Promising Special Purpose Acquisition Companies (SPAC) are being piloted around the world by small public companies. The only function of a SPAC is to acquire another company in order to list them on the stock exchange and take them public.
Talkspace recently made headlines for becoming the only virtual healthcare company possible through a SPAC merger. This post aims to provide insight into this merger and its aftermath.
Who is Talkspace?
Talkspace Inc is a US-based online therapy website founded in 2012, primarily to reduce the stigma of seeking psychological help, with the help of licensed therapists who specialize in mostly behavioral issues.
Not only did the startup grow immediately, but it recorded amazing growth during the coronavirus outbreak, when mental health services were hit hard during the strict quarantine.
Who is a SPAC?
A SPAC, Hudson Executive Investment Corp’s sole purpose is to invest in New York-based companies primarily focused on the healthcare and other sectors. As it was formed to merge with an organization, it raised $314 million on the NASDAQ in June 2020.
What’s the deal?
In January 2021, Hudson Executive Investment Corp announced a definitive merger agreement with leading online therapy app provider Talkspace Inc.
After obtaining the approval of all stakeholders; The deal was finalized in June 2021 for $414 million in cash from the SPAC and $25 million in additional acquisitions from the SPAC.
Not only did it support the transaction with more than $300 million subscribed in shares priced at $10, but Hudson Executive Capital secured an additional $25 million to stop the redemptions. Therefore, TALK will begin trading on NASDAQ in June 2021.
What’s the deal?
Pursuant to the merger agreement, Talkspace is to merge with Tailwind Merger Sub 1, a wholly owned subsidiary of Hudson Executive Investment. Talkspace is deemed to be merged with Tailwind Merger Sub II, another wholly-owned subsidiary of Hudson Executive Investment.
After integration, All rights vested in existing Talkspace common stock are deemed to be voided upon exchange of Hudson Executive Investment Corp’s equity or a mixture of cash and equity.
The agreement provides that the transaction may be closed at any time prior to closing with the consent of both parties. or if the government prohibits the merger due to irremediable violations by either party. Especially from Talkspace. Unless the purchased stock is approved by the holders of outstanding shares of Hudson Executive Corp.
Take it from the agreement.
Suppose Talkspace decides to go public with its own IPO; Let’s say it takes at least two years to complete the process. After saying that, Talkspace’s work on mental health has not attracted investors because of the general stigma associated with mental health and behavioral issues.
Because Talkspace cannot raise the necessary capital on its own; A merger with a SPAC would give the company the breathing space it was desperately seeking. In addition, A SPAC must follow a few rules in order to be public.
Ultimately, The merger gives Talkspace an opportunity for greater reach among users; Mainly because of the curiosity of those associated with the SPAC.
- The price is high for startups to negotiate a better deal with sponsors.
- When a deal is made through a SPAC; It promotes acceptance and public awareness.
- An IPO takes two years, but a SPAC can be completed in 4-5 months, thus saving a lot of time.
- The rules for incorporating a SPAC are stricter than for an IPO.
- A SPAC incorporation provides shareholders with security even in the event of liquidation.
- Sponsors can also have enough in these cases if the deal goes sour and the SPAC dissolves.
Final thoughts
The successful deal between Talkspace and SPAC is considered an innovative development in the commerce sector, and it is only the beginning. The advantages of SPACs include greater visibility and greater public support and will see many mergers in the coming years. That is, The traditional IPO will continue to be the driving force in the market and will be the preference of many companies.
Filed Under: Technology News
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