Blank Check Company Navigates Challenges to Complete Business Combination

Spring Valley Acquisition Corp. II is a blank check company, also known as a special purpose acquisition company (SPAC), that was formed in 2021 with the goal of merging with or acquiring another business. The company recently provided an update on its financial performance and progress towards completing an initial business combination.

Overview and Initial Public Offering

Spring Valley Acquisition Corp. II was incorporated in the Cayman Islands in January 2021 with the purpose of finding and merging with another company, known as the “initial business combination.” The company raised $230 million through an initial public offering in October 2022, selling 23 million units at $10 per unit. Each unit consisted of one Class A ordinary share, one right to receive one-tenth of a Class A ordinary share, and one-half of one redeemable warrant.

The company also sold 13.35 million private placement warrants to its sponsor, Spring Valley Acquisition Sponsor II, LLC, for $13.4 million. The net proceeds from the IPO and private placement, totaling $235.8 million, were placed in a trust account to be used for the initial business combination.

Timeline and Shareholder Approvals

Spring Valley Acquisition Corp. II initially had 15 months from the IPO closing to complete a business combination, meaning it had until January 2024. However, in January 2024, the company’s shareholders approved an amendment to extend the deadline to October 2025.

In November 2024, shareholders further approved another amendment to change the business combination deadline to October 2025. In connection with this extension, the company’s sponsor agreed to make monthly contributions of up to $150,000 to the trust account. However, in October 2024, the board determined that these monthly contributions were no longer required.

Financial Performance

As a blank check company, Spring Valley Acquisition Corp. II has not yet generated any operating revenue. Its financial activity has been focused on the IPO, trust account management, and expenses related to searching for a business combination target.

For the three months ended March 31, 2025, the company reported net income of approximately $0.1 million, which consisted of $0.3 million in investment income offset by $0.2 million in general and administrative expenses.

For the three months ended March 31, 2024, the company reported net income of approximately $1.9 million, which consisted of $2.2 million in investment income offset by $0.3 million in general and administrative expenses.

Going Concern and Liquidity

As of March 31, 2025, the company had $0.3 million in cash outside the trust account and a working capital deficit of $1.3 million. Management has expressed substantial doubt about the company’s ability to continue as a going concern if it is unable to complete a business combination before the October 2025 deadline.

The company’s sponsor has provided financing to date through a $269,000 loan and the potential for up to $1.5 million in working capital loans. However, there is no committed financing in place, and the company’s plans to complete a business combination before the deadline are not guaranteed.

Risks and Uncertainties

Spring Valley Acquisition Corp. II faces several external risks that could impact its ability to complete a business combination. These include the ongoing military conflicts in Ukraine and Israel, as well as changes to international trade policies and tariffs that could affect potential merger targets.

The company also notes that the specific impact of these events on its financial condition, results of operations, and cash flows is not yet determinable. The unaudited financial statements do not include any adjustments that may be necessary if the company is unable to complete a business combination.

Contractual Obligations and Accounting Policies

The company has entered into several agreements related to its operations, including an administrative services agreement with its sponsor and an underwriting agreement with its IPO underwriters. It also has deferred legal fees and non-redemption agreements with certain shareholders.

Regarding accounting policies, the company has classified its redeemable Class A ordinary shares as temporary equity, as they contain redemption features not solely within the company’s control. The company also accounts for its derivative financial instruments, such as the warrants and rights issued in the IPO, in accordance with relevant accounting standards.

Outlook and Conclusion

Spring Valley Acquisition Corp. II faces significant challenges in completing a business combination before its October 2025 deadline. The company has secured extensions from shareholders and financing from its sponsor, but its ability to find a suitable merger target and close a deal remains uncertain.

The company’s financial performance to date has been limited, as is typical for a blank check company prior to a business combination. However, the company’s reliance on external factors and lack of committed financing raise substantial doubt about its ability to continue as a going concern.

Investors in Spring Valley Acquisition Corp. II should closely monitor the company’s progress towards a business combination, as the outcome will largely determine the fate of their investment. The company’s management team will need to navigate a complex set of risks and uncertainties to have any chance of delivering value to shareholders.