Nebula Acquisition Corp. (NEBU), which is currently scheduled for an extension vote on January 9th, filed an 8-K this afternoon stating that they are in “advanced discussions” with a company in the lending enablement and risk analytics space. Per tonight’s filing, the potential target,
“…provides advanced analytics and risk-based pricing solutions to lenders through its technology platform; the platform leverages extensive proprietary data to help lenders better predict loan performance. The company is currently owned by the founders, management, and a number of other minority investors, including a prominent US-based growth equity firm. Nebula believes that the company’s financial profile is compelling: consistent EBITDA margins exceeding 50% and revenue growth above 30% for fiscal year 2018 and 2017.”
The total enterprise value of the proposed transaction is anticipated to be approximately $1.3 billion, representing a multiple of 2020 expected EBITDA that is less than 13.0x. So this has the makings of a potentially interesting deal.
However, why is Nebula releasing this information now, without a definitive agreement on file, and without being able to disclose which company this is? Well, it probably has something to do with their upcoming extension vote. If you recall, Nebula will be asking for an additional five months, which moves their completion deadline from January 12, 2020 to June 12, 2020. However, Nebula is NOT currently offering any contribution to trust for shareholders who do not redeem at the extension vote. So today’s announcement seems like a bit of advertising on Nebula’s part for why investors should not redeem so they can protect their cash in trust. Mostly because they might not be able to hammer out a definitive agreement and “officially” announce in time before that extension goes to a vote.
But still…not redeeming is a bit of a big ask for investors. They don’t know who the company is, or any of the financial details, or the structure of the intended transaction, or what if the company decides to walk away? Yet Nebula is asking investors to extend five whole months without a contribution to trust without knowing any of that information.
Today’s announcement is certainly intriguing, but a $0.03 per month contribution to trust would make investors’ decisions a lot easier. However, that could be prohibitively expensive for the Nebula team. Nebula raised $275 million at IPO, so a $0.03 contribution per month, for five months, for all 27,500,000 shares is $825,000 per month, or $4.125 million if they need all five months! Even at $0.02 per month, that could potentially be a $2.75 million dollar bill.
Best case scenario, Nebula announces their deal ahead of their extension vote and the deal is awesome. At that point, if the share is trading above trust, there won’t be any need for a monthly contribution. Stay tuned.