SPAC Sponsors Beware: The Rising Threat of Securities Liability
Special purpose acquisition companies (SPACs) are an increasingly popular way for an existing private company to become publicly traded without undergoing a traditional initial public offering, and for investors in public markets to invest in growth-stage companies. There can be generous returns for SPAC sponsors, but they should be aware of the liability risk in connection with their role. Indeed, litigation arising from several recent SPAC acquisitions, most prominently against Nikola Corporation, underscores the risks for SPAC sponsors. They therefore should be mindful of steps they can take to mitigate these risks in the reverse merger process.
In this article, published in the US-Israel Legal Review 2020, partners at Cleary Gottlieb advise those looking to create SPACs and acquire companies through them to carefully consider the accompanying legal risks and the ways to potentially mitigate them.
Click here to read (page 40): http://www.globallegalmedia.com/viewer6.html
