In July 2023, special purpose acquisition company (SPAC) FG Acquisition Corp., which was set to merge with brokerage ThinkMarkets, faced a massive share buyback that shrank its reserve funds by 47 times.
The decision by FG's public shareholders to halt the merger with ThinkMarkets contributed to them buying back their shares for cash, which significantly reduced the balance of FG Acquisition's reserve funds from $118.7 million as of June 30, 2023, to less than $2.5 million as of Sept. 30, 2023, according to FNG.
As a reminder, FG Acquisition and ThinkMarkets announced a business merger agreement in May that would have seen ThinkMarkets listed on the Toronto Stock Exchange at a valuation of $160 million. Under the terms of the agreement, FG Acquisition's public Class A shareholders would receive 43.3% of the combined company, and ThinkMarkets' shareholders would receive 53.4%. Meanwhile, the SPAC sponsors behind FG Acquisition, led by financier Larry G. Sweets Jr., would receive the remaining 3.3%.
However, in July, 11,398,742 shares of FG Acquisition's Class A stock were returned to the company by FG's public shareholders and repurchased at a price of approximately $10.21 per share. This resulted in the return of approximately $116.3 million to FG Acquisition's stockholders, demonstrating their desire and right not to proceed with the ThinkMarkets transaction, and a total reserve of approximately $2.5 million for FG Acquisition. This amount consists primarily of interest accrued on funds held in escrow prior to being returned to shareholders.
The primary reason for this buyback was the over $20 million in debt and losses that the ThinkMarkets brokerage had accumulated between 2021 and 2022.
Although FG Acquisition officially withdrew its preliminary prospectus related to the merger with ThinkMarkets, it reiterated its intention to proceed with the deal with the brokerage in early November.
However, in order to proceed with the deal, FG Acquisition must raise at least $10 million in new capital by November 30, or the deal will be called off.
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