Altimeter Growth Corp. 2 (AGCB) is a blank check company, or special purpose acquisition company (SPAC), that was formed in October 2020 with the goal of identifying and completing a business combination with one or more businesses or entities. As a SPAC, Altimeter Growth Corp. 2 does not currently have any operations and has not generated any revenue to date. The company's sole focus is to find a suitable target company to acquire and take public.
Financials
The company's financial performance has been limited, as expected for a SPAC in the pre-business combination stage. For the year ended December 31, 2022, Altimeter Growth Corp. 2 reported a net loss of $676,996 and no revenue. The company's operating cash flow and free cash flow for the year were both negative $1,066,544, as it incurred expenses related to its search for a suitable acquisition target.
In the third quarter of 2022, Altimeter Growth Corp. 2 reported a net income of $1,773,530, driven by $2,034,887 in interest earned on the company's marketable securities held in the trust account. However, this was offset by $231,274 in operating expenses and a $30,083 loss on the fair value of the company's forward purchase agreement (FPA) asset. For the first nine months of 2022, the company reported net income of $1,366,599, with $2,710,779 in interest income and a $396,409 loss on the FPA asset.
Initial Public Offering
Altimeter Growth Corp. 2 completed its initial public offering (IPO) in January 2021, raising $450 million by selling 45 million Class A ordinary shares at $10 per share. The company also sold 1.1 million private placement shares to its sponsor for $11 million. The proceeds from the IPO and private placement are being held in a trust account and will be used to fund the company's future business combination.
Risks and Challenges
As a SPAC, Altimeter Growth Corp. 2 has until January 2023 (or April 2023 if it has executed a letter of intent, agreement in principle, or definitive agreement for a business combination by January 2023) to complete a business combination. If the company fails to do so, it will be required to redeem 100% of the outstanding public shares at a per-share price equal to the amount in the trust account.
The company's business model and the SPAC market in general have faced increased scrutiny from regulators in recent months. In March 2022, the SEC proposed new rules that could significantly impact SPACs, including enhanced disclosure requirements and potential changes to the accounting and financial reporting standards applicable to these entities. If adopted, these rules could make it more challenging for Altimeter Growth Corp. 2 to complete a successful business combination.
Recent Developments
Despite these regulatory headwinds, the company remains focused on identifying a suitable target and completing a transaction. In its most recent quarterly report, Altimeter Growth Corp. 2 stated that it continues to evaluate potential acquisition targets and is in various stages of discussion with several companies. However, the company has not yet entered into a definitive agreement for a business combination.
Liquidity
Altimeter Growth Corp. 2's liquidity position remains strong, with $452.7 million in cash held in the trust account as of September 30, 2022. The company also had $46,196 in cash held outside the trust account at the end of the third quarter. To fund any working capital needs or transaction costs related to a business combination, the company's sponsor or its affiliates may provide additional loans, which could be convertible into shares of the post-combination entity.
The company's financial ratios reflect its pre-business combination status. As of September 30, 2022, Altimeter Growth Corp. 2 had a current ratio of 0.93 and a quick ratio of 0.46, indicating a relatively strong liquidity position. However, the company's debt ratios are not applicable, as it has no outstanding debt.
Valuation
In terms of valuation, Altimeter Growth Corp. 2's shares closed at $10.06 on September 30, 2022, slightly above the $10.00 per share IPO price. The company's price-to-book ratio was 1.19 at the end of the third quarter, suggesting the shares are trading at a modest premium to the company's net asset value.
Outlook
It's important to note that as a SPAC, Altimeter Growth Corp. 2's future performance and valuation will be heavily dependent on the success of its eventual business combination. The company's ability to identify and acquire a high-quality target, negotiate favorable terms, and integrate the acquired business effectively will be crucial in determining the long-term prospects for the combined entity.
Conclusion
Investors should closely monitor Altimeter Growth Corp. 2's progress in finding a suitable acquisition target, as well as any updates on the regulatory landscape for SPACs. The company's ability to navigate the uncertain environment and complete a value-enhancing business combination will be key to its future success.