Quantum Fintech (QFTA) Rejects Termination of TradeStation Merger Agreement
INTEL by Kristi Marvin
Quantum Fintech Acquisition Corp. (NASDAQ:QFTA), filed an 8-K this afternoon exposing a potential battle over their business combination with TradeStation. It’s eerily reminiscent of Dune’s current battle with TradeZero, even including the names of the selling companies.
TradeStation, which is a subsidiary of Japanese financial services fim Monex Group (TYO: 8698), provides an equity trading and investment platform for retail investors to access options products, crypto and futures. Quantum Fintech and TradeStation announced their business combination in November 2021 and, at that time, expected to close their deal in the first half of 2022.
However, as QFTA notes in their 8-K, they received a notice of termination from TradeStation today citing Section 12.01(c) of their merger agreement. Section 12.01(c) provides that the Merger Agreement may be terminated by either party if the Transaction is completed on or before August 1, 2022 (the “Termination Date”). However, Section 12.01(c) clarifies that the right to terminate is “not available to any party whose breach of any provision of the Merger Agreement was the primary cause or principal cause of the failure to close the business combination on or before this date.”
In response, QFTA sent a letter return to TradeStation indicating that they are not allowed to terminate because the reason the transaction has not yet closed is due to “TradeStation Violations and Non-Performance of the Merger Agreement” and therefore TradeStation’s notice of termination is “invalid and unenforceable, and that TradeStation continues to be bound by its obligations under the Merger Agreement in all respects.”
However, QFTA’s 8-K does not go into detail as to how or why TradeStation violated or failed. Maybe that will be coming in future repositories.
Interestingly, the 8-K goes on to note that PIPE investors, of which Monex Group (TradeStation’s sole shareholder) has subscribed for 5,000 PIPE shares out of a total of 12,500,000, have the option to terminate their subscription agreements on August 1 or later. , 2022. But, according to 8-K, it doesn’t look like PIPE investors have done it yet. More importantly, QFTA noted that the $125 million investment in PIPE is not a condition to the closing of the business combination. So even if all the PIPE investors walk, the deal is still going. At least, according to QFTA.
Keep in mind that Quantum Fintech’s state of jurisdiction is Delaware, just like Dune and Twitter. In addition, the QFTA is an 18-month SPAC that can automatically extend for 6 months (without trust contribution) if it has signed a letter of intent. Since QFTA and TradeStation clearly meet this extension requirement, this means that if QFTA chooses to extend on August 9, 2022, its new deadline will be February 9, 2023.
Between Dune and QFTA now, it most likely means that lawyers will tighten future business combination agreements to avoid issues like this. In the meantime, additional information on the TradeStation situation is most likely coming in.