In a recent opinion addressing the enforcement of trading restrictions (“lock-ups”) that are commonly agreed in connection with a business combination transaction between a special purpose acquisition company (“SPAC”) and a target company (“de-SPAC transaction”), the Delaware Court of Chancery determined that the restrictions at issue did not apply to certain shares held by the target company’s former Chief Executive Officer because he did not actually hold SPAC shares immediately after the consummation of the transaction.  The decision illustrates that common formulations of lock-ups may give rise to unintended consequences which allow relevant major parties, insiders or management to trade during the intended lock-up period.  Given frequent share price volatility both pre- and post-combination, lock-ups are a critical element of de-SPAC transactions and the agreements creating them must be drafted carefully.

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