SPACs AND LITIGATION

Priya Cherian Huskins of Woodruff Sawyer gives a perspective on SPACs, insurance, and litigation issues.

Why More SPACs Could Lead to More Litigation (and How to Prepare)

Market turmoil due to COVID-19 has halted many IPO plans, but IPOs by SPACs (special acquisition companies) are actually picking up in pace. Indeed, according to my sources at the Nasdaq, 40% of proceeds raised in IPOs to date this year have been from SPACs. And, as night follows day, more SPAC IPOs will lead to more SPAC litigation.

Compared to traditional IPOs, SPACS have not been involved in much litigation at all. But now is not the time for directors of SPACs to become complacent about litigation risk. If the past is any guide, there are several categories of SPAC suits worth guarding against.

As I discuss below, some of these suits are more problematic than others—with bankruptcy being potentially especially difficult. I’ll also discuss ways to mitigate your litigation risk, including through insurance.

Here are five types of private litigation that may be of concern to SPACs, one of which is likely only a theoretical category. Outside the scope of this article are potential Securities and Exchange Commission enforcement actions, which of course are also a concern for SPACs.

Read the rest of the article here: https://woodruffsawyer.com/do-notebook/more-spacs-more-litigation/

For additional SPAC insurance information, click here: https://woodruffsawyer.com/wp-content/uploads/2020/01/Management-Liability_SPAC-Insurance-Guide-2020.pdf