In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has filed a securities suit against IonQ, a quantum computing company that became a publicly traded company in September 2021 through a merger with a publicly traded SPAC. As is the case with many of the SPAC-related securities suits, the new lawsuit against IonQ follows the publication of a critical short-seller report about the company and its technology. A copy of the complaint, filed on May 31, 2022, can be found here.



dMY Technology Group, Inc. III (DTG) was a special purpose acquisition company (SPAC). DTG completed an IPO on November 12, 2020. IonQ develops quantum computers. On September 30, 2021, IonQ became a publicly traded company as a result of its merger with DTG.


On May 3, 2022, IonQ was the subject of a research report by short-seller Scorpion Capital. Among other things, the report asserted that IonQ is “a scam built on phony statements about nearly all key aspects of the technology and business.” The report also stated that the Company reported “fictitious revenue via sham transactions and related-party round-tripping.” According to the subsequently filed securities lawsuit complaint, the IonQ’s share price decline 9% on this news.


The Lawsuit

On May 31, 2022, a plaintiff shareholder filed a securities class action lawsuit in the District of Maryland against IonQ and two of its officers. (The two individual defendants apparently were both officers of IonQ prior to the merger; apparently no former directors or officers of the SPAC were named as defendants.) The complaint purports to be filed on behalf of investors who purchased shares of IonQ, or, prior to the merger, of the SPAC, between March 30, 2021 (the date that DTG and IonQ filed a Form S-4 about the merger with the SEC) and May 2, 2022 (the day before the publication of the short-seller report).


The complaint alleges that during the class period, the defendants failed to disclose to investors: “(1) that IonQ had not yet developed a 32-qubit quantum computer; (2) that the Company’s 11-qubit quantum computer suffered from significant error rates, rendering it useless; (3) that ionQ’s quantum computer is not sufficiently reliable, so it is not accessible despite being available through major cloud providers; (4) that a significant portion of IonQ’s revenue was derived from improper round-tripping transactions with related parties; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”


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



By my count this lawsuit is the 48th SPAC-related securities class action lawsuit to be filed since January 1, 2021, and the 17th to be filed so far in 2022. Like many of the prior SPAC-related securities suits, this lawsuit was filed after the defendant company experienced a stock price drop following the publication of a short-seller report. By my count, 20 of the 48 SPAC-related securities lawsuits (41.6%) that have been filed since January 1, 2021 have followed the publication of a short-seller report.


As has also been the case with some of the SPAC-related lawsuits that have been filed to date, the individuals named as defendants in this lawsuit include only executives from the operating company; no former directors or officers of the SPAC were named as defendants. By my count, 18 of the 48 SPAC-related securities suits filed since January 1, 2021 (37.5%) did not name any former executives of the SPAC as defendants.


This lawsuit has only just been filed and it remains to be seen how it will fare. I will say that reading the complaint, and in particular, reading the risk factor disclosures from the defendant company’s SEC filings, that the company provided extensive precautionary disclosure about uncertainties around the company’s quantum computer technology. The company repeatedly and in detail emphasized the “significant barriers” the company faced in its “attempts to produce quantum computers” and that various developmental technological capabilities are “not yet available for customers and may never be available.” The parties will have to fight all of this out, but it looks to me that the company will have substantial grounds on which to defend its disclosures.


One final note about this lawsuit is that it involves a SPAC from the SPAC IPO Class of 2020. As readers will recall, the number of SPAC IPOs really began to take off in late 2020, but the peak of the SPAC frenzy was not until the first quarter of 2021. Most of the SPACs that completed their IPOs in early 2021 have not yet announced or completed their intended merger transaction, so those SPACs have not yet reached the SPAC lifecycle phase in which litigation tends to arise (if indeed it arises at all). For that reason, I continue to believe that the peak of SPAC-related litigation filings is still yet to come; in any event, I believe there will be many more SPAC-related securities lawsuits filings in the months ahead and on into 2023.