In recent years, the listing has shone brilliantly in the international capital market, and has been widely joined and supported by hedge fund tycoons to business stars. Today we will use the detailed SPAC transaction process and some cases to talk about what is SPAC.

SPAC (Special Purpose Acquisition Company) is an innovative financing method for backdoor listing. The entire transaction process is shown below:

For example:

On March 28th, 2014, under the guidance of Wenyin International, SPAC company Sino Mercury Acquisition Corp (hereinafter referred to as SMAC) was registered and established.

On September 2, 2014, SMAC listed IPO on the Nasdaq motherboard under the ticker symbol SMAC.US, selling a total of 4 million UNIT. Each UNIT includes a common stock (Common), a warrant (Warrant), and an authorized share (Right). Each unit was sold at a selling price of $8, and at the end of September, 4 million UNIT were sold out.

On April 27th, SMAC announced that it was working with Wins Finance Group Ltd. ($prudent Financial (WINS.US) $) reached a final merger agreement, after the completion of the merger, the new company will be listed on the NASDAQ capital market under the stock code: WINS.

The first stage: establishment and listing of SPAC Company(pre-announcement stage)

For investors, there are three stages of buying throughout the life cycle of SPAC

In the first stage, we need to focus on:

Initiator

SPAC sponsors are usually investment banks, fund companies and other professional institutions, they have a wealth of experience in the field of PE and mergers and acquisitions. For example, in 2020, through the merger of Chinese companies listed in the United States through SPAC business: Wachovia English, the investment fund IBIS Capital as the sponsor set up SPAC and carried out IPO.

There is also the largest SPAC case in history-Pershing Square, INC. Tontine Holdings, whose sponsor is the company set up by William Albert Ackman, a famous team of investors in the United States, whose team has well-known investors with rich investment experience and has become a very cash-absorbing sponsor.

Shares + warrants

SPAC issues shares to public investors in the form of an investment unit (Unit). There are generally 1 common share + 1 Warrant or 3 Warrant shares in a Unit. The Warrant here usually means that you can subscribe for a common share at a price of $11.50 before some time in the future.

Warrant can be simply understood as a call option with an exercise price of $11.50 and a long expiration date.

The time limit for the exercise of warrants begins 30 days after the completion of the SPAC M & A transaction or the later date in the 12 months after the listing of SPAC.Finally, 5 years after the completion of the SPAC M & A transaction, but the exercise can be terminated ahead of time when shareholders choose to redeem or SPAC liquidation. SPAC shares exceed a certain amount (usually $18) for a certain period of time and can be forcibly redeemed by SPAC.

Warrants are standard in SPAC transactions, but the forms and requirements of warrants in different SPAC are also different. For example, the warrants issued by Ucommune Group Holdings Limited in SPAC IPO belong to "Attached stock right"(right), the performance of its interests is as follows: (1) an right may acquire 1 to 10 common shares after the completion of the business merger; (2) if the SPAC is liquidated and dissolved, the right will expire and has no value; (3) the right holder has no redemption.

While those who completed the listing of SPAC in 2017$Altimar Acquisition Corp (ATAC.US) $The warrants included in the unit raised by the company are:Voting rightThe voting right honors 1/10 of the voting rights of the future merged company. The company publicly raised 4 million unit at a share price of $10 per unit (including 1 common share and 1 vote).

AboutConditions for redemption of warrants、Expiration of warrantsOftimeAnd so on, can be issued at the time of the listing of SPAC--Warrants Agreement (Warrant Agreement)Found it in.

Trust account

What makes SPAC unique is that the funds raised from its IPO need to be deposited in an escrow account, which can not be used for other purposes, but can only be used to pay the cash consideration needed for SPAC mergers and acquisitions in the future, as well as the company's working capital after the completion of SPAC mergers and acquisitions.

Under normal circumstances, if SPAC does not complete the SPAC M & A transaction within 24 months after listing, the funds in the escrow account will be returned to SPAC shareholders with interest. If the investor is dissatisfied with the investment target, the principal can also be redeemed at the original price.

For public investors, the share prices of stocks bought in the first stage can also largely reflect the value of cash placed in trust accounts.The funds in the trust account are generally used to:

1. Buy short-term low-risk investments. Usually before De-SPAC, it will be used to buy short-term US Treasuries.

After 2.De-SPAC starts, it will use the money to pay the M & A consideration.

3. After the transaction is completed, it will be used to pay 3.5% of the performance reward.

4. Finally, if the De-SPAC transaction is not successful at maturity, it will be used to redeem common shares.

As of April 19, 2021, the profile of the companies in the first phase of SPAC (part):

The second stage: identify the target company and conduct the business contract.Parallel(after the announcement, merge the front stageSegment)

In the second stage, we need to focus on:

The general meeting of shareholders

After the announcement of the target merger and acquisition company, the general meeting of shareholders is required to vote to approve the business merger agreement. as long as more than 50% of the shareholders cast a unanimous vote, SPAC will complete the merger with the target company, and the enterprise will receive the funds deposited by SPAC investors in the escrow account, and SPAC investors will also receive part of the equity of the merged company in return.

But if more than 50 per cent of shareholders vote against the merger, the merger fails, and of course SAPC's management team can choose to re-look for potential M & A companies within the prescribed period of 18 months.

Shareholders who voted against it have two options: one is to redeem the original unit at the original price, or the other is to follow the deal to complete the merger.

Redemption right of SPAC shareholders

In the second stage, SPAC has announced the target company, and investors buy at this stage, which represents an optimistic view on the ability of the target company and SPAC to complete mergers and acquisitions, but if the SPAC M & A transaction is not attractive in the market, SPAC shareholders have a choice.Redeem its stake in SPACThat is, before the implementation of the business merger, public investors can require SPAC to redeem its subscribed common shares and return the corresponding investment funds (according to the proportion of rights and interests in the escrow account at that time).

And when public investors are optimistic about business mergers, they canExercise warrants after the merger to purchase SPAC common shares at a discounted price.

It should be noted that the voting rights contained in common shares are separated from warrants and redemption rights. Whether SPAC shareholders vote for or against the SPAC M & A transaction at the general meeting (or not), it will not affect their exercise of redemption.

As of April 19, 2021, the profile of the companies in the second phase of SPAC (part):

Let's look at a few specific cases:

Faraday Future (Faraday Future)

On April 6, 2021, Faraday Future (Faraday Future, FF) formally submitted S4 listing documents to the US Securities Regulatory Commission, planning to work with SPAC Property Solutions Acquisition Corp. The merger transaction will be listed on NASDAQ under the stock symbol "FFIE". After the news was announced, SPAC$Property Solutions Acquisition (PSAC.US) $It rose more than 4.5% before trading, with trading volume exceeding US $3.09 million, an increase of nearly eight times over the previous trading day.

$FutureFuel Corp (FF.US) $The company plans to complete its merger and listing with SPAC in May, and the company's chief executive said the combined Faraday would be able to sell 2400 electric vehicles in the future.

Traveloka

On April 9, 2021, according to media quotes, Traveloka, an Indonesian unicorn and online travel service, is having in-depth discussions with Bridgetown on the listing and merger of SPAC.

On the same day$Bridgetown Holdings Ltd (BTWN.US) $Shares rose, closing up 13.18% at $12.11. It is reported that the transaction values Traveloka at about $5 billion. If the listing is successful, Southeast Asia will usher in a new Internet listed giant.

Grab

According to market news on March 12, Grab, a "super application" company in Southeast Asia, plans to work with SPAC$Altimeter Growth Corp (AGC.US) $Reached a cooperation, in the way of backdoor listing on Nasdaq, the news came out, Altimeter Growth Corp closed up more than 22% on the day.

On April 13th, Grab officially announced that it will work with SPAC Altimeter Growth Corp. The merger to make it public values Grab at $39.6 billion. The merger is reported to be the largest blank cheque transaction in history and the largest ever U.S. stock offering by a Southeast Asian company, Altimeter Growth Corp. It closed up more than 9% on the day.

The third stage: the merger is completed, the new company is renamed and officially transferred to the main board of the United States.

After confirming the merger intention and completing the delivery, SPAC will submit the M & A transaction documents and M & A statements signed by both parties to SEC, and the final target company and SPAC will merge and change their names and go public.

For example, IPOA SPAC of Social Capital acquired Virgin Galactic in 2019. On the day of the acquisition, the original stock symbol: "IPOA" stopped trading and was replaced by a new stock symbol: "SPCE".

At this stage, the following documents need to be paid attention to:

Public Information Disclosure-shareholder Voting statement (Proxy Statement)

As mentioned above, the SPAC merger and acquisition transaction must be approved by the general meeting of shareholders. Prior to the shareholders' meeting, SPAC shall send to its shareholdersShareholders' statement of vote (proxy statement)Summarize the relevant information of SPAC M & A transaction in detail. The shareholders' voting prospectus shall contain the following contents:

Public disclosure information document: Super 8murk

Within four working days after the settlement of the SPAC M & A transaction, the listed company is required to file a special document with the U.S. Securities and Exchange Commission (SEC): Super 8Murk to disclose the key data after the merger, most of which has been stated in the above-mentioned shareholder voting prospectus.AndSimulated financial information、Redemption of SPAC shareholdersWill be in thisUpdate in Super 8Murk.

An overview of the companies that have completed business mergers as of April 19, 2021 (part):

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