Biote has settled a contentious lawsuit with Marci Donovitz, the ex-wife of its founder, over allegations related to its 2022 merger with SPAC Haymaker Acquisition Corp. III. The lawsuit, filed in Delaware’s Court of Chancery, accused Biote executives of irresponsibly agreeing to the merger terms, which allegedly provided minimal cash infusion. According to the suit, Donovitz was misled into waiving a minimum cash closing condition just before the merger, which ultimately led to her seeking legal recourse.
Under the terms of the settlement, Biote will repurchase all 8.3 million of Marci Donovitz’s shares at $7.23 each, amounting to a $60 million settlement that will be paid out over the next three years. This resolution stems from disputes arising since the merger, where founder Gary Donovitz also contested the transaction, describing it as a scheme that diluted his shares.
Haymaker Acquisition Corp. III had raised over $315 million through its initial public offering specifically to fund the merger with Biote, which subsequently went public on NASDAQ at $7.41 per share. However, contentious legal battles followed, alleging mismanagement and enrichment of company insiders at the expense of shareholders.
Marci Donovitz’s lawsuit highlighted that significant redemptions by SPAC investors severely depleted the cash reserves intended for Biote, a fact allegedly known to the defendants well in advance of the merger. Despite this, the transaction proceeded, leading to allegations of self-enrichment and mismanagement.
SPACs, once popular for their speed in taking companies public compared to traditional IPOs, have faced increased scrutiny from regulatory bodies like the SEC. This scrutiny includes tighter regulations aimed at improving transparency and investor protections amidst concerns over speculative and potentially misleading practices.
The settlement with Marci Donovitz represents a significant financial agreement but also underscores ongoing challenges and regulatory changes facing SPACs in the current financial landscape.
