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Sarah M. Abrams, Esq.

As I noted in my recent survey of key directors’ and officers’ liability issues, one of the most significant recent developments in the financial markets has been the meteoric rise of special purpose acquisition companies (SPACs). In the following guest post, Sarah Abrams, Director, Management Liability Claims at Markel, takes a look at the SPAC phenomenon and considers the underwriting implications, particularly with respect to climate tech companies. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submission from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
Continue Reading Guest Post: Heating Up: SPAC Climate Tech Companies and Underwriting Considerations

Last week, when a group of plaintiffs’ attorneys filed a shareholder’s derivative suit against Bill Ackman’s SPAC seeking damages and alleging the company was really an Investment Company that should be registered under the Investment Company Act, I assumed the attorneys filed the suit because it was Ackman’s firm; because of the size and prominence of the SPAC; and because of Ackman’s unusual plan to invest the SPAC’s IPO proceeds in a minority interest. Well, it turns out, the plaintiffs’ lawyers involved were just getting started. They have now filed two more shareholders derivative suits against two other SPACs’ boards and sponsors, based on the same theory as in the Ackman SPAC suit that the SPACs involved are really Investment Companies that should be registered under the Investment Company Act. Looks like these SPACs-are-Investment-Companies suits are a thing now, and this could all get very interesting.
Continue Reading More SPACs-Are-Really-Investment-Companies Derivative Suits Filed

John Reed Stark

Among the agencies largely closed by the current partial U.S. federal government shutdown is the U.S. Securities and Exchange Commission (SEC). In the following guest post,  John Reed Stark, President of John Reed Stark Consulting and former Chief of the SEC’s Office of Internet Enforcement, takes a look at what the SEC’s closure means for the processes and responsibilities that constitute the agency’s watch. Stark calls on the country’s political leaders to end the stalemate and re-open the government, including the SEC. Every day the shutdown continues, and the SEC staff remain at home, Stark says, the risks to U.S. markets increase. A version of this article originally appeared on Securities Docket. I would like to thank John for allowing me to publish his article as a guest post. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is John’s article.
Continue Reading Guest Post: Why the Shutdown Must End

As I have noted in prior posts, a number of commentators have proposed that companies filing with the SEC to complete IPOs ought to be able to include in their bylaws a mandatory arbitration provision requiring shareholder claimants to submit claims – including even claims under the federal securities laws – to arbitration. This idea, which has been percolating for years, received a significant boost in a statement last summer from outgoing SEC Commissioner Michael Piwowar, in which he suggested that the SEC would favorably view submissions by IPO companies that included bylaw provisions requiring mandatory arbitration of securities claims. As detailed in an April 23, 2018 paper from Elisa Mendoza of ISS Securities Class Action Services entitled “The Uncertain Role of IPOs in Future Class Actions” (here), this idea has its critics. But what might this kind of mandatory arbitration proposal, if put into action, actually mean for securities class action litigation going forward? Mendoza’s paper helpfully takes a statistical look at this question in light of historical securities litigation involving IPO companies.
Continue Reading IPO-Related Securities Litigation and the Idea of Shareholder Claim Mandatory Arbitration

As I noted at the time, on March 20, 2018, the U.S. Supreme Court issued its unanimous decision in Cyan, Inc. v. Beaver County Employees Retirement Fund, holding that state courts retain concurrent jurisdiction for liability actions under the Securities Act of 1933. In the following guest post, Doug Greene, Jessie Gabriel, Marco Molina, and Brian Song of the Baker & Hostetler law firm take a comprehensive look at the decision, including its context and significance. As the authors note, the decision has important implications for companies and their D&O insurers, as well as for claims going forward. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest  Post: The State of Securities Litigation After Cyan

sup ct 3In a June 27, 2017 order (here), the United States Supreme Court granted the petition of Cyan, Inc. for a writ of certiorari to consider the question of whether or not state courts retain concurrent jurisdiction for liability lawsuits under the ’33 Act, or whether as a result of changes to the relevant statutes under the Securities Litigation Uniform Standards Act of 1998 (SLUSA), state courts lack subject matter jurisdiction over ’33 Act suits. This case will address what has become a significant issue in IPO-related securities class action litigation, particularly in California, which is whether or not the plaintiffs’ state court securities class lawsuits can be removed to federal court or must be remanded back to state court.
Continue Reading Supreme Court Agrees to Hear Whether State Courts Retain Jurisdiction for IPO Securities Suits

vivintWe have seen the scenario before – shortly after its debut, an IPO company releases unexpected results, the company’s share price declines, and the lawsuits appear. Usually when this happens, the updated results pertain to reporting periods following the IPO. But what about a situation where the disappointing results pertain to a reporting period that was completed prior to the IPO – in fact, the day before the IPO? That was the situation involving Vivint Solar, where the company released results for the reporting period ending September 30, 2014 – that is, just a day before the company’s October 1, 2014 IPO –several weeks after the company’s debut.
Continue Reading Second Circuit Rejects First Circuit Test Requiring IPO Company Interim Financial Information Disclosure

tickerThere are fewer public companies in the U.S. than there were in the nineties. Understanding the reason for the decline in the number of public companies is important to understanding whether or not the decline is a cause for concern, as well for thinking about what if anything policymakers should about it. In an interesting May 2017 paper entitled “Looking Behind the Declining Number of Public Companies: An Analysis of U.S. Capital Markets” (here), EY takes a detailed look at the drop in the number of companies listed on U.S. exchanges and examines the causes. The paper’s analysis has a number of important implications for policymakers, for investors, and for all market observers. A version of the EY paper appeared in a May 18, 2017 post on the Harvard Law School Forum of Corporate Governance and Financial Regulation blog (here).
Continue Reading Why Are There Fewer Public Companies and How Worried Should We Be About it?

paul-weiss-large-300x53In the following guest post, attorneys from the Paul Weiss law firm review and analyze a November 3, 2016  Second Circuit decision (here)  in which the appellate court held that the standard pre-IPO lock-up agreements between a company’s pre-IPO shareholders and the company’s lead IPO underwriters do not make those parties a “group” within Section 13(d) of the ’34 Act, and therefore that the lock-up agreement alone is insufficient to trigger Section 16(b) short-swing profit liability. I would like to thank the Paul Weiss attorneys for their willingness to allow me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the Paul Weiss attorneys’ guest post.
Continue Reading Guest Post: IPO Lock-Up Agreement Parties Not a “Group” Liable for Short-Swing Profits