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Quantum Fintech (QFTA) Rejects TradeStation’s Termination of Merger Agreement


Quantum Fintech (QFTA) Rejects TradeStation’s Termination of Merger Agreement

Quantum Fintech Acquisition Corp. (NASDAQ:QFTA), filed an 8-K this afternoon laying out a potential battle regarding their business combination with TradeStation. This is oddly reminiscent of Dune’s current battle with TradeZero, including even the selling company names.

TradeStation, which is a subsidiary of Japanese financial services fim Monex Group (TYO:8698), provides a stock-trading and investment platform allowing retail investors to access options, crypto and futures products. Quantum Fintech and TradeStation announced their business combination back in November of 2021, and at that time, anticipated closing their deal in the first half of 2022.

However, as QFTA notes in their 8-K, they received received a termination notice today from TradeStation citing Section 12.01(c) of their merger agreement.  Section 12.01(c) provides that the Merger Agreement may be terminated by either party if the deal has closed on or before August 1, 2022 (the “Termination Date”).  Nevertheless, Section 12.01(c) goes on to state that the termination right is “not available to any party whose breach of any provision of the Merger Agreement has been the primarily cause of, or primarily resulted in, the failure of the closing of the Business Combination to occur on or before such date.”

In response, QFTA sent a letter back to TradeStation stating they are not permitted to terminate because the reason the deal has not yet closed is because of “TradeStation’s breaches of, and failure to perform under, the Merger Agreement” and therefore, TradeStation’s Termination Notice is “invalid and unenforceable, and that TradeStation continues to be bound to its obligations under the Merger Agreement in all respects.”

However, QFTA’s 8-K does not go into specifics as to how or why TradeStation breached or failed to perform. Perhaps that will be forthcoming in future filings.

Interestingly, the 8-K goes on to note that the PIPE investors, of which Monex Group (the sole shareholder of TradeStation) subscribed for 5,000 PIPE shares out of the total 12,500,000, have the ability to terminate their subscription agreements on or after August 1, 2022. But, per the 8-K, it does not appear the PIPE investors have done so yet. More importantly, QFTA noted that the $125 million PIPE investment is not a condition to closing the business combination. So even if all of the PIPE investors walk, the deal is still on. At least, according to QFTA.

Keep in mind that Quantum Fintech’s state of jurisdiction is Delaware, just like Dune and Twitter. Furthermore, QFTA is an 18-month SPAC that can automatically extend 6-months time (without a contribution to trust) if it has signed an LOI. Since QFTA and TradeStation clearly meet that extension requirement, it means that should QFTA opt to extend on August 9, 2022, its new deadline will be February 9, 2023.

Between Dune and QFTA now, this most likely means lawyers will be tightening up future business combination agreements to avoid matters such as this. In the meantime, additional information on the TradeStation situation is most likely coming down the pike.