In the ongoing 1% excise tax battle, Anzu Special Acquisition Corp I (Nasdaq: ANZU) dropped a supplement to its extension vote proxy this morning. Anzu is holding its previously adjourned extension vote at 9:30AM (ET) today to extend its completion deadline six months from March 4, 2023 up to September 4, 2023.

Anzu’s previously scheduled extension votes were adjourned due to language in its previous proxies stating that it planned to set aside 1% of interest for the tax in the event of a liquidation, thereby reducing the current trust value by $0.10. Investors were obviously not happy about that and it became a real possibility that the extension would be voted down. As a result, the meeting was adjourned so Anzu could come up with a different solution.

Today, Anzu filed that solution, which is to sign an agreement with an insurance agent to cover the tax liability, but only in the event of a liquidation in the calendar year 2023 and only if the extension amendment is passed.

This does mean that the redemption value for shareholders is now $10.17, and not $10.07, at today’s extension vote. But, there are some caveats.  For any shareholders that do not redeem at today’s vote and stay in the deal, they must bank on a deal closing (and not a liquidation) that occurs in calendar year 2023 and no later. However, this is barring any additional engagements with the insurance carrier to cover calendar year 2024.

However, today’s solution presents a bit of game theory again. The choices are: vote yes to ensure the extension vote is passed and protect the $10.17 redemption value or, vote no causing a liquidation and receive only $10.07.  Obviously, investors are going to vote yes.  However, this doesn’t address what happens with redemptions at the vote and the resulting trust value post-vote.

For redemptions, the choice becomes: redeem now and get $10.17 per share or, do not redeem and hope that the deal closes in 2023 and doesn’t liquidate. In the latter scenario, if Anzu does liquidate or close in 2024, the redemption value is reduced $0.10. That’s a tough bet.

As they say, a bird in the hand is worth two in the bush, so today’s vote will most likely be on the high side as far as redemptions since investors will probably prefer the locked-in $10.17 now.  However, it also means the extension vote will most certainly be approved. That means Anzu will get additional time to complete a deal, but a lot less cash to work with. Having said that, redemptions have been high regardless.  The result would probably not be that much different no matter what the roadmap looks like.

Nonetheless, engaging an insurance agent to cover the excise tax is a novel solution for cash strapped sponsors. We’ll have to watch and see if additional SPAC teams pick up this playbook and follow suit.