SPAC Fraud

HAVE YOU BEEN DAMAGED BY A SPAC INVESTMENT?

What is a SPAC?

SPACs, or Special Purpose Acquisition Companies, are the latest way to bring private companies public. They are also rife with opportunities to defraud investors. Basically, a SPAC is a shell company designed to hunt for private companies to acquire. SPACs raise their funds from Initial Public Offerings (IPOs). Then, flush with cash, they target a company to buy. The acquisition is done by merging the private company into the SPAC itself. This kind of PacMan swallowing of a target acquisition provides an easy avenue to circumvent protections for investors.

SPAC Acquisitions Circumvent Key Investor Protections

Using a SPAC avoids one of the strongest investor Federal Securities law protections. The Securities laws require companies, their directors and the underwriters of an offering to verify the accuracy of the disclosures in the offering documents. With a SPAC and no offering documents, these securities law protections are inapplicable, and, in addition, there are no underwriters to “kick the tires.”

Conflicts of Interest

The absence of these offering related investor protections in a SPAC merger by which a private company becomes public has led to mergers driven by conflicts of interest and losses for public investors due to many SPAC transactions.

These conflicts of interest include:

The interests of the SPAC sponsors, who typically acquire their shares in the SPAC at nominal prices, to consummate any merger, and therefore may not have the same interests as shareholders who purchased their shares in the SPAC for much more

The interests of a private acquisition target to make overzealous statements concerning the current or projected financial condition of the company in order to reap the benefits of being a public company.

In 2021 alone, investors in fourteen SPACs brought class actions against the SPAC, its sponsors, and even of executives of the target company. Investors in Stable Road Acquisition Company (SRAC) are the latest victims of unlawful SPAC conduct:

What Can Be Done to Recover Losses

Whether you acquired shares in a SPAC IPO, or shares in the open market, a SPAC acquisition may require your approval. If your approval is required, the SPAC will be required to send you a Proxy Statement that must contain accurate and complete statements about the business to be acquired. If the Sponsors have or control enough shares to approve the merger on their own, you will receive an Information Statement that also must be accurate and complete statements about the business to be acquired. If no shareholder approval is required at all, you should receive a Tender Offer Statement that contains information about the target company business and your rights to cash out your shares rather than become a public shareholder in the merged company. Misrepresentations in any of these documents can provide grounds for violations of the federal Proxy or Tender Offer laws or general anit-fraud laws and give rise to a class action to recover losses resulting from those misrepresentations.

IF YOU HAVE SUFFERED LOSSES FROM INVESTMENT IN A SPAC, PLEASE CONTACT US FOR A FREE EVALUATION OF YOUR RIGHTS BY COMPLETING THE SHORT FORM BELOW AND WE WILL GET BACK TO YOU PROMPTLY.