![]() Katz, through the Sponsor, effectively ran Gig3, including serving as its executive chairman, secretary, president and CEO. The Company’s Sponsor was controlled by the defendant and alleged “serial founder of SPACs” Avi Katz. Gig3’s sponsor, GigAcquisitions3 (the Sponsor), was issued “founder’s shares” for $25,000 (amounting to about 20% of Gig3’s post-IPO equity), which could not be redeemed, lacked liquidation rights and were also subject to a lock-up. (Gig3 or the Company) - now Lightning eMotors, Inc. The Corwin doctrine does not apply to SPAC mergers because stockholders’ voting interests were decoupled from their economic interests as a result of the redemption feature.The SPAC’s redemption feature is a “bespoke check on the sponsor’s self-interest” and the “primary means protecting stockholders from a forced investment in a transaction they believe is ill-conceived” (making disclosure relating to the redemption option crucial) and.The SPAC sponsor, even though it controlled less than 25% of the SPAC’s voting power, could be considered a controlling stockholder based solely on the SPAC’s structure.Among the novel rulings making this a “must-read” for anyone involved with SPACs or SPAC transactions are the court’s holdings that: GigAcquisitions3, the court went well beyond her earlier MultiPlan decision in finding that breach of fiduciary duty claims survived a motion to dismiss. (See our client alert “ Court of Chancery Issues SPAC-Related Decision of First Impression” for more on MultiPlan.)įlash forward a year, to January 2023, where Vice Chancellor Will had yet another opportunity to weigh in on SPAC breach of fiduciary duty claims. Many practitioners and commentators chalked the decision up to “bad facts making bad law,” and that more attention to process and more robust disclosures could help avoid the same result with future challenged deals. The MultiPlan ruling also largely turned on what the court held were misleading disclosures that interfered with a SPAC stockholder’s ability to decide whether to approve the merger or redeem their shares. There, the court went on to deny a motion to dismiss by applying traditional fiduciary principles, concluding that the sponsor (because of its financial interest in the SPAC) and the board (based on skewed personal interests) were conflicted, and that the process was faulty because of a lack of independent financial advice or a fairness opinion. Stockholders Litigation that paved the way for SPAC stockholders to bring direct breach of fiduciary duty claims against SPAC boards and sponsors.Īmong the notable aspects of the decision, MultiPlan clarified that “well-worn fiduciary principles” under Delaware law would apply to Delaware SPAC board decisions (regardless of the fact that SPACs were not exactly the same as other Delaware corporations). With all the SPAC activity and scrutiny over the past several years, it was only a matter of time before the Delaware courts had an opportunity to weigh in on SPAC stockholder litigation.Įarly last year, in January 2022, Vice Chancellor Lori Will of the Delaware Court of Chancery issued a groundbreaking opinion in MultiPlan Corp.
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