2020 was a record-breaking year for SPACs, with more than USD 70 billion raised. The blaze of SPAC glory for the previously minor market player became an inferno in the spring of 2021, with more than USD 160 billion in SPAC proceeds year to date. But with this increased popularity, SPACs have become a target for shareholder litigation.
This development comes as no surprise to practitioners in the US, where public M&A is synonymous with lawsuits. While the plaintiffs’ bar has had to brush up its strategy, the basic premises of their SPAC filings are thus far the same as those employed in traditional M&A.
Much more will certainly be written concerning protections for board and sponsors as the SPAC path to liquidity becomes more established. But at the outset, the best way to reduce litigation risk is likely to adhere to best practices in traditional M&A and IPO.
- Disclosure-based lawsuits
- Process-based lawsuits
This article was first published in IFLR on 27 April 2021.