When senior SEC staff issued a statement in April saying that most warrants issued by SPACs should be treated as liabilities rather than as equity, it triggered a huge slowdown in the previously hot SPAC IPO market. It also forced many existing SPACs to review the way they had previously accounted for warrants; in some instances, individual SPAC companies concluded that they needed to restate their prior financial statements. Now, in a development that highlights the risks that these seemingly obscure accounting issues present, a plaintiff shareholder has filed a securities class action lawsuit against Virgin Galactic Holdings, a post-SPAC-merger company that restated its financials based on the warrant accounting issue. The May 28, 2021 complaint, a copy of which can be found here, alleges that the company had previously improperly accounted for its warrants, and that the prior accounting treatment violated the securities laws.
Continue Reading Virgin Galactic Hit with Securities Suit Over SPAC Warrant Accounting Issue
Trouble Brewing in SPAC-Land?
As has been extensively noted on this site and elsewhere, the sheer level of SPAC-related action has been the one of the top business stories of the last few months. However, as I noted earlier this week, there have already been some distant early warning signs of possible problems on the SPAC horizon. Further developments this week suggest there could be growing trouble in SPAC-land. As discussed below, a newly released statement by the SEC about SPAC accounting potentially could cool off the hot market for SPACs, and a statement of intent by a leading plaintiffs’ firm raises the possibility of further SPAC-related litigation.
Continue Reading Trouble Brewing in SPAC-Land?