A Delaware vice chancellor has delayed the approval of a $29.75 million settlement in a stockholder suit involving Latch Inc.’s SPAC-led public offering, citing concerns over the definition of the investor class. Vice Chancellor Lori W. Will postponed final approval of the settlement for investors who purchased shares in the June 2021 merger with TS Innovation Acquisitions Corp., a Special Purpose Acquisition Company (SPAC) led by Tishman Speyer, after their stock value sharply declined.
The proposed settlement follows a lengthy legal battle that stemmed from accusations that TS Innovation and its directors misrepresented critical aspects of Latch’s business, leading to significant financial losses for investors. In December, the settlement terms were disclosed after multiple mediation sessions, with the claimants accusing the SPAC of prioritizing its own interests over those of shareholders.
The key issue before the court is whether successor shareholders, those who purchased stock after the initial merger, should be included in the class eligible for compensation. Vice Chancellor Will stated that she believes the settlement is a “fairly strong result” compared to other similar “de-SPAC” cases but emphasized the need for clarification regarding the class definition.
“The question I have with the class definition is whether it should include successors in interest,” said Vice Chancellor Will. “This case isn’t especially novel—it’s a well-worn theory at this point.”
In her ruling, the vice chancellor also reduced the attorney fee request from $7 million to $5.5 million, noting that the case does not present particularly novel legal issues.
Latch’s stock, which initially debuted at around $11 per share, peaked at $17 before experiencing a dramatic decline. By March 2024, the company’s securities were delisted, with its shares now trading at around 12 cents.
Counsel for the class had initially requested a $7 million fee, which Vice Chancellor Will trimmed to $5.5 million, citing the case’s reliance on a well-established legal theory that has been addressed in several prior SPAC-related litigation cases.
The case, which remains pending, is being closely monitored by legal experts as it could set important precedents for future SPAC-related stockholder lawsuits.
