Corporate Governance Risks and Shareholder Activism in SPAC-Driven Tech Firms: Assessing the Strategic and Financial Implications of Board Entrenchment and Legal Retaliation in Declining SPACs

The SPAC (Special Purpose Acquisition Company) boom of 2020-2021 promised a streamlined path to public markets for tech firms, but the model's structural flaws have since exposed investors to unprecedented governance risks and legal volatility. As SPAC-derived companies struggle with declining valuations and operational underperformance, board entrenchment and retaliatory legal tactics have become central to shareholder activism battles. This article examines how governance failures in SPACs-exemplified by the hypothetical Gorilla Technology conflict between Sigma/Bradbury and its board-highlight systemic vulnerabilities and long-term valuation risks for investors.

The Governance Quagmire in SPACs

SPACs are inherently conflict-ridden vehicles. Sponsors retain founder shares and a "promote" (typically 20% of post-merger equity), creating misaligned incentives with public shareholders. According to a report by Jones Day, Delaware courts have increasingly applied the "entire fairness" standard to SPAC mergers, holding directors accountable for misleading disclosures and conflicts of interest. For instance, in In re MultiPlan Corp. Shareholders Litigation, the court denied a motion to dismiss, finding that proxy materials had concealed material financial risks, leading to a $33.75 million settlement. Such cases underscore how SPAC boards, often financially aligned with sponsors, may prioritize sponsor interests over transparency, eroding investor trust.

The Gorilla Technology scenario mirrors these dynamics. If Sigma/Bradbury's board failed to disclose valuation risks or operational weaknesses during its de-SPAC transaction, shareholders could face similar litigation. As Harvard Law's Corporate Governance Blog notes, SPACs are "battlegrounds for corporate governance," where directors' independence is frequently compromised by sponsor ties. This entrenchment exacerbates risks for investors, particularly in tech firms where valuations hinge on speculative growth narratives.

Shareholder Activism and Legal Retaliation

Shareholder activism has surged in SPACs, both pre- and post-de-SPAC. Activists often target SPAC sponsors' acquisition choices before de-SPAC, leveraging urgency to influence deals. Post-merger, as lockups expire and insider shares flood the market, short-sellers and activist funds exploit volatility. For example, in Delman v. GigAcquisitions3, courts ruled that proxy statements had understated valuation risks, triggering a $9 million settlement. These cases illustrate how governance lapses in SPACs invite litigation, with courts scrutinizing whether directors acted in shareholders' best interests.

In the Gorilla Technology context, if Sigma/Bradbury's board retaliated against shareholder activism by blocking dissenting voices or delaying disclosures, it could face heightened legal exposure. The SEC's aggressive stance under Chair Gary Gensler has further amplified this risk, with regulators pushing for SPACs to meet traditional IPO disclosure standards. This environment pressures boards to prioritize transparency, yet entrenched interests may resist, prolonging conflicts and eroding firm value.

Valuation Risks and Strategic Implications

SPAC-derived tech firms have underperformed compared to traditional IPOs, with many failing to meet growth expectations. A 2026 Diligent report highlights that SPACs face "heightened scrutiny" during high-growth phases, where governance weaknesses can accelerate valuation declines. For example, the "China Water" and "Waitr" cases involved suits over misrepresentations in proxy statements, leading to significant post-merger losses. These outcomes suggest that investors must factor in not just operational risks but also the likelihood of governance-driven litigation.

The Gorilla Technology conflict exemplifies this. If Sigma/Bradbury's board delayed addressing governance concerns or inflated growth projections, the firm's valuation could face downward pressure from both legal settlements and reputational damage. Moreover, as cybercrime costs rise and AI governance frameworks evolve, SPACs lacking robust oversight may struggle to adapt, compounding risks.

Conclusion: Navigating the SPAC Minefield

For investors, the Gorilla Technology case underscores the need for rigorous due diligence on SPAC governance structures. Key considerations include:
1. Board Independence: Prioritize SPACs with independent directors and transparent decision-making processes.
2. Disclosure Quality: Scrutinize proxy statements for material omissions, particularly in valuation and risk disclosures.
3. Litigation History: Monitor legal precedents like MultiPlan and Gig3, which signal courts' willingness to penalize fiduciary breaches.

As SPACs continue to face regulatory and legal headwinds, the path to long-term value creation will require boards to abandon entrenchment and embrace accountability. For investors, the lesson is clear: in the SPAC arena, governance is not just a compliance issue-it is the linchpin of sustainable returns.