425: Arrowroot Acquisition Corp. Faces Nasdaq Delisting Threat Amid iLearningEngines Deal

Arrowroot Acquisition Corp. is at risk of being delisted from the Nasdaq due to non-compliance with listing rules, specifically the requirement to complete a business combination within 36 months of its IPO, as it seeks to finalize its merger with iLearningEngines, Inc.

Summary

• Arrowroot Acquisition Corp. received a notice from Nasdaq on March 5, 2024, indicating potential delisting due to non-compliance with Nasdaq IM-5101-2.
• This rule requires special purpose acquisition companies (SPACs) to complete a business combination within 36 months of their IPO.
• Arrowroot intends to request a hearing before the Nasdaq Hearings Panel by March 12, 2024, to request more time to complete its proposed business combination with iLearningEngines.
• The company previously received a notice on January 8, 2024, for failing to hold an annual meeting of stockholders within 12 months after its fiscal year ended December 31, 2022.
• Nasdaq may grant the company until June 28, 2024, to regain compliance if the plan submitted on February 22, 2024, is accepted.
• The hearing request will stay any suspension or delisting action pending the outcome of the hearing.
• There is no assurance that Arrowroot will be able to satisfy Nasdaq's continued listing requirements or complete the business combination.
• The company's securities will continue to trade on Nasdaq while the hearing request is pending.

Sentiment

Score: 3

Explanation: The document indicates significant challenges and uncertainty regarding the company's future, particularly concerning its Nasdaq listing and the completion of its business combination. The potential for delisting and the need for a hearing before the Nasdaq Hearings Panel contribute to a negative sentiment.

Positives

• Arrowroot is requesting a hearing, which will temporarily prevent delisting.
• The company has a plan to regain compliance, which, if accepted, could provide additional time.
• The company's securities will continue to trade on Nasdaq while the hearing request is pending.

Negatives

• Arrowroot is non-compliant with Nasdaq listing rules.
• There is no guarantee that Arrowroot will be able to regain compliance or complete the business combination.
• The company received two notices from Nasdaq regarding non-compliance.

Risks

• The company may not be able to satisfy Nasdaq's continued listing requirements.
• The business combination with iLearningEngines may not be completed.
• The company's securities could be suspended or delisted from Nasdaq.
• The company may face challenges in addressing the concerns raised in the Annual Meeting Notice during the hearing.

Future Outlook

The company intends to request a hearing before the Nasdaq Hearings Panel to request sufficient time to complete the business combination with iLearningEngines. There is no assurance that the company will be able to satisfy Nasdaq's continued listing requirements, regain compliance with Nasdaq IM-5101-2 or Nasdaq Listing Rule 5620(a), and maintain compliance with other Nasdaq listing requirements.

Management Comments

• The Company intends to timely request a hearing before the Panel to request sufficient time to complete the Company's previously disclosed proposed business combination with iLearningEngines.

Industry Context

This situation is common for SPACs approaching their deadline to complete a business combination. Many SPACs face challenges in finding suitable targets and completing deals within the allotted timeframe, leading to potential delisting or liquidation.

Comparison to Industry Standards

• Many SPACs struggle to complete mergers within the 2-year timeframe, leading to liquidations or extensions.
• Companies like Gores Metropoulos II, Inc. (now Sonder Holdings Inc.) and Churchill Capital Corp IV (now Lucid Group, Inc.) successfully completed mergers but faced significant volatility post-merger.
• The success of Arrowroot's business combination will depend on iLearningEngines' performance and market conditions, similar to how other de-SPACed companies have been evaluated.

Stakeholder Impact

• Shareholders face the risk of delisting, which could negatively impact the value of their investment.
• Employees of both Arrowroot and iLearningEngines face uncertainty regarding the future of the business combination.
• Customers and suppliers of iLearningEngines may be concerned about the stability of the company.

Next Steps

• Arrowroot will request a hearing before the Nasdaq Hearings Panel by March 12, 2024.
• Nasdaq will review Arrowroot's plan to regain compliance.
• The Nasdaq Hearings Panel will make a decision regarding Arrowroot's request for additional time.

Key Dates

Keywords

delisting, Nasdaq, compliance, business combination, Arrowroot Acquisition Corp., iLearningEngines, hearing, listing rules, SPAC