Jonathan Kolber and Gilad Shany were probably the first Israelis to spot the SPAC trend on Wall Street, and now, after the trend has died, they are also the first to return money to investors. In the past two years, through ION Asset Management, Kolber and Shany have floated three SPACs, each of which raised about a quarter of a billion dollars for a future acquisition. A SPAC (special purpose acquisition company) is floated without having any business activity, and raises money from the public with the aim of acquiring an existing company within a specified time, usually two years. SPAC offerings reached a peak on Wall Street in early 2021. Hundreds of companies were floated and sought acquisition targets, some in Israel. Several SPACs were floated by Israeli sponsors as well, ION Asset Management being the first.
At the end of 2020, the group announced the flotation of the first ION Acquisition Corp., which after a short while announced a merger with content recommendations company Taboola. After the report of the merger with Taboola, ION Asset Management floated ION Acquisition Corp. 2, which eventually merged with Innovid, developer of a platform for television advertisement delivery and measurement. ION Asset Management floated its third SPAC in May 2021, raising $253 million. Meanwhile, however, the SPAC market has changed considerably: the number of flotations has declined, the share prices of the companies that were acquired have fallen steeply, and in the case of many deals the SPAC investors chose not to participate and applied to redeem their investments.
The reasons for that were mainly that investors realized that during the hype companies had been merged into SPACs at excessive valuations, on the basis of over-optimistic forecasts that failed to materialize. At the same time, regulators in the US took action to cool the market down. As a result, almost a year and a half after it was floated, ION Acquisition Corp. 3 has not announced any merger. Since the deadline for completion of a merger is two years, it was decided to liquidate, and return the money to the SPAC investors.
The company announced three weeks ago that since it did not expect that it would be able to complete a merger within the stipulated period of time, it would redeem all issued shares at $10.08 per share (the offering was at $10 per share). At the end of last week, the company reported its final and full delisting from the New York Stock Exchange.
The timing: End of year tax considerations
ION Acquisition Corp. 3 thus joins a growing trend of SPACS failing to complete mergers and having to return money to their investors. According to the SPAC Research website, many SPACs are bringing forward the liquidation process and carrying it out before two years have passed since their flotation, out of tax considerations, with the end of the year approaching. The site’s figures indicate that 65 SPACs have announced reimbursement of investors this year, fourteen of them in November alone. Liquidation means irrecoverable losses for the SPAC sponsors, estimated at $5-9 million in each case, arising from the costs of registering the company for trading, such as payments to bankers and lawyers, fees, and so forth, and subsequently the costs of carrying out due diligence at potential acquisition targets.
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ION’s previous two SPACs, as mentioned, did complete mergers in 2021, since when the companies’ share prices have plunged by nearly 80%. Taboola was valued at $2.6 billion in the merger, and is now traded at a market cap of $643 million, and this after its share price rose substantially recently following the announcement of a strategic agreement that included making Yahoo! the largest shareholder in the company.
Innovid, which was acquired at a valuation of $1.3 billion, now has a market cap of just $279 million. The SPAC sponsor, ION Asset Management, holds a 4.9% stake in Taboola, currently worth $32 million, and a 10.1% stake in Innovid, currently worth $28 million.
Kolber hit by Fiverr share price collapse
As mentioned, ION’s SPACs were led by Gilad Shany and Jonathan Kolber. Shany manages ION Crossover Partners, which takes Israeli companies at the growth stage and helps them to go public. Kolber, today a partner in investment group Viola, was formerly a representative of Charles Bronfman. Kolber is an investor in a private capacity in freelancer platform Fiverr (NYSE: FVRR). Fiverr was floated on the New York Stock Exchange in 2019, and Kolber invested in it before the flotation, and is a director of the company. According to the most recent filing, Kolber holds 8% of Fiverr, worth $91 million. In early 2021, when the stock was at a peak, this stake was worth about $1 billion, but since then the share price has collapsed by more than 90%. Kolber sold an estimated $100 million worth of shares before the collapse.
Published by Globes, Israel business news – en.globes.co.il – on December 13, 2022.
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