CRA’s Tiago Duarte-Silva was engaged in a dispute regarding an agreement between a PIPE (private investment in public equity) investor and a special purpose acquisition company (SPAC) that sought to take public an online sports goods retailer. A third party entered into an option agreement with the PIPE investor, stipulating that the third party may exercise a call option to acquire shares in the sports retailer at a predefined price over a set period, after which point the PIPE investor could exercise a put option to sell the shares to the third party at a predefined price over another period.
The retailer faced insolvency proceedings, which arguably should dissolve the shares and terminate the rights embodied in any option agreements. The PIPE investor interpreted the put option as providing full protection against business failure resulting in insolvency and then liquidation, or delisting.
Dr. Duarte-Silva provided opinions on the economic aspects of the downside protection provided by the aforementioned put option. Drawing upon his experience with derivatives, global standards and derivatives exchanges’ rules, and the economics underlying inducements to SPAC investors, he opined on the bespoke nature of the options and whether comprehensive downside protection would be consistent with the investment’s terms and risks.
Dr. Duarte-Silva was supported by Aaron Dolgoff, Dr. Rahul Chhabra, and Hannah Sayre.
