Hub Security to pay $11 million to settle claims over SPAC listing
The cybersecurity company, whose shares collapsed after its IPO, was accused of misleading investors ahead of its SPAC offering. It did not admit wrongdoing as part of the settlement.
Hub Security has reached a settlement with plaintiffs in a class-action lawsuit filed in New York, agreeing to pay $11 million to investors who purchased the company’s shares between early March 2023 and the end of July that year.
The settlement, signed late last week, follows a sharp collapse in Hub Security’s market value after the company went public on Wall Street through a SPAC merger in early March 2023 at a valuation of $1.3 billion. Plaintiffs alleged that the valuation was artificially inflated through pre-arranged SPAC share orders placed by investment funds prior to the company’s public listing and withdrawn once trading began.
Within months of the listing, Hub Security’s share price fell dramatically, reducing the company’s market capitalization to tens of millions of dollars. Today, the company is valued at approximately $13 million, about 1% of its initial public valuation.
The class-action lawsuit alleged that Hub Security made false and materially misleading statements regarding its business, revenue, customer base, growth prospects, and the circumstances surrounding the SPAC transaction itself.
According to the plaintiffs, these statements caused Hub Security’s shares to trade at artificially inflated prices. In January 2024, Calcalist reported remarks by the company’s former CEO suggesting that Hub Security had gone public without a fully developed product. The company operates in the field of hardware-based cybersecurity.
As part of the settlement, Hub Security did not admit to any wrongdoing. In a statement, the company said it agreed to the settlement to avoid the costs and uncertainty of prolonged litigation. The $11 million compensation will be paid by the company’s insurance providers.
In parallel, Hub Security continues to face legal exposure in Israel. Before its Wall Street listing, the company’s shares were traded on the Israeli capital market, and a separate class-action lawsuit seeking NIS 91 million has been filed against it in the Finance Division of the Tel Aviv District Court. That case, submitted in March 2023, is still awaiting a court decision on whether it will be certified as a class action.
