SPACs, de-SPACs, and Sponsor Liability: Conflicts of Interest, Mismanagement Claims, Disclosure Obligations

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Tuesday, May 2, 2023

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, April 7, 2023

or call 1-800-926-7926

This CLE course will examine the liability risks for sponsors of special purpose acquisition companies (SPACs) and explain how a de-SPAC transaction should be structured to avoid conflicts of interest, SEC disclosure violations, and mismanagement claims.

Description

In recent years, SPACs have become a preferred method for raising capital in the IPO market, even in the present weaker state of the U. S. equity capital markets. SPACs require less time and expense to go effective than a standard IPO, but time constraints for deal-making and sponsor conflicts of interest, among other management, disclosure and regulatory issues, create a risk of litigation when a de-SPAC transaction (merger with a target company that inherits the SPAC’s stock listing and starts trading) is consummated.

Sponsor conflicts of interest and fairness issues have given rise to shareholder claims. With over 300 SPACs presently searching for targets to acquire, and de-SPAC combinations being announced every week, the SEC is increasingly focused on the incentives of sponsors, directors, officers, and affiliates to close a de-SPAC transaction that may not be in the best interests of shareholders. Failure to perform adequate due diligence and valuation of the target, or to disclose material conflicts of interest, could result in SEC investigation and shareholder litigation.

The SEC is anticipated to announce new rules on SPAC’s and de-SPACs this summer. So, more and more SPAC mergers now contain fairness opinions to support the fairness of the transaction. Some other changes are also already occurring in anticipation of new rules from the SEC. There are additional legal and regulatory risks in acquiring a portfolio company affiliated with the sponsor, which can affect other investment funds in which the sponsor is involved.

Listen as our authoritative panel discusses the liability risks for sponsors in forming SPACs and closing de-SPAC transactions.

READ MORE

Outline

  1. SPACs: key features
    1. Streamlined IPO: shell company
    2. Time taken to merge with and bring public a private company (de-SPAC transaction) has increased by several months on average.
    3. Failure to close a de-SPAC transaction within the announced deadline forces unwinding of the SPAC
  2. Issues of concern for sponsors
    1. Conflicts of interest inherent in a SPAC
    2. Disclosure obligations: SPAC and de-SPAC stage
    3. Due diligence of the target company
    4. Claims of improper capitalization or mismanagement post-closing
    5. Proper capitalization of the entities pre- and post de-SPAC transaction
  3. Issues of concern for investment bankers
  4. Securities litigation trends
  5. Regulatory developments

Benefits

The panel will review these and other important issues:

  • What are the reasons behind the formation of SPACs, and what are the risks in an overcrowded market?
  • How do the incentives created under SPACs differ for the sponsor and the investors?
  • What are the sponsor's disclosure obligations at the SPAC and de-SPAC stage?
  • How can mismanagement claims arise against the sponsor post-closing?
  • How to anticipate, avoid and protect against claims against the sponsor?
  • What special concerns should sponsors have concerning acquisitions of portfolio companies affiliated with or controlled by the sponsor?

Faculty

Brecher, Dan
Dan Brecher

Counsel; Chair, Securities and Investment Banking Group
Scarinci & Hollenbeck

Mr. Brecher’s experience ranges from serving as general counsel of New York Stock Exchange and NASD/FINRA member...  |  Read More

Lucosky, Joseph
Joseph M. Lucosky

Managing Partner
Lucosky Brookman

Mr. Lucosky is the founding and managing partner of Lucosky Brookman LLP and oversees both the transactional and...  |  Read More

Nussbaum, Mitchell
Mitchell S. Nussbaum

Vice Chair; Co-Chair, Capital Markets and Corporate Department
Loeb & Loeb

Mr. Nussbaum’s practice focuses on representing emerging growth companies and investment banks in initial public...  |  Read More

Attend on May 2

Early Discount (through 04/07/23)

Cannot Attend May 2?

Early Discount (through 04/07/23)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

Download