10-Q: Cartesian Growth II Delisted, Faces Going Concern Doubt

Cartesian Growth Corporation II reports a net loss for Q2 2025, faces delisting from Nasdaq, and raises substantial doubt about its ability to continue as a going concern.

Summary

• Cartesian Growth Corporation II (CGC II) is a blank check company that has not yet commenced operations or completed a business combination since its incorporation on October 13, 2021.
• The company was delisted from Nasdaq on July 15, 2025, due to its failure to complete an initial business combination within 36 months of its IPO, and its securities are now quoted on the over-the-counter market.
• Shareholders approved two charter amendments to extend the business combination deadline: the First Extension (November 6, 2023) to November 10, 2024, and the Second Extension (November 6, 2024) to November 10, 2025.
• These extensions resulted in significant shareholder redemptions: approximately 7.1 million Class A shares for $77.4 million (First Extension) and 8.6 million Class A shares for $99.6 million (Second Extension).
• Management has determined that the company's liquidity condition and impending liquidation date raise substantial doubt about its ability to continue as a going concern.
• The company reported a net loss of $152,231 for the three months ended June 30, 2025, a decrease from net income of $2,107,407 for the same period in 2024.
• Net income for the six months ended June 30, 2025, was $407,633, significantly lower than $4,642,279 for the same period in 2024.
• Cash and marketable securities held in the Trust Account totaled $87,027,424 as of June 30, 2025, with a working capital deficit of $4,345,203.
• The Sponsor has provided various non-interest bearing promissory notes and extension payments to fund the company's operations and extensions.

Sentiment

Score: 2

Explanation: The company faces severe existential threats, including delisting from Nasdaq, a 'going concern' warning, and a rapidly approaching liquidation deadline (November 10, 2025) without a business combination. Significant shareholder redemptions have depleted the Trust Account, and the shift to the less liquid over-the-counter market further diminishes investor prospects. The fundamental purpose of a SPAC has not been met, and the probability of a successful business combination appears low, making the stock a high-risk, speculative investment with a strong likelihood of capital loss.

Positives

• Generated interest income on cash and marketable securities held in the Trust Account: $689,016 for the three months ended June 30, 2025, and $1,361,827 for the six months ended June 30, 2025.
• The Sponsor continues to provide financial support through promissory notes and extension payments, demonstrating ongoing commitment to the company's operations and search for a business combination.
• Successfully extended the business combination period multiple times, with the current deadline set for November 10, 2025.

Negatives

• Delisted from Nasdaq on July 15, 2025, due to failure to complete a business combination within 36 months of its IPO, with securities now trading on the less liquid over-the-counter market.
• Reported a net loss of $152,231 for the three months ended June 30, 2025, a significant decline from net income of $2,107,407 in the prior year period.
• Net income for the six months ended June 30, 2025, decreased substantially to $407,633 from $4,642,279 in the prior year period.
• Management has determined that the company's liquidity condition and impending liquidation date raise substantial doubt about its ability to continue as a going concern.
• Experienced significant shareholder redemptions totaling approximately $77.4 million and $99.6 million in connection with the First and Second Extension votes, respectively, substantially reducing the capital available for a business combination.
• Working capital deficit of $4,345,203 as of June 30, 2025.
• Interest earned on cash and marketable securities in the Trust Account decreased significantly from $2,307,680 (Q2 2024) to $689,016 (Q2 2025) and from $4,584,166 (H1 2024) to $1,361,827 (H1 2025).

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to its liquidity condition and the impending liquidation date if a business combination is not completed.
• Delisting from Nasdaq limits market quotations, reduces liquidity for securities, may classify Class A ordinary shares as a 'penny stock' (requiring more stringent broker rules and potentially reducing trading activity), limits news and analyst coverage, and decreases the ability to issue additional securities or obtain future financing.
• No longer qualifying as a 'covered security' under the National Securities Markets Improvement Act of 1996, the company is now subject to state-level securities regulation, which can be unfavorable for blank check companies.
• Failure to consummate an initial business combination by November 10, 2025, will result in the company ceasing operations, redeeming public shares, and liquidating.
• Uncertainty exists regarding the Sponsor's ability to satisfy its indemnity obligations for third-party claims, which could reduce funds available in the Trust Account for redemptions.
• Global economic consequences from military conflicts (e.g., Russia-Ukraine, Hamas-Israel) may create market volatility, diminished liquidity, and economic uncertainty, adversely affecting the ability to complete a business combination or the operations of a target business.
• The ability to raise equity and debt financing may be impacted by increased market volatility or decreased market liquidity, potentially making third-party financing unavailable or on unacceptable terms.
• The exercise price of warrants and the $18.00 per share redemption trigger price may be adjusted if additional Class A Ordinary Shares or equity-linked securities are issued for capital raising at a price less than $9.20 and the volume-weighted average trading price is also below $9.20.

Future Outlook

The company expects to incur significant costs in its pursuit of acquisition plans and does not anticipate generating operating revenues until after completing an initial business combination. If a business combination is not completed by November 10, 2025, the company will cease operations, redeem public shares, and liquidate. Management does not believe the adoption of new income tax disclosure standards (ASU 2023-09) will materially impact its financial statements.

Management Comments

• "We may pursue our initial business combination in any business industry or sector; however, we have focused on seeking high-growth businesses with proven or potential transnational operations or outlooks in order to capitalize on the experience, reputation, and network of our management team."
• "Furthermore, we seek target businesses where we believe we will have an opportunity to drive ongoing value creation after our initial business combination is completed."
• "We intend to effectuate our initial business combination using cash from the net proceeds of our initial public offering, the sale of the private placement warrants, the sponsor loan, our share capital or a combination of cash, share capital and debt."
• "We expect to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful."
• "Management has determined that our liquidity condition and liquidation date raise substantial doubt about our ability to continue as a going concern."

Industry Context

The company's situation reflects the challenging environment for Special Purpose Acquisition Companies (SPACs), particularly those that have struggled to identify and complete a business combination within their initial timeframe. The delisting from Nasdaq and subsequent trading on the over-the-counter market is a common outcome for SPACs failing to meet listing requirements, indicating increased regulatory scrutiny and investor fatigue in the sector. High redemption rates, as experienced by Cartesian Growth Corporation II, are also prevalent, as investors opt to redeem their shares rather than participate in prolonged extensions or uncertain deals. The 'going concern' warning is a critical indicator of financial distress, typical for SPACs nearing their dissolution date without a definitive acquisition target.

Comparison to Industry Standards

• The redemption value per share in the Trust Account increased from approximately $11.66 (December 31, 2024) to $12.00 (June 30, 2025), which is above the initial IPO price of $10.00 per unit, a positive for remaining public shareholders, consistent with SPACs earning interest on trust funds.
• The company experienced substantial shareholder redemptions (7.1 million shares for ~$77.4 million in Nov 2023 and 8.6 million shares for ~$99.6 million in Nov 2024), significantly reducing capital available for a business combination, a trend observed across the SPAC industry as investors redeem rather than extend.
• Delisting from Nasdaq on July 15, 2025, due to failure to complete a business combination within 36 months of its IPO, is a severe negative and a common consequence for SPACs that cannot secure a deal, placing the company in a less liquid trading environment compared to peers on major exchanges.
• The 'going concern' warning is a standard disclosure for SPACs approaching their dissolution date without a definitive business combination, highlighting the inherent risks of this investment vehicle.
• The prolonged search for a target since its IPO in May 2022, without success, indicates the competitive and challenging landscape for SPACs to identify and close suitable deals, a struggle many SPACs have faced in recent years.

Corporate Governance

Related Party Transactions

• The Sponsor and DirectorCo were issued 5,750,000 Class B ordinary shares for a total subscription price of $25,000.
• The company pays the Sponsor $10,000 per month for office space, utilities, secretarial support, and administrative services under an Administrative Services Agreement.
• The Sponsor loaned the company $4,600,000 at no interest (Sponsor Loan), convertible into Sponsor Loan Warrants.
• The Sponsor provided an unsecured promissory note (First Extension Note) for up to $1,800,000 to fund extensions of the business combination period.
• The Sponsor provided an unsecured promissory note (Second Extension Note) for up to $2,400,000 to fund further extensions of the business combination period.
• The Sponsor provided additional unsecured promissory notes totaling $1,500,000 ($500,000 on Oct 12, 2023; $250,000 on Jan 19, 2024; $250,000 on Jul 12, 2024; $250,000 on Nov 6, 2024; $250,000 on Dec 16, 2024; $250,000 on May 27, 2025), which are non-interest bearing and convertible into warrants.
• The Sponsor or its affiliates, or certain officers and directors, may provide Working Capital Loans up to $1,500,000, convertible into warrants.

Stakeholder Impact

• **Shareholders**: Public shareholders who redeemed received cash at a premium to the IPO price, but those remaining face significant uncertainty, delisting, reduced liquidity, and potential loss of investment if no business combination is completed by November 10, 2025. Warrant holders face uncertainty regarding exercisability and value.
• **Sponsor/Founder Shareholders**: Have provided substantial funding through loans and extension payments, indicating continued support, but their investment is at high risk if a business combination does not occur, as their founder shares and warrants could become worthless.
• **Creditors**: Promissory note holders (primarily the Sponsor) are exposed to the risk of non-repayment if the company liquidates without a business combination. Deferred underwriting fees are contingent on the completion of a business combination and would be waived otherwise.

Next Steps

• Identify and evaluate target businesses for an initial business combination.
• Perform business due diligence on prospective target businesses.
• Structure, negotiate, and complete a business combination by November 10, 2025.
• If an initial business combination is not completed by the deadline, the company will cease operations, redeem public shares, and liquidate.
• File a registration statement for Class A Ordinary Shares issuable upon exercise of warrants after a business combination.

Key Dates

Recommendation

The company's delisting from Nasdaq, coupled with a 'going concern' warning and a rapidly approaching liquidation deadline (November 10, 2025) without a definitive business combination, presents an extremely high-risk profile. Significant shareholder redemptions have severely reduced the capital available for an acquisition, and the shift to the illiquid over-the-counter market further diminishes any potential for investor returns. The fundamental purpose of the SPAC has not been achieved, and the probability of a successful outcome is very low, making the stock a strong sell for any investor seeking to avoid substantial capital loss.

Keywords

SPAC, Blank Check Company, Business Combination, 10-Q, SEC Filing, Delisting, Nasdaq, Over-the-Counter Market, Going Concern, Shareholder Redemptions, Trust Account, Promissory Note, Warrants, Financial Results, Cartesian Growth Corporation II