Pegasus Digital Mobility Acquisition Corp. Announces Revaluation of its Business Combination with Gebr. Schmid Group and the Entering Into Related Agreements
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Insights
The amendment to the business combination agreement and the shareholders' undertaking agreement between Pegasus Digital Mobility Acquisition Corp., Pegasus Topco B.V. and Gebr. Schmid Group indicates a strategic reassessment of the initial terms, reflecting a mutual interest in adjusting the deal structure to current market conditions. The reduction in the number of shares issued to Schmid shareholders suggests a revaluation of the transaction, potentially due to changes in the valuation of Schmid or market dynamics affecting the deal's perceived value.
An earn-out agreement linked to future share price performance is a common mechanism to align the interests of the acquiring and target company shareholders post-acquisition. It incentivizes the target company's shareholders to continue contributing to the combined entity's success. The specific thresholds set at USD 15.00 and USD 18.00 per share indicate confidence in the post-merger performance, but also introduce an element of risk for the Schmid shareholders, as the additional compensation is contingent on the stock's future performance.
The transfer of private placement warrants to the Schmid shareholders and the conditions set for the exercise of remaining warrants by the Sponsor and Pegasus' directors and officers can be seen as a move to stabilize the post-merger share price. A 'cashless' exercise of warrants minimizes the dilution of existing shares, which could be favorable for current shareholders. Additionally, the subscription agreement with XJ Harbour HK Limited for the transfer of equity interest in Schmid Technology (Guangdong) Co., Ltd. adds a layer of complexity to the transaction, with staggered payments and share allotments that need to be scrutinized for their impact on the financials of the combined entity.
The extension of the business combination closing to April 30, 2024, suggests that there might be regulatory, operational, or due diligence complexities requiring additional time to resolve. Legal experts would analyze the implications of this extension, which may include renegotiations of terms, reassessment of risk and securing of further approvals. The reduction in share issuance and the introduction of an earn-out agreement may reflect a compromise between the negotiating parties to address valuation disagreements or share price volatility.
The legal intricacies of the earn-out agreement and the private placement warrant conditions will be carefully structured to ensure compliance with securities laws and to protect the interests of all parties involved. The earn-out agreement's three-year term provides a limited window for the share price targets to be met, which may necessitate a focused strategy to enhance shareholder value within that period.
The XJ Subscription Agreement introduces cross-border transactional elements, given the involvement of a subsidiary in China. This necessitates careful legal navigation of international business laws, foreign investment regulations and potential geopolitical risks. The structured payment plan to XJ, including a significant deferred payment with interest, requires legal oversight to ensure enforceability and alignment with the broader strategic objectives of the acquisition.
From a market perspective, the business combination between Pegasus Digital Mobility Acquisition Corp. and Gebr. Schmid Group, along with the associated agreements, signifies an attempt to create a more competitive and financially robust entity. Market analysts would examine the strategic fit of the companies, the potential for synergies and the expected impact on the market position of the combined company.
The earn-out agreement linked to share price performance is a signal to the market about the anticipated growth trajectory and the management's confidence in achieving specific financial milestones. This could influence investor sentiment and the stock's performance. Market research would also delve into the implications of the transfer of equity interest from XJ Harbour HK Limited to TopCo, assessing how the integration of Schmid Technology (Guangdong) Co., Ltd. could enhance the combined company's market presence, particularly in the Asia-Pacific region.
Additionally, market analysts would assess the potential impact of the transaction on the competitive landscape, considering the unique capabilities or technologies that Schmid brings to the table. The transaction's completion timeline and the milestones set forth in the earn-out agreement would be factored into market forecasts and the anticipated financial performance of the combined entity.
In connection with these changes, an earn-out agreement has been agreed which awards 2,500,000 TopCo shares to Anette Schmid and Christian Schmid should the share price of the combined company reach or exceed
In addition, the Pegasus Digital Mobility Sponsor LLC, a
In addition, the Sponsor and certain directors and officers of Pegasus have undertaken towards TopCo that, subsequent to the closing of the business combination, they will (i) only exercise the remaining 7,750,000 private placement warrants on a "cashless basis" in accordance with the terms of the private placement warrants, and (ii) exercise the private placement warrants on a "cashless basis" in accordance with the terms of the private placement warrants when the reference price as defined in the warrant agreement reaches
In addition, Pegasus, Schmid and TopCo entered into a subscription agreement with XJ Harbour HK Limited ("XJ") (the "XJ Subscription Agreement") according to which XJ agreed to in stages transfer its
The completion of the business agreement is currently expected towards the end of the first quarter of 2024.
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute "forward-looking statements." All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company, including those set forth in the "Risk Factors" section of the Company’s registration statement and final prospectus for the offering filed with the SEC. Copies are available on the SEC’s website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.
About Pegasus Digital Mobility Acquisition Corp.
The Company is a blank check company incorporated as a
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Investor Relations
investor-relations@pegasusdm.com
Source: Pegasus Digital Mobility Acquisition Corp.
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