In this workout FE Solutions back has been set up and wishes to IPO and we're asked to calculate the proceeds to the SPAC and its post IPO EV. Now, that's a very posh way of saying calculate its EV equity bridge. And over on the right hand side, I've already started my answer here. I've got my equity on the right hand side, my sources of funds, and on the left hand side I've got my cash and EV as my uses of funds. And I'll be filling in these boxes as we do the figures. It also says to calculate the sponsor's cash contribution and the value of those shares. Lastly, it says the sponsor promote shares are issued at par value. Ignore the minimal proceeds in the analysis. Okay, so each share that's going to be offered in the IPO is worth 10. The number of shares being offered to outside investors, 5.5 million. And the sponsor, in addition, will hold 1.4 million promote shares of their own, giving them 20% shareholding. So the total post IPO shares will be the 5.5 being held by the outside shareholders, plus the 1.4 million being held by the sponsor, giving us 6.9 million. But the share proceeds raise is not going to be the 6.9 million times by the 10 because instead because 1.4 million of the 6.9, they're the sponsored promo chairs, they were issued at par value those minimal proceeds. So it's just the 5.5 million that are going to have any real proceeds given. We multiply that by the 10. So at the moment, share proceeds raises 55. That's going to be my first cash item. So share proceeds 55 million.

Now in addition, we've got private placement warrants to the sponsor. The number of warrants that the sponsor's going to buy is 3.5 million. They're each going to cost one. Therefore the proceeds 3.5 times by the one we've got more proceeds into our SPAC.

So warrant proceeds another 3.5 million.

Now, we do have some warrants going to our outside shareholders. They're going to get one warrant per share that they own. However, they aren't going to provide the company with any more proceeds because the cost of those warrants is included in the initial share cost of 10.

But what I can calculate here is the total warrants outstanding post deal. Well, we know that each a share is going to have one warrant. So I'll take that one and I'll multiply it by the number of shares the outside investors have, which is 5.5 million. But I'm then going to add onto that the number of warrants held by the sponsor. We know they're going to have 9 million. Lastly, we're going to have some fees being paid. We've got SPAC initial IPO fees. That's going to be 2.5% of the share proceeds raised, which was 55 million. So we've got SPAC initial IPO underwriting fees, and we'll have other expenses. We're also going to have some deferred fees, but we'll see them later on in our SPAC process we're not going to see that this stage. So finishing up our cash box here, we've got proceeds of 55 and warrant proceeds of 3.5, but we're now going to have two different types of fees to be paid.

The first one, the SPAC initial underwriting fees, and then we'll have the other expenses sponsor management as well that needs to be paid.

So now if I add all of them up, I'll work out that the total cash our company's got is 56.5.

And just to do that again, my net proceeds to the SPAC the 55 million share proceeds adds on the 3.5 million warrants minus those two sets of fees.

Now, the equity value, each share is going to be worth $10. There's going to be 6.9 million shares. So we've got equity value of 68.8 minus the cash gets it to our EV figure. And again, I can put all of that into my diagram up at the top here just to make it a little bit clearer. So the equity that we've raised, 68.8, most of that is still cash. The remainder is our EV.

Now, you might ask yourself, where's the EV in a post IPO SPAC that hasn't bought an operating company yet? Well, we've raised lots of equity. Most of it's still left as cash, but the EV represents the management and their expertise that has some EV value in it.

Back down to the bottom, the only other thing we were asked for was the sponsor cash contribution. Remember their promote shares, they had a minimal value. They barely put anything in for that. So we ignored that. The only thing they've spent money on is the warrants. So they've spent 3.5 million and yet what is the value of their shares? Well, we know they've got 1.4 million shares each valued at 10. They've got shares worth 13.8. So it's well within their interest to make sure this IPO happens, and then we buy an operating company, get that share price up, and really improve the value of those shares.