TradeStation to become publicly traded, NYSE-listed company
TradeStation Group, Inc and Quantum FinTech Acquisition Corporation (NYSE:QFTA), a special purpose acquisition company, announced today that they have executed a definitive business combination agreement through which TradeStation will become a publicly traded, NYSE-listed company under the ticker symbol “TRDE.”
As FX News Group has reported, Monex, the owner of TradeStation, has recently confirmed that TradeStation had some ambitious plans in the United States. Today, the plans are detailed.
The transaction is expected to close in the first half of 2022. Net proceeds from the transaction are intended to be used to help fund the company’s plans to accelerate account and revenue growth through substantially increased brand-awareness and performance-based marketing spend, as well as increased product development and IT headcount for completion of certain new product feature initiatives, and to add liquidity to support an anticipated larger customer base.
TradeStation’s management team, including John Bartleman, President, Chief Executive Officer and member of TradeStation’s Board of Directors, will continue to lead the company following completion of the transaction.
Assuming no redemptions of any public shares of Quantum FinTech, the transaction will provide approximately $316 million of cash prior to payment of expenses, consisting of the contribution of approximately $201 million of cash held in Quantum FinTech’s trust account, and $115 million of additional capital through a private placement of common stock by Quantum FinTech (“PIPE”).
The PIPE includes, as co-anchor investments, $50 million from Monex and $50 million from Galaxy Digital LP, which is affiliated with Galaxy Digital Holdings Ltd, one of the world’s leading technology-driven financial services and investment management firms that provides institutions and direct clients with a full suite of financial solutions spanning the digital assets ecosystem.
The transaction values the combined company at an implied pro forma enterprise value of approximately $1.43 billion. The transaction has been approved by the boards of directors of both TradeStation and Quantum FinTech, as well as by Monex, TradeStation’s sole shareholder. The transaction is expected to close in the first half of 2022, subject to the satisfaction of customary closing conditions, including the approval of Quantum Fintech’s shareholders.
At closing, 48% of the shares held by Quantum Fintech’s sponsors will convert to unvested performance-based earn-out shares (798,894 shares) or be forfeited (1,610,554 shares).
The structure of the business combination involves a merger between a newly-formed subsidiary of TradeStation and Quantum FinTech, with Quantum FinTech surviving the merger and becoming a wholly-owned subsidiary of TradeStation. Quantum FinTech’s shareholders, including the PIPE investors, will receive shares in TradeStation in exchange for their Quantum FinTech shares. Each Quantum FinTech share held by the PIPE investors and the sponsors of Quantum FinTech will be exchanged for one common share of TradeStation.
However, each holder of a Quantum FinTech public share that has elected not to redeem will receive more than one common share of TradeStation based on an exchange ratio formula supported by the issuance of an additional 750,000 shares of TradeStation common stock.
More specifically, the holders of Quantum FinTech public shares will receive in exchange for each share they have elected not to redeem a number of shares of TradeStation common stock equal to (1) the sum of the total number of non-redeemed Quantum FinTech public shares and 750,000, divided by (2) the total number of non-redeemed Quantum FinTech public shares. Under this formula, if zero shares are redeemed each Quantum Fintech public share will be exchanged for 1.037 shares of TradeStation common stock and, as another example, if 90% of the Quantum public shares are redeemed each Quantum FinTech public share will be exchanged for 1.373 shares of TradeStation common stock.
Upon closing of the merger, each issued and outstanding Quantum FinTech warrant will become a warrant to receive the number of shares of TradeStation common stock that the warrant holder would have received if the holder had exercised such warrant immediately prior to the Transaction.
Assuming no redemptions of Quantum FinTech public shares, Monex will own approximately 80% of TradeStation at closing. All of Monex’s shares in TradeStation, excluding only the shares it will acquire in the PIPE, are subject to lockups: one-third until the earlier of the first anniversary of the closing and TradeStation achieving a $12.50 per share sustained stock price, one-third until the earlier of the second anniversary of closing and TradeStation achieving a $15.00 per share sustained stock price, and one-third until the earlier of the third anniversary of closing and TradeStation achieving a $17.50 per share sustained stock price.
For purposes of the lock-ups, a sustained stock price means achieving the specified price per share or higher, on a last reported sale price basis, for 20 out of any 30 consecutive trading days. The lock-ups are subject to customary permitted transferee exceptions.
Each PIPE investor, other than Monex, that invests at least $5.0 million will receive additional shares of TradeStation common stock, for no additional consideration, equal to 10% of the shares it has committed to purchase at $10.00 per share.
Additionally, all PIPE investors, other than Monex, will be entitled to receive for no additional consideration additional shares of TradeStation common stock if the volume weighted average price of TradeStation common stock is less than $10.00 per share during an agreed upon measurement period.
This volume weighted average price for the measurement period (the “Adjustment Period VWAP”) will be the lower of the average of the volume weighted average price per share of TradeStation common stock for (1) the successive 60-trading-day period that begins on the effectiveness date of the resale shelf registration statement for the PIPE investors’ TradeStation shares and (2) the 10-day trading period which ends on the 60th trading day of such period, subject to a floor of $6.50. The additional number of shares will equal the number of shares purchased by the PIPE investors (other than Monex) multiplied by a fraction, the numerator of which is the difference between $10.00 and the Adjustment Period VWAP and the denominator of which is the Adjustment Period VWAP.
Following the closing of the transaction, Monex will receive earn-out consideration equal to approximately 34.1 million shares and the sponsors of Quantum FinTech will receive earn-out consideration equal to 798,894 shares, in each case upon the following “triggering events”:
- prior to the 5th anniversary of the closing, if TradeStation achieves a $12.50 per sustained share stock price, 50% of the earn-out consideration is payable.
- prior to the 5th anniversary of the closing, if TradeStation achieves a $15.00 per share sustained stock price, the remaining 50% of the earn-out consideration is payable.
- prior to the 5th anniversary of the closing, if a change of control transaction occurs where the price paid is equal to or in excess of the applicable hurdle price, the applicable percentage of the earn-out consideration is payable.
For purposes of the earn-out, a sustained stock price means achieving the specified price per share or higher, on a volume weighted average price basis, for 20 out of any 30 consecutive trading days.