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Ask HN: Sue after poorly managed SPAC?

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Re: Ask HN: Sue after poorly managed SPAC?

#31

Post by logifail »

spac_throwawayy wrote: post #8
nowherebeen wrote: post #6

You selling immediately when they launch would have been the opposite of what they wanted to achieve. Which is lots of buyers pushing the price up. I haven’t seen a single SPAC do well after a week though. They all drop like flies. There’s a reason why they don’t go through IPO.

Right, which means they are incentivized to not give me access to my shares which I’m entitled to. Maybe not in their best interest for me to sell, so maybe fiduciary duty is the wrong thing. Seems like they can’t block me from selling. There must be something illegal with that.

> Seems like they can’t block me from selling

Waaaay back in 2000 I bought shares in lastminute.com which was at the time pretty much at the height of the .com boom.

Great move on my part (not).

There was no way for retail investors to dump their shares quickly IIRC as you needed your paper(!) share certificate in order to be able to sell. Institutional investors were able to dump their holdings quickly, us suckers were stuffed.

"Lastminute became a symbol of the dotcom boom and bust as its shares hit a high of 511p after floating at 380p in March 2000, only to slide as low as 80p a month later"[0]

I have the share certificate kept safe as a reminder not to be so stupid again.

[0] https://www.theguardian.com/business/2014/dec/16/lastminute-...

Re: Ask HN: Sue after poorly managed SPAC?

#32

Post by spac_throwawayy »

wombatpm wrote: post #28

If they will work on contingency, sue them. In the non SPAC world, investors sue all the time when the stock takes a major hit. Here they deprived you of you ability to sell to suckers. If the CEO and others got to sell at opening price - sue them for everything you can think of

Thanks, that’s where I’m leaning. It does seem like some investors were able to sell immediately based on social media posts. The price even had a nice pop after listing. Would’ve been nice to catch some of that before it started a long trend down.

Re: Ask HN: Sue after poorly managed SPAC?

#35

Post by echelon »

dehrmann wrote: post #27
echelon wrote: post #23

Earlier quoted context omitted.

If the company goes bankrupt from the lawsuit, then there's no money left for anyone. Private equity will pick up the husk for pennies on the dollar.

> If the company goes bankrupt from the lawsuit, then there's no money left for anyone. Bankruptcy means there isn't enough money for everyone, not that there's no money.

It goes to the debt holders first. Shareholders get wiped out.

Would plaintiffs in a lawsuit come before debt holders if their claim is based on shares they couldn't exercise?

Re: Ask HN: Sue after poorly managed SPAC?

#36

Post by dehrmann »

spac_throwawayy wrote: post #26
dehrmann wrote: post #24

For comparison, I worked for Spotify and had shares when they direct-listed. First, they transferred shares from their ledger to Computershare (they were fine, but the website felt like it was made 15 years ago). From there, Spotify had an arrangement with Morgan Stanley to transfer the shares to their books. I was able to trade on the first day, but it had to be broker-assisted (they charge $120). Once the shares we…

Thanks for this comparison. This sounds like what I’d expect: possible to sell on the first day though maybe not cheap or easy. We weren’t even told where our shares were until after they started trading. Turns out they were at a sort of holding company and the only thing to do was transfer them out (no way to sell). They were not made eligible for transfer until multiple days after trading started.

And it's not like there was a 180-day lockup.

There's a lot of good advice on here. Personally, I'd continue engaging with the firm interested in a class action, and as someone suggested, find another lawyer for a second opinion.

If nothing comes from this, I'd think of it as the company was desperate, so it was either going to be picked up for cheap by PE or go public via a SPAC and all the shadiness those come with, so this was the expected outcome at this point. Those paper gains would have been hard to realize.

Re: Ask HN: Sue after poorly managed SPAC?

#37

Post by ab_testing »

phphphphp wrote: post #11

SPACs are, in practice, a Hail Mary for companies with little hope of ever going public the traditional way because they’re just not that attractive to real investors. Therefore, if a company goes public via a SPAC, you should assume they’re in a very weak position. So, while you could conceivably sue (and perhaps get a settlement out of them) it’s going to be a pretty poor outcome for you even in the best case scena…

Not the original poster. I had no idea that Buzzfeed was even public. But it looks like they are attractively priced now. They have positive earnings compared to a lot of other SPAC's that never hit profitability and have an extremely low PE of 3.3. What gives. Does the market not see any chance to rebound to the IPO price of around ~10.

Re: Ask HN: Sue after poorly managed SPAC?

#38

Post by a-dub »

> I had no lockup but communication from the company and setup were extremely poor so I was not able to sell my stock immediately.

yikes. this is not a good look. maybe it will turn out that you actually dodged a bullet here.

Re: Ask HN: Sue after poorly managed SPAC?

#39

Post by dehrmann »

echelon wrote: post #35
dehrmann wrote: post #27

Earlier quoted context omitted.

> If the company goes bankrupt from the lawsuit, then there's no money left for anyone. Bankruptcy means there isn't enough money for everyone, not that there's no money.

It goes to the debt holders first. Shareholders get wiped out. Would plaintiffs in a lawsuit come before debt holders if their claim is based on shares they couldn't exercise?

Assuming they won the lawsuit, the plaintiffs are creditors. IANAL, but the fact that the lawsuit was over the liquidity of shares shouldn't be relevant if damages were awarded.

https://www.investopedia.com/ask/answers/09/corporate-liquid...

> Should the debtor have a pending lawsuit against them, the victim is often positioned as a preferential creditor pending the outcoming of court proceedings.

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