8-K: Mountain Crest V and CUBEBIO Announce Definitive Business Combination Agreement

Mountain Crest Acquisition Corp. V and CUBEBIO Co., Ltd. have entered into a definitive agreement for a business combination that will result in CUBEBIO becoming a publicly listed company on the Nasdaq.

Summary

• Mountain Crest Acquisition Corp. V (MCAG), a special purpose acquisition company, and CUBEBIO Co., Ltd., a Korean in-vitro diagnostics company, have agreed to a business combination.
• The transaction will involve a merger of a subsidiary of CubeBio Holdings Limited (PubCo) with MCAG, and a share swap where CUBEBIO shareholders will exchange their shares for PubCo shares.
• The pre-transaction equity value for CUBEBIO is set at $375 million, with a potential earn-out of an additional $245 million based on revenue targets.
• The earn-out is contingent on CUBEBIO achieving revenues of at least $42.7 million in the fiscal year ending December 31, 2026.
• The business combination is expected to close in the first quarter of 2025.
• Following the closing, PubCo Ordinary Shares are expected to be listed on the Nasdaq Stock Market.

Sentiment

Score: 7

Explanation: The document is generally positive, highlighting the potential of the business combination and CUBEBIO's technology. However, it also acknowledges risks and uncertainties, which tempers the overall sentiment.

Positives

• CUBEBIO will gain access to public markets and capital through the merger.
• Mountain Crest V has a track record of successfully completing SPAC business combinations.
• CUBEBIO's innovative cancer diagnostic technology has significant growth potential.
• The transaction includes a potential earn-out, incentivizing future performance.
• CUBEBIO has secured a supply contract in Taiwan, Vietnam, and Malaysia, although revenue is not expected until regulatory approvals are obtained.

Negatives

• The earn-out is contingent on achieving a specific revenue target, which may not be met.
• CUBEBIO does not expect to generate revenues under the Taiwan Biotech Contract until CUBEBIOs products are approved for sale in Taiwan, Vietnam, and Malaysia which may take up to 24 months or more.

Risks

• The business combination is subject to various closing conditions, including shareholder and regulatory approvals.
• The inability to complete the business combination could negatively impact both companies.
• CUBEBIO's future performance is subject to market conditions and competition.
• The COVID-19 pandemic could impact CUBEBIO's business and the ability of the parties to complete the business combination.
• There is a risk that the listing of the post-business combination entity's securities on Nasdaq may not be obtained.

Future Outlook

The parties expect the business combination to close in the first quarter of 2025, with CUBEBIO becoming a publicly listed company on the Nasdaq. CUBEBIO aims to grow into a global company by increasing corporate value.

Management Comments

• Dr. Suying Liu, Chairman, the CEO and CFO of Mountain Crest V commented, 'CUBEBIOs diagnostic innovation, non-invasive productization and active commercialization present significant growth potential. We are excited to be working with CUBEBIO on this proposed business combination.'
• Eun-jong Choi, the CEO of CUBEBIO emphasized, 'We expect to consummate the business combination during the 1Q 2025 and will faithfully carry out the process for completing the business combination, and grow CUBEBIO into a global company by increasing corporate value.'

Industry Context

This announcement reflects the ongoing trend of private companies using SPACs to go public, particularly in the healthcare and diagnostics sectors. The focus on innovative diagnostic technologies aligns with the growing demand for early cancer detection solutions.

Comparison to Industry Standards

• The valuation of $375 million for CUBEBIO is within the range of other early-stage diagnostic companies going public via SPACs, although specific comparables are not provided in the document.
• The earn-out structure is a common mechanism in SPAC transactions, designed to align the interests of the target company's shareholders with the long-term performance of the combined entity.
• The timeline for closing the transaction in the first quarter of 2025 is typical for SPAC mergers, which often require several months for regulatory approvals and shareholder votes.
• The Taiwan Biotech Contract, while significant, is subject to regulatory approvals, which is a common hurdle for medical device and diagnostic companies.

Stakeholder Impact

• Shareholders of Mountain Crest V will receive PubCo Ordinary Shares.
• Shareholders of CUBEBIO will exchange their shares for PubCo Ordinary Shares.
• Employees of CUBEBIO will become part of a publicly listed company.
• Customers of CUBEBIO may benefit from increased access to capital and resources.
• The transaction may create new opportunities for suppliers and partners.

Next Steps

• File relevant materials with the SEC, including a registration statement on Form F-4 and a proxy statement on Schedule 14A.
• Mail the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting.
• Obtain shareholder approvals from both Mountain Crest V and CUBEBIO.
• Obtain necessary regulatory approvals.
• Complete the business combination in the first quarter of 2025.

Key Dates

Keywords

business combination, SPAC, CUBEBIO, Mountain Crest V, Nasdaq, merger, diagnostics, cancer, IPO, public listing