In March 2021, White & Case published a client alert entitled "How SPACs Can Manage the Risks of White Collar Scrutiny."1 The article discussed the surge in interest and publicity surrounding "SPACs" (Special Purpose Acquisition Companies), and how US government regulators and the securities plaintiff's bar would be watching closely as a record number of SPACs entered into "de-SPAC" transactions.
Both parts of this prediction proved true in 2021. First, a total of 610 companies completed SPAC IPOs on US stock exchanges, which is more than a two-fold increase from the 245 SPAC IPOs in 2020.2 Further, a total of 221 de-SPAC transactions closed during 2021.3
Second, regulatory authorities and securities plaintiffs scrutinized this SPAC activity. The SEC's high-profile enforcement actions concerning Momentus Inc. and Nikola Corporation, along with the DOJ's indictment of the latter company's CEO, demonstrate that the government will not hesitate to pursue SPACs, SPAC sponsors, and the targets/new public companies emerging from SPAC transactions (collectively, "SPAC Transaction Parties") and their officers and directors. Private securities plaintiffs also focused on SPAC Transaction Parties and their officers and directors, filing 31 securities class actions and 14 derivative actions in 2021.4
As many of the SPACs raised in 2020 and 2021 will be seeking to complete de-SPAC transactions this year, government enforcement and private securities litigation related to those de-SPAC transactions are likely to increase in 2022.
The primary way for SPAC Transaction Parties and their officers and directors to reduce the risks arising from government and securities plaintiff scrutiny is to ensure that all public disclosures made in connection with their de-SPAC transaction do not contain any material misstatements or omissions and include appropriate risk factors and cautionary language. Among other things, they should take care to avoid exaggerating the potential or stage of development of a company's technology or the market's interest in its products, ensure that all financial projections have a reasonable basis and that any conflicts between the interests of SPAC sponsors, officers and directors, and shareholders are described in appropriate detail.
Certain SPAC Transaction Parties and individuals became subject to government and securities plaintiff scrutiny due in large part to disclosures made by the target's officers on Twitter, Instagram and in television appearances. It is thus critically important that SPAC Transaction Parties have tight controls in place to review all disclosures by officers before they are publicly disseminated.
Further, many SPAC Transaction Parties found themselves subject to government investigations and private securities actions after a short seller report or the financial media alleged misrepresentations by them, which often leads to an immediate decline in the trading price of the company's stock. While it is difficult to discern when a short seller or the media will target an entity, it is critical that, once the allegations are made, the SPAC Transaction Parties consult with counsel to determine whether and how to respond. Several SPAC Transaction Parties and their officers have been sued for disclosures made after a short seller report was issued.5 Depending on the nature of the allegations, counsel may well recommend that a special committee of independent directors be formed to engage independent counsel and conduct an internal investigation into the short seller's allegations.
Finally, SPACs, SPAC sponsors and their officers should ensure that, if they represent that they have conducted reasonable due diligence on potential SPAC targets, they can later prove they have done so. This diligence can include following up on any potential red flags concerning the officers of the target company, scrutinizing the target's financial projections, engaging third parties to assist with evaluating the target's technology or financial results and ensuring that they have sufficient time to thoroughly vet all material representations made by the target.
SEC and DOJ Actions
Momentus and Stable Road Acquisition – SEC Civil Action
On July 13, 2021, the SEC announced a sweeping SPAC-related enforcement action ("SEC Order") against all parties to a de-SPAC transaction: the SPAC, Stable Road Acquisition Corp. ("Stable Road"); the SPAC sponsor, SRC-NI Holdings, LLC ("SRN-NI"); the SPAC's Chief Executive Officer, Brian Kabot; the SPAC's proposed merger target, Momentus, Inc. ("Momentus"); and Momentus's founder and former CEO, Mikhail Kokorich. The SEC moved quickly to charge these entities and individuals after the de-SPAC transaction was announced, but before it closed.
The SEC Order found that Momentus—a space infrastructure company—violated the antifraud provisions of the securities laws, namely Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.6 The SEC found that Momentus and Kokorich misrepresented that the company's technology had been successfully tested in space, when, in fact, its sole in-space test had failed to meet the Company's success metrics.7 In addition, the SEC found that Momentus and Kokorich concealed and made misstatements about the United States government's concerns with the national security risks posed by Kokorich, a Russian national.8 These concerns impacted Momentus's ability to obtain licenses essential8 for its operations from United States authorities.
The SEC Order also found that Stable Road violated negligence-based antifraud provisions and filed inaccurate registration statements and proxy solicitations.9 These violations stemmed from Stable Road's failure to conduct adequate due diligence on the target. Stable Road retained a space technology consulting firm to investigate the target, but did so only one month before the merger announcement.10 Under this compressed timeline, the firm did not evaluate whether Momentus's in-space test was successful.11 Consequently, the SEC Order concluded that Stable Road incorporated and disseminated Momentus's material misrepresentations to investors in its public filings, including registration statements signed by the CEO of Stable Road, Kabot, who was charged individually with violating the proxy solicitation provisions, Section 14(a) of the Exchange Act and Rule 14a-9 thereunder.12
Finally, the SEC Order found the conduct of Kabot, as a managing member of Stable Road's sponsor, SRC-NI, was attributable to SRC-NI, and that both had caused Stable Road's deceptive "scheme liability" under Section 17(a)(3) of the Securities Act.13
The SEC settled the charges against all parties with the exception of Kokorich, whose case is still pending.14 Without admitting or denying the SEC's findings, Momentus, Stable Road and Kabot agreed to pay civil penalties in the amount of $7 million, $1 million and $40,000, respectively.15 Momentus and Stable Road also agreed to provide PIPE investors with the right to terminate their subscription agreements prior to the shareholder vote to approve the merger; SRC-NI agreed to forfeit 250,000 founders' shares it would otherwise have received upon consummation of the business combination; and Momentus agreed to retain an internal compliance consultant for a period of two years.16
Nikola's CEO – DOJ Criminal Indictment & SEC Civil Action
On July 28, 2021, the Department of Justice indicted the former CEO and Executive Chairman of Nikola, Trevor Milton.17 Milton was criminally charged with securities fraud and wire fraud in connection with an alleged scheme to defraud and mislead investors about the development of Nikola's battery-powered electric vehicles, hydrogen fuel cell-powered electric vehicles, and hydrogen station infrastructure. VectoIQ Acquisition Corp. ("VectoIQ"), a SPAC formed in 2018, consummated a business combination with Nikola on June 3, 2020.
The DOJ alleged that Milton, Nikola's CEO and primary spokesperson with investors, sought to "fraudulently induce retail and other investors to purchase Nikola's stock by making false and misleading statements about Nikola's products and milestones on social media and in television and podcast interviews."18 Milton's allegedly fraudulent statements concerned Nikola's technological capabilities, products, in-house production capabilities and commercial achievements.19
Milton initially filed motions to dismiss the DOJ's case for lack of proper jurisdiction or to transfer venue.20 On November 15, 2021, the court denied these motions.21 On November 30, 2021, Milton filed an appeal in the Second Circuit and his appeal remains pending.22
On December 15, 2021, Milton filed several additional motions to dismiss asserting, among other things, that he did not receive notice that his alleged misstatements could be considered criminal and that prosecutors failed to directly connect such statements with the sale or purchase of Nikola shares.23 On January 14, 2022, the government filed a single brief responding to Milton's motions to dismiss.24 On January 31, 2022, Milton filed several Reply Memoranda of Law in support of his motions to dismiss, which remain pending.25
The day after the DOJ's indictment, on July 29, 2021, the SEC filed a parallel securities fraud action with almost identical allegations.26 On August 9, 2021, the DOJ filed an application to intervene in this matter and requested a full stay in proceedings until the conclusion of the parallel criminal case against Milton.27 On August 18, 2021, Milton filed a motion to dismiss or, in the alternative, to transfer venues.28 These motions have been fully briefed and remain pending.
Nikola – SEC Civil Action
Nearly five months after the DOJ and the SEC filed charges against Milton, on December 21, 2021, the SEC announced settled charges against Nikola for violating the anti-fraud provisions and Rule 13a-15(a) under the Exchange Act.29 Nikola agreed to pay a $125 million penalty.30
The SEC Order found that Nikola, which neither admitted nor denied the SEC's findings, made material misrepresentations through Milton, who "at all times spoke in his capacity as CEO or Executive Chairman of Nikola."31 In addition, the SEC found Nikola misled investors by misrepresenting or omitting "material facts about the refueling time of its prototype vehicles, the state of its headquarters demonstration hydrogen station, the anticipated cost and sources of electricity for its hydrogen production, and the economic risks and benefits associated with its contemplated partnership with General Motors."32 The SEC also found that Nikola failed to maintain disclosure controls and procedures for monitoring or reviewing Milton's interviews and social media activity.33
SPAC-Related Private Securities Litigation
Private securities litigation related to SPACs increased exponentially in 2021. As mentioned above, shareholders filed 31 securities class actions against SPAC Transaction Parties34 in 2021, after filing only five such suits in 2020.35 Nearly all of these suits involved claims under Section 10(b) and Rule 10b-5 of the Exchange Act, which prohibit fraudulent misstatements.
Plaintiffs in several of these suits drew liberally from short seller reports targeting newly formed companies following SPAC mergers.36 For example, plaintiffs filed a securities class action against Lordstown Motors Corporation ("Lordstown") within a week of short seller Hindenburg Research releasing a report targeting the company.37 In addition, ten of these suits were filed against companies in the electric vehicle industry, such as Lordstown and Nikola.38
Given that the majority of SPAC-related securities cases were filed in the past year, only 17 of them have entered the motion to dismiss phase as of this writing. Courts have granted motions to dismiss in two cases and substantially denied them in three others.
Successful Motions to Dismiss
Courts granted motions to dismiss in SPAC-related securities actions concerning Exela Technologies Inc. ("Exela") and HF Foods Group Inc. ("HF Foods").
In the action concerning Exela, a plaintiff alleged violations of Sections 10(b) and 20(a) of the Exchange Act39 against the company, its CEO, CFO and chairman of the board of directors.40 The plaintiff alleged defendants failed to disclose risks associated with a legal action against one of the companies that merged with the SPAC during the de-SPAC transaction.41 Defendants moved to dismiss and a court granted their motion in June 2021.42
Defendants focused their motion to dismiss on the plaintiff's alleged failure to plead an actionable misstatement or a strong inference of scienter.43 Defendants emphasized that Exela had disclosed the existence of the lawsuit throughout the class period and made clear that the company could not guarantee a positive outcome.44 The court granted defendants' motion without prejudice, concluding that the plaintiff had failed to plead facts demonstrating Exela did not adequately disclose the existence of the relevant lawsuit or that its statements regarding the lawsuit were false or misleading.45 The court also held that the plaintiff had failed to plead scienter with respect to any defendants, concluding that the plaintiff did not adequately allege that defendants knew or recklessly did not know that their statements were false at the time they were issued.46 Plaintiffs filed an amended complaint after the court's ruling. As discussed below, the court denied a renewed motion to dismiss by defendants.47
In the action regarding HF Foods, the plaintiff alleged violations of Sections 10(b), 14(a) and 20(a) of the Exchange Act against the company, along with several members of senior management of the post-de-SPAC company, based mainly upon allegations made in a Hindenburg short seller report that the company engaged in and concealed various related party transactions.48 The Plaintiff also alleged that the company concealed ownership of luxury cars and manipulated its index rebalancing process.49 Defendants moved to dismiss and a court granted their motion without prejudice in August 2021.50
The court concluded that the plaintiff's fraud claim failed "due to a lack of clear allegations of falsity."51 The court also found that the plaintiff's claims failed to establish scienter due mainly to improper "group pleading"—grouping allegations against all individual defendants together "without particularized facts alleged as to each [d]efendant."52 The court concluded that the plaintiff "ma[d]e little to no distinction among the actions taken and the intentions held by the five Individual Defendants with respect to [their alleged malfeasance]."53
Unsuccessful Motions to Dismiss
Courts denied motions to dismiss securities lawsuits involving Alta Mesa Resources, Inc. ("Alta Mesa"), QuantumScape Corporation ("QuantumScape"), and Exela.
In the suit involving Alta Mesa, plaintiffs alleged that the post-de-SPAC company, its management and board of directors, two executives from the SPAC, the SPAC sponsor and three associated entities,54 failed to disclose serious defects concerning Alta Mesa's resources, resulting in an 80 percent devaluation of the company within a little over a year of the de-SPAC transaction.55 Defendants filed several motions to dismiss, alleging the plaintiffs failed to adequately plead scienter and claiming various alleged misstatements amounted to non-actionable puffery.56 The court rejected defendants' motions to dismiss in full, concluding Alta Mesa's substantial write-down of the value of its assets within a little over a year of the de-SPAC was "enough" for the case to proceed.57 The court relied on similar reasoning in concluding the plaintiffs pleaded "facts sufficient to show" that defendants acted with scienter by signing a securities filing listing Alta Mesa's value before its 80 percent devaluation.58
In the action concerning QuantumScape, plaintiffs based their pleading on a short seller report by Scorpion Capital and a Seeking Alpha article alleging the company failed to disclose material adverse facts regarding its technology and future business prospects.59 The plaintiffs advanced claims under Sections 10(b) and 20(a) of the Exchange Act against QuantumScape and its senior management.60 Defendants contended that the Scorpion Capital report and Seeking Alpha article were unreliable sources, and that the plaintiffs challenged non-actionable statements.61 Defendants also argued that the plaintiffs failed to allege a strong inference of scienter,62 relying instead upon incredible statements by anonymous employees.63 The court rejected these arguments, relying mainly upon its conclusion that the Scorpion Capital report and Seeking Alpha article bore sufficient indicia of reliability to warrant acceptance at the pleading stage.64 The court dismissed a single forward-looking alleged misstatement involving puffery, but otherwise rejected defendants' motion with respect to the remaining 26 alleged misstatements.65
In Exela, plaintiffs' amended complaint contained new allegations of scienter and that defendants misled investors regarding the predictability of the company's revenue.66 Defendants filed a second motion to dismiss contending that plaintiffs failed to allege an actionable misstatement or a strong inference of scienter.67 In particular, defendants reiterated their argument that Exela disclosed the risks that plaintiffs alleged defendants fraudulently concealed and that plaintiffs failed to plead a strong inference of scienter by intimating that defendants could have disclosed more information.68 The court denied defendants' motion to dismiss, concluding that plaintiffs had pleaded a plausible misrepresentation claim based on Exela's disclosures concerning the predictability of its revenue stream.69 The court declined to address whether plaintiffs had "rectified the deficiencies in their other theories" identified in the court's prior decision, concluding that plaintiffs' pleading of a single viable claim warranted denial of defendants' motion to dismiss.70
Conclusion
The increased focus on SPACs by the government and private securities plaintiffs shows no sign of abating in 2022. We expect continued government scrutiny of, and enforcement actions directed at, SPAC-related transactions. In December 2021, SEC Chairman Gary Gensler previewed such action, stating that he asked the SEC staff for proposals for the SEC's consideration around how to better align the legal treatment of SPACs and their participants with the investor protections provided in IPOs with respect to disclosure, marketing practices, and gatekeeper obligations.71We also expect that in egregious circumstances the DOJ will pursue criminal charges against executives at post-de-SPAC companies and even potentially against executives of SPAC sponsors. Finally, we expect plaintiffs to continue to file opportunistic securities actions against SPAC Transaction Parties and officers and directors,72 particularly against those targeted by short seller reports or the financial media, or who announce surprise negative business or financial results soon after closing their de-SPAC transactions.
1 Tami Stark, Douglas R. Jensen and Era Anagnosti, How SPACs Can Manage the Risks of White Collar Scrutiny, WHITE & CASE LLP (Mar. 23, 2021).
2 US SPACs Data Hub, WHITE & CASE LLP (2022) (data from Refinitiv, an LSEG business).
3 Id.
4 Yelena Dunaevsky & Teresa Milano, SPAC Litigation Outlook: 2021 Trends Lead to 2022 Predictions, WOODRUFF SAWYER (Jan. 20, 2022); Kevin LaCroix, The Top Ten D&O Stories of 2021, THE D&O DIARY (Jan. 3, 2022).
5 See, e.g., Am. Compl., Borteanu v. Nikola Corporation et al., No. 2:20-cv-01797 (D. Ariz. Jan. 24, 2022), ECF No. 95; Am. Consolidated Class Action Compl. For Violations of the Federal Securities Laws at 9-10, In Re XL Fleet Corp. Securities Litigation, No. 1:21-cv-02002-LGS (S.D.N.Y. Jul. 20, 2021), ECF No. 72; First Am. Complaint For Violation Of The Federal Securities Laws, Timothy Bond, et al. v. Clover Health Investments, Corp., et al., No. 3:21-cv-00096 (M.D. Tenn. Jun. 28, 2021), ECF No. 70; Am. Class Action Compl. For Violations of the Federal Securities Laws, Jesus Mendoza v. HF Foods Grp. Inc., et al., No. 2:20-cv-02929-ODW-JPR (C.D. Cal. Dec. 4, 2020), ECF No. 47.
6 Respondents neither admitted nor denied the findings in the SEC Order. In re Momentus, Inc., Stable Road Acquisition Corp., SRC-NI Holdings, LLC, and Brian Kabot, Exchange Act. Rel. No. 92391, at 2, 12 (July 13, 2021).
7 Id. at 2.
8 Id. at 9-10.
9 Id. at 12. The Order found violations of Sections 17(a)(2) and (3) of the Securities Act; Section 14(a) of the Exchange Act and Rule 14a-9 thereunder; Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder.
10 Id. at 6.
11 Id.
12 Id. at 3, 12. Section 14(a) of the Exchange Act and Rule 14a-9 thereunder prohibit material misrepresentations or material omissions in proxy materials sent to stockholders of registered securities.
13 See id. at 12.
14 SEC v. Kokorich, No. 1:21-cv-01869 (D.D.C. July 13, 2021). On September 27, 2021, Kokorich filed a motion to dismiss the Complaint (ECF No. 8). Shortly thereafter, on October 25, 2021, the SEC submitted a Memorandum in Opposition to the motion to dismiss (ECF No. 11). On November 11, 2021, Kokorich submitted a Reply to this Memorandum (ECF. No. 13). The court has not yet issued a decision on the motion.
15 Momentus, Inc., Rel. No. 92391 at 16-17.
16 Id. at 13, 15-16.
17 US v. Milton, 21-cr-00478 (S.D.N.Y. July 28, 2021), ECF No. 1.
18 Id. ¶ 22.
19 Id. ¶ 2.
20 Id., ECF No. 11.
21 Id., ECF No. 32.
22 US v. Milton, No. 21-02937 (2d Cir. Nov. 30, 2021).
23 Milton, 21-cr-00478, ECF No. 38 (Motion to Dismiss Counts One and Two of the Indictment for Lack of Fair Notice); ECF No. 41 (Motion to Dismiss Counts One and Two of the Indictment for Failure to Allege the Requisite Connection with a Security); ECF No. 43 (Motion to Dismiss Counts Two and Three of the Indictment for Failure to Sufficiently Allege that the Object of Defendants Alleged Scheme was Money or Property); ECF No. 45 (Motion to Dismiss the Indictment for Failure to Sufficiently Allege Materiality); ECF No. 48 (Motion to Dismiss Charges of Scheme Liability Under Count One of the Indictment); ECF No. 50 (Motion to Dismiss Count Two of the Indictment for Vagueness).
24 Id., ECF No. 71.
25 Id., ECF No. 74, 75, 77.
26 SEC v. Trevor Milton, No. 1:21-cv-6445 (S.D.N.Y. July 29, 2021).
27 Id., ECF No. 13.
28 Id., ECF No. 21.
29 Rule 13a-15(a) of the Exchange Act requires issuers to maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. The controls and procedures ensure that information is gathered and communicated to the issuer's management in an appropriate manner to allow timely decisions regarding required disclosures. See 17 CFR §240.13a-15 (2007).
30 In re Nikola Corporation, Exchange Act Rel. No. 93838, at 12 (Dec. 21, 2021).
31 Id. at 8.
32 Id. at 2.
33 Id. at 5.
34 While all of these suits targeted post-de-SPAC companies, several of them also targeted SPAC sponsors and their officers.
35 See Yelena Dunaevsky & Teresa Milano, SPAC Litigation Outlook: 2021 Trends Lead to 2022 Predictions, WOODRUFF SAWYER (Jan. 20, 2022).
36 See, e.g., Am. Class Action Compl. For Violations of the Federal Securities Laws, Jesus Mendoza v. HF Foods Grp. Inc., et al., No. 2:20-cv-02929-ODW-JPR (C.D. Cal. Dec. 4, 2020), ECF No. 47 (drawing on short seller report by Hindenburg Research ("Hindenburg")); Consolidated Class Action Compl. For Violations Of The Federal Securities Laws, In re QuantumScape Securities Class Action Litigation, No. 3:21-cv-00058-WHO (N.D. Cal. Jun. 21, 2021), ECF No. 131 (drawing on short seller report by Scorpion Capital); First Am. Complaint For Violation Of The Federal Securities Laws, Timothy Bond, et al. v. Clover Health Investments, Corp., et al., No. 3:21-cv-00096 (M.D. Tenn. Jun. 28, 2021), ECF No. 70 (drawing on short seller report by Hindenburg); Am. Consolidated Class Action Compl. For Violations of the Federal Securities Laws at 9-10, In Re XL Fleet Corp. Securities Litigation, No. 1:21-cv-02002-LGS (S.D.N.Y. Jul. 20, 2021), ECF No. 72 (drawing on short seller report by Muddy Waters Research); Consolidated Am. Compl. For Violations Of The Federal Securities Laws at 146-54, In re Lordstown Motors Corp. Securities Litigation, No. 4:21-cv-00616-PAG (N.D. Ohio Sept. 10, 2021), ECF No. 61 (drawing on short seller report by Hindenburg).
37 See Lordstown Motors Corp., No. 4:21-cv-00616-PAG, ECF No. 1.
38 See SPAC 2021 Year-End Review and 2022 Preview: Tailwinds, Headwinds, and Regulatory Landscape, JD SUPRA (Jan. 7, 2022).
39 Section 20(a) of the Exchange Act provides that a person who controls another person found liable for a violation of the Exchange Act is jointly and severally liable unless the controlling person acted in good faith and did not directly or indirectly induce the violation. See 15 USC. § 78t(a).
40 See Lead Pls.' Insur Shamgunov and Elena Shamgunova Am. Class Action Comp., Bo Shen v. Exela Techs., Inc., et al., No. 3:20-cv-00691-D (N.D. Tex. Aug. 11, 2020), ECF No. 26.
41 See id.
42 See Bo Shen v. Exela Techs., Inc., No. 3:20-CV-0691-D, 2021 WL 2589584, at *1 (N.D. Tex. June 24, 2021).
43 See Defs.' Mot. to Dismiss at 1, Bo Shen, No. 3:20-cv-00691-D, ECF No. 28.
44 See id. at 15-24.
45 See Bo Shen, 2021 WL 2589584, at *6.
46 See id. at *7-*10, *15, *17, *20-*21.
47 See Defs.' Mot. to Dismiss, Bo Shen No. 3:20-cv-00691-D, ECF No. 49.
48 See Am. Class Action Compl. For Violations of the Federal Securities Laws, Jesus Mendoza v. HF Foods Grp. Inc., et al., No. 2:20-cv-02929-ODW-JPR (C.D. Cal. Dec. 4, 2020), ECF No. 47 (naming HF Foods' CEO, President and COO, Co-CEO, CFO, and Vice President as defendants).
49 Id.
50 See Jesus Mendoza v. HF Foods Grp. Inc., et al., No. 2:20-cv-02929-ODW-JPR, 2021 WL 3772850, at *1 (C.D. Cal. Aug. 25, 2021). The court granted plaintiff leave to amend, but ultimately terminated and deconsolidated the case when plaintiff failed to file a timely amendment. See Judgment by Judge Otis D. Wright, II, No. 2:20-cv-02929-ODW-JPR (C.D. Cal. Sep. 4, 2021), ECF No. 64.
51 See id. at *5.
52 See id. at *8.
53 See id. at *9.
54 These entities consisted of three private equity firms that had ownership interests in the SPAC targets.
55 See Second Corrected Consolidated Am. Compl., In re Alta Mesa Resources, Inc. Securities Litigation, No. 4:19-CV-00957 (S.D. Tex. Apr. 6, 2020), ECF No. 69 (naming as defendants several officers and members of Alta Mesa's board of directors prior to the de-SPAC transaction, several of Alta Mesa's executives and its board of directors following the de-SPAC transaction, and five firms that sponsored the de-SPAC transaction).
56 See Board Defs.' Mot. To Dismiss Pls.' Second Corrected Consolidated Am. Compl. at 6-11, Alta Mesa, No. 4:19-CV-00957, ECF No. 127; Management Defs.' Mot. To Dismiss Pls. Second Corrected Consolidated Am. Compl. at 16-25, Alta Mesa, No. 4:19-CV-00957, ECF No. 125.
57 See Camelot Event Driven Fund v. Alta Mesa Res., Inc., No. 4:19-CV-00957, 2021 WL 1416025, at *1 (S.D. Tex. Apr. 14, 2021) (denying all motions to dismiss).
58 See id. at *12.
59 See Consolidated Class Action Compl. For Violations of the Federal Securities Laws, In re QuantumScape Securities Class Action Litigation, No. 3:21-cv-00058-WHO (N.D. Cal. Jun. 21, 2021), ECF No. 131.
60 See id.
61 See id. at 4-17.
62 See id. at 18-23.
63 See id.
64 See In re QuantumScape Securities Class Action Litigation, No. 3:21-CV-00058-WHO, 2022 WL 137729, at *9 (N.D. Cal. Jan. 14, 2022).
65 See id. at *1, *9.
66 See Lead Pls.' Second Am. Class Action Comp. at 9, 103-109, Bo Shen, No. 3:20-cv-00691-D, ECF No. 44.
67 See Defs.' Mot. to Dismiss, Bo Shen No. 3:20-cv-00691-D, ECF No. 49.
68 See id. at 13-15.
69 See Shen v. Exela Techs., Inc., No. 3:20-CV-0691-D, 2022 WL 198402, at *9 (N.D. Tex. Jan. 21, 2022).
70 See id.
71 See Gary Gensler, SEC Chairman, Remarks Before the Healthy Markets Association Conference (Dec. 9, 2021).
72 We also expect plaintiffs to increase derivative litigation against companies involved in SPAC-related transactions in the aftermath of the Delaware Court of Chancery's decision in In re Multiplan Corp. Stockholders Litigation, C.A. No. 2021-0300-LWW, 2022 Del. Ch. LEXIS 1 (Del. Ch. Jan. 3, 2022).
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