Post-SPAC Technology Company Hit With Securities Class Action

Private companies with cutting-edge technology have become particularly attractive targets for special purpose acquisition companies (SPACs). These private companies may choose to go public via SPAC for a number of reasons that include the ability to share projections with investors, better valuation prospects and deal execution certainty. Much like companies that go public by way of a traditional IPO, however, companies that go public via SPAC can also become subject to Section 10(b) securities class actions. The risk for this type of company may be particularly acute given its high growth prospects or the volatility that may accompany its securities. An example of a company that went public via SPAC that was quickly confronted with this type of action is Velodyne.