SPACs and the regulation gap: The effect of first SEC intervention on share and warrant returns

•The SEC intervened in the emerging SPAC market on April 12, 2021.•We investigate the effect of this official SEC regulation announcement on SPACs.•Event study results indicate no significant impact on SPAC share and warrant returns.•In multivariate tests, some SPAC characteristics lead to better/worse returns.•Results are robust to anticipation effects due to prior public SEC announcements. We examine the effect of first official SEC announcement regarding Special Purpose Acquisition Companies (SPACs), which is an alternative mechanism of taking firms public and suggested to enjoy a regulation gap compared to its counterparts. If so, a big adverse effect may be expected at the time of the first regulatory intervention. Our results do not show support for this hypothesis; however, we find that some SPAC characteristics lead to significantly worse returns in a multivariate setting. Interestingly, despite the regulation targeting warrant accounting directly, we find that offering warrants in SPAC units have a positive impact on announcement returns.