Another day, another SPAC company in legal crosshairs. This time it’s Wheels Up Experience Inc., the private aviation firm that promised high-flying returns and is now under investigation by Robbins LLP for possible securities law violations. The San Diego-based shareholder rights law firm announced the probe Monday.
It is looking into whether Wheels Up and certain officers issued misleading statements to the market. The company, which trades on the New York Stock Exchange under the ticker UP, has struggled since going public via a merger with a special purpose acquisition company in 2021.
Wheels Up operates a membership-based fleet of aircraft. It sells on-demand private jet travel to wealthy individuals and corporate clients. That business model, once a darling of the SPAC boom, has faced serious turbulence.
Since the merger, the stock has cratered. The company has burned through cash.
Layoffs have hit. And now this investigation. Robbins LLP did not specify the exact nature of the alleged violations.
But these probes follow a pattern: a company says something rosy, the stock rises, bad news emerges, the stock falls, and investors sue, claiming they were misled. The firm is urging shareholders who bought Wheels Up securities and suffered losses to come forward. No formal allegations have been filed yet.
The investigation is early. Many such probes close quietly after the company shows its disclosures were accurate.
But the fact that a law firm is spending resources on this suggests they see enough smoke to warrant a look. Wheels Up is not alone. The SPAC wave of 2020 and 2021 produced dozens of companies that went public with splashy promises and little revenue.
Many have since collapsed or are under fire. Electric vehicle makers, space tourism firms, digital health startups — the list is long.
Regulators have taken notice. The Securities and Exchange Commission has tightened rules around SPAC disclosures. Investor lawsuits have piled up.
Private aviation is a tough business. It is capital-intensive. Margins are thin.
Customer loyalty is fickle. Wheels Up tried to scale fast by acquiring smaller operators and building a high-end brand.
It worked for a while. Then the pandemic travel boom faded, fuel costs rose, and the economy got shaky. The company has made moves to stabilize.
It brought in a new CEO. It cut costs.
It restructured debt. But the stock has not recovered. For investors who bought in at the SPAC merger price, losses are steep.
Robbins LLP is asking those investors to contact them. The firm handles shareholder class actions. It has taken on similar cases against other post-SPAC companies.
The outcome here is uncertain. Litigation is expensive and slow.
Many cases settle. Some are dismissed. What is clear is that the SPAC experiment has left a trail of broken promises and angry investors.
Wheels Up is just the latest name on that list. Whether the company misled anyone or simply failed to execute is what the investigation will try to determine.
For now, shareholders are left waiting. They can talk to a lawyer or a financial advisor. Or they can watch the stock and hope the company turns around.
Neither option is easy.
