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December 15, 2021 Feature

The Attack of SPACs: A Primer on an Emerging Vehicle for Mergers

Daniel A. Cotter
VectorInspiration/DigitalVision Vectors via Getty Images Plus

VectorInspiration/DigitalVision Vectors via Getty Images Plus

Practitioners should become familiar with the basic structure and challenges that SPACs present and that will raise issues that litigation will have to resolve.

What is a SPAC? “SPAC” stands for “special purpose acquisition company.”1 At its formation, the SPAC has no operations.2 Because of the nature of investors betting on the management, at times SPACs are referred to as “blank check companies.”3 The term is ascribed to SPAC transactions because when investors make a purchase decision, the company is “a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person.”4 In many instances, the SPAC is set up to prepare for a merger with an existing company, taking the company public through the initial public offering (IPO) of the SPAC.

The SPAC explosion has hit the mainstream in recent times, with various celebrities forming their own SPACs.5 Former House Speaker Paul Ryan and former NBA star Shaquille O’Neal have SPACs.6 And on a recent cover of New York magazine, the question raised was, “Can I SPAC My Stonks with NFTs?,” a snarky way of saying that SPACs, like many other new investment vehicles, are here to stay.7 The SPAC market is likely here to stay due to the ease of setting up SPACs and to the financial markets that have supported them. Furthermore, the Russell 3000 is soon to welcome a number of de-SPACs to its index.8

This article discusses the emergence of SPACs, their history and how they developed, the manner in which the SPAC can effectively serve as an alternative for an IPO and in so doing create concerns in terms of sufficiency of disclosures and sufficiency of due diligence, the conflicting interests that can be cited as bases for litigation, and the types of claims that have been arising. The article also considers some lawsuits involving SPACs that have been filed. A companion piece in this issue focuses on the specific directors and officers insurance issues in connection with SPACs.9

A Short History of SPACs

Once upon a time in the United States, blank check companies were prohibited10 due to the speculative nature of the offering and the goal of protecting the average investor. Created in 1993 by David Nussbaum,11 SPACs were designed to circumvent such prohibitions. Nussbaum is an investment banker who cofounded a SPAC-focused investment bank, EarlyBirdCapital Inc.12

Although SPACs have been around for some period of time, the explosion of utilizing this vehicle is a much more recent phenomenon. Despite its creation in 1993, the SPAC was seldom used for many years.13 In 2003, one SPAC out of 127 IPOs in the United States went public.14 In 2009, one SPAC IPO transaction was completed for $36 million.15 Those numbers increased to 248 and 485 SPAC IPOs and $83.4 billion and $135.6 billion in funds raised in 2020 and year-to-date in 2021, respectively.16

Not that long ago, the New York Stock Exchange did not list any SPACs due to their speculative nature and the fact that they didn’t qualify for listing standards, and Goldman Sachs prohibited its organization from being involved in SPACs.17 However, we are now experiencing the attack of SPACs. As outlined below, the SPAC vehicle is becoming a major tool used to effectuate mergers, creating legal exposures and risks different from the traditional IPO.

The Traditional IPO

IPOs have been around for centuries. It is believed that the first IPO in recorded history is that of the Dutch East India Co., which offered shares to the public in 1602.18 Companies in the United States must register with the Securities and Exchange Commission (SEC) by filing an S-1.19 The company seeking to go public files its S-1 and prospectus, which contains substantial information about the company’s history, risk factors, and financial history, as well as details about the current company’s operations.20

This is in contrast to the filings that are made by SPACs. While they, too, file a form S-1 with the SEC, the filing is different and creates potential conflicts and additional grounds for lawsuits and litigation, including in the directors and officers insurance arena.

The SPAC Formation and Filing

A timeline for the SPAC commences with the formation of the company. The SPAC has a sponsor,21 who receives a percentage of the company as “founder’s stock.”22 The SPAC then quickly turns toward getting the company ready for its IPO. The SPAC governing documents specify the period of time for the SPAC to locate a target acquisition company (typically, 18 to 24 months); and, once it is public, the investor receives a unit, consisting of a share of stock at a set price and a warrant.23

The SPAC has some definite advantages over the IPO as a vehicle to go public, including (1) speed to the public listing, with a traditional SPAC taking two to three months to IPO given the nature of no business plan or definitive existing entity, compared to the traditional IPO, which can take a year or more; (2) a known price at IPO, which is set in the registration and based upon the amount raised and the valuation, whereas the traditional IPO depends much more on market conditions at the time of listing; (3) potential to raise additional capital simultaneous with the IPO, with many SPACs also raising debt in a side investment, i.e., a private investment in public equity (PIPE); (4) lower costs to market the IPO to investors as the extensive road show that takes place for the traditional IPO is not required; and (5) many sponsors have expertise and networks to assist the SPAC with that talent.24

But there are also a number of disadvantages to the SPAC transaction, leading to potential conflicts and lawsuits. These cons include (1) potential shareholder dilution, given that sponsors own typically 20% of the SPAC; (2) redemptions by the initial SPAC investors; (3) a shorter time frame to get the company ready for being public; (4) less financial diligence because there is not the financial history and an existing company to examine; and (5) upon merging with a target company, lack of underwriting because the SPAC is already public.25

A Recent Example of a SPAC

On June 25, 2021, TdMY Technology Group, Inc.,26 filed its S-1 with the SEC to plan its IPO. TdMY’s S-1 starts by outlining the company’s purpose of filing the S-1:

TdMY Technology Group, Inc. is a blank check company whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, engaged in any substantive discussions, directly or indirectly, with any business combination target with respect to an initial business combination with us.27

As noted, investors are not making purchases based on an existing business plan of an entity that has been in business privately for a period of time and seeks to go to the public markets for capital. Rather, the investors are expressing complete confidence in the management team of the SPAC, in this case TdMY. In the TdMY IPO, the company seeks to raise $287.5 million.28

While some SPACs truly are blank check because they have no specific plans or purpose and don’t specify any particular focus, in the case of TdMY, it has a specific focus:

Our business strategy is to identify and complete our initial business combination with a company within the mobile app ecosystem or a consumer internet company with an enterprise valuation in the range of $500 million to $1.5 billion, though our search may span many consumer software segments worldwide. We intend to specifically focus on companies that have created compelling mobile app experiences with significant growth in segments such as gaming, entertainment, education, e-commerce, dating and health and wellness.29

The company has in place a management team that it believes will be beneficial to finding a deal:

Our management team has demonstrated consistent progress in building, investing, nurturing and leading mobile app and software companies. We believe we can also recruit top talent and use that intellectual capital to great competitive advantage. The members of our management team have experience in advanced user acquisition techniques to expand a company’s addressable market, a network of relationships with key ecosystem partners in both distribution and monetization of an app, experience in gamification and virality to enhance the lifetime value and organic growth of an app, a hiring network of market-making talent in each key function, experience in artificial intelligence techniques and “Big Data” to market more efficiently and monetize more aggressively, experience with integration of personalized gamification, demand curves and machine learning, and experience scaling all aspects of a consumer technology company.30

When TdMY goes live, we will understand how successful its SPAC IPO was. TdMY is taking advantage of the quickness of an IPO using a SPAC versus the traditional IPO path.31

SPACs in the Insurance Space

In recent years, the insurance industry has gone from its staid and true origins to one that is alive with insurtech32 offerings and innovative insurance start-ups. For example, funding for insurtech reached $7.1 billion in 2020, up from zero not long ago.33 And SPACs are not new to the insurance arena. For many of the start-ups in recent years, SPACs have been used, and the approach has been used in demutualizations.34

However, the SPAC can cause challenges in the insurance industry, as the “SPAC typically must identify, negotiate and consummate its de-SPAC transaction within 24 months of its IPO, subject to extension by the stockholders. This timeline can be challenging for some insurance industry transactions, such as acquisitions of—or mergers with—U.S. insurance companies or their holding companies.”35 Anyone who has worked on a Form A transaction36 understands that many variables dictate the time it takes to complete the acquisition process, and the timeline for a de-SPAC transaction might be problematic depending on the domicile of the insurance company.

A good example of the use of a SPAC to acquire an insurance company is that of CF Corporation’s merger with Fidelity & Guaranty Life in a November 2017 $1.835 billion transaction.37 On April 21, 2016, CF Corporation filed its S-1 with the SEC. Like TdMY, the filing made clear that it was a blank check offering:

CF Corporation is a newly organized blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. We have not selected any business combination target and we have not initiated any substantive discussions with any business combination target.38

CF Corporation—cofounded by Chinh Chu, former Blackstone Group Inc. senior managing director, and William Foley II, Fidelity National Financial Inc. chairman39—sought and raised $600 million in its 2016 IPO. The S-1 was very broad in terms of opportunities that the SPAC sought:

Although we may pursue targets in any industry, we intend to focus on industries that complement our management team’s backgrounds in the financial, technology and services sectors. Our founders will deploy a proactive, thematic sourcing strategy and focus our efforts on companies where we believe the combination of our founders’ operating experience, deal-making track record, professional relationships, and capital markets expertise can be catalysts to enhance the growth potential and value of a target business and provide opportunities for an attractive risk-adjusted return to our shareholders.40

CF Corporation pursued several opportunities aligned with the description, including a financial technology database company, a software company, an insurance brokerage business, a financial technology company, and a processing business. Eventually, CF Corporation entered into a merger agreement with Financial & Guaranty Life.41 The merger was “financed with $1.2 billion from CF Corp.’s IPO and forward purchase agreements, and more than $700 million in additional new common and preferred equity.”42 As part of the merger, CF Corporation changed its name to FGL Holdings.43 In June 2020, FGL Holdings gave notice to the SEC of another merger and resultant delisting from the New York Stock Exchange.44

The Risks That SPACs Present

Given the nature of the SPAC IPO with the typical blank check approach and the proliferation of SPAC transactions, exposures and risks are sure to follow. A recent article identifies a number of potential exposures from the SPAC, including:

  • “[A] SPAC requires the filing of a registration statement with the SEC and exposes SPAC management to the risk of strict liability under Section 1145 and other provisions of the Securities Act of 1933 (’33 Act) for misstatements and omissions in that document.”
  • “If shareholders believe a proxy statement lacks adequate disclosures for them to make an informed decision, they can challenge the statement under Section 14(a) of the Securities Exchange Act of 1934 (’34 Act), which governs the solicitation of proxies, as well as Sections 10(b) and 20(a) of that statute.”
  • “Although such [de-SPAC] registration statements generally include comparable content to proxy statements, they can expose the continuing public entity to strict liability under the ’33 Act.”
  • “[F]inancial projections made in connection with a de-SPAC transaction can, and likely will, still be challenged by shareholders if they are not properly identified as forward-looking, not accompanied by meaningful cautionary language, or knowingly false when made.”46

SEC Concerns about and Attacks on SPACs

The increase in SPAC offerings, along with associated concerns and exposures, has caused the SEC to issue several advisories in recent months.

On December 22, 2020, the SEC’s Division of Corporate Finance issued disclosure guidance for SPACs.47 The guidance in large part focused on the questions of potential conflicts of interest among various constituencies:

• Have you clearly described the sponsors’, directors’ and officers’ potential conflicts of interest? Have you described whether any conflicts relating to other business activities include fiduciary or contractual obligations to other entities; how these activities may affect the sponsors’, directors’ and officers’ ability to evaluate and present a potential business combination opportunity to the SPAC and its shareholders; and how any potential conflicts will be addressed?

• Is it possible that you will pursue a business combination with a target in which your sponsors, directors, officers or their affiliates have an interest? If so, have you disclosed how you will consider potential conflicts of interest?48

The issues raised in the guidance may trigger some underwriters of directors and officers insurance to consider how best to underwrite for SPACs.

On March 31, 2021, SEC Acting Chief Accountant Paul Munter issued a public statement on SPACs and the financial complexities presented.49 After describing the growth of the SPAC market and what SPACs are, Munter discussed how complex SPAC financial reporting can be and addressed numerous other “unique risks and challenges of a private company entering the public markets through a merger with a SPAC,” including:

• Market and timing considerations;

• Financial reporting considerations;

• Internal control considerations;

• Corporate governance and audit committee considerations; and

• Auditor considerations.50

These risks also raise significant concerns about the risk profile of SPACs, as they call into question the soundness of the SPAC listings and nature of the “leap of faith” investors and others must take and may impact insurance availability.

Also on March 31, 2021, the SEC Division of Corporate Finance staff issued a public statement addressing accounting, financial reporting, and governance issues.51 The staff statement notifies those planning to use “shell companies” of certain restrictions placed on the shells and warns the SPACs regarding internal controls:

Upon consummation of the business combination, the combined company will need the necessary expertise, books and records, and internal controls to provide reasonable assurance of its timely and reliable financial reporting. A private operating company may have viewed the necessity for those capacities differently prior to the business combination, and may not be able to develop those capacities without advance planning and investment in resources.52

The SEC was not finished with its focus on SPACs. On April 8, 2021, SEC Acting Director of the Division of Corporate Finance John Coates issued a public statement addressing and highlighting the SEC staff’s focus on the plethora of SPAC transactions, including the filing and disclosure requirements, and emphasizing legal liability exposures that disclosures may present when the SPAC engages in a de-SPAC transaction.53 The de-SPAC transaction is the merger that takes place by the SPAC post-IPO, and, as noted, the disclosures are not as robust in the S-1 of a SPAC IPO compared to the traditional IPO. Coates noted that the SEC continues “to be vigilant about SPAC and private target disclosure so that the public can make informed investment and voting decisions about these transactions.”54

Nevertheless, some observers and experts have argued that

an advantage of SPACs over traditional IPOs is lesser securities law liability exposure for targets and the public company itself. They sometimes specifically point to the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward-looking statements, and suggest or assert that the safe harbor applies in the context of de-SPAC transactions but not in conventional IPOs. This, such observers assert, is the reason that sponsors, targets, and others involved in a de-SPAC feel comfortable presenting projections and other valuation material of a kind that is not commonly found in conventional IPO prospectuses.55

In his public statement, Coates challenged those arguments, warning:

It is not clear that claims about the application of securities law liability provisions to de-SPACs provide targets or anyone else with a reason to prefer SPACs over traditional IPOs. Any simple claim about reduced liability exposure for SPAC participants is overstated at best, and potentially seriously misleading at worst. Indeed, in some ways, liability risks for those involved are higher, not lower, than in conventional IPOs, due in particular to the potential conflicts of interest in the SPAC structure.56

Finally, on April 12, 2021, Coates and Munter issued a joint public statement on accounting and reporting considerations for SPAC warrants.57 This public statement caused concern in the SPAC world as it stated that in review of two SPAC fact patterns, the equity warranties issued by the SPAC should be considered liabilities. Coates and Munter indicated that “certain features of warrants issued in SPAC transactions may be common across many entities” and that generally accepted accounting principles (GAAP) might lead to the warrants being treated as liabilities and not equity.58 This is because the GAAP guidance “includes guidance that entities must consider in determining whether to classify contracts that may be settled in its own stock, such as warrants, as equity of the entity or as an asset or liability.”59 The facts of each situation will predominate.

The SEC seems increasingly focused on SPACs, in particular making sure that the investors and others are provided the information needed and that the financial reporting and accounting treatment are adequate. The flurry of advisories, public statements, and other actions by the SEC suggests that it is worried about the risks presented to the investor.

SPACs present unique issues in the area of conflicts of interest, given sponsors and the SPAC management. Among those risks are:

• potential conflicts of interest between the investors and the sponsors,

• any relationships between the officers and directors of the SPAC (or the sponsor) and those of the target,

• any continued relationship that the SPACs officer and directors will have with the combined company[, and]

• any conflict of interest a SPAC underwriter may have in providing services for the SPAC IPO in light of any deferred IPO underwriting compensation.60

The SEC and litigation to date raise significant concerns in terms of sufficiency of disclosures and sufficiency of due diligence, the conflicting interests that can be cited as bases for litigation,61 and the impact those insufficiencies have on the investing public. Given the explosion of SPACs and the increased SEC focus, as well as the plaintiffs bar, more litigation and SEC action are anticipated. The main focus of lawsuits to date has been on breach of fiduciary duty and on securities law disclosure litigation.

A Recent SEC Action

Recently, the SEC announced that it had filed charges against SPAC “Stable Road Acquisition Company, its sponsor SRC-NI, its CEO Brian Kabot, the SPAC’s proposed merger target Momentus Inc., and Momentus’s founder and former CEO Mikhail Kokorich for misleading claims about Momentus’s technology and about national security risks associated with Kokorich.”62 The SEC complaint63 and the Stable Road matter identify the risks that are present in the SPAC transaction, including the potential conflict of interest for those who stand to profit from the offering. SEC Chair Gary Gensler stated in the press release announcing the lawsuit:

This case illustrates risks inherent to SPAC transactions, as those who stand to earn significant profits from a SPAC merger may conduct inadequate due diligence and mislead investors. . . . Stable Road, a SPAC, and its merger target, Momentus, both misled the investing public. The fact that Momentus lied to Stable Road does not absolve Stable Road of its failure to undertake adequate due diligence to protect shareholders. Today’s actions will prevent the wrongdoers from benefitting at the expense of investors and help to better align the incentives of parties to a SPAC transaction with those of investors relying on truthful information to make investment decisions.64

The SEC complaint includes claims for relief against Kokorich for violation of section 10(b) of the ’34 Act and section 17(a) of the ’33 Act. The first count alleges that

Kokorich’s fraudulent violations included: misleading Stable Road and its representatives regarding Momentus’s technology and his own national security issues; participating in the creation, editing, or approval of investor presentations that contained misrepresentations or misleading omissions of material fact; making false and misleading statements and omissions of material fact directly to PIPE investors; and [other 10(b) violations].65

The second count alleges that Kokorich

(i) employed devices, schemes, or artifices to defraud; (ii) obtained money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or (iii) engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchaser.66

The SPAC world will be watching this SEC action and other SPAC-related lawsuits to see how the law develops, as presently there is no mature body of law relating to SPACs and the issues they present.

Congressional Consideration of SPACs

On May 24, 2021, the House Subcommittee on Investor Protection, Entrepreneurship and Capital Markets held a virtual hearing on SPACs and the need for investor protections.67 At the hearing, witnesses discussed that “all IPO vehicles, whether traditional IPOs or SPACs, should operate on a level playing field and be subject to the same type of regulation of disclosure and liability.”68 Among the topics covered was legislation that would “exclude certain special purpose acquisition companies from safe harbor for forward-looking statements.”69 While the current Congress cannot seem to find agreement on much that can pass, some members of the House appear to share the concerns raised by the SEC. Given the growth of SPACs, we can expect further scrutiny by Congress.

Litigation Involving SPACs

As noted, we can expect an uptick in lawsuits filed against SPAC registrants in the coming years. In addition to the SEC actions such as the one discussed involving Kokorich, other litigation is likely to become frequent. Exposures can come in a wide variety of areas connected to the SPAC. “Risks include litigation based on: (1) SPAC IPO registration statements; (2) de-SPAC proxy statements; (3) potential de-SPAC registration statements; (4) financial projections—which significantly distinguish SPAC disclosures from those made in traditional IPO[s]; (5) redemption of SPAC shares; (6) de-SPAC deadlines; and (7) post-SPAC public status.”70

In the first quarter of 2021, at least eight class action SPAC-related lawsuits have been filed.71 For example, on April 2, 2021, Justin Kojak filed a class action lawsuit in the U.S. District Court for the Central District of California against Canoo Inc., an electric vehicles company, and the former directors and officers of the SPAC, Hennessy Capital Acquisition Corp. IV, into which Canoo merged.72 Kojak alleges that as part of the SPAC merger documents, Canoo had touted its engineering services line; but just months after the merger, “Canoo revealed that the Company would no longer focus on its engineering services line.”73

Kojak alleges a number of false and misleading statements by Canoo, including:

Defendants failed to disclose to investors: (1) that Canoo had decreased its focus on its plan to sell vehicles to consumers through a subscription model; (2) that Canoo would de-emphasize its engineering services business; (3) that, contrary to prior statements, Canoo did not have partnerships with original equipment manufacturers and no longer engaged in the previously announced partnership with Hyundai; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.74

Kojak argues that there is no safe harbor for the forward-looking statements made prior to the merger, as well as that the defendants violated sections 10(b) and 20(a) and Rule 10b-5 of the ’34 Act. Notably, all of the premerger directors and officers of Hennessy, the SPAC, are named defendants; and the lawsuit references much premerger activity and many discussions by the SPAC officers and directors.

Canoo is not the only de-SPAC facing litigation. In New York, a spate of lawsuits against SPACs has been filed.75 From September 2020 through March 2021, “at least 35 SPACs have been hit with one or more shareholder lawsuits filed in New York state court.”76 Allegations include that “SPAC directors breached their fiduciary duties to shareholders by providing allegedly inadequate disclosures regarding proposed de-SPAC mergers”; and some lawsuits also “assert claims against the SPAC itself, as well as the target company and its board of directors, for allegedly aiding and abetting the SPAC directors’ breaches.”77

In addition to such allegations, lawsuits have been commenced for failed SPAC mergers. For example, in Morgan Joseph TriArtisan, LLC v. BHN LLC,78 an investment bank sued the target company for failure to pay fees based on the investment bank’s successful introduction of the target company to a SPAC, as the target company retained the investment bank to do. The target company cross-claimed against the SPAC, seeking reimbursement under their deal documents.

A variety of claims and theories will be tried against SPACs and target companies for premerger and postmerger activities. Likely causes of action include (1) section 10(b) of the ’34 Act and related Rule 10b-5 claims for misleading or false statements; (2) section 14(a) of the ’34 Act and Rule 14a-9 claims for false and misleading statements in connection with proxy solicitations; and (3) section 11 of the ’33 Act by purchasers of securities for false statements in a registration statement. All of these allegations will invoke and involve potential directors and officers claims.79

One thing is for certain: “with . . . increased popularity, SPACs have become a target for shareholder litigation.”80


With the SPACtacular growth in SPAC IPOs in recent years and the increased scrutiny by both the SEC and by plaintiffs lawyers looking for defendants, we will see increased exposures for SPACs as they seek to become public and engage in de-SPAC merger transactions. Given the astronomical growth in SPAC IPOs and record-setting numbers in the first half of 2021, litigation is likely to grow in a similar linear fashion. In addition, we likely will see increased SEC enforcement actions against SPACs. Practitioners will need to get ready to address the myriad lawsuits that will be filed in coming years in those SPACs that fail SPACtacularly. A new cottage industry appears to be developing, and the SPAC creators and their insurers best be prepared financially and not have blank checks in response, but reserve for the claims coming in the door.


1. Julie Young, Special Purpose Acquisition Company (SPAC), Investopedia (Nov. 24, 2020),

2. Special Purpose Acquisition Companies, U.S. Sec. & Exch. Comm’n (Dec. 22, 2020), (“A SPAC is a company with no operations that offers securities for cash and places substantially all the offering proceeds into a trust or escrow account for future use in the acquisition of one or more private operating companies.”).

3. Young, supra note 1.

4. Blank Check Company,, (last visited Oct. 20, 2021).

5. Amrith Ramkumar, The Celebrities from Serena Williams to A-Rod Fueling the SPAC Boom, Wall St. J. (Mar. 17, 2021),

6. Amrith Ramkumar & Maureen Farrell, When SPACs Attack! A New Force Is Invading Wall Street, Wall St. J. (Jan. 23, 2021),

7. Aude White, On the Cover of New York Magazine: The New World of Money, New York (Apr. 12, 2021), “Stonks” is a misspelling of the word “stocks” to refer to amateur or bad investment decisions by folks, such as in the GameStop run-up. “NFTs” refers to non-fungible tokens.

8. David Pogemiller, De-SPACs Get Set to Join the Russell 3000, TheStreet (June 25, 2021), A de-SPAC transaction is one in which the publicly traded SPAC merges with a private operating company, with private company shareholders receiving SPAC shares or cash as consideration for the merger. The Russell 3000 seeks to be a benchmark of the entire U.S. stock market.

9. See Teresa Milano & Jonathan R. Walton, Turbulent Times for SPACs: Ripples Through the D&O Insurance Market, Brief, Fall 2021, at 40,

10. [Webinar] What Is a SPAC and Why Are They Suddenly So Popular?, Excelsior Capital, (last visited Oct. 20, 2021).

11. Id.

12. EarlyBirdCapital, (last visited Oct. 20, 2021).

13. See SPAC Statistics, SPACInsider, (last visited Oct. 20, 2021) (showing the rise of SPACs in IPOs from 2009 to 2021).

14. SPAC Analytics, (last visited Oct. 20, 2021).

15. Id.

16. Id.

17. [Webinar], supra note 10. Goldman seemed to have avoided SPACs due to their speculative nature.

18. Andrew Beattie, What Was the First Company to Issue Stock?, Investopedia (Mar. 10, 2021), An “initial public offering” is the “process of offering shares of a private corporation to the public in a new stock issuance.” Jason Fernando, Initial Public Offering (IPO), Investopedia (Feb. 28, 2021),

19. Off. of Inv. Educ. & Advoc., SEC Pub. No. 133, Investing in an IPO (2013),; see also SEC, Form S-1, (last visited Oct. 20, 2021).

20. SEC Pub. No. 133, supra note 19.

21. The SPAC management team, i.e., those who create the company and seek to take it public to then find a target merger acquisition, is known generally as the sponsor. See, e.g., Mohsin Meghji, SPACS: A Path to Public Ownership, Priv. Co. Dir., (last visited Oct. 20, 2021).

22. Deloitte, Private-Company CFO Considerations for SPAC Transactions (2020),

23. Id.

24. Why So Many Companies Are Choosing SPACs over IPOs, KPMG (2021),

25. Id.

26. Bizapedia shows that the company incorporated on April 16, 2021. TDMY Technology Group, Inc., Bizapedia, (last visited Sept. 2, 2021).

27. TdMY Tech. Grp., Inc., Registration Statement (Form S-1), at i (June 25, 2021),

28. Id.

29. Id. at 5–6.

30. Id. at 6.

31. See [Webinar], supra note 10 (“Traditional IPOs can take up to 2–3 years to finalize, but SPACs are typically completed in 2–3 months.”).

32. “Insurtech” generally refers to companies in the insurance space, primarily start-ups, disrupting the insurance industry through the use of innovate technologies and the analysis of big data.

33. Quarterly Insurtech Briefing: Q4 2020 & Year in Review, CB Insights, (last visited Oct. 20, 2021).

34. “Demutualization” is a process pursuant to which a private, member-owned company, such as a co-op or a mutual life insurance company, changes its structure in order to become a publicly traded company owned by shareholders. Illinois, Pennsylvania, and a few others have been the leading states in the insurance demutualization process.

35. Geoffrey Etherington et al., Using SPACs in the Insurance Industry, Bloomberg L. (Feb. 5, 2021), The timing of the de-SPAC generally is specified in the S-1 and is designed to make the SEC comfortable that the money raised is not just to enrich the owners.

36. A Form A transaction occurs when an insurer enters into a transaction where 10% or more of the insurer will be sold to a third party; in such transactions, each state requires the filing of a Form A application to seek the insurance department’s approval.

37. Press Release, FGL Holdings, CF Corporation Completes Acquisition of Fidelity & Guaranty Life (Nov. 30, 2017),

38. CF Corp., Registration Statement (Form S-1), at i (Apr. 21, 2016),

39. Id. at 2.

40. Id.

41. CF Corp., Current Report (Form 8-K) (May 24, 2017),

42. Press Release, supra note 37.

43. Id.

44. FGL Holdings, Current Report (Form 8-K) (June 1, 2020),

45. Section 11 of the Securities Act of 1933 provides investors with the ability to hold issuers, officers, underwriters, and others liable for damages caused by untrue statements of fact or material omissions of fact within registration statements at the time that they become effective. Section 11 claims most commonly appear in lawsuits involving IPOs.

46. Bruce A. Ericson et al., Pillsbury Winthrop Shaw Pittman LLP, The SPAC Explosion: Beware the Litigation and Enforcement Risk, Harv. L. Sch. F. on Corp. Governance (Jan. 14, 2021),

47. Special Purpose Acquisition Companies, supra note 2.

48. Id.

49. Public Statement, Paul Munter, Acting Chief Accountant, U.S. Sec. & Exch. Comm’n, Financial Reporting and Auditing Considerations of Companies Merging with SPACs (Mar. 31, 2021),

50. Id.

51. Public Statement, U.S. Sec. & Exch. Comm’n Div. of Corp. Fin., Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies (Mar. 31, 2021),

52. Id.

53. Public Statement, John Coates, Acting Dir., U.S. Sec. & Exch. Comm’n Div. of Corp. Fin., SPACs, IPOs and Liability Risk under the Securities Laws (Apr. 8, 2021),

54. Id.

55. Id. (footnote omitted).

56. Id. (footnote omitted).

57. Public Statement, John Coates, Acting Dir., Div. of Corp. Fin., & Paul Munter, Acting Chief Accountant, U.S. Sec. & Exch. Comm’n, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (Apr. 12, 2021),

58. Id.

59. Id.

60. SPAC Litigation and Enforcement Update: Spring 2021, Baker Botts: Thought Leadership (Apr. 23, 2021),

61. As noted, the sponsors typically have 20% of the stock before the IPO and often can increase that amount during the actual IPO. They often also have incentives on a de-SPAC.

62. Press Release, U.S. Sec. & Exch. Comm’n, SEC Charges SPAC, Sponsor, Merger Target, and CEOs for Misleading Disclosures Ahead of Proposed Business Combination (July 13, 2021),

63. Complaint, SEC v. Kokorich, No. 1:21-CV-1869 (D.D.C. July 13, 2021),

64. Press Release, supra note 62 (emphasis added).

65. Complaint, supra note 63.

66. Id.

67. Going Public: SPACs, Direct Listings, Public Offerings, and the Need for Investor Protections: Virtual Hearing Before the Subcomm. on Investor Prot., Entrepreneurship & Cap. Mkts. of the H. Comm. on Fin. Servs. (May 24, 2021) [hereinafter Virtual Hearing],

68. Cydney Posner, The House Hears about SPACs, Cooley PubCo (June 1, 2021),

69. Virtual Hearing, supra note 67.

70. Ericson et al., supra note 46.

71. Kevin LaCroix, Another Post-SPAC Merger Electric Vehicle Company Securities Suit, D&O Diary (Apr. 4, 2021), (“I note in closing that this lawsuit is by my count the eighth SPAC-related securities class action lawsuit to be filed this year.”).

72. Complaint, Kojak v. Canoo Inc., No. 2:21-cv-02879 (C.D. Cal. Apr. 2, 2021),

73. Id. at 1.

74. Id. at 2.

75. Douglas A. Rappaport et al., Recent SPAC Shareholder Suits in New York State Courts: The Beginning Wave of SPAC Litigation, Harv. L. Sch. F. on Corp. Governance (Apr. 23, 2021),

76. Id.

77. Id. Board members generally owe the duties of loyalty and care in performing their duties. See, e.g., Duties of Care and Loyalty, LeadingAge, (last visited Oct. 20, 2021).

78. No. 651969/2014, 2017 WL 3951623 (N.Y. Sup. Ct. Aug. 31, 2017).

79. See Milano & Walton, supra note 9.

80. Michelle Heisner & Santiago Corcuera-Mansi, SPAC Litigation Gains Momentum, IFLR: Cap. Mkts. (Apr. 27, 2021),

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Daniel A. Cotter is a partner at Howard & Howard Attorneys PLLC in Chicago, Illinois, where he focuses his practice on corporate transactional, privacy and cyber, and insurance regulatory matters. He has served in various TIPS and ABA leadership positions, including currently as secretary of the National Conference of Bar Presidents.