Aura FAT Projects Pursues Asia Pacific Fintech Targets (Pending: AFAR)

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A Quick Take On Aura FAT

Aura FAT Projects Acquisition Corp. (AFAR) has raised 100 million from an IPO at a price of 10.00 per unit, according to the terms of its most recent S-1 / A regulatory filing..

The SPAC (Special Purpose Acquisition Company) intends to pursue a merger with a new emerging technology company “with an acute growth potential in Southeast Asia and Australasia in sectors such as the Web 3.0, blockchain, cryptocurrency, digital ledger, e-gaming and other new financial technology and services sectors. “

Given the large number of SPACs available for investment, my approach is to be highly selective and invest in those teams that have a strong track record of SPAC success.

My outlook on the Aura FAT Projects SPAC is Hold due to lack of a SPAC track record of successful investor returns.

Aura FAT Sponsor Background

Aura FAT has two executives leading its sponsor, Aura FAT Projects Capital LLC.

The SPAC is headed by:

– Co-CEO and Chairman Mr. Tristan Lo, who is a lifelong entrepreneur in a variety of industries and Asia and Australia.

– Co-CEO and CFO Mr. David Andrada, who co-founded Fat Projects Acquisition Corp. (FATP) and is or has been CFO of other companies in various industries.

The SPAC is the second vehicle by this executive group.

The first SPAC, Fat Projects Acquisition, went public via IPO in late 2021 and has not yet identified a proposed company for an initial business combination.

Aura FAT’s Market

According to a 2021 market research report by Research and Markets, the global fintech market (broadly defined) was an estimated 7 2.77 trillion in 2016 and is forecast to reach .5 31.5 trillion by 2026.

This represents a forecast CAGR of 27.5% from 2016 to 2026.

The main drivers for this expected growth are a growing popularity for digital payment preferences by consumers, increasing use of smartphones and wider adoption of e-commerce platforms.

Also, a growing use of Internet of Things (“IoT”) technologies and electronic signature adoption will fuel growing demand.

Aura FAT’s SPAC IPO Terms

Singapore-based Aura FAT sold 10 million units of Class A ordinary shares at a price of $ 10.00 per unit for gross proceeds of approximately $ 100 million, not including the sale of customary underwriter options.

The IPO also provided for one warrant per share, exercisable at $ 11.50 per share on the later of [a] the completion of its initial business combination, and [b] 12 months from the closing of the offering and expiring 5 years after completion of the initial business combination or earlier upon redemption or liquidation.

The SPAC has 21 months to complete a merger (initial business combination). If it fails to do so, shareholders will be able to redeem their shares / units for the remaining proceeds from the IPO held in trust.

Stock trading symbols include:

  • Units (AFARU)

  • Warrants (AFARW)

  • Common Stock (AFAR)

Founder shares are 20% of the total shares and consist of Class B shares.

The SPAC sponsor also purchased 5 million warrants at 1.00 per warrant in a private placement.

The warrants are identical to the public warrants except that there are restrictions on transfer until 30 days after the close of its initial business combination, may be exercised on a cashless basis (eg, for stock) and will be entitled to registration rights.

Conditions to the SPAC completing an initial business combination include a requirement to purchase one or more businesses equal to 80% of the net assets of the SPAC and a majority of voting interests voting for the proposed combination.

The SPAC may issue additional stock / units to effect a contemplated merger. If it does, then the Class B shares would be increased to retain the sponsor’s 20% equity ownership position.

Commentary About Aura FAT

The SPAC intends to focus on a wide variety of fintech-related industries for its potential merger target.

Leadership of the SPAC has a range of past operating experience but no strong focus in one industry.

The broader fintech space has tremendous growth opportunities ahead of it as it seeks to disrupt traditional, legacy banking companies which have proven to be slow to adapt to new technologies and haven’t provided enticing offerings to younger demographics.

Investing in a SPAC before a proposed business combination is announced is essentially investing in the senior executives of the SPAC, their ability to create value and their previous SPAC track record of returns to shareholders.

So, in a sense, investing in a SPAC can be written to investing in a venture capital firm as a limited partner.

The cost of that investment is roughly the same, 20% of the upside to the SPAC sponsor, but the time frame for realizing a significant gain can be far faster, a 1- to 3-year time period for a SPAC versus 10 or more. years for a typical venture capital fund.

Also, unlike a venture capital fund, a SPAC is liquid, providing public investors with an added liquidity benefit should they need to sell.

In the case of this particular management group, there is no previous SPAC track record of providing successful results to shareholders, which is a negative.

Given the large number of SPACs available for investment, my approach is to be highly selective and invest in those teams that have a strong track record of SPAC success.

My outlook on the Aura FAT Projects SPAC is on hold due to lack of a SPAC track record of successful investor returns.

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