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Nebula (NEBU) to Combine with Open Lending
by Kristi Marvin on 2020-01-06 at 11:46am

Nebula also Intends to Tender their Warrants for $1.50

Nebula Acquisition Corp. (NEBU), announced this morning that they have entered into a Business Combination Agreement with Open Lending, LLC, a leading provider of lending enablement and risk analytics solutions to financial institutions, with an implied estimated enterprise value at closing of approximately $1.3 billion.

The consideration payable to the stockholders of Open Lending will consist of a combination of cash and shares of common stock of the Company. In addition to the $275 million of cash held in Nebula’s trust account (assuming no redemptions), additional investors have committed to participate in the transaction through a $200 million private placement of common stock at $10.00 per share anchored by True Wind and several noteworthy and leading fundamental investors.

As for what “lending enablement” is, per this morning’s press release, “Open Lending is a lending enablement platform for the automotive finance market powered by proprietary data, advanced decisioning analytics, an innovative insurance structure and scaled distribution. The platform enables near-prime consumers, approximately 50% of borrowers today, to finance their vehicles at more attractive rates when compared to traditional lending alternatives, while presenting a similar risk profile to the lender as that of a prime borrower. Furthermore, Open Lending’s technology platform unlocks value for a diverse partner ecosystem, benefitting dealers, lenders, insurers and OEM’s.”  So basically, it’s lending software with a layer of data and analytics on top to help drive (pun intended) the loan origination to car buyers that they are calling “near-prime”.  That generally means auto buyers with a credit profile that falls outside the “ideal” for traditional loan providers. (As a side note, what’s interesting about the above information is the fact that 50% of borrowers today fall into the “near-prime” bucket.  Seems like a lot.)

However, Open Lending facilitated over $1.7 billion of automotive loans in 2019 for over 275 financial institutions, taking no balance sheet risk. Open Lending management expects EBITDA margins to exceed 50% and organic revenue growth to top 80% in 2020, representing over 140,000 loans facilitated.

Upon the close of the transaction, the Company intends to change its name to Open Lending Corporation and is expected to trade on The Nasdaq Stock Market under a new ticker symbol.

As for the transaction structure, the consideration payable to the stockholders of Open Lending will consist of a combination of cash and shares of common stock of the Company. In addition to the $275 million of cash held in Nebula’s trust account (assuming no redemptions), additional investors have committed to participate in the transaction through a $200 million private placement of common stock at $10.00 per share anchored by True Wind and several noteworthy and leading fundamental investors.

Warrant Tender

However, there are a few notable items found within today’s filings. Namely, that Nebula intends to tender their warrants at $1.50 per whole warrant.  If you recall, Nebula’s unit structure at IPO was a 1/3 warrant and there were 9,166,166 public warrants issued at IPO.  The Founders purchased an additional 5,000,000 private placement warrants at $1.50, but the Founders have agreed to cancel all of their warrants.  However, in order to receive $1.50 per warrant, you must vote for the warrant amendment they are proposing and that amendment will reduce the term of any and all remaining NEBU Warrants to expire upon the consummation of the Merger.  So essentially, Nebula wants to clean up all of their warrants and not leave any behind and they’re willing to pay potentially $13.75 million to do that (assuming all 9,166,666 warrants vote yes).  However, in order for the warrant amendment to be passed, 8,250,000 warrants need to be validly tendered (that also means they had to vote “yes”), or 90%.  That’s a high bar, so is $1.50 per warrant enough to secure 90% of the vote?

Well, we have a few precedents we can use for comparison.  First, Thunder Bridge paid $1.50 for 3/4’s of their full warrant.  Second, Trinity Merger recently paid $1.60 for 3/4’s of their warrant.  If we use those two SPACs as a guide, Nebula is probably going to get pushback on that $1.50 price for a full warrant with $2.00 being more in line with what warrant holders will be willing to accept.  However, maybe Nebula wanted to start low.

Extension Vote

The other notable item in today’s filed documents is the condition to termination if immediately following the Extension Meeting and after giving effect to the exercise of any Redemptions, the trust holds less than $170,000,000 of cash.  Remember, Nebula is not offering any contribution to trust to shareholders who do not redeem at this extension vote, so they are banking on Open Lending being a well-received transaction where shareholders want to hold the share.  However, in an ideal world, Nebula would have had enough time to market this deal to investors before any such extension vote.  Unfortunately, their vote is scheduled for this Thursday.  That doesn’t leave a lot of time to change over the shareholder base.  However, approximately 40% of shareholders would have to redeem at the extension vote in order for this to terminate, which currently seems unlikely given the share price is trading well north of estimated trust value.  One other quick note, if redemptions DO deplete the trust below $170 million, there is a 5-day window where Nebula can “take any and all actions” to increase the trust value back to $170 million.  So it’s not a total black or white issue at the vote and as stated above, the share price is trading above trust so 40% redemptions is unlikely.

Quick takes:  This appears to be another well received deal given the initial pop in share price this morning upon announcement.  The only real sticking point is going to be that warrant tender price since we have precedent transactions with a greater value.  Rather than offer $2.00 per warrant as an alternative, maybe they’ll consider following the lead of Thunder Bridge and Trinity by letting warrant holders keep a 1/4 and pay $1.50.  Either way, my gut is saying no shot warrant holders vote yes if that offer price stays as is.  Additionally, it will be interesting to see the results of this extension vote on Thursday.  The timing between announcement and vote is tight and no contribution to trust is always a little risky. Let’s see what happens.


  • Financial Technology Partners and FTP Securities (“FT Partners”) served as strategic and financial advisor to Open Lending.
  • Goodwin Procter LLP served as legal counsel to Open Lending.
  • Deutsche Bank Securities and Goldman Sachs & Co. LLC are acting as capital markets advisors, financial advisors, and private placement agents.
  • Greenberg Traurig, LLP is acting as legal counsel to Nebula.
  • UBS Investment Bank is acting as sole arranger in the concurrent debt financing.



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