The SPAC boom has cooled off but lawsuits against the blank-check firms are reportedly booming
- Class-action suits against SPACs ramped up in the first half of 2021, according to a new report.
- 14 federal lawsuits were filed against SPACs in the first half of 2021, up from seven in the first half of 2020 and just six in 2019.
- "The better the market for investors, the worse the market for class-action securities lawyers," said Joseph Grundfest, director of the Stanford clearinghouse and a former
SECofficial, in a statement.
A cooling of the
14 federal lawsuits were filed against SPACs in the first half of 2021, up from seven in the first half of 2020 and just six in 2019. Eight of the 14 filings in 2021 revolved around alleged misrepresentation of a product's commercial viability. Half of all federal lawsuits against SPACs so far this year involved the auto industry.
"The rise of SPAC-related suits is no surprise given the huge increase in SPACs we saw in 2020 and early 2021," Bloomberg intelligence analyst Elliott Stein told Bloomberg.
The report comes as interest in SPACs is waning, as some investors worry the blank-check deals pose outsized risks compared to normal IPOs.
In July, the SEC fined space SPAC Momentus $8 million for misrepresenting the commercial viability of its rocket propulsion technology. Execs at
Bloomberg was the first to report the findings from Cornerstone.
"The better the market for investors, the worse the market for class-action securities lawyers," said Joseph Grundfest, director of the Stanford clearinghouse and a former SEC official, in a statement.
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