by Mark Schonfeld, Evan M. D’Amico, Thomas J. Kim, Jonathan Whalen, Tina Samanta, and Timothy Zimmerman

On July 13, 2021, the Securities and Exchange Commission (“SEC”) announced a partially settled enforcement action against a Special Purpose Acquisition Company (“SPAC”), the SPAC sponsor and the CEO of the SPAC, as well as the proposed merger target and the former CEO of the target for misstatements in a registration statement and amendments concerning the target’s technology and business risks.[1]  As of the date of the enforcement action, the registration statement had not been declared effective and the proxy statement/prospectus had not been mailed to the SPAC shareholders.  This action is notable because the allegations against the SPAC, its sponsor and its CEO are premised on a purported negligent deficiency in their due diligence, which failed to uncover alleged misrepresentations and omissions by the target and its former CEO.  This action has important implications for SPACs, their sponsors and executives for their diligence on proposed acquisition targets. Continue reading →