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The rise of special purpose acquisition companies (SPACs) has led to a surge in shareholder litigation, particularly in the Delaware Court of Chancery. SPACs raise capital to take private companies public through a process known as a “de-SPAC” transaction. This article examines how fiduciary‑duty claims arising from de‑SPAC transactions are reshaping disclosure obligations, liability standards, and damages analysis.
The article also explains the SPAC lifecycle and focuses on the critical pre‑merger period, when shareholders rely on public disclosures to decide whether to redeem their shares or remain invested. Recent Delaware decisions—including MultiPlan, Hennessy, Mountain Crest, and InterPrivate—clarify that misleading or incomplete disclosures may impair shareholders’ redemption rights, creating direct fiduciary duty claims subject to entire fairness review. Relying on J.S. Held’s expertise in economic damages, the article identifies critical valuation, class‑certification, and forensic accounting challenges that will affect future SPAC litigation and settlement strategy in Delaware courts.
In large part due to the significant increase in special purpose acquisition company (“SPAC”) formation in the financial markets, there has been a similar increase in SPAC-related litigation – most notably in the Delaware Court of Chancery (the “Court”). While some of the suits filed are standard securities class action matters, the more interesting disputes (to the writers of this article, of course) allege breaches of fiduciary duties (i.e., direct action breach of fiduciary class action lawsuit). As of the writing of this article, none of these fiduciary duty suits have been tried to verdict.
The primary focus of the fiduciary litigation is the alleged inaccuracy and insufficiency of public disclosures during the SPAC merger process. SPACs (often referred to as “blank check” companies) raise capital as a vehicle to take private companies public (referred to as a “de-SPAC” transaction). Generally, the disagreements regarding the public disclosures involve the periods leading up to the de-SPAC transaction. Additionally, pre-merger SPAC shareholders have alleged that fiduciaries recommended unfair de-SPAC transactions along with self-dealing by SPAC insiders.
On January 24, 2024, the Securities and Exchange Commission (“SEC”) published rule S7-13-22 with the stated purpose to “enhance investor protections in initial public offerings by special purpose acquisition companies … and in subsequent business combination transactions between SPACs and private operating companies.” [1] In that rule, the SEC defined SPACs as follows: “special purpose acquisition companies … are shell companies organized and managed by a sponsor for the purpose of merging with or acquiring one or more unidentified private operating companies, commonly known as a de-SPAC transaction, within a certain time frame.” [2]
SEC Final Rule S7-13-22 continues to state: “The de-SPAC transaction is a hybrid transaction that contains elements of both an initial public offering … and a merger and acquisition … transaction. While structured as an M&A transaction, the de-SPAC transaction also is the functional equivalent of the private target company’s IPO, because it results in the target company becoming part of a combined company that is a reporting company and provides the private target company with access to cash proceeds that the SPAC had previously raised from the public. As part of this process, the shareholders of the SPAC go from owning shares in the shell company to owning shares in a combined company that conducts the business of the private target. As a result, the de-SPAC transaction implicates disclosure and liability concerns associated with both IPOs and M&A transactions.” [3]
The SEC also sets forth the following regarding the structure and lifecycle of a SPAC:
For the purposes of the fiduciary duty litigation, relevant actions occur between step #5 (i.e., Merger Announcement) and step #9 (Tender Offer) noted above. It is during this time period that SPAC shareholders evaluate the accuracy and sufficiency of public disclosures made by the SPAC sponsors. Specifically, at this time, the SPAC shareholders rely on the aforementioned disclosures to inform their decision whether to opt into the merger or redeem their shares at par value plus interest.
In the first decision to test the Court’s fiduciary principles in a de-SPAC context, Vice Chancellor Will denied a motion to dismiss and applied entire-fairness review to the MultiPlan merger, concluding that the sponsor’s “founder shares” and the board’s parallel incentives created a disabling conflict, and that materially incomplete disclosures deprived public stockholders of a fully informed choice whether to redeem at the $10-per-share trust value or remain invested. The court framed the harm as a direct injury to each investor’s personal redemption right (and not, as in most M&A litigation, a derivative injury) and confirmed that SPAC fiduciaries owe the traditional duty of candor even though investors already possess the contractual right to exit. Although the merits never reached trial, the parties settled for $33.75 million, now an informal reference point for valuing “MultiPlan claims.”
In the In ReHennessy Capital Acquisition IV Canoo decision, the Court delivered the first post-MultiPlan dismissal of a SPAC fiduciary-duty suit, underscoring that entire-fairness scrutiny does not relax Delaware’s pleading standards. Vice Chancellor Will noted in that case that, after the Multiplan decision, “SPAC lawsuits are ubiquitous in Delaware.” The Court held that sponsor conflicts and a steep post-merger price decline, standing alone, cannot sustain a claim; plaintiffs must allege specific, knowable omissions that actually distorted the redemption decision. Because the strategic overhaul of Canoo, the company that merged with Hennessy, took place only after the merger and there were no well-pled facts showing the SPAC fiduciaries knew of undisclosed problems pre-closing, the complaint failed.
On October 18, 2024, the Court denied defendants’ motion to dismiss in a failure-to-disclose matter even though the Court stated that the allegations were “not strong” as compared with other SPAC cases that survived motions to dismiss. In this matter, John Solak v. Mountain Crest Capital, LLC et al., the defendant raised $57.5 million through an IPO on January 8, 2021. On April 7, 2021, the defendant announced a merger agreement with Better Therapeutics.
The defendant filed with the SEC and issued proxy statements to shareholders to approve the merger on October 12, 2021. The shareholder vote meeting was scheduled for October 27, 2021, and the deadline to redeem shares was October 25, 2021. The proxy statement valued the shares at $10, but the dilution of the redemptions and founder shares, along with the costs of the merger, reduced the actual cash balance to less than $7.50 per share.
Defendant’s share price trended as follows:
The Court noted in its decision that “the Proxy misstates an investment value of $10 per share and fails to disclose that the actual amount of cash being placed into the merger was 25 [percent] less than disclosed. In light of the assertion of a $10 valuation in the Proxy, it is reasonably conceivable that a stockholder would find the cash per share figure material to the decision whether to redeem or invest in the de-SPACed company. At this pleading stage, I find these allegations – that the fiduciaries disclosed an investment value untethered to an undisclosed cash per share figure – sufficient to claim of breach…”
The shareholder complaint in the InterPrivate litigation [14] shows how those same principles play out when investors split into two economically divergent groups. In the 2024 complaint, plaintiffs say the sponsor and directors steered the merger with Aeva, masked problems, and thereby impaired a fair redemption decision. The complaint adds an allegation that the price was misleading, and that the value of what was purchased was not $10 per share but instead $8.50 per share after taking into account cash dilution as a result of the merger.
But roughly 50 percent of the float in fact redeemed at $10.20 per share. Others kept (or later sold) shares that soon traded below $3 per share after trading at $16.16 per share the first day of trading. The case appears headed toward settlement as of the time of this writing, but presents interesting issues for consideration for damages estimation in this new twist on the MultiPlan line of cases.
Why InterPrivate Complicates Damages and Class Structure
Forensic Accounting takeaways
Together, MultiPlan sets the fiduciary-duty and entire-fairness framework, while InterPrivate spotlights the practical valuation and certification hurdles that arise once redeeming and non-redeeming investors pursue the same direct claim.
While many Delaware SPAC cases are pending, the chart below provides a representative sample of some of the more significant open SPAC matters in Delaware and summarizes the questions at issue and case status.
Case: In re MultiPlan Corp. Shareholders Litigation.
Stage: Settled (October 2024)
Key remedy / issue: $33.75 M cash; direct claim for impairment of redemption right.
Latest move: Settlement approved; sets headline valuation for future risk. The D&O Diary
Case: In re Hennessy Cap. Acq. IV
Stage: Dismissed at pleadings (May 2024); first full defense win post-MultiPlan.
Key remedy / issue: Court found no well-pled disclosure violation ⇒ no redemption-right impairment.
Latest move: Plaintiffs filed notice of appeal (pending). www.hoganlovells.com
Case: In re Skillsoft Shareholders Litigation.
Stage: Dismissed pre-discovery (February 2025) under entire-fairness.
Key remedy / issue: VC Laster found no non-ratable benefit to sponsor.
Latest move: Motion for reargument denied April 1, 2025. Enhanced Scrutiny
Case: Smith v. Fattouh (InterPrivate/Aeva)
Stage: Putative class action: term-sheet for $14 M global settlement signed July 2, 2024 (court approval pending).
Key remedy / issue: Claims mirror MultiPlan but raise two-track damages problem: (i) redeemers capped at trust ~$10; (ii) market purchasers allege drop-based damages.
Latest move: Removal to D. Del. created extra class-certification hurdles; parties agreed to stay cert briefing during settlement talks. SECQ4
Case: Mountain Crest v. Better Therapeutics
Stage: Motion-to-dismiss denied (October 2024).
Key remedy / issue: New theory: nondisclosure of net cash per share; Court allowed claim to proceed.
Latest move: Fact discovery underway; no settlement talks disclosed. Reuters
Case: Trident / (Lottery.com)
Stage: $2.6 M settlement preliminarily approved November 2024.
Key remedy / issue: Complaint highlights difficulty of a single class when some holders redeemed at $10 per share while others later sold into a collapse.
Latest move: Settlement hearing scheduled June 2025. Law360The D&O Diary
We would like to thank our colleague, F. Dean Driskell III, and our contributors, Prof. J.W. Verret and Andrew Duncan.
F. Dean Driskell III is an Executive Vice President in J.S. Held’s Economic Damages & Valuations practice. As a CPA with ABV, CFF, and CFE certifications, Dean specializes in performing consulting services for clients involved in various types of accounting, economic, and commercial disputes as well as fraud and forensic accounting matters. With more than 30 years of experience in financial analysis, accounting, reporting, and financial management, Dean has served clients and their counsel in both private and public sectors, providing technical analyses, accounting / restatement assistance, valuation services, and litigation support across a variety of industries, and as an expert witness in litigation.
Dean can be reached at [email protected] or +1 470 690 7925.
Prof. J.W. Verret, JD, CPA / CFF, CFE, CVA, CCFI, teaches accounting and finance, securities law, M&A, corporate law and banking law at the George Mason University Law School. He is a licensed CPA in the state of Virginia and is licensed in financial forensics by the AICPA. He is a Certified Fraud Examiner, a Certified Valuation Analyst, a Certified Cryptocurrency Forensic Investigator and holds a certificate from the Wharton School of Business in the Economics of Blockchain. He served on the Investor Advisory Committee of the Securities and Exchange Commission. He formerly served on the Financial Accounting Standards Advisory Committee, which advises on the development of Generally Accepted Accounting Standards (GAAP). Prof. Verret helps the Financial Accounting Standards Board in the development of new valuation and reporting rules for crypto assets. He also clerked for the Delaware Court of Chancery and has served as an expert in numerous corporate and securities litigation and arbitration matters.
Andrew Duncan was formerly a Vice President in J.S. Held’s Economic Damages & Valuations practice.
[1] SEC Final Rule S7-13-22, page 1.
[2] SEC Final Rule S7-13-22, page 8.
[3] SEC Final Rule S7-13-22, pages 8 and 9.
[4] SEC Final Rule S7-13-22, page 9.
[5] SEC Final Rule S7-13-22, page 10.
[6] SEC Final Rule S7-13-22, page 10.
[7] SEC Final Rule S7-13-22, page 10 and footnote 12.
[8] SEC Final Rule S7-13-22, pages 10 and 11.
[9] SEC Final Rule S7-13-22, page 11.
[10] SEC Final Rule S7-13-22, page 11.
[11] SEC Final Rule S7-13-22, pages 11 and 12.
[12] SEC Final Rule S7-13-22, page 12.
[13] SEC Final Rule S7-13-22, page 13.
[14] See Aeva Technologies 10-Q available at https://www.sec.gov/Archives/edgar/data/1789029/000095017024056096/aeva-20240331.htm#ii_item1 at Note 14.
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