Sort-of IPO planned for Yubico with merger. SPACs get more attractive

Another identity authentication firm is turning to a pseudo-IPO to generate funds.

Multifactor access security key firm Yubico is merging with ACQ Bure, a special purpose acquisition company, or SPAC.

The transaction values Yubico at 8.3 billion Swedish kronor (US$800 million), an enterprise-value-to-sales multiple of 5.2, a figure executives feel is defensible. ACQ will issue up to 51.6 million and up to SEK 3.7 billion ($360 million) as merger consideration.

The buyout should be final this fall, at which point Yubico’s five largest shareholders are expected to be Bure Equity (which created ACQ Bure), Yubico co-founder Stina Ehrensvärd, AMF Tjänstepension and AMF Fonder, Andreessen Horowitz and the Fourth Swedish National Pension Fund.

Moves like this are not the last resort when a company needs cash, but still, it is not a great look.

A SPAC is a tool that a private company use to get funding when its revenues are insufficient and/or economic conditions conspire to pinch off more-common funding options for most firms.

According to a press release, Yubico is merging with ACQ after which the combined public company will be known as Yubico and listed on Nasdaq Stockholm. Yubico CEO Mattias Danielsson will be CEO of the combined company.

A critical product for Yubico, called YubiKey, is cybersecurity against stolen credentials, a market that even if bruised, is not going away. By some measures, the company is doing well.

The company’s 2022 operating profit was SEK 215 million ($21 million) on net sales of SEK 1.5 billion ($150 million). That sales total was a record for Yubico, according to the company.

According to Yubico, the newly combined firm “is expected to have a strong financial position which exceeds the current net cash position in Yubico.”

The boards of ACQ and Yubico reportedly agree that annual order intake will grow an average of 25 percent over the next five years. Earnings before interest and taxes will grow 20 percent.

How a SPAC works

One or more executives, often called promoters, create a public company (that in reality is just a fund). At least in the United States, the promoter cannot form a SPAC with the intention of acquiring with a specific company, although that rule has been broken over the years.

The promoter had two years to buy a company, or they have to give back the money. Along comes an opportunity – a digital ID company that cannot go public or entice venture capital.

If the funders agree with the promoter that this is a good investment, in they go. The promoter leaves with fees and other incentives.

Yubico’s previous owners will get money for operations with different strings attached than they would with a straight IPO. They also get share dilution and shareholder headaches. What they do not get is the prestige, often fleeting, of an IPO. Offsetting that is the knowledge that SPACs are better than insolvency, something that seems unlikely in Yubico’s case.

Face and palm biometric startup Elenium Automation last week announced it was considering looking for a SPAC.

Article Topics

Andreessen Horowitz  |  biometric authentication  |  biometric security key  |  investment  |  stocks  |  Yubico