425: Alchemy & Cartiga Announce SPAC Merger for Litigation Finance

Alchemy Investments Acquisition Corp. 1 and Cartiga, LLC announced a proposed business combination, aiming to bring Cartiga's data-driven litigation finance platform to the public market.

Summary

• Alchemy Investments Acquisition Corp. 1 (ALCY) and Cartiga, LLC have announced a proposed business combination.
• Cartiga is a leading data-driven, tech-forward asset management platform specializing in investing in legal claims and law firms, operating in a $300 billion+ market.
• The company leverages proprietary data and advanced analytics to achieve attractive risk-adjusted returns by providing capital and services to law firms and their clients.
• Cartiga originates, manages, and monetizes assets through two primary segments: Law Firm Finance (backed by claims & other legal receivables) and Purchase of Consumer Claim Proceeds.
• The company has a strong equity base with $250 million+ in contributed equity capital from top global asset managers and institutional investors.
• Key financial metrics for the nine months ended June 30, 2025, include YTD Revenue of $61,292,000, YTD EBITDA of $14,986,000, YTD Adjusted EBITDA of $19,230,000, and YTD Net Income of $5,984,000.
• Cartiga boasts a 20%+ blended asset-level Internal Rate of Return (IRR) on realized litigation investments and over $1.6 billion in lifetime originations.
• The company has a proprietary database of over 250,000 funded litigation-linked assets and a track record spanning over 20 years.

Sentiment

Score: 9

Explanation: The filing presents a highly positive outlook for Cartiga, emphasizing its strong financial performance, proprietary technology, experienced management, and significant market opportunity within the litigation finance sector. The proposed SPAC merger is framed as a strategic move to capitalize on this growth.

Positives

• Cartiga operates in a large, underpenetrated legal services market valued at over $300 billion, representing ~1.4% of US GDP.
• The company benefits from a strong equity base with over $250 million in committed equity from blue-chip institutional investors.
• Proprietary data and advanced analytics provide a competitive moat, enabling better financial forecasting, more predictable cash flows, and attorney scoring.
• Achieves attractive risk-adjusted returns with a 20%+ blended asset-level IRR on realized litigation investments, outperforming many traditional asset classes.
• Assets deliver predictable cash flows from creditworthy counterparties (primarily rated insurance companies) with historically low correlations to broader markets.
• The company has a proven 20+ year track record and an experienced management team with public company CFO experience.
• A scalable technology platform drives efficient business operations, from customer acquisition and underwriting to asset management and monetization.
• Demonstrated resilience during the COVID-19 pandemic, successfully managing extended asset durations without a significant increase in credit losses, with average duration now returning to 18 months.
• Proactive approach to regulation, with board representation in industry trade organizations (ALFA, ARC), positioning Cartiga to lead in a maturing regulatory environment.

Risks

• The proposed Business Combination Agreement may be terminated due to various events, changes, or circumstances.
• Potential legal proceedings may be instituted against Alchemy or Cartiga following the announcement of the Business Combination.
• Inability to complete the proposed Business Combination due to failure to obtain shareholder or member approvals, regulatory approvals, or satisfy other closing conditions.
• Failure to meet the minimum cash requirement of the Business Combination Agreement due to shareholder redemptions and inability to obtain replacement financing.
• Inability to obtain or maintain the listing of the combined company's securities on Nasdaq following the proposed Business Combination.
• The proposed Business Combination may disrupt current plans and operations of both Alchemy and Cartiga.
• Inability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by competition, Cartiga's ability to grow profitably, and retention of key employees.
• Costs related to the proposed Business Combination could be higher than anticipated.
• Changes in applicable laws or regulations could adversely affect the combined company.
• Alchemy or Cartiga may be adversely affected by other economic, business, and/or competitive factors.
• Risks relating to the uncertainty of the projected financial information with respect to the combined public company (Pubco).
• Risks related to the organic and inorganic growth of Cartiga's business and the timing of expected business milestones.
• The amount of redemption requests made by Alchemy's shareholders could impact the transaction's viability.

Future Outlook

Cartiga plans to expand its data and service products, coupling capital offerings with data-driven solutions for business optimization. Future opportunities include industry consolidation through acquisitions, expanding sophisticated lead generation, launching funds, automating attorney and trial counsel matching, deploying AI tools, and developing subscription models for practice management solutions. The company also aims to accelerate the scale of its multi-product asset base on its balance sheet and in managed funds.

Management Comments

• Management believes Cartiga is one of the strongest capitalized companies in the Litigation Finance sector, backed by $280MM in committed equity.
• Management states that Cartiga's assets are characterized by generally highly predictable cashflows with historically low correlations to broader markets.
• Management believes Cartiga demonstrated remarkable resilience during the COVID-19 pandemic, successfully managing extended asset durations without significant credit loss increases.

Industry Context

The legal services industry, despite its significant contribution to US GDP (~1.4%), remains largely underpenetrated by traditional financial markets (banking, bond, equity, private equity, private credit). Cartiga operates in this visible white-space, providing capital and technology solutions to law firms and plaintiffs, addressing information asymmetry and financial staying power issues. The litigation finance industry is experiencing outsized growth and shows no correlation to most major asset classes, making it an attractive, uncorrelated asset class.

Comparison to Industry Standards

• Cartiga's blended asset-level IRR of 20%+ on realized litigation investments is presented as outperforming other securities and indices, including US 2-Year Treasuries, Single-A Bond Index, High Yield Bond Index, LC Consumer Loans, and BDCs.
• The company's performance is compared to Burford Capital's IRR, a well-known publicly traded company in litigation finance, to illustrate the asset class's potential.
• Cartiga's asset yields, primarily from investment-grade insurance companies, are stated to be ~20%+ with ~90%+ of cases resulting in a settlement, indicating strong performance relative to market benchmarks like the Merrill Lynch High-Yield Bond Index.

Corporate Governance

Stakeholder Impact

• Shareholders of Alchemy: Will vote on the Business Combination and become shareholders of the combined public company, potentially benefiting from Cartiga's growth and market position.
• Law Firms (Clients): Will gain access to structurally efficient capital, data-driven insights, and technology to cover litigation costs, pursue growth, and optimize practices, leading to higher success rates and better financial management.
• Plaintiffs (Clients): Will receive non-recourse advances, enabling them to avoid low-ball settlement offers due to financial need and pursue fair outcomes, potentially realizing higher net proceeds from litigation.
• Employees: The combined company will have approximately 95 employees with specialized expertise, with potential for growth and expansion.

Next Steps

• Alchemy Investments Acquisition Corp. 1 intends to file a Registration Statement on Form S-4, including a preliminary proxy statement/prospectus, with the SEC.
• Alchemy will mail a definitive proxy statement and proxy card to shareholders for a Special Meeting relating to the transaction.
• Obtain approval of the shareholders of Alchemy and members of Cartiga for the Business Combination.
• Secure certain regulatory approvals and satisfy other conditions to closing in the Business Combination Agreement.
• Work towards the expected timing of the Business Combination's consummation.

Key Dates

Recommendation

The proposed business combination with Cartiga presents a compelling investment opportunity in an underpenetrated, high-growth market (litigation finance) with historically low correlation to broader economic cycles. Cartiga demonstrates strong fundamentals, including a 20%+ blended asset-level IRR, significant lifetime originations, a robust proprietary data and technology platform, and an experienced management team. The company's resilience during the COVID-19 pandemic and proactive stance on regulation further de-risk the investment. The SPAC merger provides a pathway for Cartiga to access public markets and accelerate its strategic growth initiatives, making it an attractive long-term 'buy' for investors seeking exposure to innovative financial services with strong risk-adjusted returns.

Keywords

Litigation Finance, Legal Claims Investment, Law Firm Finance, SPAC Merger, Alchemy Investments Acquisition Corp 1, Cartiga, Asset Management, Fintech, Legal Tech, Special Purpose Acquisition Company, SEC Filing, Investor Presentation