Opacity is to a very large extent the whole point of a special-purpose acquisition company. It is what investors in blank-check vehicles are ultimately signing up for. The usual way of going public, via an initial public offering, is a gigantic pain-in-the-ass involving an enormous amount of disclosure for those who are so inclined to pore over and sift through before deciding whether they want a piece. This is precisely what many if not most companies merging with SPACs are trying to avoid—a fact that is, or ought to be, well known to the investor in a pre-merger SPAC, who have in effect outsourced all of that hard work to the people running the SPAC. This arrangement works pretty well for all sides until it doesn’t, and then, well, you know what happens.
Shareholder lawsuits against post-merger special purpose acquisition companies rose to 15 through the first half of 2021, tripling from just five in all of 2020, according to data from Woodruff Sawyer. The jump came even as overall securities cases fell 13% this year, according to the data.
We suppose we’re surprised it’s that only 15, given that roughly 150 SPACs have found dance partners over the last two years and there are plenty of official investigations for plaintiffs’ lawyers to draft off. We all suppose there’s not a lot of sympathy to go around here, given that this is exactly what the blank-check signers uh, signed up for.
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