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De-SPAC Transaction
funds such as PIPE or any other debt financing, filing, and preparing proxy offer documents and accounting considerations and audits and financial forecasts are some of the most common evaluations and information sharing between the target company and SPAC. Furthermore, for the opportunity of an acquisition and arranging the purchase agreement, if the SPAC has an additional capital requirement in pursuance of a business combination (i.e., the acquisition of assets and business of the target company), the PIPE arrangement is facilitated to expand the existing funds of the SPAC and reduce the risk of dilution of equity funds and warrants facilitated by the sponsors. PIPE also assists in providing a guarantee as a medium which balances the minimum funds invested would remain unaffected in the event where the original investors decide to back out from the arrangement.7 The PIPE arrangement by the SPAC will assist in financing a portion of the purchase agreement and price that is decided upon by the business combination.
De-SPAC Transaction
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After extensive searches for a favourable and desirable target company for acquisition by the SPAC, the De-SPAC procedure is initiated and is similar to the merger of a company. The SPAC will be in the position similar to that of a buyer and would require a compulsory voting process from the shareholders. Most SPACs require more than 20% of voting from shareholders which is treated as mandatory for the De-SPAC initiation to transcend smoothly. This offers the right of the public shareholders to redeem their shares at a pro rata price of the total funds held in the Trust Account. When the shareholders voting is regarded, the shareholders who vote against the De-SPAC transaction would be offered with the choice for redemption of their public shares, but the typical exercise from the documents warrants for the offer to be made to all the shareholders. This redemption option is not applicable towards the public warrants. Essentially the De-SPAC transaction should be completed within a limited time frame and an extension of such a date would effectuate the
7 Max Bazerman and Paresh Patel, ‘SPACs: What You Need to Know’ (Harvard Business Review, August 2021) <https://hbr.org/2021/07/spacs-what-youneed-to-know> accessed 17 September 2021.
