A court ruling Wednesday bolstered research that argues the true worth of blank-check company mergers is often far below the typical $10-a-share valuation.
The Delaware Chancery Court ruling found that the GigCapital3 must face claims that public shareholders were denied crucial information, including how much money shares were worth in the purchase of electric vehicle manufacturer lightning emotors, Bloomberg Law reports.
The GigCapital3 SPAC shareholders couldn't make an informed decision on whether to cash out shares or participate in its purchase of Lightning eMotors, court Vice Chancellor Lori Will ruled.
The ruling adds to legal problems facing SPACs and their sponsors, who earn huge payouts when blank-check companies complete mergers.
In the Gig3 case, the sponsor's initial $25,000 investment had an implied market value at the time of the merger worth $39 million—a 155,900% return, Klausner argued. Sponsors only earn those returns when a deal is completed. Read more.
Source: Lawsuit Testing Value of SPACs Survives Motion to Dismiss