SPACs and Delaware Fiduciary Duties
Special purpose acquisition companies, or SPACs, are popular new tools for raising capital that have garnered significant attention and momentum over the past year. In 2020, 248 SPAC initial public offerings raised over $83 billion in capital—more than quadrupling the number of such offerings from the previous year and eclipsing the amount of capital they raised in 2019 by $69 billion. The amount and value of such offerings is set to grow exponentially again in 2021; as of April 1, 2021, 298 SPAC initial public offerings raised over $97 billion and an additional 247 SPACs filed for an IPO that had yet to close.
There have been few fully litigated cases relating to SPACs. Although many of the cases that have been filed have focused on federal securities law, the nature of SPACs and so-called de-SPACing transactions also potentially implicate a host of state law issues, particularly in connection with the fiduciary duties of directors. This article addresses several issues under Delaware law and how the unique features of SPACs may have an impact on the applicability of those rules.