After a several months-long lull in which relatively few SPAC-related securities suits were filed, plaintiffs’ lawyers have now in the past several days filed several new cases. The latest example is the lawsuit filed late last week against the electric scooter company Bird Global, Inc., which merged with a publicly traded SPAC in November 2021. The lawsuit comes after the company’s announcement on November 14, 2022 that due to a reporting error the company would be restating its previously published financial statements for several prior reporting periods. A copy of the November 17, 2022 complaint can be found here.



Bird, according to its self-description, is “a micromobility company engaged in delivering electric transportation solutions for short distance.” (It rents out electric scooters.) Switchback II Corporation was a publicly traded SPAC. Switchback completed an IPO on January 7, 2021. On May 14, 2021, Switchback and Bird announced their plan to merge. The merger was completed on November 3, 2021, with Bird as the surviving company.


Bird divided its offerings between core vehicle-sharing business and operations (“Sharing”) and sales of Bird-designed vehicles for personal use (“Product Sales”). In the reporting periods following the merger, Bird published its financial statements in the ordinary course.


On November 12, 2022, Bird filed a Form 8-K  and press release in which the company announced that it would restate its financial statements for certain prior periods due to issues concerning the recognition of Sharing Revenue. The press release announcing the restatements stated that the company had identified an error in its recognition of certain trips completed by customers of its sharing business for which collectability was not probable. The press release stated further that the company believes that the error “resulted in an overstatement of Sharing revenue in the consolidated statements of operations for the impacted periods and an understatement of deferred revenue in the consolidated balance sheets as of the end of each impacted period.”


According to the subsequently filed securities lawsuit complaint, the company’s share price declined over 15% on this news.


The Lawsuit

On November 17, 2022, a plaintiff shareholder filed a securities class action complaint in the Central District of California against the company, its CEO, and its CFO. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between May 14, 2021 (the date the proposed merger was announced) and November 14, 2022 (the date the company announced the restatements).


The complaint alleges that during the class period the defendants made false and misleading statements and/or failed to disclose that: “(1) Bird was improperly recording Sharing Revenue for certain trips by its customers where collection was not probable; (2) as such, Bird overstated its Sharing Revenue for the relevant quarters and fiscal year during the Class Period; (3) Bird failed to disclose that its internal controls were not effective as they relate to calculating Sharing Revenue recognition; (4) as a result, Bird would need to restate its previously disclosed Sharing Revenue; and (5) as a result, Defendants’ public statements were materially false and misleading at all relevant times.”


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 class.



This lawsuit has only just been filed and it remains to be seen how it will fare. I will say that when the time comes for the Court to assess the plaintiff’s allegations, the Court is going to have to look long and hard to find any allegations (much less sufficient allegations) of scienter.


As I had noted at the outset of this post, for several months this year, there was a bit of a lull in new filings of SPAC-related securities suits. Thus, while there were 17 SPAC-related lawsuits filed during the five months between January 1, 2022 and May 31, 2022, since May 31, prior to the filing of this lawsuit, there had only been four SPAC-related securities suits filed in the five and a half months since May 31, 2022. Now there have been at least two new SPAC-related suit filings in just the last few days.


On a larger time-scale, there have now been 53 SPAC-related securities suits filed since January 1, 2021, including the now 22 SPAC-related suits that have been filed so far this year. This lawsuit does share a notable feature in common with many of the other previously filed lawsuits, as it relates to an electric vehicle company (if indeed one can group this electric scooter company with other companies that make electric cars or trucks or related component parts). By my count, 18 of the 53 SPAC related suits that have been filed since January 1, 2021 have (if this case is counted) been filed against companies in the electric vehicle companies.


It is also noteworthy to me that this lawsuit relates to a company that merged with a SPAC from the SPAC IPO class of 2021. As I am sure most readers are aware, the first few months of 2021 were the absolute high water mark during the SPAC frenzy. There were over 600 SPAC IPOs in 2021, with most of those in the year’s first months. Even with all of the SPAC-related lawsuits described in the preceding paragraphs, relatively few of the lawsuits filed so far have involved SPACs from the 2021 IPO class. By count, only five of the 53 SPAC-related lawsuits filed since January 1, 2021 have involved SPACs from the 2021 IPO class.


The likely explanation for the relatively low levels of litigation activity against the massive IPO class of 2021 is that most of these SPACs are still searching for a merger partner. Over 400 of the 613 SPACs that completed IPOs in 2021 are still seeking a merger partner. Obviously many of these SPACs are now coming toward the end of their search periods. In coming months many of these SPACs will be completing mergers – or perhaps liquidating. The likelihood is that much of the litigation that ultimately will be filed against the SPAC IPO class of 2021 is still somewhere over the future time horizon.


MultiPlan SPAC-Related Chancery Court Action Settles: While there have been many SPAC-related suits filed in recent months, very few of the cases have yet reached the motion to dismiss stage, and even fewer have settled. However,  the parties in one of the SPAC-related suits disclosed in a court filing last week that they had reached a settlement in the case. The settled Delaware Chancery Court action had been filed against MultiPlan; the SPAC into which MultiPlan had merged; the SPAC sponsor; the SPAC directors; the SPAC controlling shareholder; and the SPAC controlling shareholder’s financial vehicle. The case in question was not one of the securities class action lawsuits of the type described above; it was rather a state law breach of fiduciary duty direct action. As discussed here, the suit survived a dismissal motion in a landmark ruling that was among the first to consider the duties of SPAC directors, officers, and sponsors under Delaware law. Now, according to a November 18, 2022 Law360 article (here), the case has been settled, for $33.75 million. A copy of the parties’ stipulation of settlement can be found here. The settlement is subject to court approval. This case is among the first of the many cases that have been filed as part of the recent SPAC litigation wave to settle.