Special purpose acquisition firm prepares to acquire stratospheric balloon startup World View The public is now under the official deadline as the shareholders voted to push back the deadline by which it should complete the deal.
World View, founded a decade ago, originally focused on using a fleet of stratospheric balloons to provide space tourism experiences. For the past five years or so, the company has highlighted the opportunity to fill “a critical gap in the remote sensing ecosystem,” as the an investor presentation from January. In that presentation, World View said it has conducted more than 115 stratospheric flights, with current and past customers including NASA, the US Air Force, and the Sierra Nevada Corporation. In that presentation, the company plans to make $17 million in revenue this year on 15 flights, and up to $89 million by 2025 on 65 flights. (World View declined to comment on whether it is on track to hit this year’s target.)
World View announced that it will merge with SPAC Leo Holdings Corp. II in January, and the two companies said they expect to complete the business combination in the second quarter of this year. At the time, World View told investors that Leo had about $47 million in cash it was committed to using to expand its stratospheric flight operations.
But since that date, Leo has continuously extended the date by which the merger must be completed. According to regulatory filings with the Securities and Exchange Commission (SEC), Leo has extended the deadline seven times since announcing the World View deal, and 87.9% of shareholders recently voted to allow eleven more. month extensions – until October 12, 2024 .
Under SEC regulations, SPACs generally have two years to complete the merger with their target company after listing, according to Pitchbook. If the SPAC cannot convince shareholders to approve deadline-extensions, or if options run out, the rules require the SPAC to be liquidated.
World View declined to comment for this story “due to legal restrictions on material non-public information,” a spokeswoman said. Leo did not respond to TechCrunch’s inquiry by the time of publication.
The blank-check firm faced issues even before the business combination was announced. Regulatory filings show Leo Holdings Corp II raised $375 million in a January 2021 IPO. But two years later, and less than a week before the World View merger was announced, shareholders exercised their right to redeem a staggering $334 million of that amount. The SPAC’s quarterly reports show the loss: as of November 2022, the company reported having $376.6 million on hand; six months later, that number had dropped to just $47.6 million.
Leo isn’t the only SPAC seeing high redemptions; according to SPAC Research, as quoted by Russell Investments, more than 90% of investors generally chose to redeem their shares in the first quarter of 2023. Unfortunately for World View, redemptions continue. In October, shareholders elected to redeem another $6.3 million in shares, leaving the cash-in-trust going to World View to about $43 million.
Dozens of companies enter the public markets by merging with a special purpose acquisition company, a shell or blank-check firm that raises capital through the public markets with the sole purpose of acquisition or merger. of a private company to take it public. The space industry has undergone its own SPAC boom in the past two years, with major companies including Astra, Virgin Orbit, Satellogic, Momentus and several others undergoing their own mergers.
But almost all of them failed miserably in their own financial projects; because of this, many companies’ market caps are only a fraction of their valuation at the time the SPAC is announced. Some are even worse: Virgin Orbit went bankrupt, and Astra looks set to follow suit.
The boom-and-bust pattern is not unique to the space industry; as a result, the SEC proposed imposing stricter rules on SPAC transactions. The data suggests a slowdown in SPAC transaction closings across the board, which could explain at least part of the delay here — but not all of it. According to Mergermarket, the average time between SPAC IPO and merger completion was 22.5 months in the fourth quarter of 2022, compared to just 11.2 months in the fourth quarter of 2021. However, it has been more than 34 months since Leo IPO; if the company cannot complete the transaction, it must return the money to shareholders and liquidate.