GigCapital2, Inc. Adds Some Sugar to Sweeten their IPO

This afternoon, GigCapital2 (GIX.U), the second SPAC effort led by Avi Katz, re-filed their S-1 and amended their terms ahead of their expected IPO pricing next week.  Gig2, which is a $130 million TMT focused SPAC, has now added a Right to its Unit and reduced it’s life from 21 months to 18.

Looking more specifically at the changes, Gig2’s new Right is not the standard Right to receive 1/10th of one share, but rather it is 1/20th of one share. However, a right for 1/20th of share on a $130 million deal is rather small.  It’s value is only $6.5 million.  Will that be enough to satisfy investors?

Well, Gig2 has also reduced the duration on their SPAC by three months, down to 18 months total, to find and close an acquisition.  However, they have also added the Crescent Term for this go-around, which adjusts the warrant strike and redemption trigger in the event of the issuance of additional securities in connection with a business combination closing.  In light of Constellation Alpha’s recent announcement of their PIPE done at $3.25 per share for their business combination, the Crescent Term feels 100% necessary. It’s not even a sweetener, it just feels mandatory.  However, what Gig2 did do to sweeten it is change the threshold at which the Crescent Term kicks in.  The $9.20 threshold, which has become customary as of late, has now been given a little extra protective padding with a $9.50 threshold.

All told, Gig2 now has a lot of bells and whistles:  one full warrant, a 1/20th right, 18 months, the Crescent Term. And all those bells and whistles mean that investors have been pushing back on this SPAC in light of the fact that the Gig Team still needs to finish Gig1, which is asking for another six months to close their combination with Kaleyra.  Investors are not happy that this team is going to have a divided focus.  So, in order sell Gig2, this deal needed to be “sweetened-up”.  This SPAC will get done, but the real indicator of investor sentiment will be how it trades day-1.

Revised summary of terms below: