Post-SPAC transaction: Challenges and benefits of operating as a public company

11/11/2020

Operating as a public company comes with distinct challenges and benefits. The primary benefit is the ability to raise capital to drive growth through capital expenditures, reducing one’s debt-to-equity ratio, and funding significant research and development for new products and services. Additionally, continued capital may be available via secondary offerings. The visibility that comes with being a public company can be advantageous in extending companies’ market reach, establishing new customer bases and distribution channels.

However, the growth potential fueled by the capital infusion comes at an operating cost. Public companies are held to significantly greater regulatory scrutiny by the Securities and Exchange Commission (SEC), resulting in a loss of autonomy compared to private companies. Further, they need to strengthen corporate governance to comply with the Sarbanes-Oxley (SOX) Act; face increased financial disclosures requiring more sophisticated financial reporting; and must build a robust IT infrastructure and an investor relations function.

SEC compliance
NYSE/NASDAQ listing regulations
Sarbanes-Oxley (SOX) compliance
Code of ethics and whistleblower hotline
Board structure and composition
Establishing audit and other committees
Risk identification and mitigation

Audit of historical data
Retrospective and prospective U.S. GAAP accounting and disclosure requirements
SEC reporting timeline adherence
Potential tax implications – clarifying tax positions for the registrant, shareholders, and directors

Cybersecurity governance and reporting

IT infrastructure

Scalability and sustainability
Current infrastructure and integration across applications
Data retention and retrieval
Business continuity and disaster recovery
Internal and board reporting dashboards

Efficiency, timeliness, and accurate financial close and reporting
Integrated reporting
Non-financial reporting – KPI, business metrics dashboards, etc.
Policies and procedures
Controls within and across business units
Potential areas for operational improvement

"Life as a public company is challenging. The target’s management team will be faced with SEC compliance issues, listing regulations of NYSE or NASDAQ, and cybersecurity, governance and reporting issues to name a few." Swami Venkat, CPA, CISA, CFE, ACA, Partner, CFO Advisory Leader, CohnReznick Advisory

Swami Venkat, CPA, CISA, CFE, ACA, Partner, CFO Advisory Leader, CohnReznick Advisory

973.871.4044

Marisa Garcia, CPA, Partner, CohnReznick Advisory

646.601.7786

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_{This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}