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Lawyers behind Ackman's retreat are targeting dozens more SPACs



(Reuters) – Lawyers whose actions prompted billionaire investor William Ackman to make changes to his specialty acquisition company are preparing to target dozens more such vehicles, according to people familiar with the matter.

The group, which includes former U.S. Securities and Exchange Commission Commissioner Robert Jackson, filed lawsuits last week against three short-term acquisition companies: GO Acquisition Corp., E.Merge Technology Acquisition Corp. and Ackmans Pershing Square Tontine Holdings.

The lawsuits accuse SPAC of conducting business illegally by not registering as an investment company. Mr Ackman said last week that the lawsuit against his SPAC was meritorious, but acknowledged that the legal uncertainty surrounding it would make it more difficult to find a merger partner.

GO Acquisition declined to comment while E.Merge Technology Acquisition did not respond to a request for comment.

The law firm, which includes law firms Susman Godfrey LLP and Bernstein Litowitz Berger & Grossmann LLP, one of the most productive US shareholders, could bring up to 50 lawsuits against SPAC in the coming months, two sources said.

Former Commissioner Jackson and representatives of law firms either declined to comment or did not respond to questions for comment.

Although none of the group's lawsuits have had their day in court, they point to a rapidly escalating legal campaign against SPAC. These scale vehicles raise money in a listed offering to run a merger with a private company. There are currently 438 SPACs, which, like those sued, have not yet completed a merger, according to data from SPAC Research.

SPAC became one of Wall Street's hottest investment trends last year, with many retail investors trapped at home during the covid-1

9 pandemic placing speculative bets on them. They lost part of their appeal after many reported weak financial results and a set of rules opposed their revelations. Assad, a shareholder in SPAC. He has been the plaintiff in at least 33 other shareholder cases since 2010 against a number of companies, from oil and gas explorer Noble Energy to consumer credit bureau Equifax Inc., a search of legal databases shows.

Financial Industry Regulatory Authority registerlist Mr. Assad is an employee of the broker-dealer Revere Securities LLC, and public records show that he lives in Methuen, Massachusetts, a city north of Boston.

Mr. Assad, 76, referred all questions to his lawyer, who did not return calls and emails for comment. Revere Securities was not responsible for calls either.

None of the lawyers in the SPAC lawsuits answered questions about their affiliation with Assad.

Two lawyers who have not been involved in Assad's case said that it was common for law firms and their financial backers to hire nominee shareholders – often referred to in legal circles as "frequent applicants" – when targeting companies.

The other lawyer, Foley & Lardner LLP corporate partner Louis Lehot, said that there is nothing wrong with frequent complainants, but that it would be ethically problematic for the lawyers involved if Assad was a "straw man" for shareholders' lawsuits without have been significantly harmed by the companies involved.

"Our legal system relies on real plaintiffs to raise real claims that y has actually suffered and had those claims tried," Lehot said.

Investment company act

SPAC has traditionally relied on being exempted from registering as an investment company under the Investment Company Act of 1940 so that they can make investments and sell shares without restrictions before they go together with a company. They usually park the money they have raised from a listing on US government bonds and money market funds until they find a target for mergers.

The lawsuits allege that such investments fall outside a SPAC's primary mission to merge with a company and constitute a breach of the Investment Companies Act. They claim that the SPAC sponsors have turned these vehicles into extensions of their hedge funds.

Many Wall Street law firms working with SPAC say the lawsuits are unlikely to succeed. In a statement to clients sent this week, White & Case LLP said the lawsuits "do not contain any new arguments or revelations" and that their dissertation "was long ago rejected by the SEC."

Douglas Ellenoff, a corporate and securities partner at law firm Ellenoff Grossman & Schole LLP, said the lawsuits could be successful in discouraging some companies from continuing with SPAC mergers while the litigation is ongoing.

"It has a very chilling effect on all responsible capital markets, participants trying their best to do things in accordance with the securities laws," Ellenoff said.

Mr. Ackman said last week that he planned to give his SPAC shareholders warrants in a "better structured vehicle", which he called a special acquisition law firm. The SPARC warrants would give Tontine's shareholders the right to invest in a merger with a private company once the target has been announced – unlike a SPAC, where investors tie up their money while the sponsor searches for a suitable target.

Mr. Jackson served as SEC commissioner between 2018 and 2020 and then returned to New York to teach at the New York University School of Law. Among his partners in the lawsuits is Yale Law professor John Morley, who has spent years researching investor protection. Catalog

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