Modern Media (MMDM) Intends to Get a PIPE at $8.00


Modern Media (MMDM) Intends to Get a PIPE at $8.00

Jul 30, 2019 INTEL by Kristi Marvin

In the least surprising news of the the week (so far), Modern Media Acquisition Corp. (MMDM), filed a new Preliminary Proxy/F-4 this morning and included within it was the news of an intended PIPE financing to be done at $8.00.  A date for a shareholder vote has still not been scheduled as of yet, but Modern Media has until September 17th to close their combination with Akazoo Ltd.

However, going back to that $8.00 PIPE, let’s start with a little background and how MMDM got here. If you recall, Modern Media originally raised $207 million at their IPO back on May 11, 2017. Subsequent to that, Modern Media has had two extension votes. At the first extension vote, back in February of this year, $61 million was removed from trust due to redemptions.  At the second extension vote, held in June, MMDM did not offer any contribution to trust to extend. As a result, nearly $140 million redeemed leaving just $14.7 million in trust.  However, there is a condition to closing that MMDM have no less than $53.0 million of available cash upon the consummation of the Business Combination.  So clearly this deal was going to need a PIPE.


However, before we get to the PIPE, there were a few changes to the Transaction Agreement as well.  Per the proxy, on July 29, 2019, the parties to the Business Transaction Agreement and Macquarie executed a Letter Agreement that amended certain provisions of the Business Transaction Agreement to provide for the PIPE Financing and agreed to the terms of the PIPE Financing. Specifically, the Letter Agreement provides that:

  • The sponsor will forfeit 2.6 million PubCo Ordinary Shares (promote shares) upon consummation of the Business Combination
  • The sponsor will also forfeit 7.32 million PubCo warrants (private placement warrants) upon consummation of the PIPE Financing
  • Depending on the amount of available cash that MMAC has upon consummation of the Business Combination, certain PubCo Ordinary Shares sold in the PIPE Financing may include PubCo Ordinary Shares held by former shareholders of Akazoo (promote shares)
  • A certain number of PubCo Warrants will be issued for no additional consideration to holders of PubCo Ordinary Shares that previously held Akazoo equity, equal to the difference between the total amount of PubCo Warrants forfeited by the sponsor and the total amount of PubCo Warrants issued to investors in the PIPE Financing as an incentive to participate in the PIPE Financing, subject to a minimum issuance of PubCo Warrants which decreases as the amount raised in the PIPE Financing increases.
  • Macquarie also gets a right of first refusal for the duration of the Lock-Up Period to serve as a bookrunning managing underwriter, bookrunning managing placement agent or bookrunning managing initial purchaser in connection with any offering or placement of securities or other credit transaction by PubCo and to serve as financial advisor in connection with any disposition of the business, assets or voting securities by PubCo.



To be clear, MMDM is still in the process of securing committments to the PIPE, but they do state that they anticipate that the PIPE shares will be sold at $8.00.  Furthermore, as per the Letter Agreement, MMDM has the ability to offer, for no additional consideration and as an incentive, shares and warrants up to an amount equal to the sponsor shares and warrants MMDM intends to forfeit.  Basically, MMDM will be transferring part of the promote and private placement warrants to PIPE investors as a sweetener.

Additionally, MMDM states that they anticipate issuing 5,926,029 shares in the PIPE, which at $8.00, means a $47.4 million raise.  However, the agreement also provides for a tiered amount of sponsor shares to be forfeited so that depending on how much MMDM has in aggregate at closing (PIPE financing + trust account), they will forfeit shares according to the following schedule:

  • An aggregate of $60 million of available cash after consummation of the Business Combination, the sponsor has agreed to forfeit 2.35 million PubCo Ordinary Shares
  • An aggregate of $70 million of available cash after consummation of the Business Combination, the sponsor has agreed to forfeit 2.1 million PubCo Ordinary Shares.

This is instead of the 2.6 million PubCo Ordinary Shares originally agreed to be forfeited in the Letter Agreement.

Lastly, MMDM does not intend to accept subscriptions in the PIPE Financing after August 16, 2019, which tells us that the shareholder vote will at least be after that date.

Nevertheless, when a PIPE is announced below $10.00, a SPAC can (and should) expect a complete redemption of the trust account, which calls in to question the float and Nasdaq eligibility, per the new rules.  This transaction will most likely result in a nearly non-existent float (temporarily, before Rights shares are delivered), but it remains to be seen what the lock-ups will look like for any PIPE investors since a subscription agreement hasn’t been filed yet.  Removing lock-ups creates other issues, but it remains to be seen how MMDM intends to address this float issue.

UPDATE:  Yes, there will be 2.07 million Rights shares added to the float post-combination, but that’s still not a “huge” float and as we saw with PECK (which had Rights) and KERN, which had a float of approximately 1.4 million shares post-closing, that level of float is enough to cause issues with volatility in the share price.

Stay tuned…