Brooklyn Journal of Corporate, Financial & Commercial Law


Nicole Lynch

First Page



Special Purpose Acquisition Companies (SPACs) have skyrocketed in recent years as an alternative for taking private companies public through an initial public offering (IPO). SPACs are blank-check companies that raise capital through public exchanges for the “special purpose” of acquiring a privately held company. Once acquired, the private company will take the SPAC’s place on the public exchange, effectively accomplishing the same thing as a traditional IPO but without all the onerous reporting requirements and upfront costs. For these reasons, SPACs have become the next big thing in securities markets despite being around since the 1990s. Throughout 2020 and 2021, the market saw an unprecedented amount of SPACs go public, raising record amounts of cash. However, with all this newfound popularity also came greater scrutiny from SPAC shareholders, who slowly but surely began to see the inherent flaws in this seemingly successful investment vehicle. While much of the commentary and criticism surrounding SPACs has been primarily focused on federal securities laws, more focus ought to shift to the court’s treatment of how traditional fiduciary duties apply to SPAC sponsors who execute the de-SPAC transaction with the private company target. This is because SPAC sponsors stand to benefit immensely from any acquisition of a target company, no matter how profitable the outcome is for their shareholders. Recently, however, in this new wave of SPAC litigation, the Delaware Court of Chancery in In Re MultiPlan Corp. S’holders Litig., 268 A.3d 784 (Del. Ch. 2022) (MultiPlan) held that fiduciary principles and the entire fairness standard do, in fact, apply to shareholder claims. While the MultiPlan case surely opened the door to heightened fiduciary standards, greater clarity, protection, and uniformity are still needed.