Filing Overview
Venus Acquisition Corporation filed a Form 8-K dated June 10, 2021, reporting entry into a definitive merger agreement with VIYI Algorithm Inc. The filing was signed on June 14, 2021. Venus is a Cayman Islands special purpose acquisition company and intends to change its name to MicroAlgo Inc. upon closing.
Business Context and Transaction
Venus completed its initial public offering on February 11, 2021, issuing 4,600,000 units at $10.00 per unit for gross proceeds of $46.0 million. VIYI develops and applies bespoke central processing algorithms, including analytical, recommendation, and acceleration algorithms, integrated with software, hardware, or both.
Under the merger agreement, Venus Merger Sub will merge with VIYI, with VIYI surviving as a wholly owned subsidiary of Venus. WiMi Hologram Cloud Inc. owns approximately 73% of VIYI. The transaction is expected to close in the third quarter of 2021, subject to stockholder approval and customary closing conditions.
Key Financial and Capitalization Terms
| Item | Reported amount or term |
|---|---|
| VIYI transaction valuation | $400.0 million |
| Reference share value | $10.10 per share |
| Merger consideration | Approximately 39.6 million Venus ordinary shares |
| Expected ownership | VIYI stockholders approximately 85% of the combined company, assuming no Venus stockholder redemptions and conversion of outstanding rights into 485,000 shares |
| Venus shares outstanding as of June 9, 2021 | 6.05 million, including 4.6 million shares subject to possible redemption |
| Backstop financing | Up to $10.0 million gross through open-market purchases and/or a private placement |
The filing does not provide clear revenue, profit, operating margin, cash flow, debt, or liquidity figures for Venus or VIYI. Venus’s trust account balance after potential redemptions is not clearly stated in the filing text.
Material Changes and Governance
- The merger is structured as a stock-for-stock transaction intended to qualify as a tax-free reorganization.
- At closing, Venus is expected to increase its authorized share capital to 200 million ordinary shares and change its name to MicroAlgo Inc.
- The post-closing board is expected to have five members, four nominated by VIYI, with at least three independent directors to satisfy Nasdaq requirements.
- VIYI shareholders will receive registration rights for the merger consideration shares, subject to lock-up restrictions.
- Except for an aggregate of 2 million shares, locked-up shares generally cannot be sold for six months, with an early-release provision for 50% of the shares if the stock price reaches $12.50 for the specified trading period.
Conditions, Outlook, and Risks
Closing requires, among other matters, an effective proxy/registration statement, Venus stockholder approval, Nasdaq listing approval for the consideration shares, required director elections, the name and authorized-capital changes, performance of contractual obligations, and the absence of material adverse effects or legal impediments.
Either side may terminate the agreement if closing has not occurred by September 30, 2021, subject to the agreement’s other termination provisions. VIYI is required to deliver PCAOB-compliant financial statements for the quarter ending June 30, 2021 no later than August 15, 2021.
Key risks include failure to complete the merger or obtain an extension of Venus’s February 11, 2022 business-combination deadline, redemptions reducing available trust funds, failure to satisfy minimum trust-account requirements, regulatory or stockholder approval delays, litigation, Nasdaq listing risks, execution and employee-retention challenges, COVID-19-related economic conditions, and competitive, technological, legislative, and regulatory risks affecting VIYI, particularly in China. The filing also cautions that projected future results and transaction benefits are forward-looking and subject to material uncertainty.
Investor Verification Checklist
- Verify the final proxy/registration statement, including audited PCAOB-compliant VIYI financial statements and historical operating metrics.
- Confirm the trust-account balance, redemption levels, minimum cash conditions, and the actual amount raised under the backstop arrangement.
- Review the final merger consideration, capitalization, dilution from warrants, rights, options, and other convertible securities.
- Confirm stockholder and regulatory approvals, Nasdaq listing approval, board composition, and completion timing.
- Review the full merger agreement, registration rights agreement, lock-up terms, transaction support agreement, and backstop agreement for termination rights and contingencies.