ANALYSIS: SPAC Plaintiffs Are Filing Early—But Not Too Early

With SPAC initial public offerings on the rise, and litigation nipping at their heels, it’s a good time to look for trends and commonalities among special purpose acquisition companies that end up in litigation, as well as when that litigation is likely to occur. This, the first in a series discussing those trends, highlights when plaintiffs are most likely to initiate SPAC litigation.

The Litigation Sweet Spot: Four Months

Combined research of Bloomberg Terminal data on completed SPAC mergers and Bloomberg Law Dockets data on SPAC-targeted lawsuits has revealed 36 lawsuits involving SPAC deals that were announced and closed in 2020 through Q1 2021. These cases were filed from approximately one to 10 months after the merger announcement, with the majority of cases filed in the first four months.

Despite the quick turnaround, plaintiffs filed only 11 of the 36 complaints ahead of the merger’s completion date—typically around the three-month mark—while 25 were filed after that date. Comparing these two trends suggests that most plaintiffs are suing right around the completion date—seeking either to stop the impending merger from happening or to contest something about it immediately after the deal is done.

Others, meanwhile, seem to take a bit longer for issues that negatively impact the stock’s performance to come to light, as demonstrated by a second spike occurring around eight months past the merger’s announcement.

More to Come

SPAC litigation is an evolving area, with more litigants filing cases every month. To search and set an alert for additional cases involving SPACs, use this search of Bloomberg Law’s Dockets. And, stay tuned for the next installment of the series discussing SPAC industry subgroups.

Bloomberg Law subscribers can find related content on our In Focus: Special Purpose Acquisition Companies resource.

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