This afternoon, we had another new SPAC filing with the addition of UTXO Acquisition Inc. (UTXOU), a $50 million SPAC focused on companies in Asia and North America.  UTXO will be led by Dr. Wei Huang, as Chief Executive Officer.  However, since a “management section” seems to have been skipped in the filing and only one other team member was listed (CFO And COO – Dr. Yuanyuan Huang), and there are currently no board members, it’s a little hard to say.

In fact, it’s hard to say a lot about just what’s going on with this filing since it seems to leave more questions than answers. However, let’s start with the obvious anomalies. For one, UTXO is an 18 months duration SPAC, but it can extend twice, for 3-months each time, for a total of 24 months.  Except, there’s no criteria for extending (such as an LOI or definitive agreement on file) and there is no contribution to trust of any kind if they do extend.  So basically, if they can’t complete a combination by 18 months, they just get to extend?  That’s not an 18-month SPAC, that’s a 24-month SPAC.

Additionally….there’s that pesky missing management section.  Keep in mind that SPAC’s are not operating companies. They are blank check companies and pretty much the most important thing you are selling in a SPAC IPO is the management team.  And yet, they left that section out.  To be clear, they included Dr. Wei Huang and Dr. YuanYuan Huang’s bios upfront in the summary section, but that’s not necessarily obvious and we’re still missing, ummm, a Board.  But ok, let’s assume they’ll drop that in later and look at the bios we do have.

Dr. Wei Huang, UTXO’s CEO, is a mathematician and geophysicist by training and previously worked as a project manager for Schlumberger, until 2013, and ION Geophysical as a technical advisor from 2013 to 2018. However, Dr. Huang is also the founder of and currently serving as the Chairman of the Board of Dake Data, Ltd., which according to Dake’s website, is a diversified blockchain and cryptocurrency company, founded in 2017.  So maybe Dake was started as a side gig while he was still at ION and it grew to the point where it became a full time gig.  No shame in that game, side gigs are common place now. However, this isn’t really “deal-making” experience.

As for Dr. YuanYuan Huang, he has “over 10 years of experience as a financial professional providing investment banking services to start-ups, small to middle-sized companies, and venture capital and private equity firms. (Note: but it doesn’t say where he worked or what his position was) Since June 2018, Dr. Yuanyuan Huang has served as the Managing Member of Fundin, LLC, a consulting firm providing information technology consulting services to private real estate equity funds and developers.”  He also sounds like a pretty smart guy having obtained his Ph.D. in Physics from William and Mary in 2007, and a master’s degree in Finance from the George Washington University in Washington, D.C. in 2008.  Plus, he is also the main contributor to a proprietary algorithm for analyzing Solid State Nuclear Magnetic Spectrum. Which, I have no idea what a solid state nuclear magnetic spectrum is, but it sounds fancy.

But here’s the thing, UTXO is essentially asking for a 100% in trust, 1/2 warrant, 24 months SPAC deal.  Plus, they’ve left out the Crescent Term, have a warrant call trigger at $16.50, but kicked in a right in the unit at 1/10.  Oh, and there are currently only two guys on the team and they don’t have a Board.  Or a management section.  Or deal making experience.

If those terms sound “off” to you, you would be in the majority of opinions.  However, I chalk it up to both the underwriter (Univest) and issuer’s counsel (Getech Law LLC) being new to the SPAC game.  It’s okay to be new.  The SPAC door is always open.  But in the current SPAC market, it’s really helpful to have SPAC experience. In UTXO’s case, both underwriter and issuer’s counsel are very green and the terms reflect that misread of the market.

So what should UTXO do going forward….for starters, they should add some team members with some solid M&A experience. They’re also going to need to either fix those extensions with some contributions to trust for extending, or just stick with 18 months. Bring that warrant call trigger to $18.00 and add in a Crescent Term at $9.50 and then they’re in line with deals of other comparable size and focus.  Frankly, I’d rather see them get rid of the right and just over-fund at 101%, but let’s stick with the basics for now.

Current summary of terms below, but let’s see if the terms change in subsequent filings. (Terms might not change, by the way. $50 million is a lot easier to get to than $200 million and the SPAC market is hot.  But if UTXO gets done at these terms, all bets are off as to what else can get done.)

Univest Securities, LLC is sole book-runner.
Getech Law LLC & Hunter Taubman Fischer & LI LLC are issuer’s counsel and underwriter’s counsel, respectively.
Marcum Bernstein & Pinchuk LLP is auditor.