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SPAC Transactions: Enforcement And Litigation Risks - Corporate/Commercial Law


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In the first three months of 2021, there have been approximately
300 initial public offerings (IPOs) of special
purpose acquisition companies (SPACs) that have raised $100
billion, which are significant increases over the record number of
transactions and amounts raised in all of 2020. Inevitably, the
growth in SPAC deal activity has attracted scrutiny from market
regulators, including the US Securities and Exchange Commission
(SEC) and Financial Industry Regulatory Authority (FINRA), as well
as private plaintiffs. We expect this will continue and perhaps
increase, particularly if retail investors get involved in SPAC ....

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Limiting SPAC-Related Litigation Risk: Disclosure And Process Considerations | Goodwin


INTRODUCTION
2020 marked an incredible surge in the prevalence of Special Purpose Acquisition Company (“SPAC”) initial public offerings and business combinations (“deSPAC transactions”). In 2020, there were 248 SPAC IPOs (raising total gross proceeds of over $83 billion) and 66 deSPAC transactions, as compared with 2019’s 59 SPAC IPOs (raising approximately $13.6 billion in gross proceeds) and 28 deSPAC transactions.
[1] And the pace continues to skyrocket in 2021 with 160 SPAC IPOs in the first two months of the year and 13 completed deSPAC transactions.
[2] This spectacular rise, and the related profits, has unsurprisingly garnered attention from both the United States Securities and Exchange Commission (“SEC”) and plaintiffs’ law firms. Most recently, the SEC’s Division of Corporation Finance released guidance ....

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The SPAC Explosion: Beware the Litigation and Enforcement Risk | Pillsbury Winthrop Shaw Pittman LLP


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SPACs have seen exponential growth in 2020, but SPAC sponsors, investors and targets should beware the scrutiny de-SPAC transactions are receiving from the plaintiffs’ bar and the
TAKEAWAYS
2020’s SPAC IPO explosion will inevitably lead to some underwhelming de-SPAC transactions (or failures to consummate any transaction at all) and thus a likely increase in SPAC-related litigation.
SPAC litigation will likely embroil not only SPAC sponsors but also the directors and officers of the acquisition target and the continuing public entity that takes over the target’s business.
Although SPACs present a unique method of creating a public company, the key steps to limit litigation risk and regulatory scrutiny are familiar ones e.g., thorough diligence, comprehensive disclosures and reasonable forecasts. ....

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