The M&A landscape has changed dramatically in the past few years as waves of investors rushed the trend to set up Special Purpose Acquisition Companies (SPACs) as a seemingly more attractive way to get a company public than a traditional IPO have changed. However, while the recent SPAC boom can largely be attributed to the promise of a quick and efficient path to a public market, investors are increasingly screaming at a standstill, spurred on by recent guidance and statements from the SEC. In a flood of lawsuits, minority shareholders in particular are claiming to be victims of injustices in the SPAC proceedings. This article discusses the tactics that dissenting shareholders can use to redress the tenacious tactics of majority shareholders and SPAC management.
SPACs have been around since the 1990s, but they have grown in popularity significantly in recent years. Katie Kolchin, Spotlight: 2020, the year of SPAC 3 (SIFMA Insights 2020). In 2020 alone, SPAC’s revenue grew 462% year over year, outperforming traditional IPOs while claiming about 50% of the market share. Sanghamitra Saha, 2020 was the year of the SPAC IPOs: Here are the Prominent 4, NADSAQ (December 28, 2020). The trend continued strongly this year, with 366 SPAC IPOs completed by early July with gross proceeds of over $ 112.7 billion, compared to 248 total SPACs in 2020 and 59 in 2019. SPAC Statistics, SPACInsider (last visited on July 9, 2021). From January to around mid-March 2021, over 72% of all listed companies were SPACs. Preston Brewer, Are SPACs Why Securities Disputes Rise Up ?, Bloomberg Law (March 16, 2021). However, this surge in SPAC filings has recently been faced with an increase in litigation from dissenting shareholders.