ESS Inc. said closing of its SPAC merger later this week — and a subsequent public listing — remained on course, despite a big pullout from the deal by the special-purpose acquisition company’s shareholders.
In a filing late Tuesday, ACON S2, the SPAC that aligned with ESS in May, said holders of nearly 20.8 million shares — out of 25 million — had redeemed their shares at $10.
That would remove just shy of $208 million from a merger that, when it was announced in May, was expected to net $465 million in proceeds for the Wilsonville-based grid-scale battery maker.
Holding the deal together is a $250 million “PIPE” (private investment in public equity) that ACON S2 had raised from investors as part of the merger deal with ESS. According to the merger prospectus, the deal needs $200 million to close.
“This does not jeopardize the close,” a spokesman for the company said via email. “The company is above minimum cash with PIPE only.”
A SPAC raises money in an initial public offering and then looks to acquire an existing private business, which then becomes the publicly traded entity if the deal goes through. Seen as a faster, less cumbersome way for a company to go public, SPAC deals exploded in popularity in the last couple of years.
Ten dollars is the initial price of SPAC shares, which are then publicly traded. Investor funds are held in trust pending a merger, and shareholders can redeem shares for $10 plus interest up to two days before the merger vote. (The ESS merger vote was Tuesday morning. With the SPAC sponsors committed to the deal, it was approved.)
Shares in ACON S2 (Nasdaq: STWO) had struggled to stay at $10 since the merger was announced, making redemption a more likely option for shareholders.
The high redemption rate can be seen as a sign of a lack of excitement about the deal, but that's become more common as fervor for SPAC deals has waned in the past several months.
While the ESS deal still appears ready to go through, with an expected close by Friday, the company will face the question of how it pursues its growth plan without $208 million it had expected to help it get to profitability in 2023.
ESS makes a unique, iron-based flow battery that it bills as a better alternative to lithium-ion batteries for long-duration grid energy storage. It employs about 165 people at a Wilsonville headquarters and factory that it has been rapidly building out.
