After the 2021 peak of the SPAC IPO frenzy, many SPACs wound up liquidating, while another significant tranche of the SPACs (or the SPACs post-merger successor companies) wound up in litigation. The post-frenzy glut of SPAC-related lawsuits has since been making its way through the courts ever since, and some have made it to the settlement stage. In recent days, the parties to two of these SPAC-related lawsuits have reached noteworthy settlements. As discussed below, the two settlements – the Alta Mesa SPAC-related lawsuit settled for $126.3 million and the Grab Holdings SPAC-related lawsuit settled for $80 million – are among the largest ever SPAC-related lawsuit settlements and could potentially set standards for future SPAC lawsuit settlements. The two settlements are subject to court approval.

Alta Mesa

Background

The Alta Mesa lawsuit related to a SPAC IPO from an earlier era; indeed, the Alta Mesa lawsuit was already pending as the SPAC IPO frenzy reached its crescendo in 2021.

Silver Run Acquisition Corporation II, a Special Purpose Acquisition Company (SPAC), completed an IPO in March 2017. On August 16, 2017, Silver Run announced its plan to merge with two separate but interrelated oil-and-gas companies, Alta Mesa Holdings LP (AMH) and Kingfisher Midstream LLC.  The merger proxy stated that AMH and Kingfisher were “poised for accelerating growth” with significant increases in production and earnings expected by 2019. The merger closed on February 9, 2018, with the transaction valued at $3.8 billion. The combined company was known as Alta Mesa Resources, Inc., with AMH and Kingfisher as subsidiaries of Alta Mesa.

Two months after the merger closed, Alta Mesa filed its first 10-K as a public company, and also issued an earnings release. Among other things, the company released EBITDA and production estimates that were, as the subsequently filed securities complaint alleged, “dramatically reduced” from the equivalent figures in the proxy statement. As 2018 progressed, the company continued to release similarly disappointing news.

In February 2019, the company announced that it would not be able to file its 2018 annual report on time and that it was going to be taking material asset impairment charges, with the write-downs totaling $3.1 billion (less than twelve months after the merger transaction that had valued the company at $3.8 billion). In May 2019, the company announced that the SEC was investigating circumstances involved possible material weaknesses in the company’s internal controls.  

In September 2019, the company filed for Chapter 11 bankruptcy protection. Alta Mesa’s assets sold for $320 million, less than 10% of Alta Mesa’s claimed post-merger value of $3.8 million.

The Lawsuit

In January 2019, shareholder plaintiffs filed a securities class action lawsuit against Alta Mesa in the Southern District of Texas. The plaintiffs filed their Second Amended Consolidated Complaint (here) on April 6, 2020. The complaint names as defendants 12 individuals who were officers or directors of Alta Mesa (including one individual who had been CEO of Silver Run prior to the merger); two other individuals who were officers of Silver Run; and four related entities, including Riverstone, which had sponsored the Silver Run SPAC, and the three investment firms that owned AMH or Kingfisher prior to the merger. Several of the individual defendants were also officers or directors of Riverstone, the SPAC sponsor.  

The complaint alleges that prior to the merger, the defendants made a series of misrepresentations to induce Silver Run investors to vote in favor of the merger, including, among other things, using misleading reserve and financial projections to overstate the value of AMH and Kingfisher. The complaint alleges further that the misrepresentation of the company’s reserves and projections continued after the merger.

As discussed here, in April 2021, Southern District of Texas Judge George C. Hanks, Jr., denied the defendants’ motion to dismiss. As a general matter, Judge Hanks said that “the circumstances surrounding the company’s financial reporting … are alone enough to entitle Plaintiffs to discovery.” 

In ruling on the motion with respect to the plaintiffs’ claims under Section 10(b), Judge Hanks focused on the company’s various disclosures shortly after the merger closed, as well as the $3.1 billion write-down. Judge Hanks said, “Under the circumstances, the enormity of the write-down over such a short period of time is enough for the case against these defendants to proceed.”

Subsequent Proceedings and Settlement

Following the dismissal motion denial, the case headed into discovery. Following discovery and a series of pretrial motions, the parties entered into settlement negotiations. As reflected in the plaintiffs’ January 6, 2025, unopposed Motion for Preliminary Settlement Approval (here), the plaintiffs and various of the defendants reached separate settlements over the course of Fall 2024. The case apparently had reached the trial stage as to the remaining defendants in December 2024 when the final settlement with the remaining defendants was reached. According to the plaintiffs’ counsel’s January 8, 2025, press release about the settlement (here), the jury trial was in its third week when the parties concluded the settlement.

According to the January 6, 2025, Stipulation of Settlement in the final settlement (here) – involving Alta Mesa and certain of its directors and officers, as well as Riverstone — the final portion of the settlement is to be funded with the “remaining proceeds” of the settling defendants’ D&O insurance policies, with the remaining unpaid balance to be paid by Riverstone. Plaintiffs’ counsel has indicated they intend to seek approximately 33%, or about $41.7 million, in fees.

According to plaintiffs’ counsel’s press release, the $126.3 million settlement would represent the “largest-ever securities fraud class action recovery involving a SPAC, if approved by the court.”

Grab Holdings Ltd.

Background

Altimeter Growth Corp. was a SPAC. It completed its IPO on September 30, 2020. On December 1, 2021, Altimeter completed a business combination with Grab Holdings Limited, a delivery app organized under the laws of Cayman Islands and based in Singapore, with Grab as the surviving entity with its shares listed on Nasdaq.

On March 3, 2022, Grab released its fourth quarter 2021 financial results. The company announced that its quarterly revenues had declined 44% from the previous quarter. The company also reported a $1.1 billion loss. In its financial release, the company stated that the revenue declined as the company “preemptively invested to grow driver supply to support strong recovery in mobility demand.” In a conference call held in connection with the earning release, the company’s CEO said that “our driver supply base moderated down amid lower mobility demand in the third quarter.” According to the complaint, the company’s share price declined over 37% on this news.

 The Lawsuit and Settlement

On March 16, 2022, a plaintiff shareholder filed the first of two securities class action subsequently consolidates lawsuits in the Southern District of New York against Grab, its CEO, and its CFO. A copy of the initial complaint can be found here.

 The complaint alleges that the defendants failed to disclose to investors: “(1) that Grab’s driver supply declined during the third quarter; (2) that, as a result, Grab continued to invest heavily in driver and consumer incentives to ‘preemptively recalibrate driver supply’; (3) that, as a result, the Company’s financial results would be adversely impacted, including, among other things, a significant decline in revenue; and (4) that, as  a result of the foregoing, Defendant’s positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”

On March 12, 2024, the court entered an order granting in part and denying in part the defendants’ motion to dismiss. The case moved into discovery, and, while discovery went forward, the parties also entered mediation, which ultimately resulted in $80 million settlement.

The parties’ January 2, 2025, Stipulation of Settlement (here) says that Grab “shall pay, or cause to be paid by Defendants’ insurers to pay” the settlement amount into the settlement escrow fund according to the settlement stipulation’s timetable. Plaintiffs’ counsel had indicated that they intend to request up to one-third of the settlement fund, or about $26.6 million, in fees.

Discussion

The sheer volume of SPAC-related litigation working its way through the courts has been an important part of the D&O liability landscape since the peak of the SPAC IPO frenzy. The courts themselves have commented on the sheer quantity of litigation. For example, Delaware Vice Chancellor Sam Glasscock, in a November 2024 opinion (discussed here), noted that an anaconda snake eats just once a year. Open the snake’s belly, he said, and you will not see what it is eating, but what it has eaten in the past. So too with the progress of the SPAC litigation. As VC Glasscock put it “the bulge of the SPAC carcasses continues to be digested.” And as the mass of litigation has slowly made its way through the system, some of the cases – like these two – have made their way to the settlement stage.

These two settlements are indeed noteworthy, if for no other reason than their size. While these two settlements – as large as they are – would not rank anywhere near top of the list of the largest of the overall securities class action lawsuit settlements, they are definitely among the largest when it comes to SPAC-related securities lawsuits.

Indeed, the plaintiffs’ counsel in the Alta Mesa lawsuit claimed, in their press release about the settlement, that the Alta Mesa settlement is the “largest-ever securities fraud class action recovery involving a SPAC, if approved by the court.” I have no reason to contest this assertion. The Grab Holdings also is among the largest SPAC-related securities lawsuit settlement; indeed, as far as I know, it is the second-largest (readers can correct me if I am wrong about that).

To my knowledge, prior to these two settlements, the largest prior SPAC-related securities class action lawsuit settlement was the April 2021 $35 million settlement in the Akazoo securities class action lawsuits, discussed here. The SPAC-related Securities Class Action lawsuit filed against Clover Health Investments settled in April 2023 for $22 million (of which $19.5 million was funded by D&O Insurance).

Many of the other notable SPAC-related lawsuit settlements of which I have been aware have been in the Delaware breach of fiduciary duty direct action lawsuits (as opposed to securities class action lawsuits). MultiPlan, the first of the Delaware SPAC-related breach of fiduciary duty direct action cases, settled for $33.75 million. As discussed here, the various ATI Physical Therapy lawsuits (inclusive of securities class action litigation; derivative litigation; and the Delaware direct action breach of fiduciary duty lawsuits) settled in September 2024 for a combined $31 million, of which the settlement of the securities class action lawsuit represented $18.9 million, the settlement of the direct action fiduciary duty lawsuit represented $6 million, and the settlement of the derivative lawsuit represented $6.45 million.

The potential longer-term significance of these two recent SPAC-related lawsuit settlements has to do with the mass of SPAC-related litigation that remains pending. One factor that always comes up in negotiations to try and settle corporate and securities litigation are the settlements that have gone before. One party or the other will try to argue what “cases like this settle for.” Indeed, the various parties may attempt to cite prior settlement examples they think are relevant to the case they are trying to settle. In future SPAC-related lawsuit settlement negotiations, plaintiffs’ lawyers may well try to cite these two settlements in an attempt to set the potential settlement range.

However, a factor that may come into play in these putative future negotiations is the amount of D&O insurance available. D&O insurance practitioners who were active during the peak of the SPAC IPO frenzy know that insurance for many of these transactions was scarce and expensive. The SPAC IPOs that launched during that period likely will have lower levels of D&O insurance available for possible settlement than apparently were available for the settlement of these two cases. The dearth of D&O insurance, where applicable, could make these two settlement data points less relevant.

I will say this about the Alta Mesa settlement – it was complicated. It is hard to tell from the electronic court file everything that was going on, but the one thing that is clear is that the case settled in a piecemeal fashion. There were various settlements with various defendants over the course of Fall 2024 before the final settlement during the trial in the case against the remaining defendants. I am guessing that one reason for this piecemeal process is that the various groups of defendants (the SPAC officer, the officers of the SPAC sponsor, the SPAC sponsor, the pre-merger target companies, the owners of the pre-merger companies, the post-merger successor company) all had their own D&O insurance programs, a feature of these SPAC-related suits that can make them difficult to resolve.

There is one final note that should not be overlooked here, and that is the fact that the final settlement of the Alta Mesa case took place during trial. Readers of this blog know that trials in securities class action lawsuits are extremely rare. According to data maintained by Adam Savett of the Wolf Popper law firm (here), only 24 cases — inclusive of the Alta Mesa case — filed post-PSLRA and involving post-PSLRA conduct have gone to trial since 1996. (Of those 24 cases, only 16 actually went to verdict. Another 11 cases filed after the PSLRA was enacted but involving pre-PSLRA conduct have also gone to trial.) The Stanford Law School Securities Class Action Clearinghouse database has identified nearly 7,000 federal and state securities class action lawsuit filings since 1996 (the state securities suit database only goes back to 2010). The fact that the Alta Mesa case went to trial at all is a noteworthy face about the case, even though in the end the case did not make it all the way to a jury verdict.