Lifeline Spac I merged with Canatu

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From page 39 of the 2023 Annual Report

"If the Company fails to complete an Acquisition by 15 October 2024, the Company’s Board of Directors is, according to the Articles of Association, obliged to convene a General Meeting to decide on placing the Company into liquidation. In this situation, the General Meeting is obliged to approve the proposal for liquidation and to resolve to place the Company into liquidation.

In liquidation, the funds deposited in the Company’s escrow account will be released and the Company’s net assets will be distributed to the Company’s Class A shareholders on a pro rata basis. Class B shareholders are not entitled to a distribution in the liquidation procedure. At the end of the financial year, the funds deposited in the Company’s escrow account were EUR 103.5 million and thus exceeded the sum of the original subscription prices of the Class A shares of EUR 100 million. However, the dissolution of the Company and the fulfillment of related obligations would have an effect on the funds to be distributed to Class A shareholders in a possible liquidation procedure."

Apparently, granting an extension after next October is not possible. The costs of fulfilling the obligations related to the dissolution of the company have not been disclosed. One would think it wouldn’t cost millions.

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Yeah, it cannot continue after October and the distributable funds will be distributed to Class A shareholders.

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It is also possible that Lifeline SPAC invests in a company that the market does not consider a good investment, in which case the share price could drop even further from its current level. Of course, before that investment decision, every shareholder always has the option to choose to withdraw their money, receiving that 10€/share back.

So perhaps the market is currently pricing in that it is more likely for the investment to target a bad company rather than a good one, or that no investment will be made at all.

A possible liquidation of the company also takes some time, during which the money is stuck and the so-called annual return decreases at least somewhat. And of course, there is always a small risk of finding some discrepancies during the liquidation, which could lead to the money being stuck for an even longer time.

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It must be remembered that the general meeting must approve the investment; otherwise, no investment will be made and the funds will be returned to the shareholders. The €10 redemption right applies to a scenario where the majority votes in favor, and those who do not believe in the case can then request the redemption of their shares.

In a scenario where many consider the selected investment target to be poor, it often happens that the share price hovers around 10, but more and more people start shorting the company. However, this carries the risk that the majority will request redemption, leaving the stock’s free float very thin. In these cases, a short-term short squeeze is often seen in the US immediately after trading begins with a new ticker (sometimes rising by several hundred percent).

In the US, there are services that track the distributable assets of each SPAC, and the price there generally rises as the liquidation date approaches. In Finland, the markets are not as efficient.

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Time is passing, and the sand in the hourglass is running low. :hourglass:

Let’s highlight a candidate again, namely Solar Foods

  • Listing has been discussed before, now brought up again
  • Valuation size is in the right ballpark
  • A more typical SPAC target company, an early-stage growth company

The company started Solein production at the end of last year in Vantaa Vehkala. The factory cost 42 million euros. According to Vainikka, it is a unit where production can be tested on an industrial scale.

That refers to the first factory, which will remain a development unit. An industrial-scale factory is a significantly more expensive investment that requires capital—which Lifeline would have available.

A larger factory, costing over 200 million euros, is already in the plans. Listing and the capital raised in the IPO could play a significant role in financing this investment.

The valuation has been in the right ballpark in a previous funding round:

Solar Foods raised funding in 2023 through the growth financing company Springvest. In that round, the company was valued at 177 million euros.

The factory, patents, etc., have at least been mentioned as valuable. One can only guess at a suitable total value :man_shrugging:

I hold a lot of Lifeline myself, and I’ve started to hope for an announcement regarding the accelerated dissolution of the whole setup at the next AGM. The interest income has been reasonable, and the capital held in trust has grown nicely. I don’t know what a weak target company would do at this point—at least cause a delay in removing the shares from my portfolio.

Is Solar Foods a good target for LL or not? It’s certainly a high-risk growth company, as SPAC target companies usually are. For Solar Foods, it would likely be a surer path to a successful listing than the traditional way, or so I would assume.

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Solar Foods’ marketing apparently related to Springvest’s round this time as well.

Other targets for Lifeline then, if there are more coming.

And this is not investment advice :grin:

Edit:
However, the round is only €8M, which only covers running costs at this point. :thinking:
Quite a lot more capital will be needed for the actual factory building and scaling up production.

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At a nominal value of €14, it would be a 40% increase from the current value. I would easily accept this, no matter how much dilution occurs :grin:

The share of the stake being acquired in the target company will indeed be diluted at these steps.

So, essentially, the extent of the dilution is what’s holding back the potential increase in valuation.
Assuming, of course, that the target company provides the conditions for this.

The delay caused by liquidation is, in my view, the biggest risk if a suitable target is not found. For this reason, I would hope for an expedited procedure from the general meeting if it looks like a suitable partner won’t be found.

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That’s true mathematically. But in efficient markets, this is already priced in before the share price would reach the incentive tiers of €12 or €14.

In this case, the calculation also changes in that €100M is not the original valuation, but part of the whole. The fund’s capital will be used to acquire perhaps 10–40% of the entire target company, so the amount of dilution across the total number of shares is smaller.

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That kind of speculation is pointless when there are too many variables (especially future expectations, which are difficult to assess and constitute a large part of growth companies’ valuations). In Sweden, the share price performance of Bure’s SPAC, now Yubico, has been good, with a peak return of over 130% relative to the IPO price and still over 79%.

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After a long time, I scanned through Lifeline Ventures’ own portfolio companies.
https://www.lifelineventures.com/companies/
Filtered for current companies (Current), a large part of the list has already been acquired or listed elsewhere. It’s probably not worth bringing those up here anymore.

A few picks where the valuation would be sufficient for listing via a SPAC - or at least there could be potential. I skipped the biotech companies; I don’t know how to assess their potential.

Figures from Finder

Aiven

Aiven provides fully managed cloud database and messaging services hosted in the cloud of the customer’s choice, including Amazon Web Services, Google Cloud Platform, and Microsoft Azure. Its mission is to allow developers to focus on building awesome applications without worrying about data infrastructure management
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Ductor

Ductor’s groundbreaking technology prevents ammonia inhibition in biogas production. This is done by adding one fermentation step, prior to biogas fermentation, as well as a nitrogen stripping unit. Ductor’s patented microbiological innovation eliminates the nitrogen dilemma by turning problem waste into profitable recyclable goods.

Figures in Finder are only for the parent company; there is a lot of activity elsewhere in the world, and no information on group figures. An interesting green tech option that, for instance, sought funding through Springvest in 2019.

Iceye

Iceye empowers others to make better decisions in governmental and commercial industries by providing access to timely and reliable satellite imagery. Iceye is the first organization in the world to successfully launch synthetic-aperture radar (SAR) satellites with a launch mass under 100 kg.

Just raised funds from a funding round, e.g. Solidium heavily involved

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Oura Health

Oura is an award-winning wellness ring and app, designed to help people get more restful sleep and perform better. The independently validated science behind Oura and the design of the Oura ring make it the perfect companion for busy professionals, athletes and anyone who wants to get insights into their sleep, recovery and readiness to perform.

unlikely for the Helsinki stock exchange :grin: Nasdaq is perhaps more likely as a target, but the size is valid nonetheless. It’s making a loss, so increasing capital to finance growth might be necessary :person_shrugging:
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P2X Solutions

As a developer of an emission-free welfare society P2X Solutions is a forerunner of the energy future – the company’s vision is to produce green hydrogen and refine it further into synthetic fuels in a cost-effective manner. P2X will construct a 20 MW electrolyzer plant, which runs on electricity produced by renewable energy and thus the final product will be green hydrogen. Part of the green hydrogen will be further refined utilizing Power-to-X technology.

Green hydrogen, production facility in progress. Swiss Alpiq just became the main owner. P2X continues as an independent company.

Virtually no revenue yet in the 2022 figures

Smartly.io

Smartly.io automates every step of social advertising to unlock greater performance and creativity. Its advertising and creative automation platform makes online advertising easy, effective, and enjoyable. Smartly.io works closely with 650+ brands including eBay, Uber, TechStyle and Skyscanner, managing over $1 billion in annual ad spend.

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Solar Foods

Solar Foods is a Finnish food tech company that creates innovations for producing food without agriculture. With its revolutionary biotech solution Solein, Solar Foods enables natural protein production anywhere by using air, water, and electricity. The unique bioprocess of Solein provides a new platform technology for nutritious food ingredients, plant-based meat alternatives or even cultured meat.

More on this from a couple of posts ago. A small round of additional funding was raised, which will last for half a year. More is needed if they intend to scale.

Sulapac

Sulapac® is a biodegradable and microplastic-free material made entirely from renewable sources and certified wood. It can be used as packaging for everything from cosmetics to foodstuff to gift boxes and more. It has all the benefits of plastic, yet it biodegrades completely and leaves no trace once it’s gone.

revenue is still small, scaling is needed for global expansion. There was a round through Springvest in 2023

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Swappie

Swappie is changing the European market in consumer electronics by building the world-leading marketplace for refurbished devices. The company’s marketplace offers easy and safe buying and selling of used smartphones. Swappie buys phones from customers and companies, refurbishes them in-house and sells them in top condition and with a proper warranty.

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Varjo

Varjo was founded by a team of industry professionals with decades of experience and a vision of seamlessly merging the virtual and real worlds. The Bionic Display™ in Varjo’s VR devices delivers an unprecedented human-eye resolution of 60 pixels per degree. It revolutionizes professional VR by bringing every detail, texture, contour and color into 20/20 focus.

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And a couple of others I came across that would be suitable in terms of size

From Finland

  • Virta Ltd (Liikennevirta Oy)
  • Infinited Fiber

From Sweden

  • Orbital Systems
  • Material Exchange
  • Matsmart
  • TrusTrace
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Thanks, great list!

Regarding Swappie’s figures, one thing to note is that the numbers found on Finder probably don’t give a completely accurate picture, at least in terms of revenue. It has been mentioned in the media (and on Swappie’s LinkedIn pages) that the Swappie Group’s revenue in the 2022 financial statements was €208M. The 2023 figures haven’t been released yet.

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It’s worth noting regarding those figures that only the reported numbers from the companies are visible, and the group structure remains hidden. Swappie and Ductor, at least, have more extensive operations elsewhere in the world, so it isn’t reflected in these figures.

Because of that, some Lifeline companies might have been overlooked for the list in terms of revenue. Going through it quickly, however, the biggest ones should be included. At least with the exception of Biotech.

Ductor is actually a very interesting company that solves many problems in both waste management and fertilizer supply. I tried to participate in the Springvest offering back in the day, but all the shares went to those who had already invested earlier :person_shrugging:

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I wouldn’t rule out Solar Foods as an option just yet, even though time is starting to run out. Although the article mentions a technical listing, if authorization for listing is sought and obtained on June 5, 2024, Lifeline is a potential route for a faster process. And this would provide capital for ramping up the factory and doesn’t require share sales by existing owners :thinking:

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It’s not worth making comparisons to Virala, though, as the problem there was mainly that the target company was from the wrong sector and was also a bit too bland and uninspiring. With another company, the share price performance could have been positive.

On the other hand, which of those mentioned by @kettunen would be the most interesting to the general public? :thinking:

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Lifeline’s goal is to bring a growth company to the stock exchange, so Bure’s SPAC (Yubico) is a better peer. They brought their own portfolio company, so in that sense @kettunen’s outlines make sense.
The stock price performance has been quite excellent, having risen over 120% in 6 months, but on the other hand, the starting valuation was around 4x revenue.

Raising 100 million from the Finnish market is not necessarily easy for many growth companies, because the masses participating in IPOs expect a P/E 15 valuation.

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Did I understand correctly that we should bring a company to the stock exchange that either isn’t attractive to investors or doesn’t want to list? It is not worth it, nor is it possible to list such a company normally or via a SPAC. The advantage of a SPAC for a listing company is the straightforwardness of entering the market. There is no need to organize an expensive offering with advisors.

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Even the Virala SPAC is in the green if you bought at the IPO, while at the same time the Helsinki general index including dividends is in the red, so it hasn’t exactly been a total disaster for investors.

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The Annual General Meeting looks routine:

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Of course, anything in progress cannot be commented on, and completed matters should be announced via a stock exchange release. Hopefully, however, at the general meeting, they will comment at least on a general level whether they are still trying to get a deal done or if Lifeline SPAC is preparing for dissolution.

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