Compute Health Wants to Amend Their Warrant Agreement
by Kristi Marvin on 2023-07-10 at 7:36pm

Compute Health Acquisition Corp (NYSE: CPUH), recently amended their completion proxy outlining some big changes to their warrants as part of the closing of their business combination with Allurion. Let’s unpack the details.

What’s Changing

In simple terms, Compute Health proposes four main changes to its warrant agreement:

  1. Eliminate of section 4.5 from the original warrant agreement, which provides for the adjustment of the number of shares that a warrant holder receives in case of reorganizations, mergers, or certain other events involving Compute Health, i.e., the “anti-dilution” provision.
  2. Following a Business Combination, each existing warrant will be adjusted to allow the holder to purchase 1.420455 shares of the newly formed company, New Allurion, at the same exercise price of $11.50 per share. Previously, each warrant entitled the holder to purchase one share of Compute Health.
  3. Each holder of Compute Health public warrants will receive half of a New Allurion public warrant for each Compute Health public warrant they hold after the Business Combination.
  4. Extend the term of the Compute Health Warrants to expire six years after the completion of the Business Combination.

Impact on Warrant Holders

The critical question here is: are these changes good or bad for warrant holders?

First, let’s look at the change to the number of shares per warrant. On the surface, it might appear more attractive as each warrant now allows for the purchase of more shares in the new company than before. Instead of exercising one full warrant to purchase one full share, warrant holders would be exercising one full warrant to purchase 1.420455 shares. However, post closing, Compute Health public warrants holders will receive only half of a New Allurion public warrant.

As a result, if you’re a Compute Health warrant holder, in actuality you will be exercising one whole warrant to receive only 0.7102275 shares.

So, if we try to calculate how these changes differ in value, and whereas before the threshold was an $11.50 exercise price, technically, it is now equivalent to $16.19 (if you divide $11.50 by 0.7102275, instead of one warrant).

However, it appears Compute Health and Allurion are compensating for that by adding an extra year to the term of the warrants to provide additional value. Where previously the public warrants had a term of five years, they will now have six years.

Regardless, the item that is going to be of most interest to warrant holders is the elimination of section 4.5 in the original warrant agreement – the anti-dilution provisions. It raises the question as to why does Compute Health and Allurion want to eliminate this?  Are they planning another acquisition or some type of scenario where warrant holders would be disadvantaged without section 4.5? Keep in mind that the warrant proposal requires the approval of at least 50% of holders and section 4.5 is exactly the type of amendment that makes warrant holders itchy to vote no.

 

Recent Posts
by Nicholas Alan Clayton on 2025-05-05 at 8:10am

At the SPAC of Dawn Last week’s hot streak continues this week in the form of a high volume of votes for SPACs. Two are seeking approvals for their business combinations while six more aim to get the stamp on their extension votes. Investors will also have an eye on upcoming Fed comments on Wednesday...

by Kristi Marvin on 2025-05-03 at 10:02am

Terms Tracker for the Week Ending May 2, 2025 Welcome to our weekly column where we discuss the findings from our IPO terms tracker based on the previous week’s pricings. April wrapped with some real momentum. Over the course of the month, 19 SPACs filed new S-1s, while 12 IPOs priced. Furthermore, nine deal announcements...

by Nicholas Alan Clayton on 2025-05-02 at 3:21pm

ProCap Acquisition Corp. (NASDAQ:PCAPU) has filed for a $200 million SPAC to hunt for a fintech or financial services target. The new S-1 filing was BTIG’s second of the week after a two-month break, bringing its 2025 new SPAC filings to five and the bank has so far managed to IPO five SPACs as well....

by Nicholas Alan Clayton on 2025-05-02 at 12:09pm

MSM Frontier Capital Acquisition Corp. (NASDAQ:MSMUU) has filed for a $225 million SPAC to search for a infrastructure target in Africa. The new SPAC will head out on this expedition with a trust that is not overfunded and units that each contain one right to a 1/8 share. It will also have 24 months to...

by Nicholas Alan Clayton on 2025-05-02 at 8:25am

At the SPAC of Dawn This action-packed week in SPACs comes to an end with three more SPACs launching their IPOs, bringing it to nine on the week. And, the crypto strategy that SPACInsider noticed becoming increasingly popular among de-SPACs earlier this year has continued to gain steam. This week, edtech firm Classover (NASDAQ:KIDZ), fresh...

logo

Copyright © 2025 SPACInsider, Inc. All Rights Reserved