Well, just in case some smart-ass judge thinks that’s the perfect reason for junking that smart-ass lawsuit, those professors and their allies have a back-up plan. Two, in fact. For a start.

In addition to his eye-popping lawsuit against Bill Ackman’s troubled special purpose acquisition company, Pershing Square Tontine Holdings, Assad has just filed two similar lawsuits in federal court against SPACs GO Acquisition Corp. and E.Merge Technology…. All three cases accuse the SPACs and their sponsors and directors of breaching the Investment Company Act of 1940 because they hold securities…. Similar allegations could be made against all SPACs….

The new lawsuits target other heavy hitters in the financial and corporate world. GO Acquisition was founded by Noam Gottesman, who co-founded hedge fund GLG Partners, and Gregory O’Hara, the former chief investment officer of J.P. Morgan’s special investments group. O’Hara is now the president of Clementine Investments, a specialty travel and hospitality private investment firm.

Lest Gottesman, O’Hara and 398 other SPAC sponsors think Ackman’s found a clever way out, well, it isn’t quite that easy.

“It is time consuming and I don’t expect this to be a short process given the level of scrutiny of SPACs,” said Jocelyn Arel, a partner at Goodwin Procter LLP…. The SPARC is an untested product that is a “very tenuous” offering for shareholders, said William Birdthistle, a securities law professor at Chicago-Kent College of Law. “I find that a strange fallback position….”

The SEC’s concerns about the blank-check market is only one of several challenges the SPARC faces in securing the agency’s approval, Birdthistle said.

A SPARC would also need the New York Stock Exchange to agree to change some of its rules to allow SPARC warrants to trade on the exchange, according to Ackman’s Aug. 19 letter to investors.

The NYSE would have to then submit the proposed changes to the SEC for approval, a process that could extend into 2022.

Ackman’s SPARC model appears to have some similarities with a private equity fund that would trigger SEC rules concerning investment companies, Birdthistle said. Such regulations would limit investments from retail investors.

The SPARC is also a novelty made in response to a legal setback, he said.

“I wouldn’t really like to be betting on the viability of a SPARC,” Birdthistle said.

Only one option, then, really: Press on and hope for the best (or at least that you’ve cut enough of a sweetheart deal for yourself to make it worthwhile come what may).

[Forbes], merging with Magnum Opus Acquisition, is expected to be valued at an implied pro forma enterprise value of $630 million, net of tax benefits…. Forbes said the move will “further capitalize on its successful digital transformation, using technology and data-driven insights to create more deeply engaged audiences, and associated high-quality and recurring revenue streams.”

Two More SPACs Hit With ‘Reform’ Lawsuits From the Plaintiff Suing Pershing Square Tontine [II]
Ackman’s SPAC Twist Faces Slow Going With Risk-Wary Regulators [Bloomberg Law]
Forbes announces plan to go public via SPAC [CNBC]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

On the other hand, the increasingly litigious SPAC investor has noticed, blank-check companies are not like hedge funds in one crucial respect: They are not registered with the SEC and therefore not subject to all sorts of rules, such as those that might prevent a SPAC’s sponsors from hilariously enriching themselves at the expense of everyone else involved. Take the biggest of them all, Pershing Square Tontine Holdings. As its name implies, it was created and managed by Bill Ackman, a hedge fund manager who also runs a similarly-named hedge fund, and whose reputation therefrom is presumably what made people wish to buy shares of Pershing Square Tontine Holdings. And like pretty much every other SPAC on earth, it cut some sweetheart deals with its sponsors, giving them a quick and handsome 13-fold return on the warrants issued them before ever actually doing anything that a SPAC is supposed to do, and trying to do something that they apparently aren't supposed to do.

No matter, sayeth these aggrieved investors. No matter, also, that Ackman’s role at Tontine was and is the only reason anyone would ever buy a share of it, nor that Tontine has more investor protections than most SPACs. They have changed their minds about the wisdom of the endeavor, and therefore want to destroy it and every other blank check in the hands of a professional investor.

The case, which is being argued by Robert Jackson, a former S.E.C. commissioner, and John Morley, a law professor at Yale, contends that Ackman’s SPAC isn’t an operating company, but is actually an investment company like Ackman’s funds, which should be regulated by the Investment Company Act of 1940. If certain SPACs were regulated as investment companies, much of the industry could be affected because it would make it harder for anyone in the investment business to participate in a SPAC…. “Investing in securities is all the company has ever done since its I.P.O.,” the complaint says of Pershing Square’s SPAC. Simply buying some stock is not what a SPAC is meant to do, the lawsuit argues.

Of course, Tontine didn’t actually buy those shares of Universal Music Group (although Ackman’s hedge fund did, which is admittedly not a good look for the purposes of this lawsuit), as Ackman was quick to point out. And even if it had, it would have required the approval of those shareholders, and asking permission of investors before buying and selling stock is not something that hedge fund managers managing hedge funds are generally in the practice of doing. Still, no matter.

If the suit succeeds, it could make professional investors who have found SPACs attractive wary of potential legal challenges, chilling the market. Proving damages will be difficult because the Universal Music deal was scrapped. But more important, perhaps, the case attempts to address underlying issues about the motivations of some SPAC sponsors. And its analysis of the meaning of investing in securities — part of any M.&A. deal — raises existential questions about the purpose and treatment of SPACs in general.

Bill Ackman’s SPAC Gets Sued [DealBook]
Bill Ackman SPAC sued, plaintiffs say directors were promised ‘staggering compensation’ [CNBC]

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