Special Purpose Acquisition Company (SPAC) : Boom of The Shell Companies
Special Purpose Acquisition Company (SPAC) : Boom of The Shell Companies
Special Purpose Acquisition Company (SPAC) : Boom of The Shell Companies
1. Introduction
2. Market Situation
3. Structure
5. Business Combination
6. Liquidation
Profits max. 95% Why German legal forms have not been used so far.
Withholding tax
tax-free
Tax reasons
Management
Approval of the participation
business including the
combination by the issuance of warrants
general meeting
Restrictions on
capital increase and
Corporate law capital reduction
Distribution of reasons
company assets
and dissolution
Minimum par
Restrictions on the value of shares
acquisition of treasury EUR 1
shares (retransfer in
case of rejection)
Foreign legal forms more flexible and therefore more suitable for SPACs
9 SPACs | February 2021 CMS Germany
4. Initial Public Offering
− Due to their short business history, SPACs are regularly qualified as start-ups
• According to ESMA, a start up issuer is a company that has been operating in its current sphere of economic
activity for less than three years
• even if the issuer was incorporated more than three years ago, the recommendations would be applicable if the
company completely changed its business less than three years ago
− ESMA information requirements for specialist issuers, such as start-up companies, are amongst others:
• Business plan with strategic objectives for the next two years
• Information about the extent to which the issuer’s business is dependent upon any key individuals,
− SPAC raises capital by selling public units composed of shares (Aktien) and warrants (Optionsscheine)
to investors
− Following the IPO, the units become separable, such that the public can trade units, shares, or whole
warrants, with each security separately listed in the securities exchange
− Warrants become exercisable
(a) upon completion of a business combination and
(b) one year after the IPO,
whichever event occurs later.
− They entitle the holder to acquire further shares at a fixed issue price
− The term of a warrant is usually four years
− If the SPAC is liquidated, the warrants expire worthless
− 85% to 100% of the IPO proceeds are deposited in a trust account for the purpose of investor protection
− Offering expenses, including the up-front portion of the underwriting fee, and a modest amount of
working capital will be funded by the sponsor. The remaining expenses are only paid upon the
consummation of an initial business combination.
− Typical structure for the underwriting fee:
i. 2% of the gross proceeds to be paid at the closing of the IPO, and
ii. 3.5% of the gross proceeds deposited into the trust account and payable to the underwriters on
closing of the De-SPAC transaction; in case no De-SPAC transaction occurs, the 3.5% discount is
never paid to the underwriters and is used with the rest of the trust account balance to redeem the
public shares.
Public Offering of
Ordinary Share Units consisting of:
ordinary share
warrant
Warrants
Proceeds
Interest-bearing investment,
usually government bonds Access of the
approx. 95% in
management to approx.
fiduciary custody by
max. 5% to cover
third parties running costs
− The SPAC usually has a limited period of time, i.e. 18 to 24 months, to identify a potential target
company and execute the business combination
• in case a business combination does not occur prior to the deadline, the SPAC will be dissolved, and
shareholders will receive their pro rata share of the amount in trust
• Holders of founder shares are not entitled to receive funds on such a dissolution
− The period may vary depending on the company and industry
− Once a target company or group is identified and an agreement is reached with its shareholders, the
SPAC requires shareholder approval to complete the proposed acquisition
− If a business combination is not approved, the SPAC management is free to present new business
combination transactions to the shareholders' meeting, provided that the deadline has not yet expired
− The SPACs often arrange committed equity financing, such as a private investment in public equity
("PIPE") commitment, to finance a portion of the purchase price for the business combination
− Acquisition structures
• Acquisition by cash and/or new shares in the SPAC
• Merger or contribution of the shares in the target company by way of a capital increase against issuance of new
shares
− The management team of SPACs is only interested in taking over operational functions in the target
company in exceptional cases and therefore largely resigns after the completed business combination or
withdraws to positions on the supervisory board
− The management of the target company normally remains in office of the combined company
NIKOLA IMMATICS
Purchase aspects Purchase aspects
Merger with VectoIQ Acquisition Corp. (DE) Merger with Arya Sciences Acquisition (Cayman I.)
USD. 149 Mio. cash, USD 104 Mio. from PIPE-
USD 237 Mio. cash, USD 525 Mio. from PIPE-Financing
Financing
Involvement SPAC-Management Involvement SPAC-Management
Founder Shares: 20% nach SPAC-IPO Founder Shares: 20% nach SPAC-IPO
SPAC-CEO Chairman of the Directors' Board SPAC-CEO member of the Directors' Board
− Business Combination: Virgin Galactic and Social Capital Hedosophia Holdings Corp.,
Cayman Islands (SPAC)
• IPO Proceeds USD 690 million gross; USD 31 million underwriting discounts and commissions; thereof
USD 24,15 million deferred underwriting commission payable only upon completion of business combination;
• IPO of 69,000,000 Units (each unit consisting of one Class A ordinary share and one-third of one warrant)
@ USD 10;
• Separate trading of shares and warrants on 52nd day after date of Prospectus
• SCH Sponsor Corp. (the sponsor) holds 20% of shares (class B shares); founder shares locked-up until one
year after business combination (earlier after business combination, if good share price performance); only
holders of the founder shares have the right to vote on the election of directors prior to the initial business
combination; sponsor shares are protected by anti-dilution rights
• Each whole warrant entitles to acquire one Class A ordinary share @ USD 11.50; exercisable 12 months after
IPO or, if earlier, 30 days after the completion of the business combination;
• Sponsor purchased an aggregate of 8,000,000 warrants (one warrant entitling to the acquisition of one share) @
USD 1.50 per warrant (USD 12,000,000 in the aggregate);
• Founder warrants transferrable 30 days upon business combination
− Business Combination: Immatics N.V. and ARYA Sciences Acquisition Corp., Cayman Islands
(SPAC)
• IPO Proceeds USD 143.75 million gross; USD 7.5 million underwriting discounts and commissions; thereof
USD 4.67 million deferred underwriting commission payable only upon completion of business combination;
• IPO of 12,500,000 Unit (each unit consisting of one Class A ordinary share and one-half of one redeemable
warrant) @ USD 10;
• Separate trading of shares and warrants on 52nd day after date of Prospectus
• ARYA Sciences Holdings (the sponsor) holds 20% of shares (class B shares); founder shares locked-up until
one year after business combination (earlier after business combination, if good share price performance); only
holders of the founder shares have the right to vote on the election of directors prior to our initial business
combination; sponsor shares are protected by anti-dilution rights
• Each whole warrant entitles to acquire one Class A ordinary share @ USD 11.50; exercisable 12 months after
IPO or, if earlier, 30 days after the completion of the business combination;
• Sponsor purchased an aggregate of 5,437,500 warrants (one warrant entitling to the acquisition of one share)
@ USD 1.00 per warrant (USD 5,437,500 in the aggregate);
• Founder warrants transferrable 30 days upon business combination
− In case the SPAC is unable to complete the initial business combination within the specified time frame,
the SPAC will:
i. cease all operations except for the purpose of winding up,
ii. redeem the then outstanding public shares for cash at a per-share price equal to the aggregate
amount then on deposit in the trust account, plus or minus interest, divided by the number of then
outstanding public shares, and
iii. as promptly as reasonably possible following such redemption, dissolve and liquidate, subject in
each case to the SPAC’s obligations under applicable law, including to provide for claims of
creditors.
− The sponsors waive their rights to liquidating distributions from the trust account with respect to any
shares held by them prior to the IPO.
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