Hernán Kazah Says SPACs Remain On the Radar Even if MEKA Was Shut Down

Kaszek Ventures’ co-founder says investors on good tech companies prefer to wait for the VC market and valuations to improve

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Bloomberg Línea — Kaszek Ventures co-founder and managing partner Hernán Kazah says that the model of SPACs remains on his radar as an IPO alternative for Latin American startups even after MEKA, the blank check company he launched by him and MercadoLibre’s (MELI) former and current executives was dissolved last month.

In early June, MEKA, a SPAC created by Kaszek and Mercado Libre, delisted its shares from the market and refunded shareholders who had put money into the compan’s IPO after failing to find a Latin American technology company to merge with and subsequently list in New York.

MEKA managed to raise $287 million on Nasdaq in an IPO in 2021, a figure many considered enough to bring another company to the stock markets, but failed to do so.

“There are some challenging things ahead and we don’t have a concrete plan at the moment. But the problem was not the [SPAC] vehicle itself,” Kazah told Bloomberg Línea.

Kazah says the “blank check company” model, questioned by many investors, is still valid. In his view, combination teams like his fund Kaszek and MercadoLibre could help good technology companies to reach the public markets under better conditions.

Created in the United States more than two decades ago, special-purpose acquisition companies (SPACs), also referred to as a ‘blank check companies’, were popular among Latin American companies over the last two years. Besides MEKA, other SPACs launched in the region were LatAmGrowth (LATGU), which raised $130 million, XPAC (XP’s broker SPAC), which raised $200 million, Valor Latitude, Dila Capital, and SoftBank LDH Growth.

As a market rule, this type of companies exist to merge with another firm and serve as a vehicle to go public within two years. Otherwise, the SPAC dissolves and, as is the case of MEKA, the investors get their money back.

“We closed the SPAC two weeks ago because we couldn’t find the target we were looking for,” Kazah said.

“When we started MEKA, there was a super bullish market and at that point a logical value [for mergers] ended up being surpassed by offers from private investors who paid a slightly higher valuation for investments in startups. And then the opposite happened, the market closed and got bearish,” said the long-time startup investor.

MEKA was looking for a company in the technology area in Latin America. According to Kazah, entrepreneurs of good companies with resources, were reviewing their projects and had no plans to sell shares at a time when they considered that the price would be unfair, according to the executive.

“[First] the market was overpriced and we would bid pricing that private investors thought was too low. And then the market got too cold and the entrepreneurs of viable companies preferred to hold out [without a merger to make a listing possible],” he said.

MEKA was created by Mercado Libre co-founder Hernan Kazah and the company’s former CFO Nicolas Szekazy, who left the e-commerce giant in 2011 to found the venture capital investment firm Kaszek.

Kazah and current Mercado Libre CFO Pedro Arnt were MEKA’s co-CEOs, while Mercado Libre co-founder and CEO Marcos Galperin and Szekazy were amongst SPAC’s special advisors.

MEKA reported on June 5 the dissolution and wind-down of the company. The firm said it would redeem all of its Class A common stock, par value $0.0001, that was issued in its IPO, at a per-share buy-back price, payable in cash, equal to the aggregate amount then deposited in the trust account.

The biggest loss from the dissolution of the vehicle was for the sponsors: Kaszek and Mercado Libre.

Scores of SPACs have canceled planned IPOs or refunded their investors in recent months, in a list that included SVF Investment, overseen by SoftBank Investment Advisers, which also manages the Japanese conglomerate’s Vision Fund. Merger plans by golfer Tiger Woods’ SPAC were also cancelled.

Yet there are companies that managed to hit their target, as revealed by a Bloomberg Línea report in March, noting the successful merger of Utah-based Mercato Partners’ SPAC with Brazilian startup Nuvini, and HPX Corp. of Carlos Augusto Piani, Rodrigo Xavier, and Bernardo Hees with Emergência Participações of Ambipar.