In its recently proposed rules that relate primarily to SPACs and shell companies, the SEC did propose certain changes relating to projections that would apply to all reporting companies. In particular, the proposed amendments reiterate the SEC’s view that projected financial information included in filings must have a reasonable basis. To address specific concerns that certain companies may present projections more prominently than actual historical results (or the fact that they have no operations at all) or use non-GAAP financial measures in the projections without a clear explanation or definition of the measure, the SEC proposed that:

• Any projected measures that are not based on historical financial results or operational history should be clearly distinguished from projected measures that are based on historical financial results or operational history;

• It generally would be misleading to present projections that are based on historical financial results or operational history without presenting such historical measure or operational history with equal or greater prominence; and

• The presentation of projections that include a non-GAAP financial measure should include a clear definition or explanation of the measure, a description of the GAAP financial measure to which it is most closely related, and an explanation why the non-GAAP financial measure was used instead of a GAAP measure.

According to the SEC, these amendments “should assist registrants in presenting their projections in an appropriate format and with the appropriate context, which in turn should facilitate investors’ evaluation of the projections, assessment of the reasonableness of the bases for these projections (particularly when compared to historical performance and results), and determinations about the appropriate reliance to place on the projections when making an investment or voting decision.”