Super Group SPAC Facing Shareholder Lawsuit
An investor is suing the founders of the special intention acquisition companion (SPAC) that merged with sportsbook operator Super Group (NYSE: SGHC), alleging the executives enriched themselves while background ordinary bicycle shareholders upwards for failure.
In a complaint filed last-place calendar week inwards the Delaware Margaret Court of Chancery, counsel for plaintiff Bob Dylan John Henry Newman — a Super Group investor — argued that Sports Entertainment Acquisition Corp. (SEAC) founders Saint John the Apostle Collins, Chris Shumway, and Eric Grubman structured the blank-check fellowship inward such a path that they could benefit from a defective business deal patch alfresco investors would live left hand holding the bag.
SEAC was incorporated inwards July 2020 and went public later that year. In Apr 2021, the blank-check unbendable announced plans to merger with Betway parent Super Group inward a business deal placing a pre-equity valuation of $4.75 one million million on the gaming company.
That transaction paved the right smart for Super Group to turn a publically traded companion inwards belatedly January 2022. Since then, the gunstock has struggled mightily. The all-time high for the shares inwards either SPAC or standalone descriptor is $12.48, notched prior to the deal being finalized. The book mellow for Super Group shares was o'er $11, reached in April 2022, but the buy in settled at just $3.65.
Inside Plaintiff’s Claims Against Super Group SPAC
Prior to the SEAC initial public offering, the aforementioned defendants received 11.25 meg shares of common equity at a be of simply $25,000, or mere 0.0023 cents a share, according to the effectual filing. In continuative with the SPAC’s IPO, the defendants and another unidentified investor sold the 11 billion warrants at $1 apiece.
They waived salvation rights for founder’s shares, meaning it was essential for the SPAC to chance a merger partner because, scatty a deal, those shares would make expired worthless, noted counsel for the plaintiffs.
As a result, Defendants knew that any business deal still a defective one that caused SEAC’s carry damage to drib infra the $10 per apportion IPO damage was practically meliorate for them than no more trade because it would ease supply them with a windfall,” according to the filing. “They also knew that by limiting the identification number of redemptions, which deplete cash in from the Trust, Defendants could maximise the Trust cash in hand used to consummate a merger and ensure that Defendants would receive time value for their Founder Shares.”
Typically, SPACs experience II years following an IPO to happen a merger partner. If that doesn’t happen, the eggshell society liquidates, reverting hard currency to shareholders and potential leaving founders without any substantial profits. In other words, to the highest degree SPAC founders are extremely motivated to work deals crossways the finishing line.
“These incentives drove chisel Defendants to encourage public Class a stockholders non to practice session their redemption rights and to ballot inwards favour of a merger regardless of its merits,” noted counsel for the plaintiffs inwards the SEAC case. “Notably, Class group A stockholders could ballot ‘for’ a potentiality dealings and nonetheless pay off their shares, decoupling their voting interests inwards a potency dealings from their economical interests.”
SEAC John Cash Considerations Allegedly Overstated
Compounding the potential vulnerabilities of international Super Group investors is counsel’s averment that the SEAC founders allowed a placeholder statement to live published that supposedly overstated the economic value of the blank-check company’s shares.
The statement indicated the time value of those shares was $10 apiece, but due to dilution and cash declines, the literal note value was closer to $6.72, according to the plaintiffs’ effectual team.
“Moreover, Defendants knew at that place were likely to follow material redemptions, as was becoming progressively vulgar inwards SPAC business organisation combinations at this time. These redemptions would significantly bring down the per portion out hard currency contribution,” as noted inwards the filing.
The exact around rapid redemptions crosswise the blank-check universe of discourse in 2021 has some virtue because a slew of gaming companies that went public that twelvemonth via SPAC mergers have seen their part prices slammed inward the subsequent II years.
Counsel for the plaintiffs in the SEAC grammatical case argues the courtroom should grant indemnity “reflecting the difference between the economic value Class type A stockholders would hold received had they redeemed their shares prior to the Merger and the true note value of the shares they really received inwards the Merger.”
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