Hub Security’s promises to go public via a SPAC merger according to a valuation of $1.3 billion were shattered last week by a harsh reality. Against the background of the investors’ refusal to participate in the company’s IPO on Nasdaq, the price of the cyber company’s share today stands at just under $1.7, 84% lower than the price that Hub promised its investors in Israel. The company’s market cap was estimated at just $157 million as of Friday, CTech reports.
Hub Security stopped trading in Tel Aviv two weeks ago at a value of NIS 740 million (approximately $205 million). The company’s management and its controlling owners promised investors until the very last minute that the moment is coming when the company will reach Nasdaq and trade at a value of $1.28 billion (NIS 4.6 billion). In other words, the company’s management’s promise to investors was that the value of their holdings would be multiplied 3.6 times within a day. As part of the merger with Mount Rainier Acquisition, the Israeli investors were supposed to receive 0.7 shares of Hub in Nasdaq for each share they held in Tel Aviv, but even after the dilution, the offer seemed promising since it was supposed to provide the investors in Tel Aviv with a 2.5-times profit.
Hub has hit multiple potholes since it first agreed to merge with the SPAC. A vote on the deal was delayed in December and again last month after one of the investors in the company, the Clover Wolf hedge fund, withdrew and decided not to invest in the company as part of the merger. This $10 million investment was part of the PIPE fundraising.
The deal finally closed last week.
Due to a lack of funding from PIPE investors, which was a precondition for the merger to take place, and in order to complete the move to the U.S. anyway, the company entered into an “Equity Line” agreement. This agreement characterizes companies in problematic situations and results in a deal with underwriters to provide a line of credit in exchange for shares and options.
Hub received the $100 million credit line of the SPAC into which it was merged after the owner of Mount Rainier closed a line of credit for the company in preparation for its registration in New York.
HUB develops and markets confidential computing solutions and services that aim to disrupt cybersecurity for enterprises and governments worldwide. Read more.
