In the latest SPAC-related federal court securities class action lawsuit to be filed, a plaintiff shareholder has filed a securities suit against a building management technology company – which merged with a SPAC in 2021 — that recently restated its financial statements for the reporting periods after the company became publicly traded. The complaint in the new lawsuit filed against Latch, Inc. can be found here. As also noted below, in a separate development, a different plaintiff shareholder has filed a separate SPAC-related Delaware Chancery Court action against former directors and officers of a SPAC and the SPAC’s sponsor.
Continue Reading SPAC-Related Securities Suit Filed Against Building Technology Company

Although the filing of SPAC-related securities lawsuits has been one of the important securities litigation stories so far this year, the filing this past week of yet another SPAC-related securities suit did highlight the fact that it is the first SPAC-related securities suit to be filed since late May. As discussed further below, there may be some reasons for this apparent lull in SPAC-related securities suit filings over the last several months. However, the recently filed suit, as also discussed below, at the same time arguably underscores the fact that it is entirely possible that the apparently lull in filings between May and August was purely coincidental and that we are likely to see continued numbers of SPAC-related securities suit filings as the year progresses.
Continue Reading Online Lottery Company Hit with First SPAC-Related Securities Suit Filing Since May

According to the latest statistics from SPACInsider, there are currently over 580 SPACs seeking merger partners. Financial media reports have already speculated that many of the searching SPACs may not find a suitable merger partner within the applicable search period. One concern from this combination of circumstances is that some SPACs may feel pressure to do whatever they have to do to complete a deal, any deal. As I have noted in prior posts, deals completed under these kinds of circumstances can later subject the SPAC managers to scrutiny and perhaps even litigation.

In a Delaware Chancery Court lawsuit brought by former public shareholders of a SPAC against the former directors and officers of the SPAC and others alleging that the SPAC officials, in their push to complete a deal, misrepresented the target company as a U.S.-based manufacturer of electric vehicles, when, the plaintiff shareholders allege, the company was in fact just a vehicle dealer that buys Chinese electric vehicles that the company rebrands as its own. As discussed below, this new lawsuit may illustrate one of the kinds of circumstances in which many of the currently searching SPACs could fall.
Continue Reading SPAC Execs Allegedly Misrepresented Target Company’s Business to Complete Deal

As I have noted in recent posts (most recently here), a few of the many SPAC-related securities lawsuits that have been filed in the last 18 months are so are reaching the dismissal motion stage, and in at least some cases the dismissal motions are being denied, at least in part. In the latest example, the federal judge presiding over the SPAC-related securities class action lawsuit involving commercial space travel firm Momentus and Stable Road Acquisition Corp, its SPAC partner, as well as the SPAC sponsor and certain SPAC executives, has largely denied the defendants’ motion to dismiss. As discussed below, the securities suit may be unusual in that it was only filed after the SEC launched a securities enforcement action against the same entities and individuals and involving the same allegations; however, the court’s rulings nevertheless may have some implications for the many other pending SPAC-related suits.
Continue Reading Securities Suit Against SPAC and SPAC Merger Target Largely Survives Dismissal Motion

As readers of this blog well know, over the last 18 months or so there has been an onslaught of SPAC-related securities class action litigation. Most of these cases have only just been filed and therefore have not yet reached the motion to dismiss stage. However, a number of the earlier filed cases are now reaching that dismissal motion stage, and although the results so far are mixed, some of the cases are surviving the initial pleading hurdles, at least in part.

On July 1 ,2022, and in the latest example of a SPAC-related securities suit surviving the dismissal motion at least in part, Northern District of California Judge Susan Illston partially denied the motion to dismiss in the SPAC-related securities suit filed against Velodyne Lidar and certain of the executives of the SPAC into which Velodyne merged. As discussed below, there are several interesting features of Judge Illston’s opinion, a copy of which can be found here.
Continue Reading SPAC-Related Securities Suit Partially Survives Dismissal Motion

As readers of this blog know, as a follow-on effect to the massive wave of SPAC activity in the U.S., there has also been a surge of securities class action lawsuits involving companies that engaged in SPAC transactions. Many of these suits have only just been filed, so it is too early to tell how they will fare. But some of the cases are now reaching the motion to dismiss stage. If the recent motion to dismiss ruling in the SPAC-related lawsuit against mobile gaming technology company Skillz is any indication, many of these cases could encounter substantial hurdles as they go forward.
Continue Reading Motion to Dismiss Granted in SPAC-Related Securities Suit Against Gaming Company

The number of securities class action lawsuit filings in the first half of 2022 remained at the lower levels that prevailed last year and below the more elevated levels that prevailed during the period 2017-2020. Though the number of securities class action lawsuit filings in the year’s first six months is below the recent higher levels, the number of suits filed is still consistent with long-term averages. The difference in the number of filings so far this year and the elevated numbers during the recent period were both largely due to merger objection lawsuit filings patterns.
Continue Reading Pace of Securities Suit Filings in First Half 2022 Slightly Below Last Year’s Annual Level

According to a new report about SPACs and SPAC-related securities litigation, even though the market for SPAC IPOs may have cooled in recent months, SPAC-related litigation has “yet to heat up.” Indeed, according to the report, litigation involving the 977 SPACs that completed IPOs during the period January 2019 and April 2022 “may continue to grow over the next few years.” The report, which is entitled “SPAC Federal Securities Litigation Analysis” and was written by David P. Abel, Managing Attorney, U.S. Market Advisors Law Group PLLC, can be found here.
Continue Reading Further SPAC-Related Securities Litigation Filings Likely in the Months Ahead?

In an article published last month, the Wall Street Journal chronicled the difficulties that many of the SPACs launched during the SPAC IPO frenzy in late 2020 and early 2021 are having trying to identify a suitable merger target. Many of the SPACs, the article suggested, might be forced to liquidate; still others, the article suggested, could “pursue low-quality companies” as the SPAC sponsors seek to “stave off possible losses.” I had occasion to recall the Journal article as I read the allegations in a newly filed SPAC-related shareholder derivative suit. The new lawsuit illustrates the one of the types of litigation risk some SPACs could face as they mull last minute mergers before the approaching end of their 24-month search period.
Continue Reading Derivative Suit Alleges SPAC Merged with Company Outside the Targeted Industry