b'TABLE OF CONTENTSMERGERS & ACQUISITIONS capital post-business combination. In 2021, abeginning in the middle of 2021, redemptions number of SPACs saw large numbers ofstarted to become much more common, even redemptions of their Class A common stock where the SPACs share price was above the sometimes as high as 90% of the public Class Aredemption value. For example, according to stockholdersputting pressure on minimum cashstatistics made available by SPACInsider, of the 23 closing conditions set forth in their respectivebusiness combinations voted on in December business combination agreements. SPACs have2021, 17 SPACs had redemptions of 50% or more of sought creative ways to meet these conditions, fromtheir public shares. The most important securing non-redemption commitments fromimplications of significant redemptions are that the public stockholders to obtaining additionalcombined company no longer has the use of the financing through back-up purchase commitmentsfunds used to redeem public stockholders and from third parties. 2021 also saw the PIPE marketthere could be pressure on the ability of the SPAC get clogged as some historic PIPE investors haveto meet any minimum cash conditions in the decreased their commitment to the market or atbusiness combination agreement.least have slowed down their deal execution. As aFinally, as concerns have grown about the large result, some SPACs have sought alternative sourcesnumber of SPACs seeking deals, some IPO terms of financing, including convertible debt or preferredhave become more investor friendly, especially stock, common equity PIPEs with warrants and evenfor new SPAC investors. Some of these terms discounted PIPEs, all to attract investors with theinclude increased warrant coverage (e.g., offering a possibility of increased returns. full warrant per unit in the IPO rather than a Another significant development in the SPACfraction), a shorter duration (e.g., 18 months before market has been the significant increase in thethe SPAC must liquidate) or increased funding of percentage of shares of being put back to thethe trust (i.e., the SPAC sponsor puts more capital SPAC for redemption in connection with theat risk by overfunding the trust account).business combination. Common to all SPACs, public stockholders of the SPAC have the right toRegulationcause the SPAC to redeem their sharesthoughThere was also a flurry of activity on the not their warrantsin connection with a businessregulatory front in 2021 that made clear the combination at a price equal to pro rata portion ofSecurities and Exchange Commission (the the funds on deposit in the SPACs trust account, orSEC) has SPACs in its crosshairs. essentially $10.00 plus interest from the date of theIn early April 2021, in a prepared speech given at a IPO. Thus, stockholders would have a disincentivePracticing Law Institute conference, John Coates, to put their shares if the trading price of thethe then acting director of the SECs Division of SPAC was above the redemption value.Corporate Finance (he was named the SECs Stockholders historically did not typically exerciseGeneral Counsel in June 2021), commented that redemption rights even when the SPACs sharethe deSPACing process may lead to some price was below the redemption value. However,significant and yet undiscovered issues. MAYER BROWN |25'