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They said “no assets”, “no operations” “after the dividend is paid out” in an example aka as FANTASY, not real, made up, fake or false narrative.
The yesterday press release clarified what will remain of ENZC and its future:
ENZC valuation isn't based on the ITV-1 therapeutic only. It is based on the ALL product lines.
The transaction, once completed, will provide BGEN and VIRO with significant additional capital to continue their development and expansion of existing and future technology platforms. In addition, Sagaliam expects to raise additional capital through a private investment in public equities ("PIPE"). The anticipated capital raise from the PIPE is expected to be primarily used by BGEN and VIRO to pay transaction-related expenses and fund the clinical trials of ITV-1, marketing of IPF Immune™, production of fully human monoclonal antibodies (mAbs) and continued advancement in its proprietary technology involving the application of Artificial Intelligence (AI) in therapeutic discoveries and production.
Charles Cotropia, CEO of Enzolytics, stated, "At Biogenysis, we have a pipeline of Monoclonal Antibodies. In addition, we are creating a strong IP portfolio for multiple infectious diseases covering diagnostics, therapeutics, and vaccines for these viruses. Strategically, we are focused on meeting milestones and licensing each of these assets. The SPAC agreement allows us to move forward with multiple Monoclonal Antibodies simultaneously, bringing significant value to our shareholders."
The ITV-1 therapeutic is just the appetizer. The main course is the Monoclonal Antibodies.
We don't know the intricate details about the Business Combination however the ENZC has shared what the could during the course of the negotiations.
We should be getting an update of the Business Combination agreement later this month per press release:
Finally, ENZC has negotiated additional compensation in the form of a monthly management fee to be paid by Sagaliam Acquisition Corp (SAGA) to ENZC over a 30-month period following the close of the purchase of BGEN and VIRO. The funds will be used to facilitate the continued compliance of ENZC's OTC Market filing requirements, administration of the dividend payment of the 45 million SAGA share issuance received as part of the SAGA purchase transaction to the ENZC shareholders and the Company's development of a new business strategy to be implemented after the close of the sale of BGEN and VIRO. ENZC and SAGA have continued the process of documenting the Business Combination agreement and expect to provide further guidance later this month.
How long does a typical SPAC transaction take?
Commencing with the closing of the IPO, a SPAC can hold substantive discussions with a target. If a SPAC needs more time than is set forth in its organizational documents, it can seek a shareholder vote to amend its organizational documents to extend the deadline. With each vote to extend the deadline, the SPAC’s organizational documents typically also provide that the SPAC must offer shareholders the right to redeem their shares for a pro rata portion of the cash held in the trust account. Typically, it takes around 4–5 months from the signing of the definitive documents to closing. From the closing of the SPAC’s IPO to the closing of the business combination, the average time frame is approximately 16 months.
The Press Release has a lot of updates and future projections.
There is still much the company is not sharing in respect to mAbs possibly due to NDAs.
updated the progress being made on the permit application with the European Medicine Agency (EMA) for the patented immunotherapy ITV-1 treatment of HIV/AIDS virus, for use by patients after receiving chemo and radiation treatment to facilitate recovery from the treatments and those with immunodeficiency.
A report has been prepared by the Bulgarian Academy of Science Institute of Organic Chemistry, describing the module 3 clinical trials to be conducted using the Company's ITV-1 therapeutic.
In the second and third quarters of 2023, VIRO will continue meetings with Director Iseness in connection with the launch of pharmacokinetics studies to submit documents and begin the preparation of the investigators' brochure. The studies are being performed on volunteers in anticipation of the start of module 3 clinical trials administering ITV-1 later this year.
VIRO and Dr. Ivanov have completed conversations with R & D Services, LTD, ("RDS") a specialized provider of onsite operational and administrative support of clinical trials at state funded, municipal and private health facilities. RDS is certified under the international standards ISO 14001:2015, ISO 27001:2013 and ISO 14001:2015. RDS has a well-developed patient referral network enabling the inclusion of a maximal number of patients in a minimal amount of time, once the centers are established and the clinical trial is launched. RDS will provide a designated software platform for tracking patients participating in clinical trials.
VIRO has also moved forward preparing preliminary studies from data received and processed from volunteers, who have been taking insulin for years to control their type 2 diabetes, to determine the impact ITV-1 has on the volunteer's blood sugar levels. The initial results have been extremely encouraging and show great promise. Clinical studies for diabetes are expected to begin in October 2023, including documentation, reports, and the selection of a principal investigator
In addition to the EMA, VIRO's African project is progressing in August with the initial administration of ITV-1 to HIV/AIDS infected volunteers at the HEAL Africa Hospitals, GOMA, PRC and Panzi Hospital, Bukavu, DRC under the supervision of Neuro Pharma Ltd - Rwanda.
Finally, ENZC has negotiated additional compensation in the form of a monthly management fee to be paid by Sagaliam Acquisition Corp (SAGA) to ENZC over a 30-month period following the close of the purchase of BGEN and VIRO. The funds will be used to facilitate the continued compliance of ENZC's OTC Market filing requirements, administration of the dividend payment of the 45 million SAGA share issuance received as part of the SAGA purchase transaction to the ENZC shareholders and the Company's development of a new business strategy to be implemented after the close of the sale of BGEN and VIRO. ENZC and SAGA have continued the process of documenting the Business Combination agreement and expect to provide further guidance later this month.
Interesting, Timely and Accurate
Cancer-killing pill that annihilates tumours hailed as 'holy grail' breakthrough
https://www.msn.com/en-us/health/other/cancer-killing-pill-that-annihilates-tumours-hailed-as-holy-grail-breakthrough/ar-AA1eDRLr?ocid=DELLDHP&pc=MDDCJS&cvid=cd56a8d62fb84d8995f5ec62abbfeee1&ei=37
This is the plan:
Enzolytics, Inc. (OTC PINK: ENZC) (“ENZC” or “the “Company”) recently entered into a nonbinding letter of intent with Sagaliam Acquisition Corp. (“NASDAQ: SAGA”) (“SAGA”)(together the “Parties”) to sale its two operating subsidiaries Biogenysis, Inc. (“BGEN”) and Virogentics, Inc. (“VIRO”) in a transaction valued at $450 million. The purchase price includes a make-whole provision to be calculated six months after close of the transaction. ENZC has disclosed its intention to declare a dividend and subject to and upon approval by the regulatory entities the value of the transaction will be paid to ENZC shareholders as of the date of record. The remaining terms and conditions are still being negotiated and are not to a point where any other provisions can be disclosed with certainty. The parent company ENZC and its othersubsidiary RobustoMed, Inc. (“RBMD”) are not part of the transaction.
This is FANTASY until we get the remaining terms and conditions.
The following is presented as an EXAMPLE ONLY and while the terms are similar to the expected terms, the negotiations between the parties may produce significant differences from that presented in this example. The example is presented for illustrative purposes and only as an example of a similar transaction.
After the dividend to Company E shareholders, there would be no assets or operations in
Company E, but management would be able to purchase new operations or develop other
products that would be the assets of Company E. The Company E common shares would
continue to trade on OTC Markets as a new business strategy is implemented.
ENZC was VERY EXPLICIT (stated clearly and in detail, leaving no room for confusion or doubt) in say the example transaction is presented for illustrative purposes and only as an example of a similar transaction.
Nobody knows what will remain of ENZC until after the deal is signed.
Many people have many opinions from the "SKY is FALLING" to "to the MOON".
What is interesting is in Supplemental Information ENZC assets are mentioned while in the EXAMPLE ENZC is left with no assets.
It has caused much debate as to what it all means and people have shared their opinions, frustrations, likes ,dislikes etc.. and has brought colorful posting supporting the different views.
We will find out what it all means when the 8K is released until then like the Beatles said:
Let it be, let it be
Let it be, let it be
Yeah, there will be an answer
Let it be
Let it be, let it be
Let it be, let it be
Whisper words of wisdom
Let it be
It will go with SAGA per press release.
There will be cash involved through the pipe as stated in the press release.
What are key considerations in a SPAC deal?
https://melayan.medium.com/what-are-key-considerations-in-a-spac-deal-987e94d7fe72;
What is a SPAC?
What is a SPAC? A special purpose acquisition company (or blank check company), which is formed for the purpose of acquiring or merging with an operating business by a specific date, typically 24 months after the SPAC’s IPO. SPACs have been in the news lately. According to spacinsider.com, in 2020 there were 248 SPACs that became public, raising over $83 billion in proceeds. By contrast, in 2016, less than $3.5 billion in total SPAC IPO proceeds were raised from 13 SPAC IPOs. Notable companies that have merged with or been acquired by SPACs (and hence are now publicly traded) include DraftKings, Utz Brands, Fisker, and Virgin Galactic, to name a few.
Why do I need to be aware of SPACs?
As of the first quarter of 2021, over 300 SPACs have gone public raising over $90 billion dollars. This is more than all of 2020 (both in terms of number of SPAC IPOs and proceeds raised), which itself was hailed as the year of the SPAC. As of the time of this writing, there are over 430 SPACs actively looking for private company targets. If your company is considering selling itself, it may receive some interest from one or more SPACs. If you are on the hunt for an acquisition target, you may face competition for targets from motivated SPACs, who have strong incentive to get a deal done.
What are some of the key considerations in negotiating a SPAC transaction?
SPACs have been around since the 1990s but, as alluded to above, the number of SPAC megers with private companies (also referred to as a “de-SPAC transaction”) has exploded in the last two years. In addition, SPACs had a reputation for involving unscrupulous financial players. In recent years, however, major institutional investors have formed their own SPACs or otherwise have joined the frenzy. All this is to say that we don’t have a long history of data from which to pull trends, as we may be able to do with traditional private target M&A transactions.
Nonetheless, when negotiating a SPAC transaction, there are some key issues to think through.
Valuation/Earnout
Unlike a traditional underwritten IPO (which may come with pricing and market risks), in a de-SPAC transaction, the valuation of the target company is fixed in the merger agreement. Valuation tools and metrics used in traditional M&A transactions can used in the SPAC context.
To the extent the parties disagree on valuation, they can also rely on familiar tools to bridge the gap, such as an earnout. In 2020, the percentage of deals containing an earnout for the target stockholders was slightly more than half.
While an earnout is a familiar tool in an M&A practitioner’s tool box, in a de-SPAC transaction, the parties have another lever to pull. The parties may also bridge any gap between valuation by negotiating whether or not (and to what extent) the SPAC sponsor’s (also called the “founder”) shares may vest, with shares being forfeited if milestones tied to stock price are not attained.
Of all the de-SPAC transactions that closed in 2020, 59% of them required the sponsor to subject its shares to vesting or forfeiture. Of those deals that imposed vesting requirements, over 80% of deals had vesting periods of 5 years or less, with almost 20% of deals imposing vesting requirements that are tied to stock price. And of those deals that resulted in sponsor forfeiture, almost half required forfeiture of both founder shares and warrants.
Mix of Consideration/Purchase Price Adjustment
In a de-SPAC transaction, the merger consideration will almost always consist of some stock consideration. In 2020, only 2% of closed de-SPAC transactions were cash-only. The number of deals that were stock only vs. a mix of stock and cash were roughly equal. In 2020, of the deals where the merger consideration comprised stock and cash, the percentage of cash, on average, was around 20%.
Perhaps due to the competitive nature of a large number of SPAC seeking targets in 2020, almost three quarters of closed deals had no post-closing purchase price adjustment mechanism and no escrow. Of the minority of deals with an escrow, however, the most common use of the escrow was to secure indemnity obligations, followed by an escrow for purposes of purchase price adjustment.
Indemnification
Given the large number of SPACs competing for deals, it is no surprise that only 30% of closed de-SPAC transactions in 2020 had seller indemnification provisions and only 30% had a termination fee. In 2021, it will not be a surprise if these percentages trend downward.
Cash
In a de-SPAC transaction, each stockholder has the option to redeem its shares at the closing of the business combination for a pro rata portion of the cash held in the trust account. As a result, the amount of cash at the closing will be unknown and, for obvious reasons, target companies are reluctant to close without a condition that the SPAC have a minimum amount of cash available at closing. In 2020, approximately 80% of deals had a closing minimum cash condition.
SPACs typically raise capital through PIPEs to ensure that the minimum cash closing will be satisfied at closing. If PIPE proceeds are not enough to make up the difference, a renegotiation may occur and target companies should be prepared for this possibility. One potential way to minimize the risk is to get commitments from PIPE financiers at the signing of the business combination agreement. In 2020, of the deals that required additional financing, over half were PIPE-only financings.
Post-Closing Board Composition
Most post-closing boards of directors of the combined business entity will be staggered. In 2020, approximately 70% of post-closing boards were staggered, with the average size of the board being around 7 to 9 directors. In just over half of post-closing boards, SPAC sponsors designated one or two directors.
How long does a typical SPAC transaction take?
Commencing with the closing of the IPO, a SPAC can hold substantive discussions with a target. If a SPAC needs more time than is set forth in its organizational documents, it can seek a shareholder vote to amend its organizational documents to extend the deadline. With each vote to extend the deadline, the SPAC’s organizational documents typically also provide that the SPAC must offer shareholders the right to redeem their shares for a pro rata portion of the cash held in the trust account. Typically, it takes around 4–5 months from the signing of the definitive documents to closing. From the closing of the SPAC’s IPO to the closing of the business combination, the average time frame is approximately 16 months.
What considerations should a target company keep in mind if it will go public via a SPAC transaction?
A target company must have two to three years of financial statements, audited in compliance with the rules of the Public Company Accounting Oversight Board (PCAOB). As a result, even if a target company has audited financial statements, additional audit procedures may be required before financial statements are ready to be filed with the SEC. A PCAOB audit will often be a gating items and thus early discussions regarding financial statement and audit readiness will take place.
In addition, a target company should analyze whether it has people, procedures and IT systems required to handle the regular demands (which include speed and accuracy)of public reporting, including necessary internal controls and procedures.
A target company must also ensure it has the necessary corporate governance policies, procedures, and practices that meet public company compliance requirements, including those of the applicable stock exchange.
Target company stockholders should balance the potential upside of continuing to own a significant portion of the operating business against the cost and distraction of operating a public company and the need for immediate liquidity after closing.
What are key considerations in a SPAC deal?
https://melayan.medium.com/what-are-key-considerations-in-a-spac-deal-987e94d7fe72;
What is a SPAC?
What is a SPAC? A special purpose acquisition company (or blank check company), which is formed for the purpose of acquiring or merging with an operating business by a specific date, typically 24 months after the SPAC’s IPO. SPACs have been in the news lately. According to spacinsider.com, in 2020 there were 248 SPACs that became public, raising over $83 billion in proceeds. By contrast, in 2016, less than $3.5 billion in total SPAC IPO proceeds were raised from 13 SPAC IPOs. Notable companies that have merged with or been acquired by SPACs (and hence are now publicly traded) include DraftKings, Utz Brands, Fisker, and Virgin Galactic, to name a few.
Why do I need to be aware of SPACs?
As of the first quarter of 2021, over 300 SPACs have gone public raising over $90 billion dollars. This is more than all of 2020 (both in terms of number of SPAC IPOs and proceeds raised), which itself was hailed as the year of the SPAC. As of the time of this writing, there are over 430 SPACs actively looking for private company targets. If your company is considering selling itself, it may receive some interest from one or more SPACs. If you are on the hunt for an acquisition target, you may face competition for targets from motivated SPACs, who have strong incentive to get a deal done.
What are some of the key considerations in negotiating a SPAC transaction?
SPACs have been around since the 1990s but, as alluded to above, the number of SPAC megers with private companies (also referred to as a “de-SPAC transaction”) has exploded in the last two years. In addition, SPACs had a reputation for involving unscrupulous financial players. In recent years, however, major institutional investors have formed their own SPACs or otherwise have joined the frenzy. All this is to say that we don’t have a long history of data from which to pull trends, as we may be able to do with traditional private target M&A transactions.
Nonetheless, when negotiating a SPAC transaction, there are some key issues to think through.
Valuation/Earnout
Unlike a traditional underwritten IPO (which may come with pricing and market risks), in a de-SPAC transaction, the valuation of the target company is fixed in the merger agreement. Valuation tools and metrics used in traditional M&A transactions can used in the SPAC context.
To the extent the parties disagree on valuation, they can also rely on familiar tools to bridge the gap, such as an earnout. In 2020, the percentage of deals containing an earnout for the target stockholders was slightly more than half.
While an earnout is a familiar tool in an M&A practitioner’s tool box, in a de-SPAC transaction, the parties have another lever to pull. The parties may also bridge any gap between valuation by negotiating whether or not (and to what extent) the SPAC sponsor’s (also called the “founder”) shares may vest, with shares being forfeited if milestones tied to stock price are not attained.
Of all the de-SPAC transactions that closed in 2020, 59% of them required the sponsor to subject its shares to vesting or forfeiture. Of those deals that imposed vesting requirements, over 80% of deals had vesting periods of 5 years or less, with almost 20% of deals imposing vesting requirements that are tied to stock price. And of those deals that resulted in sponsor forfeiture, almost half required forfeiture of both founder shares and warrants.
Mix of Consideration/Purchase Price Adjustment
In a de-SPAC transaction, the merger consideration will almost always consist of some stock consideration. In 2020, only 2% of closed de-SPAC transactions were cash-only. The number of deals that were stock only vs. a mix of stock and cash were roughly equal. In 2020, of the deals where the merger consideration comprised stock and cash, the percentage of cash, on average, was around 20%.
Perhaps due to the competitive nature of a large number of SPAC seeking targets in 2020, almost three quarters of closed deals had no post-closing purchase price adjustment mechanism and no escrow. Of the minority of deals with an escrow, however, the most common use of the escrow was to secure indemnity obligations, followed by an escrow for purposes of purchase price adjustment.
Indemnification
Given the large number of SPACs competing for deals, it is no surprise that only 30% of closed de-SPAC transactions in 2020 had seller indemnification provisions and only 30% had a termination fee. In 2021, it will not be a surprise if these percentages trend downward.
Cash
In a de-SPAC transaction, each stockholder has the option to redeem its shares at the closing of the business combination for a pro rata portion of the cash held in the trust account. As a result, the amount of cash at the closing will be unknown and, for obvious reasons, target companies are reluctant to close without a condition that the SPAC have a minimum amount of cash available at closing. In 2020, approximately 80% of deals had a closing minimum cash condition.
SPACs typically raise capital through PIPEs to ensure that the minimum cash closing will be satisfied at closing. If PIPE proceeds are not enough to make up the difference, a renegotiation may occur and target companies should be prepared for this possibility. One potential way to minimize the risk is to get commitments from PIPE financiers at the signing of the business combination agreement. In 2020, of the deals that required additional financing, over half were PIPE-only financings.
Post-Closing Board Composition
Most post-closing boards of directors of the combined business entity will be staggered. In 2020, approximately 70% of post-closing boards were staggered, with the average size of the board being around 7 to 9 directors. In just over half of post-closing boards, SPAC sponsors designated one or two directors.
How long does a typical SPAC transaction take?
Commencing with the closing of the IPO, a SPAC can hold substantive discussions with a target. If a SPAC needs more time than is set forth in its organizational documents, it can seek a shareholder vote to amend its organizational documents to extend the deadline. With each vote to extend the deadline, the SPAC’s organizational documents typically also provide that the SPAC must offer shareholders the right to redeem their shares for a pro rata portion of the cash held in the trust account. Typically, it takes around 4–5 months from the signing of the definitive documents to closing. From the closing of the SPAC’s IPO to the closing of the business combination, the average time frame is approximately 16 months.
What considerations should a target company keep in mind if it will go public via a SPAC transaction?
A target company must have two to three years of financial statements, audited in compliance with the rules of the Public Company Accounting Oversight Board (PCAOB). As a result, even if a target company has audited financial statements, additional audit procedures may be required before financial statements are ready to be filed with the SEC. A PCAOB audit will often be a gating items and thus early discussions regarding financial statement and audit readiness will take place.
In addition, a target company should analyze whether it has people, procedures and IT systems required to handle the regular demands (which include speed and accuracy)of public reporting, including necessary internal controls and procedures.
A target company must also ensure it has the necessary corporate governance policies, procedures, and practices that meet public company compliance requirements, including those of the applicable stock exchange.
Target company stockholders should balance the potential upside of continuing to own a significant portion of the operating business against the cost and distraction of operating a public company and the need for immediate liquidity after closing.
What are key considerations in a SPAC deal?
https://melayan.medium.com/what-are-key-considerations-in-a-spac-deal-987e94d7fe72;
What is a SPAC?
What is a SPAC? A special purpose acquisition company (or blank check company), which is formed for the purpose of acquiring or merging with an operating business by a specific date, typically 24 months after the SPAC’s IPO. SPACs have been in the news lately. According to spacinsider.com, in 2020 there were 248 SPACs that became public, raising over $83 billion in proceeds. By contrast, in 2016, less than $3.5 billion in total SPAC IPO proceeds were raised from 13 SPAC IPOs. Notable companies that have merged with or been acquired by SPACs (and hence are now publicly traded) include DraftKings, Utz Brands, Fisker, and Virgin Galactic, to name a few.
Why do I need to be aware of SPACs?
As of the first quarter of 2021, over 300 SPACs have gone public raising over $90 billion dollars. This is more than all of 2020 (both in terms of number of SPAC IPOs and proceeds raised), which itself was hailed as the year of the SPAC. As of the time of this writing, there are over 430 SPACs actively looking for private company targets. If your company is considering selling itself, it may receive some interest from one or more SPACs. If you are on the hunt for an acquisition target, you may face competition for targets from motivated SPACs, who have strong incentive to get a deal done.
What are some of the key considerations in negotiating a SPAC transaction?
SPACs have been around since the 1990s but, as alluded to above, the number of SPAC megers with private companies (also referred to as a “de-SPAC transaction”) has exploded in the last two years. In addition, SPACs had a reputation for involving unscrupulous financial players. In recent years, however, major institutional investors have formed their own SPACs or otherwise have joined the frenzy. All this is to say that we don’t have a long history of data from which to pull trends, as we may be able to do with traditional private target M&A transactions.
Nonetheless, when negotiating a SPAC transaction, there are some key issues to think through.
Valuation/Earnout
Unlike a traditional underwritten IPO (which may come with pricing and market risks), in a de-SPAC transaction, the valuation of the target company is fixed in the merger agreement. Valuation tools and metrics used in traditional M&A transactions can used in the SPAC context.
To the extent the parties disagree on valuation, they can also rely on familiar tools to bridge the gap, such as an earnout. In 2020, the percentage of deals containing an earnout for the target stockholders was slightly more than half.
While an earnout is a familiar tool in an M&A practitioner’s tool box, in a de-SPAC transaction, the parties have another lever to pull. The parties may also bridge any gap between valuation by negotiating whether or not (and to what extent) the SPAC sponsor’s (also called the “founder”) shares may vest, with shares being forfeited if milestones tied to stock price are not attained.
Of all the de-SPAC transactions that closed in 2020, 59% of them required the sponsor to subject its shares to vesting or forfeiture. Of those deals that imposed vesting requirements, over 80% of deals had vesting periods of 5 years or less, with almost 20% of deals imposing vesting requirements that are tied to stock price. And of those deals that resulted in sponsor forfeiture, almost half required forfeiture of both founder shares and warrants.
Mix of Consideration/Purchase Price Adjustment
In a de-SPAC transaction, the merger consideration will almost always consist of some stock consideration. In 2020, only 2% of closed de-SPAC transactions were cash-only. The number of deals that were stock only vs. a mix of stock and cash were roughly equal. In 2020, of the deals where the merger consideration comprised stock and cash, the percentage of cash, on average, was around 20%.
Perhaps due to the competitive nature of a large number of SPAC seeking targets in 2020, almost three quarters of closed deals had no post-closing purchase price adjustment mechanism and no escrow. Of the minority of deals with an escrow, however, the most common use of the escrow was to secure indemnity obligations, followed by an escrow for purposes of purchase price adjustment.
Indemnification
Given the large number of SPACs competing for deals, it is no surprise that only 30% of closed de-SPAC transactions in 2020 had seller indemnification provisions and only 30% had a termination fee. In 2021, it will not be a surprise if these percentages trend downward.
Cash
In a de-SPAC transaction, each stockholder has the option to redeem its shares at the closing of the business combination for a pro rata portion of the cash held in the trust account. As a result, the amount of cash at the closing will be unknown and, for obvious reasons, target companies are reluctant to close without a condition that the SPAC have a minimum amount of cash available at closing. In 2020, approximately 80% of deals had a closing minimum cash condition.
SPACs typically raise capital through PIPEs to ensure that the minimum cash closing will be satisfied at closing. If PIPE proceeds are not enough to make up the difference, a renegotiation may occur and target companies should be prepared for this possibility. One potential way to minimize the risk is to get commitments from PIPE financiers at the signing of the business combination agreement. In 2020, of the deals that required additional financing, over half were PIPE-only financings.
Post-Closing Board Composition
Most post-closing boards of directors of the combined business entity will be staggered. In 2020, approximately 70% of post-closing boards were staggered, with the average size of the board being around 7 to 9 directors. In just over half of post-closing boards, SPAC sponsors designated one or two directors.
How long does a typical SPAC transaction take?
Commencing with the closing of the IPO, a SPAC can hold substantive discussions with a target. If a SPAC needs more time than is set forth in its organizational documents, it can seek a shareholder vote to amend its organizational documents to extend the deadline. With each vote to extend the deadline, the SPAC’s organizational documents typically also provide that the SPAC must offer shareholders the right to redeem their shares for a pro rata portion of the cash held in the trust account. Typically, it takes around 4–5 months from the signing of the definitive documents to closing. From the closing of the SPAC’s IPO to the closing of the business combination, the average time frame is approximately 16 months.
What considerations should a target company keep in mind if it will go public via a SPAC transaction?
A target company must have two to three years of financial statements, audited in compliance with the rules of the Public Company Accounting Oversight Board (PCAOB). As a result, even if a target company has audited financial statements, additional audit procedures may be required before financial statements are ready to be filed with the SEC. A PCAOB audit will often be a gating items and thus early discussions regarding financial statement and audit readiness will take place.
In addition, a target company should analyze whether it has people, procedures and IT systems required to handle the regular demands (which include speed and accuracy)of public reporting, including necessary internal controls and procedures.
A target company must also ensure it has the necessary corporate governance policies, procedures, and practices that meet public company compliance requirements, including those of the applicable stock exchange.
Target company stockholders should balance the potential upside of continuing to own a significant portion of the operating business against the cost and distraction of operating a public company and the need for immediate liquidity after closing.
You may be right.
Why change from 14287 to 17092?
And what is quite interesting or should I say odd it is not list on their website.
This is definitely new:
Brief Summary
The purpose of this study is to learn about the safety and tolerability of different doses of REGN17092 administered with a needle either under the skin (called "subcutaneous") or into a vein (called an "infusion") in healthy participants. This is the first time that REGN17092 will be given to people.
Other aims are to assess:
How much of the study drug is in the blood at different times
Whether the body makes its own antibodies against the study drug (which could make the drug less effective or lead to side effects)
Don't know what if anything is going on with REGN14287 however that have another mAbs REGN17092 that is getting ready to go through clinicals,
The thing is I didn't find it mentioned anywhere on Regeneron website.
A Trial to Learn if Different Doses of REGN17092 Are Safe in Healthy Adults
https://www.clinicaltrials.gov/study/NCT05923424?cond=covid&term=regeneron&page=2&rank=16
Study Overview
Brief Summary:
The purpose of this study is to learn about the safety and tolerability of different doses of REGN17092 administered with a needle either under the skin (called "subcutaneous") or into a vein (called an "infusion") in healthy participants. This is the first time that REGN17092 will be given to people.
Other aims are to assess
How much of the study drug is in the blood at different times
Whether the body makes its own antibodies against the study drug (which could make the drug less effective or lead to side effects)
Show more
OFFICIAL TITLE
A Phase 1, Randomized, Double-Blind, Placebo-Controlled Study to Assess the Safety, Tolerability, Pharmacokinetics, and Immunogenicity of REGN17092, an Anti-SARS-CoV-2 (COVID-19) Monoclonal Antibody, in Adult Healthy Volunteers
CONDITIONS
Healthy Volunteers
INTERVENTION / TREATMENT
Drug: REGN17092
Drug: Matching Placebo
STUDY START (ESTIMATED)
2023-08-11
PRIMARY COMPLETION (ESTIMATED)
2024-11-06
STUDY COMPLETION (ESTIMATED)
2024-11-06
ENROLLMENT (ESTIMATED)
128
STUDY TYPE
Interventional
PHASE
Phase 1
OTHER STUDY ID NUMBERS
R17092-HV-2312
2023- 505041-52-00 ( Registry Identifier ) (REGISTRY: EU CT Number)
ENZC don't have to have audited financials however SAGA does.
SAGA is a blank check company incorporated in Delaware on March 31, 2021. They were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, or the initial business combination. They are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, as modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and, as such, we are subject to all of the risks associated with early stage and emerging growth companies.
Why is it worrisome?
The Outstanding Shares are 3,010,804,133 and the Authorized Shares are 3,900,000,000.
The company will not declare a dividend until the six month period is up.
They will then declare the dividend with an ex-dividend date about 30 days out.
Anyone owning shares prior to ex-dividend date will get the dividend.
The deal has already started it is just not finalized for signature yet.
It must be completed before the “Extended Deadline Date” which is October 23, 2023.
It is impossible to say when the deal will finally be signed so this is just a best guess estimate based on information available.
1. They just gave us Supplemental Information and an example of a similar transaction.
2. The also released a press release with the following statements:
Dr. Gaurav Chandra, CEO of Biogenysis stated, "At Biogenysis, our primary focus is on developing and producing monoclonal antibodies to treat numerous infectious viruses. We have realized meaningful progress in achieving significant results which will be reported as we progress. Through the SPAC agreement, we will be able to expand our programs and bring monoclonal antibodies therapies to market more rapidly. Our intellectual property portfolio includes diagnostics, therapeutics, and vaccines targeting numerous viruses that have been analyzed using our AI technology. We expect that this progress and technology will lead to diverse licensing and partnering opportunities
Diana Zhabilov, CEO of Virogentics added, "The Virogentics team is excited about the SAGA agreement which will support further development of the Company's technologies and bring them to a higher level of achievement. Virogentics' IPF Immunotherapy platform can be used in combination with existing therapies for treatments of different viral and chronic diseases and under the proposed SAGA agreement, this extension can be realized. The Company is moving ahead toward registration of its ITV-1 therapeutics under the requirements of the European Medicines Agency (EMA). Also, the Company expects favorable results from the outcome of ITV-1 trials being conducted in Africa
Barry Kostiner, CEO of SAGA commented, "We are working together with the Enzolytics team to structure our transaction to give the Enzolytics shareholders the benefits of our Nasdaq listing, while also protecting their interests, given the current volatility in financial markets. Additionally, we are committed to working together to facilitate continued liquidity and provide the capital needed to properly fund the Enzolytics technology that has already demonstrated tremendous promise."
Charles Cotropia, CEO of Enzolytics, Inc., stated, "This transaction with SAGA is a monumental step forward for our Company, providing BGEN and VIRO with the necessary funding to fully advance technologies in the medical field that are so desperately needed. Each of our subsidiaries has laid the groundwork for therapies that are at a point where the next advances place them at the forefront of the global biotech market.
3. The SPAC merger process with a target company may be completed in as little as three to four months, which is substantially shorter than a typical traditional IPO timeline.
4. The 10 key phases of a merger and acquisition deal:
https://www.wolterskluwer.com/en/expert-insights/10-key-phases-of-a-m-and-a-deal
Strategy development completed
Target identification completed
Valuation analysis completed
Negotiations completed
Due diligence ?
Deal closure soon
Financing and restructuring ?
Integration and back-office planning ?
Post-merger compliance ?
Business as usual ?
Conclusion ?
5. The June 29, 2023 press release basically was the final straw needed to get the deal closer to finalization. The purchase price:
Enzolytics, Inc. Reports Amendment to Non-Binding Term Sheet with the Special Purpose Acquisition Company Sagaliam Acquisition Corp.
Enzolytics, Inc. (the "Company" or "ENZC"), a drug development biotech company, and Sagaliam Acquisition Corp. (NASDAQ:SAGA) ("Sagaliam") (together the "Parties") announced today they have agreed to an amendment to the executed non-binding term sheet for the sale of Biogenysis, Inc. ("BGEN") and Virogentics Inc. ("VIRO"), operating subsidiaries of the Company, amending the combined purchase price to $450,000,000.00. In addition, the Parties have agreed to a Make Whole calculation six months after close to ensure the value to be received by ENZC. The Parties will now focus on completing the business combination agreement as soon as possible.
Also in the same press release the following statement was made:
As soon as the Agreement is finalized, the Parties will file an 8-K providing the details of the purchase of the subsidiaries. (why mention this if they are not close)
I believe we are close to the deal closure and my best guess estimate is by the end of the month we should see a 8K.
That is a reasonable and has been discussed here a lot as you probably already know.
ENZC will still have Robustomed.
The company may not know or maybe they do and want to wait until after the deal is done through the lockout period and after the dividend is issued.
I think all the focus is getting this deal done and moving our biotechnology to the next level.
So what are your concerns?
I did some research on SPACs when the potential agreement was first announced and basically after the deal is signed some companies stock price gown down quite a bit while others move up and continue to do so.
Why the difference?
Results. Companies must perform to provide revenue and profits.
List of Companies That Went Public By Merging With A Special Purpose Acquisition Company ('SPAC')
https://stockmarketmba.com/listofcompaniesthathavemergedwithaspac.php
I look at a lot of companies that went the SPAC route and found mixed results.
Most SPAC trade around $10 and soon after the deal closes a lot of them drop significantly. Some recovered some didn't.
MoonLake Immunotherapeutics (MLTX) completed SPAC on 4/5/2022 and closed at $13.25.
Closed on 5/5/2022 at $5.73
Closed on 11/5/2002 at $8.49
Closed on 4/21/2023 at $21.67
EQRx, Inc. (EQRX) completed SPAC on 12/17/2021and closed at $8.29
Closed on 1/18/2022 at $6.28
Closed on 7/18/2022 at $5.00
Closed on 12/16/2022 at $2.18
Closed on 4/21/2023 at $1.85
The bottom line is the SPAC gets you to a higher exchange or to become a public trading company however companies must perform, must produce, must provide results.
ENZC has provided little or no revenue and no profits.
What ENZC has is POTENTIAL.
Will it be realized?
It is quite possible with what they have on the table.
Whether it is ENZC or any company they must produce results leading to revenue and profits.
As I said earlier and will say again the bottom line is:
Whether ENZC stayed as the are or move forward with SAGA, they must perform ie provide results by producing revenue and profit.
What will drive SAGA Scientific Holdings Corp. share price is results of operations such as announcing clinical trials and their results through different stages, licensing agreements, partnering and whatever else they can do to bring shareholder value.
It ran up to a buck in February 2021 when many OTC stocks ran up to ridiculous levels.
It had nothing to do with any of these companies fundamentals.
Most came crashing back down soon afterwards.
Make-Whole Provision
During the six-month period between the close of the transaction and the Make-Whole
calculation, the shareholders of Company E will be able to sale or acquire additional shares of
Company E. The holders of common shares of Company E will be entitled to their proportionate
share of any shares required to be issued under the Make-Whole calculation,
If on the six-month anniversary of the transaction, Company S’s common shares are trading at
$10 or more there will be no shares required to be issued. The value of the Purchase Shares
would still be $450 million. The shares would be paid as a dividend to the shareholders of
Company E and they would be the owners of 90+% of Company S and each individual
shareholder would still own their proportionate percentage of Company E.
If on the six-month anniversary of the transaction, Company S’s shares are trading at $5.00 on
NASDAQ, the value of the Purchase Shares would be $225 million and the Make-Whole
calculation would require an additional 45 million shares to be issued to Company E to MakeWhole the $450 million Purchase Price. The additional shares would be allocated proportionately
to the holders of Company E’s common shares on the declared dividend date. In this example,
the percentage ownership by Company E prior to the dividend would be 95.2% plus.
After the dividend to Company E shareholders, there would be no assets or operations in
Company E, but management would be able to purchase new operations or develop other
products that would be the assets of Company E. The Company E common shares would
continue to trade on OTC Markets as a new business strategy is implemented.
There is no fraud.
Nobody was misled.
People misled themselves.
One has to show proof of loss to sue successfully.
It is not going to happen here.
One needs to be realistic about ENZC and what they do.
RESULTS have been very limited as to leading to revenue however the POTENTIAL of ENZC is through the ROOF.
Going to the NASDAQ is AAA.
We still now little about what is driving this and who the players are besides SAGA.
We don't who the NDAs are with and what they entail.
Is Big Pharma involved waiting in the wings to sign licensing/partnership deals.
As I said earlier and will say again the bottom line is:
Whether ENZC stayed as the are or move forward with SAGA, they must perform ie provide results by producing revenue and profit.
What will drive SAGA Scientific Holdings Corp. share price is results of operations such as announcing clinical trials and their results through different stages, licensing agreements, partnering and whatever else they can do to bring shareholder value.
ENZC guaranteed nothing.
Anyone wanting to sue is nothing but a improbable stretch if even that.
One has to show proof of loss due to the action of the company.
AIMVHO
Exciting times ahead
He will probably relinquish his ENZC responsibilities to someone else at some point depending on what direction they go.
Until we hear something formal he is legally responsible for ENZC.
True
A SAGA board could be made now and it would automatically flip when it changes to SAGA Scientific Holdings Corp. if the ticker change.
Once the deal goes through a new board can be made.
The company name is not changing. ENZC will still exist.
2 Subs are being sold.
A new board will be needed.
I didn't know the subs had any share structure.
It was not mentioned in the proposed agreement of any shares in the subs.
The agreement talks about ENZC shareholders getting a dividend nothing about subs.
What shares in what subs are you referring to.
Enzolytics Inc. Files Supplemental Information Report on the Sale of Biogenysis, Inc. and Virogentics, Inc to Sagaliam Acquisition Corp.
https://www.theglobeandmail.com/investing/markets/stocks/ENZC/pressreleases/18396340/enzolytics-inc-files-supplemental-information-report-on-the-sale-of-biogenysis-inc-and-virogentics-inc-to-sagaliam-acquisition-corp/
The Press Release
1. We have realized meaningful progress in achieving significant results which will be reported as we progress. Through the SPAC agreement, we will be able to expand our programs and bring monoclonal antibodies therapies to market more rapidly.
2. AI has played a critical role in advancing our research and development in drug discovery, and we remain committed to using AI to revolutionize healthcare.
3. The Company is moving ahead toward registration of its ITV-1 therapeutics under the requirements of the European Medicines Agency (EMA). Also, the Company expects favorable results from the outcome of ITV-1 trials being conducted in Africa.
4. Barry Kostiner, CEO of SAGA commented, "We are working together with the Enzolytics team to structure our transaction to give the Enzolytics shareholders the benefits of our Nasdaq listing, while also protecting their interests, given the current volatility in financial markets. Additionally, we are committed to working together to facilitate continued liquidity and provide the capital needed to properly fund the Enzolytics technology that has already demonstrated tremendous promise."
5. Charles Cotropia, CEO of Enzolytics, Inc., stated, "This transaction with SAGA is a monumental step forward for our Company, providing BGEN and VIRO with the necessary funding to fully advance technologies in the medical field that are so desperately needed. Each of our subsidiaries has laid the groundwork for therapies that are at a point where the next advances place them at the forefront of the global biotech market.
Supplemental Information
https://www.otcmarkets.com/otcapi/company/financial-report/376167/content
1. . The purchase price includes a make-whole provision to be calculated six months after close of the transaction. ENZC has disclosed its intention to declare a dividend and subject to and upon approval by the regulatory entities the value of the transaction will be paid to ENZC shareholders as of the date of record.
2. The remaining terms and conditions are still being negotiated and are not to a point where any other provisions can be disclosed with certainty.
3. The parent company ENZC and its other subsidiary RobustoMed, Inc. (“RBMD”) are not part of the transaction.
4.As additional terms and events regarding the transaction take place, the Company will disclose them through additional press releases.
5. The disclosure of the transaction has resulted in numerous questions from existing shareholders of both ENZC and SAGA prompting the parties to offer the following description of a fictious example similar to the contemplated transaction to provide clarity.
Description of Example Transaction
1. Company S, a NASDAQ listed entity, enters into a purchase agreement with Company E, an OTC PINK listed entity, to acquire all the issued and outstanding shares of Company E’s two wholly owned subsidiaries, SB and SV, for $450 million (the “Purchase Price”). The Purchase Price will be paid by issuing 45 million of Company S’s common shares (the “Purchase Shares”) valued at $10 per share.
2. The issuance of the Purchase Shares to Company E will result in a 90% plus ownership position of Company S until the Purchase Shares are paid as a
dividend to the shareholders of Company E.
3. The Make-Whole calculation (described below) will be made six-months after the closing date of the transaction, The dividend will be declared 15 days after the Make-Whole calculation so that any shares required to be issued based on the calculation will be included in the dividend and paid upon receiving final regulatory approval.
4. The transaction does not result in an increase in issued and outstanding shares of Company E.
Make-Whole Provision
1. If on the six-month anniversary of the transaction, Company S’s common shares are trading at
$10 or more there will be no shares required to be issued.
2. If on the six-month anniversary of the transaction, Company S’s shares are trading at $5.00 on NASDAQ, the value of the Purchase Shares would be $225 million and the Make-Whole calculation would require an additional 45 million shares to be issued to Company E to Make Whole the $450 million Purchase Price.
3. After the dividend to Company E shareholders, there would be no assets or operations in Company E, but management would be able to purchase new operations or develop other products that would be the assets of Company E. The Company E common shares would to trade on OTC Markets as a new business strategy is implemented.
What does it all mean?
ENZC soon to be SAGA Scientific Holdings Corp. probably have mAbs ready for clinical trials and if so they should establish SAGA a firm foothold in the mAbs marketplace.
From the June 29, 2023 Press Release Enzolytics, Inc. Reports Amendment to Non-Binding Term Sheet with the Special Purpose Acquisition Company Sagaliam Acquisition Corp.:
As soon as the Agreement is finalized, the Parties will file an 8-K providing the details of the purchase of the subsidiaries. It is anticipated that ENZC will dividend to the existing ENZC shareholders the Saga shares received as the purchase price of the subsidiaries. This will occur on the dividend date in accordance with the individual shareholder's percentage ownership of the Company.
From the July 6, 2023 Virogentics, Inc to Introduce a Dietary Supplement Offers Additional Information on ITV-1 And Diabetic Clinical Trials:
The Company, assisted by Sagaliam Acquisition Corp. ("NASDAQ:SAGA"), is preparing a supplemental information filing to give insight into the SAGA transaction and offer explanations to some of the shareholder questions surrounding the sale of ENZC's operating subsidiaries, Virogentics ("VIRO") and Biogenysis ("BGEN"). The filing is expected to be completed the first of the week of July 10th.
First off the Parties will file an 8-K providing the details of the purchase of the subsidiaries.
A week later The Company, assisted by Sagaliam Acquisition Corp. ("NASDAQ:SAGA"), is preparing a supplemental information filing to give insight into the SAGA transaction and offer explanations to some of the shareholder questions surrounding the sale of ENZC's operating subsidiaries, Virogentics ("VIRO") and Biogenysis ("BGEN")
IMHO the first PR suggested that the closing of the deal was imminent.
However with the second PR preparing a supplemental information filing to give insight into the SAGA transaction and offer explanations to some of the shareholder questions surrounding the sale of ENZC's operating subsidiaries suggest it is going to be awhile before the deal closes otherwise why do a supplemental if the deal is imminent.
Another thing to think about is where did they get the information that shareholder had questions surrounding the sale.
Are they talking about us (retail) or are they talking about some of the Series C Preferred shareholders or somebody(s) else?
Has the company been snooping around message boards?
Finally there will probably be no further information on the dividend other then what they already said. Until they have the actual numbers after the deal close then they will be able to precisely give hard numbers and we probably won't know until they actually declare the dividend.
Exciting times for ENZC...
It is not a matter of right or wrong it is business.
Dividends are paid to shareholders as long as the own shares prior to the ex-dividend date.
Most SPAC deals usually just buy out the stock of the target company.
It didn't happen in our case and I suspect that it would have been a long and arduous if not impossible process going through all the different series of stock (A, B, D &E) and the commons. Also with over 3 billion outstanding along with the other mishaps from years past probably wouldn't be a good selling point.
SAGA is purchasing two clean shells (lack of better wording) loaded with what we believe to be priceless biotechnology amongst other things.
You have shell one aka Biogenysis Inc. then you have shell two aka Virogentics, Inc. with Artificial Intelligence (AI) and Monoclonal Antibody platforms and whatever else is included will become SAGA Scientific Holdings Corp.
How did ENZC get to a SPAC?
"On behalf of the employees and consultants of ENZC who contributed to making this transaction possible, I can confidently say that we are delighted with the progress we have made in reaching this new pinnacle," stated Charles Cotropia, CEO of ENZC.
To qualify for a SPAC merger a company should ideally meet the following criteria:
https://clearthink.capital/blog/required-criteria-to-qualify-for-spac-merger/
Reasonable Valuation of at Least $250M
From a practical standpoint, SPACs typically acquire companies that are valued at a minimum of 3X the amount of cash in the SPAC. This is due to the dilutive effect of the sponsor’s carry in the SPAC. If the valuation of the target company gets too close to the amount of cash in the trust, the dilution associated with the sponsor’s carry becomes too large relative to the overall transaction size.
As most SPACs are $100M+, with a few exceptions under $100M, we recommend companies only pursue SPAC mergers if they are able to justify a valuation of $250M or greater.
("BGEN") and Virogentics Inc. ("VIRO") was valued at $450 Million.
Ability to Justify Valuation
Anyone can provide a number they think their company is worth, but to get market acceptance the company must be able to justify its valuation. This can be done using comparable companies’ valuations, relevant metrics, etc.
If a company is unable to effectively justify their valuation, it is likely the transaction will have very high redemptions and the stock will fall post-close.
What in the WORLD did ENZC share to justify their valuation?
Don't know however IMHO it is all about the mAbs (and the laboratory testing and research). Heck what do I know? nothing but pure speculation. This is the $64,000 question.
Must Have a Clear Use of Proceeds
If a SPAC transaction is successfully completed, the target company receives a large influx of capital. The company must be able to show a clear use of proceeds and benefit from this capital.
Once completed, the transaction will provide BGEN and VIRO with significant additional capital to continue developing and expanding their existing and future technology platforms.
The anticipated capital raise from the PIPE is expected to be primarily used by VIRO to pay transaction-related expenses and fund the clinical trials of it anti-HIV therapeutic ITV-1, complete the African Project and advance marketing of IPF Immune™. The funds are to be used by BGEN to complete the production of and test species-specific monoclonal antibodies (mAbs) for treating COVID-19, HIV, and Feline Leukemia. The funding will significantly enhance BGEN's drug discovery capabilities using its proprietary, cutting-edge Artificial Intelligence (AI) technology and enlarge its IP portfolio while also expanding the AI platform's capabilities to advance health care from that based on reactive disease care to P4 medicine, namely care that is predictive, preventive, personalized and participatory.
The sale has nothing to do with shares of ENZC except the amount of ENZC shares you own will determine how many shares of SAGA you get.
It is impossible to determine exactly what ENZC function will be moving forward until we are provided more information after the deal closes.
Choppy Market for SPACs and PIPEs, Competition for Targets Spurs Deal Innovations
https://www.skadden.com/insights/publications/2022/01/2022-insights/corporate/choppy-market-for-spacs-and-pipes
Takeaways
While the SPAC IPO and PIPE markets were challenging in 2021, the enormous amounts of capital already raised should drive merger activity in 2022.
As more shareholders choose to redeem shares and potential PIPE investors scrutinize terms, dealmakers have been forced to reevaluate target prices and look for additional ways to fund de-SPACs.
The SEC has made clear that it will continue to scrutinize SPAC disclosures and accounting practices, and the agency is slated to propose new rules for SPACs this year.
The 2021 SPAC market was a roller-coaster. Following a strong 2020, transactions accelerated in the first three months of 2021, with 298 SPAC IPOs priced and 97 de-SPAC transactions (mergers of target companies with SPACs) announced in that quarter alone. After that, activity slowed significantly in the second and third quarters of 2021. The fourth quarter of 2021 saw a rebound, though still below the level in the first quarter, with 163 SPAC IPOs priced and 61 de-SPAC transactions announced. Nonetheless, compared to 2020, the SPAC IPOs priced and de-SPAC transactions announced in 2021 more than doubled. SPACs priced a record-breaking 613 IPOs, representing a 147% increase over 2020’s 248, and announced an unprecedented 267 de-SPAC transactions, representing a 178% increase over 2020’s 96. As of December 31, 2021, SPACs collectively were holding in trust over $138 billion in IPO proceeds — “dry powder” — and over 500 were seeking an M&A target.
Through the first quarter of 2021, private operating companies looking to go public through a de-SPAC could expect to receive substantial cash from both the SPAC’s trust account and a concurrent private investment in the public equity (PIPE). In some cases, the sum raised in the PIPE exceeded the IPO proceeds. That began changing in the second quarter, as more investors opted to redeem their shares prior to the completion of the de-SPAC and the PIPE market tightened. In the fourth quarter, on average, SPACs returned over 60% of the amount they held in trust, up from 53% in the third quarter, 22% in the second quarter and just 10% in the first quarter. The average PIPE was smaller relative to the amount raised in the IPO compared to earlier last year. In addition, there were more terminations of de-SPAC deals in 2021 than in previous years, although the 2021 termination rate did not meaningfully increase compared to 2020 or 2019 given the greater number of announced deals in 2021.
Despite this widely reported slowdown in the SPAC market and the heightened regulatory scrutiny discussed below, we are cautiously optimistic that de-SPAC activity will remain strong in 2022, given the significant number of SPACs searching for targets and the staggering amounts of dry powder. We also expect increasing deal innovation in light of market pressures.
Stepped-Up Regulatory Scrutiny
Since the U.S. Securities and Exchange Commission (SEC) issued disclosure guidelines for SPAC IPOs and de-SPACs in December 2020, the agency has continued focusing on SPAC filings and transactions.
In an April 8, 2021, statement, Acting Director of the Division of Corporation Finance John Coates discussed potential liability risks for SPACs and questioned whether the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995 (PSLRA) applies to the projections of targets in de-SPAC transaction disclosures. While his remarks do not have the force of law, they reflect the SEC’s concerns about the use of projections in de-SPAC transactions.
The SEC has also targeted SPAC accounting practices. The Division of Corporation Finance and the Office of the Chief Accountant of the SEC jointly issued a statement on April 12, 2021, outlining the staff’s view that terms common to many SPAC warrants may require that the instruments be classified as balance sheet liabilities. Most SPACs had treated these as equity, so the pronouncement forced many to reassess their accounting. Ultimately, most SPACs restated their financial statements and related disclosures.
The accounting treatment of public shares subject to redemption also attracted SEC attention. Through comment letters and in discussions with auditors, the agency required that these be classified as temporary equity. Again, this differed from conventional practices, under which a portion of the public shares were accounted for as permanent equity. Consequently, most SPACs restated their financial statements and related disclosures.
The SEC’s rulemaking agenda calls for the commission to propose amended rules governing SPACs in April 2022. Practitioners will be watching closely. (See “SEC Expected To Introduce Host of New Rules in 2022, Enhance Enforcement.”)
In addition, the Financial Industry Regulatory Authority (FINRA) has set its sights on SPACs. In October 2021, FINRA launched an examination sweep covering member firms’ SPAC offerings and the services provided to the entities and their affiliates.
PIPE Market Challenges
As noted above, potential PIPE investors have been scrutinizing de-SPAC valuations more closely. This has resulted, in some cases, in a reduction of the target’s purchase price.
As PIPE capital has been harder to find and shareholder redemption rates have risen, SPACs have looked for alternative ways to show market support and/or raise additional cash. Some are bringing in their own buyers for all or significant portions of PIPEs. This can include a “pre-PIPE” process in which the SPAC essentially tests the PIPE market with some investors before launching the formal process, and/or a “PIPE upsize” process in which the PIPE is enlarged with existing investors after the de-SPAC transaction is announced.
Another alternative is support from a strategic investor that is not a traditional PIPE investor, via either a cash contribution or commercial arrangement.
To further incentivize potential investors, in some cases PIPE transactions have included convertible debt, convertible preferred equity or warrants in addition to or instead of common stock.
Any such incentives should be analyzed carefully, not only from commercial and contractual perspectives, but also for their impact on the market’s view of the target valuation.
As long as the market for PIPE funds remains competitive, we expect to see creative incentives and structures continue.
Litigation
SPACs have also drawn attention from plaintiffs’ law firms. Before many de-SPAC transactions close, some shareholder-plaintiffs raise objections like those routinely seen in conventional public company mergers. Plaintiffs may, for example, assert disclosure-based claims under Section 14(a) of the Securities Exchange Act, or breach-of-fiduciary-duty claims under state law and seek additional disclosures. There have also been a growing number of federal securities lawsuits under Section 10(b) or 11 of the Securities Exchange Act after de-SPAC closings where the resulting company’s stock price has fallen. Framed as class actions, these cases highlight the need for SPACs to conduct and document robust due diligence on any target. In addition, see our January 6, 2022, memorandum for recent developments in Delaware, “Court of Chancery Issues SPAC-Related Decision of First Impression.”
The Search for Targets
As the surge in SPACs and total dry powder has heightened competition for targets, creative deal structures have emerged. For example, some SPACs have considered combining two private companies to create one public-company-ready business, or teaming up with other SPAC sponsors to conduct a single transaction between one target and multiple SPACs.
Many SPACs are now looking at targets outside the U.S., including in Asia and Europe. (See "SPACs Considering German Targets Face Unique Challenges.")
We also expect SPACs to seek mergers with divisions of public companies. For the parent, this may be an attractive alternative to a traditional sale, IPO, spinoff or split-off.
Given the number of SPACs in the market and their competition for targets, we expect to see more transactional innovations.
The Market Minute: This Is Why You Keep Hearing About PIPE Deals With SPACs
https://news.crunchbase.com/public/this-is-why-you-keep-hearing-about-pipe-deals-with-spacs/
If you read about SPACs as much as I do, you’ve probably seen the mention of PIPE deals whenever one of these blank-check mergers is announced.
PIPE deals are nothing new, but they’re an area of the SPAC process we haven’t covered very much in this column. And after I had a very interesting conversation about PIPE deals with an investor, I figured we’d tackled PIPE deals and how they relate to SPACs this week.
PIPE stands for private investment in public equity and refers to deals in which a private investor buys stock of a publicly traded company. A deal like this essentially is another capital raise, and has commonly become a part of the SPAC transaction — though they weren’t created for that purpose.
A PIPE deal is a way, in conjunction with a SPAC, to raise money for a company going public, according to Bryan Koslow, the founder of investment advisory firm Clarus Group.
“You have traditional IPOs, you’ll see shares getting allocated to institutions and high-net-worth individuals as a way to thank them for their business or to ensure future business,” Koslow said. “With PIPE deals they’re similar, but they’re not available to your mainstreet investor or your mom-and-pop investors.”
PIPE deals allow accredited institutional investors to get in on the deal at a below-market price, Koslow said.
In a SPAC merger, the acquirer and the target company typically agree to a minimum cash flow, and that amount is usually more than what’s held in the SPAC’s trust, which is why a company then goes out for a PIPE deal, according to Alex Fayette, a principal investor at ACME Capital.
PIPE deals have just about become standard with a SPAC deal, and they’ve become something of a way to validate a deal by blue-chip investors.
“It’s some stamp of approval of, ‘This is a good deal, this is a good business’…there’s that validating point,” Fayette said. “But the other point, similar to IPOs, is you’re typically trying to optimize for partners who have a long-term investment vision of the company.”
According to SPAC Insider, 349 SPAC IPOs have taken place in 2021 so far, and they’ve generated more than $108 billion in gross proceeds. SPAC activity in the first half of 2021 has already surpassed 2020, which was a record-year for SPACs and essentially put the method of going public on the map.
Increasingly, SPACs are showing up to merger talks with a PIPE deal already “pre-baked,” according to Fayette. It’s often because there was more interest in the SPAC IPO than the amount of money the SPAC was aiming to raise, so the management team had conversations with investors who didn’t make it into the SPAC IPO to come into the PIPE deal. It’s not the norm for SPACs to have the PIPE deal pre-baked, he noted, but it is happening more frequently.
And companies typically want prestigious investors, like the T. Rowe Price(s) and Fidelity Investment(s) of the world, as investors in their PIPE deal.
“You see sometimes SPACs come to the table and maybe they’re fighting over a company, there’s more than one SPAC offer for a company and one of them may say….
‘We already have most of the PIPE or all of the PIPE pre-baked, ready to go,’” Fayette said. “And that takes a lot of risk off the table.”
In a lot of ways, the process of raising money for a PIPE deal is similar to an IPO roadshow orchestrated by an investment bank. Company management pitches investors, though often joined by someone from the SPAC management team.
But a key difference in the allocation process between a PIPE deal and an IPO is that with an IPO the banks typically build a book of interest to determine pricing, whereas with a SPAC, the price is more or less set by the merger, Fayette said.
Another important difference is that PIPE deals are only open to institutional investors, which has drawn some scrutiny from the public, Koslow said.
“Some of this speaks to the general wealth inequality we’re hearing a lot about,” Koslow said. “Where it feels like the rich are getting richer and mainstreet is getting left behind.”
How financing SPAC takeovers became Wall Street’s new favorite trade
https://www.cnbc.com/2021/01/25/how-financing-spac-takeovers-became-wall-streets-new-favorite-trade.html
KEY POINTS
PIPEs, increasingly deployed in conjunction with red hot SPACs, are mechanisms for companies to raise capital from a select group of investors outside the market.
Bankers from several firms have told CNBC they’ve received an uptick in inbound interest recently from investors looking for future PIPE opportunities.
In 2020, PIPEs generated $12.4 billion in supplemental capital to help fund 46 SPAC mergers, according to data pulled by Morgan Stanley.
The heightened prevalence of this product is raising concerns about the potential lack of understanding among the broader cohort of SPAC investors about how these investments work.
For most investors these days, it’s literally a “PIPE dream.”
PIPEs, or private investments in public equity, are mechanisms for companies to raise capital from a select group of investors outside the market. But as PIPEs are increasingly being deployed in conjunction with a surge in SPAC mergers, a larger group of fund managers are seeking access to this security, with limits on who and how many can invest.
While SPACs, or special purpose acquisition companies, will tap the public markets to raise capital to fund a future takeover, PIPEs are allocated to a small group of investors. Managers of the funds participating in the PIPE will sign a non-disclosure agreement, with trading restrictions, and are brought over a proverbial “wall,” where they’re given material, non-public information from the SPAC about which target they’re looking to acquire. They’re then allowed to choose whether or not they want to invest at the SPAC’s IPO price — or sometimes at a discount — and ride what they’re hoping is a pop when that takeover is announced.
Bankers from several firms have told CNBC they’ve received an uptick in inbound interest recently from investors looking for future PIPE opportunities.
“Many of these transactions are performing very well, and have been well-received in the post-announcement period,” said Warren Fixmer, who runs SPAC Equity Capital Markets at Bank of America. “So the alpha generation that it represents obviously is attracting a broader group of investors.”
In 2020, PIPEs generated $12.4 billion in supplemental capital to help fund 46 SPAC mergers, according to data pulled by Morgan Stanley. Their data looked at SPAC deals with valuations greater than half a billion dollars. On average, PIPE capital added almost triple the purchasing power to the SPAC, Morgan Stanley said. For every $100 million raised through a SPAC, a corresponding PIPE added another $167 million, the data showed.
Big money in PIPEs
Some of the largest PIPEs have surpassed $1 billion in size and were committed over the last few months. The latest was announced Monday morning, with Foley Trasimene’s Acquisition Corp.’s takeover of Alight Solutions, which included a $1.55 billion private placement. Another Foley SPAC utilized a $2 billion private placement, announcing in December a deal to purchase Paysafe. Chamath Palihapitiya’s SPAC, Social Capital Hedosophia V is deploying a $1.2 billion PIPE to acquire SoFi. Additionally, Altimar Acquisition Corporation announced an agreement with both Owl Rock and Dyal to take the combined alternative-asset manager public with a $1.5 billion PIPE.
More committed PIPEs will lag the SPAC IPOs, meaning if 2020 was the year of the SPAC surge, 2021 and 2022 will be the time where these vehicles merge.
Morgan Stanley data showed that there’s still more than $90 billion worth of “dry powder” that needs to be deployed toward acquisitions over the next two or fewer years. That implies a total of $117 billion of PIPE capital is expected to be raised in connection with SPAC mergers during that time frame, Morgan Stanley said.
Against that backdrop, prospective PIPE investors are calling up placement agents en masse and looking to be included in financing those mergers, bankers from three separate firms told CNBC.
The heightened prevalence of this product is raising concerns about the potential lack of understanding among the broader cohort of SPAC investors about how these investments work.
“There are two generic losers, or people at risk: The first are the existing shareholders, but the second is the perception about the fairness of our capital markets,” said Harvey Pitt, former chairman of the Securities and Exchange Commission. “People who are not privy to the disclosures, people who aren’t able to get the benefit of these pricing discounts and people who are seeing the power of their equity holdings downgraded by virtue of what we call dilution.”
Investors in the PIPE usually receive their securities at a discount at least to the market price and sometimes they even get shares below the IPO price. About one-third of SPACs in the 2019 through 2020 merger cohort that issued shares in PIPEs, sold those shares at a 10 percent discount or more to the IPO price, according to a recent SPAC study by Stanford Law School and New York University School of Law. That can ultimately be dilutive to investors who acquired stock at the IPO of the SPAC.
PIPE investors can pressure stock
A key question, Pitt said, is what types of disclosures investors in PIPEs receive compared to that of the broader market. While he notes that it would be “entirely appropriate” for the SPAC to share potential merger plans or things of that nature, other details about the company’s future could be a more grey area.
But proponents of PIPEs say they serve as a signal of validation to the market and therefore can improve performance. Those 2020 SPACs that included PIPEs had a median performance of 46 percent, one month after their deals closed, according to Morgan Stanley. Those without PIPEs saw gains less than half that (21 percent) over the same time period.
But once investors in the PIPE are eligible to sell, that can put pressure on the overall stock as it widens the float. Usually that takes place in the weeks following a SPAC’s deal closing — far shorter than the typical IPO lockup.
Because of these factors, PIPEs could be an area that draws greater regulatory scrutiny this year, as investors start to better understand the rules and potential financial impact around these securities relative to public shares in the SPACs.
“It’s not illegal to engage in one of these offerings, but there are, shall we say, minefields all along the process that could turn what might be legal into something that is illegal or crosses that line,” said Pitt, who currently serves as the CEO of Kalorama Partners, a consulting firm. “That’s why there needs to be scrutiny, and that’s why there is scrutiny of these transactions.”
To qualify for a SPAC merger a company should ideally meet the following criteria:
https://clearthink.capital/blog/required-criteria-to-qualify-for-spac-merger/
Reasonable Valuation of at Least $250M
From a practical standpoint, SPACs typically acquire companies that are valued at a minimum of 3X the amount of cash in the SPAC. This is due to the dilutive effect of the sponsor’s carry in the SPAC. If the valuation of the target company gets too close to the amount of cash in the trust, the dilution associated with the sponsor’s carry becomes too large relative to the overall transaction size.
As most SPACs are $100M+, with a few exceptions under $100M, we recommend companies only pursue SPAC mergers if they are able to justify a valuation of $250M or greater.
Ability to Justify Valuation
Anyone can provide a number they think their company is worth, but to get market acceptance the company must be able to justify its valuation. This can be done using comparable companies’ valuations, relevant metrics, etc.
If a company is unable to effectively justify their valuation, it is likely the transaction will have very high redemptions and the stock will fall post-close.
Must Have a Clear Use of Proceeds
If a SPAC transaction is successfully completed, the target company receives a large influx of capital. The company must be able to show a clear use of proceeds and benefit from this capital.
Focus on what we KNOW!
Follow the science....
It is impossible to determine exactly what ENZC function will be moving forward until we are provided more information after the deal closes.