Ribbit LEAP Ltd. (NYSE:LEAP) announced late last night that it will not complete a business combination by its initial deadline of September 10, and will instead redeem all shares.
The SPAC will cease all operations on August 15 and shareholders will shortly thereafter receive $10.02 per share. The move marks another high-profile SPAC ending in liquidation as its sponsor, Ribbit Capital, has been a prominent fintech investor with earlier investments in Robinhood (NASDAQ:HOOD), Zillow (NASDAQ:ZG) and MercadoLibre (NASDAQ:MELI).
It also IPO’d with a highly customized SPAC structure designed to align the long-term interests of its sponsor with the target company including a $100 million forward purchase agreement and long-term lock-ups. But, in a letter to investors, Ribbit Capital conceded that the thesis behind this approach was “wrong.”
“Since LEAP’s listing, we held conversations with over 100 potential partners that met our initial criteria for growth, quality, and readiness. We discovered in the process either that those companies did not meet our standard for long-term projected value creation or that they viewed the merits of a transaction with LEAP as less compelling than a traditional IPO or, more commonly, staying private.”
For all of the talk about SPAC sponsors being the party seeking to cut a deal and run, it is interesting that Ribbit LEAP observed the opposite phenomenon in its prospective targets as its long-term alignment structures were more a detriment than advantage in negotiations.
The investor letter also cited other complications, first among them that “SEC commentary and actions contributed to a growing perception of the de-SPACing process as a riskier, more complicated path compared to conventional IPOs, discouraging the highest quality companies from giving the SPAC route earnest consideration”, despite the fact that fintech companies that listed via traditional IPO after Ribbit LEAP were down an average -49% from their IPO price themselves.
Ultimately, the Ribbit team explained that in a highly saturated SPAC market, they “saw little appeal in competing with offers from others willing to get a deal done at any cost.” This indicates that this may have been simply a case of unfortunate timing for Ribbit LEAP’s approach, which may have borne more fruit in a different SPAC cycle.
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