Latin American SPAC Alpha Capital announced this Wednesday (17), its merger with the SaaS company Semantix. According to the companies, it’s the first time a technology-focused SPAC has merged with a target company in the region.
A SPAC (Special-Purpose Acquisition Company), also called the “blank check company”, is a vehicle that provides private businesses with a way to enter the public stock market faster than an IPO process – it takes a few months, while the IPO can take more than a year – using regulatory arbitrage for mergers and acquisitions, which is simpler than the rules for listing a company on the stock exchange. In other words: one regulation is exchanged for another.
According to the company, Semantix will have its equity value assessed at approximately $1 billion, assuming a price of $10.00 per share and no trust redemptions, and is expected to be traded on Nasdaq under the ticker symbol STIX.
Following the transaction, institutional investors have committed approximately $94 million in subscriptions to a private placement in public equity (PIPE), which is expected to be funded at the merger’s closing.
This mechanism allows the SPAC to add other investors if the value required for the merger with the partner is greater than the SPAC supports. In the case of Union Acquisition Corp. II, for instance, the SPAC raised $ 200 million. But if the merger with the target company needed $ 500 million or $ 1 billion, the vehicle would seek other investors who will not enter the SPAC, but invest in this PIPE.
In this case, investors give a letter of intent to directors of the SPAC. If the SEC (US Securities and Exchange Commission) approves it, the money is released to the SPAC. This feature goes directly to the shares of the merged company and gives flexibility to SPACs, which can choose to make a merger of $800 million, $1 billion, or even $5 billion, for example. Singapore startup Grab recently made a $40 billion SPAC.
Innova Capital, one of Alpha Capital’s largest existing investors, has committed not to redeem $23 million of Alpha Capital’s publicly traded Class A common stock. Together with the current PIPE commitments, this represents sufficient capital to satisfy the minimum cash condition needed to complete the transaction. The merger is expected to close in the first half of 2022 and is subject to shareholder approvals and other closing conditions.
Semantix’s current management team will continue to lead the business and will use the transaction capital to accelerate its market share. Semantix focuses on industrial, financial, retail, telecommunications, healthcare, agribusiness, and other sectors, serving small and large companies.
Based in São Paulo, the data company was founded in 2010 by CEO Leonardo Santos. Semantix expects to earn approximately $73 million in revenue by 2022 with more than 300 customers in more than 15 countries.