Delaware Court Holds de-SPAC Transaction Subject to Entire Fairness
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Key takeaways:
- The Delaware Court of Chancery held fiduciary duty claims against the sponsor and directors of a SPAC were subject to entire fairness review, on the grounds that their interests in connection with a “de-SPAC” transaction were adverse to those of the public stockholders.
- The fiduciary duty claims related primarily to the disclosure given to the public stockholders in connection with their redemption rights, which omitted allegedly known facts that led to the SPAC’s share price falling significantly below the redemption price soon after the merger closing.
- There are steps sponsors and directors of SPACs may take to limit the risk of entire fairness review of a de-SPAC transaction, although at the cost of limiting the sponsor’s control over that transaction.