425: Learn CW Investment Corporation Announces Amendments to Business Combination Agreement and New Financing

Learn CW Investment Corporation (LCW) has entered into side letters modifying the Business Combination Agreement with Innventure and secured a $7.5 million Series B Preferred Stock Financing, while also negotiating for additional financing.

Summary

• Learn CW Investment Corporation (Learn CW) has filed a report regarding amendments to its Business Combination Agreement with Innventure LLC.
• On September 24, 2024, Learn CW entered into a side letter (BCA Side Letter) to the Business Combination Agreement, waiving and modifying certain provisions.
• These modifications include Learn CW's covenants to list its Class A Ordinary Shares and Public Warrants, and address potential breaches related to Innventure's termination of certain purchase agreements.
• The side letter also acknowledges certain financings as Additional Financings and increases the Learn CW Convertible Promissory Note to $4.8 million.
• A side letter to the Sponsor Support Agreement (SSA Side Letter) was also entered into, modifying provisions related to Additional Financings and the assignment of rights by the Sponsor.
• Holdco entered into a Series B Investment Agreement with Commonwealth Asset Management LP to issue 750,000 shares of Series B Preferred Stock at $10.00 per share, expected to close concurrently with the Business Combination, providing approximately $7.5 million in gross proceeds.
• Holdco is also negotiating for additional Series B Preferred Stock financing, but there is no guarantee it will close.
• The Series B Preferred Stock will carry an 8.0% annual cumulative dividend, paid in kind, and have voting rights equivalent to the Original Issue Price ($10.00) divided by the Minimum Price of Holdco Common Stock.
• Mandatory conversion to Common Stock occurs on the fifth anniversary of issuance, with optional conversion upon effectiveness of a registration statement.
• Innventure terminated unit purchase agreements with John Scott and Michael Otworth, effective upon consummation of the Business Combination.
• Holdco will change its name to Innventure, Inc., and its common stock is expected to be listed on the Nasdaq Global Market under the ticker symbol INV and its warrants are expected to be listed on Nasdaq under the ticker symbol INVWW.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company is securing financing and modifying agreements to facilitate the merger, but there are also risks and uncertainties associated with the transaction.

Positives

• The $7.5 million Series B Preferred Stock Financing provides additional capital for Holdco.
• The modification of the Business Combination Agreement and Sponsor Support Agreement may streamline the merger process.
• Listing on the Nasdaq Global Market under the ticker symbol INV and its warrants are expected to be listed on Nasdaq under the ticker symbol INVWW could increase visibility and liquidity for the combined company.

Negatives

• There is no guarantee that the Additional Preferred Stock Financing will close.
• The Series B Preferred Stock ranks junior to existing or future secured or unsecured indebtedness and other liabilities (including trade payables) of Holdco.
• The company is waiving listing requirements for its shares and warrants on the listing exchange.

Risks

• The Additional Preferred Stock Financing is subject to general economic, industry and market conditions and other events and factors, many of which are beyond Holdco's control.
• The Business Combination is subject to various risks and uncertainties, including failure to obtain Learn CW shareholder approval and regulatory approvals.
• Unexpected costs related to the Business Combination could negatively impact the combined company's financial performance.
• The amount of any redemptions by existing holders of Learn CWs common stock being greater than expected could reduce available capital.
• The potential characterization of Innventure as an investment company subject to the Investment Company Act of 1940 could create regulatory hurdles.

Future Outlook

The document contains forward-looking statements regarding the Business Combination, anticipated benefits, revenue growth, financial performance, product expansion, and the financial condition of Innventure and Learn CW.

Management Comments

• Officers of the Company and Parent have determined to preemptively waive any breach or default of the Business Combination Agreement that may arise, directly or indirectly, including with respect to Section 6.05 (Parent Public Filings) of the Business Combination Agreement, as a result of Parent failing to maintain the listing of the Parent Class A Ordinary Shares and the Parent Public Warrants on the Listing Exchange.

Industry Context

The announcement reflects the ongoing trend of SPAC mergers and related financing activities. The modifications to the Business Combination Agreement and the securing of additional financing are common steps in completing such transactions. The document does not provide enough information to compare to specific competitors.

Comparison to Industry Standards

• The document does not provide enough information to compare to specific competitors.
• The terms of the Series B Preferred Stock, including the dividend rate and conversion features, are generally within the range of similar financing transactions.
• The document does not provide enough information to compare to specific projects.

Related Party Transactions

• Innventure terminated unit purchase agreements with John Scott and Michael Otworth, who are members of Innventure1 LLC, a related party of Innventure.

Stakeholder Impact

• Shareholders of Learn CW will vote on the Business Combination.
• Employees of Innventure and Learn CW may be affected by the merger.
• Customers and suppliers of Innventure may experience changes as a result of the merger.
• Creditors of Innventure and Learn CW may be affected by the new financing arrangements.

Next Steps

• Closing of the Series B Preferred Stock Financing concurrently with the Business Combination.
• Negotiation and potential closing of the Additional Preferred Stock Financing.
• Filing of a registration statement with the SEC covering the resale of Common Stock issuable upon conversion of Series B Preferred Stock within 120 days from the original issuance date.
• Learn CW shareholder vote on the Business Combination.
• Consummation of the Business Combination.
• Listing of Innventure, Inc. common stock and warrants on the Nasdaq Global Market.

Key Dates