425: Insight Acquisition Corp. Modifies Underwriting Agreement and Business Combination Agreement with Alpha Modus

Insight Acquisition Corp. amends its underwriting agreement with Cantor Fitzgerald & Co. and Odeon Capital Group, LLC, and modifies its business combination agreement with Alpha Modus, Corp., extending the outside date to September 9, 2024.

Summary

• Insight Acquisition Corp. has modified its underwriting agreement with Cantor Fitzgerald & Co. and Odeon Capital Group, LLC.
• Cantor Fitzgerald will forfeit $900,000 of their deferred fee, receiving 210,000 shares of the company's common stock instead of $3,000,000 in cash upon closing of the Alpha Modus business combination.
• Odeon Capital Group will receive 90,000 shares of the company's common stock in full satisfaction of the remaining $1,000,000 deferred underwriting discount.
• The company has also amended its business combination agreement with Alpha Modus, Corp.
• Each share of Alpha Modus common stock will be exchanged for one share of Insight Acquisition Corp. Class A common stock and a contingent right to receive a pro rata portion of 2,200,000 earnout shares.
• Each share of Alpha Modus Series C Preferred Stock will be exchanged for one share of Insight Acquisition Corp. Series C Preferred Stock and a contingent right to receive a pro rata portion of 2,200,000 earnout shares.
• The amendment eliminates the closing condition to pay off the indebtedness of Polar Multi-Strategy Master Fund and Janbella Group, LLCs up to $1,000,000 each.
• The combined company is required to issue 1,392,308 shares to Janbella, 210,000 shares to Cantor Fitzgerald & Co., 90,000 shares to Odeon Group, LLC, and 125,000 shares to Michael Singer at closing.
• The outside date for the business combination has been extended to September 9, 2024.
• Michael Singer will receive 125,000 shares of Class A common stock in exchange for waiving amounts due to them now and in the future under the Sponsor Payment Agreement and Management Payment Agreement.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the modifications to the agreements are necessary steps towards completing the business combination, the extension of the outside date and potential dilution of shares introduce some uncertainty.

Positives

• The restructuring of underwriter fees reduces the cash outlay required at the closing of the business combination.
• The extension of the outside date provides more time to finalize the business combination with Alpha Modus.
• The waiver of fees by the Sponsor and Michael Singer simplifies the capital structure and reduces liabilities.

Negatives

• The dilution of existing shareholders due to the issuance of shares to Cantor Fitzgerald, Odeon, Janbella and Michael Singer.
• The extension of the outside date may indicate potential challenges in completing the business combination.

Risks

• Failure to complete the business combination with Alpha Modus by the extended outside date of September 9, 2024.
• Potential delays in the registration and resale of the shares issued to Cantor Fitzgerald & Co.
• The risk that the anticipated benefits of the business combination are not realized.

Future Outlook

The company is focused on completing the business combination with Alpha Modus, Corp. by the extended outside date of September 9, 2024. The company will file a registration statement on Form S-1 to register the resale of the Registrable Securities.

Industry Context

SPACs often modify their underwriting agreements and business combination agreements to adapt to changing market conditions and ensure the successful completion of a merger. Fee reductions and extensions of outside dates are common strategies to address challenges in closing deals.

Comparison to Industry Standards

• SPACs commonly use shares to settle deferred underwriting fees, especially when cash resources are limited.
• Extending outside dates is a frequent occurrence in SPAC transactions, reflecting the complexities of completing mergers within the initial timeframe.
• The earnout structure is a typical mechanism to align the interests of the target company's shareholders with the future performance of the combined entity.
• Comparable companies include other SPACs that have modified their underwriting agreements or extended their business combination timelines, such as Digital World Acquisition Corp. and CF Acquisition Corp. VI.

Related Party Transactions

• The Sponsor Payment Agreement and Management Payment Agreement are related-party transactions.
• The waiver of fees by the Sponsor and Michael Singer is a related-party transaction.
• The issuance of shares to Michael Singer is a related-party transaction.

Stakeholder Impact

• Shareholders will experience dilution due to the issuance of new shares.
• Management will receive shares in exchange for waiving fees.
• The successful completion of the business combination will impact the future of both Insight Acquisition Corp. and Alpha Modus, Corp.

Next Steps

• File a registration statement on Form S-1 to register the resale of the Registrable Securities.
• Obtain stockholder approval for the business combination.
• Satisfy all closing conditions outlined in the Business Combination Agreement.
• Complete the business combination with Alpha Modus, Corp. by September 9, 2024.

Key Dates