This week, another shareholder derivative suit was dismissed based on a forum selection clause contained in the company’s bylaws. In November 2020, a shareholder filed a derivative action alleging that directors and officers of The Gap, Inc., an apparel company, had failed to create meaningful diversity on the Board of Directors on within the company’s leadership roles. The plaintiff also alleged that Gap made false statements about the diversity of the company’s workforce, as well as its efforts to increase diversity among its employees.
United States District Court for the Northern District of California
Post-SPAC Technology Company Hit with Securities Class Action
By Corey I. Rogoff on
Private companies with cutting-edge technology have become particularly attractive targets for special purpose acquisition companies (SPACs). These private companies may choose to go public via SPAC for a number of reasons that include the ability to share projections with investors, better valuation prospects and deal execution certainty. Much like companies that go public by way of a traditional IPO, however, companies that go public via SPAC can also become subject to Section 10(b) securities class actions. The risk for this type of company may be particularly acute given its high growth prospects or the volatility that may accompany its securities. An example of a company that went public via SPAC that was quickly confronted with this type of action is Velodyne.