The explosive growth of SPACs (“special purpose acquisition companies”) as a mechanism for taking private companies public is leading to a similar increase in SPAC-related lawsuits. As both trends appear likely to continue, it’s important for SPACs, their sponsors and directors, and their targeted private companies to be aware of and take steps to manage potential litigation risks.

  • The specific characteristics of SPACs present unique litigation issues.
  • Understanding those issues are crucial to mitigating litigation risk and closing delay.
  • There are several affirmative steps that SPACs, sponsors and directors, and advisors should consider to reduce both litigation risk and exposure.
In this client alert, Jeffrey Lang and Luke Appling examine the growing trend of SPAC litigation, the characteristics of SPACs that pose litigation risk, and provide seven affirmative steps SPAC sponsors, directors, and their advisors should take to mitigate litigation risk and potential liability.