SPACs were back in the business headlines again last Friday, as the news circulated that shareholders of Digital World Acquisition Corp., a special purpose acquisition company, had approved the proposed business combination with Trump Media & Technology Group, the corporate parent of Truth Social, Donald Trump’s social media company. On the same day, in a reminder of what has happened to all too many companies that merged with SPACs during the peak of the SPAC frenzy in 2020 and 2021, shareholders of a SPAC that merged with an electric vehicle company sued the directors and officers of the SPAC as well as the EV company, alleging that in the merger proxy statement the defendants failed to disclose multiple business problems at the target company. The lawsuit is the latest SPAC-related securities suit to be filed after the collapse of the SPAC surge.


Northern Genesis Acquisition Corp. (NGA) was a SPAC. It completed an IPO on August 17, 2020. On May 6, 2021, NGA completed a business combination with an electric vehicle company based on Canada. The combined company is named Lion Electric Company. On support of the proposed merger, on March 24, 2021, NGA filed with the SEC and distributed to investors a proxy statement.

During the period 2022 and 2023, information that Lion Electric was experiencing supply chain and manufacturing problems became public. The shares that investors had purchased at the time of the SPAC IPO at $10 per share are now trading as Lion Electric at just over $1 per share.

The Lawsuit

On March 22, 2024, a plaintiff investor filed a securities class action lawsuit against NGA; against the founders of NGA who served as NGA’s executive officers or directors; Lion Electric; Lion’s CEO; and Lion’s President. A copy of the complaint can be found here. The complaint purports to be filed on behalf of a class of investors who held NGA common stock on the date of record for the merger, March 18, 2021.

The complaint emphasizes that in connection with the merger, the investors in the class had the option of voting in favor of the merger, and it if was approved, receiving shares in the combined company, or voting against the merger and redeeming their shares. The complaint emphasizes that the proxy statement was essential for the shareholders in trying to decide which course they would take.

The complaint alleges that the defendants were aware of “multiple serious business problems” at Legacy Lion (the predecessor company with which NGA merged), yet they pressed forward with the merger because of the substantial benefits they stood to gain if the merger was completed. As part of this effort, the complaint alleges, the defendants caused “a materially false, incomplete, and misleading joint proxy statement” to be prepared and filed with the SEC.

Specifically, the complaint alleges that the “Risk Factors” section of the proxy statement contained several misleading statements, “describing problems that had already materialized as mere risk.” The allegedly misleading proxy statement sections concerned supply chain problems and shortages of raw materials; dependence on third-party suppliers, many of whom were single-source suppliers; and the company’s ability to manufacture its vehicles as a scale to meet its customers’ needs. The complaint also alleges that the proxy statement failed to provide the net cash value of the investors’ share, and that the financial projections were “objectively unrealistic.”

The complaint alleges that the defendants: “(i) used materially deceptive ‘risk factor’ statements to withhold the truth about problems facing Legacy Lion Electric, including supply chain problems with its suppliers and sub-suppliers; (ii) misled NGA’s stockholders about Lion Electric’s prospects using grossly unrealistic financial projections; and (iii) failed to provide NGA stockholders with the ‘net cash’ value of their shares – the key disclosure about the fundamental purchasing power their NGA shares represented.”

The complaint alleges that the defendants violated Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 thereunder. The complaint seeks to recover damages on behalf the plaintiff class.


It has now been almost three years since the peak of SPAC IPOs. Among the remnants of that financial transaction activity is a spate of SPAC-related securities class action lawsuit, now including this new lawsuit. By my count, there have now been 69 SPAC-related securities lawsuits filed since January 1, 2021, including three already so far this year. (By way of comparison, there were 12 SPAC-related securities lawsuits filed in 2023.)

This latest lawsuit shares several features with many of the earliest SPAC-related securities lawsuits filed in 2021 and 2022; for example, the lawsuit arises out of a SPAC merger with an electric vehicle company. Many de-SPAC companies have stumbled as they struggled to deal with being a publicly traded company, but the post-merger EV companies seem to have fared particularly poorly. Of the 69 SPAC-related securities lawsuits that have been filed since January 1, 2021, fully 21 have involved allegations related to SPAC mergers with companies in the EV industry.

This new complaint also shares another attribute in common with many of the earlier filed SPAC-related securities suits, as it is based on allegations of misrepresentations of supply chain disruptions. There was a point in the emergence of SPAC-related securities suits that I noted that the SPAC suits and suits relating to supply chain disruption each represented developing trends – trends that frequently coincided.

Despite the lawsuits somewhat familiar characteristics, there is also a sense in which this lawsuit is a bit of a surprise. The surprise is that the lawsuit is only now just being filed. Both the SPAC IPO and the merger took place some time ago and the company’s problems began to emerge about two years ago. The fact that this case is only now just being filed is something of a reminder that we may continue to see SPAC-related litigation to be filed, perhaps for some time to come. Other SPAC-related cases filed this year seem to be similarly belated (refer, for example, here).

It has been my expectation that the filing of SPAC-related litigation would be now really pretty much died down, because so much of the SPAC-related activity is so clearly in the rear-view mirror. On the other hand, the completion just this past week of the Truth Social SPAC merger is a reminder that SPAC-related events continue to play out. And in that regard, you do have to kind of wonder whether we might eventually see securities litigation arising out of the Truth Social merger, and if we do, how long we will have to wait.