Draper Oakwood Technology Acquisition Corp. (DOTA), put out a press release this morning removing the recently added requirement that in order for shareholders to exercise their redemption rights, they MUST vote either for or against the Business Combination Proposal in addition to redeeming their shares. At first glance, you might think, no big deal…however, it’s a very big deal if you owned shares post-record date of December 5th, 2018.
To explain further, this is an issue of when were you a shareholder of record and DOTA decided to re-work the rules regarding voting and redemption on December 5th. Prior to the voting change, if you bought DOTA shares you could still redeem up to two days prior to the vote and not need to vote yes or no. However, DOTA decided to change the redemption requirement to include that you have to vote in order to be able to redeem. AND, in order to vote, you need to be a shareholder of record by December 5th. That meant that anybody who bought shares after December 3rd (settling Dec. 5th), they were left holding shares they could no longer redeem since their shares would settle post-record date.
This explains why DOTA traded down to roughly $6.00 recently. If you could no longer redeem, get out while you can? However, it made an excellent opportunity this morning for anyone who was fortunate enough to buy them at $6.00 since they are now worth ~$10.27, if redeemed.
However, it makes for an important point – always check the redemption requirements. Unfortunately, in DOTA’s case, they changed the rules while the game was still playing and that seems unfair. The good news is, they made amends and it’s been corrected now.