Gig Capital (GIG), announced this morning that they have entered into an additional Forward Purchase Agreement in regards to its Rights Shares, this time, with Kepos Alpha Fund L.P. (“Kepos”). If you recall, Gig previously entered into a similar agreement last week with Greenhaven Road Capital, whereby Greenhaven agreed to not sell the Shares underlying its Rights and GigCapital agreed to purchase the shares underlying those Rights, including any additional Rights that Greenhaven might acquire, according to a schedule. Kepos’s schedule is similar, but for a different number of Rights.
The schedule for Kepos is:
- $1.05 per Right or Additional Right for the first 1,000,000 Rights or Additional Rights (which reflects $10.50 per Share for the first 100,000 Shares);
- $1.07 per Right or Additional Right for the next 3,329,950 Rights or Additional Rights (which reflects $10.70 per Share for the next 332,995 Shares);
As of October 1, 2019, Kepos held 579,950 Rights, and Kepos may acquire up to 2,750,000 Additional Rights after October 1, 2019 and prior to the closing of the Business Combination. So, again, at worst Kepos gets their Rights Shares purchased 60 days post-closing (or February 15, 2020, whichever is earlier) for $10.50 per Share, and at best, at $10.64 per Share (it appears that Kepos will get one penny less than Greenhaven’s $10.65, assuming Kepos manages to increase their Rights position to 3,329,950).
More importantly, if both Greenhaven and Kepos manage to acquire the full amount of the Rights according to their respective agreements (10,000,000 and 3,329,950), that would total 13,329,950 Rights out of the available 14,375,000, leaving just 1,045,050 Rights for 104,050 Shares. Additionally, Gig is still (as of today) planning on commencing a cash tender offer for any remaining outstanding Rights. However, maybe they’ll be able to arrange a third Forward Purchase for the last last million or so. Any takers?
However, there is also the possibility that if Greenhaven and Kepos are able to max out their Rights purchases, Gig will decide they don’t need to do the tender offer. After all, the only remaining Shares underlying those outstanding Rights would be a manageable 104,505. Either way, Gig is already on the hook for potentially ~$14 million that they’ll need to spend to purchase all those Rights back from Greenhaven and Kepos, so do they really want to spend another mil tendering the remaining Rights? Obviously, it’s going to depend on how many Rights Greenhaven and Kepos are able to purchase, so let’s see what happens.