The pace of SPAC-related securities lawsuit filings recently has perceptibly increased. Earlier this week, I noted two SPAC-related securities class action lawsuits that had been filed in the preceding days. Following my publication of that earlier post, plaintiffs’ lawyers filed two more SPAC-related securities suits, adding to the growing numbers of SPAC-related securities suits that have been filed this year. As discussed below, the likelihood is that we will continue to see further SPAC-related securities suit filings in the months ahead.


The Lucid Group Lawsuit

Churchill Capital Acquisition Corporation IV is a special purpose acquisition corporation (SPAC) that completed an IPO on July 30, 2020. On February 22, 2021, Churchill IV announced that it had entered an agreement to merge with Lucid Motors, an electric automobile manufacturing company. Lucid was founded by Peter Rawlinson in 2007. Rawlinson remains CEO of Lucid. The merger closed on July 23, 2021, with Lucid as the surviving publicly traded company.


On September 28, 2021, Lucid announced the commercial launch of Lucid Air, an electric SUV. On November 15, 2021, the company announced its financial results for the preceding quarter. Among other things, Rawlinson allegedly “confirmed” the company’s “ability to achieve 20,000 units in 2022,” and based on “the expansion of Lucid’s manufacturing capacity” to have production capacity for “up to 90,000 vehicles” by year end 2023. The subsequently filed complaint also alleges that in the company’s earnings release, the company “also assured investors that supply chain issues, which were plaguing other auto manufacturers, would not interfere with the Company’s ability to reach its production targets.” According to the complaint, in the following months the company reiterated its production goals and its control of supply chain issues.


On February 28, 2022, the company, according to the complaint, “admitted” that it had delivered only 125 EVs in 2021 and had still produced only 400 EVs by February 28, 2022, that it would only produce between 12,000 and 14,000 EVs in 2022. Rawlinson allegedly attributed the reduced production outlook to “the extraordinary supply chain and logistics challenges [Lucid] encountered.”


On April 1, 2022, a plaintiff shareholder filed a securities class action complaint in the Northern District of California against Lucid, Rawlinson, and the company’s CFO. A copy of the complaint can be found here. The complaint purports to be filed on behalf of a class of investors who purchased Lucid securities between November 15, 2021 (the date of the company’s quarterly earnings release) and February 28, 2022. The complaint alleges that during the class period the defendants “overstated Lucid’s production capabilities while concealing that ‘extraordinary supply chain and logistics challenges’ were hampering the Company’s operations from the start of the Class Period.”


The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the plaintiff class.


The Playstudios Lawsuit

Acies Acquisition Corp. is a SPAC that completed an IPO on October 27, 2020. On February 1, 2021, Acies announced that it had reached an agreement to merge with Playstudios (Old Playstudios), a then-privately held gaming company. The merger was completed on June 21, 2021, and the next day Playstudios’ securities began trading on Nasdaq.


The subsequently filed securities lawsuit complaint alleges that the defendants “repeatedly” misrepresented that Playstudios’ “flagship game” Kingdom Boss was “on track” for release in 2021; the complaint alleges that “Playstudios never even launched Kingdom Boss.” The complaint further alleges that in the Registration Statement and Proxy Statement issued in connection with the business combination the defendants characterized Old Playstudios as a “profitable, rapidly growing, and valuable business with strong future potential.”


The complaint alleges that when Playstudios announced its quarterly results for the quarter ended June 20, 2021 (that is, just nine days after the merger was completed) the company “revealed” the Kingdom Boss launch was being delayed until later in the year and investors should expect decreased revenues and profits during the year as a result. The company’s shares declined 13% on this news. On February 26, 2022, Andrew Pascal, the company’s founder and CEO, attributed the company’s failure to meet revenue and earnings projections to the failure to launch Kingdom Boss, and “revealed” that Kingdom Boss “was not only delayed, but indefinitely ‘suspended.’”


On April 5, 2022, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against Playstudios and Pascal. A copy of the complaint can be found here. The complaint purports to be filed on behalf of two sets of investors: first, a class of investors who purchased Playstudios securities between June 22, 2021 (the date the Playstudios securities began trading publicly) and March 1, 2022; and investors who held common stock of Acies as of May 25, 2021 and who were eligible to vote at the June 16, 2021 and who exchanged their Acies stock for shares of Playstudios.


The complaint asserts, on the first of the two classes, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint asserts on behalf of the second of the two classes that the defendants violated Section 14(a) of the ’34 Act. The complaint seeks to recover damages on behalf of the plaintiff classes.



With the flurry of SPAC-related securities lawsuit filings in recent days, there have now been a total of 42 SPAC-related securities lawsuits that have been filed since January 1, 2021, including 11 that have been filed so far in 2022.


These two latest lawsuits are somewhat unusual compared to many of the other previously filed SPAC-related lawsuits, in that the individuals named as defendants include only directors and officers of the operating company; neither lawsuit named former directors and officers of the SPAC as defendants, as has been the case in many of the other SPAC-related suits.


The lawsuit filed against Lucid does share one feature in common with many of the prior SPAC-related securities suits, in that it involves a company in the electric vehicle industry. By my count, 15 of the 42 total SPAC-related lawsuits have involved EV or smart vehicle technology companies.


If the Lucid name and the circumstances involved in the Lucid lawsuit sound familiar, that is because the company and the SPAC that acquired the company, as well as several of their respective executives, were the subject of a lawsuit that was filed in April 2021, before the SPAC and Lucid consummated their business combination. The two lawsuits involve different class periods and difference sets of alleged misrepresentations; however, both suits involve alleged misrepresentations relating to Lucid’s vehicle production capabilities. Given the different time frames involved in the two lawsuits, the cases may or may not be consolidated. For now I have treated them as separate lawsuits; I note all this because, given the two Lucid suits, two of the 42 SPAC-related securities suits filed since January 1, 2021 (and two of the EV-related suits) relate to Lucid.


There is one other feature of the Lucid lawsuit and that is that it is yet another example of a securities class action lawsuit arising out of supply chain issues. As I have noted in a number of posts (most recently here), there has been a series of lawsuits arising out of supply chain disruption. Indeed, almost a year ago, I noted the emergence of litigation involving both SPACs and supply chain disruption. The disruption to global supply chains arguably is a second-level effect of the COVID-19 pandemic, along with economic disruption and labor force disruption. Because the connection between this lawsuit and the pandemic is too attenuated, I have not counted this suit as pandemic-related. It is however clearly supply chain related. With the war in Ukraine and the resulting further disruption of global supply chains, we undoubtedly will see further securities litigation relating to these issues (that is, economic inflation, supply chain disruption, and labor supply disruptions).


One final note about these two new lawsuits is that they both involve companies that merged with SPACs from the SPAC IPO class of 2020. There still have only been two SPAC-related lawsuits involving SPACs from the SPAC IPO class of 2021, a year in which there were over 600 SPAC IPOs. Eventually, as the SPACs from the Class of 2021 complete their intended merger transactions, and the SPACs reach the SPAC lifecycle events that so far at least have led to SPAC-related litigation, further lawsuits will begin to emerge involving the SPAC IPO Class of 2021. Because there are so many of these Class of 2021 SPACs out there, the likelihood is that over the months to come we could see a significant amount of SPAC related litigation emerge.