First SPAC to Close Since 2008
By David Feldman at 29 November, 2009, 11:38 am
GSME Acquisition Partners I raised $36 million as the first SPAC to raise money and go public since August 2008. The SPAC Wire reports that GSME has only 12-18 months to close a deal. It is looking for a deal in China. Cohen & Company was lead underwriter along with Rodman & Renshaw and I-Bankers Securities. The Cayman Islands company will automatically dissolve if they do not close a deal by November 25, 2010, but if they have signed a letter of intent by then, they can stay alive for another six months. The $10.00 units include a share and one 5-year warrant exercisable at $11.50. Management bought warrants for $1.8 million simultaneous with the offering. The ordinary shares and warrants will trade on the OTC Bulletin Board, the units have the symbol GSMEF. An amount equal to 100% of the gross offering proceeds are going into the trust account. This leaves the insider subscription amounts to pay fees and expenses. A letter of credit arrangement guarantees an additional $.30 per share to holders that vote for a deal that isn’t approved, or in the event of liquidation. This way investors get their full original investment, plus interest, plus 3%.
Other typical provisions include a requirement that the market value of an acquired company be at least 80% of the funds in trust. $1.4 million of the underwriter commission is deferred until a deal is completed. The deal will not be done if more than 19% of the shareholders exercise their conversion right. They can try to repurchase shares from those intending to vote against the deal. It appears the offshore company either does not intend to function as a “foreign private issuer” (which might exempt it from proxy requirements for the sale) or it will be an FPI but is going to give shareholders a full proxy anyway.
It was indeed appropriate that two of the most prolific law firms in the SPAC world, Graubard Miller and Ellenoff Grossman & Schole, were the lawyers for this deal. Many have said that when the SPAC market returns, it will be mostly with the $30-$50 million size deals. This makes the most sense to me. Congrats to all on, hopefully, restarting the SPAC market.
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