Sarah M. Abrams, Esq.

As I noted in my recent survey of key directors’ and officers’ liability issues, one of the most significant recent developments in the financial markets has been the meteoric rise of special purpose acquisition companies (SPACs). In the following guest post, Sarah Abrams, Director, Management Liability Claims at Markel, takes a look at the SPAC phenomenon and considers the underwriting implications, particularly with respect to climate tech companies. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submission from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.



SPACS are not going anywhere anytime soon, despite recent “normalization” of SPAC IPOs and increased oversight and litigation.

In fact, prominent institutional investors worry they will not see other profitable opportunities that come to market without SPAC participation.  That concern appears warranted after 2020 and the first half of 2021, in which 298 SPACs raising approximately $88 billion in capital in Q1 and 60 SPACs raising $12.8 billion in Q2.[i] As of July 27, 2021, there were 570 active SPACs looking for target companies to acquire, with approximately $170 billion in capital at the ready.[ii]

Anticipation is even higher for climate tech related SPAC transactions as Congress prepares to pass its infrastructure bill allocating, for example, $5 billion for projects that “demonstrate innovative approaches to transmission, storage, and distribution infrastructure to harden and enhance resilience and reliability”[iii]  as well as $9 billion for grid-balancing technologies and $7.5 billion to electric vehicle (EV) charging.  At least 28 climate tech startups have been acquired by SPACs, and since the beginning of 2020, these have raised at least $7.5 billion, according to data compiled by Silicon Valley Bank (SVB).[iv] Climate-related SPACs are performing well compared to other sectors. Share prices of climate startups that went public through a SPAC in 2020 rose 131% on average between the merger and the end of the year, compared to 50% in all sectors.[v]

What is concerning in the wake of the Lordstown Motors case[vi] and SEC enforcement action against Stable Road SPAC, its sponsor and target,[vii] is the ability of target climate tech companies to execute on represented output. Considering the development of these two matters may be informative in considering director and officer insurance underwriting implications in this burgeoning SPAC space.

Lordstown Motors, which is in the business of developing and manufacturing light duty electric trucks was called out in a short seller report for having no sellable product after misleading investors on demand and production capabilities.[viii]  Once that report was made public along with an inquiry from the SEC, the share price fell and securities class action lawsuits filed.[ix]

The SEC enforcement action brought against Stable Road Acquisition Company (“Stable Road”), its sponsor, SRC-NI (“SPAC Sponsor ”), its CEO Brian Kabot, Stable Road’s proposed merger target, Momentus Inc., and Momentus’ founder and former CEO Mikhail Kokorich alleges material misrepresentation regarding the target technology and repetition of misrepresentations by the SPAC and SPAC sponsor along with failure to conduct appropriate due diligence.[x]

Glaring in Lordstown, In Re Stable Road and the continuing litigation involving SPACs is the purported lack of due diligence into target company capacity to perform as projected.  This particular liability concern will be magnified alongside the anticipated new targets created in the wake of the cash infused into green energy by the infrastructure deal.  While there will be increased opportunities, there are clear takeaways for SPAC D&O underwriters.

In general, climate tech companies need a lot more PIPE funding to support the requisite physical hardware for production of the sustainable product produced.[xi]  However, institutional investor PIPEs have slowed down due to oversaturation by the sheer volume of SPAC related transactions and overvaluation of various targets.  Underwriting questions regarding PIPE funding, particularly in climate tech, is a must.

Additionally, questions relative to the target company production capabilities must be asked and answered.  Given the rising raw materials cost and supply chain disruption resulting from the second wave of the pandemic, there must be information provided in target company pre-IPO presentations provided. With availability to government funds on the line, climate tech companies may strive to prove up better corporate structure and problem solves surrounding production abilities.  For certainty, there should be an ask as to Federal capital reliance and any benchmarks attached.





[iii] Id.


[v] Id.

[vi] Rico v. Lordstown Motors, et. al, 4:21-cv-00616 (U.S.D.C ND Ohio 2021)



[ix] See Lordstown Motors