Reverse Mergers & Low Float Plays

[Potse]

HLTT(.30)...post-merger details on the proposed SPK/Varian deal......

One aspect of HLTT that is particularly interesting at the moment is its 5.5% ownership position in privately-held Varian Biopharma. Originally Varian was planning to go public via HLTT, but I think Varian/HLTT had difficulty attracting financing. Both parties mutually agreed to abandon the plan. So Varian then entered into a potential acquisition deal with SPK (a Nasdaq SPAC). As with most SPAC deals it is taking a considerable amount of time to get the deal closed.

Recently SPK mentioned in its filings that as part of closing the deal a simultaneous private placement was being worked on. I found that a bit interesting (and somewhat unusual) because the SPAC already had a fairly decent amount of cash (around $50M). SPK recently had its vote to extend the time for the SPAC to complete its acquisition and the 8-K disclosed a couple of items that caught my attention: 1) One day before the vote an institutional investor agreed to pay the first month's extension. I am not entirely sure but it is possible this investor may not have had any previous relationship with this SPAC. 2) More than 61% of the SPAC's shares were tendered for redemption. There are now only a little more than 2.5M shares outstanding in this SPAC.

That recent disclosure of work being done on a private placement and the institutional investor paying the first extension almost suggests to me that SPK probably was aware there would be a high number of redemptions but SPK/Varian might still be interested in trying to get a deal completed. If that is the case it will be interesting to see what kind of adjustments might be made to the original terms of the deal and what (if any) positive/negative impact it might have on HLTT. Under the original deal, HLTT was going to own a little more than 2.2% of the post-merger company.

Although a date has not yet been set for the shareholder vote on the merger of SPK and Varian Biopharma, I think there is now a strong likelihood the merger will get approved. Most of the investors who wanted to cash-out of this particular SPAC probably already did it with the most recent extension vote. The amended S-4 that SPK filed last week contains enough information on pages 24/25 to do some reasonably accurate calculations on the private placement, final structure, and HLTT's ownership position.

It looks like they have made arrangements for an $11.8+M private placement at a price above $6.6, and the final share structure (including the private placement shares) will be in the range of 7.91M and 8.95M shares. HLTT will own a little over 246K shares (around 2.75-3.1%) of the post-merger company.

https://www.otcmarkets.com/filing/html?id=16146559&guid=_Fz-keuR5l-FJth