Litigation has arisen from shareholders feeling ‘misled’ when newly-listed businesses underperform

According to leading international law firm RPC, a fourfold increase in US shareholder class action lawsuits relating to special purpose acquisition companies (SPACs) has caused some insurers to restrict coverage.

The number of class actions relating to SPACs rose to 33 in 2021 – 22, up from just eight in 2020 – 21. RPC said the rise in class action lawsuits is partly due to shareholders feeling misled when companies underperform after going public. Plaintiffs have argued pressure on directors to close deals has, in some cases, resulted in projections being exaggerated, causing shares to be artificially inflated.

SPACs have gained popularity in recent years as they enable businesses to raise capital quicker t...

Suzanne Townley
News Editor
Solicitors Journal

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