b'TABLE OF CONTENTSAssociation, started his remarks by saying thatThe most common type of lawsuit, or potential deSPACs should really be called SPAC Targetlawsuit, involves a claim that the directors of the IPOs, alluding to how the SEC views businessSPAC breached their fiduciary duties by agreeing to combinations. He went on to note that he had askeda transaction not in the best interests of the staff of the SEC for proposals around how tostockholders or that the proxy statement or better align the legal treatment of SPACs and theirregistration statement filed with the SEC in participants with the investor protections providedconnection with the transaction was materially in other IPOs, with respect to disclosure, marketingdeficient. It is not uncommon to see within days of practices, and gatekeeper obligations. Withthe announcement of a business combination one respect to disclosure, he asked the SEC staff foror more press releases issued by plaintiff class recommendations about how investors might beaction lawyers announcing that they are better informed about the fees, projections,investigating potential breaches of fiduciary duties. dilution, and conflicts that may exist during allThese announcements are often followed up after stages of SPACs. In regards to marketing practices,the proxy statement or registration statement filing he asked the SEC to make recommendationsby letters alleging material misstatements or around how to guard against what effectively mayomissions in such filings and demanding revisions. be improper conditioning of the SPAC target IPOIn most cases, these investigations and market. This could, for example, include providingdemands amount to nothing.more complete information at the time that a SPACHowever, depending on the facts and, especially, target IPO is announced. And finally, with respectthe performance of the combined companys stock to gatekeeper obligations, he had asked the SECprice, some cases are brought alleging staff for recommendations about how we canmisstatements or omissions in the SEC filings made better align incentives between gatekeepers andin connection with the business combination. investors, and how we can address the status ofAccording to one report, five such lawsuits were gatekeepers liability obligations. While the finalbrought in 2020 and nearly 30 in 2021. scope or timing of these potential regulations isnt known at this time, it is likely 2022 will be very activeBecause securities class action cases can be hard to on the regulatory side. win, some plaintiffs (or more appropriately, some plaintiffs lawyers) have started bringing, or Litigation including, claims that directors breached their While litigation against SPACs and their sponsors isfiduciary duties. The lawsuits assert that the SPAC not new, 2021 saw an increase in the number ofstructure creates an inherent conflict of interest cases filed and a broadening of the bases assertedbetween the SPACs sponsor and its board, on the for liability. Given the large number of completedone hand, and the SPACs public stockholders, on SPAC transactions and the number of SPACs stillthe other hand. Because of this inherent conflict of looking for targets, increased litigation againstinterest, so the reasoning goes, the business SPACs can be expected to continue. combination must be judged under the entire fairness test rather than the more deferentialbusiness judgment rule.MAYER BROWN |27'