8-K: Soulpower Secures $3.28M in Related-Party Notes

Soulpower Acquisition Corporation obtained two unsecured promissory notes totaling up to $3.285 million from its sponsor's managing member for working capital.

Summary

• Soulpower Acquisition Corporation (the "Company") issued two unsecured promissory notes to Soulpower Management LLC (the "Lender") on February 19, 2026.
• The "A Note" is for a principal amount of up to $785,000, bears a flat 22% interest rate, and is due upon the earlier of an initial business combination consummation or the Company's liquidation. As of the filing date, $745,000 has been advanced under this note.
• The "B Note" is for a principal amount of up to $2,500,000, bears no interest, and will be automatically and irrevocably forgiven in full upon the consummation of the Company's initial business combination. Approximately $1,212,050 has been advanced under this note as of the filing date.
• Both notes are non-convertible into securities of the Company and the proceeds are being used for general working capital purposes.
• The Lender, Soulpower Management LLC, is the sole managing member of the Company's sponsor, Soulpower Acquisition Sponsor LLC, and is controlled by Justin Lafazan, the Company's Chief Executive Officer and Chairman of the Board of Directors. Certain other directors of the Company are also members of the Lender.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a necessary but somewhat costly step for the SPAC to continue operations and pursue a business combination. The related-party nature and high interest on the A Note introduce some concerns.

Positives

• Secured additional working capital totaling $1,957,050 ($745,000 from A Note + $1,212,050 from B Note) to support ongoing operations and the search for an initial business combination.
• The B Note, representing the larger portion of the funding, will be fully forgiven upon the consummation of an initial business combination, reducing future liabilities if a deal is successful.

Negatives

• The A Note carries a flat 22% interest rate, which represents a high cost of capital for the company.
• The funding originates from a related party (Soulpower Management LLC), which can raise potential conflict of interest concerns.
• Reliance on related-party financing for general working capital could indicate challenges in securing third-party funding under more favorable terms.

Risks

• Failure to consummate an initial business combination would result in both the A Note and B Note becoming due upon liquidation, potentially impacting shareholder returns.
• The A Note's 22% interest rate could become a significant financial burden if the initial business combination is delayed or does not materialize.
• The occurrence of certain events of default on either note could trigger immediate repayment of the unpaid principal balance and all other sums payable.

Future Outlook

The company intends to use the proceeds from these notes for general working capital purposes, supporting its ongoing efforts to consummate an initial business combination. The B Note's forgiveness upon a successful business combination provides a clear incentive for a timely transaction.

Management Comments

• Justin Lafazan, Chief Executive Officer and Chairman of the Board of Directors of the Company, is also the authorized signatory of the managing member of Soulpower Management LLC, the Lender.

Industry Context

StockSavvy.ai notes that SPACs often rely on sponsor financing for working capital as they search for a target. While common, the terms of the A Note, particularly the 22% flat interest, are on the higher end for such arrangements, potentially reflecting the current market environment for SPACs or specific circumstances of Soulpower Acquisition Corporation.

Comparison to Industry Standards

• Compared to typical SPAC sponsor loans, the 22% flat interest rate on the A Note is notably high. Many SPACs receive interest-free or low-interest loans from their sponsors, or loans convertible into warrants, which offer a different risk/reward profile.
• The B Note's forgiveness upon business combination is a standard feature in SPAC sponsor loans, aligning the sponsor's interests with a successful de-SPAC transaction.
• The reliance on related-party financing for working capital is common for SPACs, such as those seen with Churchill Capital Corp IV or Gores Holdings VI, which also received loans from their sponsors to cover operational expenses during their search for a target.

Related Party Transactions

• Soulpower Acquisition Corporation issued two unsecured promissory notes to Soulpower Management LLC.
• Soulpower Management LLC is the sole managing member of the Company's sponsor, Soulpower Acquisition Sponsor LLC.
• Soulpower International Corporation, controlled by Justin Lafazan (CEO and Chairman of the Company), is the sole managing member of Soulpower Management LLC.
• Certain other directors of the Company are also members of Soulpower Management LLC.

Stakeholder Impact

• Shareholders: The funding provides necessary capital to continue operations and pursue a business combination, but the 22% interest on the A Note represents a cost that could impact future equity value if not offset by a successful deal. The B Note's forgiveness is beneficial if a deal closes.
• Creditors (Soulpower Management LLC): The Lender benefits from the 22% interest on the A Note and potentially from the successful consummation of a business combination through its affiliation with the sponsor.

Next Steps

• Continue efforts to identify and consummate an initial business combination.
• Utilize the proceeds from the notes for general working capital purposes.

Key Dates

Recommendation

The financing provides essential working capital for Soulpower Acquisition Corporation to continue its search for a business combination, which is a positive. However, the high 22% interest rate on the A Note and the related-party nature of the transaction introduce potential concerns regarding the cost of capital and corporate governance. The B Note's forgiveness upon a successful deal is a standard and beneficial feature. Given these mixed signals, a 'hold' recommendation is appropriate as investors await further developments on a potential business combination.

Keywords

SPAC, promissory note, working capital, related party transaction, corporate finance, acquisition, business combination, Soulpower Acquisition Corporation