SPAC Related Litigation Analysis – Revisited

Federal securities litigation following the SPAC bubble reaches its midway point.

This report provides an updated analysis to our prior report on securities class action litigation that trailed the “SPAC IPO” bubble. Additionally, this report expands the observation period from January 1, 2019 up through June 30, 2023.

Highlights from our updated findings include:

  • Newly proposed regulation may have paused SPAC IPOs, but the litigation continues.
  • Like the SPAC IPO frenzy itself, the trailing SPAC related litigation bubble has deflated.
  • SPAC related litigation is unlikely to increase unless there is a reversion in regulation and change in economic conditions.
  • 1,025 SPAC IPOs took place during the observation period, with the bulk of those occurring in 2021 (613).
  • 76 SPAC related litigations were filed during the observation period, with most filed in 2021 (33).
  • 51 of the 76 SPAC related litigations remain active.
  • 29 of the active 51 SPAC related litigations are approaching or awaiting a ruling on the motion to dismiss.
  • 15 of the 76 SPAC related litigations have been dismissed.
  • Most dismissals were voluntary on the part of the plaintiff and not a result of the defendant’s success on merits.
  • Ten SPAC related litigations have settled or announced a tentative settlement.
  • The largest settlement amount of $35 million was also the first announced settlement for the cohort.
  • The average settlement amount is a little less than $12 million.
  • Most of the SPACs subject to federal securities litigation are small cap companies.
  • Relatively low settlement values are impacted by relatively low-class wide damages for matters in which the primary defendant is a small cap company.
  • Numerous settlements and dismissals are likely to be announced in the coming months, which could dramatically shift the dismissal and settlement outlooks.

SPACs Background

In June 2022, we published an initial report on federal class action litigation related to the public offerings of Special Purpose Acquisition Companies (SPAC) filed between January 1,2019 and April 30, 2022. The initial report highlighted a wave of litigation that followed the SPAC IPO bubble of 2021. Among other things, it also correctly projected that proposed regulation would substantially reduce the volume of SPAC IPOs, but securities litigation against completed (flawed) SPAC offerings would continue. Nevertheless, because of the infancy of most of the litigation filings, it was difficult to provide an outlook on how the lawsuits might progress. We now have a better (though incomplete) picture. Accordingly, this report includes an updated analysis on the status of SPAC-related litigation for an expanded observation period up through June 30, 2023.

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