TKK Symphony Acquisition Corporation (TKKS), which announced last night that they would be further extending the expiration of its tender offer for a seventh time, also announced that if they were not able to close their combination with Glory Star New Media by February 20th, they would be issuing a dividend of one warrant to purchase one-half of one ordinary share to outstanding shareholders as of Februrary 21, 2020. However, the questions was, why? Well, we have an answer now and it goes back to TKKS’s IPO prospectus.
“We will have until 18 months from the consummation of this offering to consummate our initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination within 18 months, we may, by resolution of our board of directors, extend the period of time to consummate a business combination for no more than four (4) months as set out below.
Pursuant to the terms of our amended and restated memorandum and articles of association and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company on the date of this prospectus, in order for the time available for us to consummate our initial business combination to be extended, we must issue to holders of our public shares by way of a dividend one warrant to purchase one half of an ordinary share for an aggregate of up to 22,000,000 potential extension warrants, or 25,300,000 potential extension warrants if the underwriters’ over-allotment option is exercised in full.”
In a nutshell, TKKS is going to extend their completion deadline four months if they can’t close by the 20th. And rather than the typical two or three cent contribution to trust that we usually see in an extension, TKKS will be issuing a warrant dividend instead. If you’ve previously tendered your share, they’ll still remain outstanding at February 20th, until they are paid from the trust. So tendered shares will still be entitled to the warrant dividend.
All of this means that regardless of what the trust looks like at the 20th, even if the cash in trust is fully depleted due to the tender offer, TKKS will have four more months to go get a PIPE and replace that cash (if they decide to do that). Plus, warrant holders will get another 1/2 warrant. Or, TKKS and Glory Star can just decide to close regardless of how much cash they have. However, the fact remains that TKKS would be adding a significant amount of warrants to an already sizeable overhang if they extend, so ideally, TKKS closes before the 20th.
Regardless, there was no mention of a four-month extension at all in yesterday’s press release, so it seems poorly executed. Stay tuned for further developments.