2022_Fintech M&A Insights

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LOOKING AHEAD What does the future hold for SPACs? Will SPAC transactions remain a popular vehicle for companies to go public in the long term? Only time will tell, and those questions have become more complicated and difficult to answer in light of recent interest in SPACs from regulators, including the SEC. In April 2021, the SEC released public statements regarding the liability risks under U.S. securities laws with respect to SPACs and regarding accounting and reporting considerations for warrants issued by SPACs 6 . Although it is not clear what the SPAC market will look like going forward, SPACs will very likely continue to be a topic closely watched by investors, regulators, and advisors in the second half of 2021 through 2022. 27 The Changing FinTech Landscape: A Snapshot of M&A Themes and Trends For a private company, a SPAC may be an attractive vehicle to become a public company without going through a traditional IPO process. One potential benefit is with respect to timing. The timeline for a SPAC transaction can be as quick as three to five months, while the timeline for an IPO is typically four to six months (and will often take longer). Furthermore, the company's valuation is established through a negotiation by the company and the SPAC, rather than through the book-building process that is typical for an IPO. Investments by sophisticated PIPE investors can also help validate the valuation in advance of the company going public. Although SPAC transactions have a number of potential benefits, there are additional considerations that should be assessed. At the formation of the SPAC, the sponsor will typically receive 20% of the SPAC's shares (often referred to as the "promote" or "founder shares"), which are purchased by the sponsor for a nominal amount. These shares will convert into publicly traded shares as part of the de-SPAC transaction, which has the effect of diluting the shares that will be received by the target company's shareholders. Additionally, it is common for the public shareholders of the SPAC, as well as the sponsor, to purchase warrants that are exercisable for publicly traded shares—once exercised, these warrants will also dilute the shares held by the shareholders of the target company. Moreover, because a de-SPAC transaction will typically require a shareholder vote and the SPAC shareholders will have the right to redeem their shares prior to completion of the de-SPAC transaction, there is a risk that the transaction will not be approved or significant shareholder redemptions might leave the company with less capital than is contemplated. BENEFITS AND CONSIDERATIONS 4 Source: (last visited on January 23, 2022). The statements are available at 5

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