The SPAC boom has hit a major roadblock in the form of faulty disclosures, the law firm of Schiffer Hicks Johnson writes in an article for JDSupra. The recent deluge of SPAC litigation has mainly focused on these disclosures — specifically, disclosures made during the SPAC’s IPO as well as the de-SPAC transaction. One recent lawsuit naming the so-called “King of SPACs,” Chamath Palihapitya, focused on a number of allegedly misleading and fraudulent statements made in the SPAC’s Form S-4 Registration Statement. Another, a class involving LiDAR technology intended for use in autonomous vehicles, targeted statements made in the SPAC’s 10-Q concerning various aspects of the company’s performance.
In both of these, as well as numerous other SPAC lawsuits, plaintiffs allege that the SPAC made representations through its disclosures that its performance, financial position, and/or future outlook were far rosier than was actually the case. When the truth came out, stock prices dropped precipitously, leading to major losses.
Given the centrality of the SPAC’s disclosures to a plaintiff’s claims, SPACs need to take special care in crafting their disclosures going forward. The article examines how SPACs can use guidance issued by the SEC to craft robust disclosures that will weaken a plaintiff’s claims. Read more.
