Inflection Point Acquisition Corp. II
PROPOSED BUSINESS COMBINATION: USA Rare Earth, Inc.
ENTERPRISE VALUE: $902.6 million
ANTICIPATED SYMBOL: tbd
Inflection Point Acquisition Corp. II proposes to combine with USA Rare Earth, Inc.
USA Rare Earth, LLC (“USARE”) is a company building a vertically integrated, domestic rare earth element magnet production supply chain. USARE is building out a magnet production facility in Stillwater, Oklahoma and controls mining rights to the Round Top heavy rare earth and critical minerals deposit in West Texas. USARE is poised to become a leading domestic supplier of rare earth magnets and heavy rare earth elements needed in the electric vehicle, green energy, consumer electronics, and defense industries, as well as for chipsets, semiconductors, and 5G.
SUBSEQUENT EVENT – 2/4/25 – LINK
- USA Rare Earth PIPE Investment Reaches $40M
- USA Rare Earth and IPXX announced an additional $15.25 million in PIPE funding received from IPXX affiliates and related investors, including CEO Michael Blitzer, raising the total investment to over $40 million.
EXTENSION – 11/19/24 – LINK
- The SPAC approved the extension from November 30, 2024 to August 21, 2025.
- 22,794,651 shares were redeemed.
- No contribution will be made into the trust account.
NON-REDEMPTION AGREEMENT – 11/14/24 – LINK
- Harraden Circle Investors and L1 Capital Global Opportunities agreed not to redeem 700,000 Shares and 300,000 Shares respectively.
- Each has the option to enter into a forward prepaid transaction as well for the same amount of shares.
NON-REDEMPTION AGREEMENT – 11/13/24 – LINK
- Pursuant to the Non-Redemption Agreement, Newtyn agreed not to redeem an aggregate of 700,000 Shares at the extension vote
- Inflection Point granted Newtyn an option to enter into a forward purchase agreement in connection with the closing of the Business Combination with respect to up to 700,000 Class A ordinary shares of Inflection Point.
- Pursuant to the Forward Purchase Option, Newtyn will have the right, but not the obligation, to enter into an over-the-counter Equity Prepaid Forward Transaction with respect to up to 700,000 Class A ordinary shares of Inflection Point in connection with the closing of the Business Combination.
- Inflection Point granted Newtyn an option to enter into a forward purchase agreement in connection with the closing of the Business Combination with respect to up to 700,000 Class A ordinary shares of Inflection Point.
TRANSACTION
- The Proposed Business Combination implies a pro forma combined enterprise value of $902.6 million, excluding additional earnout consideration.
- USARE expects to use the net proceeds from the Proposed Business Combination for general corporate purposes, including progressing the development of its Stillwater magnet facility.
- The Proposed Business Combination is expected to be completed in early 2025.
Fee Reduction Agreement
- Cantor Fitzgerald will accept in place of the Original Deferred Fee either of:
- Cash fee of $4,000,000
- Cash fee of $2,000,000 plus 400,000 Shares plus 2.0% of the amount by which the Total Capital Raised exceeds $50,000,000.
- Solely if Inflection Point elects to pay the all-cash fee, Cantor Fitzgerald will forfeit 1,650,000 Placement Warrants.
Updated Transaction Overview
Original Transaction Overview
SPAC FUNDING
- Convertible Preferred Funding:
- Investors have committed $40.75 million at closing in USARE’s 12% Series A Cumulative Convertible Preferred Stock, issuing a total of 3,995,098 USARE Class A Units and warrants to purchase 4,463,848 USARE Class A Units at a deemed value of $10.20 per share.
- Undisclosed Investors agreed to purchase 1,176,471 shares of Class A-1 Convertible Preferred Unit with warrants for 1,426,471 common shares for $12 million.
- Inflection Point Fund & Newtyn Partners agreed to purchase 1,323,529 shares of Class A-2 Convertible Preferred Units with warrants for 1,542,279 common shares for an aggregate amount of $13.5 million.
- Blitzer and Collective Capital Management agreed to purchase 1,495,098 shares of Class A-2 Convertible Preferred Units and warrants for an aggregate amount of $15 million.
- Inflection Point Fund pre-funded the Investment by purchasing an aggregate of 833,333 additional Units and Warrants, approximately for $8.5 million.
- Each share of Series A Preferred Stock has a stated value of $12.00 and accrues dividends daily at an annual rate of 12% if paid in kind or 10% if paid in cash, including previously accrued dividends, with dividends compounding semi-annually.
- Investors have committed $40.75 million at closing in USARE’s 12% Series A Cumulative Convertible Preferred Stock, issuing a total of 3,995,098 USARE Class A Units and warrants to purchase 4,463,848 USARE Class A Units at a deemed value of $10.20 per share.
- PIPE
- USA Rare Earth and Inflection Point Acquisition Corp. II have secured $40.75 million in PIPE funding from IPXX affiliates and investors, including Chairman & CEO Michael Blitzer.
- IPPX CEO’s Convertible Note Agreement
- Blitzer issued a Convertible Promissory Note for SPAC expenses and, in agreement, will receive an additional 104,167 shares at closing in exchange for forgiving 50% of the outstanding balance.
SPONSOR SUPPORT AGREEMENT
- The sponsor agreed to forfeit 60,000 warrants for every $1,000,000 by which the gross proceeds plus any additional financing proceeds are below $50,000,000 up to a maximum of 1,500,000 warrants.
- On January 31, 2025, the Sponsor, Inflection Point, and USARE amended the Sponsor Support Agreement to remove provisions for the Sponsor’s potential warrant forfeiture.
EARNOUT
- Company
- 10 million shares can be earned based on the following thresholds beginning after the first anniversary from the Closing and five years thereafter.
- 50% if the share price equals or exceeds $15.00.
- 50% if the share price equals or exceeds $20.00.
- The aggregate number of shares that can be earned is calculated from the quotient of
- (A) the Aggregate Earn-out Consideration divided by
- (B) the USARE Fully Diluted Capital.
- 10 million shares can be earned based on the following thresholds beginning after the first anniversary from the Closing and five years thereafter.
LOCK-UP
- Company
- 50% will be released 6 months from the Closing and the remaining 50% will be released at the earlier of 12 months or $12.00 for 20/30 trading days at least 180 days from the Closing.
- Sponsor
- 50% will be released 6 months from the Closing and the remaining 50% will be released after 12 months.
NOTABLE CONDITIONS TO CLOSING
- There is no minimum cash condition mentioned.
NOTABLE CONDITIONS TO TERMINATION
- The outside date will be August 22, 2025.
ADVISORS
- Company
- Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC, is the exclusive financial advisor, lead capital markets advisor and private placement agent.
- King & Spalding LLP is serving as legal counsel
- SPAC
- White & Case LLP is serving as legal counsel
- Gateway Group is serving as investor relations and media relations advisor for the transaction.
MANAGEMENT & BOARD
Executive Officers
Michael Blitzer, 45
Chief Executive Officer and Chairman
Mr. Blitzer is the founder and co-CEO of Kingstown Capital Management, which he founded in 2006 and grew to a multi-billion asset manager with some of the world’s largest endowments and foundations as clients. Over 17 years, Kingstown has invested in public and private equities, SPACs, PIPEs, and derivatives. At Kingstown, Mr. Blitzer oversaw and participated in nearly all the firm’s investment decisions including countless public and private investments in disruptive growth industries. Mr. Blitzer brings an in-depth understanding of public markets and has invested in a variety of corporate transactions such as spin-offs, rights offerings, public offerings, privatizations, and mergers & acquisitions. He currently sits on the board of directors and audit committee of LUNR. He was also a public company director of Signature Group Holdings after its exit from bankruptcy in 2011, where he also sat on the audit committee, and was on the board of directors of the European mutual fund TREND AD. Mr. Blitzer began his Wall Street career at J.P. Morgan Securities in 1999 advising companies globally in private debt and equity capital raises followed by work at the investment fund Gotham Asset Management, which was founded by the author and investor Joel Greenblatt. Mr. Blitzer taught courses in Investing at Columbia Business School for five years in the 2010s. He holds an MBA from Columbia Business School and a B.S. from Cornell University where he received the Cornell Tradition Fellowship. Mr. Blitzer currently sits on the Executive Advisory Board of the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School and is a trustee of Greens Farms Academy in Westport, CT where he is also Treasurer and Chair of the Investment Committee.
Peter Ondishin, 36
Chief Financial Officer
Peter Ondishin has been our CFO since April 2023, and he was previously an employee of IPAX Mr. Ondishin has been the CFO of Kingstown Capital Management since August 2020, and he was previously the Controller of Kingstown from April 2019 to August 2020. Mr. Ondishin was the Assistant Controller for Atlantic Investment Management from January 2016 to March 2019. Before that, Mr. Ondishin worked as an accountant for Fir Tree Partners from January 2014 to January 2016. Mr. Ondishin began his career in assurance at PwC. Mr. Ondishin holds a B.A. and an MBA from Rutgers University, and he is also Certified Public Accountant.
Board of Directors
Nicholas Shekerdemian, 28
Director Nominee
Mr. Shekerdemian previously served as a director of IPAX from February 2021 to February 2023. Mr. Shekerdemian is the Founding Partner of The Venture Collective, a venture capital firm founded in October 2019 focused on solving the world’s largest problems. The Venture Collective is backed by a series of exited founders, hedge fund managers and Fortune 500 executives and has invested in the likes of Axiom Space, Infogrid, Builder.ai, LifeBiosciences and HelixNano. Mr. Shekerdemian was previously Founder and CEO, from January 2016 to January 2019, and Chairman from January 2019 to August 2022, of a venture backed business called Headstart (sold to Silverback United, Inc. in August 2022). At Headstart, he received backing from investors including Peter Thiel, Y Combinator, FoundersX Ventures, Hack VC, Plug and Play, and the founders of Zynga and Unity. Mr. Shekerdemian is an advisor to the United Nations on education through the United National Technology Innovation Lab (UNTIL). Personally, Mr. Shekerdemian is an active angel investor with 50+ investments spanning consumer, enterprise software and biotech.
Paula Sutter, 55
Director Nominee
Ms. Sutter previously served as Executive Chairwoman on IPAX from February 2021 to February 2023. Ms. Sutter began her career over 25 years ago at the Donna Karan Company serving in a variety of roles. She currently serves on the board of ThredUp Inc. (“ThredUp”), a high-growth re-commerce platform backed by Goldman Sachs and Park West. Ms. Sutter served as Global President of Diane von Furstenberg (“DvF”) from 1999 to 2013. She joined DvF with the task of relaunching and rebuilding the brand. Ms. Sutter led DvF’s transformative growth and developed a vast range of accessories and home furnishings, spearheading the company’s evolution into a true lifestyle omnichannel brand. During her tenure, she built the business from its commercial launch to an iconic international brand, expanding its global footprint of freestanding DvF stores, launching DvF.com as well as establishing a substantial presence in department stores worldwide. From 2014 to 2017, Ms. Sutter was Operating Partner at TSG Consumer Partners and CEO of TSG Fashion (collectively, “TSG”). As group CEO, Ms. Sutter provided hands-on strategic planning as well as operational and management strategy to her portfolio, which included Revolve Group, Inc. (NYSE: RVLV) (“Revolve”), Forward by Elyse Walker, Alexis Bittar, Backcountry, and Paige Denim. During her tenure at TSG, Ms. Sutter was deeply involved in the management and sales processes for Paige Denim and Alexis Bittar. Ms. Sutter was also instrumental in driving topline growth and margin expansion at Revolve which resulted in a successful initial public offering of the business in 2019. Additionally, Ms. Sutter helped source and diligence new investment opportunities in the broader apparel and retail space. After leaving TSG Consumer Partners, Ms. Sutter founded Paula Sutter LLC, a brand advisory consulting firm focused on strategic planning, top line growth initiatives and product development and expansion. Beginning in 2018, she worked closely with several private PE- and VC-backed companies, including Alexander Wang, Mackage and MeUndies Inc. in both advisory and board of director roles, as well as advising investment firms including Lee Equity Interluxe and Permira. Ms. Sutter is also a Series A investor in Allbirds, Inc.
Elliot Richmond, 43
Director Nominee
He has also been the CFO and a director of Ahren Acquisition Corp. since April 2021. Mr. Richmond has had a successful 20-year career in investment banking, during which he was honored by Financial News’ “40 Under 40 Rising Stars in Investment Banking.” He was previously a Partner and Managing Director at Moelis & Company (from 2012 to 2019). Prior to joining Moelis & Company in 2011, Mr. Richmond was Director of UK Investment Banking, and Head of UK ECM, at Bank of America Merrill Lynch. Throughout his career, Mr. Richmond has advised on over $75 billion worth of domestic and cross-border mergers & acquisitions and equity offerings. Notable transactions where he has taken a leadership role include WS Atkins $3.2 billion sale to SNC-Lavalin, ICI’s $16 billion sale to Akzo Nobel, WPP’s $2 billion hostile acquisition of TNS, and Dubai World’s $3.5 billion acquisition of Economic Zones FZE and LSE delisting. Alongside his investment banking career, Mr. Richmond is also an experienced early-stage investor, having partaken in over 100 private pre-seed through Series C equity investments across a variety of sectors in the UK and the US. He holds a B.Sc. in Economics from University College London and has also partaken in the Wharton School’s Merrill Lynch Investment Banking Institute.
Erica Dorfman, 33
Director Nominee
She currently serves as of Brex’s Head of Global Financial Products and is responsible for the development of financial products spanning cards, payments, cash movement, reimbursements, credit limits, billing, and pricing. She was previously the President of Brex Cash from 2019-2022 and led Brex’s application for a bank charter. Ms. Dorfman previously served as CFO and COO of Tally Technologies from 2018-2019 where she secured a $50 million Series C financing for the Company anchored by Andreessen Horowitz. Prior to Tally Technologies, Ms. Dorfman served as Vice President of Capital Markets at SoFi from 2016-2018, overseeing over $10 billion of transactions across asset sales, bank and asset manager warehouses, and 15+ securitizations across student loans, consumer unsecured loans, and mortgage. Ms. Dorfman served as a private equity associate at BDT Capital Partners from 2013-2016, and she began her career in investment banking at J.P. Morgan covering industrials companies from 2011-2013. Ms. Dorfman has made 20+ angel investments personally across fintech and B2B software, and she is currently a Scout for Greylock Capital. She received Forbes 30 Under 30 recognition in 2019.
Samuel Sayegh, 33
Director Nominee
Mr. Sayegh is the co-founder of UNCAP Investment Management, an alternative investment firm focused on the digital assets and blockchain space founded in 2021. He is also a shareholder in the management companies of other alternative asset managers. Previously, Mr. Sayegh served from 2018 to 2021 as the CFO and Head of the Defense and Intelligence business unit at SPARK Neuro, a Peter Thiel-backed neuroscience software company that has raised over $33 million. Before that, Mr. Sayegh ran his own consulting business called Palm Advisory services from 2014-2017. Earlier in his career, Mr. Sayegh worked on the consumer and education teams at LLR Partners, a private equity firm that has raised over $5 billion since inception. He began his career in investment banking in the industrials group at RBS. Mr. Sayegh attended the University of Pennsylvania, where he graduated in 2011 with a B.S. from the Wharton School and a B.A. from the College of Arts & Sciences.