One of the significant contributing factors to the total number of securities class action lawsuit filings in 2022 was the number of SPAC-related securities suits filed during the year. However, while there were a significant number of SPAC-related suits filed in 2022, the number of SPAC-related suit filings declined as the year progressed, to the point that it was not clear whether the phenomenon would continue into 2023. As it has turned out, the plaintiffs’ lawyers have continued to file SPAC-related suits this year. In the latest example, on May 12, 2023, a plaintiff shareholder filed a securities suit against energy storage services provider Stem, Inc., which merged with a SPAC in April 2021. This latest filing shows that the SPAC-related suits continue to be filed and that the suits continue to be a factor in the total overall number of securities suit filings.


Star Peak Energy Transition Corp. was a special purposed acquisition company (SPAC). Star Peak completed an IPO in April 2020. Legacy Stem was a private company offering energy storage systems software services provider. In December 2020, Star Peak announced its intent to complete a business combination with Legacy Stem. On April 28, 2021, the companies completed their business combination, with the combined companies known as Stem, whose shares subsequently traded on the NYSE.

The securities class action complaint alleges that leading up to and following the merger, Stem represented that its AI-driven approach to energy storage management gave it a competitive advantage that differentiated Stem from its competitors. On February 24, 2022, Stem announced its entry into a strategic partnership with Available Power (AP). Stem attributed its entry into the AP partnership to the attributes of its software platform.

In a presentation at an investor conference in January 2023, Stem “revealed” that is 2022 bookings backlog was “partially offset by a Stem-initiated cancellation (~$130M) due to partner non-performance on an agreed timeline.” (The company later clarified that this cancellation related to an AP project.). The company’s share price declined nearly 9% on this news.

On January 11, 2023, Blue Orca, a short seller, issued a report alleging various additional undisclosed issues with Stem’s business and financial prospects, including, among other things, that the Company had allegedly overstated its software revenues by falsely claiming that 100% of its services revenue line was attributable to software revenues. The company issued a press release refuting Blue Orca’s claims. However, on February 16, 2023, the company announced financial results below analysts’ estimates and issued disappointing 2023 revenue guidance that was also below analysts’ estimates. The stock fell a further nearly 14% on this news, putting the company’s share price nearly 70% below the company’s initial post-merger-closing share price.

The Lawsuit

On May 12, 2023, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against Stem; certain of its directors and officers; and certain individuals who had served as directors or officers of the SPAC prior to the merger. A copy of the complaint can be found here. The complaint purports to be filed on behalf of two plaintiff classes: investors who purchased shares pursuant or traceable to the offering documents contributed in connection with the April 28, 2021 merger (the offering document class); and investors who purchased shares of the company between March 4, 2021 (when the SPAC filed its annual report on form 10-K) and February 16, 2023 (when the company issued its disappointing financial results) (the open market trading class).

The complaint alleges that the defendants failed to disclose that: “(i) the Company had overstated Legacy Stem’s and its own post-Merger business and financial prospects; (ii) Stem’s software revenue did not make up 100% of the Company’s services revenue; (iii) Stem had overstated the benefits expected to flow from its AP partnership; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times.”

The complaint alleges, on behalf of the offering document class, that the defendants violated the liability provisions of the Securities Act of 1933, and on behalf of the open market trading class, that the defendants violated the liability provisions of the Securities Exchange Act of 1934.


This SPAC-related lawsuit was filed a considerable time after the SPAC merger took place and is based on developments that also were a considerable time after the SPAC merger. However, the lawsuit does also allege misrepresentations both before and after the completion of the SPAC merger. The complaint also names as defendants a number of individuals who served as directors and officers of the SPAC. So the company’s SPAC merger history is an important part of the complaint. For that reason, I am comfortable classifying the lawsuit as SPAC-related, even though it was filed a considerable amount of time after the SPAC merger.

As I noted at the outset of this post, the decline in the number of SPAC-related lawsuit filings in the second half of 2022 raised the question of whether or not SPAC-related securities suit filings would continue into 2023. As it has turned out, the SPAC lawsuit filings have indeed continued this year, as this new lawsuit shows. By my count, there have been a total of 61 SPAC-related lawsuits files since January 1, 2021, of which six have been filed so far in 2023.  At this point, it is clear that the SPAC-related securities suit filings will be a factor contributing to the total number of securities suits filings again this year.

One particular feature this new lawsuit has in common with many of the SPAC-related securities suit filings since January 1, 2021, is that involves allegations that were first raised in a short-seller report. Many of the previous SPAC-related securities suit filings also involved allegations raised in a short-seller report that caused the defendants company’s share price to decline. By my count, at least 23 of the 61 SPAC-related securities lawsuits that have been filed (about 37%) have involved allegations from a short seller report.