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Nebula (NEBU) Amends Business Combination Agreement
by Kristi Marvin on 2020-03-18 at 7:17pm

Nebula Acquisition Corp. (NEBU), filed an 8-K tonight announcing they have amended their business combination agreement with Open Lending LLC.  Given the current market conditions, amendments are expected. However, Nebula’s amendments mostly revolved around the public warrants, but didn’t make any substantial adjustments to valuation.  Read below for the changes:

Business Combination Agreement Amendment

Nebula’s amendments to the business combination agreement mostly concern the public warrants and Nebula’s previously stated intention to tender them for $1.50 per whole warrant.  In the original business combination agreement, it also said that if warrant holders do tender, they MUST vote FOR the warrant amendment proposal which reduces the term of any and all remaining NEBU warrants to expire upon the consummation of the Merger.  It was a little complicated and you can read more about that HERE, but regardless, that warrant tender offer has now been waived and has been replaced with a warrant exchange for cash.

Today’s amendment amends the Business Combination Agreement to:

  • Waive the provisions that requires Nebula to commence a tender offer for the public warrants
  • Provide that Nebula shall seek the approval of the holders of the public Warrants so that upon consummation of the Business Combination, each of Nebula’s outstanding public warrants will be exchanged for $1.50 cash per each whole public warrant
  • Provide that the registered holders of the public warrants holding at least a majority of the public NAC warrants approving the warrant Amendment
  • Provide that all of the Contingency Consideration (consisting of 15,000,000 shares of ParentCo Common Stock) will be issued if, prior to or as of the second anniversary of the Closing, the VWAP of the ParentCo Common Shares is greater than or equal to $13.00 for any twenty (20) trading days within any thirty (30) trading day period.

So basically, (as stated above) now Nebula is completely waiving the warrant tender offer and instead, will just seek to amend the warrant agreement (via a majority of yes votes, 50%) so that all whole warrants will be exchanged for $1.50 post combination close.

Additionally, the Contingency Consideration to Open Lending, which previously had two price hurdles of $12.00 and $14.00 (7,500,000 shares, each), has now been changed to reflect just one price hurdle of $13.00. This mirrors the Sponsor earn-out as well (see below)

Founder Support Agreement Amendment

Previously, the Sponsors were entitled to an earn-out with two price hurdles of $12.00 and $14.00 as well (for 625,000 shares, each).  This has been amended to reflect one price hurdle of $13.00. Plus, a portion of the Sponsor’s Founder Shares will come off of lock-up with a price hurdle of $13.00.   Per today’s amendment:

  • The earn-out consideration (consisting of 1,250,000 shares of ParentCo Common Stock) will be issued by ParentCo to the Sponsor if, prior to or as of the second anniversary of the Closing, the VWAP of the ParentCo Common Shares is greater than or equal to $13.00 for any twenty (20) trading days within any thirty (30) trading day period and
  • 3,437,500 ParentCo Common Shares issued in exchange for the shares of Nebula’s Class B common stock will be released from lockup and no longer subject to forfeiture if, prior to or as of the seventh anniversary of the Closing, the VWAP of the ParentCo Common Shares is greater than or equal to $13.00 for any twenty (20) trading days within any thirty (30) trading day period.

Bottom line:  removing the tender off and making it a straight warrant amendment approval and exchange certainly simplifies things.  However, it’s still a bit of a “game theory” situation since if the warrant amendment doesn’t pass with a 50% majority, Open Lending can terminate the deal.  So whether warrant holders would rather keep their warrants rather than exchange them for $1.50, is kind of off the table. Meaning, if the warrant amendment doesn’t pass, there is a risk Open Lending walks away and Nebula has to liquidate, in which case, warrants expire worthless.  So the choice becomes, take the $1.50 or risk receiving $0.00.  Something is better than nothing, especially right now.

Additionally, since we’re in an extremely challenging and uncertain time, it’s interesting we didn’t see something more substantial as far as re-struck deal. Keep in mind that Nebula has a $295 million minimum cash closing condition (but a $200 million PIPE at $10.00 certainly helps).  It’s still early though and market conditions could improve, if we’re all lucky. Or they could get worse. Time will tell if additional changes are necessary.




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