SEC official warns on red-hot SPAC market and says the blank-check firms have significant and undiscovered issues

• An SEC official warned about 'undiscovered' issues surrounding fundraising by SPACs, The Wall Street Journal reported Wednesday.
• The surge in SPACs is "turning up questions" that need careful examination, said the acting head of the SEC's Corporation Finance division.
• About 300 SPACs have been created this year and have raised about $98 billion.

A top regulator with the Securities and Exchange Commission warned about the jump in fundraising by blank-check companies known as SPACs as there are "some significant and yet undiscovered issues," according to a report by The Wall Street Journal.

The issues with SPACs are "not something that's going to stop them by any means, but they are relatively as yet incompletely worked through mechanisms, despite the fact they have been around for a while," said John Coates, acting director of the SEC's Corporation Finance division, at a legal conference Wednesday, the WSJ reported.

The Journal noted that data provider SPAC Research has said 301 SPACs have been created so far this year, raising about $98 billion.

SPACs are shell, or blank-check, firms that take private companies public by acquiring or merging with them. The moves allow private companies to bypass the traditional IPO route that can be slower and costlier.

"Their current surge is bringing the level of attention by many more participants in the market than previously had been involved, and that is turning up some questions that have to be thought through more carefully," said Coates, who spoke at a conference sponsored by the Practising Law Institute, according to the report.

The SEC has started an inquiry into Wall Street's SPAC frenzy, Reuters reported last month. The regulator sent correspondence to Wall Street banks, requesting details about how underwriter banks manage SPAC-related risks.

SPACs have attracted a number of high-profile investors such as hedge fund manager Bill Ackman and billionaire Chamath Palihapitiya alongside notable non-Wall Street figures such as ex-baseball player Alex Rodriguez, tennis star Serena Williams and ex-House Speaker Paul Ryan.