This SPAC is merging with an already-public company as sponsors get creative before time runs out

Traders on the floor of the NYSE, June 8, 2022.Source: NYSESPACs are known to be a roundabout investment vehicle to take private companies public. Not this one.Bull Horn Holdings is merging with biotech Coeptis Therapeutics, a public company traded over the counter. The SPAC sponsors told CNBC they went for a public company partly because of greater transparency via a past performance record, which addresses some of the criticisms levelled against blank-check deals.”We love this deal because it’d already spent some time in the minor leagues and it was ready to move forward. We’ve created a model that should be looked at by everybody,” Bull Horn CFO Chris Calise said in an interview.”There are a lot of sponsors right now and the bell is going to ring pretty quickly. I think they are looking for anything unique to make a deal happen,” Calise said. His SPAC was originally targeting a company in the sports and entertainment industry.This particular deal highlighted the peril many sponsors face as they race the clock to find a target amid a regulatory crackdown and waning enthusiasm. There are nearly 600 blank-check firms hunting for deals right now, most of which launched in 2020 and 2021, according to SPAC Research. SPACs typically have a two-year deadline to merge with a company, and they would have to return capital to investors if a deal fails to come to fruition.Zoom In IconArrows pointing outwardsIt remains to be seen if other sponsors would replicate Bull Horn’s model. It is not uncommon for a stock traded over-the-counter to have a public offering and call it an IPO, according to Jay Ritter, a finance professor at University of Florida who studies IPOs and SPACs.Ritter noted that Coeptis is currently trading at $2.72 per share in the OTC market, below the price the shares should trade at if they are going to be converted into $175 million of shares in the new company at $10 each (there are 38.99 million Coeptis shares outstanding.)”The market is skeptical about the ability of the SPAC to complete the merger without massive redemptions,” Ritter said.The SPAC market took a sharp turn for the worse this year as fears of rising rates dented the appeal for growth-oriented companies with little profits. Some high-profile transactions have also fallen apart, including SeatGeek’s $1.3 billion deal with Billy Beane’s RedBall Acquisition Corp. as well as Forbes’ $630 million deal with former Point72 executive Jonathan Lin-led SPAC Magnum Opus.

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