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

As I have noted in recent posts (here, for example), SPAC-related securities suit filings continue to accumulate and represent a significant current securities litigation phenomenon. But while the number of suits continues to mount, relatively few of these cases have yet reached the dismissal stage. In a recent ruling, however, the defendant company’s motion to dismiss in a SPAC-related securities suit was substantially denied as to the company itself and its top executives. In particular, the claims based on allegations that the company, Romeo Power, and its senior officials made supply chain misrepresentations were sustained, though the related claims against three former executives of the SPAC with which Romeo had merged were dismissed. A copy of the June 2, 2022 opinion in the case can be found here.
Continue Reading Dismissal Denied in SPAC-Related Securities Suit Alleging Supply Chain Misrepresentations

In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has filed a securities suit against IonQ, a quantum computing company that became a publicly traded company in September 2021 through a merger with a publicly traded SPAC. As is the case with many of the SPAC-related securities suits, the new lawsuit against IonQ follows the publication of a critical short-seller report about the company and its technology. A copy of the complaint, filed on May 31, 2022, can be found here.
Continue Reading Quantum Computing Company Hit with SPAC-Related Securities Suit After Short-Seller Report

As I have noted in prior posts (most recently here), one of the most significant recent securities litigation trends has been the number of filings against post-SPAC-merger publicly traded companies. In the latest of these SPAC-related suit filings, last week a plaintiff shareholder filed a securities class action lawsuit against Arquit Quantum, a U.K.-based cybersecurity firm that merged with a SPAC in September 2021. Though this latest lawsuit is in many ways representative of the emerging SPAC-related securities litigation, it also has some distinct features as well, as discussed further below. A copy of the May 6, 2022 complaint in the case can be found here.
Continue Reading U.K-Based Cybersecurity Firm Hit with SPAC-Related Securities Suit

Consistent with what is already a well-established current securities class action litigation filing trend, plaintiff shareholders last week filed two more SPAC-related securities suits. Although the two new suits are somewhat different from each other, they share the common feature that they both involve corporate defendants that recently became publicly traded through merger with a SPAC. The SPAC-related lawsuits, including the two most recently filed examples, represent a significant securities litigation phenomenon this year. The two new lawsuits are discussed below.
Continue Reading Two More SPAC-Related Securities Suits Launched

In a new lawsuit that closely mirrors the features of many recent SPAC-related securities lawsuits, and that indeed almost entirely replicates the most recent suits, a plaintiff shareholder has initiated a securities class action against Canadian-based lithium battery recycler, Li-Cycle Holdings Corp. Li-Cycle completed a merger with a publicly traded SPAC in August 2021 and was the subject of a short-seller report in March 2022. The lawsuit against Li-Cycle is the latest in the development of what is becoming an increasingly significant securities litigation phenomenon this year. A copy of the April 19, 2022 lawsuit against Li-Cycle can be found here.
Continue Reading After Short Seller Report, Lithium Battery Recycler Hit with SPAC-Related Securities Suit

In the latest SPAC-related securities suits filing, electric aviation company Lilium N.V. has been sued by an investor after a short-seller published a report questioning the company’s technological and regulatory readiness, its development prospects, and its financial resources. Lilium became a publicly traded company in September 2021, when it merged with Qell Acquisition Corp., a special purpose acquisition company (SPAC). This lawsuit is the latest in a series of securities class action lawsuits filed since the beginning of 2021 against post-SPAC-merger companies, as discussed below. A copy of the April 18, 2022 lawsuit against Lilium can be found here.
Continue Reading Electric Aircraft Company Hit With SPAC-Related Securities Suit

The pace of SPAC-related securities lawsuit filings recently has perceptibly increased. Earlier this week, I noted two SPAC-related securities class action lawsuits that had been filed in the preceding days. Following my publication of that earlier post, plaintiffs’ lawyers filed two more SPAC-related securities suits, adding to the growing numbers of SPAC-related securities suits that have been filed this year. As discussed below, the likelihood is that we will continue to see further SPAC-related securities suit filings in the months ahead.
Continue Reading Two More Post-SPAC-Merger Companies Hit with Securities Suits

Last week, the SEC introduced proposed disclosure guidelines for special purpose acquisition companies (SPACs) which, if ultimately finalized, will significantly alter the business, legal, and regulatory environment for SPACs and for their merger partners. In the meantime, plaintiffs’ lawyers continue to demonstrate their interest in pursuing claims against post-SPAC-merger operating companies. As discussed below, and in two more examples of what is already one of the most noteworthy securities litigation phenomena so far this year, last week plaintiffs’ lawyers filed two more SPAC-related securities class action lawsuits. As has been the case with many of the recent SPAC-related securities suits, both of the latest suits involve companies in the electric vehicle and smart vehicle industries.
Continue Reading Two More Post-SPAC-Merger Vehicle Technology Companies Get Hit With Securities Suits

In what is the latest step in what the Wall Street Journal has called “SEC Chairman Gensler’s wider push to rein in Wall Street through tougher regulation,” the SEC has approved, by a 3-1 vote, new proposed disclosure requirements and investor protections in connection with SPAC IPOs and de-SPAC transactions. The overall effect of the proposed new regulations, if implemented in a form similar to the proposal, would be to make the SPAC-related disclosure requirements more like those applicable to traditional IPOs. The proposed rules could have a sweeping impact not just on the SPAC IPO marketplace, but also on the marketplace for de-SPAC transactions, at a time when over 600 SPACs are currently searching for merger targets.

The SEC’s March 20, 2022 press release about the proposed new rules can be found here. The Commission’s 372-page proposal can be found here. The Commission’s short fact sheet about the proposed new rules can be found here. Cydney Posner’s detailed analysis of the proposal on the Cooley law firm’s PubCo blog can be found here.
Continue Reading SEC Proposed New SPAC-Related Disclosure Rules and Investor Protections