 

- OmniML, a San Jose, Calif.-based machine learning models developer, raised $10 million in seed funding led by GGV Capital and was joined by investors including Qualcomm Ventures, Foothill Ventures, and others.  

- Leaf, a Los Angeles-based food and agricultural data infrastructure company, raised $5 million in seed funding led by S2G Ventures and was joined by investors including Cultivian, Radicle Growth, and SP Ventures. 

- Swaypay, a Chicago-based payment plug-in earning shoppers cashback via social media, raised $4.2 million in seed funding. Anthemis and BBG Ventures and were joined by investors including Revolution, Tribe Capital, Not Boring Capital, and Centre Street Partners. 

- Nurse-1-1, a Boston-based healthcare marketing company, raised $2.3 million in seed funding led by Argon Ventures and was joined by investors including York IE and Hyperplane.

- RoundlyX, a Richmond, Va.-based digital asset wealth management platform. raised $2 million in seed funding from investors including Virginia Innovation Partnership, Frontier Venture Capital, Riverbend Capital, Orange DAO, and Blockchain Founders Fund.

PRIVATE EQUITY

- Liberty Strategic Capital acquired Zimperium, a Dallas-based mobile security platform for enterprise environments, for approximately $525 million.

- Goldman Sachs Asset Management agreed to acquire NextCapital Group, a Chicago-based enterprise digital advice company. Financial terms were not disclosed.  

OTHER

- Axis Bank agreed to acquire Citigroup’s banking arm in India for $1.6 billion. 

- Agility Public Warehousing agreed to acquire John Menzies, an Edinburgh-based airport ground-handling company, for $750 million. 

-  ChartHop acquired Gather, a Cleveland, Ohio-based people operations workflow software. Financial terms were not disclosed.

- Ebiquity agreed to acquire Media Management Inc, a St. Louis, Mo-based media auditing company, and a conditional agreement to acquire MediaPath Network, a Stockholm-based media consultancy. Financial terms were not disclosed.

-  Fastly acquired Fanout, a Mountain View, Calif.-based API building and streaming platform. Financial terms were not disclosed. 

- Netguru acquired a minority stake in Pilot44, a San Francisco-based consultancy focused on customer-facing companies. Financial terms were not disclosed. 

SPAC

- OnlyFans, a London-based subscription content platform for creators and fans, is weighing going public via a SPAC merger, according to Axios. 

FUNDS + FUNDS OF FUNDS

- Next Coast Ventures, an Austin-based venture capital firm, raised $310 million across three funds focused on early-stage tech businesses and entrepreneurs.

PEOPLE

- Bling Capital, a Miami-based venture capital firm, hired Kyle Lui as general partner. Formerly, he was with DCM Ventures.