Capital Markets / Investor Relations in Two Minutes or Less
What Astra Space Teaches Public Company Executives and Investors
Recently, Astra Space a small publicly traded SPAC announced it would be going private at $0.50 a share to forgo a bankruptcy filing.
Sometimes a take-private at $0.50 a share equals a grand slam home run!
When a company’s stock falls below $5 a share, or worse $1 a share, the management team needs to get really creative about unlocking shareholder value.
In this type of scenario, alignment between management and the Board of Directors is essential.
The primary goal is to always avoid a Zero!!!
The All Cash Take Private of a SPAC
A sub $1 take out is the closest experience a public company executive gets to being encircled at Bastogne in WWII and the take out represents Patton’s forced march to relieve the beleaguered soldiers. I have a penchant for historical references!
The company is spending too much, debt is too high, and not enough cash exists on the balance sheet.
You are insolvent!
There is no more stressful or demoralizing position than being insolvent as a person or a company.
The problem is that an IPO at $10, only to see the stock go to $0.60, and then get taken out at $3, does not represent a win for a Board member lacking experience in this type of scenario.
Key Learnings for Public Executives
1. Always Avoid a Zero: Any shareholder value is good value in this scenario!
2. Sub $1 Take Out Is a Hard Sell: Management needs to align with the Board, otherwise the probability of a zero is highly likely.
3. Board Alignment Matters: Management needs to do a lot of work and messaging to get alignment and ultimate approval of such a deal from the Board.
4. Shareholder Base Matters: The more institutional holders, the easier it will be to salvage shareholder value.
Finally, for investors, the warrants are going to be worth a lot more than you think!
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