“On top of this, a number of investors are restricted to North American mandates and in order to take advantage of increasing opportunities in the North American and global markets, the move to the Nasdaq was essential.
“We are on the precipice of commercialising our technology across a number of large global markets – from gold to food and wine, to fashion, rubber and plastics – and the valuation reflects that.”
As part of the agreement, the newly merged company will be registered in Ireland and named SMX.
More SPAC investors cashing out early
Security Matters was founded in Israel and went public on the ASX in 2018. It has been developing provenance technology, building a “sub-molecular-based hidden barcode system” that can be read using a unique reader. It allows people to verify the origins and history of a product.
As part of the SPAC, Security Matter’s publicly listed Irish company, Empatan PLC, will form part of the merged business.
Local shareholders will receive one share in the new company, which will be named SMX Public Company Limited, for every 10.2 shares they now own. Security Matters shareholders will own 55.5 per cent of the combined company if there are no redemptions by Lionheart’s shareholders. However, the odds of this are unlikely.
Under the terms of a SPAC, investors in the shell company can cash out their shares if they do not want to become shareholders of the new entity.
Redemption rates vary, and were low in the early part of last year when demand for early-stage companies with exciting future prospects was high.
But this year the number of investors pulling their money before the target company was acquired has soared, as investors became more risk-averse and rotated away from tech. CBInsights figures reveal that the average redemption rate for a SPAC merger reached 80 per cent in the first few months of the year, up from about 50 per cent in 2021 and only 20 per cent in 2020.
There has also been a drop-off in the number of SPAC mergers (or de-SPACs) this year. In the fourth quarter of calendar year 2021, there were 50 transactions completed, compared to 16 in the first quarter of this year.
Mr Alon said the redemption rate would be known after a shareholder meeting in the fourth quarter, but the business was working on a strategy to reduce the risk.
“It is the reason why we’re now working on building a private investment in public equity which will be an independent source of financing for the merged entity,” he said.
Despite the challenging conditions for SPACs this year, Mr Alon was confident that SMX would receive a favourable reception on the US exchange.
“As the world transitions to a circular economy and businesses are increasingly compelled to meet best practice ESG standards, SMX is well-placed to provide transparent traceability for its customers,” he said.
“SMX is on the verge of commercialising its technology. We have established all the main foundations and key structures required for the next stage of growth, and we do think this SPAC listing will be a catalyst for re-rating the business.”
If there are no redemptions, the company will have about $US116 million in cash after fees and expenses at the completion of the deal. This will be used to finance its operations and invest in strategic growth opportunities.
The deal is still subject to various regulatory approvals, as well as the approval of SMX and Lionheart shareholders.
ClearThink Capital is acting as financial adviser to SMX, while EF Hutton, a division of Benchmark Investment, has been advising Lionheart.
