Overview

Blank Check Company was incorporated on March 22, 2021 as a Cayman Islands company to merge or acquire a business. They have signed an agreement to acquire a target business as of April 25, 2023. They intend to use cash from their IPO proceeds and private placement to fund the acquisition.

Issuing additional shares to acquire a target business could significantly dilute existing investors’ ownership, subordinate their rights, change control of the company, delay or prevent a change of control, and adversely impact share prices and market conditions. Taking on debt could also subject the company to default, restrictions on operations, and limited flexibility.

Financial Performance

The company has not yet commenced operations or generated revenue. For the three months ended March 31, 2024, they had net income of $4.6 million. This consisted of a $6.6 million gain on warrants and $1.4 million in interest income, offset by $3.4 million in operating costs.

For the three months ended March 31, 2023, they had a net loss of $2.1 million. This consisted of $3.7 million in operating costs and a $2 million warrant liability loss, offset by $3.6 million in interest income.

Liquidity

Initial funding has come from $25,000 in founder shares and $5.45 million in loans from the sponsor. IPO proceeds were $351.9 million, of which $243.6 million has been redeemed, leaving $129.6 million in the trust as of March 31, 2024. $106.2 million remained as of May 22, 2024 after further redemptions.

The company expects to use substantially all trust proceeds to fund the acquisition. They may withdraw interest to pay taxes. If equity or debt is used for consideration, remaining proceeds will fund working capital.

The company has $43,922 available outside the trust and may obtain additional loans from the sponsor or management team. The $5.45 million in existing loans may convert into warrants.

Through a series of shareholder meetings, the sponsor has committed to contribute up to $900,000 in extensions to the trust account deadline. The deadline has been extended to December 17, 2024.

Ongoing liquidity needs include due diligence, regulatory, and other transaction costs. If the company does not complete an acquisition by the deadline, it will commence dissolution. There is doubt about the ability to continue as a going concern past one year.