In June this year, during an interview with LABS, Kaszek’s co-founder Hernán Kazah said that SPACs could be a good investment tool but that the firm didn’t have any particular plan regarding the instrument. Well, three months later the story is different. Last Friday, MEKA (MELI Kaszek Pioneer Corp), the SPAC created by Mercado Libre and Kaszek, completed its IPO on Nasdaq, raising $287million in a highly sought-after capital raise. MEKA’s next step is to start dialoguing with top technology companies to build a tailored partnership model.
SPACs (also called “blank-check companies”) provide private businesses a path to enter the public stock market more quickly than an IPO process — it takes a few months, while an IPO can take more than a year — by using mergers and acquisitions (M&A) regulatory arbitrage, which is simpler than the rules for listing a company on the stock exchange. In other words, you trade one set of regulations for another.
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In other words, a SPAC is a non-operational company listed on a stock exchange to raise money to buy another company. The model is growing popular on Wall Street. In Latin America, the hunt has begun with initiatives by Alpha Capital, Valor Latitude, SoftBank, DILA Capital, XP, and now Meli and Kaszek.
MEKA brings back together the original founding team from Mercado Libre as Sponsors. Together these executives have collectively generated over $150 billion of enterprise value, either through Mercado Libre, now the largest company by market capitalization in Latin America, or through the investment portfolio of Kaszek Ventures, the leading venture capital firm in Latin America, with over 11 unicorns in their current portfolios.
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The goal of Mercado Libre and Kaszek is to place the innovative structure of their SPAC at the service of a leading digital company in Latin America to assist them in their capital raising, business expansion, and corporate governance efforts. In doing so, both organizations aim at fostering a stronger internet ecosystem in the region that will drive economic growth, while generating increased returns for the entrepreneurs, investors, and limited partners involved.
“The Latin American technology ecosystem is thriving. Lots of great companies, with world-class founders, have built strong businesses over the past decade and, with the latest digitalization push from the pandemic, are now primed to take advantage of MEKA’s platform to access public markets with the backing of Mercado Libre and Kaszek in key public company workstreams, commercial agreements, and operational support,” said Kazah in a press statement.
Among the improvements that MEKA says it brings compared to traditional SPACs are:
- A performance based Sponsor Promote structure that only vests if the SPAC generates returns for investors, with no promote equity accrued to sponsors if the company does not trade above its IPO price;
- A warrantless SPAC transaction that avoids adding dilution to target company shareholders;
- A minimum of $50M has already been committed to the PIPE through a forward purchase agreement with Mercado Libre and Kaszek;
- A longer than customary lock up, of 18 months, unless certain performance thresholds are met.