Shares of Silver Crest Acquisition: What’s Causing Today’s Drop

Silver Crest Acquisition Corporation NASDAQ:SLCR

Silver Crest Acquisition Corporation (NASDAQ:SLCR)

Silver Crest Acquisition Corporation (NASDAQ:SLCR) shares were trading around 13% lower today as of 2:42 PM ET. Silver Crest Acquisition Corporation (NASDAQ:SLCR) is a special purpose acquisition company (SPAC). This move appears to have been motivated by a regulatory filing made by the company that extends a deadline for shareholders who might want to revoke their choice to redeem their shares from the company.

Then What?

Tim Hortons China is the Chinese branch of the well-known Canadian coffee and doughnut chain Tim Hortons, and Silver Crest Acquisition Corporation (NASDAQ:SLCR) had previously declared that it intended to combine operations with Tim Hortons China and then take the combined company public. The shareholders gave their blessing to the acquisition earlier this month.

In a filing with the Securities and Exchange Commission today, Silver Crest Acquisition Corporation (NASDAQ:SLCR) announced that it would give holders of Class A ordinary shares until September 16 to alter their minds about redeeming their shares if they had previously decided to do so.

Shareholders of a SPAC have the option to redeem their shares at the net asset value price that the SPAC was initially issued at, which is usually $10 per share if they do not like the acquisition target that the SPAC has chosen to pursue after the announcement of a deal by the SPAC.

Following the initial redemptions, just 3.5 million Class A shares were left, as stated on the Twitter profile titled “The Spac Shack.” However, according to the closing conditions, Silver Crest must have at least $5 million of net tangible assets following the redemptions. Because of this, management may be concerned about the deal closing and hoping that some shareholders will change their minds about redeeming their shares.

What’s Next?

As part of the agreement with Silver Crest Acquisition Corporation (NASDAQ:SLCR), Tim Hortons China was valued at around $1.7 billion. This appears to be a pretty high valuation because the company is projected to earn a loss of $60.3 million in 2021 despite having approximately $101 million in revenue.

Despite today’s decline in the Silver Crest Acquisition Corporation (NASDAQ:SLCR) stock price, which was caused by the extension of the deadline for the redemption-reversal deadline, there is still the possibility of a gain if the agreement is not scrapped. However, this appears to be more of a short-term gamble on the acquisition going through, and taking into account the current valuation, the stock could still decline once the merger has been completed.

Featured Image:  Megapixl @Adiruch 

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About the author: I'm a financial journalist with more than 1.5 years of experience. I worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan. I love to write about marketing and finance. Other than that, I like spending time in the gym and playing PC games.