Illustration by Laurent Bazart
Startups Markets

Fearing ‘Tsunami’ of Lawsuits, SPAC Insurers Hike Premiums

Photo: Illustration by Laurent Bazart

It’s getting costlier for SPAC backers to buy insurance against future shareholder lawsuits, a fresh sign of soured sentiment toward these once-hot public offerings.

Insurance carriers that write policies to shield company directors and executives against shareholder lawsuits are increasing premiums for those affiliated with special purpose acquisition companies. Some insurers in this market—which  includes Axa XL, Chubb and Japan’s Sompo—are also becoming more selective in underwriting SPACs due to concern about a possible wave of litigation against SPAC sponsors and the companies they have taken public, say lawyers and brokers who work on the transactions.

Last summer, SPACs planning to raise $250 million in their initial public offerings would pay an average of $200,000 to receive $10 million of insurance coverage protecting their directors and executives, estimates Tyler McAllister, a senior vice president for insurance broker Marsh. Now those SPACs are paying $650,000 for half the amount of coverage, he said.

The jump in premiums is putting a strain on SPAC creators, who have to pay these costs out of pocket. The new lawsuits could pressure target companies to rein in their growth projections, which could lead to lower valuations on future SPAC mergers.

Get access to exclusive coverage
Read deeply reported stories from the largest newsroom in tech.
Latest Articles
 
The Briefing Autonomous Vehicles Startups
Way Mo’ Cash for High-Tech Cars
A Waymo minivan arrives to pick up passengers for an autonomous vehicle ride, Wednesday, April 7, 2021, in Mesa, Ariz. Photo: AP
Alphabet’s self-driving car subsidiary Waymo on Wednesday said it raised $2.5 billion from investors, with an asterisk: Alphabet was the lead investor in the round, according to a person familiar with the deal. In Silicon Valley, the lead designation usually belongs to the party that contributed half of the total amount in the round. So either Alphabet CFO Ruth Porat wanted to make sure...
Latest Briefs
 
OnlyFans Seeks Billion-Dollar Valuation
Amazon Blames Social Media Groups For Fake Reviews
Oracle Shares Dip 5% Amid Data Center Buildout Plans
Stay in the know
Receive a summary of the day's top tech news—distilled into one email.
Access on the go
View stories on our mobile app and tune into our weekly podcast.
Join live video Q&A’s
Deep-dive into topics like startups and autonomous vehicles with our top reporters and other executives.
Enjoy a clutter-free experience
Read without any banner ads.
Bird CEO Travis VanderZanden. Photo by Bloomberg.
SPAC Boom Helps Tech Founders Cement Control
When scooter-rental startup Bird goes public later this year, CEO Travis VanderZanden won’t have to worry about the firm’s uncertain prospects emboldening activist shareholders.
Clockwise from top left: Gladly CEO Joseph Ansanelli, The Archivist co-founders Ashley Granada and Joseph Einhorn, Fabric co-founder Ryan Bartley, Smartrr CEO Gabriella Yitzhaek, Shogun CEO Finbarr Taylor, Nacelle CEO Brian Anderson, Fabric CEO Faisal Masud and ReCharge co-founders Oisin O’Connor and Michael Flynn. Photos: the companies.
Startups to Watch Venture Capital Startups
Seven E-Commerce Startups to Watch
As online shopping booms, venture investment in the e-commerce sector has taken off. That has put a spotlight on the small software companies that power online shopping, from enabling product subscriptions to making merchants’ websites run faster.
Gene Farrell, Smartsheet’s chief strategy and product officer. Photo by Bloomberg
The Big Interview Enterprise Amazon
A Former AWS Executive Helps Smartsheet Grow Up
When Gene Farrell left Amazon Web Services four years ago to join a company called Smartsheet, his former employer sued Farrell for violating his noncompete agreement.
Sequoia Capital's offices in Menlo Park, Calif. Photo: Bloomberg
Venture Capital Startups
Is Sand Hill Road Over? No. But Zoom Deals Are Here to Stay
When Andreessen Horowitz finishes construction on its new office in San Francisco’s SoMa neighborhood, its partners shouldn’t expect to find an assigned desk waiting for them.
EzCater CEO Stefania Mallett (l), Kinside CEO Shadiah Sigala (center) and SeatGeek CEO Jack Groetzinger (right). Photos: ezCater, Kinside and SeatGeek
Startups
Three Startups Show How the Pandemic’s Hardest Hit Are Rebounding
Kinside CEO Shadiah Sigala remembers the moment in November when she knew her startup, which helps parents find day care openings, wasn’t just recovering after a tough half year—it was about to take off.
Art: Mike Sullivan
Exclusive Google AI
Google’s Next AI Move: Teaching Foreign Languages
Google CEO Sundar Pichai last month previewed an artificial intelligence model that he said would enable people to have open-ended conversations with technology.