On Wednesday, online trading platform Webull announced its decision to go public on the Nasdaq stock exchange through a merger with SK Growth Opportunities, a special purpose acquisition company (SPAC), in a deal valuing the merged entity at $7.3 billion.
This transaction stands out as one of the few high-value mergers in the currently subdued blank-check market, amidst growing concerns from both regulators and investors.
SPACs, commonly referred to as blank-check firms, are established solely for raising capital through an initial public offering (IPO) without having any ongoing business activities. Their primary objective is to use the funds from the IPO to acquire or merge with an already existing company.
This allows existing companies to become publicly traded without undergoing the traditional IPO process.
"The traditional IPO path has many hurdles that we've encountered over the years," Webull's Group President Anthony Denier said, citing the possibility of the company being valued against peers that are not direct competitors.
This approach to going public is seen as a way for the market to establish a company's value rather than relying on underwriter assessments, a principle Denier said aligned with “Webull’s core values of democratisation.”
The popularity of SPACs — a hallmark during pandemic-era dealmaking — has waned recently due to increased scrutiny from the U.S. Securities and Exchange Commission (SEC). The De-SPAC index, tracking companies that have gone public via SPAC mergers, has lost close 13% this year and 34% over the past six months.
Investors in SPACs have the option to redeem their shares if they disagree with the merger choice, a process that can significantly reduce the post-merger company's available cash, posing substantial risks.
Webull, which began its U.S. operations in 2018 and has since expanded globally, offers commission-free trading on stocks, equity options, and ETFs, targeting a more experienced segment of retail investors, according to Anthony Denier.
The platform has seen a resurgence in user activity recently, fueled by optimism for the U.S. economy’s “soft landing” as the Federal Reserve prepares to unwind its quantitative tightening measures.
Post-merger, Webull plans to list on the Nasdaq with a new ticker symbol, with current shareholders expected to retain their stakes in the new company. The deal is anticipated to be finalized in the latter half of the year.
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