This morning, Chardan Healthcare Acquisition Corp. (CHACU) filed for a $70 million, Chardan-backed SPAC focusing on Healthcare companies in North America. Chardan Healthcare will be led by senior members of Chardan Capital Markets, a veteran SPAC underwriter.
Gbola Amusa, who has served as Partner, Director of Research, and Head of Healthcare Equity Research at Chardan Capital Markets since December 2014, will be Chairman of the Board for this team and Jonas Grossman, the current Partner and Head of Capital Markets for Chardan, will be leading as President and CEO. Finally, George Kaufman, who is currently Managing Director and Head of Investment Banking, will be CFO and Head of Strategy.
Looking at this SPAC’s structure, these terms look very aggressive. Of the five deals currently on file (CF Finance, Monocle, Schultze, Andina III, Chardan Healthcare), only Chardan Healthcare is offering a 1/2 share in their warrant. AND, it’s the only SPAC on file with a 24 month life. On top of that, the warrant trigger to call the warrants for redemption is set at >$16.00, rather than the standard >$18.00. (We’ll be putting together a comparison of all five, shortly)
Additionally, you will also notice that the underwriting fee is not being split as upfront/deferred. That’s because Chardan has decided to take a flat fee of just $500K, which makes sense since this is their deal and by lowering the underwriting fee, it reduces the amount of at-risk capital needed to bring the trust to 100%. However, they are purchasing their at-risk capital warrants at $0.40.
Since there is a conflict of interest with Chardan Capital Markets underwriting a SPAC with Chardan as a sponsor, Chardan Healthcare will be utilizing B. Riley FBR as their Qualified Independent Underwriter, but again, just like CF Finance, the QIU is not on the cover. That’s branding, folks. Both Chardan and Cantor want their deals to be 100% their own.
It remains to be seen if Chardan Healthcare will stick with these terms given the comparison to the other four SPACs currently on file. It’s aggressive for sure, but it’s a lot easier to start high rather than work your way up from low.
Chardan is sole book-running manager.
Loeb & Loeb LLP and Schiff Hardin LLP are issuer’s counsel and underwriter’s counsel, respectively.