During 2021, a double-digit number of technology companies from Israel merged into companies SPAC On Wall Street, and as of today they are all showing a sharp decline in value compared to the value in the merger. Recall that SPAC companies are inactive companies that issue on the stock exchange and raise money from the public in order to merge an existing company within a pre-allotted time, and for private companies this is an alternative way to reach the market without an IPO.
The SPAC trend was at its peak between mid-2020 and early 2021, with hundreds of issues of SPAC companies and then many mergers that brought to market even companies that in retrospect were less suited to the public market. As a result, there was a change in the trend and the number of SPAC issues decreased, the market value of merged companies shrank, and the redemption rates in transactions (decision of investors in SPAC to withdraw the investment funds and not participate in the transaction) increased.
One of the most prominent declines among Israeli women was the digital insurance company hippo, Which began trading on the New York Stock Exchange last summer after being merged at a value of $ 5 billion, and today is traded at a value of $ 538 million – a decrease of almost 90% in the value of the company. This is, among other things, in view of the negative sentiment towards companies in the field of inshortech in which Hippo operates, to which were added the sharp declines in the markets and the transition to the preference of value companies over growth companies.
Hippo is focusing on home insurance in the US. As of the end of the first quarter of 2022, the fund had about $ 772 million in cash, of which $ 336 million in cash and the balance of investments. The post and was appointed active chairman, while President Richard McCarton became CEO.
But even after the exchanges at the top, stock hippo Continued to plummet and reached a low of 90 cents a share last week. Since then, the company’s stock has been trading below one dollar for five consecutive trading days. If the trend continues for 30 trading days, the company will receive a warning letter from the TASE management about non-compliance with the conditions for further trading on it, and will be given a six-month period to return and display a price higher than $ 1 – otherwise it may be deleted from trading in New York.
Pagaya merger approved to SPAC
Another Israeli, who despite the negative sentiment in the market is making her way to Wall Street, is the fintech company Pagaya, which will start trading on the NASDAQ this week, after SPAC shareholders approved the deal to merge.
Pagaya announced a merger with the US EJF Acquisition Corp last September, following the weakening of the SPAC trend, so sentiment was already embodied in the deal. Although since then there have been significant upheavals in the markets against the background of rising inflation and interest rates – which is probably not reflected in the value of the merger at this stage. Pagaya’s value in the merger remains unchanged, $ 8.5 billion (EV – value of activity) and the deal becomes the second largest Israeli merger with SPAC, after Iron Source (currently traded at only $ 2.3 billion).
Despite this, not everything in the merger went smoothly: a week before the shareholders’ meeting, the SPAC company reported a rather unusual event – Barclays Bank, which served as one of its financial advisers, announced his resignation.
The bank, which also accompanied the SPAC in the IPO, was defined as a financial and capital market adviser for EJF, so his resignation apparently indicates that he is not behind the deal, or at least behind its terms of completion – probably the company’s value. The bank’s resignation report states that Barclays has notified the EJF and Pagaya of an immediate termination of his position, as well as a waiver of any deferred payment and any commission; In addition, the bank announced that it disclaims any responsibility for the registration document submitted to the SEC (this is a kind of prospectus that a company submits to a US Securities and Exchange Commission prior to a merger with SPAC). However, unlike Barclays, UBS Bank, which serves in the deal as SPAC’s lead financial advisor, remains in office. Pagaya is advised by Bank J. According to Morgan.
The merging Spock stock is plummeting
At the same time, SPAC shares have fallen significantly in recent trading days, having since the merger reported traded almost unchanged and often above $ 10 (the SPAC issue price). In a little over a week, the stock has fallen by 44%, and is currently trading at a price of about $ 5.6. As mentioned, investors in SPAC have the option to vote in favor of the deal but decide to redeem their investment money and not participate in it in the end, and some may also have chosen to sell shares in the market towards the completion of the deal.
Pagaya was founded in 2016 by CEO Gal Krubiner, Chief Technology Officer Avital Pardo and Chief Revenue Officer Yahav Yulzeri. It developed machine-based technology that helps provide accurate credit. PIPE, the private placement accompanying the merger, rose from $ 200 million to $ 350 million.
A number of other companies from Israel are today waiting for the completion of their mergers with SPAC. Selena is expected to complete the merger next quarter at a value of $ 1.2 billion ($ 942 million net of cash), satellite technology company Stickspay announced a merger worth $ 813 million ($ 632 million before cash), the parent security company Securities Securities traded on a subsidiary “A. announced a merger worth more than $ 1 billion, Freytos, which provides transportation technology merging at a value of about half a billion dollars, and recently Holisto from the travel-tech field reported a merger at a value of $ 405 million.