Dune Acquisition Rejects Merger Partner’s Rejection

The saga of TradeZero and Dune Acquisition rolls on.

Two months after the Dune board recommended that their shareholders vote against the deal, Trade Zero informed Dune of its intent to terminate the merger agreement. Dune rejected that idea, saying in a letter filed with the SEC on Friday that TradeZero is in material breach of the merger agreement.

“Dune intends to take all necessary steps to protect Dune and its investors, including to continue to pursue its ongoing litigation against TradeZero and certain of its affiliates,” Dune CEO Carter Glatt wrote.

If this all sounds puzzling, perhaps some background context is in order.

Dune Acquisition in April filed suit against TradeZero in Delaware, claiming the brokerage platform duped them into a reverse merger before “trying to run out the clock on the transaction” and stick the blank-check company with the substantial cost of calling it off. The lawsuit accuses TradeZero and its senior leaders of defrauding Dune into the deal with bogus financial figures and “stonewalling” its request for an update before pulling a “last-minute bait and switch” that completely undermined the merger’s logic.

As announced last October, the deal valued the combined enterprise at $566 million. 

Then, in May, Dune’s board unanimously reversed their initial endorsement of the deal, instead recommending that shareholders vote against the merger. Dune later called a shareholder meeting for a vote to extend the SPAC’s merger deadline until December 2023.

The extension was approved, but at dire cost to the SPAC’s financials. Shares valued at $164.1 million were redeemed in connection with the vote, according to an 8-K filed last month, leaving $8.4 million in the SPAC’s trust — far short of the $80 million minimum cash condition for closing a deal with TradeZero.

TradeZero apparently used that cash shortfall — and the original July 12 outside date for completing the deal — as justification for notifying Dune of its intent to terminate.

But the Dune board is evidently having none of that. Glatt in his letter to TradeZero cc’s three different law firms.

“Dune has attempted to engage with TradeZero to raise additional financing to ensure compliance with the Minimum Cash Condition, and even though TradeZero is obligated pursuant to Section 7.08 of the Merger Agreement to use its commercially reasonable efforts to cooperate in connection with the arrangement of any Pre-Approved Arrangements sought by Dune, TradeZero has not done so,” Glatt’s letter states.

TradeZero’s termination notice, he wrote, “is invalid and unenforceable and is hereby rejected.”

Even though less than 7% of the SPAC’s original stockholders are still invested — and could still redeem their shares — it looks like Dune and TradeZero will probably meet next in a Delaware courthouse. Read more.

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