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Streaming service Slacker is looking to become the fifth music company to go public by merging with a special purpose acquisition corporation, or SPAC — and the clock is ticking. Its owner, LiveOne, has signed a letter of intent to combine Slacker, which it estimates will have a valuation of $160 million, with Roth CH Acquisition V Co.

But like many other SPAC deals, Slacker’s merger with Roth has faced challenges. For starters, many of Roth’s shareholders have opted not to take part in the Slacker deal. Roth experienced $93 million in redemptions in the second quarter, according to its latest 10-Q filing, as shareholders opted for a $10 redemption value rather than roll the dice on a music streaming company that expects to finish 2023 with 3.75 million free and paying users. That leaves Roth with $26.4 million to contribute to Slacker once the deal is done.

To shore up support ahead of a merger, Roth entered into non-redemption agreements with shareholders representing 2 million shares. Those shareholders agreed not to redeem public shares and will receive a payment of 4 cents per share per one-month extension, according to a Roth filing with the SEC.

Starting a SPAC gives the founders a limited window to put investors’ money to good use or return the funds to shareholders. Running out of time to close a deal with Slacker, in May, Roth received shareholder approval to extend the merger deadline by up to six months. The extension ends Dec. 4 — barely more than three months away. “It seems [like a] very tight [timeline],” says Megan Penick, an attorney at Michelman & Robinson. “I mean, conceivably they could still complete it. It just seems that they must still be conducting their due diligence and coming to terms on how the deal is going to be structured.”

A SPAC effectively puts the cart before the horse: It raises money through an initial public offering (IPO) before setting about finding an appropriately sized, high-growth company to take public. (Pursuing a target before the IPO, as Digital World Acquisition Corp. did with Donald Trump’s Truth Social, is against the rules.) The target company is spared the long and costly process typically incurred when taking a company public. The SPAC founders get a stake in the post-merger company and investors benefit when the post-merger stock rises above the redemption price. The number of SPAC IPOs jumped from 55 in 2019 to 610 in 2021, according to S&P Global Market Intelligence, while money raised increased from $14 billion in 2019 to $160.8 billion in 2021.

Overall, however, SPACs have failed to live up to their lofty expectations. “Too many SPACs, not enough suitable targets,” says Penick. After 265 SPACs closed mergers in 2021, only 187 did so in 2022. And while there were 100 SPAC deals in the first half of 2023, the value of the deals amounted to just one-tenth of the deals closed in the first half of 2021, according to S&P Global.

Faced with a shortage of good candidates, many SPACs have opted to dissolve and return capital to shareholders. Music Acquisition Corporation, co-founded by former Geffen Records president Neil Jacobson, dissolved in 2022 after raising $230 million in a 2021 IPO. Liberty Media did the same with its SPAC, Liberty Media Acquisition Corp., in November, more than two months before the deadline to complete a deal or return to shareholders the $575 million it raised in an IPO. “Frankly, getting an extension wasn’t worth it, given we had nothing on the table that was attractive enough for us to take [a] look,” said Liberty Media president and CEO Greg Maffei.

Perhaps the biggest problem with SPACs is they haven’t been a good investment for the original investors. Abu Dhabi-based music streamer Anghami has fallen 91% to 89 cents since merging with Vista Media Acquisition Corp. in February 2022. French music streamer Deezer has fallen 76% to 2.06 euros since merging with IPO2 in July 2022. And New York-based publisher and label Reservoir Media has fallen 43% to $5.45 since merging with Roth CH Acquisition II — the same team behind the SPAC that intends to merge with Slacker — in July 2021. All three stocks had a $10/10 euro IPO price.

Worse yet, Alliance Entertainment ended up trading over the counter in February after a high number of redemptions left its partner SPAC, Adara Acquisition Corp, with just $1.7 million to contribute to the merged company — probably not enough to cover investment banking and legal fees for the transaction. That also left Alliance short of the New York Stock Exchange’s float requirements. “The issue of having enough market volume and enough market cap to remain a listed security is a challenge that a lot of SPACs run into,” says Michael Poster, an attorney at Michelman & Robinson. Alliance has dropped 75% to $2.02 since it merged with Adara in February.

Slacker didn’t respond to a request for comment on the deal.