As I noted in my recent round-up of D&O insurance issues, one of the consequences of the end of the SPAC IPO boom is that many of the SPACs from the IPO classes of 2020 and 2021 have given up trying to find a merger target and instead have opted to liquidate – which raises the question whether liquidation could lead to litigation. On the one hand, where’s the harm, since the investors get their money back. On the other hand, in our litigious society, litigation often follows after disappointed expectations. A December 30, 2022, lawsuit brought by SPAC investors against the SPAC, its sponsors, and its directors and officers, may provide an example of how litigation can arise in the wake of a SPAC liquidation.



Pioneer Merger Corp. is a special purpose acquisition company (SPAC). Pioneer completed an IPO on January 21, 2021. In May 2021, Pioneer announced its intent to merge with Acorns, a wealth management mobile app company. The merger agreement included a provision that if the merger failed to go through Akorns would pay a termination fee of $32.5. On January 3, 2022, Pioneer announced that it had entered into a termination fee agreement with Acorns. Acorns agreed to pay Pioneer $17.5 million in equal monthly installments through December 15, 2022. Acorns also agreed that if Pioneer failed to complete a business combination by December 15, 2022, it would pay Pioneer an additional $15 million no later than December 22, 2022.

On December 15, 2022, Pioneer announced that it had not located a new transaction and would liquidate. The decision to liquidate triggered Acorns’ obligation to pay the additional $15 million. However, the subsequently filed complaint alleges, rather than distribute the termination fee to the SPAC’s public shareholders, the defendants allegedly said that they would return only the funds held in the SPAC’s trust and “no other amounts.” The complaint alleges that the entire termination fee would be distributed only to the holders of the SPAC’s founders’ shares.

The Lawsuit

On December 30, 2022, one of the SPAC’s public shareholders filed a class action lawsuit in the Southern District of New York against the SPAC; its sponsor; and the SPAC’s directors and officers. A copy of the complaint can be found here.

The complaint asserts that the case involves an alleged “planned misappropriation of a $32.5 million corporate asset by the sponsor of [a SPAC].” The complaint alleges that in its public filings, the SPAC had asserted that the defendants would “lose their entire investment if the SPAC did not complete a business combination.” However, the complaint asserts, “having failed to make a deal” and rather than take a loss, the defendants “decided to extract a consolation prize for themselves: Defendants have stated that they will award the entire $32.5 million Termination Fee … to themselves,” while the holders of the public shares “will receive only the IPO Proceeds (with minimal interest).” The defendants’ actions to retain the Termination fee would, the complaint alleges, “render the Termination an utterly disloyal, self-dealing transaction through which Defendants traded away a corporate asset solely to line their own pockets.”

The complaint seeks an order “(i) enjoining Defendants from distributing any of the SPAC’s assets other than the IPO proceeds held in the SPAC’s trust account; and (ii) requiring the Defendants to distribute the SPAC’s net assets, including the Termination Fee, to holders of the [public shares].”


While this new lawsuit does represent an example where a SPAC’s move to liquidate has triggered a lawsuit, it also represents a relatively unusual circumstance where a liquidating SPAC has assets beyond the IPO funds held in trust. Most other SPACs will not have assets beyond the IPO funds held in trust so the circumstances that led to the litigation here will not be relevant in most other circumstances, and the case is to that extent not a meaningful example for most other SPACs for the possibilities of litigation in the context of a SPAC liquidation.

That said, this is the not the first example where a liquidating SPAC with assets beyond the trust funds became involving in litigation. For example, as discussed here, in August 2022, investors in FAST Acquisition Company, a SPAC that had announced its plans to liquidate, filed a pre-liquidation lawsuit against the SPAC, its sponsors, and its directors and officers, disputing the way that the SPAC’s directors and officers intended to deal with a financial asset of the SPAC in connection with the liquidation (as in the Pioneer case, the financial asset in question in the FAST case was a termination fee associated with a prior unsuccessful attempt to merge).

As a minimum, these two cases do illustrate ways that, at least in certain circumstances, litigation can arise in the context of a proposed SPAC liquidation. Just the same, the circumstances involved in these two cases are unusual; very few SPACs will have assets at the time of liquidation other than the IPO funds held in trust. The fact that problems can arise, and that litigation can follow, does show that liquidation is not always going to be risk-free or that investors will not pursue claims if they believe them to be valid.

According to SPACInsider, as of January 3, 2022, there were 382 SPACs still seeking merger partners. Many of these searching SPACs are from the SPAC IPO classes of 2020 and 2021, meaning that their initial 24-month search period has ended or is about to end. In some cases, the search periods may have been extended. But in many cases, these SPACs searches are likely to end in liquidation. In many cases, the liquidation will unfold uneventfully. But as the Pioneer and FAST cases show, when problems do arise, litigation can result. It remains to be seen whether and to what extent SPAC liquidation-related litigation emerges as a substantial issue in 2023.