SPAC Strikes Back
By Yelena Dunaevsky, Esq., Woodruff Sawyer
SPAC lawsuits of all kinds have been increasing in frequency and regularity over the last several months. From merger objection lawsuits to securities class actions to breach of fiduciary duties suits, the allegations and legal theories have been abundant. All these suits, interestingly, were brought against the SPAC or parties connected with a SPAC. Some of the suits ended up in lengthy court proceedings, and some went away quietly greased with a “mootness fee.” But now, it seems that at least one of the SPACs has had enough.
Dune Acquisition Corporation issued a press release on April 18, 2022, announcing that it filed a complaint in Delaware court against TradeZero Holding Corp. TradeZero happens to be Dune’s acquisition target; the parties entered into a merger agreement on January 26, 2022. According to a recently filed Form 8-K, the complaint alleges that TradeZero fraudulently induced Dune to enter into the merger agreement and that TradeZero has materially breached the merger agreement.
There are no details of how the alleged fraudulent inducement was achieved or of the alleged breach, so we can only speculate as to the nature of the financial information and projections that were provided. But in a surprising plot twist, the press release also states that despite the lawsuit, Dune is continuing to work with TradeZero under the terms of the merger agreement to complete the merger. If both the merger and the lawsuit are successful, the awkwardness between the officers of the SPAC and the target who will be steering the combined company post-merger will be cosmic.