As I have noted in prior posts (most recently here), many of the SPACs that completed IPOs during the SPAC frenzy in 2020 and 2021 are nearing the end of their two-year search period. Many of these SPACs have not identified suitable merger partners and the SPACs are liquidating. One question I have been asking as these SPACs liquidate is whether there might be litigation. One the one hand, in the liquidation, the investors get their money back. On the other hand, in our litigious society litigation is always possible when plans don’t work out. In the latest example of how litigation might arise in the SPAC liquidation context, investors in SPAC which has announced its plan to liquidate have brought an action against the SPAC, its directors and officers, and the SPAC sponsor, in a fight about how assets the SPAC holds beyond the IPO trust funds are to be distributed.Continue Reading Liquidating SPAC Hit With Investor Suit Over Planned Asset Distribution
As I noted in my recent year-end round up of the top D&O stories of 2022, one of the important trends last year was the volume of SPAC-related D&O litigation. Now, in what is the first SPAC-related securities suit of 2023, a plaintiff shareholder has launched a SPAC-related securities suit against satellite company Terran Orbital, related to the company’s March 2022 merger with a publicly-traded SPAC. Although the new lawsuit reflects the ongoing trend of SPAC-related lawsuit filings, the new lawsuit also has some unusual features, as discussed below. The February 17, 2023, complaint in the lawsuit can be found here.Continue Reading First SPAC-Related Securities Suit Filing of 2023
In yet another Delaware court D&O insurance coverage decision that is sure to set the D&O insurance industry spinning, a Delaware Superior Court Judge has held that a SPAC’s post-merger runoff policy provides coverage for the defense fees of former directors of the pre-Merger target company for alleged Wrongful Acts that the occurred prior to the merger – even though the former directors were not directors or officers of the SPAC at the time they allegedly committed the alleged Wrongful Acts. The court’s ruling could even further complicate the already fraught process of placing and structuring D&O insurance in the De-SPAC context. A copy of the Court’s February 6, 2023 opinion can be found here. (Please note that I have linked to the copy of the opinion on the Court’s website; the website copy to which I linked says that the opinion was filed under seal, but the seal reportedly was lifted by the court on February 16, 2023.)Continue Reading Delaware Court: Pre-Merger Target Company Execs Are Insured Persons Under SPAC’S Post-Merger Tail Policy
In two dismissal motion grants last week in pending SPAC-related securities suits, the respective courts’ rulings could have potential significance for other pending or prospective SPAC-related cases. The January 10, 2023, ruling in the SPAC-related suit involving DraftKings has important implications for the many pending SPAC-related cases based on short seller reports, and the January 11, 2023, ruling in the Lucid case has potential implications for SPAC-related securities suits based on alleged pre-merger misrepresentations. The two rulings and their potential significance are discussed below.Continue Reading SPAC-Related Securities Suit Dismissals Could Be Significant for Other Cases
In my recent wrap-up of the top D&O stories of 2022, I noted that one of last year’s key topics was the quantity of litigation involving special purpose acquisition companies (SPACs). It now appears that this trend is continuing into the new year. Late last week, a plaintiff shareholder filed a SPAC-related securities suit against battery development company Enovix, alleging that the company had misrepresented its manufacturing capabilities. A copy of the January 6, 2023, complaint against the company can be found here.Continue Reading Battery Co. Hit with SPAC-Related Securities Suit
In a few days, when I work up my summary of the year’s events in the world of D&O, one of the stories I will be covering will be the volume of SPAC-related securities litigation during the year. The SPAC-related litigation represents a significant part of the year’s securities class action lawsuit filings. The latest example of this phenomenon is the lawsuit filed late last week against residential home improvement financing platform Sunlight Financial Holdings, Inc., which became a public company through a July 2021 merger with a SPAC. The new lawsuit is in many ways representative of the kinds of SPAC-related lawsuits filed this year. A copy of the complaint in the new lawsuit can be found here.
Continue Reading Construction Financing Platform Hit with SPAC-Related Securities Suit
After a several months-long lull in which relatively few SPAC-related securities suits were filed, plaintiffs’ lawyers have now in the past several days filed several new cases. The latest example is the lawsuit filed late last week against the electric scooter company Bird Global, Inc., which merged with a publicly traded SPAC in November 2021. The lawsuit comes after the company’s announcement on November 14, 2022 that due to a reporting error the company would be restating its previously published financial statements for several prior reporting periods. A copy of the November 17, 2022 complaint can be found here.
Continue Reading Electric Scooter Company Hit With SPAC-Related Securities Suit
Although there have been literally dozens of SPAC-related securities class action lawsuits filed since January 1, 2021, in recent months the pace of filing of these lawsuits has noticeably slowed. After an extended period when many of these suits were filed each month, during the period since May 31, 2022 only three of these suits have been filed. However, this past week, a SPAC-related securities lawsuits was filed against Core Scientific, a digital mining company that merged with a SPAC in January 2022. As discussed below, this latest filed lawsuit has several interesting features. A copy of the complaint filed against Core Scientific can be found here.
Continue Reading Digital Asset Mining Company Hit with SPAC-Related Securities Suit
As I have previously noted, plaintiffs’ lawyers have over the last several months filed a plethora of securities class action lawsuit against companies that became publicly traded through a merger with a Special Purpose Acquisition Company (SPAC). Since these cases have only just been filed, few of the cases have yet reached the initial pleading hurdles. However, in a ruling last week, Central District of California Judge Christina A. Snyder denied in part the defendants’ motion to dismiss the securities suit pending against electric vehicle company Faraday Future Intelligent Electric, Inc., which became a public company through a June 2021 merger with a SPAC. As discussed below, the ruling may have significance for a number of the recently filed SPAC-related securities suits. A copy of Judge Snyder’s October 20, 2022 order can be found here.
Continue Reading Court Denies in Part Motion to Dismiss SPAC-Related Securities Suit Against EV Company
In the latest lawsuit to emerge in the aftermath of the recent SPAC frenzy, a plaintiff shareholder has filed a securities class action suit against Opendoor Technologies, a residential real estate digital platform, which merged into a publicly traded SPAC in December 2020. The SPAC involved was one of the many financial vehicles launched by the so-called “King of SPACS,” Chamath Palihapitiya, while the SPAC craze was picking up steam. A copy of the October 7, 2022 complaint can be found here.
Continue Reading SPAC-Merged Real Estate Platform Hit with Securities Suit