Black Ridge Acquisition Corp. Gets Another $5M Backstop


Black Ridge Acquisition Corp. Gets Another $5M Backstop

Jun 26, 2019 INTEL by Kristi Marvin

This afternoon, Black Ridge Acquisition Corp. (BRAC), announced that they have entered into a Letter Agreement for another $5 million backstop in addition to their previous $5 million backstop with TV Azteca. This new backstop is with Simon Equity Development, LLC (“Simon”), an indirectly wholly-owned subsidiary of Simon Property Group, Inc., and Allied Esports Media, Inc., which is a party to BRAC’s proposed business combination.

The signed Letter Agreement calls for Simon to purchase $5,000,000 of newly issued shares of BRAC common stock at the closing of the Business Combination at a price equal to the per share amount in BRAC’s trust account.  However, the dollar amount of newly issued shares will be reduced by the dollar amount Simon spends purchasing shares of BRAC in open market or privately negotiated transactions.  Simon would agree not to convert any shares purchased in the open market or in privately negotiated transactions at the shareholder vote to approve the Business Combination.

The terms of this backstop are the same as the ones given to the $5 million TV Azteca backstop.  In summary:

  • one additional share of Black Ridge common stock for every ten (10) shares that are purchased, or 1/10 of a share.
  • one warrant to purchase one (1) share of Black Ridge common stock for every two (2) shares purchased. The terms are the same as the public warrants

Additionally, just like TV Azteca, as part of that $5 million purchase, Simon and BRAC have agreed to work together on various future projects to “to bring esports experiences to Simon’s mall locations across the United States.”  That’s a little vague, but okay.

The takeaway is, Black Ridge now has $10 million in backstops to close their combination.  However, BRAC’s shareholder meeting to approve their extension has been scheduled for July 8th, but we still don’t have a fully filled-in proxy.  There are still a lot of blanks.  For example, we still don’t know how much time they will be asking for, or how much they intend to contribute to the trust for remaining shareholders post the extension vote.

Interestingly, BRAC had previously scheduled their vote to close this combination for June 28th, so they sounded close to wrapping up this deal. Hence, perhaps they don’t need a full three months extension.  Additionally, now that they have a $10 million backstop, maybe they also won’t offer any additional contribution if they only need a month or so. We won’t know until Black Ridge files that proxy, but it should be coming any day now ahead of the July 8th vote.

Stay tuned for any further updates.