Posted on: September 24, 2023, 07:38h.
Last updated on: September 24, 2023, 07:38h.
Jason Ader’s 26 Capital (NASDAQ: ADER) is set to liquidate after losing a recent court case related to its attempted merger with Okada Manila.
The special purpose acquisition company (SPAC) announced its plans to liquidate a trust account on Sept. 21, and it will not be depositing the final monthly installment payment of $275,000 to extend the merger timeline. Typically, SPACs have 24 months to complete a transaction before being faced with the possibility of liquidation. 26 Capital began its initial public offering (IPO) in January 2021, and later attempted a reverse merger with Okada Manila that valued the company at $2.6 billion.
In October of last year, 26 Capital and Universal Entertainment, the parent company of Okada Manila, agreed to extend the merger termination date by a year in an effort to finalize the deal.
However, the parties were unable to complete the merger due to conflicts and legal disputes. The Delaware Court of Chancery ruled earlier this month that Universal Entertainment can abandon the merger agreement.
Small Pulse for 26 Capital
When a SPAC liquidates, investors receive their capital back. There is a possibility that 26 Capital shareholders may receive additional compensation despite the liquidation.
Although the judge ruled that Universal Entertainment is not obligated to proceed with the merger, he also ruled that 26 Capital can pursue financial damages against the Japanese gaming company. 26 Capital has stated its intention to pursue these damages.
“26 Capital is committed to vigorously pursuing all available remedies against the UEC Parties, including damages, and it will issue further releases with updates on such remedies and any such recovery as needed,” according to a statement issued by the SPAC. “In connection with the liquidation of the Trust Account, 26 Capital will redeem all of the outstanding shares of common stock that were included in the units issued to public stockholders in its initial public offering at a per-share redemption price of approximately $10.95, before taking into account the removal of a portion of the accrued interest in the Trust Account to pay taxes and dissolution expenses.”
Typically, SPAC shares are priced at $10 each until a deal is announced. However, 26 Capital closed at $11.07 last Friday.
26 Capital Liquidation Mechanics
The outcome of 26 Capital’s pursuit of punitive damages against Universal Entertainment, and any potential benefits for investors, are still uncertain. However, there are a few other important details for shareholders to be aware of.
Firstly, the SPAC’s shares will be cancelled on Monday, Sept. 25, and public investors will receive the aforementioned redemption amount. Proceeds from the trust account will be held until they are distributed to investors.
“26 Capital’s sponsor has agreed to waive its redemption rights with respect to its founder shares issued in a private placement prior to 26 Capital’s initial public offering. There will be no redemption rights or liquidating distributions with respect to 26 Capital’s warrants, which will expire,” added the SPAC in the statement.