We all knew this was coming, right?
GigCapital, Inc. (GIG) announced this afternoon that the Sponsor and Founders have agreed to contribute $240,000 to GigCapital’s Trust account for each calendar month that is needed to complete their business combination with Kaleyra. The $240,000 is being contributed as a loan and will not bear interest and will be repayable by GigCapital upon consummation of the business combination.
As a reminder, Gig’s vote to extend their deadline six months from June 12th to December 12th, 2019, will take place on June 5th, with a record date of April 26th.
However, while initially the lack of a stated contribution to trust in their most recent proxy pointed to a possible strategic replacement of SPAC investors with PIPE investors, that theory went out the window once the Gig Team filed GigCapital2. There would most likely be little interest in either SPAC since the team would be dividing their attention across two active deals. Consequently, Gig1 and Gig2 were both in a bit of a pickle. The Gig Team had all but ensured a significant amount of redemptions in Gig1, and had given themselves a real marketing problem with Gig2.
However, what’s interesting about this contribution is there isn’t a set per-share amount as we’ve seen in previous extension votes. Typically a team will state $0.025 or $0.03 contributed per month for every share that is not redeemed. Gig’s contribution, however, is just a flat $240,000 per month, which means we won’t know the exact amount per share until all the redemptions have been counted post extension vote.
So, if half of Gig’s shareholder elect to redeem on June 5th, shareholders who remain can expect ~$0.0334 per share every month. However, if three-fourths of Gig’s shareholders elect to redeem, the remaining shareholders can expect a whopping $0.067! Alternatively, if only 25% opt out, it’s only $0.022 per month. This becomes a bit of a gamble now for SPAC investors. They have no idea what they can expect until post-vote. Worst case scenario (for investors), nobody opts to redeem and it’s then $0.0167 per month for the next six months.
This is great for the Gig Team since they’ve capped their contribution at $240,000 per month, but it’s unclear if investors are going to being willing to take the risk. Which means, of course, a massive amount of redemptions, which also completely negates the purpose of the offer of a contribution in the first place.
This vote is going to be interesting. Stay tuned for any further updates.