In a recent decision, the U.S. Court of Appeals for the Ninth Circuit has ruled that investors cannot initiate legal action over alleged misstatements made by an acquired company before a merger. This aligns with a similar stance taken by another federal appeals court. The case in question involved electric car manufacturer Lucid Motors and its projections for automobile production ahead of its 2021 acquisition by Churchill Capital Corporation IV (CCIV), a special purpose acquisition company (SPAC).
The court’s decision dismissed a class action suit alleging that Lucid Motors and its CEO misled investors in violation of securities law. At the time of Lucid’s alleged misrepresentations, CCIV and Lucid were entirely separate companies, making it impossible to impute Lucid’s statements to CCIV. The Ninth Circuit emphasized that “Lucid’s alleged misrepresentations made about itself cannot be imputed to another company that later acquired it.”
This ruling adds to a burgeoning consensus among federal appeals courts, shaping the legal landscape for SPAC transactions and investor litigation.