Shareholder class-action lawsuits against post-merger SPACs hit a number of 15 through the first half of 2021, tripling from just five cases in all of 2020.
While many of these class actions could be dismissed in court, some have resulted in punishing settlements. In April 2021, music streaming company Akazoo S.A. settled two security lawsuits for an aggregate amount of $35 million and the stock was delisted from the Nasdaq.
Investors are trying to hold SPAC leaders accountable at a time when regulators are stepping up their oversight. The SEC has repeated warned investors of underlying risks in investing in corporate shells, while demanding better disclosures and tighter accounting rules from blank-check deals. "The day of being cavalier is over," Huskins said. "One of the things we may see as a result of this pressure on diligence and disclosure is a cooling off of valuation. In a world where diligence is increasingly precise, it's harder to tolerate puffiness in the numbers."in the second quarter as regulatory pressure mounted. SPACs raise capital in an initial public offering and use the cash to merge with a private company and take it public, usually within two years.
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