Dune Acquisition Corporation (DUNE) Files Lawsuit Against Its Target, TradeZero
by Nicholas Alan Clayton on 2022-04-18 at 9:53am

Dune (NASDAQ:DUNE) announced this morning that it has filed a lawsuit in Delaware court alleging that its combination target TradeZero “fraudulently induced” it into entering the merger and has “materially breached” that agreement, causing “irreparable injury” to Dune. But, in a twist, it is also continuing to work to close the deal and intends to call a special meeting to vote on the transaction soon.

Several things are unusual about this situation starting with the fact that SPACs have been the target of litigation themselves, but rarely are they the plaintiffs of such suits. The act of a SPAC suing its target for fraud but still trying to complete the deal also appears at odds with itself. The suit asserts it is necessary to protect Dune and its investors, but if TradeZero misled it into a bad deal, then wouldn’t the best thing for investors be to terminate the deal rather than force it through?

A quick review of the conditions to termination filed in the Super 8-K shows Dune can terminate this combination if, among other things, “… by Dune if TradeZero’s audited combined financial statements materially deviate from its unaudited financial statements.”  And while most of the public information on this suit has been heavily redacted and we don’t have access to the financials, “duping Dune” into this transaction with misleading financial information is at the heart of the allegations of this lawsuit.  If the current allegations are true, it does seem like Dune would have cause to terminate.

Additionally, Dune and TradeZero have an outside date of July 12, 2022, which is just slightly longer than their current completion deadline of June 22, 2022.  Which means they can’t just run out the clock to terminate without having to extend their deadline in order to find a new target.  Plus, any extension would require a shareholder vote, which, unfortunately in today’s climate, would require an additional contribution of funds to trust.  That can get expensive if a team needs a lot of additional time.

The choices are therefore threefold:

  1. Terminate the combination, extend and find a new target company
  2. Terminate the combination and liquidate the trust
  3. Put this to a shareholder vote and close or liquidate (if there’s a majority “no vote”)

But, in a liquidation, investor capital would be returned with interest and is therefore already protected in this case, and it would certainly appear to be better protected than if this deal were to close and be turned into shares of a company the SPAC now finds untrustworthy.

In the meantime, the slow tempo of the US legal process makes it likely that this litigation will be hanging over the deal though the vote unless it is summarily dismissed. And, that same speed may mean that investors and the public may not be privy to many details of the complaint until the deal is already done.

All told, this is a very unusual situation and if this deal does actually go to a vote, shareholders should be given all of the facts, no matter how ugly.

 

Recent Posts
by Nicholas Alan Clayton on 2025-05-20 at 10:59am

SPACInsider contributor Henrique Santa Rosa this week compiled his three favorite potential SPAC targets among potential targets in Brazil. We look at why they are compelling and why each could be a fit for a blank-check merger. Brazil is both South America’s largest economy and most populous, making it a ripe target for SPACs. But,...

by Nicholas Alan Clayton on 2025-05-20 at 8:24am

At the SPAC of Dawn Welsbach Technology Metals (OTC:WTMA) have given some extra reading material for shareholders ahead of its vote to approve its combination with Evolution Metals next month in the form of the duo’s first investor presentation for the deal. The presentation details Evolution’s plan to build up a rare earth processing facility...

by Nicholas Alan Clayton on 2025-05-19 at 8:17am

At the SPAC of Dawn A busy week of Fed speaking engagements is set to follow this week after Moody’s late Friday downgrade of US debt, which has left markets in the red through the weekend. SPACs may dodge some of the early fallout from the from the switch from AAA to AA1, as none...

by Kristi Marvin on 2025-05-17 at 10:02am

Terms Tracker for the Week Ending May 16, 2025 Welcome to our weekly column where we discuss the findings from our IPO terms tracker based on the previous week’s pricings. It was a very, very good week for SPAC IPO trading performances. The average performance for just this week alone clocked in at an average...

by Nicholas Alan Clayton on 2025-05-16 at 8:23am

At the SPAC of Dawn The faucet of new SPACs to market is fully open with two more new SPACs pricing overnight and Churchill X (NASDAQ:CCCXU) already fully over-allotted after its May 14 IPO. Of the two IPOs Wen Acquisition Corp (NASDAQ:WENNU) showed particular speed, having filed its initial S-1 just over two weeks ago...

logo

Copyright © 2025 SPACInsider, Inc. All Rights Reserved