Special Purpose Acquisition Corporation

Special Purpose Acquisition Corporation
“ SPAC”

SPAC
A blank check company
taken public via an IPO

SPAC Sponsor
Forms SPAC
Completes initial public offering
Generally has specific industry experience
Understands financial markets

Purpose of SPAC
To finance one or more acquisitions
in target industry or geography

SPAC Timeframe for Acquisition(s)
Generally 18 months to complete an acquisition without an extension
24 months to complete an acquisition with an extension
If no acquisition is made net IPO assets (i.e. cash) is distributed back to shareholders

SPAC IPO Proceeds
97+% of IPO proceeds placed in third party trust
1 to 2 % of proceeds can be used for:
Due diligence expenses
Legal and accounting expenses
Directors and officers insurance
SEC reporting

SPAC IPO
Typically listed on American Stock Exchange
NASDAQ may begin to list
“ Units” are offered
After SPAC filing of an audited balance sheet reflecting IPO proceeds, units can be split into common stock and warrants that trade separately
Filing must occur within 90 days of IPO

Post IPO Stock Ownership
80% of SPAC held by new public shareholders
20% held by management, sponsors or insiders.
This represents their “carry” (similar to investment funds)

SPAC Acquisition
Acquisition consideration can be a combination of:
Cash
Debt of
Stock
Frequently done as merger so “acquired” company receives SPAC stock as consideration

SPAC Excess Cash
Can be used for:
Growth capital
Additional acquisitions
Acquired company merges into SPAC and SPAC sponsors control board and company

80% Target Requirement
80% of SPAC value must be used for acquisitions
Multiple acquisitions must be completed in a single business combination
Acquisition agreements must be drafted so they occur simultaneously
Contractual agreement ensures that only targets of a minimum size are proposed to shareholders

SPAC Shareholder Vote
Vote to approve acquisition(s) by SPAC shareholders required
Prevents sponsors from closing an acquisition against shareholder interests
Majority of shareholders required to approve transaction

Shareholder Negative Votes
If over 20%/30% of shares vote against transaction, it will be prevented from closing
If less than 20%/30% vote no, those investors will have the option to rescind their prorata portion of dollars in trust
These shareholders may keep their warrants

No Acquisition by SPAC
Shareholders rescind their prorata portion of funds in trust
SPAC is dissolved
Generally sponsors do not get their investment back

SPAC Stock Market Trading
Prior to announcement of acquisition
Trade close to SPAC cash value
Generally low trading volume
After announcement of acquisition
Trading volume increases
Stock value reflects market view of business combination
Post acquisition
Trades a a typical listed company

Frequency of SPAC’s (Dealogic-2/27/08)
25% of IPO’s in 2007. 66 in total.
143 to list or complete their first merger

SPAC Post Acquisition Trading of 2007 IPO’s
Most trading flat or below offer prices
11 of 66 trading at more than 3% above offering price
Of 28 priced within last 6 months of 2007, six are trading above offer price

Risks for Shareholders of Company to be Acquired
6 or more months may pass before shares can be sold
Selling shareholders could loose control of the board and company during interim period
Selling shareholders could put downward pressure on stock price

Dickson Consulting
See www.dicksonconsulting.biz for additional information
Contact= [email_address]

Special Purpose Acquisition Corporation

by dickson consulting

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