Plaintiffs Lack Standing to Sue Over Pre-Merger Statements of SPAC Target Company

 

The D&O Diary – Over the last couple of years, a significant number of SPAC-related securities lawsuits have been filed, often arising after the post-merger de-SPAC company stumbles following the SPAC merger. In many of these cases, the securities suit plaintiffs allege the pre-merger private company made misleading statements about its business or operations. In a recent decision, a court held the plaintiffs, one who purchased shares of the pre-merger SPAC and another bought shares in the post-merger de-SPAC, did not have standing under the securities laws to sue for alleged misrepresentations made by the pre-merger private company. This issue often comes up in SPAC-related securities suits. The decision could have important implications for government contractors contemplating a SPAC merger.