Meteora Capital Partners, LP v. Roadzen Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE METEORA CAPITAL PARTNERS, LP, ) METEORA SELECT TRADING ) OPPORTUNITIES MASTER, LP, and ) METEORA STRATEGIC CAPITAL LLC, ) ) Plaintiffs, ) ) v. ) C.A. No. 2025-0421-JTL ) ROADZEN INC., ) ) Defendant. ) OPINION GRANTING SUMMARY JUDGMENT Date Submitted: May 20, 2026 Date Decided: August 27, 2026 Ronald N. Brown, III, Daniel P. Klusman, DLA PIPER LLC, Wilmington, Delaware; Aaron T. Morris, Andrew W. Robertson, William Spruance, MORRIS KANDINOV LLP, New York, New York; Attorneys for Plaintiffs Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, and Meteora Strategic Capital, LLC. Alexandra D. Rogin, Paul S. Seward, ECKERT SEAMANS CHERIN & MELLOTT, LLC, Wilmington, Delaware; Richard E. Schrier, SHAYNE LAW GROUP, P.C., New York, New York; Attorneys for Defendant Roadzen Inc. LASTER, V.C.  To facilitate a merger, the constituent companies entered into a side deal with an asset manager. After the merger closed, the asset manager exercised its rights under the agreements governing the side deal. The surviving company failed to comply. The asset manager filed this action against the surviving company for breach of contract. The asset manager moved for partial summary judgment establishing that its reading of the agreements is correct and seeking a decree of specific performance enforcing the surviving company’s obligation to remove transfer restrictions from shares that the asset manager holds. This decision grants the asset manager’s motion for summary judgment. The plain language of the agreement supports the asset manager’s reading. The agreement contains the rights that that asset manager seeks to enforce. The surviving company must remove the transfer restrictions. I. FACTUAL BACKGROUND The facts are drawn from the parties’ submissions on the motion for summary judgment.1 At this procedural stage, the court must view the evidence in the light most favorable to the non-movant.2 1 Citations in the form “Compl. Ex. ___ at ___” refer to exhibits filed with the complaint. Dkt. 1. Citations in the form “PX ___ at ___” refer to exhibits attached to the affidavits the plaintiffs filed with their opening brief and reply brief. Dkts 4, 32. Citations in the form “DX ___ at ___” refer to exhibits attached to the affidavits the defendant filed with its answering brief. Dkt. 30. 2 Merrill v. Crothall-Am., Inc., 606 A.2d 96, 99 (Del. 1992) (citation omitted); Brown v. Ocean Drilling & Expl. Co., 403 A.2d 1114, 1115 (Del. 1979). A. The Company, The SPAC, And The Merger Roadzen Inc. (the “Company”) is a British Virgin Islands company focused on using artificial intelligence to transform the global auto insurance market. Before the events giving rise to this litigation, the Company was privately held. Vahanna Tech Edge Acquisition I Corp. (the “SPAC”) was a special purpose acquisition company. In November 2021, the SPAC issued approximately 20 million shares in its initial public offering. After the IPO and a private placement of warrants, the SPAC’s trust account held $197.5 million in cash. In addition, the SPAC had approximately $935,000 on its balance sheet for total cash of $198.5 million.3 In February 2023, the SPAC and the Company entered into a merger agreement that contemplated a standard de-SPAC transaction (the “Merger Agreement”).4 The Company would merge with a SPAC subsidiary, the Company’s common stock would be converted into shares of the SPAC’s common stock, and the SPAC would change its name to Roadzen (the “Merger”). Through the Merger, the Company would access the public markets and receive a slug of cash from the SPAC. 3 See PX 4 at F-4. Technically, the trust account contained around $204 million in cash, but that amount included deferred commissions of $6,525,000 owed to the SPAC’s underwriters that would become payable if the SPAC completed a business combination. Those amounts were paid out once the de-SPAC transaction closed. For consistency, this decision deducts the deferred underwriter commissions when referring to amounts in the trust. For the parties, however, deferring the commissions was important, because the SPAC listed its shares on the Nasdaq Global Market. It requires net tangible assets of at least $200.1 million, and the higher figure of $204 million enabled the SPAC to clear that hurdle. 4 The Company and the SPAC amended the Merger Agreement as of June 29, 2023. The amendments are not relevant to this case. 2  The Merger Agreement required that the SPAC have at least $50 million available at closing, after giving effect to any redemptions (the “Minimum Cash Condition”). 5 After the Merger was announced, the SPAC’s public investors submitted redemption requests for 15,670,446 Class A shares. With the redemption price set at $10.76 per share, the aggregate redemptions would require paying out $168.6 million. The SPAC’s cash would drop from $198.5 million to just $29.9 million, causing the Minimum Cash Condition to fail. B. The Meteora Transaction The SPAC and the Company could have waived the Minimum Cash Condition. Instead, they turned to Meteora. 6 Founded by Vikas Mittal in 2021, Meteora specializes in event-driven investments with an emphasis on SPAC-related instruments. 5 There were other financial requirements in play, but the Minimum Cash Condition was the principal constraint on the parties’ ability to close. The SPAC’s pre-Merger articles of incorporation, for example, required that the SPAC have net tangible assets of at least $5,000,001 to close a business combination, but that requirement was never in jeopardy. The SPAC also chose to list on the Nasdaq Global Market, rather than the Nasdaq Capital Market where most SPACs list. To maintain its listing after the de-SPAC in November 2021, the post-Merger entity had to requalify for listing under IM-5101-2, which meant it had to satisfy Global Market Rule 54101(b). The clear path was Rule 5101(b)(3), which required a bid price of at least $4, a market value of listed securities of at least $75 million, and a market value of unrestricted publicly held shares of $20 million. Those requirements were not seriously at risk either. 6 Meteora participated in the transaction through three entities: Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, and Meteora Strategic Capital LLC. The differences between the entities are not important for this decision, which refers to them collectively as “Meteora.” 3  The transaction with Meteora combined two components (together, the “Meteora Transaction”). The first and more complex component was an OTC Equity Prepaid Forward Transaction (the “Forward”). That element was governed by an agreement dated August 25, 2023 (the “Forward Agreement”),7 which incorporated by reference the ISDA 2002 Master Agreement (the “Master Agreement”). 8 The second and simpler component involved Meteora committing to purchase newly issued shares from the post-Merger entity (the “Subscription”). That element was governed by a subscription agreement, also dated August 25, 2023 (the “Subscription Agreement”).9 The Forward Agreement and the Subscription Agreement (jointly, the “Transaction Agreements”) were executed together, referenced each other, and comprised the unitary Meteora Transaction. 7 DX B (cited as “FA”). The Forward Agreement is styled as a confirmation of a swap and defines itself as the “Confirmation,” as if it were the confirmation of a trade. It technically is, but it is also a lengthy and densely written contract. The term “Confirmation” is sufficiently inapt that this decision eschews it. Styling the Forward Agreement as a trade confirmation also results in the agreement looking like a multiple-page term sheet without the section numbers and paragraph designations used to navigate complex agreements. That makes it hard to cite. This decision uses the format “FA at [X], [Y]” where X is the page number and Y is the term-sheet-style label that appears opposite the operative language. 8 See PX 7 (cited as “MA”). 9 DX C (cited as “SA”). The Subscription Agreement, happily, has the look and feel of a typical contract. 4  1. The Acquired Shares Through the Meteora Transaction, Meteora committed to acquire 5 million shares (the “Acquired Shares”).10 Meteora would obtain those shares in two ways. Meteora would acquire some shares that had been submitted for redemption by purchasing them from their third-party owners (the “Recycled Shares”). Meteora would acquire other shares directly from the Company (the “Subscribed Shares”). First, under the Forward Agreement, Meteora committed to buy at least 3.5 million Recycled Shares. Without that commitment, the SPAC would have to redeem those shares at $10.76 per share for total proceeds of $168.6 million, leaving the SPAC a cash balance of $29.9 million and causing the Minimum Cash Condition to fail.11 Assuming Meteora bought 3.5 million Recycled Shares, the SPAC would only have to satisfy redemption requests totaling $130,940,000. The SPAC would therefore be left with cash at closing of $67,560,000,12 sufficient to allow the Merger to close. Second, under the Subscription Agreement, Meteora committed to acquire enough Subscribed Shares directly from the SPAC to own a combined 5 million 10 The Forward Agreement does not use this term, which this decision uses for convenience. The Forward Agreement instead uses the term “Maximum Number of Shares.” FA at 3, Maximum Number of Shares. In theory, Meteora would buy fewer shares if the purchase would result in Meteora owning greater than 9.9% of the SPAC’s common stock. Id. That was not a realistic possibility, but perhaps it was pertinent for other Meteora deals. 11$198.5 million in available cash minus $168.6 million in anticipated redemptions = $29.9 million in cash at closing. 12 $198,500,000 in available cash minus $130,940,000 in anticipated redemptions = $67,560,000 in cash at closing. 5 shares. Assuming Meteora purchased 3.5 million Recycled Shares, Meteora would acquire 1.5 million Subscribed Shares.13 Meteora agreed to pay $10 per share for the Subscribed Shares, so if Meteora bought 1.5 million Subscribed Shares, then Meteora would owe the SPAC $15 million. It might seem that the $15 million would add to the SPAC’s cash on hand at closing for the purpose of satisfying the Minimum Cash Condition, but as discussed in the next section, Meteora never actually transferred any funds to the SPAC for the Subscribed Shares. Through these two mechanisms, Meteora would end up owning 5 million Acquired Shares. If Meteora purchased more Recycled Shares, then it would purchase fewer Subscribed Shares. The Forward Agreement initially defined the term “Number of Shares” as the sum of the Recycled Shares and the Subscribed Shares, then used that defined term (subject to adjustments) in later calculations. 2. The Prepayment At first glance, the Meteora Transaction seemed to enable the Company to emerge from the Merger with more cash. After all, Meteora’s purchase of Recycled Shares negated the redemption of those shares and the outflow of cash that would have caused. Meanwhile, the Subscription Agreement implied that Meteora would pay the Company $10 for each Subscribed Share. But any near-term cash benefit to the Company was a mirage. 13 SA at 1. 6  Under the Forward Agreement, the SPAC committed on behalf of the post- Merger entity to wire Meteora a cash payment immediately after closing (the “Prepayment”). The Prepayment was based on the Prepayment Amount, defined as the full amount Meteora paid for the Subscribed Shares plus 99.5% of the redemption price multiplied by the number of Recycled Shares.14 The Forward Agreement called the 0.5% deduction the “Prepayment Shortfall.”15 By definition, the Prepayment wiped out 99.5% of any cash benefit the Company otherwise received. Assuming 3.5 million Recycled Shares and 1.5 million Subscribed Shares, the Prepayment Amount would be $52,471,700.16 14 The Forward Agreement defines the Prepayment Amount as follows: “A cash amount equal to the (a) the sum of (i) the number of Recycled Shares multiplied by the Initial Price plus (ii) the number of Subscribed Shares multiplied by the Per Share Price (as defined in the [Subscription Agreement]) less (b) the Prepayment Shortfall.” FA at 4, Prepayment Amount. The Initial Price was the redemption price of $10.76 per share. 15 The Forward Agreement defines the Prepayment Shortfall as “[a]n amount in USD equal to one-half percent (0.50%) of the product of (i) the Recycled Shares multiplied by (ii) the Initial Price, paid by Seller to Counterparty on the Prepayment Date (which amount shall be netted from the Prepayment Amount).” Id., Prepayment Shortfall. 16 The calculations are as follows: Value of Recycled Shares component = 3.5 million Recycled Shares * $10.76 = $37,660,000. Value of Subscribed Shares component = 1.5 million Subscribed Shares * 10.00 = $15,000.000. Prepayment Shortfall = 0.5% * $37,660,000 = $188,300. 7  Meteora would not receive that much in cash. The Forward Agreement called for netting out the amount Meteora committed to pay for the Subscribed Shares against the Prepayment, so Meteora never had to pay any cash to the Company for the Subscribed Shares. That deduction would reduce the Prepayment to $37,471,700.17 And that was not all. The Forward Agreement also called for the Company reimburse Meteora for legal fees of up to $50,000 and expenses of up to $0.07 per Recycled Share. 18 With 3.5 million Recycled Shares, the maximum per-share payment would be $245,000. Adding those amounts to the Prepayment, Meteora would receive $37,766,700.19 Using the figures assumed so far, the Meteora Transaction would enable the SPAC to reach closing with $67,560,000 million in cash. After wiring $37,766,700 to Recycled Shares component + Subscribed Shares component – Prepayment Shortfall = $37,660,000 + $15,000,000 = $52,660,000 – $188,300 = $52,471,700. 17 Assuming again that Meteora purchased 1.5 million Subscribed Shares at $10 per share, the calculation would be: Prepayment Amount – Calculated value of Subscribed Shares or $52,471,700 - $15,000,000 = $37,471,700. 18 Id. at 5, Reimbursement of Legal Fees and Other Expenses (entitling Meteora to “an amount equal to (a) the reasonable and documented attorney fees and other reasonable out-of-pocket expenses related thereto actually incurred by Seller or its affiliates in connection with this Transaction, not to exceed $50,000 in the aggregate and (b) expenses actually incurred in connection with the acquisition of the Recycled Shares (other than Recycled Shares held by Seller as of the date hereof) in an amount not to exceed $0.07 per such Recycled Share.”). 19 $37,471,700 + $50,000 + $245,000 = $37,766,700. 8 Meteora immediately after closing, the Company would be left with net cash from the SPAC of $29,793,300. Ironically, the net amount of $29,793,300 in cash from the SPAC would be less than the Minimum Cash Condition. It also would be less than the Company would have received from the SPAC if the parties had simply waived the Minimum Cash Condition. Without the Meteora Transaction, the Company would have emerged from closing with $29,900,000 in cash. The $106,700 delta reflects the difference between the legal fees and expense reimbursements of $50,000 and $245,000, respectively, and the Prepayment Shortfall of $188,300. If the Meteora Transaction had ended at this point, then the SPAC’s actions could be analogized to an aspiring borrower applying for a bank loan who had to meet a net worth requirement but who could not satisfy it because of a debt imminently coming due. To solve the problem, the aspiring borrower enlists a friend who agrees to pay the debt, but on the condition that the borrower repay the friend as soon as the bank funds the loan. If the borrower did not explain to the bank what was going on, the borrower would be committing bank fraud. If the borrower explained to the bank what was going on, the bank would not do the deal. Translated to the Merger, the SPAC is the borrower and Meteora is the friend. The Company is the bank, because it could veto the Meteora Transaction by refusing to proceed. For purposes of the Merger, all three knew everything that was planned. Not only that, but they disclosed the details to the SPAC’s and the Company’s stockholders. Yet everyone went through with the deal. Such is the magic of markets. 9  3. The Settlement Amount Up to this point, the description of the Meteora Transaction has only covered what would happen before and immediately after closing. So far, Meteora has made out quite well. Immediately after closing, it would own 5 million shares and would have received a payment of $37,766,700. The Meteora Transaction did not stop there. After closing, the deal got better for Meteora. The principal commitment Meteora made in the Forward Agreement was to pay the Company an amount in cash defined as the “Settlement Amount.”20 Meteora would make the payment based on a future “Valuation Date,” scheduled by default to occur 18 months after the Merger closed.21 The Forward Agreement gave Meteora the right to accelerate the Valuation Date, either after specified acceleration events or unilaterally in its “sole discretion.”22 20 See id. at 5, Settlement Amount. 21 See id. at 2, Valuation Date. The cash payment is not actually due on the Valuation Date. Instead, the Valuation Date kicks off a “Valuation Period,” defined as the time required for 10% of the total volume traded—excluding any volumes traded during opening and closing auctions—to equal the Number of Shares less any Subscribed Shares that were not yet freely tradeable plus something called the “Estimated Maturity Shares.” Id. at 5–6, Valuation Period. The Forward Agreement never defines “Estimated Maturity Shares,” and it appears nowhere else in the contract, suggesting a mistaken carryover from another deal. Payment only becomes due on the Cash Settlement Payment Date, defined as the tenth local business day after the end of the Valuation Period. Id. at 6, Cash Settlement Payment Date. For simplicity, this decision ignores that complication. 22 See id. at 2, Valuation Date. 10  From the Company’s standpoint, the prospect of receiving the Settlement Amount held out the possibility that the Company would get more cash on the Valuation Date than it paid to Meteora in the Prepayment. In that happy scenario, the Company could come out ahead. In reality, the Forward Agreement stacked the deck in favor of Meteora, giving the Company only one narrow and highly improbable path to upside. The Forward Agreement defines the Settlement Amount as a cash payment equal to a calculated price based on the Valuation Date (the “Settlement Price”)23 multiplied by the difference between the “Number of Shares” and the “Unregistered Shares.” 24 The Settlement Price generally would be “the volume weighted daily VWAP Price over the Valuation Period.” 25 The Forward defines “VWAP Price” as “[f]or any scheduled trading day, the volume weighted average price per share as reported on the relevant Bloomberg Screen.” 26 If Meteora exercises its right to accelerate the Valuation Date unilaterally, without any acceleration event, the Settlement Price would be the closing price on the trading day before the Valuation Date.27 23 See id. at 5, Settlement Amount. The Forward Agreement does not contain an analogous term, but having one is convenient. 24 See id. 25 Id. 26 Id. at 2, VWAP Price. 27 See id. at 5, Settlement Amount. The definition of Cash Settlement Payment Date technically does not accommodate this scenario. See id. at 6, Cash Settlement 11  The VWAP Price formula inferably favors Meteora over a single-day pricing mechanic. By using a valuation window, Meteora has the ability to affect the price through market activities during the window, such as by selling shares. The VWAP Price formula also excludes opening and closing auctions, where institutions are active and much of the daily trading takes place. As defined, the VWAP Price formula enables Meteora to affect the weighted average to a greater degree by selling during quieter mid-trading-day periods. The Number of Shares starts out as 5 million, reflecting all of the Acquired Shares. Meteora could reduce the Number of Shares through the Early Termination Option outlined below. The parties bargained for the Company to register all of Meteora’s shares, so the number of Unregistered Shares was expected to be zero. How might the Company come out ahead? Under the assumptions used to date, the Company would wire $37,766,700 to Meteora immediately after closing. The Company wired that amount based on Meteora owning 5 million shares, so the payment represented value of $7.49 per share.28 If the Number of Shares never fell, Payment Date. It seems likely that the Forward Agreement intends for payment to be due on the tenth local business day after the Valuation Date in this setting too. 28 Recall that the Prepayment includes legal fees and expenses and excludes the value of the Subscribed Shares. The amount of the Prepayment attributable to the Recycled Shares is $37,471,700. The amount excluded for the Subscribed Shares is $15,000,000. $37,471,700 / 5,000,000 = $7.49 Technically, the Prepayment and Settlement Amount are formula-based calculations. Using a per-share value nevertheless provides a convenient way to 12 and if the Settlement Amount resulted in a higher weighted average price, the Company would benefit. The opposite is true for Meteora. Unfortunately for the Company, Meteora’s rights under the Forward Agreement eliminated any realistic possibility that the Company would benefit from meaningful upside. For starters, the Forward Agreement calls for the Company to pay Meteora an amount called the “Settlement Amount Adjustment,” defined as $1.25 multiplied by the Number of Shares.29 The Settlement Amount Adjustment functions as a fee of $1.25 paid to Meteora for each share remaining in the Number of Shares on the Valuation Date. Assuming the Number of Shares remains at 5 million, Meteora would receive $7.25 million.30 Notably, the formula for the Settlement Amount Adjustment does not exclude Unregistered Shares. If there are Unregistered Shares, Meteora pays nothing for them in the Settlement Amount, effectively getting them for free. Meteora still perceive the economic substance of the trade and the Company’s give and get under the Forward. 29 FA at 5, Settlement Amount Adjustment. The formula for the Settlement Amount Adjustment defines the payment as “[a] cash amount equal to the product of (1) (w) the Number of Shares as of the Valuation Date less (y) the number of Terminated Shares as of the Valuation Date less (y) the number of Shortfall Sale Shares, multiplied by (2) $1.25.” Id. This decision discusses Terminated Shares and Shortfall Sale Shares below. See infra, Part I.B.3.a (The Early Termination Option) & Part I.B.3.c (Shortfall Sales). The formula appears to contain an error in that the definition of Number of Shares already accounts for Terminated Shares, so technically the formula calls for deducting them twice. The illustrative calculations in this decision assume the parties intended a single deduction and accounts for that in the Number of Shares. 30 FA at 5, Settlement Amount Adjustment. 13 receives $1.25 per share for them in the Settlement Amount Adjustment. In effect, the Company is paying Meteora, rather than Meteora paying the Company, to buy those shares.31 Slick. And there is more. Meteora possesses three additional rights that make it realistically impossible for the Company to come out ahead. The only real question is how much less Meteora will pay the Company than it received in the Prepayment. a. The Early Termination Option The Forward Agreement authorizes Meteora to designate shares as “Terminated Shares” and remove them from the Number of Shares used to calculate the Settlement Amount (the “Early Termination Option”).32 Meteora can exercise the Early Termination Option at any time and from time to time. If Meteora exercises the Early Termination Option, then Meteora must immediately pay the Company an amount equal to the “reset price” for each share (the “Early Termination Obligation”). 31 The Forward Agreement achieves this result by treating the Settlement Amount Adjustment not as an adjustment to the Settlement Amount, but as a separate payment. The Forward Agreement does provide, however, that if the Settlement Amount Adjustment would result in the Company owing a net payment to Meteora, then no payment is due. The Settlement Amount Adjustment therefore cannot apply if the per share price used to calculate the Settlement Amount falls below $1.25. The Settlement Amount Adjustment also does not apply if the Meteora unilaterally accelerates the Valuation Date. Id. 32 Id. at 6, Optional Early Termination. 14 The reset price starts at the redemption price of $10.76 but adjusts downward if the Company issues additional shares at a lower price.33 The Early Termination Option enables Meteora to capture all of the upside if the Company’s shares trade above $10.76 per share. Assume (i) the reset price never adjusts downward and (ii) the Company’s shares trade at $13.76. If Meteora hypothetically sells 100,000 shares, it generates $13,760,000 in gross proceeds. Meteora can exercise the Early Termination Option for those shares and pay the Company $10,760,000, reflecting the Early Termination Obligation of $10.76 per share. The Number of Shares declines by the number of Terminated Shares, so Meteora will not have to pay for those shares on the Valuation Date. Meteora pockets $3,000,000 (ignoring transaction costs). As a practical matter, the Early Termination Option eliminates any possibility that Meteora could pay the Company more than $10.76 per share on any Valuation Date. If the Valuation Date does not accelerate, then Meteora can see it coming months away. If the Valuation Date accelerates, then Meteora can pick when it will occur. And Meteora can sell shares during the Valuation Period or engage in other market activities (other than short sales)34 that affect the VWAP Price. If Meteora thinks the Settlement Price will exceed $10.76, then Meteora can exercise the Early 33 Id. at 2, Reset Price. The price does not adjust upward if the Company issues shares at a higher price. That asymmetry benefits Meteora. 34 See infra, Part II.D (explaining that after the Merger closed, the lone restriction on Meteora’s trading barred Meteora from engaging in short sales). 15 Termination Option and pay only $10.76 per share. If Meteora thinks the Settlement Price will be less than $10.76, then Meteora can hold the shares through the Valuation Date and pay the lower Settlement Price. In that setting, Meteora also receives the Settlement Amount Adjustment of $1.25 per share.35 If Meteora acted rationally, then the best the Company could hope for would be to receive $10.76 for as many shares as possible under the Early Termination Option. After effectively paying Meteora $7.49 per share immediately after closing, the Company would net $3.27 per share. If Meteora exercised the Early Termination Option for all of the Acquired Shares, the Company would come out ahead in absolute terms by $16,350,000. Those proceeds would likely only arrive after a Valuation Date that occurred 18 months after closing, making the real return less because of the time value of money. b. Accelerating The Valuation Date An equally important set of rights under the Forward Agreement gives Meteora optionality around the Valuation Date. The Forward Agreement contains triggers that allow Meteora to accelerate the Valuation Date without losing the Settlement Amount Adjustment, including: 35 The Settlement Amount Adjustment does not apply if Meteora chooses to accelerate the Valuation Date unilaterally and an acceleration trigger has not occurred. See FA at 2, Valuation Date (“In the event the Valuation Date is determined pursuant to clause (c), the Settlement Amount Adjustment will not apply in calculation of the Settlement Amount” and authorizing Meteora to accelerate the Valuation Date under that settling in its “sole discretion”). 16 • If the Company’s stock price trades below $1 per share for any thirty trading days during a forty-five day trading window; • If the Company’s stock is delisted; • If the Company failed to register “all shares held by [Meteora]” in accordance with the Forward Agreement” (a “Registration Failure”).36 Meteora can also accelerate the Valuation Date unilaterally, in its sole discretion, but in that setting Meteora gives up the Settlement Amount Adjustment.37 Accelerating the Valuation Date potentially creates significant value for Meteora. As a general matter, it closes the Forward earlier, increasing Meteora’s internal rate of return. Specific to the Forward, the formula for the Settlement Amount calls for deducting Unregistered Shares from the Number of Shares. The Forward Agreement defines “Unregistered Shares” as any Acquired Shares that were neither registered for resale under an effective registration statement nor eligible to be resold freely under Section 144.38 As a practical matter, the Recycled Shares were already freely tradable, so the definition only applies to the Subscribed Suares. The deduction for Unregistered Shares means that Meteora would not have to pay anything to the Company for the Subscribed Shares if they remained Unregistered Shares on the Valuation Date. Meteora would get those shares for free. 36 See FA at 2, Valuation Date. 37 See id. Also, the price used to calculate the Settlement Payment in that scenario is the prior trading day’s closing price, rather than the VWAP Price. Id. As discussed previously, the VWAP Price likely favors Meteora. 38 See id. at 5, Settlement Amount. 17 But as noted previously, the same shares remain in the calculation for purposes of the Settlement Amount Adjustment, so the Company pays Meteora $1.25 for each Unregistered Share. The Forward Agreement contains requirements making it likely that Meteora could declare a Registration Failure and accelerate the Valuation Date.39 In a five- paragraph, 1,898-word section titled “Share Registration,” the Forward Agreement established two different registration requirements.40 The first was prominent and required notice from Meteora (the “Notice-Based Registration Requirement”). The other was buried later in the provision and required registration based on specific post-closing deadlines (the “Time-Based Registration Requirement”). The Notice-Based Registration Requirement appears in the first sentence of the first paragraph of the section titled “Share Registration.” It requires the Company to use commercially reasonable efforts to file a registration statement at its sole cost and expense “[w]ithin 30 days after receipt of a written request” from Meteora.41 The Time-Based Registration Requirement does not appear until midway through the 551-word second paragraph of that same section. That four-sentence paragraph starts by prohibiting the Company from identifying Meteora as a statutory 39 See id. at 2, Valuation Date (defining “Valuation Date” as the earlier of 18 months after closing or the date specified by Meteora in a written notice following the occurrence of, among other things, “a Registration Failure”). 40 See id. at 9–12, Share Registration. 41 Id. at 9. 18 underwriter, next gives Meteora the option to remove its shares from the registration statement if the SEC requires it, and next addresses the Company’s obligation to keep the registration statement in effect. Then comes a 432-word third sentence. Nestled in that linguistic monstrosity are two provisos. The second states: [P]rovided further, that it shall be a “Registration Failure” if (a) the Registration Statement covering all of the shares described above in this section is not declared effective after the 90th calendar day (or 120th calendar day if the Commission notifies the Counterparty that it will “review” the Registration Statement) after the Trade Date (provided however, that in the event the Commission issues any written rules related to special purpose acquisition companies that would reasonably effect [sic] the timing of the effectiveness of the Registration Statement and such rules become effective following the date hereof and prior to the effectiveness of the Registration Statement such number of calendar days in this subsection (i) shall be changed to the 120th calendar day) (or 180th calendar day if the Commission notifies the [Company] that it will “review” the effectiveness of the Registration Statement) . . . .42 That easily missed obligation required an effective registration statement by the 90th day after the Trade Date of August 25, 2023, resulting in a deadline November 23, 2023. The final sentence of that paragraph introduces a qualifier that states: “Notwithstanding the foregoing, no Registration Failure will be deemed to have occurred with respect to any Shares that may be transferred at such time under Rule 144 . . . .”43 For a successor to a SPAC like the Company, previously unregistered shares like the Subscribed Shares remain restricted and cannot be transferred under Rule 42 Id. at 10. 43 Id. 19 144 until at least one year after the Merger closes.44 It was thus highly likely that Meteora would be able to declare a Registration Failure unless the Company beat the deadlines for the Time-Based Registration Requirement. Sneaky. c. Shortfall Sales A final and less significant means by which Meteora could secure value involves “Shortfall Sales.” 45 This mechanism allows Meteora to recapture the Prepayment Shortfall through open market sales. Starting on the 180th day after the Trade Date of August 25, 2023, the Forward Agreement allows Meteora to sell shares in the open market, without paying any amount to the Company, up to the point where the total proceeds equal the Prepayment Shortfall. 46 The Forward Agreement requires Meteora to notify the Company when it has exercised that right (“Shortfall Sale Shares”).47 Under the assumptions used to date, the Prepayment Shortfall would be $188,300. Starting on February 21, 2024, Meteora could engage in Shortfall Sales to recover that amount. The higher (lower) the price, the fewer (more) shares Meteora could sell. 44 See 17 C.F.R. § 240.144(i)(2) (setting a one year holding requirement for unregistered securities in companies that were previously business-combination- related shell companies to be eligible for transfer under Rule 144). 45 FA at 4, Prepayment Shortfall Consideration; id. at 6, Shortfall Sales. 46 Id. at 4, Prepayment Shortfall Consideration. 47 Id. at 6, Shortfall Sales. 20  Meteora argues that Shortfall Sales reduce the Number of Shares, 48 but nothing in the Forward Agreement calls for that result. Shortfall Sale Shares are deducted from the Settlement Amount Adjustment, but not from the Number of Shares or the Settlement Amount. The authorization for Shortfall Sales has two principal effects. First, it ensures that the Prepayment Shortfall only looks like a detriment to Meteora. Although deducted from the Prepayment, Meteora can make up that amount through Shortfall Sales. Second, the provision governing Shortfall Sales creates an opportunity for Meteora to receive more shares. The Company covenanted that until the later of 60 days after closing and Meteora’s recapture of 100% of the Prepayment Shortfall, it would not “offer or agree to sell” any shares or securities convertible into shares (the “No-New-Issuance Covenant”). 49 If the Company breached the No-New-Issuance Covenant, then the Company had to deliver to Meteora a make-whole amount to compensate for any declines in the price at which Meteora subsequently sold Shortfall 48 Dkt. 4 at 11. 49 See FA at 7, Shortfall Sales. The covenant contains exceptions, generally for issuances unrelated to raising capital. The one exception for raising capital authorizes the Company to sell “any Shares issuable pursuant to any convertible offering (or series of convertible offerings) by the Counterparty up to $50,000,000 in the aggregate that is entered into within two (2) months following the consummation of the [Merger].” Id. 21 Shares.50 The Company could pay the amount in cash or in additional shares valued at 90% of the VWAP Price.51 Recall that the Time-Based Registration Requirement obligates the Company to register the Subscribed Shares within 120 days or risk a Registration Failure. That deadline would run before Meteora could begin executing Shortfall Sales. If the Company hustled to file a registration statement that complied with the Time-Based Registration Requirement but offered to sell new shares of its own in addition to the Subscribed Shares, then the Company would trip the No-New-Issuance Covenant and have to issue more shares to Meteora. Devious. 4. Summing Up As this description shows, the Meteora Transaction is highly favorable to Meteora. At its core, the structure operates like a synthetic long put option. That t