U.S. law firms file suit against blank-check firms

Aug 27 - The legal tussle around the special purpose acquisition companies intensified on Friday as a group of U.S. law firms filed suit last week calling for blank-check firms to be regulated as investment companies.

SPACs are acquisition vehicles that use IPO capital to take a private company public, and can make investments and sell stock with restrictions before such a merger.

Any company that temporarily holds short-term treasuries and qualifying funds for the money market, while seeking a business combination with one or more operating companies is not an investment company under 1940 Act, a group of 49 law firms said in a joint statement on Friday.

The case is being argued by former Securities and Exchange Commissioner John Morley and Yale Law School professor Robert Jackson.

Earlier this month, Bill Ackman'sAckman's blank check firm was sued by an investor who alleged Pershing Square Tontine Holdings LtdTontine Holdings Ltd had improperly invested in securities and that it should be regulated under the Investment Company Act of 1940.

Reuters reported https: www.reuters.com article USA-USA - spacs-lawsuits - exclusive, exclusive-lawyers - behind-ackmans - retreat-may-target-more - spacs-idUSKBN 2 FR 1 U 7 on Thursday that the same lawyers who targeted Ackman could bring up to 50 new suits against other SPACs.

Ackman called https: www.reuters.com last week, calling business ackman-seeks - £600 (Business ) - dispute - damages - harm - 2021 08 - 20 the lawsuit meritless, but conceded that it was unlikely to be resolved soon and could also dissuade potential merger partners. His Pershing Square Tontine HoldingsTontine Holdings is the biggest SPAC ever, raised $4 billion last year.

The billionaire investor said he planned to give Tontine shareholders warrants in a better structured vehicle, which he called a special purpose acquisition rights company.

Activity in the blank check space has recently waned off last year's boom due to heightened scrutiny from the SEC and souring investor sentiment.