The SPAC wave hits Russia

Could a company from Russia, or with strong connections to Russia, ever be targeted by a SPAC? The question remained open until very recently, given the small numbers of international IPOs from Russia — the latest example in the digital field being Ozon in November last year.

Such a player has now emerged, with Nexters preparing its NASDAQ introduction through a combination with SPAC company Kismet. Nexters is among the most successful game development companies with Russian founders. It is behind such hit games as Hero Wars and Throne Rush, claiming more than 200 million installs worldwide. It has established its headquarters in Cyprus and split its teams between Limassol, Moscow and other Eastern European locations.

Nexters generated $318 million in net bookings and $120 million in free cash flow to equity in 2020. In the second quarter of 2021, its games generated $154 million in bookings, up 40% year-on-year, while the number of monthly paying players grew to around 400,000 (+43% y-o-y). The blended average bookings per paying player was maintained at around $125.

The merger agreement between Kismet and Nexters signed in February 2021 placed the latter at an enterprise value of $1.9 billion. Initially scheduled for completion in the second quarter, the merger has been postponed to Q3 — “due to a marketwide change related to certain SPAC accounting treatments that have been introduced by regulators in Q2,” as Kismet explained in an exchange with East-West Digital News.

Kismet, alongside two PIPE investors – the Emirati sovereign wealth fund Mubadala and the Russian PE firm VPE Capital – have contributed $100 million, allowing Nexters to meet the minimum cash condition required to complete the business combination.

Three SPACs in a row

Founded by Russian telco top executive Ivan Tavrin, Kismet has launched no fewer than three SPACs. The first vehicle (the one that merged with Nexters) closed its $250 million NASDAQ IPO in August 2020. The two next ones raised $230 million and $287.5 million, respectively, almost simultaneously in April 2021. The three vehicles have an almost identical focus — the technology and sectors primarily in Russia or more broadly the EMEA region.

Asked about the strategy behind creating these multiple vehicles, Kismet told EWDN: “Having [these] vehicles enables [us] to pursue multiple transaction opportunities simultaneously. We have the team, the pipeline, and the expertise to support this expansion.”

“We have the ambition of building the leading SPAC franchise in EMEA, and the practice of running several SPAC vehicles in parallel is a part of this strategy,” Kismet said, referring to a “well-precedented practice” in more mature SPAC markets such as the USA.

Answering a Bloomberg journalist who asked him if the Russian origins of a company could be an issue for international investors, Tavrin noted that his SPAC investors were “100% the same” as those investing in SPACs targeting Western companies: “US investors, as any other, are not looking at geographies, they’re looking at revenues and they’re looking at business,” the Russian businessman said.

Russian-founded SPAC targets

In March 2021, Denis Sverdlov, a Russian serial entrepreneur and former government member, also took advantage of the SPAC wave, introducing his company Arrival on the NASDAQ. 

Based in the UK, this innovative electric car maker has little to do with Russia, putting aside the origin of its founder — but its success offered yet another illustration of Eastern European entrepreneurs’ ability to develop global success stories in the tech field.  

Another Russian-founded company involved in a SPAC, Momentus, drew the SEC’s attention in a negative light earlier this month. According to the Commission, Mikhail Kokorich, a Russian national who sought asylum in the USA but now lives in Switzerland, misled the SPAC investors about the state of the company’s technology and about “national security risks” associated with him. 

The SEC also found that SPAC company Stable Road grossly failed to perform adequate due diligence to identify those issues, and endorsed Momentus’s misleading information in the merger documents.

Co-founded by Kokorich, Momentus “offers the infrastructure services necessary to enable enterprise and human existence to flourish in space.” The company announced its merger with Stable Road in October 2020, claiming that the partners were “creating the first publicly-traded space infrastructure company at the forefront of the new space economy.”

Following its investigation, the SEC reached a settlement with Momentus and Stable Road while maintaining its legal action against Kokorich. Under a revised merger agreement – announced in July 2021 – the enterprise value of Momentus was established at $567 million, down from $1.131 billion under the original deal.

A July 16 SEC filing from Stable Road indicates that some PIPE investors dropped out of the deal, while others stayed in the PIPE under new terms. Six new undisclosed investors joined the PIPE.

Momentus’s latest move was to name John Rood, former US Under Secretary of Defense, to replace Korkorich as CEO. Kokorich, who denies the SEC’s accusations, stated: “At least my origin and nationality will not stay anymore between Momentus and Space.”

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