Mountain Crest Acquisition Corp. (MCACU), the latest SPAC to file for IPO, debuted a $50 million deal that has a unit with just one share and one right (1/10), but without any warrants. However, Mountain Crest IS offering an over-funded trust at $10.20 day one. It’s a bit curious to remove warrants in an environment where other SPACs are increasing their warrant coverage in order to sell. So will this structure work?
Not including a warrant in a SPAC unit is unusual, but not unheard of. Atlantic Acquisition Corp., which is now HFFG, had a similar structure and was also underwritten by Chardan. Atlantic was also over funded at $10.20 with one share and one right, but was a $40 million IPO versus Mountain Crests $50 million. However, the big advantage in not having any warrants associated with a SPAC is in negotiation with a target company. They get to start day-one as a public company without a public SPAC warrant overhang and the rights convert to shares at closing. It’s a much cleaner structure. However, in light of the absence of warrants, Mountain is over-funding at $10.20 in trust at day-one of IPO.
Additionally, Mountain Crest intends to focus on companies in North America and will be led by Dr. Suying Liu, as Chairman and CEO. Dr. Liu has been the Head of Corporate Strategy of Hudson Capital Inc. (Nasdaq: HUSN) since May 2020, where he leads the company’s strategic development for both general operations and specific growth areas. And while May of 2020 is fairly recent, between November 2018 and April 2020, Dr. Liu served as the Chief Strategist of Mansion Capital LLC, a privately-held real estate investment firm with brokerage and property management operations serving clients from both North America and Asia for their investments in the U.S. real estate market.
Looking at the rest of Mountain Crest’s structure, this SPAC has 12 months to close a combination, but can extend three times, for 3-months each, by contributing $0.10 per share to trust, or 21 months total. There is no Crescent Term included because there aren’t any warrants. However, Mountain Crest is only trying to raise $50 million and it’s a lot easier to get to $50 million than it is to $200 million or $300 million. So this will be another interesting test case…maybe $10.20 is attractive enough to generate interest. We’ll have to wait and see.
Summary of terms below:
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