The sponsor and the SPAC’s officers and directors will waive redemption rights with respect to their founder shares (and any public shares they may purchase) in connection with the De-SPAC transaction or a charter amendment to permit an extended period to consummate the De-SPAC transaction, effectively agreeing to stay invested in the SPAC through the closing of the De-SPAC transaction or until liquidation. Effectively, if the De-SPAC transaction never occurs, the public shareholders get their money back, while the public warrants, founder shares and founder warrants expire without value. However, the SPAC charter documents typically require the offer to be made to all shareholders. Under stock exchange listing rules, if a shareholder vote is sought, only shareholders who vote against the De-SPAC transaction are required to be offered the ability to redeem their public shares. As a result, at least 20% of the SPAC’s outstanding shares will be committed to vote in favor of a transaction, helping the process of achieving a majority vote to approve the transaction.Īs part of the De-SPAC process, the SPAC is required to offer the holders of public shares the right to redeem their public shares for a pro-rata portion of the proceeds held in the trust account, which typically results in a redemption amount equal to approximately $10.00 per public share. The sponsor and any other holders of founder shares will typically commit at the time of the IPO to vote any founder shares held by them and any public shares purchased during or after the IPO in favor of the De-SPAC transaction. The proxy process can take three to five months to complete from the date a definitive agreement for the De-SPAC transaction is signed. This results in most of the De-SPAC transactions conducting a public vote by the SPAC’s shareholders, which involves the filing of a proxy statement with the SEC, the review and commenting by the SEC, the mailing of the proxy statement to the SPAC’s shareholders, and the holding of a shareholders meeting to tally all of the votes casted and record the voting result. Stock exchange rules do not always require a vote by the SPAC shareholders, but the structure of the De-SPAC transaction (e.g., if the SPAC does not survive a merger or is re-domiciling in a different jurisdiction) may require a vote, and if more than 20% of the voting stock of the SPAC is being issued in the De-SPAC transaction (to the seller of the target business, to PIPE investors or to a combination thereof), the stock exchange rules will require a shareholder vote. The De-SPAC process is similar to a public company merger, except that the buyer (the SPAC) is typically required to obtain shareholder approval, which must be obtained in accordance with SEC proxy rules. De-SPACing is the stage after the execution of a definitive agreement and before the actual combination of the SPAC/PPE TM public entity with the target operating company. The most intense phase of becoming a public listed company via a combination with a Special Purpose Acquisition Company (SPAC) or the enhanced Private-to-Public Equity (PPE TM) mechanism is the De-SPAC process. De-SPAC Process – Shareholder Approval, Founder Vote Requirements, and Redemption Offer
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