425: Alchemy Investments Acquisition Corp 1 Announces Non-Binding LOI with Cartiga, LLC for Potential Business Combination

Alchemy Investments Acquisition Corp 1 and Cartiga, LLC have announced a non-binding letter of intent for a potential business combination, aiming to leverage Cartiga's data-driven litigation finance platform as a Nasdaq-listed company.

Summary

• Alchemy Investments Acquisition Corp 1 (ALCY), a SPAC, has entered into a non-binding letter of intent with Cartiga, LLC for a potential business combination.
• Cartiga is an alternative investment firm specializing in litigation finance, utilizing data analytics to drive investments.
• Cartiga has originated over $1.6 billion in assets and realized $1.6 billion in cash since 2000.
• Cartiga's strategy involves integrating legal and financial data to predict litigation outcomes and optimize investment performance.
• The proposed business combination aims to consolidate the fragmented litigation finance market and enhance Cartiga's scale and market presence.
• Cartiga has over $250 million in committed equity capital from a blue-chip investor base.
• Cartiga's proprietary database contains over 250,000 individual litigation-linked asset fundings across 8,000+ lawyers and law firms.
• Cartiga has completed four rated securitization transactions, with three fully realized.
• The transaction is subject to customary closing conditions, including shareholder and regulatory approvals.
• The parties intend to file a registration statement with the SEC, including a proxy statement/prospectus.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the potential business combination and Cartiga's strong track record, but tempered by the non-binding nature of the letter of intent and the inherent risks associated with SPAC transactions.

Positives

• Cartiga has a proven track record with over $1.6 billion in lifetime originations and $1.6 billion in cash realizations since inception in 2000.
• Cartiga has a comprehensive platform investing in the U.S. litigation and legal services market.
• Cartiga uses advanced data analytics and bespoke technology to enhance underwriting, risk assessment, and portfolio management.
• Cartiga has a large addressable market of $300 billion+.
• Cartiga has longstanding partnerships with lawyers supported by a 20-person in-house sales and business development team.
• Cartiga has a robust data moat with a proprietary claims and outcomes database.
• Cartiga is led by seasoned professionals with domain expertise in the legal, finance, and asset management industries.
• Cartiga is a profitable, well-capitalized, scalable business with a diversified portfolio of non-correlated assets generating predictable shorter duration cash flows.
• Cartiga is supported by over $250 million in committed equity capital from a blue chip investor base.

Negatives

• The letter of intent is non-binding, and the business combination may not be completed.
• The proposed business combination is subject to shareholder and regulatory approvals.
• The inability to obtain or maintain the listing of securities on Nasdaq following the proposed Business Combination is a risk.
• The proposed Business Combination disrupts current plans and operations as a result of the announcement and consummation of the proposed Business Combination is a risk.
• The ability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by, among other things, competition, the ability of Cartiga to grow and manage growth profitably, and retain its key employees is a risk.
• The amount of redemption requests made by Alchemys shareholders is a risk.

Risks

• The non-binding nature of the letter of intent allows either party to cease discussions.
• Legal proceedings could be instituted against the parties following the announcement of the business combination agreement.
• Failure to obtain shareholder or regulatory approvals could prevent the completion of the business combination.
• Changes in applicable laws or regulations could adversely affect Alchemy or Cartiga.
• The uncertainty of projected financial information with respect to Cartiga poses a risk.
• The amount of redemption requests made by Alchemy's shareholders could impact the transaction.
• The inability to obtain or maintain the listing of securities on Nasdaq following the proposed Business Combination is a risk.
• The proposed Business Combination disrupts current plans and operations as a result of the announcement and consummation of the proposed Business Combination is a risk.
• The ability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by, among other things, competition, the ability of Cartiga to grow and manage growth profitably, and retain its key employees is a risk.

Future Outlook

The business combination aims to consolidate the fragmented litigation finance market, enhance Cartiga's scale and market presence, and drive long-term growth for shareholders.

Management Comments

• 'We view Cartigas platform as an attractive alternative investment, offering a return profile that is uncorrelated with other asset classes,' said Mr. Vittorio Savoia, Co-CEO of Alchemy.
• 'We believe Cartiga and Alchemy make a compelling partnership,' added Mr. Mattia Tomba, Co-CEO of Alchemy.
• 'As funding, disclosure, and regulatory standards evolve, we expect the interest for publicly traded litigation finance asset management companies to grow,' said Mr. Mattia Tomba, Co-CEO of Alchemy.
• 'We believe a Nasdaq listing will put Cartiga in a leadership position in the industry by enhancing transparency, reducing the cost of capital, and expanding access to flexible funding,' said Mr. Mattia Tomba, Co-CEO of Alchemy.
• 'Combining with Alchemy aligns perfectly with our goals,' remarked Cartiga's CEO, Mr. Sam Wathen.
• 'Leveraging a Nasdaq listing would enable Cartiga to establish new industry guidelines with full transparency and utilize its public currency to drive growth and acquire complementary businesses,' said Cartiga's CEO, Mr. Sam Wathen.
• 'Enhanced transparency would ultimately lower funding costs, benefiting companies like ours,' said Cartiga's CEO, Mr. Sam Wathen.

Industry Context

The announcement reflects a trend towards consolidation and increased transparency in the litigation finance industry, with Cartiga aiming to establish itself as a leader in the space through a Nasdaq listing.

Comparison to Industry Standards

• Cartiga's focus on data analytics and technology aligns with the growing trend of tech-enabled solutions in the alternative investment space.
• Burford Capital is a major player in the litigation finance industry, and Cartiga's proposed Nasdaq listing could position it as a more transparent and accessible competitor.
• The stated addressable market of $300 billion+ represents approximately 1.4% of US GDP, indicating a significant opportunity for growth and underpenetration by traditional capital providers.
• Cartiga's assets deliver high risk-adjusted returns, with net realized yields of ~20%+, which is competitive compared to other alternative investment strategies.

Stakeholder Impact

• Shareholders of Alchemy will have the opportunity to vote on the proposed business combination.
• Employees of Cartiga may benefit from the increased scale and resources of a publicly listed company.
• Customers of Cartiga (law firms and plaintiffs) may benefit from enhanced services and access to capital.
• The combined company may have a greater impact on the litigation finance industry.

Next Steps

• The parties may enter into definitive documentation regarding a Business Combination.
• A newly formed holding company intends to file relevant materials with the SEC, including a Registration Statement on Form S-4.
• Alchemy will mail the definitive proxy statement and a proxy card to each shareholder entitled to vote at the Extraordinary Meeting relating to the transaction.
• The parties will seek shareholder and regulatory approvals for the business combination.

Key Dates

Keywords

business combination, litigation finance, SPAC, Cartiga, Alchemy Investments Acquisition Corp 1, alternative investment, data analytics, merger, acquisition