It’s the green light for the Kew Media Group, the latest – and sixth – special purpose acquisition company to have found a positive reception from investors.
The company, which made at least one previous attempt to raise capital, has now filed a final prospectus for its initial public offering. The first attempt – where the issuer intended to raise $70 million – was made late last year. In February, when the original prospectus became stale, the company filed an amended prospectus that was not taken to investors. Put it down to market conditions.
So early last month the issuer filed a new prospectus, which it took on the road to round up investors. When it was all over Kew Media had raised the $70 million that it was seeking, with the bulk of those commitments coming from institutional investors.
“It’s done and dusted,” noted one market participant, adding that Kew Media “intends to be growth-oriented and target opportunistic, and to acquire value-added investments in the media production and distribution industry and/or related sectors.”
In this way Kew Media is different from the other five SPACs that have been financed. Kew is sector specific whereas the other five – which have all raised larger amounts of capital – are seeking targets in virtually all industries.
But in getting its $70 million, Kew Media was required to make a couple of changes compared with the other five that have been financed.
For one, it offered the investors a more attractive deal. The plan, when the preliminary prospectus was filed last month was to issue units with each unit consisting of a common share plus half a share purchase warrant. During the road show, the terms of the deal changed: As a result investors are now being offered a common share plus a full warrant. The terms applying to the full warrant are the same as the terms that apply to the half warrant, it runs for five years and has an $11.50 exercise price.
One reason for the extra concession offered to investors in this transaction may have been the angst experienced by institutional investors over the lack of action from the other five SPACs. In short, the investors – who have anted up more than $1 billion so far on the previous SPACs – would like to see a qualifying transaction proposed, to know officially, that the sponsors and founders are working hard to get a deal.
If and when a deal is proposed the shareholders have lots of opportunities to give their views on it. They can accept it, they can vote against or they can vote to accept the cash offer. Typically the sponsors have two years to bring a deal to shareholders.
Secondly, given the desire by the institutional investors for some action on a qualifying transaction, Kew Media changed the terms on its offering when it filed the preliminary prospectus about a month back. Rather than take the traditional two years, Kew opted for a shorter period. And the clock is ticking 12 months from the date of closing: if it’s unable to consummate a qualifying acquisition within that time period, investors get their money back. Kew has a maximum of 18 months to get a deal done.