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NPD: This is why Sony started the PS5 showcase with GTA V

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If anyone had doubts about the value of Sony’s deal with Rockstar Games on the PlayStation 5, we have the answer in U.S. sales numbers for Grand Theft Auto V for the month of May. Grand Theft Auto V ranked No. 2 on the charts, just behind Call of Duty: Modern Warfare, according to the May report from market researcher NPD. This is amazing because GTA V first came out in 2013.

The game has had quite the run, thanks in part to the excellent GTA Online, which has helped Rockstar and parent Take-Two Interactive hang on to the audience all these years.

Sony announced on Thursday that Rockstar would upgrade GTA V for the PS5. GTA V for PlayStation 5 will be available for purchase in the same way it is on earlier platforms. What’s new and interesting here is that GTA Online will be available as a standalone game on the PlayStation 5, and it’ll be free for PS5 players for the first three months from launch. The PS5 is expected to debut in the 2020 holiday season.

Overall, GTA V has sold more than 130 million copies across all platforms. The improved GTA V will debut in 2021.

Source: http://feedproxy.google.com/~r/venturebeat/SZYF/~3/z7Rh0kQui1Y/

Fintech

The Impact of COVID-19 on Capital Markets Operations

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The Depository Trust & Clearing Corporation (DTCC), the premier market infrastructure for the global financial services industry, today published a white paper examining how capital markets operations responded during the COVID-19 pandemic and where market participants are focused in a post-pandemic future.

In a new white paper, “Managing through a Pandemic: The Impact of COVID-19 on Capital Markets Operations”, buy and sell-side firms reported that, while their post-trade operations (Ops) and operations technology (OpsTech) proved largely resilient during the pandemic, several key challenges emerged as market volatility surged throughout 2020. The study was conducted with research assistance from McKinsey & Company, and was based on insights from Ops and OpsTech professionals at 35 buy and sell-side firms. The top areas of focus highlighted were:

  • Cash fixed income and cash equities were most impacted by the pandemic-induced market volatility, with 30-35% of firms across the buy-side and the sell-side reporting operational post-trade processing challenges in these asset classes.
  • From a processing perspective, settlements/payments and collateral/valuations were impacted the most, with 58% of sell-side firms reporting challenges in settlement and payments during the peak of the pandemic.
  • Buy-side firms typically experienced less disruption to post-trade processes than sell-side firms due to simpler operational models, with the sell-side reconciling breaks and settling trades across hundreds of counterparties.
  • The sudden transition to a work-from-home operating model was achieved almost seamlessly, and in most cases within a matter of days, due to the ability to implement tactical changes to operating models.

Respondents cited that efforts made in recent years to re-engineer and automate processes and upgrade technology platforms were the main reason for firms’ resilience during the pandemic and their ability to manage an unusually prolonged business-continuity planning (BCP) event. A significant majority of respondents stated that the pandemic validated their Ops priorities and investment plans.

Michael Bodson, President & CEO at DTCC, said, “During, and in the immediate aftermath of the COVID-19 pandemic, the industry remained resilient, with buy and sell-side firms working seamlessly to support unprecedented volumes and ensure uninterrupted trading for clients and underlying investors. However, opportunities remain for further optimizing post-trade processes across the capital markets.”

The survey highlighted that while the pandemic did not create an impetus for change in Ops and OpsTech due to largely resilient operations, a consensus emerged around where firms should focus next:

  • Sell-side and buy-side firms are aligned on the need to further simplify and standardize a sub-set of post-trade services which were hardest hit. For the sell-side, these include making enhancements to reconciliations and confirmations capabilities, while the buy-side prioritized an increased focus on fails and collateral management.
  • More than half of firms who responded to the survey plan to increase capacity, build new capabilities or re-engineer post-trade processes.
  • Respondents highlighted the need for a continued focus on shortening settlement cycles due to the impact of the unprecedented trading volumes and volatility on liquidity and margin. More than 50% of firms plan to increase capacity in support of these processes.
  • The stigma around working from home and productivity no longer exists, with many firms planning to retain part of the remote and flexible working model post-pandemic across post-trade operations.

Bodson added, “As the impact of the pandemic continues to unfold, firms must keep their focus on delivering continued improvements to efficiency, while reducing risk. At the same time, to unlock new sources of value and remain relevant to clients, a focus on innovation will be essential. The industry will need to embrace collaborative approaches, common processes, best practices and deploy operating models that continue to meet the evolving needs of market participants.”

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Source: https://australianfintech.com.au/the-impact-of-covid-19-on-capital-markets-operations/

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Startups

9 investors, execs and founders discuss Zagreb’s startup potential

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Startups may not spring to mind when speaking about the beautiful country of Croatia. Indeed, the country is most popular as a tourist destination, and given that tourism accounted for about 20% of its GDP in 2018, to an extent, its pre-pandemic focus was mostly on growing its share of the international tourism market.

But Croatia’s entrepreneurs haven’t been quiet: Startups like Infobip and Rimac are significant local hero businesses now, and the region can boast of high-quality talent in the tech, automotive, manufacturing, and agtech spaces. With only two venture capital firms operating in the capital of Zagreb, the startup scene is still young, but the country’s relatively recent EU membership has given it access to a growing set of direct investment instruments.

The current tax framework on capital gains tax (zero if you hold the shares for more than two years) and a new ‘digital nomad’ visa are helping to attract investors and talent to the city, which is also close to some of the best beaches in the world.

Access to fresh, outside capital is always a catalyst for growth, so to get an inside look at Zagreb’s fast-growing startup ecosystem, we spoke with nine local founders, investors and C-level executives.

According to the respondents, Zagreb’s strongest tech areas include HR solutions, automotive, fintech, mobile gaming, IoT, insurtech, and AI. The city’s angel investor scene isn’t very strong yet, but that could be attributed to the ecosystem’s youth.


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The city has an excellent work-life balance, and most of the talent wants to stay there. “Now, with the COVID-19 pandemic, it’s easier to land remote jobs and stay in Zagreb, which will positively impact our ecosystem,” one of the investors said.

However, with competition heating up, startups looking for larger, serious investment will probably have to look beyond the country’s borders while trying to retain their engineering talent. Luckily, an increasing number of international investors are looking at Zagreb for their deal flow pipeline.

Some top Croatian startups include: Agrivi, Amodo, Ascalia, Bellabeat, Cognism, Degordian, Dok-Ing, Infobip, Mindsmiths, OptimoRoute, Oradian, Photomath, Repsly, ReversingLabs, ScoreAlarm, Sportening and AdScanner.

We surveyed:


Lucija Ilicic, CEO, PlatePay

Which are the most interesting startups in your city?
Photomath, Sportening, and Mindsmiths.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Mostly revenue-oriented.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
People would choose to live and move here during the pandemic. Some of them did, especially having in mind that Croatia now has the digital nomad visa.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Investors: Fil Rouge Capital, Feelsgood, Zicer, Bird Incubator; Founders: Ivan Klarić, Damir Sabol, Mislav Malenica, Mate Riimac

Where do you see your city’s tech scene in five years?
The Croatian startup ecosystem really grew during last year and has huge potential. I see it as a perfect place for digital nomads, home of a few new unicorns and a European center for AI solutions development.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Sportening, Mindsmiths, and of course, PlatePay.

Julien Coustaury, partner, Fil Rouge Capital

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Strong in fintech, automotive, insurtech, and AI. We are excited that the whole ecosystem is growing strong with flagships such as Rimac, Optimoroute, Oradian, Infobeep, Agrivi, Tvbeat, Orqa, and Bellabeat, and our relevant funding partners with us and a new PE fund that have just been creating. There is money, talent and we have unicorns in Croatia. Very few weaknesses in Croatia at the moment, especially with the current tax framework on capital gains (zero if you hold the shares for more than two years) and the digital nomad visa. A giant leap for the region!

Which are the most interesting startups in your city?
Oradian, Lebesgue, Optimoroute, Gideon Brothers, Worcon, TVbeat, Orqa, Ascalia, Epoets Society, Hoss, Jade, Miret, My Valet, Sendbee, She’s Well, Spotsie, Taia, TDA, and Twire.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The ecosystem still a bit small to talk about the vertical focus. [We have] two active funds: SC ventures and Fil Rouge Capital. FRC runs an accelerator program along the YC model. The angel scene is a bit disappointing at the moment with not a lot of investments. Funderbeam [is] pretty active here. The quality and quantity is amazing at the moment in Croatia, probably a factor of the ecosystem being rather young.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
The current fiscal climate makes it very attractive for people to relocate/stay in Zagreb, no doubt. One million people here; proximity to one of the best seas in the world — all the ingredients are here to make it the beacon of the up and coming startup world!

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
FRC is definitely the main player in Zagreb; SC ventures, Funderbeam, Novak Law for lawyers, Algebra University, ZICER, Hub 385, Step RI.

Where do you see your city’s tech scene in five years?
No doubt a key hub in Europe on par with Vienna.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Oradian, Lebesgue, Optimoroute, Gideon Brothers, Worcon, TVbeat, Orqa, Ascalia, Epoets Society, Hoss, Jade, Miret, My Balet, Sendbee, She’s well, Spotsie, Taia, TDA, and Twire.

Josip Orsolic, CEO, Lilcodelab

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
IT, automotive, manufacturing, farming (different SaaS and IoT solutions).

Which are the most interesting startups in your city?
Rimac Automobili, Microblink, Five, Nanobit, Agrivi.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
It’s a small circle of people and not a lot of diversity, although it is getting better. Many new young successful investors emerged in the last few years.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
They will stay, maybe go to the suburbs, but just looking at the rental prices for flats/apartments I don’t see any shift in people moving outside of the city.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Mate Rimac, Damir Sabol, Alan Sumina, Tomislav Car, Luka Abrus.

Where do you see your city’s tech scene in five years?
I believe the tech scene is going to grow more and more. Many companies from other countries are opening up engineering hubs in Zagreb. There is a lot of talent, people are drawn to tech jobs; it is heavily covered by the media. Each success is celebrated and covered by the media, so there is a feeling that tech companies are being pushed, even though there are other successful companies from other industries.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Agrivi, Parklio, Seek and Hit, Electrocoin, TestDome, Include.

Vedran Tolic, founder & CBO, Q agency

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Strongest: Online betting, HR solutions, fintech, mobile gaming, IoT.
Weakest: Gaming for serious platforms; AI solutions are still in their infancy.

Which are the most interesting startups in your city?
PhotoMath, Agrivi, SofaScore, TalentLyft, Jenz, and Bellabeat.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The scene is getting stronger, but for any serious investment, startups have to look beyond our borders.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Zagreb has an excellent work-life balance, and most of the talent want to stay here. Now, with the COVID-19 pandemic, it’s easier to land remote jobs and stay in Zagreb, which will positively impact our ecosystem.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Founders: We have many charismatic founders who are raising awareness around startups and entrepreneurship in general. They are reaching large audiences and getting attention from government, the education system and the public.

Where do you see your city’s tech scene in five years?
Shifting from mostly agency work for foreign companies to a more product-oriented scene — especially in AI and ML. Products will revolve around customer and employee engagement, automation and prediction of processes which are today done by a large workforce.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Photomath, Agrivi, Bellabeat, Jenz

Bozidar Pavlovic, managing director, airt

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
AI, SaaS, electric cars manufacturing, and software development in general.

Which are the most interesting startups in your city?
Rimac Automobili, Nanobit, Infinum, Five, Agrivi, Aircash, Identyum, Airt, Mindsmiths, Electrocoin, Agency 04, Oradian, Microblink, Photomath, Agency Q, Revuto, Optimoroute, Amodo, Lemax, Ampnet, RobotiqAI, and Velebit AI.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The scene is growing recently — Zagreb is capital of Croatia, thus attracting capital and people. A recent near-unicorn (Rimac, with heavy investment from Hyundai and Porsche) helped raise visibility for this vibrant ecosystem.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Even before the pandemic, Zagreb was very attractive for tech experts worldwide due to its appealing price of accommodation, security, comfort of living and relatively high salaries. I am expecting to see the masses return after vaccination.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Davor Runje, Nikola Pavesic, Drazen Orescanin, Frane Sesnic, Tin Tezak, Ante Magzan, and Luka Sucic.

Where do you see your city’s tech scene in five years?
I see it blooming, mostly due to upcoming adoption of EUR as a local currency.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Amodo, Agrivi, Photomath, Identyum.

Matej Zelic, COO, Spotsie

What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Oil and energy, Industry 4.0. Most excited to be a part of digital transformation in the old-fashioned industries.

Which are the most interesting startups in your city?
Rimac, Agrivi, Oradian, Miret, SofaScore.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The startup ecosystem in Croatia is still in early stages of development. The investment scene (except a few business angels) started a  few years ago backed by EU with just two VCs (FRC and SVC) without a strategic plan and focus.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
People will stay here.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Fil Rouge Capital, South Central Ventures. Mate Rimac, Damir Sabol, Frane Sesnic

Where do you see your city’s tech scene in five years?
Because of micro-location, the digital nomad program, and IT talent pool, Zagreb is on the way to becoming the No. 1 tech location in CEE and Europe.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Gideon Brothers, Spotsie.

Miroslav Kovac, CEO, Coffee Cloud

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
IoT, software analytics, big data, coffee industry.

Which are the most interesting startups in your city?
Agrivi, Repsly.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Very poor startup ecosystem.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Most of the last year was in partial lockdown.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc.)
Sasa Cvetojecic, Hrvoje Prpic, Fil Rouge Capital, Bird Incubator.

Where do you see your city’s tech scene in five years?
At the same place.

Vedran Blagus, investment manager, South Central Ventures

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Industry is very agnostic. Most of them work in B2B or the enterprise space. They lack B2C knowledge, growth/expansion plan and investor relations.

Which are the most interesting startups in your city?
AdScanner, Agrivi, ReversingLabs, TalentLyft, Sportening, Codemap, Gideon Brothers.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Two VCs operating – Fil Rouge Capital (Pre-Seed, Seed, Series A – industry agnostic; B2C and B2B) and South Central Ventures (Seed, Series A, B2B). In the past six to twelve months, C-level executives from corporates started investing in startups in early stages (up to EUR 200k), but keep their investments below the radar.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
I believe that it will stay the same as it is. Development/operations in Zagreb, expansion to other European cities by opening offices there.

Who are the key startup people in your city? (e.g. investors, founders, lawyers, designers, etc)
Founders – Matija Zulj, Marin Curkovic, Mate Rimac, Marin Saric, Alan Sumina, Matija Kopic.
Investors – Luka Sucic, Stevica Kuharski, Vedran Blagus.
Lawyers – Marijana Sarolic Robic.
Media – Ivan Brezak Brkan, Bernard Ivezic.

Where do you see your city’s tech scene in five years?
Founders who exited companies they’ve been building for the past 10 years will found new companies and/or invest in early stage startups. More international investors looking at Zagreb for pipeline/investments.

Daniel Stefanic, investor

Which are the most interesting startups in your city?
Infobip, Rimac seem to be hottest ones in Croatia.

Where do you see your city’s tech scene in five years?
There’s some incredibly smart people involved in STEM in Croatia – world class. They just need better pathways to commercialisation and access to capital.

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Source: https://techcrunch.com/2021/04/21/9-investors-execs-and-founders-discuss-zagrebs-startup-potential/

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Startups

Oath Care just raised $2 million to develop a social, health-focused app that groups expectant and new parents

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Being an expectant mom can be frightening, as can mothering an infant or toddler. The answers don’t come automatically, and while there’s no shortage of books and websites (and advice from grandparents) about how to parent at every stage, finding satisfying information often proves a lot harder than imagined.

There are online social groups that deliver some of the social and emotional support that new parents need, no matter where they live. There are many dozens of mom communities on Facebook, for example. However, it’s because there’s room for improvement on this theme — big groups can feel isolating, bad information abounds —that Oath Care, a young, four-person San Francisco-based startup, just raised $2 million in seed funding from XYZ Ventures, General Catalyst, and Eros Resmini, former CMO of Discord and managing partner of the Mini Fund.

What is it building? Founder Camilla Hermann describes it as a subscription-based mobile app that’s focused on improving the lives of new mothers by combining parents who have lots in common with healthcare specialists and moderators who can guide them in group chats, as well as one-on-one video calls.

More specifically, she says, for $20 per month, Oath matches pregnant and postpartum moms in circles of up to 10 based on factors like stage of pregnancy, age of child, location, and career so they can ask questions of each other, with the help of a trained moderator (who is sometimes a mother with older children).

Oath also pushes curriculum that Oath’s team is developing in-house to members based on each group’s specific needs. Not last, every group is given collective access to medical specialists who can answer general questions as part of the members’ subscription and who are also available for consultations when individualized help is needed.

Hermann says the pricing of these 15-minute-long consultations is still being developed, but that the medical experts with whom it’s already working see the app as a form of lead generation.

It’s an interesting concept, one that could be taken in a host of directions, acknowledges Hermann who says she was inspired to cofound the company based on earlier work developing a contact tracing technology created to track outbreaks like Ebola in real time.

As she said yesterday during a Zoom call with TechCrunch and her cofounder, Michelle Stephens, a pediatric clinician and research scientist: “We’ve fundamentally misunderstand something really important about health in the West; we think that [changes] happen to one person at a time or one part of the body at a time, but it always happens in interconnected systems both inside and outside the body, which fundamentally means that it is always happening in community.”

For her part, Stephens — who was introduced to Hermann at a dinner years ago — says her motivation in cofounding Oath was born out of research into childhood stress, and that by “better equipping parents to be those positive consistent caregivers in their child’s life,” Oath aims to help enable stronger, more intimate child-parent bonds.

It might sound grand for a mobile app, but it also sounds like a smart starting point. Though the idea is to match mothers in similar situations at the outset to help bolster theirs and their children’s health, it’s easy to imagine the platform evolving in a way that brings together parents in numerous groups based on interests, from preschool applications to autism to same-sex parenting. It’s easy to see the platform helping to sell products that parents need. It’s easy to imagine the company amassing a lot of valuable information.

Indeed, says Hermann, the longer-term vision for Oath is to create rich datasets that it hopes can be used to improve health outcomes, including by identifying health issues earlier. Relatedly, it also hopes to build relationships with health systems and payers in order to increase access to its products.

For now, Oath is mostly just trying to keep up with demand. Hermann says the “small and scrappy” company found its first 50 users through Facebook ads, and that this base quickly tripled organically before Oath was forced to create a growing waitlist for what has been a closed beta until now. (Oath is “anticipating a full launch in late summer,” says Stephens.)

That’s not to say the company isn’t thinking at all about next steps.

While right now it is “laser focused on building out the most exceptional experience for this specific cohort of users in this specific period of time of their lives,” says Hermann, once it builds out many more communities of small trusted groups with “high engagement and high trust,” there is “a lot you can layer on top of that. It’s virtually limitless.”

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Source: https://techcrunch.com/2021/04/21/oath-care-just-raised-2-million-to-develop-a-social-health-focused-app-that-groups-expectant-and-new-parents/

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SPACS

Public Benefit Corporations and the SPAC Surge

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In Mintz’s recent article—“Public Benefit Corporations are Going Public,”—we predicted that, as Special Purpose Acquisition Companies (“SPACs”) reemerge as an alternative to initial public offerings (“IPOs”), Public Benefit Corporations (“PBCs”) would start going public through the SPAC process. Not surprisingly, two PBCs have recently done just that, and it seems certain that more PBCs will follow. It is important to note, however, that regulators like the U.S. Securities and Exchange Commission (the “SEC”) are increasingly focused on SPAC oversight, which may slow the frequency of SPAC transactions as regulators issue new guidance and enforcement measures.

As described in Mintz’s previous articles—“Can I Raise Venture Capital as a PBC?” and “What are My Exit Options as a PBC?”—a PBC is a legal corporate form created by the state of Delaware in 2013 that, among other things, codifies a company’s social mission.[1] A PBC allows a board of directors to make business decisions based not just on the economic interest of the corporation’s shareholders (as required by the traditional C-Corporation corporate form), but based also on the PBC’s mission, which may focus on the interests of those materially affected by the corporation’s conduct, including employees, customers, communities and the environment. PBCs are gaining mainstream acceptance as societies and markets increasingly insist that corporations generate positive social impact alongside profits.

Parallel to the rise of mission-driven PBCs is the renewed popularity of SPACs, which have dominated the markets over the past two years as an alternative IPO-strategy for many companies interested in accessing capital. Mintz’s comprehensive report produced in collaboration with PitchBook, Breaking Down the SPAC Surge: A Review of Key Trends & Issues Defining the Phenomenon (the “Mintz SPAC Report”), highlights this trend. For example, in 2020, nearly $125 billion was raised across hundreds of SPACs with 123 SPAC mergers announced or closed for an aggregate of $59.3 billion.

The process of going public through a SPAC transaction can be faster, but is no less complex, than a traditional IPO. This is how the process works:

  • First, founding investors (“Sponsors”) form and manage a shell company with no commercial operations formed to raise capital through an IPO (a “SPAC Entity”). The purpose of the SPAC Entity is to acquire or merge with an existing operating company (a “Target”) which allows the Target to become a public company. Sponsors purchase founder shares of the SPAC Entity for a nominal amount, which results in an approximately 20% equity ownership stake after the IPO.
  • Second, the SPAC Entity raises capital through an IPO by issuing units comprised of common shares and warrants to investors, with proceeds held in a trust until the Target is acquired or the SPAC expires. After these two steps, the resulting public entity is a holding company with a pool of funds held in trust to finance the acquisition of one or more Targets.
  • Third, after the SPAC IPO process, a SPAC Entity undergoes a “de-SPAC transaction.” Similar to a traditional M&A process, Sponsors vet potential Targets, and once a Target is identified, closing conditions often require a simultaneous private investment in public equity, traditionally known as a PIPE, to close the merger.
  • Fourth, the Sponsors and shareholders of the SPAC Entity vote in favor of a transaction.
  • Fifth and finally, the Target and the SPAC Entity merge and complete the business combination. The final three steps demonstrate that the merger transaction between the publicly traded SPAC Entity and the private company is a de-SPAC transaction, which results in (1) the shareholders of the private company receiving shares of the SPAC Entity and/or cash as consideration and (2) the private company becoming a publicly traded entity.

PBCs have begun to fill the demand for mission-driven companies in the public markets by engaging in SPAC IPOs and de-SPAC transactions. For example, according to ImpactAlpha, as of mid-March 2021, 31% of outstanding SPACs (based on deal value) pursue business strategies that are aligned either partially or entirely with sustainable investing strategies that include (1) social and environmental themes; (2) the achievement of impact; and (3) the integration of environmental, social, and corporate governance (“ESG”). Professor Christopher Marquis, the Samuel C. Johnson Professor in Sustainable Global Enterprise at Cornell University, discusses the link between SPACs and sustainability in his April 1, 2021 Forbes article, “New SPAC Sees Growing Market Opportunities For Stakeholder-Minded Businesses and Investors,” where he contends that the processes of both a SPAC IPO and a de-SPAC transaction can complement a PBC’s impact objectives:

Demand for ESG and impact in public markets is rising in several ways. Public equity impact strategies experienced one of the most significant growth rates across all asset classes from 2014 to 2018, and sustainability-focused funds saw record inflows in the first quarter of 2020, particularly to mitigate risks amid the Covid-19 pandemic . . . But the availability of ESG-focused companies addressing global challenges are not increasing to match this demand.

AppHarvest Inc. (“AppHarvest”), a PBC, engaged in a de-SPAC transaction by going public through a merger with a public SPAC Entity, Novus Capital Corp., on February 1, 2021, making AppHarvest the first PBC to engage in a de-SPAC transaction. AppHarvest is an agriculture technology company focused on building and operating “high-tech indoor farms to sustainably grow affordable, nutritious, chemical pesticide-free non-GMO fruits and vegetables at scale using 90% less water than traditional open-field agriculture and 100% recycled rainwater.” After AppHarvest and Novus Capital Corp. completed their merger in February 2021, the combined entity was renamed AppHarvest and now trades on Nasdaq Global Select Market. As a result of the transaction, AppHarvest received approximately $475 million of gross proceeds and over $435 million of unrestricted cash to fund operations. Since the completion of the merger in February 2021, AppHarvest’s trading price was as high as $38.21 and as low as $12.61 as of the publication of this article. On April 19, 2021, shares of AppHarvest entered into oversold territory, hitting an RSI reading of 28.3.

In addition, Sustainable Development Acquisition I Corp. (“SDAC”) formed as a SPAC Entity to acquire or merge businesses addressing global challenges identified by the United Nations Sustainable Development Goals, including businesses in the water, food, agriculture, renewable energy, and environmental resource management industries, and went public through a SPAC IPO on February 9, 2021, becoming the first PBC SPAC Entity. The Sponsors of SDAC, Renewable Resources Group and Capricorn Investment Group, each of which has dedicated their expertise and resources to investing in “market opportunities to create financial value, generate environmental and social benefits, address environmental, labor, or natural resource challenges,” raised approximately $316 million at the closing of SDAC’s upsized initial public offering of 31,625,000 units at a price of $10.00 per unit. SDAC is currently searching for Targets to merge with and to begin a de-SPAC transaction. SDAC’s units are currently traded on the Nasdaq Capital Market. Since February, SDAC’s unit price had a high of $11.45 and a low of $9.74, and closed at $10.12 as of the publication of this article.

As more PBCs go public either through SPAC IPOs like SDAC or de-SPAC transactions like AppHarvest, they should carefully address related risks. For example, a PBC going public through a SPAC will have to carefully and clearly draft its public filings with the SEC to describe not only the opportunities afforded to the PBC corporate form, but also the associated risk factors of the PBC, such as potential shareholder derivative litigation to enforce the PBC’s social mission. In addition, as Tom Burton, Mintz Member and Chair of the Energy & Sustainability Practice, discussed in “SPAC Chat Episode 3: Tracking Trends of the SPAC Surge” on the From the Edge: Insights on the Innovation Economy podcast, “the SEC has indicated that they are taking a look at this marketplace and trying to determine whether there ought to be any additional disclosure requirements.”

Not surprisingly, the SEC stated on April 12, 2021 that it will begin to examine the accounting principles that SPACs have used to classify their warrants. SPACs have typically classified warrants issued to investors during the capital raising process as equity on the SPAC’s balance sheet. However, under certain circumstances, the SEC has stated that some warrants should be classified as liabilities, which would require the SPAC to periodically account for changes in the warrants’ value. One possible adverse impact the SEC’s announcement is that affected SPACs would have to restate their financial results if the fluctuations are material. As a result of the SEC’s statement, the Wall Street Journal cautioned that the frequency of SPAC transactions has begun to decrease because “[c]ritical comments from regulators appear to be scaring off some investors and new offerings” in the April 16, 2021 article, “SPAC Hot Streak Put on Ice by Regulatory Warnings.”

While there may be challenges and risks associated with SPAC transactions and evolving regulatory oversight, there are also exciting opportunities for PBCs that go public through SPACs. For example, SPACs allow companies to go public without as much public scrutiny as a traditional IPOs, while also enabling PBCs to more quickly access capital for operations or expansion. In addition, a PBC that goes public through a SPAC can quickly reach a wide range of new investors and capital, as public investors are eager to support companies making a positive social and environmental impacts. Further, the PBC could see increased publicity for and awareness of their larger social mission. In this complex and exciting marketplace, however, mission-driven leaders hoping to go public through a SPAC transaction or through the traditional IPO process should seek out experienced counsel and legal advice.

[1] In addition to Delaware, 35 states and the District of Columbia have passed legislation allowing the formation of PBCs. See https://benefitcorp.net/policymakers/state-by-state-status.

Source: The National Review – Public Benefit Corporations and the SPAC Surge

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Source: https://spacfeed.com/public-benefit-corporations-and-the-spac-surge?utm_source=rss&utm_medium=rss&utm_campaign=public-benefit-corporations-and-the-spac-surge

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