SPAC Shareholders Vote Against Global Services Partners Acquisition of SouthPeak Interactive, But Transaction Proceeds Anyway. What Gives??

Global Services Partners Acquisition Corp (GSPAC), one of those oddly shaped HCFP/Brenner Securities SPACs with two classes of Units (Series A and B), has proven the ability of the structure to allow management to push through an unpopular acquisition in the face of significant shareholder opposition.

Now that the shareholder vote is complete, GSPAC management is moving ahead with the acquisition of SouthPeak, by returning the trust to shareholders, but keeping the SPAC alive as a publicly traded shell company. SouthPeak will now have to go out and complete a private financing of at least $5 million that values the company at a minimum of $35 million, after which SouthPeak will perform a reverse merger with GSPAC to become a publicly traded entity.

A few key terms are disclosed below:

• SouthPeak and/or the Company shall have completed, contemporaneous with the closing of the definitive agreement, a financing with gross proceeds of no less than $5.0 million;
• the transactions contemplated in the definitive agreement must be consummated by May 31, 2008;
• the total purchase price to be paid by the Company for SouthPeak shall consist solely of common stock of the Company having a fair value of no more than $35.0 million

The SPAC, which raised $30,000,000 in April 2006 by selling 400,000 Series A Units and 2,600,000 Series B Units has an unusual structure in which Each Series A unit consists of two shares of our common stock; and ten Class Z warrants and each Series B unit consists of two shares of our Class B common stock; and two Class W warrants.

Once again, we are not fans of this type of outcome for the SPAC product; it smells awfully like a bait and switch that could be potentially harmful to investors not savvy enough to vote against the proposed acquisition. We don't like the way this trend is going: SPACs that end up as reverse-merger candidate shell companies run contrary to the intended purpose of these instruments, and we believe that the exchanges should be taking a closer look at these outcomes.

Click here for the filing