Gobi Acquisition Corp. Wants Shareholders to Vote on Liquidating

news update

Gobi Acquisition Corp. Wants Shareholders to Vote on Liquidating

In a usual move this afternoon, Gobi Acquisition Corp. (Nasdaq: GOBI) filed a proxy for a shareholder vote, but it’s not to extend its deadline. Instead, Gobi intends to shrink its timeline so it can liquidate early.

As background, Gobi Acquisition Corp priced its IPO nearly a year ago, on June 29, 2021, raising approximately $255 million. It is a 24 month SPAC so its current completion deadline is July 1, 2023.  So with roughly 12 months left on its clock, it is asking shareholders to vote on amending its completion date to July 22, 2022 (two weeks from now) so that it can liquidate its trust early.

At first blush, you might be asking, “why can’t it just announce it wants to liquidate without having to go to a vote”? Well, Gobi was helpful enough to provide some reasons. From today’s proxy filing:

“The Board believes that the current provisions of the Memorandum and Articles of Association and the existing Trust Agreement described above were included to protect Gobi’s shareholders from having to sustain their investment for an unreasonably long period if Gobi were unable to find a suitable initial business combination target in the timeframe contemplated by the Memorandum and Articles of Association. However, even though the Board has determined that it is very unlikely that Gobi would be able to complete a business combination before the Original Termination Date, in the absence of a resolution passed pursuant to the Companies Act (2022 Revision) of the Cayman Islands to commence the voluntary liquidation of the Company prior to the consummation of a business combination, Gobi is not permitted by the Memorandum and Articles of Association and the existing Trust Agreement to return the funds in the Trust Account to Public Shareholders by way of liquidating the Trust Account until after the Original Termination Date, and the Public Shareholders may only exercise their redemption rights in connection with a shareholder vote on a proposed business combination or upon the approval of an amendment to any provision of the Memorandum and Articles of Association relating to the rights of holders of Class A Ordinary Shares.”

For the “too long, didn’t read” version, they’re saying that because of the way company documents are worded, they’re not allowed to return funds (meaning, if they liquidate) until they either run past a Termination Date with a previously announced combination, or if they redeem at a shareholder vote.

But, if we are to read into the tea leaves even further, the fact that Gobi wants to liquidate so early (with one year left on the clock), Gobi needs to protect themselves from litigation by putting the choice of liquidation up to shareholders, not themselves, in case shareholders are upset Gobi didn’t try to find an acquisition with so much time left.

Which is interesting because it’s still a shareholder vote and investors can still vote “no” and force Gobi to continue looking (or more likely, wait another 12 months to liquidate). But what would be the point? For an extra $0.10 or so of interest while waiting 12 months? Also, keep in mind that in either scenario (liquidate now or later) Gobi’s sponsor still loses all of their at-risk capital in a liquidation.  This “vote to shrink the timeline” is purely to protect against ambulance chasing lawyers and their lawsuits.

Nonetheless, a whole lot can happen in a year as we’ve seen over the last two.  SPAC Markets changed on a dime upwards in 2020 and changed just as quickly downwards in 2021. And both times you would be hard pressed to find anyone who was able to predict it. Unfortunately, with 12 months left, Gobi doesn’t have a crystal ball and would rather tag out.

As mentioned above, the vote date is scheduled for July 22, 2022 with a record date of June 23, 2022. The redemption deadline is July 20, 2022.