It should come as no surprise that the majority of lawsuits involving SPACs stem from IPO registration statements. Omissions, misstatements, allegations against the management team aren't exactly new for SPACs. In fact, they are fairly common.
Though in all fairness, SPAC IPOs tend to face less litigation as compared to traditional IPOs, though there are numerous legal concerns for SPACs, and it isn't just a minor stumbling block.
It is essential for SPACs to ensure that directors and their officers are protected from all allegations that may arise post IPO. Plus, the coverage should be able to date back to the representations during the initial process of taking the entity public.
Here extended reporting coverage or ERC is very helpful for SPACs since it provides coverage for all the reported or made claims after the policy has expired.
We have borne witness to hundreds of federal securities class action lawsuits in recent years. The market capitalization losses amounted to over a trillion dollars in 2018 under the barrage of cases.