Authors: Mahdi Shams, Brendan Bachewich
The NEO Exchange (“NEO”) announced, on April 16, 2021, a new pilot program (the “Program”) for a new type of publicly traded acquisition corporation called the Growth Acquisition CorporationTM (“G-Corp”).
This Program will allow companies in an earlier stage of their growth to access capital and go public with less of the risks associated with other public listing strategies.
With this Program, the NEO aims to address the gap left in between the Capital Pool Company (“CPC”) program, which caters to companies still in the formative phases of business development, and the NEO’s own special purpose acquisition company (“SPAC”) program which is designed for senior issuers.
The new Program is open to corporations with an enterprise value between $50 million and $500 million and is built off of the SPAC program. The SPAC program was designed with senior issuers in mind, so this new Program has been tailored to reflect the differences inherent between senior issuers and mid-market issuers.
Although the Program is novel, the securities group at MLT Aikins has extensive experience with the CPC program and other traditional offerings, which will translate well into offerings the NEO puts forth under the new Program. This will help ensure that you and your company fully understand the process of becoming a NEO G-Corp and set your company up to successfully enter the public market.
NEO G-Corp Key Features
- A minimum IPO of at least $2 million, with all proceeds being held in escrow.
- Founders’ equity ownership of the G-Corp of not more than 20% immediately following the closing of the IPO, excluding any securities purchased at or prior to the closing of the IPO at not less than the IPO price.
- A minimum investment by the founders, ensuring at least $300,000 of free working capital.
- A timeline to identify a Qualifying Transaction (“QT”) within 24 months of the closing of the IPO, which must be completed within 27 months of the closing of the IPO.
- A resulting issuer will have a market capitalization of at least $30 million and will meet the NEO’s initial listing standards.
- Investors in a G-Corp cannot exit their investment prior to the completion of the QT. In other words, there is no “redemption feature” in a G-Corp, but instead the completion of the QT is subject to the affirmative vote of the shareholders, excluding votes held by founders.
- In the event the G-Corp fails to complete a QT within the permitted time, the escrowed funds will be returned to the investors on a pro-rata basis.
Listing as a G-Corp on the NEO
Issuers who are seeking to be listed as a G-Corp through the Program must schedule a pre-filing meeting with the NEO to determine whether they are eligible and suitable for the Program. The NEO expects that applicants to the Program will have a management team that has experience with private equity markets and/or capital pool companies.
Once an issuer is deemed eligible for the Program they will have to submit documentation to the NEO describing the proposed structure of the G-Corp; this must be approved before the NEO proceeds with its standard listings review process.
For further information on the Program offered by the NEO, or for information on CPCs or SPACs, do not hesitate to reach out to a member of our securities group. We can offer you guidance through the different options and the process for applying to each.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.