One driver of the popularity of SPACs is the perception that
they have lower liability risks than a traditional IPO. But a
closer look at SPAC transactions suggests that the liability risks
are not as low as some believe, and SPAC sponsors and directors and
officers of SPAC companies should act to protect themselves against
potential claims from both the private plaintiffs' bar and the
government.
In recent days, the SEC has made clear that it is intensely
focused on SPACs. Further, in an April 8 speech, John Coates,
the acting director of the SEC's Division of Corporate Finance,
challenged the view that SPAC liability risks are lower than IPO
liability risks, stating: "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 potential conflicts
of
