Special Purpose Acquisition Company (SPAC) investments are a unique type of initial stock offering that have gained popularity in recent years. The SPAC structure enables companies to go public more quickly and affordably than the traditional initial public offering (IPO) process.
Contact a SPAC fraud class action lawyer at Silver Law Group if you believe a SPAC you invested in was a scam. Our class action attorneys exclusively represent investors in complex securities fraud cases, and we are successful litigators who achieve outstanding results for our clients.
A SPAC is a shell company created solely to acquire another company. A SPAC has a sponsor, often a celebrity or someone well-known in a specific business or industry. The SPAC offers shares to investors at $10 each and then has up to two years to use the funds they raise to acquire a target company.
The target company merges with the SPAC and becomes publicly listed. This mechanism brings a company public faster than a traditional IPO and avoids some of the regulatory constraints governing traditional IPOs.
When a SPAC issues its initial shares, there is no offering statement or underwriter verifications, as would be the case in a traditional IPO. This omission allows for various kinds of fraudulent activities. Our attorneys have represented numerous investors who have lost money in SPAC frauds and want to help you if you have lost investments in this way.
The sponsor of a SPAC usually receives about a 20 percent share in the company, which is sometimes referred to as a “promote,” despite typically making only a nominal financial investment. The sponsor has no access to the promote until a merger is finalized.
The sponsor has an incentive to acquire a company within the allowed timeframe. However, the sponsor’s risk is much lower than that of the shareholders who invested in the SPAC’s initial offering. The sponsor could select an unsuitable acquisition target because they gain access to their share of the money raised in the offering upon completion of the deal.
Many SPACs have produced dismal returns on their investors’ money while sponsors walk away substantially richer. Investors who feel that a SPAC in which they were involved engaged in fraudulent activity should contact a lawyer at Silver Law Group immediately to discuss a possible class action.
Most SPACs require some form of shareholder approval when they merge with the target company. The sponsor discloses information to shareholders regarding the target company’s business activities and financial condition. If any of the statements in these documents are false, inaccurate, or misleading, investors who lost money may have grounds for a class action lawsuit.
A class action allows everyone who was defrauded by the same conduct to join in filing a single lawsuit. The court names a lead plaintiff, who is typically the investor who suffered the largest loss in the swindle, and this plaintiff plays a role in directing the litigation. Smaller investors need only produce the records confirming their purchase of the shares, as well as the information that prompted their decision-making.
If the case settles before trial or if there is a verdict after a trial, all the investors who participated in the class action lawsuit receive a share of the proceeds. Each investor’s payment is proportional to their losses in the scam. Silver Law Group handles SPAC fraud cases on a contingency basis, so there is no upfront cost—court-approved attorneys’ fees are deducted from the verdict or settlement before distribution to the participants in the class action.
An opportunity to invest in a SPAC might seem appealing. However, these transactions are not subject to the same degree of regulatory scrutiny as traditional IPOs. It is easy for fraudsters to exploit the process.
The SPAC fraud class action lawyers at Silver Law Group will take aggressive action to recoup your lost investment. If a SPAC scam defrauded you, contact us today to discuss joining a class action.
