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Summary Special purpose acquisition companies (“SPACs”), it seems, are everywhere. SPACs have been around for decades, but use of a SPAC to take a company public without a traditional initial public offering (“IPO”) has recently exploded in popularity, especially in the first few months of 2021. One driver of the popularity of SPACs is the perception that they have lower liability risks than a traditional IPO. But a closer look at SPAC transactions suggests that the liability risks are not as low as some believe, and SPAC sponsors and directors and officers of SPAC companies should act to protect themselves against potential claims from both the private plaintiffs’ bar and the government. ....
To embed, copy and paste the code into your website or blog: As the wave of SPAC IPOs and de-SPAC transactions continues to build, so too has the scrutiny of these transactions from the SEC and the shareholder plaintiff’s bar. On April 8, 2021, the SEC gave its clearest warning yet among a series of recent signals that it plans to intensify its review of de-SPAC transactions. Most recently, the SEC raised the possibility that statements in a de-SPAC transaction proxy statement fall within the IPO exclusion to the Private Securities Litigation Reform Act (“PSLRA”) safe harbor for forward-looking statements. Meanwhile, a SPAC shareholder recently filed suit in the Delaware Court of Chancery alleging that the SPAC’s board and sponsors breached their fiduciary duties in approving a de-SPAC transaction, and argued that the claims should be reviewed under Delaware’s demanding entire-fairness standard due to conflicts posed by the board’s and sponsors’ receipt of founde ....
Monday, April 5, 2021 Not far behind the dramatic increase in the use of special purpose acquisition companies (SPACs) is a corresponding increase in the number of shareholder lawsuits and increased activity at the US Securities and Exchange Commission (SEC). In recent days, Reuters reported that the SEC opened an inquiry seeking information on how underwriters are managing the risks involved in SPACs, [i] and the SEC’s Division of Corporation Finance (Corp Fin) and acting chief accountant have issued two separate public statements on certain accounting, financial reporting and governance issues that should be considered in connection with SPAC-related mergers. [ii] This increase in activity by SEC staff comes on the heels of nearly two dozen federal securities class action filings, several SEC investor alerts and earlier guidance from Corp Fin. ....
Surge in SPAC-Related Mergers Leads to Litigation and Regulatory Risks | McDermott Will & Emery jdsupra.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jdsupra.com Daily Mail and Mail on Sunday newspapers.