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

Cartesian Growth Corporation II reports a significant decline in net income, faces delisting from Nasdaq, and raises substantial doubt about its ability to continue as a going concern after multiple extensions to complete a business combination.

Summary

• Net income for the three months ended September 30, 2025, was $338,160, a significant decrease from $2,909,414 for the same period in 2024.
• Net income for the nine months ended September 30, 2025, was $745,793, substantially lower than $7,551,693 for the nine months ended September 30, 2024.
• The company was delisted from Nasdaq on July 15, 2025, and its securities are now quoted on the over-the-counter market due to its failure to complete an initial business combination within 36 months.
• Management has determined that the company's liquidity condition and liquidation date raise substantial doubt about its ability to continue as a going concern.
• The business combination period has been extended multiple times, most recently to August 5, 2026, following a shareholder vote on November 3, 2025.
• Significant shareholder redemptions occurred: approximately $77.4 million in November 2023, $99.6 million in November 2024, and $51.2 million in November 2025.
• The Trust Account balance decreased to $37,750,814.08 as of November 4, 2025, from $88,478,622 as of September 30, 2025, primarily due to redemptions.
• The Sponsor continues to provide extension payments via non-interest bearing promissory notes to facilitate extensions of the business combination period.

Sentiment

Score: 2

Explanation: The company faces severe challenges, including delisting, significant capital erosion due to redemptions, and a going concern warning, indicating a very high risk of liquidation if a business combination is not completed soon.

Positives

• Interest earned on cash and marketable securities held in the Trust Account for the nine months ended September 30, 2025, was $2,063,025.
• The business combination period has been extended to August 5, 2026, providing additional time to identify and complete a target acquisition.
• The Sponsor continues to provide financial support through promissory notes for extension payments.

Negatives

• Net income for the three and nine months ended September 30, 2025, decreased significantly compared to the prior year periods.
• The company was delisted from Nasdaq on July 15, 2025, and its securities now trade on the less liquid over-the-counter market.
• Management has identified substantial doubt about the company's ability to continue as a going concern.
• Total shareholder redemptions across three extensions exceed $228 million, significantly depleting the Trust Account.
• The company reported a working capital deficit of $5,298,431 as of September 30, 2025.
• A deferred underwriting fee of $11,500,000 remains outstanding, contingent on completing a business combination, which is at risk.

Risks

• The company may be unable to complete an initial Business Combination within the extended Combination Period (now August 5, 2026).
• Delisting from Nasdaq limits investor ability to transact, reduces liquidity, and may lead to the company's Class A ordinary shares being deemed a 'penny stock'.
• The company is now subject to state securities regulation, which could hinder the sale of its securities in certain states.
• Global economic consequences from military conflicts (Russia-Ukraine, Hamas-Israel) could adversely affect the ability to consummate a Business Combination or the operations of a target business.
• Increased market volatility or decreased market liquidity could impact the ability to raise equity and debt financing for a Business Combination.
• The Sponsor's indemnity obligations for third-party claims against the Trust Account may not be sufficient, potentially reducing funds available for redemptions.
• Management's assessment of going concern raises substantial doubt about the company's ability to continue as a going concern.

Future Outlook

The company's primary objective remains to complete an initial business combination, with the deadline extended to August 5, 2026. It expects to incur significant costs in this pursuit and cannot assure success. The ability to raise equity and debt financing for a business combination may be impacted by increased market volatility and decreased market liquidity.

Management Comments

• "We have neither engaged in any operations nor generated any revenues to date."
• "We do not expect to generate any operating revenues until after the completion of our initial business combination."
• "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 a broader trend of SPACs facing significant challenges in completing business combinations, leading to multiple extensions and substantial capital outflows due to shareholder redemptions. The delisting from Nasdaq further exacerbates these challenges, making it harder to attract investors or a desirable target in an already competitive and scrutinizing market for blank check companies.

Comparison to Industry Standards

• The company's inability to complete a business combination within its initial 36-month period and subsequent delisting from Nasdaq represents a significant underperformance compared to successful SPACs that either complete a merger or liquidate in an orderly fashion.
• The high rate of redemptions (over $228 million across three extensions) indicates a pronounced lack of investor confidence in the company's ability to find an attractive target or in the value proposition of continued investment, which is worse than average for SPACs that successfully merge.
• The reliance on sponsor loans for extension payments is typical for struggling SPACs but highlights the diminishing public capital available, contrasting with SPACs that maintain strong investor backing.
• The move to the OTC market significantly reduces the company's appeal and liquidity compared to SPACs listed on major exchanges like Nasdaq or NYSE, which offer greater visibility and access to institutional investors.

Corporate Governance

Related Party Transactions

• The Sponsor (CGC II Sponsor LLC) and DirectorCo LLC hold founder shares.
• The company pays the Sponsor $10,000 per month for administrative services (office space, utilities, secretarial support).
• The Sponsor has provided multiple non-interest bearing promissory notes for extension payments and working capital, totaling $1,800,000 (First Extension Note), $2,400,000 (Second Extension Note), and $1,750,000 (Sponsor Notes).
• The Sponsor loaned the company $4,600,000 at no interest (Sponsor Loan) at the time of the IPO, convertible into Sponsor Loan Warrants.
• The Sponsor or its affiliates may provide Working Capital Loans up to $1,500,000, convertible into warrants.

Stakeholder Impact

• Shareholders: Face significant dilution of value due to repeated redemptions, reduced liquidity and market visibility due to Nasdaq delisting, and a high risk of total loss of investment if a business combination is not successfully completed.
• Sponsor: Continues to provide financial support for extensions through non-interest bearing promissory notes, bearing the risk of not recouping these investments if a business combination does not materialize.
• Underwriters: The deferred underwriting fee of $11,500,000 is contingent on the completion of a business combination and will likely be waived if the company liquidates.

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 the extended deadline of August 5, 2026.
• Repay Sponsor loans upon consummation of a business combination or use funds held outside the Trust Account if no combination occurs.

Key Dates

Recommendation

The company's delisting from Nasdaq, significant and repeated shareholder redemptions, and explicit 'going concern' warning indicate severe operational and financial distress. The substantial reduction in the Trust Account balance makes a successful business combination highly improbable, and the risk of liquidation is very high. Investors should exit positions to avoid further capital loss.

Keywords

SPAC, blank check company, business combination, 10-Q, SEC filing, delisting, Nasdaq, OTC market, shareholder redemptions, going concern, Cartesian Growth Corporation II, RENEU, RENE, RENEW