Advantages of SPACs Over Traditional IPOs
Shareholder Approvals Required - Target Stockholders
•
Target stockholders must also approve the de-SPAC transaction.
Prior to signing the merger agreement, the parties should make sure that certain Target stockholders
will vote in favor of the merger through voting/lock-up agreements (not to be confused with the
lock-up agreements entered into by the sellers and Sponsor at closing to agree not to transfer their
shares for six months after closing).
Note: Lock-up agreements, which involve a commitment to vote in favor of the merger, are
permissible, but, if the de-SPAC is structured as a share exchange, since the vote is considered to be
an investment decision and must occur after receipt of a prospectus contained in an effective
registration statement, actual votes or consents from the Target's stockholders cannot be obtained in
advance.
SEC staff does not object to lock-up agreements in the S-4 context in the following circumstances:
-
-
the lock-up agreements involve only executive officers, directors, affiliates, founders, and their
family members, and holders of 5% or more of the voting equity securities of the Target;
the persons signing the lock-up agreements collectively own less than 100% of the voting equity
of the Target; and
votes will be solicited from shareholders of the Target who have not signed the lock-up
agreements and would be ineligible to purchase in a private offering.
Morgan Lewis
20View entire presentation