Brattle Associates Dr. Adrienna Huffman and Adam Karageorge and Research Analyst Connor Lehner coauthored a Bloomberg Law article on the unprecedented uptick in initial public offerings (IPOs) conducted by special purpose acquisition companies (SPACs) in 2021.
The article, “SPACs and the Next Wave of Shareholder Litigation” discusses how the uptick in SPACs, and the environment it is creating, will likely result in increased shareholder litigation against the investment vehicles and the companies they eventually merge into or acquire.
There are three key trends that have emerged as likely contributors to the expected increase in SPAC-related securities litigation:
- Investors relying on SPAC sponsors to conduct the due diligence of the target company
- The ability of SPAC sponsors and the target company’s management to “hype” the stock
- The recent trend of SPAC sponsors targeting early-stage companies with little, if any, revenue or controls in place to comply with Securities and
- Exchange Commission (SEC) listing requirements