AI
Wednesday, October 05, 2022 9:49:43 AM
This is well planned RD..
As you know we (ITUP and its shareholder members) are SPAC sponsors through IREEM LLC along with certain strategic investors and are responsible for forming the SPAC entity, raising capital in the SPAC IPO transaction, identifying potential targets for acquisition, promoting the acquisition among the SPAC shareholders and consummating the acquisition.
As SPAC sponsors, we typically do not have an employment agreement or management agreement with the SPAC and are not permitted to receive compensation for our services.
And this is why we are given an initial, separate class of shares for nominal consideration.. We charged $90 per membership unit in IREEM LLC which in turn converts to SPAC Sponsor Shares @ $0.15 per share ("Nominal Consideration"). These “founder shares” automatically convert to public shares on the completion of an initial De-SPAC transaction, in which a target business is acquired by the SPAC.
Since our initial investment for founder shares is insignificant ($0.15 per share) but could be worth substantially more after a successful De-SPAC transaction, we considered a question whether the sponsors (ITUP, ITUP Shareholders who subscribed for and other strategic investors) should be treated as receiving any disguised compensation for services through the acquisition of founder shares at a bargain price. And we determined that timing of the issuance of stock is very key to determine the taxation effects. While this holds true for non-employee subscriptions, we flipped and tweaked it the other way for executive subscriptions...
What we did merits the attention of all of our recent/future subscribers
We are issuing founder (sponsor) shares prior to the S1 Filing itself as at the time subscribers subscribing to the sponsors founder shares, there generally is no identified target for a De-SPAC transaction, no SEC registration statement and not even a filing towards IPO has been complete. Meaning, the IPO is not even been approved when subscribing to the sponsor shares. This materially determines that subscribers have invested into the Sponsor placing their money into 100% risk as at this stage a successful IPO and a subsequent successful De-SPAC transaction are contingent on future events over which the sponsors do not have any control at all. The intrinsic value of the founder shares is difficult to determine and subject to many governing factors - successful IPO, Identification of De-Spac transaction, shareholders approval and successful business combination. US Treasury does not impute value to the future happenings. Further, SPAC usually has minimal assets available outside of the trust used for the general operating capital needs of the entity.
If the founder shares were rather issued to the sponsors at the time of the IPO or at the time the De-SPAC transaction was successfully concluded, the founder shares would then immediately be worth much more than the sponsor paid for them. In these cases, Treasury may treat the issuance as compensation by way of a bargain purchase as there would be an established market value for the shares, much greater than the amount paid by the sponsors.
We have thoroughly researched the timing of the issuance of the founder shares to avoid undesirable tax consequences for our dear shareholders. This said, we flipped the coin for treating shares issued as grants to executives so they are not unreasonably taxed at the time the stocks are granted....
Win Win both ends
As you know we (ITUP and its shareholder members) are SPAC sponsors through IREEM LLC along with certain strategic investors and are responsible for forming the SPAC entity, raising capital in the SPAC IPO transaction, identifying potential targets for acquisition, promoting the acquisition among the SPAC shareholders and consummating the acquisition.
As SPAC sponsors, we typically do not have an employment agreement or management agreement with the SPAC and are not permitted to receive compensation for our services.
And this is why we are given an initial, separate class of shares for nominal consideration.. We charged $90 per membership unit in IREEM LLC which in turn converts to SPAC Sponsor Shares @ $0.15 per share ("Nominal Consideration"). These “founder shares” automatically convert to public shares on the completion of an initial De-SPAC transaction, in which a target business is acquired by the SPAC.
Since our initial investment for founder shares is insignificant ($0.15 per share) but could be worth substantially more after a successful De-SPAC transaction, we considered a question whether the sponsors (ITUP, ITUP Shareholders who subscribed for and other strategic investors) should be treated as receiving any disguised compensation for services through the acquisition of founder shares at a bargain price. And we determined that timing of the issuance of stock is very key to determine the taxation effects. While this holds true for non-employee subscriptions, we flipped and tweaked it the other way for executive subscriptions...
What we did merits the attention of all of our recent/future subscribers
We are issuing founder (sponsor) shares prior to the S1 Filing itself as at the time subscribers subscribing to the sponsors founder shares, there generally is no identified target for a De-SPAC transaction, no SEC registration statement and not even a filing towards IPO has been complete. Meaning, the IPO is not even been approved when subscribing to the sponsor shares. This materially determines that subscribers have invested into the Sponsor placing their money into 100% risk as at this stage a successful IPO and a subsequent successful De-SPAC transaction are contingent on future events over which the sponsors do not have any control at all. The intrinsic value of the founder shares is difficult to determine and subject to many governing factors - successful IPO, Identification of De-Spac transaction, shareholders approval and successful business combination. US Treasury does not impute value to the future happenings. Further, SPAC usually has minimal assets available outside of the trust used for the general operating capital needs of the entity.
If the founder shares were rather issued to the sponsors at the time of the IPO or at the time the De-SPAC transaction was successfully concluded, the founder shares would then immediately be worth much more than the sponsor paid for them. In these cases, Treasury may treat the issuance as compensation by way of a bargain purchase as there would be an established market value for the shares, much greater than the amount paid by the sponsors.
We have thoroughly researched the timing of the issuance of the founder shares to avoid undesirable tax consequences for our dear shareholders. This said, we flipped the coin for treating shares issued as grants to executives so they are not unreasonably taxed at the time the stocks are granted....
Win Win both ends
