SPAC delays $350M merger with stratospheric balloon startup World View – again

Specialized acquisition company prepares to resume start-up of stratospheric balloons World Vision the public is now subject to an official deadline, with shareholders having voted to once again extend the deadline by which it must complete the transaction.

World View, founded a decade ago, originally focused on using a fleet of stratospheric balloons to provide space tourism experiences. Over the past five years, the company has instead focused on the opportunity to fill “a critical gap in the remote sensing ecosystem,” as it stated in a presentation to investors from January. In this presentation, World View states that it has completed more than 115 stratospheric flights, with current and past customers including NASA, the US Air Force and the Sierra Nevada Corporation. In that presentation, the company projected generating $17 million in revenue this year from 15 flights, and up to $89 million by 2025 from 65 flights. (World View declined to say whether it was on track to meet this year’s goal.)

World Vision announced its merger with SPAC Leo Holdings Corp. II in January, and both companies said they expect to complete the business combination in the second quarter of this year. At the time, World View told investors that Leo had about $47 million in cash that it would use to expand its stratospheric flight operations.

But since then, Leo has continued to push back the date by which it must finalize the merger. According to regulatory filings with the Securities and Exchange Commission (SEC), Leo has extended the deadline seven times since announcing the World View deal, and 87.9% of shareholders recently voted to authorize eleven additional extensions of one month – until October 12, 2024. .

Under SEC regulations, SPACs generally have two years to complete the merger with their target company after listing, according to Pitchbook. If the SPAC fails to convince shareholders to approve the deadline extensions, or if it exhausts these options, the rules require that the SPAC be liquidated.

World View declined to comment for this story “due to legal restrictions on material nonpublic information,” a spokesperson said. Leo did not respond to TechCrunch’s request at the time of publication.

The blank check company had faced problems even before announcing the business combination. Regulatory filings show Leo Holdings Corp II raised $375 million in its January 2021 IPO. But two years later, and less than a week before the World View merger was announced, shareholders exercised their right to repurchase a staggering $334 million of that value. The SPAC’s quarterly reports reflect this loss: As of November 2022, the company reported having $376.6 million; six months later, that figure had dropped to just $47.6 million.

Leo is not the only SPAC to have seen dizzying buyouts; according to SPAC Research, quoted by Russell Investments, more than 90% of investors on average chose to repurchase their shares in the first quarter of 2023. Unfortunately for World View, the repurchases continued. In October, shareholders elected to repurchase an additional $6.3 million in stock, leaving the cash in trust that would accrue to World View at about $43 million.

Dozens of companies have entered the public markets by merging with a special purpose acquisition company, shell company, or blank check company that raises capital in the public markets for the sole purpose of acquiring or merge with a private company to take it public. The space industry has seen its own SPAC boom over the past couple of years, with major companies like Astra, Virgin Orbit, Satellogic, Momentus and a handful of others making mergers of their own.

But almost all of them missed their own financial projections; as a result, the market capitalization of many companies is only a small fraction of their valuation at the time of the SPAC announcement. Some have done even worse: Virgin Orbit went bankrupt and Astra seems poised to follow suit.

The boom and bust pattern is not unique to the space industry; as a result, the SEC has proposed imposing stricter rules on SPAC transactions. The data suggests a widespread slowdown in SPAC deal consumption, which could explain at least some of the delay here – but not all of it. According to Mergermarket, the average time between a SPAC IPO and completion of a merger was 22.5 months in Q4 2022, compared to just 11.2 months in Q4 2021. However, that’s more than 34 months since Leo’s IPO; If the company is unable to complete the transaction, it must return the money to shareholders and liquidate.