Business Context and Reporting Period
Registrant: 8i Acquisition 2 Corp. (LAX), a British Virgin Islands special purpose acquisition company. The Form 8-K reports events occurring on April 11, 2022, and was signed April 12, 2022. The transaction involves the proposed acquisition of EUDA Health Limited, a British Virgin Islands company, from Watermark Developments Limited.
LAX entered into a Share Purchase Agreement to acquire all outstanding shares of EUDA Health. The transaction remains subject to shareholder, regulatory, financing, due diligence and other closing conditions.
Key Financial and Transaction Metrics
- Initial consideration: $550 million, payable in LAX ordinary shares valued at $10 per share.
- Indemnification escrow: 5.5 million purchaser shares will be withheld from closing consideration and placed in escrow.
- Potential earnout: Up to 9 million additional shares, issued in three 3-million-share tranches if the share price reaches $15, $20 and $25 thresholds during successive one-year periods after closing.
- Minimum cash condition: EUDA Health and its subsidiaries must have aggregate cash of at least $10 million at closing.
- Minimum net tangible assets: LAX must have at least $5 million of net tangible assets on a pro forma basis immediately after closing.
- Financial statements and operating metrics: The filing text does not provide clear values for revenue, profit or loss, cash flow, margins, debt, liquidity balances, or other historical financial metrics of EUDA Health.
Material Changes Versus the Prior Comparable Period
The filing does not present comparative-period financial results. The material development is the execution of the proposed business combination agreement, rather than a reported change in operating or financial performance.
- Following closing, EUDA Health’s current officers and directors are expected to become LAX’s officers and directors.
- LAX’s sponsor will have the right to nominate one independent director.
- The seller is expected to be subject to an 18-month lock-up covering shares received at closing and any earned shares.
- LAX plans to enter into an amended registration rights agreement and file a resale registration statement on Form S-3 within seven calendar days after closing, subject to applicable SEC limitations.
Guidance, Outlook, Risks and Unusual Items
- Closing deadline: The agreement may be terminated if the transaction is not completed by November 24, 2022, subject to permitted extension and other termination provisions.
- Conditions: Required conditions include LAX and seller shareholder approvals, regulatory clearance, SEC clearance and mailing of a proxy statement, execution of ancillary agreements, satisfactory due diligence, Nasdaq listing authorization and satisfaction of the cash and net tangible asset requirements.
- Due diligence: LAX and the seller must complete and be satisfied with due diligence by May 31, 2022. LAX may terminate if its results are unsatisfactory.
- Related-party consideration: LAX CEO and Chairman Meng Dong (James) Tan owns 10% of the seller.
- Fairness opinion: LAX anticipated receiving an opinion from EverEdge Global that the purchase price is fair to LAX from a financial point of view; the filing does not state that the opinion had been received as of the report date.
- Indemnification: Seller indemnification is subject to a $2.5 million threshold, with the escrow shares serving as the sole source of payment for covered claims. Representations and warranties generally survive for 15 months.
- Business risks: The filing identifies EUDA Health’s limited operating history and history of net losses, execution and growth risks, market acceptance, acquisition integration, intellectual property and litigation risks, regulatory risks, potential failure to maintain Nasdaq listing, redemption-related minimum cash risks and the possibility that the transaction will not close.
- Forward-looking statements: Projections and expected benefits are not guarantees and may differ materially from actual results.
Investor Verification Checklist
- Verify the final proxy statement, shareholder approvals, regulatory clearances and whether the transaction closed by the applicable deadline.
- Review EUDA Health’s audited financial statements for revenue, losses, cash flow, debt, cash balances, margins and going-concern or liquidity disclosures.
- Assess the impact of LAX shareholder redemptions and financing on the $10 million EUDA cash condition and LAX’s $5 million net tangible asset condition.
- Review the final fairness opinion and the valuation methodology supporting the $550 million share consideration.
- Evaluate the related-party implications of the LAX chairman’s 10% ownership interest in the seller.
- Review the complete SPA, escrow terms, indemnification limitations, earnout mechanics, lock-up provisions and registration rights.
- Determine whether the proposed combination’s anticipated benefits and market projections are supported by current operating results and independent evidence.