Key Points
Between September 2020 and March 2021, at least 35 SPACs have
been hit with one or more shareholder lawsuits filed in New York
state court.
These lawsuits generally allege that SPAC directors breached
their fiduciary duties to shareholders by providing allegedly
inadequate disclosures regarding proposed de-SPAC mergers. Some of
these lawsuits also assert claims against the SPAC itself, as well
as the target company and its board of directors, for allegedly
aiding and abetting the SPAC directors breaches.
Although these cases are in their early stages and assert
claims that are limited in scope, they signify that the
plaintiffs bar is actively monitoring and pursuing SPACs. As
In the finance world, Special Purpose Acquisition Companies (SPACs) are proliferating like Dutch tulips. This year alone, they’ve exploded in popularity, with multitudes of celebrities, politicians, and influencers sponsoring SPACs of their own. The list includes the likes of Colin Kaepernick, Shaquille O’Neal, Alex Rodriguez and Tony Hawk. Even amidst new concerns from the SEC, which reportedly opened an inquiry into the investment risks of SPACs and issued a bulletin warning prospective investors to exercise caution investing in celebrity-sponsored SPACs, SPACs have raised staggering amounts of capital.
SPACs’ attractiveness to investors stems from a similar surge in capital invested in private equity, which gobbled up over half of all publicly traded companies over the past two decades. As a result, there is pent-up appetite for publicly traded investment in general and, in particular, in the kinds of early stage or smaller cap companies that are often the targets o
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Special Purpose Acquisition Companies, or SPACs, have exploded on the financial markets over the last year or so, raising more than $100 billion so far in 2021 and already topping last year’s $82.1 billion total. Also known as a “blank check company,” SPACs are shell corporations listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process.
Though SPACs have been around since the 1990s, the capital raised last year alone by way of this strategy exceeded the amount raised in the entire previous history of these companies, with more than 130 SPACs going public so far in 2021. SPACs traditionally existed as a last resort for companies that would otherwise have had difficulties raising money on the open market. An example of this is WeWork, a provider of flexible shared workspaces and services for technology startups that plans to go public through a merger with a SPA
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In this episode of
Motley Fool Answers, host Alison Southwick and Motley Fool Personal Finance Expert Robert Brokamp are joined by Motley Fool analyst Bill Mann to explain the nuts and bolts of SPACs as we take Euphonium Industries public.
To catch full episodes of all The Motley Fool s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on April 6, 2021.
Alison Southwick: This is
Motley Fool Answers. I m Alison Southwick and I m joined as always, by Robert Brokamp in my side, Personal Finance Expert here at The Motley Fool. Hey, Bro, how are you doing?