How The Net Asset Value Is Still In Place For SPACs With Terminated Deals

Along with the hundreds of announced SPAC mergers and closed deals in 2021 came a handful of SPAC deals that were terminated. Here’s a look at what it means for the SPACs that called off mergers.

What Happened: SPACs can terminate deals for numerous reasons including a change in valuation sentiment, missing deadlines or news items coming from the acquisition target.

When SPACs call off deals, they lose the time and money spent to research and attempt to close a deal. The termination also sends the team back to the drawing board to try and find a new acquisition target.

SPACs have a deadline date to meet, which is typically 24 months from its IPO date. With deals called off, many companies find themselves with a smaller window to complete an acquisition. The timing has to include researching the company, the deal announcement, a proper review by the SEC and the voting date for shareholders.

All of these items have to get completed by the deadline. Companies can vote to extend the deadline and in doing so they open a redemption period when shareholders can redeem their shares at net asset value with the changing terms of the original SPAC IPO.

Why It’s Important: Many SPACs fail after announcing the termination of a deal, as investors often see it as a negative sign for the company moving forward.

As shares fall below the typical $10 net asset value, terminated SPACs could offer a value to investors who can redeem the shares upon merger vote for net asset value ($10 plus interest) in the future when a new target is announced and the merger vote process is set. A future deal announcement for a new target could also cause shares to move higher again.

In some cases when no deals can be reached or extension of vote dates, the SPAC can choose to liquidate, returning capital back to shareholders. This happened in 2021 with Yunhong International, which terminated a deal with Giga Energy and then chose to liquidate.

Here are some examples of companies that called off mergers in 2021 with deadlines and stock price information.

Austerlitz Acquisition Corp I AUS

Terminated Deal With: Wynn Resorts, a unit of Wynn Resorts, Limited WYNN
Deal Terminated: November 2021
Deal Deadline: February 2023
Share Price: $9.76
52-Week Range: $9.71 to $16.16

Fast Acquisition Corp FST

Terminated Deal With: Fertitta Entertainment