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In a significant number of the many SPAC-related lawsuits that have been filed in recent years, SPAC investors allege that executives at the previously private target company into which the SPAC merged made pre-merger misrepresentations about the target company’s operations or prospects. In an interesting decision in a securities suit involving Lucid Motors and that has a great deal of potential significance for many of these SPAC-related suits, the Ninth Circuit has held that the SPAC investors, who were neither purchasers nor sellers of the stock of the target company, lack standing to pursue their claims against Lucid Motors for alleged pre-merger misrepresentations. The Ninth Circuit’s August 8, 2024, opinion in the Lucid Motors case can be found here.Continue Reading 9th Circ.: SPAC Investors Lack Standing to Sue Over Merger Target Company’s Misrepresentations

As readers of this blog know, in the last couple of years a significant number of SPAC-related securities lawsuits have been filed, often arising after the post-merger de-SPAC company stumbles following the SPAC merger. In many of these cases, the securities suit plaintiffs often allege that the pre-merger private company made misleading statements about its business or operations, the truth about which only became apparent after the merger with the SPAC was completed.

In an interesting decision in a securities suit involving the used car consignment company CarLotz, which merged with a SPAC in January 2021, the court held that the named plaintiffs, one who purchased shares of the pre-merger SPAC and another bought shares in the post-merger de-SPAC, did not have standing under the securities laws to sue for alleged misrepresentations made by the pre-merger private company. Because this issue often comes up in SPAC-related securities suits, the court’s ruling potentially could have important implications in other SPAC lawsuits. A copy of the Southern District of New York’s March 31, 2023, order can be found here.Continue Reading Plaintiffs Lack Standing to Sue Over Pre-Merger Statements of SPAC Target Company