South Korean private equity firm ACE Equity Partners has filed for a $200-million Nasdaq IPO of ACE Convergence Acquisition, a special purpose acquisition company (SPAC) targeting the IT infrastructure software and semiconductor sector.
The newly incorporated blank check company will offer 20 million securities at $10 apiece. Each unit consists of one share of common stock and one-half of a warrant. The proceeds will reach $230 million if the underwriters’ over-allotment option is exercised in full, the company said in its listing prospectus.
ACE Convergence Acquisition LLC, the SPAC sponsor, has committed to purchase an aggregate of 6 million warrants in a private placement.
Each private placement warrant entitles the holder to purchase one Class A ordinary share at $11.5 per share, it added.
The company said it will focus its effort on searching for a target business in the IT infrastructure software and semiconductor sector, which has a market capitalisation of between $500 million and $1 billion.
According to ACE Convergence Acquisition, less than 60 system on chip (SoC) or infrastructure IT software companies achieved an IPO in the US during the 2011-19 period, only half of which got an IPO offer valuation below $1 billion.
“Because large investment banks are predisposed toward doing large IPOs, there has been a dearth of sub-$1 billion technology IPO offerings to deliver liquidity to private investors funding such important innovations, and good listing candidates remain in private for too long,” the SPAC said.
“We believe the addressable number of high-quality small-cap IT infrastructure software/systems and SoC targets are much larger than uptake of the conventional U.S. IPO route.”
The IPO-bound company asserted that macroeconomic disruptions, including the shakeouts in the global economy in 2020 partially caused by the COVID-19 pandemic, will accelerate the migration path to the cloud-based environment.
“Instead of accepting another dilutive round of private growth or venture capital, innovative companies in need of capital to expand to the next level may prefer alternative funding from the public market, where they also can use the public currency to pursue acquisitions, provide liquidity for employee stock options, tap into cheaper debt financing sources, and enhance the corporate profile,” it added in the prospectus.
The need for investors to diversify their search for liquidity is also amongst the rationale for ACE Convergence Acquisition’s acquisition strategy.
ACE Convergence Acquisition is a partnership between ACE Equity Partners and Behrooz Abdi and Dr. Sunny Siu, two serial technology entrepreneurs in the IT infrastructure software and SoC sector.
Founded in 2017, ACE Equity Partners has made more than $1.6 billion investments as of March 31, 2020, according to the prospectus.
Focused on pursuing assets that enhance the industrial enterprise through digitalisation and advanced technologies, the firm has backed automation software provider AIM Systems, semiconductor testing house Tesna, HMD Global Oy – the exclusive licensee of Nokia brand mobile phones, and Maxnerva Technology Services Limited, a smart factory system integration spin-off of Foxconn Technology Group.
Prior to ACE Convergence Acquisition, Chinese blank check company New Frontier Corporation had raised $478 million proceeds from its 2019 US IPO. Earlier this year, China’s CITIC Capital also raised $240 million for its SPAC, CITIC Capital Acquisition.