SPAC Founders Kept Millions Despite Merger’s Failure (Bloomberg Law)

Covered by Bloomberg Law

A shareholder of VPC Impact Acquisition Holdings II (ticker: VPCB), a SPAC launched by Victory Park Capital, has filed suit against the SPAC’s sponsor and other insiders after the SPAC announced that it will not distribute the value of the SPAC’s net assets to public stockholders during the SPAC’s liquidation. VPCB initially announced a transaction with Kredivo, which it valued at $2.5 billion, but announced in March 2022 that the agreement had been mutually terminated. In connection with the termination, the SPAC disclosed that (i) Victory Park orchestrated for itself and other institutional investors a $145 million private investment in Kredivo; (ii) Kredivo agreed to pay to the SPAC $4 million as a reimbursement of transaction costs; and (iii) Kredivo agreed that, if the SPAC failed to identify a replacement transaction, it would issue warrants permitting the SPAC to acquire up to 3.5% of Kredivo’s outstanding equity.

By MoKa

In March 2023, the SPAC announced that it had failed to identify an alternative transaction and would liquidate and dissolve. Instead of distributing the value of the Kredivo warrants to public stockholders, the SPAC announced that all public shares would be redeemed immediately and that the “redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any).” Following the redemption, Victory Park and the SPAC’s other insiders will stand to reap the value of the Kredivo warrants, and have hired a third-party liquidator to determine how to liquidate and distribute the assets.

At the original transaction valuation, the equity stake in Kredivo was valued in excess of $87 million. At a more recent valuation, the warrants are worth $50.4 million. Each of the defendants in the lawsuit agreed, in connection with the SPAC’s IPO, that they would not be entitled to any of the SPAC’s assets in a liquidation and that their failure to complete a business combination would result in a total loss of their initial investment in the SPAC.

The plaintiff, ATG Fund II LLC, is managed by ATG Capital Management LLC and represented by Morris Kandinov LLP.

Contact Aaron Morris for additional information.