What happened
Shares of the special purpose acquisition company (SPAC) Silver Crest Acquisition Corporation (SLCR) traded roughly 13% lower as of 2:42 p.m. ET today. The move appears to be driven by a regulatory filing by the company that extends a deadline for shareholders who might want to reverse their decision to redeem their shares.
So what
Silver Crest previously announced that it was planning to merge with and take public Tim Hortons China, the Chinese division of the famous Canadian coffee and doughnut chain Tim Hortons. Earlier this month, shareholders approved the deal.
But today, in a filing with the Securities and Exchange Commission, Silver Crest said it would allow holders of Class A ordinary shares until Sept. 16 to reverse their decision to redeem their shares.
After a deal is announced by a SPAC, shareholders can choose to redeem their shares if they don't like the acquisition target for the net asset value price that the SPAC was initially offered at, which is typically $10 per share.
According to the Twitter profile The Spac Shack, the initial redemptions only left 3.5 million Class A shares. But according to closing conditions, Silver Crest must have at least $5 million of net tangible assets following the redemptions, so management could be concerned about the deal closing and hoping that some shareholders will reverse their decision to redeem shares.
Now what
The deal with Silver Crest valued Tim Hortons China at about $1.7 billion. With the company generating about $101 million of revenue in 2021 and a loss of $60.3 million, this looks like a pretty high valuation.
Still, with the stock falling today on the extension of the redemption-reversal deadline, there could be upside if the deal isn't terminated. But this seems like more of a short-term bet on the deal going through, and the stock could still fall post-merger considering the current valuation.