In this Annual Report on Form 10-K (this
“Form 10-K”), references to “we,” “us” and “our” refer to HF2 Financial Management
Inc.
Introduction
We are a Delaware blank check company incorporated
in October 2012 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more target businesses. Our initial public offering was consummated
on March 27, 2013. We are actively searching for a target business for our initial business combination. Our efforts to identify
a prospective target business are not limited to a particular industry or geographic region. While we are focusing on companies
operating in the financial services industry, we are also evaluating opportunities across other industries as well. If we are unable
to consummate our initial business combination on or before September 21, 2014 (or March 21, 2015 if we have executed a letter
of intent, agreement in principle or a definitive agreement for an initial business combination before September 21, 2014 but the
initial business combination has not been completed by September 21, 2014), we will redeem 100% of the shares sold in our initial
public offering for a pro rata portion of the trust account described below.
Company History
In December 2012, our initial stockholders,
who we refer to as our sponsors, purchased an aggregate of 4,255,000 shares of our Class A common stock, par value $0.0001
per share (or Class A Common Stock), which we refer to as the “founders’ shares,” for an aggregate purchase price
of $25,000, or approximately $0.005875 per share. In February 2013, our sponsors purchased, on a net basis, an additional 143,750
founders’ shares for an aggregate net purchase price of $845, or approximately $0.005875 per share. For additional information
regarding the founders’ shares, see Item 13.
Certain Relationships and Related Transactions, and Director Independence
.
In December 2012, our Chairman, R. Bruce Cameron
purchased an aggregate of 20,000,000 shares of Class B common stock (or Class B Common Stock) for an aggregate purchase price of
$20, or $0.000001 per share, which is the per share par value. Mr. Cameron contributed the shares of Class B Common Stock
to the HF2 Class B Trust, which we refer to as the Class B Stockholder.
The registration statement for our initial
public offering was declared effective on March 21, 2013. On March 27, 2013, we consummated our initial public offering through
the sale of 15,300,000 shares of Class A Common Stock (which we refer to as the public shares and the holders of our public shares
as our public stockholders) at $10.00 per share and received proceeds, net of the underwriters’ discount and offering expenses,
of $147,763,000. Simultaneously with the consummation of our initial public offering, we sold 1,414,875 shares of Class A Common
Stock (which we refer to as the sponsors’ shares) to certain of our sponsors at $10.00 per share in a private placement and
raised $13,910,939, net of commissions.
In connection with our initial public offering,
we granted the underwriters in the offering a 45-day option to purchase up to an additional 2,295,000 shares of Class A Common
Stock (which we also refer to as public shares) to cover over-allotments. On March 28, 2013, the underwriters elected to exercise
the over-allotment option to the full extent of 2,295,000 public shares. We closed the sale of the public shares pursuant to the
exercise of the over-allotment option on April 1, 2013 and received proceeds, net of the underwriters’ discount, of $22,284,450.
Simultaneously with the closing of the sale of the public shares pursuant to the exercise of the over-allotment option, we raised
an additional $1,801,401, net of commissions, through the sale of an additional 183,525 sponsors’ shares to the sponsors
in a private placement to maintain in the trust account an amount equal to $10.50 per public share sold.
Upon the closing of our initial public
offering and the over-allotment option, $184,747,500 (representing $10.50 per public share sold in our initial public offering,
including the over-allotment option), including a portion of the proceeds of the private placements of the sponsors’ shares,
was deposited in a trust account, which we refer to as the trust account, at UBS Financial Services Inc., with Continental Stock
Transfer & Trust Company acting as trustee. The proceeds held in the trust account have been and will continue to be invested
in United States government treasury bills having a maturity of 180 days or less and/or in money market funds meeting certain conditions.
Except as described in this Form 10-K and the prospectus for our initial public offering, these proceeds will not be released until
the earlier of the completion of an initial business combination and our redemption of 100% of the outstanding public shares upon
our failure to consummate a business combination by September 21, 2014 (or March 21, 2015 if we execute a letter of intent, agreement
in principle or definitive agreement for an initial business combination before September 21, 2014 but the initial business combination
has not been completed by September 21, 2014).
Business Strategy
Our strategy is to invest in a business
with barriers to competitive entry, a sustainable competitive advantage, a motivated and capable management team and attractive
free cash returns on invested capital. Post-transaction, we intend to provide support and advice to the management team of the
company in such areas as product development, marketing, client service, recruiting and operations, as well as in the pursuit
of external growth through accretive, strategic acquisitions. We hope to assist the management team in creating value by building
the business rather than relying on financial leverage or asset trading to generate a return on invested capital.
Competitive Strengths
We believe our competitive strengths to
be the following:
Status as a public company
We believe our structure will make us an
attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative
to the traditional initial public offering through a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination. In this situation, the owners of the target business would exchange their
shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us
to tailor the consideration to the specific needs of the sellers. In addition, our shares of Class B Common Stock held in the HF2
Class B Trust may be transferred to the owners or employees of a target business. We believe target businesses might find this
method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical
initial public offering, there are additional expenses incurred in marketing, road show and public reporting efforts that will
likely not be present to the same extent in connection with a business combination with us. Furthermore, once the business combination
is consummated, the target business will have effectively become public, whereas an initial public offering is always subject to
the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering
from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of
providing management incentives consistent with stockholders’ interests than it would have as a privately held company. Being
part of a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors
and aid in attracting talented employees.
While we believe that our status as a public
company will make us an attractive business partner, some potential target businesses may view the inherent limitations in our
status as a blank check company as a deterrent and may prefer to effect a business combination with a more established entity or
with a private company.
Financial position
With $177,709,500 available for our initial
business combination as of December 31, 2013, we offer a target business a variety of options such as providing the owners of a
target business with shares in a public company and a public means to sell such shares, providing capital for the potential growth
and expansion of its operations or strengthening its balance sheet by increasing its liquidity and equity capital. Because we are
able to consummate our initial business combination using our cash, debt or equity securities, or a combination of the foregoing,
we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the
target business to fit its needs and desires.
Dual-Class Capital Structure
Our dual-class capital structure, with
one class having superior voting rights, is not uncommon for publicly-traded financial services companies. Our dual-class structure
allows for the transfer of the shares of Class B Common Stock to the owners or employees of the target business in connection with
our initial business combination, assuming the owners or employees of the target business require that we transfer the shares of
Class B Common Stock to them. We believe the availability of the Class B Common Stock for use in an initial business combination
may make the Company more attractive to target businesses and thus could help facilitate the consummation of the
Company’s initial business combination. However, we cannot assure you of this.
Offering Structure
Unlike other blank check companies that
sell units comprised of shares of common stock and warrants in their initial public offerings, we only sold shares of Class A
Common Stock in our initial public offering. Because the dilutive effects of the warrants found in the typical structure of other
blank check initial public offerings is not present in our case, we believe we will be viewed more favorably by potential target
companies when compared to other companies with dilutive securities outstanding, including other blank check companies. Also, unlike
other blank check companies, we have two classes of stock.
Competitive Disadvantages
Although we believe that we have the competitive
strengths described above, we acknowledge that we face intense competition from other entities that have business objectives similar
to ours. Many of these entities are well established and have extensive experience identifying and effecting business combinations
directly or through affiliates, and possess greater financial, technical, human and other resources than us. See Item 1.
Competition
for further information on the competition that we face in our effort to consummate an initial business combination.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we
will not engage in, any substantive commercial business unless we consummate an initial business combination. We intend to utilize
cash derived from the net proceeds of our initial public offering and the simultaneous private placement, our capital stock, debt
or a combination of these in effecting our initial business combination. Although substantially all of the net proceeds of our
initial public offering and the simultaneous private placement are intended to be applied generally toward effecting an initial
business combination, the proceeds are not otherwise being designated for any more specific purposes. Accordingly, our public stockholders
are investing without first having an opportunity to evaluate the specific merits or risks of any one or more business combinations.
Our initial business combination may involve the acquisition of, or merger with, a company which does not need substantial additional
capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences
of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and the registration
process required by Federal and state securities laws relating to the offering of securities. In the alternative, we may seek to
consummate a business combination with a company that may be financially unstable or in its early stages of development or growth.
While we may seek to effect simultaneous business combinations with more than one target business, we will probably have the ability,
as a result of our limited resources, to effect only a single business combination.
Sources of Target Businesses
We anticipate that target business candidates
will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private
equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may
be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings or these
sources may introduce us to target businesses in which they think we may be interested on an unsolicited basis. Our officers and
directors, as well as their affiliates, including Berkshire Capital, may also bring to our attention target business candidates
that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they have,
as well as attending trade shows or conventions.
We have no present intention to enter into
a business combination with a target business that is affiliated with any of our officers, directors or sponsors including (1) an
entity in which any of the foregoing or their affiliates are currently passive investors, (2) an entity in which any of the
foregoing or their affiliates are currently officers or directors, or (3) an entity in which any of the foregoing or their
affiliates are currently invested through an investment vehicle controlled by them. However, we are not restricted from entering
into any such transactions and may do so if (1) such transaction is approved by a majority of our disinterested and independent
directors (if we have any at that time) and (2) we obtain an opinion from an independent investment banking firm which is
a member of FINRA that the business combination is fair to our unaffiliated stockholders from a financial point of view.
Selection of a Target Business and Structuring of Our
Initial Business Combination
Subject to the limitation that a target
business have a fair market value of at least 80% of the balance in the trust account at the time of the execution of a definitive
agreement for an initial business combination, as described below in more detail, our management has virtually unrestricted flexibility
in identifying and selecting a prospective target business. We do not have any specific requirements with respect to the value
of a prospective target business as compared to our net assets or the funds held in the trust account. In evaluating a prospective
target business, our management may consider a variety of factors, including one or more of the following:
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financial condition and results of operation;
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brand recognition and potential;
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experience and skill of management and availability of additional personnel;
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stage of development of the products, processes or services;
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existing distribution and potential for expansion;
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degree of current or potential market acceptance of the products, processes or services;
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proprietary aspects of products and the extent of intellectual property or other protection for products or formulas;
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impact of regulation on the business;
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regulatory environment of the industry;
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costs associated with effecting the business combination;
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industry leadership, sustainability of market share and attractiveness of market industries in which a target business participates;
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competitive dynamics in the industry within which the company competes.
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These criteria are not intended to be exhaustive.
Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above
factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass,
among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information
which is made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties
we may engage.
The time and costs required to select and
evaluate a target business and to structure and complete our initial business combination remain to be determined.
Fair Market Value of Target Business
Pursuant to Nasdaq listing rules, the target
business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds
in the trust account at the time of the execution of a definitive agreement for an initial business combination, although we may
acquire a target business whose fair market value significantly exceeds 80% of the trust account balance. Our initial business
combination must comply with this rule. We may structure a business combination as an acquisition of 100% of the equity interests
or assets of the target business or businesses. We may, however, structure a business combination where we merge directly with
the target business or where we acquire less than 100% of such interests or assets of the target business. If we acquire less than
100% of the equity interests or assets of the target business, we will not enter into a business combination unless either we or
our public shareholders acquire at least a controlling interest in the target business (meaning not less than 50.1% of the voting
equity interests in the target or all or substantially all of the assets of such target). If we acquire less than 100% of the equity
interest in a target business or businesses, the portion of such business that we acquire must have a fair market value equal to
at least 80% of the trust account balance. In order to consummate such an acquisition, we may issue a significant amount of our
debt or equity securities to the sellers of such businesses and/or seek to raise additional funds through a private offering of
debt or equity securities. If we issue equity securities, shareholders of the target business may own a majority of our outstanding
shares of Class A Common Stock following our initial business combination. In addition, the owners of a target business may
require that our shares of Class B Common Stock held in the HF2 Class B Trust be transferred to such owners or employees of the
target business. Since we have no specific business combination under consideration, we have not entered into any such fund raising
arrangement and have no current intention of doing so. The fair market value of the target will be determined by our board of directors
based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash
flow and/or book value). If our board is not able to independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that
commonly renders valuation opinions on the type of target business we are seeking to acquire, with respect to the satisfaction
of such criteria. We are not required to obtain an opinion from an independent investment banking firm, or another independent
entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, as to the fair market
value if our board of directors independently determines that the target business complies with the 80% threshold.
Lack of Business Diversification
We may seek to effect a business combination
with more than one target business, and there is no required minimum valuation standard for any single target at the time of such
acquisition, although the aggregate value of the targets must be at least 80% of the balance of the funds in the trust account.
We expect to complete only a single business combination, although this process may entail the simultaneous acquisitions of several
operating businesses. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance
of a single business operation. Unlike other entities which may have the resources to complete several business combinations of
entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources
to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating our initial
business combination with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory
developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent
to our initial business combination, and
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result in our dependency upon the performance of a single
operating business or the development or market acceptance of a single or limited number of products, processes or services.
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If we determine to simultaneously acquire
several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our
purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult
for us, and delay our ability, to complete our initial business combination. With multiple acquisitions, we could also face additional
risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if
there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services
or products of the acquired companies in a single operating business.
Limited Ability to Evaluate the Target Business’
Management Team
Although we intend to scrutinize the management
team of a prospective target business when evaluating the desirability of effecting our initial business combination, our assessment
of the target business’ management team may not prove to be correct. In addition, the future management team may not have
the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers and
directors, if any, in the target business following our initial business combination remains to be determined. While it is possible
that some of our key personnel will remain associated in senior management or advisory positions with us following our initial
business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to our initial business
combination. Moreover, they would only be able to remain with our company after the consummation of our initial business
combination if they are able to negotiate employment or consulting agreements in connection with the initial business combination.
Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for them to
receive compensation in the form of cash payments and/or our securities for services they would render to our company after
the consummation of the initial business combination. While the personal and financial interests of our key personnel may influence
their motivation in identifying and selecting a target business, their ability to remain with our company after the consummation
of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with
any potential business combination. Additionally, our officers and directors may not have sufficient experience or knowledge relating
to the operations of the particular target business.
Following our initial business combination,
we may seek to recruit additional managers to supplement the incumbent management of the target business. We may not have the ability
to recruit additional managers, and cannot be certain that any such additional managers we do recruit will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management.
Opportunity for Stockholder Approval of Business Combination
We will seek stockholder approval of any
proposed initial business combination at a meeting called for such purpose at which public stockholders may seek to convert their
shares, regardless of whether they vote for or against the proposed initial business combination, into their pro rata share of
the aggregate amount then on deposit in the trust account (net of taxes payable, including franchise, income and other taxes, and
interest income), subject to the limitations described herein. The amount in the trust account is anticipated to be $10.50 per
share. When we seek stockholder approval of our initial business combination, the stockholder meeting and solicitation of proxies
in connection with the meeting will be conducted in accordance with Regulation 14A under the Exchange Act and Delaware law, including
the notice requirements for a stockholder meeting under Delaware law. We will consummate our initial business combination only
if we have net tangible assets of at least $5,000,001 upon such consummation and a majority of the outstanding shares of Class A
Common Stock voted are voted in favor of the business combination. Because approval of our initial business combination requires
the affirmative vote of a majority of the outstanding shares of Class A Common Stock that are voted, rather than a majority
of the outstanding shares of Class A Common Stock, and our sponsors hold approximately 35.4% of our Class A Common Stock,
a proposed initial business combination will be approved unless public stockholders holding public shares in excess of 35.4% of
our outstanding shares of Class A Common Stock vote against the proposed initial business combination. Other than the $5,000,001
net tangible amount threshold described above, there will not be a condition to completion of our initial business combination
based upon the number of public shares holders elect to convert.
We chose our net tangible asset threshold
of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. If we seek, however,
to consummate an initial business combination with a target business that imposes any type of working capital closing condition
or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination,
in each case in excess of $5,000,001, then this working capital or minimum available funds threshold may further limit our ability
to consummate such initial business combination (as we may be required to have a lesser number of shares seek to convert) and may
force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not
be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable
time period, if at all. Public stockholders may therefore have to wait the full 24 months from the date of our initial public offering
prospectus in order to be able to receive their pro rata share of the trust account.
In connection with any vote for a proposed
initial business combination, our sponsors, as well as all of our officers and directors, have agreed to vote their founders’
shares, sponsors’ shares and any public shares acquired in or after our initial public offering in favor of the proposed
business combination. In connection with any vote on an initial business combination, our shares of Class B Common Stock held in
the HF2 Class B Trust will be voted in proportion to the vote of the holders of the Class A Common Stock. For example, if
holders of Class A Common Stock vote 60% of their shares in favor of our initial business combination, then our Class B Stockholder
will vote 60% of its shares of Class B Common Stock in favor of our initial business combination.
If holders of public shares indicate an
intention to vote against a proposed initial business combination and/or seek conversion of their public shares into cash, our
sponsors, officers, directors or Advisory Board members or their affiliates may negotiate arrangements for the purchase of such
shares in connection with our initial business combination. None of our sponsors, officers, directors or Advisory Board members
or their affiliates has indicated any intention to purchase any shares of Class A Common Stock from persons in the open market
or in private transactions for this purpose. However, our sponsors, officers, directors, Advisory Board members or their affiliates
may determine in the future to make purchases of Class A Common Stock from persons in the open market or in private transactions,
to the extent permitted by law, in order to influence the vote on our initial business combination. The purpose of such arrangements
would be to increase the likelihood of satisfaction of the requirements that the holders of a majority of our shares of Class A
Common Stock voted are voted in favor of a proposed business combination. All public shares purchased by our sponsors, officers,
directors or Advisory Board members or their affiliates pursuant to such arrangements would be voted in favor of the proposed initial
business combination.
The open market purchases described above
by our sponsors, officers, directors or Advisory Board members or their affiliates who are
“affiliated purchasers”
under
Rule 10b-18 under the Exchange Act will comply with Rule 10b-18, which is a safe harbor from liability for manipulation
under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must
be complied with in order for the safe harbor to be available to the purchaser. For instance, the total volume of open market purchases
of Class A Common Stock on any single day must not exceed 25% of the average daily trading volume of our Class A Common Stock
during the four calendar weeks preceding the week in which the purchases are effectuated. Similarly, the purchase price cannot
exceed the highest independent bid or the last independent transaction price of our Class A Common Stock, whichever is higher,
at the time the purchases are effectuated. Our sponsors, officers, directors and Advisory Board members and their affiliates will
not make purchases of Class A Common Stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange
Act.
Conversion Rights
At the time we seek stockholder approval
of our initial business combination, public stockholders may seek to convert their shares, regardless of whether they vote for
or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account
(net of taxes payable and interest income). If a stockholder requests conversion with respect to some or all of his shares, the
shares will be converted only if we consummate our initial business combination, which requires that we have net tangible assets
of at least $5,000,001 upon consummation. If we do not consummate the initial business combination because effectuating all of
the requested conversions would cause our net tangible assets to fall below $5,000,001 or for any other reason the shares will
not be converted.
Notwithstanding the foregoing, in accordance
with our amended and restated certificate of incorporation, a public stockholder, together with any affiliate of his or any
other person with whom he is acting in concert or as a
“group”
(as defined in Section 13(d)(3)
of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of Class A
Common Stock sold in our initial public offering. Such a public stockholder would still be entitled to vote against a proposed
initial business combination with respect to all shares of Class A Common Stock owned by him or his affiliates. We believe
this restriction will prevent stockholders from accumulating large blocks of shares before the vote held to approve a proposed
business combination and attempting to use the conversion right as a means to force us or our management to purchase their shares
at a significant premium to the then current market price. By limiting a stockholder’s ability to convert no more than 20%
of the shares of Class A Common Stock sold in our initial public offering, we believe we have limited the ability of a small
group of stockholders to unreasonably attempt to block a transaction which is favored by our other public stockholders.
To determine whether a public stockholder
is acting in concert or as a group with another public stockholder, we will require each public stockholder seeking to exercise
conversion rights to certify to us whether such public stockholder is acting in concert or as a group with any other public stockholder.
Such certifications, together with any other information relating to stock ownership available to us at that time, will be the
sole basis on which we make the above-referenced determination. We believe that by having each stockholder provide a certification
to us, it will remove the possibility for any disputes between us and public stockholders with respect to whether such public stockholders
are acting as a group. If we determine, however, that a public stockholder is acting in concert or as a group with any other public
stockholder, we will notify such public stockholder of our determination and offer him an opportunity to dispute our finding. The
final determination whether a public stockholder is acting in concert or as a group with any other public stockholder will ultimately
be made in good faith by our board of directors.
We may also require public stockholders
who decide to convert their shares of Class A Common Stock, whether they are record holders or hold their shares in
“street
name,”
to either tender their certificates to our transfer agent or to deliver their shares of Class A Common
Stock to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System,
at the holder’s option, prior to the vote on the initial business combination.
There is a nominal cost associated with
the above-referenced delivery process and the act of certificating the shares or delivering them through the DWAC System. The transfer
agent will typically charge the tendering broker $45 per tender and it would be up to the broker whether or not to pass this cost
on to the holder. However, this fee would be incurred whether or not we require holders to exercise conversion rights. The need
to deliver shares is a requirement of exercising conversion rights regardless of when such delivery must be effectuated. However,
in the event we require public stockholders to exercise conversion rights prior to the consummation of the proposed initial business
combination and the proposed initial business combination is not consummated, this may result in an increased cost to public stockholders.
The proxy solicitation materials that we
will furnish to stockholders in connection with the vote for any proposed initial business combination will indicate whether we
are requiring public stockholders to satisfy the delivery requirements. Accordingly, a public stockholder would have from the time
the public stockholder received our proxy statement until the time we required the tender of the certificates to deliver his shares
of Class A Common Stock if he wishes to seek to exercise his conversion rights. This time period varies depending on the specific
facts of each transaction. As the delivery process can be accomplished by the public stockholder, whether or not he is a record
holder or his shares of Class A Common Stock are held in
“street name,”
in a matter of hours
by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System, we believe
this time period will be sufficient for the average investor.
The foregoing is different from the procedures
used by many blank check companies. Traditionally, in order to perfect conversion rights in connection with a blank check company’s
business combination, the company would distribute proxy materials for the stockholders’ vote on an initial business
combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating
such holder was seeking to exercise his conversion rights. After the business combination was approved, the company would
contact such stockholder to arrange for him to deliver his certificate to verify ownership. As a result, the stockholder then had
an
“option window”
after the consummation of the business combination during which he could monitor the
price of the company’s stock in the market. If the price rose above the conversion price, he could sell his shares in
the open market before actually delivering his shares to the company for cancellation. As a result, the conversion rights,
to which stockholders were aware they needed to commit before the stockholder meeting, would become a
“continuing”
right
surviving past the consummation of the business combination until the holder delivered its certificate. The requirement for physical
or electronic delivery prior to the meeting ensures that a holder’s election to convert his shares is irrevocable once the
initial business combination is approved.
Once made, any request to convert shares
of Class A Common Stock may be withdrawn at any time up to the vote on the proposed initial business combination. Furthermore,
if a holder of a share of Class A Common
Stock delivered his certificate in connection with a conversion
election and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that
the transfer agent return the certificate (physically or electronically).
If the initial business combination is
not approved or completed for any reason, then our public stockholders who elected to exercise their conversion rights would not
be entitled to convert their shares for the applicable pro rata share of the trust account (net of taxes payable and interest income).
In such case, we will promptly return any shares delivered by public holders.
Our sponsors do not have conversion rights
with respect to any of the founders’ shares or sponsors’ shares. Our directors, officers, Advisory Board Members and
sponsors (other than Bulldog Investors and White Sand Investor Group, LP) do not have conversion rights with respect to public
shares purchased in or after our initial public offering.
Liquidation if No Business Combination
Our amended and restated certificate
of incorporation provides that we will continue in existence only until 18 months from the date of our initial public offering
prospectus, that is, until September 21, 2014, (or 24 months from the date of our initial public offering prospectus, that is,
until March 21, 2015, if we execute a letter of intent, agreement in principle or definitive agreement for an initial business
combination before September 21, 2014 but the initial business combination has not been completed by September 21, 2014) unless
we consummate on initial business combination during this period. If we are unable to complete our initial business combination
by such date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the trust account, including any interest but net of taxes payable, divided
by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights
as stockholders (except for the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board
of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware
law to provide for claims of creditors and to the requirements of other applicable law.
Under the Delaware General Corporation
Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received
by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption
of 100% of our outstanding public shares in the event we do not complete our initial business combination by September 21, 2014
(or March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement for an initial business combination
before September 21, 2014 but the initial business combination has not been completed by September 21, 2014) may be considered
a liquidation distribution under Delaware law. If we comply with certain procedures set forth in Section 280 of the Delaware
General Corporation Law intended to ensure that we make reasonable provision for all claims against us, including a 60-day notice
period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation
may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made, and Section 281
of the Delaware General Corporation Law with respect to liquidating distributions, any liability of stockholders with respect to
a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed
to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of
our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not
complete our initial business combination by September 21, 2014 (or March 21, 2015 if we execute a letter of intent, agreement
in principle or definitive agreement for an initial business combination before September 21, 2014 but the business combination
has not been completed by September 21, 2014) is not considered a liquidation distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of
limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years,
as in the case of a liquidation distribution. If we are unable to complete a business combination within the prescribed time frame,
we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not
more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the trust account, including any interest but net of taxes payable, divided by the number
of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders
(except for the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly
as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide
for claims of creditors and to the requirements of other applicable law. Accordingly, it is our intention to redeem our public
shares as soon as reasonably possible after September 21, 2014 (or March 21, 2015, as the case may be) and, therefore, we do not
intend to comply with Section 280 of the Delaware General Corporation Law. As such, our stockholders could potentially be
liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend
well beyond the third anniversary of such date.
Because we will not be complying with Section 280
of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan,
based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may
be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an
operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely
claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We seek and will continue to seek to have
all third parties (including any vendors or other entities we engage) and any prospective target businesses enter into valid and
enforceable agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in
the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that
any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors
will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public
stockholders. Nevertheless, there is no guarantee that vendors, service providers and prospective target businesses will execute
such agreements. In the event that a potential contracted party was to refuse to execute such a waiver, we will execute an agreement
with that entity only if our management first determines that we would be unable to obtain, on a reasonable basis, substantially
similar services or opportunities from another entity willing to execute such a waiver. Examples of instances where we may engage
a third party that refused to execute a waiver would be the engagement of a third party consultant who cannot sign such an agreement
due to regulatory restrictions, such as our auditors who are unable to sign due to independence requirements, or whose particular
expertise or skills are believed by management to be superior to those of other consultants that would agree to execute a waiver
or a situation in which management does not believe it would be able to find a provider of required services willing to execute
the waiver. There is also no guarantee that, even if they execute such agreements with us, they will not seek recourse against
the trust account. Three of our executive officers, Messrs. Cameron, Foote and Forth, have agreed that they will be jointly and
severally liable, by means of direct payment to the trust account, to ensure that the proceeds in the trust account are not reduced
by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted
for or products sold to us. They may not, however, be able to satisfy their indemnification obligations if they are required to
so. This joint and several liability agreement entered into by our officers specifically provides that they will have no personal
liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed a valid and enforceable
agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account,
or (2) as to any claims under our indemnity with the underwriters of our initial public offering against certain liabilities,
including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from the trust account
could be less than $10.50 due to claims or potential claims of creditors. We will distribute to all of our public stockholders,
in proportion to their respective equity interests, an aggregate sum equal to the amount in the trust account, inclusive of any
interest, plus any remaining net assets (subject to our obligations under Delaware law to provide for claims of creditors as described
below and our obligation to redeem outstanding shares of our Class B Common Stock at par value).
We anticipate notifying the trustee of
the trust account to begin liquidating such assets promptly after such date and anticipate it will take no more than 10 business
days to effectuate such distribution. Our sponsors have waived their rights to participate in any liquidation distribution with
respect to their founders’ shares and sponsors’ shares. We will pay the costs of any subsequent liquidation from our
remaining assets outside of the trust account and from the interest income on the balance of the trust account (net of taxes payable)
that will be released to us to fund our working capital requirements. If such funds are insufficient, Messrs. Cameron, Foote and
Forth, our directors and certain of our sponsors have agreed to pay the funds necessary to complete such liquidation (currently
anticipated to be no more than approximately $15,000) and have agreed not to seek repayment of such expenses.
If we are unable to complete our initial
business combination and expend all of the net proceeds of our initial public offering, other than the proceeds deposited in the
trust account, and all of the interest income earned on the trust account, the initial per-share redemption price would be $10.50.
The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to
the claims of public stockholders.
Our public stockholders shall be entitled
to receive funds from the trust account only in the event of our failure to complete our initial business combination in the required
time period or a public stockholder seeks to have us convert or purchase his shares upon a business combination which is actually
completed by us. In no other circumstances shall a public stockholder have any right or interest of any kind to or in the trust
account.
If we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us which is not dismissed, the proceeds held in the trust account may be included
in our bankruptcy estate and subject to the claims of third party creditors with priority over the claims of our stockholders.
To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our public stockholders at least
$10.50 per share.
If we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us which is not dismissed, any distributions received by stockholders could be
viewed under applicable debtor/creditor and/or bankruptcy laws as either a
“preferential transfer”
or
a
“fraudulent conveyance.”
As a result, a bankruptcy trustee could seek to recover all amounts received
by our stockholders, including distributions of the proceeds of the trust account intended to be made promptly after September
21, 2014 (or March 21, 2015, as the case may be). Furthermore, our board may be viewed as having breached its fiduciary duties
to our creditors and/or acted in bad faith, and thereby exposed itself and our company to claims of punitive damages,
by paying public stockholders from the trust account prior to addressing the claims of creditors.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate
of incorporation contains certain requirements and restrictions relating to our initial public offering that will apply to
us until the consummation of our initial business combination. If we seek to amend any provisions of our amended and restated certificate
of incorporation relating to stockholder’s rights or pre-business combination activity, we will provide dissenting public
stockholders with the opportunity to convert their public shares in connection with any such vote. Our sponsors have agreed to
waive any conversion rights with respect to any founders’ shares, sponsors’ shares and any public shares they may hold
in connection with any vote to amend our amended and restated certificate of incorporation. The holders of shares of Class
B Common Stock will not have any rights to the funds in the trust account. Specifically, our amended and restated certificate
of incorporation provides, among other things, that:
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prior to the consummation of our initial business combination,
we shall seek stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders
may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their
pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable and interest income);
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we will consummate our initial business combination only
if we have net tangible assets of at least $5,000,001 upon such consummation and a majority of the outstanding shares of Class A
Common Stock voted are voted in favor of the business combination;
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if our initial business combination is not consummated
before September 21, 2014 (or March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement
for an initial business combination before September 21, 2014 but the initial business combination has not been completed by September
21, 2014), then we will distribute all amounts in the trust account and any net assets remaining outside the trust account (subject
to our obligations under Delaware law to provide for claims of creditors and our obligation to redeem outstanding shares of our
Class B Common Stock at par value) on a pro rata basis to all of our public stockholders and will cease operations except for
the purpose of winding up the business;
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we may not consummate any other business combination,
merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial
business combination;
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prior to our initial business combination, we may not
issue (i) any shares of Class A Common Stock or any securities convertible into Class A Common Stock, (ii) any
securities that participate in any manner in the proceeds of the trust account or (iii) any securities that vote as a class
with the Class A Common Stock on our initial business combination (other than the outstanding Class B Common Stock, of which
we have no more authorized shares available for issuance);
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prior to our initial business combination and in connection
with any vote on our initial business combination, the issued and outstanding shares of Class B Common Stock will be voted on
all matters presented to holders of our common stock for a vote in proportion to the vote of the holders of our Class A Common
Stock;
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the shares of Class B Common Stock may not be transferred,
assigned or sold prior to the consummation of our initial business combination or our dissolution; and
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the shares of Class B Common Stock may be transferred
only in connection with our initial business combination and only with the consent of our board of directors either to the owners
or employees of the target business, assuming the owners or employees of the target business require we transfer any such shares
to them, or, if they do not require that any or all of the shares of Class B Common Stock be transferred to them, that the balance
of such shares will be transferred to us in exchange for their par value.
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The provisions summarized above cannot
be amended without the approval of stockholders holding 65% of our outstanding shares. Except for those provisions set forth above,
amendments to our amended and restated certificate of incorporation must be approved by holders of a majority of our
outstanding shares of common stock. In the event we seek stockholder approval in connection with our initial business combination,
our amended and restated certificate of incorporation provides that we may consummate our initial business combination
only if approved by a majority of the shares of Class A Common Stock voted by our stockholders at a duly held stockholders
meeting.
Competition
In identifying, evaluating and selecting
a target business, we may encounter intense competition from other entities having a business objective similar to ours including
other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions.
Many of these entities are well established and have extensive experience identifying and effecting business combinations directly
or through affiliates. Moreover, many of these competitors possess greater technical, human and other resources than us and our
financial resources will be relatively limited when contrasted with those of many of these competitors. Finally, we also face competition
from other blank check companies which may seek to identify and consummate business combinations with target businesses in the
financial services industry. While we believe there may be numerous potential target businesses that we could acquire with the
net proceeds of our initial public offering and the private placement held in the trust account, our ability to compete in acquiring
certain sizable target businesses may be limited by our available financial resources.
The following also may not be viewed favorably
by certain target businesses:
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our obligation to seek stockholder approval of our initial
business combination which may delay the completion of a transaction;
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our obligation to convert or repurchase shares of Class A
Common Stock held by our public stockholders which may reduce the resources available to us for our initial business combination;
and
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the requirement to acquire one or more businesses or
assets that have a fair market value equal to at least 80% of the balance in the trust account at the time of such acquisition
which could require us to acquire the assets of several businesses at the same time, all of which sales would be contingent on
the closings of the other sales, which could make it more difficult to consummate our initial business combination.
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Any of these factors may place us at a
competitive disadvantage in successfully negotiating our initial business combination. Our management believes, however, that our
status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over
privately-held entities having a similar business objective as ours in acquiring a target business with significant growth potential
on favorable terms.
If we succeed in effecting our initial
business combination, there will be, in all likelihood, intense competition from competitors of the target business. Subsequent
to our initial business combination, we may not have the resources or ability to compete effectively.
Regulation
Acquisitions of financial services companies
are often subject to significant regulatory requirements and consents, and we will not be able to consummate a business combination
with certain types of financial services companies without complying with applicable laws and regulations and/or obtaining required
governmental or client consents. For example, if we were to attempt to acquire or acquire control of an investment management firm,
we would be required to obtain consents of the firm’s investment management clients or enter into new contracts with
them, and there is no assurance that we would be able to obtain such consents or enter into new contracts. Similarly, if we
were to attempt to acquire or acquire control of a bank or bank holding company, we would be required to obtain approval from one
or more of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the
Comptroller of the Currency (which we refer to as the Federal Banking Agencies) and/or state banking commissions. If our acquisition
target were an insurance company, state insurance commissioners in the states where the insurance company does business would review
the acquisition transaction and could prevent it by withholding their consent. The acquisition of a business in another sector
of the financial services industry may require similar approval(s) or consent(s).
We may not receive any such required approvals
or consents or we may not receive them in a timely manner, which may be a result of factors or matters beyond our control. Satisfying
any statutory or regulatory requirements may delay the date of our completion of our initial business combination beyond the required
time frame (September 21, 2014 or March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement
for an initial business combination before September 21, 2014 but the initial business combination has not been completed by September
21, 2014). If we fail to consummate our initial business combination within the required time frame, we will be forced to liquidate.
Because we are focusing on acquiring, or
acquiring control of, one or more operating businesses in the financial services industry, following our initial business combination,
we will become subject to the regulatory regimes that govern the business or businesses we acquire. The financial services industry
is subject to extensive regulation. The regulator(s) for and regulations applicable to us and to the target business will vary
depending on the target business’ activities. Many regulators, including U.S. and foreign government agencies and self-regulatory
organizations, as well as state securities, banking, and commissions and attorneys general, are empowered to conduct administrative
proceedings and investigations that can result in, among other things, censures, fines, the issuance of cease-and-desist orders,
prohibitions against engaging in some lines of business or the suspension or expulsion of a broker-dealer or investment adviser.
The requirements imposed by regulators are designed to ensure the integrity of the financial markets and to protect customers and
other third parties who deal with financial services firms and are not designed to protect our stockholders.
Governmental and self-regulatory organizations,
including the SEC, the Federal Banking Agencies, the Consumer Financial Protection Bureau, state securities, banking, and insurance
commissions, FINRA and national securities exchanges such as the New York Stock Exchange, impose and enforce regulations on financial
services companies. U.S. self-regulatory organizations adopt rules, subject to approval by the SEC, that govern aspects of the
financial services industry and conduct periodic examinations of the operations of registered broker-dealers and investment advisers.
For example, U.S. broker-dealers are subject to rules and regulations that cover all aspects of the securities business including
sales methods and trade practices; use and safekeeping of customer funds and securities; capital structures; recordkeeping; the
preparation of research; the extension of credit and the conduct of officers and employees. The types of regulations to which investment
advisers are subject are also extensive and include: recordkeeping; fee arrangements; client disclosure; custody of customer assets;
and the conduct of officers and employees. Banks and bank holding companies are also subject to extensive regulations, including
regulations regarding permissible activities and investments; capitalization; transactions with insiders; transactions with affiliates;
and consumer protection.
If we consummate our initial business combination
with a target business in the investment management sector of the financial services industry, we would be subject to extensive
regulation in the United States, primarily at the federal level, including regulation by the SEC under the Investment Advisers
Act of 1940, as amended, or the Advisers Act, and by the U.S. Department of Labor under the Employee Retirement Income Security
Act of 1974, or ERISA. The Advisers Act imposes numerous obligations on investment advisers including advertising, recordkeeping
and operating requirements, disclosure obligations and prohibitions on fraudulent activities.
We would also be subject to extensive regulation
in the United States if we consummate our initial business combination with a target business in the securities brokerage sector.
The SEC, FINRA and various regulatory agencies also have stringent rules with respect to the maintenance of specific levels
of net capital by securities brokerage firms. Failure to maintain the required net capital may subject a firm to suspension or
revocation of registration by the SEC and suspension or expulsion from FINRA and other regulatory bodies, which ultimately could
prevent any broker-dealer that we acquire, or acquire control of, from conducting broker-dealer activities. In addition, a change
in the net capital rules, the imposition of new rules or any unusually large charge against net capital could limit the operations
of broker-dealers, which could harm our business if we were to consummate a business combination with a securities brokerage firm.
If we acquire control of a bank or
bank holding company, we would be subject to extensive regulation, supervision and examination by one or more of the Federal
Banking Agencies and state banking commissions. These regulatory authorities have extensive discretion in their supervisory
and enforcement activities, including the imposition of restrictions on operations, the classification of assets and
determination of allowance for loan losses. Banking regulations, designed primarily for the protection of depositors, may
limit growth of a bank or bank holding company and the return for investors by restricting certain activities, such as the
payment of dividends to shareholders, possible mergers with or acquisitions of or by other institutions, desired investments,
loans and interest rates on loans, interest rates paid on deposits, the possible expansion of branch offices, and the ability
to provide securities or trust services. Banks and bank holding companies also are subject to capitalization guidelines set
forth in federal legislation and could be subject to enforcement actions to the extent that they are found by regulatory
examiners to be undercapitalized. If we acquire control of a bank or bank holding company, we would also be subject to
limitations on proprietary trading as well as the sponsoring of or investment in hedge funds and private equity funds under
the so-called
“Volcker Rule.”
The regulatory environment in which we
operate is also subject to modifications and further regulations. New laws or regulations or changes in the enforcement of existing
laws or regulations applicable to us may adversely affect our business, and our ability to function in this environment will depend
on our ability to constantly monitor and react to these changes. For example, the Dodd-Frank Wall Street Reform and Consumer Protection
Act, or the Dodd-Frank Act, was signed into law on July 21, 2010. The Dodd-Frank Act has increased the regulatory burdens
and reporting and related compliance costs for banks, investment advisers and other types businesses in the financial services
industry. The Dodd-Frank Act also created the Consumer Financial Protection Bureau, a new agency with broad powers to supervise
providers of consumer financial services and enforce consumer protection laws. The Dodd-Frank Act is expansive in scope and requires
the adoption of extensive regulations and numerous regulatory decisions in order to be implemented. The Dodd-Frank Act may change
the operating environment for financial services businesses and the financial markets in general and unpredictable ways.
We cannot predict what changes, if any,
will be made to existing federal and state legislation and regulations or the effect that such changes may have on our future business
and earnings prospects. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation
or supervisory action, may have a material impact on the operations of any financial services business that we acquire or attempt
to acquire.
Employees
We have four executive officers. These
individuals are not obligated to devote any specific number of hours to our matters and devote only as much time as they deem necessary
to our affairs. The amount of time they will devote in any time period will vary on a week to week basis based on whether a target
business has been selected for the business combination and the stage of the business combination process our company is
in. Accordingly, once a suitable target business has been identified, management will spend more time investigating such target
business and negotiating and processing the business combination (and consequently spend more time on our affairs) than had been
spent prior to identifying a suitable target business. We presently expect our executive officers to devote such amount of time
as they reasonably believe is necessary to our business. We do not intend to have any full time employees prior to the consummation
of our initial business combination.
RISK FACTORS
An investment in our shares of Class A
Common Stock involves a high degree of risk. You should consider carefully all of the risks described below, which we believe represent
the material risks related to our business and our Class A Common Stock, together with the other information contained in this
Form 10-K. If any of the following events occur, our business, financial condition and operating results may be materially adversely
affected. In that event, the trading price of our shares of Class A Common Stock could decline and you could lose all or part
of your investment. This Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the
risks described below.
Risks Associated with Our Business
We are a blank check company in the development stage with
no operating history and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective.
We are a blank check company in the development
stage with no operating history. Since we do not have an operating history, you will have no basis upon which to evaluate our ability
to achieve our business objective, which is to acquire an operating business. We will not generate any revenues until, at the earliest,
after the consummation of our initial business combination.
Our independent registered public accounting firm’s
report contains an explanatory paragraph that discusses the mandatory liquidation of the Company if a business combination is
not consummated and expresses doubt about our ability to continue as a “going concern.”
If we do not consummate a business combination by September
21, 2014 (or March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement for an initial business
combination before September 21, 2014 but the initial business combination has not been completed by September 21, 2014), the Company
will be liquidated and will no longer be a going concern. The financial statements contained elsewhere in this filing do not include
any adjustments that might result from our inability to consummate a business combination.
If we are unable to consummate our initial business combination,
our public stockholders may be forced to wait more than 18 months before receiving distributions from the trust account.
We have 18 months from the date of our
initial public offering prospectus, that is, until September 21, 2014, (or 24 months from the date of our initial public offering
prospectus, that is, until March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement in connection
with an initial business combination before September 21, 2014 but the initial business combination has not been consummated by
September 21, 2014) in which to complete our initial business combination. We have no obligation to return funds to public stockholders
prior to such time unless we consummate our initial business combination prior thereto and only then in cases where public stockholders
have sought to convert their shares. Only after the expiration of this time period will public stockholders be entitled to distributions
from the trust account if we are unable to complete our initial business combination. Accordingly, public stockholders’ funds
may be unavailable to them until after such time and, to liquidate their investment, public stockholders may be forced to sell
their public shares, potentially at a loss.
If the shares of Class B Common Stock remain outstanding
following the consummation of our initial business combination, the holders of the Class B Common Stock will hold a majority of
the combined voting power of our common stock.
Unlike other similarly structured blank
check companies, we are authorized to issue two classes of common stock. Our Class B Stockholder holds an aggregate of 20,000,000
shares of Class B Common Stock. Shares of our Class B Common Stock are entitled to ten votes per share and will vote with the holders
of Class A Common Stock, as a single class, on all matters presented to holders of our common stock for a vote. Due to its
ownership of the Class B Common Stock our Class B Stockholder holds approximately 89.4% of the combined voting power of our common
stock.
Prior to our initial business combination
and in connection with any vote on our initial business combination, the shares of our Class B Common Stock will be voted on all
matters presented to holders of our common stock for a vote in proportion to the vote of the holders of the Class A Common Stock.
As a result, prior to consummation of our initial business combination, holders of a majority of our shares of Class A Common Stock
will control the vote on any matter submitted to our stockholders for a vote. If the shares of Class B Common Stock remain outstanding
following the consummation of our initial business combination, the holders of the Class B Common Stock will be entitled to vote
the shares of Class B Common Stock in their own discretion and will hold a majority of the combined voting power of our common
stock.
If all 180,000,000 authorized shares of
Class A Common Stock are issued and outstanding following our initial business combination, and assuming the 20,000,000 shares
of Class B Common Stock remain outstanding, the holders of our Class B Common Stock will hold approximately 52.6% of the combined
voting power of our common stock. For so long as the outstanding shares of Class B Common Stock represent at least a majority of
the combined voting power of our common stock, the holders of our Class B Common Stock will be able to elect all of the members
of our board of directors and thereby control our management and affairs, including determinations with respect to acquisitions,
dispositions, borrowings, issuances of securities, and the declaration and payment of dividends. In addition, the holders of our
Class B Common Stock will be able to determine the outcome of all matters requiring approval of our stockholders, and will be able
to cause or prevent a change of control of our company or a change in the composition of our board of directors, and
could preclude any unsolicited acquisition of our company even though it may be in the best interests of the holders
of our Class A Common Stock. In particular, this concentration of voting power could deprive holders of our Class A Common
Stock of the opportunity to receive a premium for their shares of Class A Common Stock as part of a sale of our company,
and could ultimately affect the market price of our Class A Common Stock.
Our Class B Common Stock and other provisions in our
amended and restated certificate of incorporation and bylaws and Delaware law may inhibit a takeover of us,
which could limit the price investors might be willing to pay in the future for our Class A Common Stock and could
entrench management.
Our Class B Stockholder holds an
aggregate of 20,000,000 shares of Class B Common Stock, representing an aggregate of 200,000,000 votes. Shares of our Class B
Common Stock will vote with the holders of Class A Common Stock, as a single class, on all matters presented to holders
of our common stock for a vote. If all 180,000,000 authorized shares of Class A Common Stock are issued and outstanding
following an initial business combination, and assuming the 20,000,000 shares of Class B Common Stock remain outstanding, the
holders of our Class B Common Stock will hold approximately 52.6% of the combined voting power of our common stock. The
voting power of our Class B Common Stock may discourage unsolicited takeover proposals that stockholders may consider to be
in their best interests. In addition, after the consummation of our initial business combination, and assuming the Class B
Common Stock is not transferred to us in connection with our initial business combination, the holders of our Class B Common
Stock will control the vote on all matters presented to our holders of common stock for a vote, including the election of
directors.
Our amended and restated certificate
of incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders
may consider to be in their best interests. Our board of directors is divided into three classes, each of which will generally
serve for a term of three years with only one class of directors being elected in each year. As a result, at a given annual meeting
only one-third of the board of directors may be considered for election. Since our
“staggered board”
may
prevent our stockholders from replacing a majority of our board of directors at any given annual meeting, it may entrench management
and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors
has the ability to designate the terms of and issue new series of preferred stock.
We are also subject to anti-takeover provisions
under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal
of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for
our securities.
Our sponsors, officers and directors control a substantial
interest in our Class A Common Stock and thus may influence certain actions requiring a stockholder vote.
Our sponsors, officers and directors collectively
own approximately 35.4% of our issued and outstanding shares of Class A Common Stock as of December 31, 2013. Our sponsors,
officers, directors, Advisory Board members or their affiliates may determine in the future to make purchases of Class A Common
Stock from persons in the open market or in private transactions, to the extent permitted by law, in order to influence any vote,
including negotiating arrangements for the purchase of shares of Class A Common Stock in connection with our initial business
combination from holders of public shares who indicate an intention to vote against a proposed business combination and/or seek
conversion of their shares into cash.
The open market purchases described above
by our sponsors, officers, directors or Advisory Board members or their affiliates who are
“affiliated purchasers”
under
Rule 10b-18 under the Exchange Act will comply with Rule 10b-18, which is a safe harbor from liability for manipulation
under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must
be complied with in order for the safe harbor to be available to the purchaser. For instance, the total volume of open market purchases
of Class A Common Stock on any single day must not exceed 25% of the average daily trading volume of our Class A Common
Stock during the four calendar weeks preceding the week in which the purchases are effectuated. Similarly, the purchase price cannot
exceed the highest independent bid or the last independent transaction price of our Class A Common Stock, whichever is higher,
at the time the purchases are effectuated. Our sponsors, officers, directors and Advisory Board members and their affiliates will
not make purchases of Class A Common Stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange
Act.
Prior to our initial business combination
and in connection with any vote on our initial business combination, the shares of our Class B Common Stock will be voted
on all matters presented to holders of our common stock for a vote in proportion to the vote of the holders of the Class A
Common Stock. As a result, prior to consummation of an initial business combination, holders of a majority of our shares of Class A
Common Stock will control the vote on any matter submitted to our stockholders for a vote. As of December 31, 2013, our sponsors,
officers and directors collectively own approximately 35.4% of our issued and outstanding shares of Class A Common Stock.
In connection with any vote for a proposed business combination, our sponsors, as well as all of our officers and directors, have
agreed to vote the founders’ shares and sponsors’ shares as well as any shares of Class A Common Stock acquired
in the initial public offering or in the aftermarket in favor of such proposed business combination.
Our board of directors is and will be divided
into three classes, each of which will generally serve for a term of three years with only one class of directors being elected
in each year. If there is an annual meeting, as a consequence of our
“staggered”
board of directors,
only one-third of the board of directors will be considered for election and our sponsors, because of their ownership position,
will have considerable influence regarding the outcome. Accordingly, our sponsors will continue to exert control at least until
the consummation of our initial business combination at which time additional shares of Class A Common Stock may be issued
and/or our Class B Common Stock may be redeemed or transferred.
You will not be entitled to protections normally afforded
to investors of blank check companies.
Since the net proceeds of our initial public
offering and private placement are intended to be used to complete our initial business combination with a target business that
has not been identified, we may be deemed to be a
“blank check”
company under the United States securities
laws. However, since we have net tangible assets in excess of $5,000,001, we are exempt from rules promulgated by the SEC to protect
investors of blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of
those rules which would, for example, completely restrict the transferability of our securities, require us to complete our initial
business combination before September 21, 2014 and restrict the use of interest earned on the funds held in the trust account.
Because we are not subject to Rule 419, our shares will be immediately tradable, we will be entitled to withdraw amounts from the
funds held in the trust account prior to the completion of our initial business combination, and we will have a longer period of
time to complete such a business combination than we would if we were subject to such rule.
We may issue shares of our capital stock to complete our
initial business combination, which would reduce the equity interest of our stockholders and may cause a change in control of our
ownership.
Our amended and restated certificate
of incorporation currently authorizes the issuance of up to 180,000,000 shares of Class A Common Stock, 20,000,000 shares
of Class B Common Stock and 2,000,000 shares of preferred stock. Currently, there are 156,407,850 and 2,000,000 authorized but
unissued shares of Class A Common Stock and preferred stock, respectively, available for issuance. Although we have no commitment
as of this date, we may issue a substantial number of additional shares of Class A Common Stock or shares of preferred stock,
or a combination of Class A Common Stock and preferred stock, to complete our initial business combination. The issuance of
additional shares of Class A Common Stock or preferred stock will not reduce the per-share redemption amount in the trust
account. The issuance of additional shares of Class A Common Stock or preferred stock:
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may significantly reduce the equity interest of our existing
public stockholders;
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may subordinate the rights of holders of shares of Class A
Common Stock if we issue shares of preferred stock with rights senior to those afforded to our shares of Class A Common Stock;
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may cause a change in control if a substantial number
of shares of Class A Common Stock are issued and our outstanding shares of Class B Common Stock are redeemed, which may affect,
among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal
of our present officers and directors;
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may adversely affect prevailing market prices for our
shares of Class A Common Stock; and
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may result in the shareholders of the target business
holding a majority of our outstanding shares of Class A Common Stock and, if our shares of Class B Common Stock are redeemed
in connection with our initial business combination, our common stock.
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We may incur significant indebtedness in order to consummate
our initial business combination.
If we find it necessary to incur significant
indebtedness in connection with our initial business combination, it could result in:
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default and foreclosure on our assets if our operating
revenues after our initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness
even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain
financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest,
if any, if the debt instrument is payable on demand; and
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our inability to obtain necessary additional financing
if the debt instrument contains covenants restricting our ability to obtain such financing while the debt is outstanding.
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If we incur indebtedness, our lender will
not have a claim on the cash in the trust account and such indebtedness will not decrease the per share redemption amount in the
trust account.
If the net proceeds of our initial public offering not being
held in the trust account, together with the interest in the trust account (net of taxes payable) which will be released to us
for working capital purposes, are insufficient to allow us to operate until March 21, 2015, we may be unable to complete our initial
business combination.
If the net proceeds of our initial public
offering not being held in the trust account, together with the interest in the trust account (net of taxes payable) which will
be released to us for working capital purposes, are insufficient to allow us to operate until March 21, 2015, we might not be able
to continue searching for, or conduct due diligence with respect to, a target business and may be unable to complete our initial
business combination. In such event, we would need to borrow funds from our sponsors, officers or directors to operate or may be
forced to liquidate.
If third parties bring claims against us, the proceeds held
in the trust account could be reduced and the per-share redemption price received by stockholders may be less than $10.50.
Our placing of funds in the trust account
may not protect those funds from third party claims against us. Although we seek and will continue to seek to have all vendors
and service providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right,
title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders,
they may not execute such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse
against the trust account. A court may not uphold the validity of such agreements. Accordingly, the proceeds held in the trust
account could be subject to claims which could take priority over those of our public stockholders. Therefore, the per-share distribution
from the trust account may be less than $10.50, due to such claims.
Additionally, if we are forced to file
a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust
account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of
third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account,
we may not be able to return to our public stockholders at least $10.50.
Our stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them.
If we have not completed our initial business
combination by September 21, 2014 (or March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement
for an initial business combination before September 21, 2014
but the initial business combination
has not been completed by September 21, 2014), we will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at
a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest
but net of taxes payable, divided by the number of then outstanding public shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (except for the right to receive further liquidation distributions, if any),
subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above)
to our obligations under Delaware law to provide for claims of creditors and to the requirements of other applicable law. Accordingly,
it is our intention to redeem our public shares as soon as reasonably possible following September 21, 2014 (or March 21, 2015,
as the case may be) and, therefore, we do not intend to comply with Section 280 of the Delaware General Corporation Law. As
such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more)
and any liability of our stockholders may extend well beyond the 3 year period of time in which a claim could have been made against
our stockholders if we complied with Section 280 of the Delaware General Corporation Law. We may not properly assess all claims
that may be potentially brought against us. Accordingly, third parties may seek to recover from our stockholders amounts owed to
them by us.
If we are forced to file a bankruptcy case
or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could
be viewed under applicable debtor/creditor and/or bankruptcy laws as either a
“preferential transfer”
or
a
“fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received
by our stockholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders
promptly after expiration of the 18 month deadline (or 24 month deadline, as the case may be), this may be viewed or interpreted
as giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our
assets. Furthermore, our board may be viewed as having breached its fiduciary duties to our creditors and/or to have acted in bad
faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the
trust account prior to addressing the claims of creditors. Claims may be brought against us for these reasons.
We have not paid any cash dividends on our common stock to
date and do not intend to pay cash dividends prior to the completion of our initial business combination.
We have not paid any cash dividends on
our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. Therefore,
any benefit from your investment in shares of Class A Common Stock prior to our initial business combination will arise solely
from the appreciation, if any, in the value of our Class A Common Stock.
Our directors may decide not to enforce the indemnification
obligations of our officers, resulting in a reduction in the amount of funds in the trust account available for distribution to
our public stockholders.
In the event that the proceeds in the trust
account are reduced below $10.50 per public share and any of our officers asserts that he is unable to satisfy his obligations
or that he has no indemnification obligations related to a particular claim, our independent directors would determine whether
to take legal action against such individual to enforce such indemnification obligations. It is possible that our independent directors
in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not
to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public
stockholders may be reduced below $10.50 per share.
Since we have not yet selected a particular industry or target
business with which to complete our initial business combination, we are unable to currently ascertain the merits or risks of the
industry or business in which we may ultimately operate.
We may consummate our initial business
combination with a company in any industry we choose and are not limited to any particular industry or type of business, although
we are focusing on target businesses operating in the financial services industry. Accordingly, there is no current basis for you
to evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business which
we may ultimately acquire. To the extent we complete our initial business combination with a financially unstable company or an
entity in its development stage, we may be affected by numerous risks inherent in the business operations of those entities. If
we complete our initial business combination with an entity in an industry characterized by a high level of risk, we may be affected
by the currently unascertainable risks of that industry. Although our management will endeavor to evaluate the risks inherent in
a particular industry or target business, we may not properly ascertain or assess all of the significant risk factors. An investment
in our Class A Common Stock may not ultimately prove to be more favorable to investors than a direct investment, if an opportunity
were available, in a target business.
The requirement that the target business or businesses that
we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at
the time of the execution of a definitive agreement for an initial business combination may limit the type and number of companies
that we may complete an initial business combination with.
Pursuant to Nasdaq listing rules, the target
business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds
in the trust account at the time of the execution of a definitive agreement for an initial business combination. This restriction
may limit the type and number of companies that we may complete a business combination with. If we are unable to locate a target
business or businesses that satisfy this fair market value test, we may be forced to liquidate and you will only be entitled to
receive your pro rata portion of the funds in the trust account.
Our ability to successfully effect our initial business combination
and to be successful thereafter will be entirely dependent upon the efforts of our key personnel, some of whom may join us following
our initial business combination. While we intend to closely scrutinize any individuals we engage after our initial business combination,
our assessment of these individuals may not prove to be correct.
Our ability to successfully effect our
initial business combination is dependent upon the efforts of our key personnel. We believe that our success depends on the continued
service of our key personnel, at least until we have consummated our initial business combination. None of our officers are required
to commit any specified amount of time to our affairs and, accordingly, they will have conflicts of interest in allocating management
time among various business activities, including identifying potential business combinations and monitoring the related due diligence.
We presently expect each of our employees to devote such amount of time as he reasonably believes is necessary to our business.
The amount of time our officers and directors commit to our affairs will vary on a week to week basis. We do not have employment
agreements with, or key-man insurance on the life of, any of our officers. The unexpected loss of the services of our key personnel
could have a detrimental effect on us.
Currently, our key personnel are R. Bruce
Cameron, our Chairman of the Board, Richard S. Foote, our President, Chief Executive Officer and director, R. Bradley
Forth, our Executive Vice President, Chief Financial Officer and Secretary and Seymour A. Newman, our Chief Operating Officer.
The role of our key personnel after our initial business combination remains to be determined. Although some of our key personnel
may serve in senior management or advisory positions following our initial business combination, it is likely that most, if not
all, of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage
after our initial business combination, our assessment of these individuals may not prove to be correct. These individuals may
be unfamiliar with the requirements of operating a public company which could cause us to spend time and resources helping them
become familiar with such requirements. This could be expensive and time-consuming and could expose us to various regulatory and
compliance issues that may adversely affect our operations.
Our officers and directors may not have significant experience
or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
Although we are focusing on companies operating
in the financial services industry, in which our directors, officers and Advisory Board members have significant experience, we
may consummate a business combination with a target business in any geographic location or industry we choose. Our officers and
directors may not have enough experience or sufficient knowledge relating to the jurisdiction of the target or its industry to
make an informed decision regarding our initial business combination.
Our key personnel may negotiate employment or consulting
agreements with a target business in connection with a potential initial business combination. These agreements may provide for
them to receive compensation following our initial business combination and thus raise conflicts of interest in their determination
of whether a particular business combination should be pursued.
Our key personnel are likely to remain
with the company after the consummation of our initial business combination only if they are able to negotiate employment
or consulting agreements or other appropriate arrangements in connection with the business combination. Such negotiations would
take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation
in the form of cash payments and/or our securities for services they would render to the company after the consummation
of the business combination. The personal and financial interests of such individuals could influence their motivation in identifying
and selecting a target business.
Our officers and directors may have fiduciary obligations
to other entities, which could cause additional conflicts of interest in determining to which entity a particular business opportunity
should be presented.
Our officers and directors may in the future
become affiliated with entities engaged in business activities similar to those intended to be conducted by us. Further, our officers
and directors are affiliated with other entities which may be presented with business opportunities, either for themselves or for
their clients, which may also be appropriate for presentation to us. Specifically, Messrs. Cameron, Foote and Forth are employed
by and/or equity owners of Berkshire Capital, which is an investment bank focused on providing advice to financial institutions.
Berkshire Capital’s clients may compete with us for acquisitions in the financial services industry, and Berkshire Capital
will have no duty to present acquisition opportunities to us before it presents them to its clients. We cannot assure you that
these or other conflicts of interest arising out of our officers’ and directors’ affiliations with other entities would
be resolved in our favor. We have no formal arrangement or agreement with our Advisory Board members to provide services to us
and, accordingly, they have no contractual or fiduciary obligations to present business opportunities to us.
Our officers and directors will allocate their time to other
businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict
of interest could have a negative impact on our ability to consummate our initial business combination.
Our officers and directors are not required
to commit their full time to our affairs, which will create a conflict of interest when allocating their time between our operations
and their other commitments. We presently expect each of our officers and directors to devote such amount of time as he reasonably
believes is necessary to our business. The amount of time our officers and directors commit to our affairs will vary on a week
to week basis. We do not intend to have any full time employees prior to the consummation of our initial business combination.
All of our officers and directors are engaged in several other business endeavors and are not obligated to devote any specific
number of hours to our affairs. If our officers’ and directors’ other business affairs require them to devote more
substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs and could have a negative
impact on our ability to consummate our initial business combination. These conflicts may not be resolved in our favor.
We may engage in a business combination with one or more
target businesses that have relationships with entities that may be affiliates of our sponsors, officers or directors, which may
raise potential conflicts.
Although we do not anticipate acquiring
or acquiring control of businesses affiliated with our sponsors, officers or directors in connection with our initial business
combination, we have agreed to obtain an opinion from an independent investment banking firm regarding the fairness to our stockholders
from a financial point of view of a business combination with one or more businesses affiliated with our sponsors, officers or
directors. Despite this agreement, potential conflicts of interest may still exist and, as a result, the terms of our initial business
combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
In particular, Berkshire Capital, in its
capacity as a financial advisor to its clients, may present us with acquisition opportunities on behalf of its clients. We
will not pay Berkshire Capital any finder’s fee or other compensation for services rendered to us prior to or in connection
with the consummation of our initial business combination, other than $10,000 per month for general and administrative services
including office space, utilities and secretarial support. Also, the completion of a business combination between us and an entity
owned by a client of Berkshire Capital or any other business in which our officers or directors may have an interest could enhance their
prospects for future business from such client. Because certain of our officers and directors are employees and/or beneficial owners
of Berkshire Capital and other businesses, they will have a conflict of interest in determining whether to recommend a business
combination with a Berkshire Capital client or an entity affiliated with a client of Berkshire Capital or any other business in
which our officers or directors may have an interest.
The founders’ shares and sponsors’ shares beneficially
owned by our officers and directors will not participate in liquidation distributions and, therefore, our officers and directors
will have a conflict of interest in determining whether a particular target business is appropriate for our initial business combination.
Our officers and directors have waived
their right to convert their founders’ shares, sponsors’ shares or any other shares purchased in the open market, or
to receive distributions with respect to their founders’ shares or sponsors’ shares upon our liquidation if we are
unable to consummate our initial business combination. Accordingly, the founders’ shares and sponsors’ shares will
be worthless if we do not consummate our initial business combination. The personal and financial interests of our directors and
officers may influence their motivation in, and our officers and directors will have a conflict of interest with respect to, the
timely identification and selection of a target business or businesses and the determination of whether the terms, conditions and
timing of a particular business combination are appropriate and in our stockholders’ best interest. Moreover, in the period
leading up to the closing of any proposed initial business combination, events may occur that, pursuant to the definitive agreement
relating to the proposed initial business combination, would require us to agree to amend the definitive agreement, to consent
to certain actions taken by the target business or to waive rights that we are entitled to under the definitive agreement. Such
events could arise because of changes in the course of the target business’ operations, a request by the target business
to undertake actions that would otherwise be prohibited by the terms of the definitive agreement or the occurrence of other events
that would have a material adverse effect on the target business’ operations and would entitle us to terminate the definitive
agreement. In any of such circumstances, it would be discretionary on our part, acting through our board of directors, to grant
our consent to such actions or waive our rights. The existence of the financial and personal interests described above will result
in a conflict of interest on the part of our directors in determining whether or not to take the requested action.
Additionally, unless we consummate our
initial business combination, our officers, directors and sponsors will not receive reimbursement for any out-of-pocket expenses
incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account and
the amount of interest income from the trust account. Our officers and directors may, as part of any business combination, negotiate
the repayment of some or all of any such expenses. We do not have a policy that prohibits our officers and directors from negotiating
for the reimbursement of such expenses by a target business. If the owners of the target business do not agree to such repayment,
this could cause our management to view such potential business combination unfavorably, thereby resulting in a conflict of interest.
If the out-of-pocket expenses of our officers and directors are not reimbursed from the funds not deposited in the trust account
and the interest income on the trust account, then the financial interest of our officers or directors will influence our officers’
and directors’ motivation in selecting a target business and therefore there will be a conflict of interest when determining
whether a particular business combination is in the stockholders’ best interest.
Nasdaq may delist our shares which could limit investors’
ability to trade our shares and subject us to additional trading restrictions.
Our shares are currently listed on Nasdaq, a national securities
exchange, but our shares may not continue to be listed on Nasdaq in the future prior to an initial business combination. Additionally,
in connection with our initial business combination, it is likely that Nasdaq will require us to file a new initial listing application
and meet its initial listing requirements as opposed to its more lenient continued listing requirements. Depending upon our financial
condition, the financial condition of the target business, the structure of our initial business combination and the market’s
response to our initial business combination, we may not be able to meet those initial listing requirements described above at
that time or, if such listing requirements are changed, amended listing criteria then in effect.
If Nasdaq delists our shares, we could
face significant material adverse consequences, including:
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a limited availability of market quotations for our shares
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reduced liquidity with respect to our shares
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a determination that our Class A Common Stock is a
“penny stock”
which
will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading
activity in the secondary trading market for our shares;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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We may only be able to complete one business combination
with the proceeds in the trust account, which will cause us to be solely dependent on a single business which may have a limited
number of products or services.
It is likely we will consummate our initial
business combination with a single target business, although we have the ability to simultaneously acquire several target businesses.
By consummating a business combination with only a single entity, our lack of diversification may subject us to numerous economic,
competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible
spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations
in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business,
or
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dependent upon the development or market acceptance of
a single or limited number of products, processes or services.
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This lack of diversification may subject
us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon
the particular industry in which we may operate subsequent to our initial business combination.
Alternatively, if we determine to simultaneously
acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that
our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more
difficult for us, and delay our ability, to complete the business combinations. With multiple business combinations, we also could
face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence
investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations
and services or products of the acquired companies in a single operating business. If we are unable to adequately address these
risks, it could negatively impact our profitability and results of operations.
The ability of our public stockholders to exercise their
conversion rights may not allow us to effectuate the most desirable business combination or optimize our capital structure.
We will not know how many public
stockholders may exercise conversion rights. If our initial business combination requires us to use substantially all of our
cash to pay the purchase price, we may either need to reserve part of the trust account for possible payment upon such
conversion or sales, or we may need to arrange third party financing to help fund our initial business combination. In the
event that the acquisition involves the issuance of our capital stock as consideration, we may be required to issue a higher
percentage of our capital stock to make up for a shortfall in funds. Raising additional funds to cover any shortfall may
involve dilutive equity financing or incurring indebtedness at higher than desirable levels. This may limit our ability to
effectuate the most attractive business combination available to us.
We may be unable to consummate an initial business combination
if a target business requires that we have a certain amount of cash at closing, in which case public stockholders may have to remain
stockholders of our company and wait until our redemption of the public shares to receive a pro rata share of the trust
account or attempt to sell their shares in the open market.
A potential target may make it a closing
condition to our initial business combination that we have a certain amount of cash in excess of the $5,000,001 of net tangible
assets we are required to have pursuant to our organizational documents available upon consummation of our initial business combination.
If the number of our public stockholders electing to exercise their conversion rights has the effect of reducing the amount of
money available to us to consummate an initial business combination below such minimum amount required by the target business and
our sponsors, officers, directors or Advisory Board members or their affiliates are not able to coordinate or enter into arrangements
to repurchase such shares, we will not be able to consummate such initial business combination, and we may not be able to locate
another suitable target within the applicable time period, if at all. In that case, public stockholders may have to remain stockholders
of our company and wait until March 21, 2015 to be able to receive a pro rata portion of the trust account, or attempt
to sell their shares in the open market prior to such time, in which case they may receive less than a pro rata share of the trust
account for their shares.
In connection with any vote to approve our initial business
combination, we will offer each public stockholder the option to vote in favor of the proposed business combination and request
conversion of his, her or its public shares.
In connection with any vote to approve
our initial business combination, we will offer each public stockholder (but not our sponsors, officers and directors) the right
to request to have his, her or its shares of Class A Common Stock converted to cash (subject to the limitations described
in Item 1.
Conversion Rights
) regardless of whether such public stockholder votes for or against such proposed business
combination. We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon
such consummation and a majority of the outstanding shares of Class A Common Stock voted are voted in favor of the business
combination. Because approval of our initial business combination requires the affirmative vote of a majority of the outstanding
shares of Class A Common Stock that are voted, rather than a majority of the outstanding shares of Class A Common Stock,
and our sponsors currently hold approximately 35.4% of our Class A Common Stock, a proposed initial business combination will
be approved unless public stockholders holding public shares in excess of 35.4% of our outstanding shares of Class A Common
Stock vote against the proposed initial business combination. As of December 31, 2013, public stockholders owning 16,497,960 public
shares may exercise their conversion rights, and we could still consummate a proposed business combination so long as a majority
of shares of Class A Common Stock voted at the meeting are voted in favor of the proposed initial business combination. This
is different than other similarly structured blank check companies where stockholders are offered the right to convert their shares
only when they vote against a proposed business combination. If a stockholder requests conversion with respect to some or all of
his shares, the shares will be converted only if we consummate our initial business combination, which requires that we have net
tangible assets of at least $5,000,001 upon consummation. If we do not consummate the initial business combination because effectuating
all of the requested conversions would cause our net tangible assets to fall below $5,000,001 or for any other reason, the shares
will not be converted. Furthermore, the threshold of $5,000,001 net tangible assets is different than the more typical conversion
threshold of between 20% and 40% and further allows holders of our shares of Class A Common Stock the right to vote in favor
of our initial business combination and elect to convert their shares. This different threshold and the ability to seek conversion
while voting in favor of a proposed business combination may make it more likely that we will consummate our initial business combination.
Public stockholders, together with any affiliates of theirs
or any other person with whom they are acting in concert or as a
“group,”
will be restricted from
seeking conversion rights with respect to more than 20% of the shares sold in our initial public offering.
We will offer each public stockholder (but
not our sponsors, officers and directors) the right to request to have his, her, or its shares of Class A Common Stock converted
into cash. Notwithstanding the foregoing, in accordance with our amended and restated certificate of incorporation, a public
stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a
“group”
,
will be restricted from seeking conversion rights with respect to more than 20% of the public shares of Class A Common Stock
sold in our initial public offering. Generally, in this context, a stockholder will be deemed to be acting in concert or as a group
with another stockholder when such stockholders agree to act together for the purpose of acquiring, voting, holding or disposing
of our equity securities. Accordingly, if you purchase more than 20% of the public shares sold in our initial public offering and
our proposed business combination is approved, you will not be able to seek conversion rights with respect to the full amount of
your public shares and may be forced to hold such additional public shares or sell them in the open market. The value of such additional
shares may not appreciate over time following our initial business combination, and the market price of our shares of Class A
Common Stock may not exceed the per-share conversion price.
We may require public stockholders who wish to convert their
shares of Class A Common Stock in connection with a proposed business combination to comply with specific requirements for
conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their
rights.
In connection with any stockholder meeting
called to approve a proposed initial business combination, each public stockholder will have the right, regardless of whether he
is voting for or against such proposed business combination, to request that we convert his shares into a pro rata share of the
trust account (net of taxes payable). We may require public stockholders who wish to convert their shares in connection with a
proposed business combination to either tender their certificates to our transfer agent prior to the vote taken at the stockholder
meeting relating to such business combination or to deliver their shares to the transfer agent electronically using the Depository
Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock certificate, a stockholder’s
broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding
that public stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However,
because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks
to obtain a physical stock certificate. While we have been advised that it takes a short time to deliver shares through the DWAC
System, this may not be the case. Accordingly, if it takes longer than we anticipate for public stockholders to deliver their shares,
public stockholders who wish to convert may be unable to meet the deadline for exercising their conversion rights and thus may
be unable to convert their public shares.
If we require public stockholders who wish to convert their
shares to comply with specific requirements for conversion, such converting stockholders may be unable to sell their securities
when they wish to in the event the proposed initial business combination is not approved.
If we require public stockholders who wish
to convert their public shares to comply with specific requirements for conversion and such proposed initial business combination
is not consummated, we will promptly return such certificates to the tendering public stockholders. Accordingly, public stockholders
who attempted to convert their shares in such a circumstance will be unable to sell their securities after the failed acquisition
until we have returned their securities to them. The market price for our shares of Class A Common Stock may decline during
this time, and you may not be able to sell your shares of Class A Common Stock when you wish to, even while other public stockholders
that did not seek conversion may be able to sell their shares.
Because of our structure, other companies may have a competitive
advantage, and we may not be able to consummate an attractive business combination.
We expect to encounter intense competition
from entities other than blank check companies having a business objective similar to ours, including venture capital funds, leveraged
buyout funds and operating businesses seeking acquisitions. Many of these entities are well established and have extensive experience
in identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical,
human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many
of these competitors. While we believe that there are numerous potential target businesses that we could acquire with the proceeds
held in the trust account, our ability to compete in acquiring certain sizable target businesses will be limited by our available
financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target
businesses. Furthermore, seeking stockholder approval of our initial business combination may delay the consummation of a transaction.
Any of the foregoing may place us at a competitive disadvantage in successfully negotiating our initial business combination.
We may be unable to obtain additional financing, if required,
to complete our initial business combination or to fund the operations and growth of the target business, which could compel us
to restructure or abandon a particular business combination.
Although we believe that we have sufficient
capital available to allow us to consummate a business combination, because we have not yet identified any prospective target business,
the capital requirements for any particular transaction remain to be determined. We will consummate our initial business combination
only if we have net tangible assets of at least $5,000,001 in order to avoid being subject to Rule 419 under the Securities Act.
If our available funds prove to be insufficient, either because of the size of the business combination, the depletion of the available
net proceeds in search of a target business, or the obligation to convert into cash a significant number of shares from converting
stockholders, we will be required to seek additional financing. Such financing may not be available on acceptable terms, if at
all. To the extent that additional financing proves to be unavailable when needed to consummate a particular business combination,
we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative
target business candidate. In addition, if we consummate a business combination, we may require additional financing to fund the
operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on
the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide
any financing to us in connection with or after our initial business combination.
We may not hold an annual meeting of stockholders until after
the consummation of our initial business combination.
In accordance with the Nasdaq corporate
governance requirements, we are not required to hold an annual meeting until one year after the end of our first fiscal year following
our listing on Nasdaq. Under Section 211(b) of the Delaware General Corporation Law, we are, however, required to hold an
annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election
is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors
prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of
the Delaware General Corporation Law, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual
meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an
application to the Delaware Court of Chancery in accordance with Section 211(c) of the Delaware General Corporation Law.
If our stockholders exercise their registration rights, it
may have an adverse effect on the market price of our shares of Class A Common Stock, and the existence of these rights may
make it more difficult to effect our initial business combination.
Our sponsors are entitled to make a demand
that we register the resale of the founders’ shares at any time commencing three months prior to the date on which their
shares may be released from escrow. Additionally, our sponsors are entitled to demand that we register the resale of the sponsors’
shares and any shares our sponsors, officers, directors, Advisory Board members or their affiliates may be issued in payment of
working capital loans made to us commencing on the date that we consummate our initial business combination. The presence of these
additional shares of Class A Common Stock trading in the public market may have an adverse effect on the market price of our
Class A Common Stock. In addition, the existence of these rights may make it more difficult to effectuate our initial business
combination or increase the cost of acquiring the target business, as the stockholders of the target business may be discouraged
from entering into a business combination with us or will request a higher price for their securities because of the potential
effect the exercise of such rights may have on the trading market for our shares of Class A Common Stock.
If we are deemed to be an investment company, we may be required
to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete
our initial business combination.
A company that, among other things, is
or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, owning,
trading or holding certain types of securities would be deemed an investment company under the Investment Company Act of 1940.
Since we will invest the proceeds held in the trust account, it is possible that we could be deemed an investment company. Notwithstanding
the foregoing, we do not believe that our anticipated principal activities will subject us to the Investment Company Act of 1940.
To this end, the proceeds held in the trust account have been and will continue to be invested by the trustee only in United States
government treasury bills having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule
2a-7 promulgated under the Investment Company Act of 1940 and that invest solely in U.S. treasuries. By restricting the investment
of the proceeds to these instruments, we intend to meet the requirements for the exemption provided in Rule 3a-1 promulgated under
the Investment Company Act of 1940.
If we are nevertheless deemed to be an
investment company under the Investment Company Act of 1940, we may be subject to certain restrictions that may make it more difficult
for us to complete our initial business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may have imposed upon us
certain burdensome requirements, including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy, compliance
policies and procedures and disclosure requirements and other rules and regulations.
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Compliance with these additional regulatory
burdens would require additional expense for which we have not allotted any proceeds from our initial public offering.
If we do not conduct an adequate due diligence investigation
of a target business, we may be required to subsequently recognize write-downs or write-offs or restructuring, impairment or other
charges that could have a significant negative effect on our financial condition, results of operations and the price of our Class A
Common Stock, which could cause you to lose some or all of your investment.
We will conduct a due diligence investigation
of the target businesses we intend to acquire. Intensive due diligence is time consuming and expensive due to the operations, accounting,
finance and legal professionals who must be involved in the due diligence process. Even if we conduct extensive due diligence on
a target business, this diligence may not reveal all material issues that may affect a particular target business, and factors
outside the control of the target business and outside of our control may later arise. If our diligence fails to identify issues
specific to a target business, industry or the environment in which the target business operates, we may be forced to later write-down
or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses.
Even though these charges may be non-cash items and not have an immediate impact on our liquidity, reporting charges of this nature
could contribute to negative market perceptions about us or our Class A Common Stock. In addition, charges of this nature
may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held
by a target business or by virtue of our obtaining post-combination debt financing.
The requirement that we complete our initial business combination
by September 21, 2014 (or March 21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement for an
initial business combination before September 21, 2014 but the initial business combination is not completed by September 21, 2014)
may give potential target businesses leverage over us in negotiating our initial business combination.
We have until September 21, 2014 (or March
21, 2015 if we execute a letter of intent, agreement in principle or definitive agreement for an initial business combination before
September 21, 2014 but the initial business combination has not been completed by September 21, 2014) to complete our initial business
combination. Any potential target business with which we enter into negotiations concerning a business combination will be aware
of this requirement. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing
that if we do not complete a business combination with that particular target business, we may be unable to complete a business
combination with any other target business. This risk will increase as we approach the time limit referenced above.
We may not obtain a fairness opinion with respect to the
target business that we seek to acquire, and therefore you may be relying solely on the judgment of our board of directors in approving
a proposed business combination.
We are only required to obtain a fairness
opinion with respect to the target business that we seek to acquire if it is an entity that is affiliated with any of our officers,
directors or sponsors, including (1) an entity in which any of the foregoing or their affiliates are currently passive investors,
(2) an entity in which any of the foregoing or their affiliates are currently officers or directors, or (3) an entity
in which any of the foregoing or their affiliates are currently invested through an investment vehicle controlled by them. In all
other instances, we will have no obligation to obtain an opinion. Accordingly, investors may be relying solely on the judgment
of our board of directors in approving a proposed business combination.
We may not be required to obtain an opinion from an independent
investment banking firm as to the fair market value of the target business we are seeking to acquire.
We may not be required to obtain an opinion
from an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type
of target business we are seeking to acquire, as to the fair market value of such target business if our board of directors independently
determines that the target business satisfies the requirement that its value is no less than 80% of the proceeds in the trust account.
Accordingly, investors will be relying solely on the judgment of our board of directors in valuing such target business, and our
board of directors may not properly value such target business.
Resources could be spent researching acquisitions that are
not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
It is anticipated that the investigation
of each specific target business and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and
other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others.
If a decision is made not to complete a specific business combination, the costs incurred up to that point for the proposed transaction
likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific target business, we may fail
to consummate the business combination for any number of reasons including those beyond our control. Any such event will result
in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire
or merge with another business.
Compliance with the Sarbanes-Oxley Act of 2002 will require
substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley
Act of 2002, or the Sarbanes-Oxley Act, requires that we evaluate and report on our system of internal controls and may require
that we have such system of internal controls audited. If we fail to maintain the adequacy of our internal controls, we could be
subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation. Any inability to provide reliable financial
reports could harm our business. Section 404 of the Sarbanes-Oxley Act also requires that our independent registered public
accounting firm report on management’s evaluation of our system of internal controls, although as an
“emerging
growth company”
we may take advantage of an exemption from this requirement. A target company may not be in compliance
with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal controls
of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any
such acquisition. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation
of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to
fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported
financial information, which could have a negative effect on the trading price of our Class A Common Stock.
The requirements of being a public company may strain our
resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer
an
“emerging growth company.”
We are required to comply with various
regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory
requirements is time-consuming and will result in increased costs to us and could have a negative effect on our business, results
of operations and financial condition. As a public company, we are subject to the reporting requirements of the Exchange Act and
requirements of the Sarbanes-Oxley Act. These requirements place a strain on our systems and resources. The Exchange Act requires
that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act
requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain
and improve the effectiveness of our disclosure controls and procedures, we must commit significant resources. In addition, as
a public company, we must also maintain investor relations, legal and corporate communications functions. All of these activities
and additional efforts increase our costs, strain our resources and divert management’s attention from other business concerns,
which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
As an
“emerging growth company”
as
defined in the JOBS Act, we may take advantage of certain temporary exemptions from various reporting requirements including, but
not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act (and rules and regulations of the SEC thereunder, which we refer to as Section 404) and reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements. When these exemptions cease to apply, we expect
to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or
estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
We are an
“emerging growth company”
and
we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our shares of Class A
Common Stock less attractive to investors.
We are an
“emerging growth
company,”
as defined in the JOBS Act, enacted in April 2012, and, for as long as we continue to be an
“emerging
growth company,”
we may choose to take advantage of exemptions from various reporting requirements applicable to
other public companies but not to
“emerging growth companies,”
including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved. We could remain an
“emerging growth company”
until December 31, 2018, or until the earliest
of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that
we become a
“large accelerated filer”
as defined in Rule 12b–2 under the Exchange Act, which
would occur if the market value of our Class A Common Stock that is held by non–affiliates exceeds $700 million as of
any January 31 before the end of that five-year period, or (iii) the date on which we have issued more than $1 billion
in nonconvertible debt during the preceding three-year period. We cannot predict whether investors will find our Class A Common
Stock less attractive if we choose to rely on these exemptions. If some investors find our Class A Common Stock less attractive
as a result of any decisions to reduce future disclosure, there may be a less active trading market for our Class A Common
Stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS
Act also provides that an
“emerging growth company”
can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an
“emerging growth company”
can delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. We have elected to take advantage of this provision. As such, our financial
statements may not be comparable to companies that comply with public company effective dates. We cannot predict if investors will
find our shares of Class A Common Stock less attractive because we may rely on these provisions.
If we effect our initial business combination with a company
located outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
We may effect our initial business combination
with a company located outside of the United States. If we did, we would be subject to any special considerations or risks associated
with companies operating in the target business’ home jurisdiction, including any of the following:
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rules and regulations or currency conversion or corporate withholding taxes on individuals;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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tax issues, such as tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations and exchange controls;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
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deterioration of political relations with the United States.
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We may not be able to adequately address
these additional risks. If we are unable to do so, our operations may suffer.
If we effect our initial business combination with a company
located outside of the United States, the laws applicable to such company will likely govern all of our material agreements and
we may not be able to enforce our legal rights.
If we effect our initial business combination
with a company located outside of the United States, the laws of the country in which such company operates will govern almost
all of the material agreements relating to its operations. The target business may not be able to enforce any of its material agreements
and remedies may not be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction
may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy
under any of our future agreements could result in a significant loss of business, business opportunities or capital. Additionally,
if we acquire a company located outside of the United States, it is likely that substantially all of our assets would be located
outside of the United States and some of our officers and directors might reside outside of the United States. As a result, it
may not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our directors
or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors
and officers under Federal securities laws.
Because we must furnish our stockholders with target business
financial statements prepared in accordance with U.S. generally accepted accounting principles or international financial reporting
standards, we will not be able to complete our initial business combination with prospective target businesses unless their financial
statements are prepared in accordance with U.S. generally accepted accounting principles or international financial reporting standards.
The federal proxy rules require that a
proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical
and/or pro forma financial statement disclosure in periodic reports. These financial statements may be required to be prepared
in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or
international financial reporting standards, or IFRS, depending on the circumstances, and the historical financial statements may
be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or
PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire.
The disparity in the voting rights among the classes of our
capital stock may have a potential adverse effect on the price of our Class A Common Stock.
Each share of our Class A Common Stock
entitles its holder to one vote on all matters to be voted on by stockholders generally, while each share of our Class B Common
Stock entitles its holder to ten votes on all matters to be voted on by stockholders generally. The difference in voting rights
could adversely affect the value of our Class A Common Stock by, for example, delaying or deferring a change of control or
if investors view, or any potential future purchaser of our company views, the superior voting rights of the Class B
Common Stock to have value.
Changes in laws or regulations, or a failure to comply with
any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations
enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal
requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.
Those laws and regulations and their interpretation and application may also change from time to time and those changes could have
a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable
laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
There may be tax consequences to our initial business combinations
that may adversely affect us.
While we expect to undertake any merger
or acquisition so as to minimize taxes both to the acquired business and/or asset and us, such business combination might not meet
the statutory requirements of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a
transfer of shares or assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
We may be subject to an increased rate of tax on our income
if we are treated as a personal holding company.
Depending on the date and size of our initial
business combination, it is possible that we could be treated as a
“personal holding company”
for
U.S. federal income tax purposes. A U.S. corporation generally will be classified as a personal holding company for U.S. federal
income tax purposes in a given taxable year if more than 50% of its ownership (by value) is concentrated, within a certain period
of time, in five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose
certain entities such as certain tax-exempt organizations, pension funds, and charitable trusts), and at least 60% of its income
is comprised of certain passive items.
Risks Related to the Financial Services
Industry
While our efforts to identify a prospective
target business are not limited to a particular industry or geographic region, we are focusing our search for target businesses
in the financial services industry. Business combinations with companies with operations in the financial services industry entail
special considerations and risks. If we are successful in completing a business combination with a target business with operations
in the financial services industry, we will be subject to, and possibly adversely affected by, the risks set forth below. However,
we may complete a business combination with a target business in another industry, in which case these risks will likely not affect
us and we will be subject to other risks attendant to the specific industry in which the target business we acquire operates, none
of which can be presently ascertained.
The financial services industry faces substantial regulatory
and litigation risks and conflicts of interest, and, after the consummation of a business combination with a company in the financial
services industry, we may face legal liability and reduced revenues and profitability if our services are not regarded as compliant
or for other reasons.
The financial services industry is subject
to extensive regulation. The regulator(s) for and regulations applicable to us and to the target business will vary depending on
the target business’ activities. Many regulators, including U.S. and foreign government agencies and self-regulatory organizations,
as well as state securities, banking, and insurance commissions and attorneys general, are empowered to conduct administrative
proceedings and investigations that can result in, among other things, censure, fine, the issuance of cease-and-desist orders,
prohibitions against engaging in some lines of business or the suspension or expulsion of a broker-dealer or investment adviser.
The requirements imposed by regulators are designed to ensure the integrity of the financial markets and to protect customers and
other third parties who deal with financial services firms and are not designed to protect our stockholders.
Governmental and self-regulatory organizations,
including the SEC, the Federal Banking Agencies, the Consumer Financial Protection Bureau, state securities, banking, and insurance
commissions, FINRA and national securities exchanges such as the New York Stock Exchange, impose and enforce rules and regulations
on financial services companies. U.S. self-regulatory organizations adopt rules, subject to approval by the SEC, that govern aspects
of the financial services industry and conduct periodic examinations of the operations of registered broker-dealers and investment
advisers. For example, U.S. broker-dealers are subject to rules and regulations that cover all aspects of the securities business
including: sales methods and trade practices; use and safekeeping of customer funds and securities; capital structures; recordkeeping;
the preparation of research; the extension of credit; and the conduct of officers and employees. The types of regulations to which
investment advisers are subject are also extensive and include: recordkeeping; fee arrangements; client disclosure; custody of
customer assets; and the conduct of officers and employees. Banks and bank holding companies are also subject to extensive regulations,
including regulations regarding permissible activities and investments; capital adequacy; transactions with insiders; transactions
with affiliates; and consumer protection.
If we consummate our initial business combination
with a target business in the investment management sector of the financial services industry, we would be subject to extensive
regulation in the United States, primarily at the federal level, including regulation by the SEC under the Investment Advisers
Act of 1940, as amended, or the Advisers Act, and by the U.S. Department of Labor under the Employee Retirement Income Security
Act of 1974, or ERISA. The Advisers Act imposes numerous obligations on investment advisers including advertising, recordkeeping
and operating requirements, disclosure obligations and prohibitions on fraudulent activities.
We would also be subject to extensive regulation
in the United States if we consummate our initial business combination with a target business in the securities brokerage sector.
For example, the SEC, FINRA and various regulatory agencies also have stringent rules with respect to the maintenance of specific
levels of net capital by securities brokerage firms. Failure to maintain the required net capital may subject a firm to suspension
or revocation of registration by the SEC and suspension or expulsion from FINRA and other regulatory bodies, which ultimately could
prevent any broker-dealer that we acquire or acquire control of from conducting broker-dealer activities. In addition, a change
in the net capital rules, the imposition of new rules or any unusually large charge against net capital could limit the operations
of broker-dealers, which could harm our business if we were to consummate a business combination with a securities brokerage firm.
If we acquire control of a bank or bank
holding company, we would be subject to extensive regulation, supervision and examination by one or more of the Federal Banking
Agencies and state banking commissions. These regulatory authorities have extensive discretion in their supervisory and enforcement
activities, including the imposition of restrictions on operations, the classification of assets and determination of allowance
for loan losses. Banking regulations, designed primarily for the protection of depositors, may limit growth of a bank or bank holding
company and the return investors by restricting certain activities, such as the payment of dividends to shareholders, possible
mergers with or acquisitions of or by other institutions, desired investments, loans and interest rates on loans, interest rates
paid on deposits, the possible expansion of branch offices, and the ability to provide securities or trust services. Banks and
bank holding companies also are subject to capitalization guidelines set forth in federal legislation and could be subject to enforcement
actions to the extent that they are found by regulatory examiners to be undercapitalized. If we acquire control of a bank or bank
holding company, we would also be subject to limitations on proprietary trading as well as the sponsoring of or investment in hedge
funds and private equity funds under the so-called
“Volcker Rule.”
The regulatory environment in which we will operate is subject
to modifications and further regulations.
New laws or regulations or changes in the
enforcement of existing laws or regulations applicable to us may adversely affect our business, and our ability to function in
this environment will depend on our ability to constantly monitor and react to these changes. For example, the Dodd-Frank Wall
Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was signed into law on July 21, 2010. The Dodd-Frank
Act has increased the regulatory burdens and reporting and related compliance costs for banks, investment advisers, broker-dealers,
insurance companies, and other types of businesses in the financial services industry. The Dodd-Frank Act also created the Consumer
Financial Protection Bureau, a new agency with broad powers to supervise providers of consumer financial services and enforce consumer
protection laws. The Dodd-Frank Act is expansive in scope and requires the adoption of extensive regulations and numerous regulatory
decisions in order to be implemented. The Dodd-Frank Act may change the operating environment for financial services businesses
and the financial markets in general and unpredictable ways.
We cannot predict what changes, if any,
will be made to existing federal and state legislation and regulations or the effect that such changes may have on our future business
and earnings prospects. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation
or supervisory action, may have a material impact on the operations of any financial services business that we acquire or attempt
to acquire.
In recent years, the volume of claims and amount of damages
claimed in litigation and regulatory proceedings against financial services firms has been increasing.
After our business combination, our agreements
with clients and customers may include provisions designed to limit our exposure to legal claims relating to our services, but
these provisions may not be enforceable or otherwise protect us in all cases. The risk of significant legal liability is often
difficult to assess or quantify and its existence and magnitude often remain unknown for substantial periods of time. As a result,
we may incur significant legal expenses in defending against litigation. Substantial legal liability or significant regulatory
action against us could materially adversely affect our business, financial condition or results of operations or cause significant
reputational harm to us, which could seriously harm our business.
Financial services firms are subject to
numerous conflicts of interest or perceived conflicts of interest. We could be required to adopt various policies, controls and
procedures to address or limit actual or perceived conflicts and regularly seek to review and update our policies, controls and
procedures. However, these policies, controls and procedures may result in increased costs, additional operational personnel and
increased regulatory risk. Failure to adhere to these policies and procedures may result in regulatory sanctions or client litigation.
There have been a number of highly publicized cases involving fraud or other misconduct by employees in the financial services
industry in recent years, and we run the risk that employee misconduct could occur. It is not always possible to deter or prevent
employee misconduct and the precautions we take to prevent and detect this activity may not be effective in all cases.
After the consummation of our initial business combination,
we will face strong competition from financial services firms, many of whom have the ability to offer clients a wider range of
products and services than we may be able to offer, which could lead to pricing pressures that could materially adversely affect
our revenue and profitability.
After consummation of our initial business
combination with a target in the financial services industry, we will compete with other firms — both domestic and foreign —
on a number of bases, including the quality of our employees, transaction execution, our products and services, innovation, reputation
and price. We may fail to attract new business and we may lose clients if, among other reasons, we are not able to compete effectively.
We also will face significant competition as result of a recent trend toward consolidation in this industry. In the past several
years, there has been substantial consolidation and convergence among companies in the financial services industry. Many of these
firms have the ability to offer a wide range of products such as loans, deposit-taking, insurance, brokerage, investment management
and investment banking services, which may enhance their competitive position. They also have the ability to support investment
banking with commercial banking, insurance and other financial services revenue in an effort to gain market share, which could
result in pricing pressure on other businesses. We believe, in light of increasing industry consolidation, that competition will
continue to increase from providers of financial services products.
The financial services industry has inherent risks, which
may affect our net income and revenues.
The financial services business is, by
its nature, subject to numerous and substantial risks, including volatile trading markets and fluctuations in the volume of market
activity. Consequently, our net income and revenues are likely to be subject to wide fluctuations, reflecting the effect of many
factors, including: general economic conditions; securities market conditions; the level and volatility of interest rates and equity
prices; competitive conditions; liquidity of global markets; international and regional political conditions; regulatory and legislative
developments; monetary and fiscal policy; investor sentiment; availability and cost of capital; technological changes and events;
outcome of legal proceedings; changes in currency values; inflation; credit ratings; and the size, volume and timing of transactions.
These and other factors could affect the stability and liquidity of securities and future markets, and the ability of issuers,
other securities firms and counterparties to perform their obligations.
A reduced volume of securities and futures
transactions and reduced market liquidity generally results in lower revenues from principal transactions and commissions. Lower
price levels for securities may result in a reduced volume of transactions and may also result in losses from declines in the market
value of securities held in proprietary trading and underwriting accounts, particularly in volatile or illiquid markets, or in
markets influenced by sustained periods of low or negative economic growth, including the risk of losses resulting from the ownership
of securities, trading and the failure of counterparties to meet commitments.
For example, if we consummate a business
combination with an investment management firm, our business could be expected to generate lower revenue in a market or general
economic downturn. Under a typical arrangement for an investment management business, the investment advisory fees we could receive
would be based on the market value of the assets under management. Accordingly, a decline in the prices of securities would be
expected to cause our revenue and income to decline by:
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causing the value of the assets under management to decrease,
which would result in lower investment advisory fees;
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causing negative absolute performance returns for some
accounts which have performance-based incentive fees, resulting in a reduction of revenue from such fees; or
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causing some of our clients to withdraw funds from our
investment management business in favor of investments they perceive as offering greater opportunity and lower risk, which also
would result in lower investment advisory fees.
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Many financial services firms face credit risks which, if
not properly managed, could cause revenues and net income to decrease.
Many types of financial services firms,
including banks and broker-dealers, lend funds to their customers. Among the risks all lenders face is the risk that some of their
borrowers will not repay their loans. The ability of borrowers to repay their obligations may be adversely affected by factors
beyond our control, including local and general economic and market conditions. A substantial portion of the loans may be secured
by liens on real estate or securities. These same factors may adversely affect the value of real estate and securities as collateral.
If we enter into a business combination with a firm that makes loans, we would maintain an allowance for loan losses to reflect
the level of losses determined by management to be inherent in the loan portfolio. However, the level of the allowance and the
amount of the provisions would only be estimates based on management’s judgment, and actual losses incurred could materially
exceed the amount of the allowance or require substantial additional provisions to the allowance, either of which would likely
have a material adverse effect on our revenues and net income.
Members of the United States Congress are reviewing the tax
laws applicable to investment partnerships, including the taxation of
“carried interest,”
and these
laws could be changed in a manner that materially impacts the asset management sector within the broader asset management industry.
Some members of the United States Congress
are considering legislative proposals to treat all or part of the income, including capital gain and dividend income, recognized
by an investment partnership and allocable to a partner affiliated with the sponsor of the partnership (i.e.
“carried
interest”
) as ordinary income to such partner for U.S. federal income tax purposes. Depending on the specific provisions,
the enactment of any such legislation could materially increase taxes payable by equity holders of certain asset management businesses
and/or materially increase the tax liability of asset management businesses and thus reduce the value of their outstanding equity.
In the event that we acquire a business in the asset management sector, any such change in the U.S. Federal tax laws may have a
material adverse effect on our profitability by increasing our tax liabilities, which could adversely affect the value of our Class A
Common Stock.
We may be subject to significant regulatory requirements
in connection with our efforts to consummate a business combination with a financial services firm, which may result in our failure
to consummate our initial business combination within the required time frame and may force us to liquidate.
Acquisitions of financial services companies
are often subject to significant regulatory requirements and consents, and we will not be able to consummate a business combination
with certain types of financial services companies without complying with applicable laws and regulations and obtaining required
governmental or client consents. For example, if we were to attempt to acquire or acquire control of an investment management firm,
we would have to obtain consents of the firm’s investment management clients or enter into new contracts with them,
and there is no assurance that we would be able to obtain such consents or enter into new contracts. Similarly, if we were
to attempt to acquire or acquire control of a bank or bank holding company, we would be required to obtain approval from one or
more of the Federal Banking Agencies and/or state banking commissions. If our acquisition target were an insurance company, state
insurance commissioners in the states where the insurance company does business would review an acquisition transaction and could
prevent it by withholding their consent. The acquisition of a business in another sector of the financial services industry may
require similar approval(s) or consent(s).
We may not receive any such required approvals
or consents or we may not receive them in a timely manner, including as a result of factors or matters beyond our control. Satisfying
any statutory or regulatory requirements may delay the date of our completion of our initial business combination beyond the required
time frame. If we fail to consummate our initial business combination within the required time frame, we may be forced to liquidate.