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

On Thursday, September 23, 2021, I will be participating in a Professional Liability Underwriting Society (PLUS) webinar on the topic “SPAC and Related IPO Litigation as it has Evolved & The Current State of SEC Regulation of Disclosure.” This free, one-hour webinar will begin at 2:00 pm EDT. The session will be moderated by Greg

In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has filed a class action lawsuit against Katapult Holdings, an ecommerce firm providing online financing and product purchase options for non-prime consumers. The defendants named in the complaint include two former officers of the SPAC with which Katapult merged in June 2021. A copy of the August 27, 2021 complaint can be found here.
Continue Reading eCommerce Firm Hit with SPAC-Related Securities Suit

As I noted in prior posts (here and here), in the last few days a group of plaintiffs’ lawyers that includes former SEC Commissioner Robert Jackson and Yale Law Professor John Morley filed shareholder derivative suits against the boards of three SPACs alleging that the SPACs had improperly failed to register as investment companies under the Investment Company Act of 1940. In response, a group of 49 corporate law firms has now issued a joint statement decrying the lawsuits and trashing the plaintiffs’ arguments that SPACs are investment companies merely because the SPACs invest their IPO proceeds in trust accounts while seeking a merger partner. The corporate law firms’ joint statement sheds interesting light on the legal theories asserted in the new lawsuits. A copy of the August 27, 2021 joint statement can be found here.
Continue Reading 49 Corporate Law Firms Trash SPACs-Are-Investment-Companies Lawsuits

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

As I have noted in prior posts (most recently here),over the last several months plaintiff shareholders have filed numerous SPAC-related securities class action lawsuits. In an interesting variant of SPAC-related litigation, a claimant has filed a post-merger SPAC-related class action lawsuit in the Delaware Court of Chancery against the former directors of a SPAC and against the SPAC’s sponsor, in which the claimant alleges the defendants breached their fiduciary duties to the pre-merger SPAC shareholders. The lawsuit has a number of interesting features, as discussed below. A copy of the plaintiffs’ August 4, 2021 complaint in the action can be found here.
Continue Reading SPAC-Related Class Action Breach of Fiduciary Duty Lawsuit Filed in Delaware Chancery Court

In its recent report on securities suit filings in the year’s first half, Cornerstone Research noted that while securities suit filings generally in the first six months of the year were down, SPAC-related securities suit filings were up, with first half suit filings involving SPACs double the number of SPAC-related suits during the full prior year. As further evidence that this first half 2021 securities suit filing trend will continue as the year progresses, last week a plaintiff shareholder filed a securities class action lawsuit against a home healthcare equipment company that merged with a publicly traded SPAC in November 2019. As discussed below, this latest suit has much in common with many of the prior SPAC-related lawsuits, but it also has certain distinctive features as well.
Continue Reading Home Health Equipment Company Hit with SPAC-Related Securities Suit

As I noted in a prior post, last week the SEC filed an enforcement action against Stable Road Acquisition Corp., a special purpose acquisition company (SPAC), and its intended merger target, Momentus, relating to Momentus’s alleged misrepresentations, as well as Stable Road’s alleged lack of due diligence. Perhaps inevitably, a plaintiff shareholder has filed a securities class action lawsuit against Stable Road; Momentus; and other defendants, adding to the growing number of SPAC-related securities suits that have been filed this year. A copy of the July 15, 2021 complaint in the new securities lawsuit can be found here.
Continue Reading SPAC Subject to SEC Enforcement Action Hit with Follow-On Securities Suit

In a series of statements, comments, and staff actions, the SEC has in recent months evinced a growing concern with SPAC-related activities in the financial marketplace. The agency has now brought its first SPAC-related enforcement action (at least during the current era) against Momentus, Inc., a SPAC-merger target; Stable Road Acquisition Corp., the SPAC itself; and several other participants involved in the SPAC transaction, including the SPAC sponsor. This proceeding may be the first of many. The SEC’s July 13, 2021 press release about the proceedings can be found here. The SEC’s administrative order instituting cease-and-desist proceedings can be found here. The SEC’s separate civil action complaint against the CEO of the merger target can be found here.
Continue Reading SEC Charges SPAC, Merger Target, and Others with Securities Law Violations