Help Me With Sign New Mexico Banking NDA

Help me with industry sign banking new mexico nda

[Music] welcome everyone participants for a very engaging and interesting session on special purpose acquisition companies or spax as they are called uh this session we thought it's um you know it's very relevant in today's uh today's times uh you know when we are slowly coming out of the corvette situation um you know companies are looking at raising funds and uh we have actually seen uh you know a spat boom or so as to say happening uh in the last few years and it just it's just going up by the billions of dollars uh as the you know as the years go by uh but what really has packs you know we'll talk a little bit about what's backs are uh we have uh you know a stack expert from the u.s you know we have barry grossman who is a spac expert from the us and he's going to take us through uh you know his experience uh with respect to spac fundraising uh how the u.s has really converted this into an opportunity for raising funds and also we'll talk about the india experience and talk about the hurdles and the challenges uh but before we really go down into you know the nitty gritties and really talking about the issues in my new detail just to set the context um spacks are nothing but you know blank check companies where you know investors in in this pack just kind of write a blank check their specialized deal machines who has to say and what they really do is that they raise money from stock market investors for a specific purpose of buying privately traded companies which may or may not be targeted at that particular point in time um in case if you know the deal is struck then typically this pack acquires the company by way of a reverse merger and if no deal is struck then usually the funds are dissolved and you know the funds are returned to the shareholders uh we'll get into the details of that uh you know a little bit more uh but interestingly um right now in the us you know even we are sitting in july there have been more than 40 stacks that have already gone public uh as compared with 59 for the last year and uh the benefit that uh you know spat fundraising is really bringing in is higher valuation quick access to public markets global branding but of course many times deals don't happen shareholders don't approve the deals or regulatory challenges kick in which makes the stack uh you know just unviable for certain geographies you know including india india has seen quite a few space play out in the past and uh we will talk about those as well as you know the challenges uh from an indian context and uh you know what can really be done to make uh this pack structure a little bit more viable uh for indian companies um but i'll turn this over to barry right now uh barry maybe you know you can just talk a little bit about your experience how the u.s market is doing as facts are concerned you know you spoke about how sparks are really the hottest property right now if you could just you know tell us a little bit of the basics of the space and how they're functioning in the us uh then we can take the conversation forward that thank you very much and thank you for the introduction um i obviously appreciate this opportunity and it's privileged to speak to to you and your clients so i that thank you very much um a two minutes about who i am i'm a partner at eleanor grossman in shoal we're a new york based firm we have approximately 100 attorneys of those 100 attorneys approximately half of corporate securities lawyers and we have a dedicated spac practice that has approximately 20 attorneys in it we represent about 80 public companies including you know non-us companies and in the last few years we've been involved and we're on pace to do about the same this year we also were involved in um you know you mentioned that there were 59 stacks last year we were involved in more than half of them three on either the issuer or or the underwriter side um for this back practice at egs we've done more specs than any other firm in the us as i said we did about half the spax in 2019 and also in 2018 um we represent almost every bank that's been involved in this back practice that goes from the small banks like maxim group to the larger bags like goldman sachs um we've worked on the front end of the specs we work on the back end his backs the acquisitions and you know so and as you mentioned spax right now are incredibly hot in the us every spec that that happens right now seems to be upsized and we're working on spacks from every place in the world be it china israel south america mexico um the uk netherlands we have seen some india's facts as well um but they have their own difficulties which i guess we'll discuss later um what's happened with the fallout from the clover 19 crisis is that there are a lot of assets that are under stress there are a lot of assets that people are trying to buy at basically a discounted price what's also happened is the ipo market has been disrupted as people are nervous about raising funds of what will happen so what we're seeing is spax has all taken a huge step forward stepped into that void and are now basically almost 50 of the u.s back market we've seen startups such as electric company nicola we've seen healthcare companies like multiplan that are going out and doing these huge specs draftkings golden golden nugget common names in the u.s that are involved in everyday life in the us have become spax the size of these specs have gotten larger and larger um the multi-planets back is an 11 billion u.s acquisition which if those three will be the largest back ever largest back acquisition ever um one thing i should also comment on is that every spec ipo in the current market is closing and that's a tough statement to make you know for a lawyer but i can tell you 100 of the specs we've worked on in the last 18 months to two years have closed the two exceptions being when sponsors in effect lied or misled i guess the investment banks they were working with and we found that they had problems with that past that have not been initially disclosed other than that every stack is closing in the current market because there's such a demand for them um 20 companies view the public this year okay um admit and they're obviously choosing this background over the ipo route um what we're also seeing in the stock market is that the people who are running these backs the sponsors um high net worth individuals are people that have been involved with private equity funds family funds um investment bankers uh almost 35 to 40 of the current stacks are people that have a history of doing investments in the older generations facts there were a lot more operators involved now we're seeing a lot more people are involved in the investment side um in 2020 so far we've spat market has raised 12.1 billion dollars okay now that's not taking into account bill ackerman's back and bill from ackman's fund called pershing pershing is talking about doing a four billion dollar spec which would dwarf you know any other stock would be dwarfed in that size okay and basically there's such a there's such demand for his fact that it may end up being a seven billion dollars back okay so a seven billion dollar spec will be looking for an asset in the 21 billion dollar range which once again would be the largest fact size ever um the average spec in the u.s is this year is about 330 million and the average non-us back is approximately 100 million dollars um so what what's the spa a spac is really a newly formed company that's set up by a prominent qualified spot management team for the purpose of raising money that they then goes out and buys a company okay it's really a big pool of cash that is listing on an exchange for the sole purpose to do an acquisition and then once they close the acquisition the target is listed on this on the exchange the basic size for spec range anywhere from 50 million to as we said bill ackman's back which is 4 billion but up to now the specs have ranged from 50 million to about 1 billion um the spac it cannot have any operations it's a total blind pool okay the spec cannot okay it cannot have negotiated to do any acquisitions having said that every space sponsor that comes to us has a basic idea of the companies they want to buy the industry segment that they're interested in and probably has five to ten companies that they will go out and negotiate with any spac sponsor that comes to us and really has no idea what they're gonna buy has no clue what the market looks like is not a good sponsor for us okay um the spax sponsor seeking to leverage their name recognition that's seeking to leverage their history in the industry and that's what makes them a good team okay um public shareholders once they get the shares in this fact unlike in a private equity sector sector are able to go out and sell those shares immediately this back sponsor is locked up to left the business combination uh oh there's there's a presentation um but basic basically um the spot the shareholders can sell right away so if you can go up two or three more slides not sure there we go just just go past all that keep going up yep uh next one okay there we go um one of the advantages to the investor in the spac well these are public shareholders and as i just said the public sales have the ability to sell this back right away um they're getting access to deals that private equity people do not normally see you're getting to invest with sponsors who normally would not take your money unless you're putting up hundreds if not millions of dollars you know the spac management team you know this light set is putting up up to five percent of the capital the ipo what's what we're seeing more and more of is this back sponsors are actually syndicating out their interests so the amount of their investment is actually a lot less than that five percent um one of the most important aspects of this fact is that the capital is held in trust attending the approval of the business combination okay there has been no spack in the history of the specs and stacks have been around since 1993 that eva has not returned 100 of the money that a shareholders invested in this trust fund trust funds are basically the keys to spec people know that they won't get their money back if the deal is not done and that makes people very very comfortable which is why they're willing to invest the other aspect of this back that's very important are the warrants it wants to give people optionality to not only put their money in in the initial ipo but they have the optionality to increase their investment at a late at a later date additionally what we're also currently seeing um which is not reflected on this slide that more and more retail investors are starting to put money into stacks it used to be that you'd get four or five funds would buy up you know 90 of the stack and maybe 10 would be retail you're seeing more and more of a push now towards retails investors that are putting in more and more money which is another reason why the spax are getting larger and larger and every spec is upside next slides please um i guess i guess they're out of order um the advantage to management um you're pre-funding your acquisition strategy and what that means is if you're the sponsor team you're the management team you're now sitting with hundreds of millions of dollars in a trust account you will get calls from people that you haven't seen or heard from for years that want to invest with you or want to sell you that company the ability to have money seeing an account makes you a real player in the market and that's and we've seen this time and time again where people will come to stacks with deals that otherwise they would not know even available um unlike with a private equity fund there really are no restrictions on what you can invest in how you can invest even specs that are focused on a specific industry always have a provision allowing them to invest in any other deal they like um the spec management team is getting up to a 20 promote and they're usually putting in about five percent what this basically means is that you put up five percent you get twenty percent of the company so even if the stock drops a significant amount the smack sponsors still make a lot of money um as we noted all earlier with the money in cash it makes the trust it makes us back much more attractive um part partner for an acquisition okay and also with the money in cash you're able to leverage that and so a common feature of almost all stacks now is that at the end of this back process or before the business combination they will go out and raise additional money through either a pipe or through some sort of backstop next slide please next slide thank you um go to the next slide these are out of order um you can leave it there um i'm sorry i'm just trying to figure out where we are here um all right give me one what these are totally out of what i i do apologize um so the structuring trends one thing that has changed significantly with spax and this is talking about moving towards a more specific niche structure is actually changed significantly within the last probably six to nine months so this this um this slide actually has a mistake in it i would tell you what's happening now is that 35 to 40 percent of the space i said earlier are being run by basically invest in banks private equity funds hedge funds and those are general purpose facts those backs will not tell you what they plan on investing in they will not tell you a specific industry and they'll basically go out and find the best deal they can find um basically people are investing in these specs because they believe that this these are people with great track records and they're not trying to limit what they can do um the sponsors at risk capital has remained at five percent it used to be a lot smaller but it's actually come up the launch structure has also come changed over time it used to be that you basically got one warrant for every share of stock it's now down to between half and one third although the ackerman's back and one other spec that filed recently there were no warrants at all in the transaction so these are the first zero warrants facts okay um smaller deals the ones between 50 and 100 million dollars often have what's called the right and so you'll get um one right for every 10 shares you buy which is another way of being having the ability to buy more shares in the company that's ultimately required okay um stacks have 18 to 24 months to find their deal to close their deal and many stacks though are starting with 12 months or 15 months and they have the option of putting in additional money so that they can have more time most backs have a hundred percent of the money invested by the shareholders put into a trust account some specs have a 101 or even 102 so the investors have built-in gain even if the deal isn't done um the underwriters have also changed the way their fee is structured it used to be in a typical spec it was like a typical ipo the underwriter would get five or six percent up front now they're only getting one and a half two maybe three percent up front and the remainder is payable only upon the successful completion of a business combination what this does is it makes the underwriting your partner okay the underwriter and his incentivizer really incentivizes to make sure that you can close your business combination because he's only getting he's in the majority of his fee only upon the closing of the business combination what's also changed over time is that shareholders can vote yes on a deal and still ask for their money back so what this means is that they vote to close the business combination but they want their money back from the trust one feature of this fact that i really haven't discussed is the trust account itself in the trust account all the sh the public sales money is invested so if you have a 300 million dollar stack all 300 million dollars is put into a trust account that it cannot be touched until the business combination excuse me if a shareholder decides to vote that he doesn't want to invest in the business combination every shelter can ask to get their money back okay it used to be if you voted no on the business combination you you got our money back and you lost everything now actually when i lose everything you lost all your interest in this back now you can go yes for the business combination get your money back and keep your warrant so you keep the optionality in the future business so what this means is that no shareholder will ever vote against the business combination because even if they don't like the deal ask for their money back and they'll keep their warrant so they can basically compete or i should say participate in this back business combination going forward um another big trend that should be noted that's not on here is that the people or the banks that are involved with spax at this point many years ago when this first started there was there were only small banks that most people had never heard of in the current market every major institution goldman sachs citibank deutsche bank ubs um canter fitzgerald and all smaller banks the maximum high bankers are involved with spax um this year there will be more space than any other year more money will be raised than any other year and the banks are vigorously competing against each other for that market next slide please every spec is set up the same way in the current market every spec uses a 10 unit that unit consists of one share of stock and either a half a warrant a third warrant or as i said two specs that currently came out have no warrants okay that unit okay is what you're buying and trades publicly after a certain amount of time after the ipo the unit separates and the share and the warrants trade independent of each other as noted early in the current market basically 100 of the money invested by the public is held in trust sometimes more than that but at least 100 will be held in trust um it should also be noted that because spac sponsors have made so much money on these deals you have numerous back sponsors that are back for the fourth fifth or sixth back we have at least three sponsors who are on their fifth backs i don't know if we have any in-house that are on the six but there are numerous backs sponsors on their second and thirds back another very important trend this is basically a minimum guarantee in the deal in a spat theoretically everyone could ask for their money back so when you try to close the business combination you will have no money the forward purchase commitment is a is a commitment by an investor or a group of investors that they will either leave their money in the deal or they'll put money into the deal to make sure the stack closes the business combination with sufficient cash next slide please so every spec wants to list on either nasdaq or nysc in the earliest backed versions go back to the other one please in the earlier spac versions there were numerous facts that listed on the bulletin board that is no longer the case every stack that happens now is a minimum 50 million dollars banks just aren't interested in the smallest facts at all so because they're all 50 million dollars they qualify to list on either nasdaq or nysc the two exchanges are competing for these specs they will cut deals through these backs you know they're in the business of getting as much this business as possible and they will basically cut deals that you never would have thought possible a few years ago um they've modified their rules to make it easier to list backs and they made the whole listing process much easier um one thing to keep in mind all stacks have to have at least 400 shareholders and at least half those people need to invest at least 2500. foreign private issuers which are you know would be an indian's back or a chinese back or you know singapore's fact non-us facts okay they're exempt from certain of these rules although in general they tend to file follow all the us rules because they want to be able to be listed on the national exchanges one thing that is not on this slide that we should also discuss is the sec the sec previously made it very hard for spax to list it used to take almost 90 to 120 days for the sec to approve a spec in the spac team and they really gave you a hard time probably in the last year to a year and a half the sec has totally changed their view and with the current state of you know the u.s stock market it's changed even more the last i think two or three specs that we've filed have gotten no review from the sec which means within 30 days or less than 30 days we've cleared the scc review and are ready to go public so if you started us back on july 15th and you're able to file within let's say three weeks so in your first week of august it's possible you could have a public company by the first week in september whereas it used to be you know a five six month process it's now become a 60 to 90 day process when you start the process until when you actually have a public company that's up and trading next slide please i'm not going to spend a lot of time in this back history i just really want to say that we're in what's now called generation 3 spax and what's really happened over time is this back process has gotten easier the amount of money that's been raised has gotten easier the sponsors have become much more credible much more impressive and the type of people that are sponsors have changed i think i noted earlier that it used to be a lot of operators you know people who set up businesses who set up you know the first you know first um cmto in the us set up the first you know manufacturing facility those were people that were running specs now you're finding much more people that can find deals value deals and close deals those are the people that are really sponsoring specs at this point um next slide please thank you um the main part about this slide is that what we're seeing in the market we're seeing the deals that are closing the deals that are successful um basically the management team needs to bring back a business combination that's two to three times the money raised so if you do a 50 million dollars back you want to do a business combination that's worth anywhere from 100 to 150 200 million dollars those facts have been very very well received by the markets those are the stacks that people want to stay in those are the stacks they've been able to go out and raise additional money when they close the business combination okay um the reason those facts have been more successful is that because the sponsor is only putting up five percent of the money you're getting 20 of the overall entity so you're in effect leveraging down by buying a larger um a larger entity what we also see in the most successful specs is that the target company takes out little to no money um spec investors do not like seeing deals where they're basically putting up money just to buy another business and the and the um the owners of that other business are leaving the company recent specs have seen almost no money going to the selling target in exchange the seller of that business will end up getting stock in the surviving company and potentially even a controlling interest in the surviving company and will stay on as management you know those are the deals that are much more attractive to the stack investors next slide please earlier specs had a big problem with activist investors the activist investors would come in they would try to blackmail these back sponsors they would try to do certain things to in effect either take over the stack to get access to not access the trust fund so they could use the trust funds for their own deals or okay they would try to basically take a piece of response to interest so they would block the deal from happening and the sponsor loses money in the current spat market with the rules that have been changed and approved by nasdaq the ssc nysc okay it's basically impossible for any individual investor to block the deal um there have been all sorts of limits on how a person can vote if they own what attempts in the deal okay so there's really very little they can do so what happens in the current stock market is every investor will vote yes for the business combination even if they don't like it as noted earlier because they can keep their warrant and get back their money uh next slide please so this is what a typical stack looks like as i noted earlier you get a unit every unit in the current market costs ten dollars um you get the share and you get either half a warrant or a third warrant um and that warrant strike price is 11.50 so it's at a premium to the price that you sold the deal you're selling the shares at ten dollars per share uh prior specs in generation one and two one strike price was actually below market to encourage people to exercise right away but there was two we found that there was too much dilution in the market and it was hard to get fundamental investors in the deal the holder the warren has five years to exercise it and that five years starts after the business combination every spec also has a call provision and a warrant that the stock hits a certain price and currently it's 18 okay the sponsor has the right to call the stock i'll call the warrant i should say um there's an interesting phenomenon that had never happened previously there are certain specs with certain spec sponsors that are trading above the call price before the business combination is even done and people obviously don't want to be exercising at 18 when they don't know what the what deal is ever going to happen so people are trying to adjust for that right now that really just reflects how popular stacks are right now in the us next slide please um some of the most important features of this back deal with the trust account as i mentioned earlier because that's where the money is protected every spec has a third-party escrow agent that esco agent is is normally an institution that's a well-known institution um citibank deutsche bank ubs it's all large institutions that you know the money is safe um as i said earlier there's never been a stack that has not returned the cash that was invested in the trust account when it was supposed to return that money um and that money is not released until there's a vote on the business combination um technically you have to buy an asset that's worth 80 of the amount and trust in in actuality as i said earlier you really look for something that's two to three times um the next feature is that you know only well-received transactions get approved that's not necessarily true though because there are specs where the value you know the stock price goes up the stock price goes down um we've done oil and gas backs we've done shipping specs you know specs that are very specific to an industry obviously are impacted by how that industry is doing at that point right now biotech is is very hot technology specs are very hot um so the spec will move up and down based on that industry after the business combination um management is obviously incentivized to find a good deal if they can't close this back business combination they lose their investment unlike the public shareholders whose money is never at risk after the business combination imagine people their money is at risk the entire time they do not get their money back the deal does not close in fact if the deal does not close you can assume they're going to lose that money um and that's what the next question is talk about insiders do not participate in a liquidation distribution and their shares are in effect locked up for a year after the business combination uh next slide please oh well i so that's that's the end of the presentation um i i think the real big takeaways right now the u.s market is incredibly hot people are looking for deals people looking for management teams and all the deals are closing quickly so now thank you for your time yeah uh thanks a lot barry and i think that was quite informative um you know the amount of money that's getting raised uh through stacks in us is quite overwhelming and i think we would like to see how this would really play where the india growth story is concerned uh uh what we have really seen is that there has been a lot of interest uh where india is concerned uh you know uh for spacks to be set up to acquire indian assets uh i noticed you talked about how uh you know the the spacks that are being set up are not really being driven by a specific sector or a specific um you know geography and that's what we have also seen you know with respect to some of the sparks that have been considered in the indian context and we've also seen that how mainly investors have been excited about the indian growth story and probably with you know with announcements for self-reliance in india that needs to be taken to the next level um at the same time uh you know there have been quite a few restrictions where the indian securities law is concerned and although we did see uh you know a few a few stacks for example there was the silver eagle acquisition uh you know spat which acquired uh you know the vodafone business in india uh we also saw you know yatra being acquired through us back and being listed uh we saw constellation also although probably you know it may not have ended up acquiring an indian asset uh but let's let's just talk about what issues there may be from an indian perspective and i'm going to turn to simon you know right now simone looking at your experience um you know with m a transactions how do you really compare the spac acquisition model with let's say you know adr gdrs or uh you know we've been talking about direct listing abroad for quite some time now and still waiting for some clarifications on that front but from a securities law perspective how do you really see this pack playing out uh you know where indian acquisitions are concerned thanks paul um so in india i think you're always looking for an innovative way to get liquidity and the indian sort of markets never cease to surprise you i don't think that is necessarily you know a sure short way of calling what the indian markets would or would not do and at what point in time you know they're ready to house companies and give liquidity that that that companies really want uh today for instance if you see during covert times people expected uh the stock markets to really be depressed but you have uh you know you have the sensex and you have the uh not doing as badly as expected so indian markets are always you know choppy and it's never necessarily as expected and um spax in fact do open an avenue for indian companies to list overseas um there are a numerous number of restrictions um in in in india for indian companies to really list whether in the country as well as sort of overseas and because avenues of capital and um you know people are always looking for creative ways and to to get the best value for their product um companies do look really at our comp our clients are looking differently at innovative ways of of listing overseas now let's look at the laws really in india and let's sort of take an example of what really happened at the videocon d2h uh spac listing because i think that was one of the most sort of recent uh spac acquisitions and the ones that the one that made the most headlines now um under under indian laws uh for an entity to list um on the bosses uh indian bosses um you know you have to comply with profitability regulations you have to have been you know you have to have profits for three years uh you have to have a minimum size of an ipo at least 25 percent has to be offered to the public um and there are and the ipo process is quite is is really quite uh draconian um on the flip side people listing overseas is again a little bit of a regulatory hurdle we used to have the gdr adr routes which were accessible not only to listed companies but also to unlisted companies but recently sebi has made a revision to the regulations which now allow only listed companies to list ads gdrs overseas areas gdrs are nothing but depository receipts uh which entitle the holder um to underlying equity shares the adr american depository receipt is is a listed security listed overseas um which the investor can exchange for indian shares um uh as and when they do they they choose um but but given these sort of limitations um you know there are there are concerns wit respect to how an indian company can actually list overseas now uh videocon d2h really happened at the time where unlisted companies could in fact um go on and seek uh uh you know get get their uh deposited receipts listed overseas um in fact uh video point d2h was in the process of doing it of doing an ipo in india they pulled back their ipo and uh got their themselves sort of listed quote unquote on um on on us bosses what happened there was silver eagle was a was this pack uh silver eagle sort of acquired uh deposit depository american depository shares issued by a video call on d2h those instruments were listed on the u.s stock exchange and then were finally distributed to the shareholders of the of the stack as a result i think the the total percentage was about 33 of the capital of the company got listed overseas now it provides a great avenue um uh to to have a liquidity overseas but i think i think given that our laws are sort of changing constantly uh it remains to see what the government is likely to do um with our with with our securities regulations um like you said parole they have been talks about india opening up and allowing for indian equity to be listed overseas completely um if if that happens maybe the use of a spac may have a different purpose and um and and and and you know um companies would have perhaps a choice of whether to do um a pure spac acquisition or list directly overseas but um these changes have been really in the pipeline for a while um and there will be a lots of sort of corresponding changes whether under indian securities laws indian companies act uh indian tax regime and also our foreign exchange laws which currently are are quite restrictive uh with respect to um listing overseas uh last but not the least i think with respect to spac acquisitions um although they provide a very sort of innovative way of of of listing overseas um there are limitations with respect to um how an indian investor or indian promoter could really sort of acquire shares in this pack whether they can transfer out um to this back or and or hold um securities ultimately listed on the uh foreign exchange but i think parallel you will cover that uh subsequently um yeah in terms of you know what sort of problems under tax laws and females really yeah sure thanks simon and you know we heard barry talk about how typically you know there would be a merger of you know the target into this pack um from an indian company law perspective do you really see any issues in the outbound mergers we know that you know outbound mergers have been permitted under company's law but based on your experience how do you really see the outbound merger really working out from a company or perspective sure so so i think um there are lots of complications um with respect to our own outbound mergers right especially since um indian shareholders really are shareholders in the company and therefore how do you manage that the second issue really is is that if you have immovable assets in india then the the merged entity is not allowed to hold immovable properties in india in fact doing business in india without an entity in india again becomes extremely difficult uh especially from a tax perspective um and and um it's not necessarily a tax exempt transaction which again is fraught with complications we do require the approval of of of of quotes uh which is a long drawn process so uh there are multiple sort of uh hurdles in in doing a reverse merger which is why in the videocon d2h what they did do is uh they had you know um ads uh issued to a um to um intermediate entity and that intermediate entity sort of merged in and um those those distrib those ads were distributed to these pack holders and were listed overseas so there are innovative ways of doing this um uh and not necessarily the cookie cut away um you know given indian regulations and restrictions um but but like i said you know we're all uh we're all looking for innovative ways to um get overseas um and this is definitely one interesting structure that has been explored and will be explored i suppose in the coming months as well right yeah one one thing to keep in mind from the u.s perspective it doesn't necessarily have to be the u.s company that or the indian cup that merged into the u.s company and it doesn't even have to be a u.s company involved at all um from the u.s perspective the init the spat can be set up as an indian company or as any non-us company and the indian company can be the surviving company and the indian company can become the private the public company excuse me um so a lot the issues are really more uh seems to be on the india side rather than on the on the u.s side of this in this instance absolutely barry i think uh there are always we always have restrictions on the india side more than anywhere else in the world yes which is why our capital markets are really haven't really been ex haven't really seen um the uh the sort of magnitude that they they could have been we're trying to change that and i think the regulators are opening up um avenues for um indian securities to be listed overseas um which would provide perhaps a very different way of looking at space uh in the years to come i mean you you can and i guess so as you say you did you did mention the indian you know it's back have folks on india that have actually closed and actually done things with indian companies there have been other stacks that started off being indian focus facts i am capital tenzing that have not been able to close indian transactions for a variety of reasons have ended up buying non-indian assets um just because they could really from what i understand more for regulatory reasons they weren't able to close deals you know in india unfortunately yeah parallel i think it will be a good segue to sort of discuss the foreign exchange norms because uh that is the biggest regulatory hurdle given how um the capital structure of an indian company uh really uh you know is held by indian residents right absolutely yeah so um like simone mentioned and you know barry has been talking about how the problem is uh usually on the indian side and not on the on the u.s side our foreign exchange laws are you know one of the biggest impediments to uh to this pack uh success in india and while we've had a few space in the recent past but you know they've gone through the rigmarole of the listing overseas and so on and so forth which has you know increased the time time limit and you know really made a very efficient structure a little bit of inefficient so the problem from an indian exchange control perspective um uh is primarily that you know while um you know india had come out with specific cross-border regulations in 2018 but these regulations did not really achieve much because they went back to the law to state that you know if acquisition of shares of a foreign company by indian residents is permitted under our odi regulations or the overseas direct investment regulations then you know then that would be allowed and the biggest problem that we are seeing right now is that uh indian promoters and indian shareholders of indian companies are currently not allowed to hold shares of a foreign entity uh which has a subsidy in india and uh or you know even individuals may not be able to hold shares so they'll have you know restrictions in holding shares of a foreign entity uh because of round tripping concerns um there are also issues uh with respect to you know outbound mergers because when an indian company is going to merge with a foreign entity uh in that case what will primarily happen is that the foreign entity will end up establishing a branch in india and it's not really possible from a business perspective to run all sort of business uh you know through an indian branch uh you may or may not need an rb approval depending on the sector for the branch and uh uh immovable property is not really permitted to be uh to be held so there are certain um time limits which have been given for uh you know for disposal of the property which which cannot be held uh you know in india uh we've however seen uh you know a lot of externalization structures where um indian companies in order to access public markets outside india have been um you know uh have been externalizing outside india in a sense that they have been setting up holding company structures now that also comes along with that comes in issue of how the promoters indian promoters which will shares of uh you know of a foreign entity but um you know depending on the facts and circumstances in some cases it has been possible and possibly that's where a space structure could also work where you know companies have externalized outside india with the merger of this pack into the externalized company or the other way around where you know the target merges into this bank so uh so there's no one you know solution that fits all uh we have seen uh you know spags doing it in the way that simon described but it's not really been the most efficient way and when we talk about tax issues uh you know specifically for swap off shares leaving aside the fact that you know the swap may not be permitted under foreign exchange regulations it just increases an exposure where there is no cash involved and maybe russia i'll just bring you in at this point in time to quickly you know talk about what tax issues come in when we're dealing with this pac model and what one needs to bear in mind sure thanks paul so i won't go too much into the weeds and the tax issues because uh as uh simon and you rightly mentioned right now the primary issues uh that that really strike a spat uh deal from an india perspective are the foreign exchange issues in terms of holding of securities abroad um what this brings into of course are the tax issues that you just mentioned uh one of the key tax issues that comes up is uh you know when an indian um promoter or a shareholder of an entity is swapping out his or her shares uh for the uh for the entity listed abroad and it's at this time that there is a heavy tax incidence on the indian shareholder because uh because that that indian shareholder would have subscribed to or acquired those shares um at a much lesser value uh whereas at the time of the swap uh the tax incidence under indian tax laws would require that person to pay uh the tax on the fair fair value of that uh of that share uh sold um a lot of times this particular tax is called the phantom tax because there is no uh cash that actually comes into the shareholder however there is that tax liability that the shareholder has to meet um so this becomes a concern at the time of the swap um sometimes if this swap is uh you know uh structured in a way that it happens at the same time as the uh actual exit from the uh from the entity altogether of the shareholder what this achieves is it delays the event of taxation to a point where um while the indian tax will anyway we have to be paid at some point uh for u.s tax purposes uh the shareholder actually achieves the step up and there is no liability in the u.s however like you said each pack is different and it will be completely dependent on the facts and circumstances of the case whether such a you know structure is even even feasible from an uh outbound merger perspective like you mentioned uh there are there are challenges under the uh the fema uh cross-border merger regulations that make the entire process very difficult to accomplish a tax perspective while inbound mergers are exempt from capital gains tax in india outbound mergers uh don't have that exemption under the income indian income tax act and what this means resultantly is that the liability on the on the indian amalgamating company or the liabilities on the shareholders of the indian amalgamating company can actually uh result in a heavy capital gains tax and india's income tax act does not actually assist the shareholders or the indian amalgamating company in achieving any benefit um again in case of outbound mergers you have another issue that comes up which you just mentioned which is that under the rbi regulations the foreign uh resulting company will be deemed to have a branch office in india um now having a branch office in india under tax laws uh also brings up permanent establishment concerns and uh in terms of attribution of profits of the foreign entity so again that's an issue that needs to be kept in mind um the last issue that i would mention is um our uh you know famously called the vodafone tax issue that comes up um the vodafone tax essentially is that if you have a foreign company that has that the shares or interests of which are deriving the value primarily from assets located in india and there is a transfer of the shares of this foreign entity then there is a taxable capital gains uh event in india now um in such a case if you have an entity listed in uh in the us um and the business assets etc are all being derived from india then the substantial substantiality threshold has been met um and again an indirect transfer tax trigger could come up uh the jury is still out on whether a non-resident can claim benefits of a tax treaty in respect of indirect transfer tax so again that's an issue that is still being litigated before our courts so there is a chance that you know that that benefit under a tax treaty may not be available and hence can i add to the tax costs uh associated with such transfers um so uh yeah i i guess uh parallel that is it from the tax perspective um i think the time with the with the foreign exchange issues that you just mentioned um and and uh like you said that these are very fact specific would depend on the way the deal is structured and uh would have to be you know governed on a case-to-case basis sure thanks russia and uh i think since we are running out of time we'll just quickly take a few questions um um so um barry we have a question uh you know asking if there is a registry of existing space so that investors can look at their you know trading history their success and their models i guess there's a filing that needs to be done uh with the sec but maybe you can talk about a little bit more as to how our participants get involved with permission on public space i mean what you could do is you could find all the stacks that have actually been filed over time um we have actually have our own internal list that we could probably send out to people but what you have to keep in mind is stacks trade on what they acquire as i said earlier if you acquired an oil and gas asset that's going to trade differently than if you bought a technology company which is going to trade differently than if you bought a biotech company that may have actually failed so it's hard to say how stacks trade after their acquisition because they vary based on the industry and based on what they acquired there have been good deals and there have been terrible deals but there is a we you could put together a list of all specs that have happened over time and we could probably get that to you okay great so we'll try to pass that on to our participants um the other question is is it right to assume that this pack does not have to be 100 acquisition of the underlying that is what is fact be allowed to acquire only 50 percent of the business or does it have to be also controlling transaction and it cannot be a minority stake well what happens in reality so if you have 100 million dollars back that's buying a company worth 500 million dollars you or 400 million dollars let's say you only end up with 20 of the stack at the end of the day so although on paper you may expand you know 100 of the target in reality the fullness back shareholders will be minority owners because the target shareholders will end up with 80 of the deal so the stack can end up being a minority owner even though they're buying 100 the company if you understand what i'm trying to say right great okay so um i think just uh you know we've talked a lot about um uh you know u.s pacs and u.s facts acquiring uh indian companies and how the issues more relate to at the indian end because we're talking about two jurisdictions and you know uh how the foreign exchange laws and the tax laws become an impediment uh i'm going o turn to you and if in just one minute you can you know just briefly you know talk about uh indians facts you know the other way around and uh you know is that also reality um are there similar issues because cannot one just consider an indian's back to acquire uh assets in india um so yes apparel uh indians facts have been uh i would say thought about i would i i wouldn't say that they've been uh attempted to be implemented um there are a lot of uh challenges uh in in trying to have an indian listed stack uh the very first challenge is that the concept itself isn't something that is uh recognized or provided for under indian uh regulatory regimes uh that brings with it a host of other issues because uh existing corporate laws uh listing requirements etc uh make it very difficult to actually um operate a con an entity like a spac in uh india the very nature of a spark is the purpose of the entity is not to actually undertake any operation but to acquire a particular company um this this kind of is at loggerheads with the company's law objects clause in itself um and the companies act 2013 actually permits the roc to uh go ahead and dissolve the company if the company doesn't uh you know uh initiate operations within uh one year um and as you heard from barry uh that a timeline of a spec in the us usually is from between a year and a half to two to um actually make the acquisition so there is this one uh you know disconnect under indian law which which makes the prospect of having an indian listed spark very difficult in in addition to this um listing requirements and uh ipo requirements under india india's laws service regulations etc uh all require a track record to be established by the entity that is seeking to undertake the ipo or seeking to list itself um these track records could be previous financial results um the you know meeting certain net asset requirements which are sparked by its very nature would not be able to meet so uh there are these complete roadblocks i would say to actually having an indian listed stack which need to be dealt with if if uh you know indian space are at all to be a reality uh in india um and of course um david come the allied issues that uh if you're actually listing us back on indian stock exchanges what you're not achieving is uh you know the benefit of the global market in terms of valuation and you know the global branding that you're getting uh with the foreign listed uh spa right yeah i hear you russia and you know i guess the the main part is really uh you know the u.s valuations would be multiple of um of the indian valuations and the u.s fact would make a much better sense as compared to an indian you know spec even given regulatory restrictions on both sides of the spectrum we have seen that there have actually been very few stacks that have been successful in raising money because of these uh these considerations and i think the question really is um uh whether regulations and the policy framework is going to change in the near future in order for india to get a you know be able to get a blank check from uh from investors to this pac model so simon what what would you you know if you had a wishing bond what is it that you would like to change you know from a policy perspective and where do you really see the policy framework going and you know uh realistically are we seeing stacks being uh being the model of the day uh you know in the times to come um so so parallel i think spacks can be used even in today's um in today's sort of world you can still uh entertain a regulatory framework in india you can still use this pack to do an acquisition you would have to have an intermediate company in between and that intermediate company then sort of merges into the um into the stack and the shareholders perhaps hold the shares of the intermediate company right or multiple multiple intermediate companies and you have a merger and then this pack ceases to exist uh the shareholders hold the shares of of of of the intermediate entity it's not the most efficient way of doing things but that's one way of doing space in india today but there are so many limitations because only um you know a certain amount of shares can be can be acquired um in in this in this in this in this method um and you can't really swap your investments uh and list abroad that's something that you cannot do so i think um i think it's every sort of capital markets uh capital market lawyers dream to ensure that india does in fact expand um its uh its or or really liberalize its uh regulations um and allow for listing of uh indian securities overseas um and vice versa so that you can really truly achieve the objectives of the spec and and you have you know various avenues uh to have liquidity in the indian market alongside that you know really ensure that fema our foreign exchange laws uh permits this to happen uh unfortunately in india we have uh the the um the way we regulate is that we regulate the exception as opposed to the rule uh hopefully that really changes uh and uh genuine sort of indian investors that have the ability to can have the ability to swap their securities uh and missed overseas and it's not necessarily used only as a round-tripping round-tripping method so um lots of wishes and hopefully maybe in the next um three to four months if we have uh another such session um you know our laws perhaps will allow for more innovative things to happen through this back avenue right and i think from a tax perspective we do already have a favorable regime for uh you know gdrs and adr so probably uh what really is required and given the success of the u.s market uh first packs what really is required is a separate policy framework for space from a tax perspective as well and uh this would really you know make uh indian fundraising you know go a really long way and uh you know we are three minutes past our uh scheduled time of closure but barry uh you know some closing remarks from you uh and then you know we can close for the day the perception the us is i guess very similar that there are many many restrictions that stop um the u.s back market from expanding into india it's really a shame because the us has raised money for china vietnam singapore you know indonesia and india's market is probably you know i don't want to say better but certainly as good as all those other markets and it's a shame that it's we're not able to work together on these deals the us market there's so much cash in this facts right now looking for deals and so hopefully we can you know start to do the deals together thank you for your time by the way thank you okay thanks everyone thanks for joining us for this session