What Happens If a SPAC Merger Fails? Circle's $44.2 Million Detour

Circle's 2022 income statement contains a line called merger termination expenses. The amount is $44,194,000. Its operating loss from continuing operations that year was $38,116,000.⁸

Subtract one from the other and the year rearranges itself. Without the cost of a merger that never closed, Circle's 2022 operations would have produced roughly $6.1 million of operating income instead of a $38.1 million loss. A transaction that delivered no cash, no listing, and no shareholders was the difference between the two versions of the year.

That is the part founders underestimate. A SPAC deal that dies does not simply revert you to the status quo with a bruise. It leaves an expense line, a set of terminated financing commitments, obligations to the counterparty that survive the agreement itself, and employees holding equity awards whose vesting terms quietly depended on a closing that did not happen.

Everything below comes from filings made by Concord and by Circle between 2021 and 2025, covering the Irish scheme and Delaware merger structure the two companies used. Treat it as an explanation of mechanisms rather than advice about your own transaction, and take the specific clauses to counsel who will read your actual agreement.

On July 7, 2021, Concord Acquisition Corp signed a business combination agreement with Circle Internet Financial Limited, an Irish company. Circle's shareholders would exchange their shares for stock in a new Irish holding company under a court-approved scheme of arrangement, and a merger sub would then merge into Concord. The agreement set Circle's company equity value at $4,500,000,000, adjusted for later issuances and non-converting debt. Separate subscription agreements committed investors to purchase $415 million of Concord stock at $10.00 per share on closing.¹

Then came February 16, 2022. Concord's 8-K describes the sequence in the flat register these documents prefer: the business combination agreement was terminated, the sponsor letter agreement and the $415 million subscription agreements were terminated in accordance with their terms, and immediately afterward the parties signed a new transaction agreement. The new company equity value was $9,000,000,000. The filing described the terminated subscriptions and disclosed no replacement subscription agreements.²

Read those two paragraphs together and the exchange becomes visible. Circle's stated equity value doubled on the same afternoon its committed third-party capital went from $415 million to nothing disclosed. Only one of those two numbers is a good afternoon.

The new agreement also added machinery. Up to 20% of the combined company's fully diluted shares were reserved as earnout shares for existing Circle holders, released in four tranches at trading-price hurdles of $12, $14, $16, and $100. Another 37.5 million shares were to sit in escrow after closing as security for specified liabilities.²

None of that is unusual for a de-SPAC. All of it was contingent on a closing, which is the point. The $9 billion figure was a definition inside a contract, not a valuation anyone had paid. A private company can double the number in its own deal without a single new dollar arriving, because the number and the dollars are governed by different sections of the same document.

The first clock was Concord's charter. Its amended and restated certificate of incorporation gave it until December 10, 2022 to consummate a business combination.⁵

The second clock was the SEC. Circle's holding company filed its Form S-4 registration statement on August 6, 2021 and amended it seven times, the last on November 14, 2022. It was never declared effective.¹⁰

The transaction agreement did offer relief, and the shape of that relief is worth reading twice. Concord could seek a shareholder vote to extend the deadline to January 31, 2023, but only if the SEC had already declared the S-4 effective.⁵ The escape hatch required the thing that was not happening.

Circle also paid to keep the earlier deadline alive. On June 7, 2022 it entered into a promissory note and lent Concord $2,760,000, which Concord deposited into its trust account to extend its liquidation date from June 10 to December 10, 2022. The amount was $0.10 per public unit.³⁷

Follow that money to its resting place. Circle's cash went into a trust account it did not control, to buy six months for a transaction that did not close, and then left that trust as part of the redemption paid to Concord's public shareholders. The target financed the extension and the public shareholders banked it.

The original agreement had carried a third date on top of those: an outside date 270 days from signing, extended automatically by 30 days if the SEC had not declared the registration statement effective by then.¹ That drafting anticipated a registration delay measured in weeks.

By early December the arithmetic was finished. On December 5, 2022 the parties signed a termination agreement with a mutual release of claims, and said publicly that the S-4 had not been declared effective.⁴⁵ Circle filed to withdraw the registration statement the same day.¹⁰ Jeremy Allaire's quoted line was that the parties were disappointed the proposed transaction "timed out."⁵ It is an accurate verb. Nothing was rejected, nothing was blocked, and nobody changed their mind. Two calendars simply finished before the paperwork did.

The convenient summary is that one deal died. The filings show a set of instruments unwinding separately, each on its own contractual logic.

The pattern across that table is that the security which brought cash gets its cash back, and everything conditional on a closing evaporates. Public shareholders funded the trust and were repaid from it. Warrants, earnouts, escrow shares, support agreements, and the promote were all payment for a future that had to arrive first.

The redemption figure deserves a second look. Concord's units sold at $10.00 in December 2020 and the trust paid roughly $10.18 in December 2022. Public shareholders got their money back and about 1.8% for holding it across two calendar years. Redemption protects your principal with real discipline. It is not otherwise trying very hard to impress you.

Concord's sponsors were Concord Sponsor Group LLC, an affiliate of Atlas Merchant Capital, and CA Co-Investment LLC. They held 6,900,000 Class B founder shares and had bought 752,000 private units at $10.00 each for $7,520,000. As SPAC sponsors customarily do, they had waived their redemption rights on those shares, which is the trade that makes the promote work: no trust money on the way out, substantial upside if a deal closes.⁷

No deal closed. So the termination agreement gave them something else. Under the transaction agreement, Circle agreed to pay or procure payment of certain Concord expenses, capped at $10 million in the aggregate, and to issue Concord $20,000,000 of restricted, unregistered ordinary shares valued at the Circle valuation set out in that agreement.⁴⁷

Now read the sentence Concord's board had to write next. Because the charter extinguishes public stockholders' rights once their shares are redeemed, and because the sponsor had agreed to provide releases, Concord's independent directors concluded that the Circle shares to be received by Concord would be for the benefit of the sponsor.⁴

That is a disclosure doing something unusual: naming, in advance and in plain language, which pocket the break-up consideration lands in. The public shareholders got the trust and a closed account. The sponsor got equity in a private company that was worth a great deal more three years later.

Circle's own accounting completes the picture. The $44.194 million of 2022 merger termination costs consisted of 396,514 shares of Circle common stock, expense reimbursements, forgiveness of a promissory note, and the recognition of previously capitalized transaction-related expenses.⁸

Take that apart and very little of it is a cheque written in December. The shares were newly issued equity. The forgiven note was the $2.76 million extension loan, converted from an asset into a cost. The previously capitalized expenses were legal, accounting, and advisory fees Circle had already paid over eighteen months and parked on the balance sheet in the reasonable expectation of a closing to charge them against. Termination is the accounting event that turns deferred optimism into a current expense.

This is also why the SEC's 2024 SPAC rules, effective July 1, 2024, require disclosure about sponsor compensation, conflicts of interest, dilution, and any determination by the SPAC's board on whether a de-SPAC transaction is advisable and in the best interests of the SPAC and its security holders.⁹ The sponsor and the public shareholder are not adversaries by design. They simply hold instruments that respond to a missed deadline in opposite directions, and the closer the deadline gets, the less that distinction stays theoretical. For the full mechanics of a shell that returns the money, see our breakdown of what happens when a SPAC liquidates.

In September 2021, two months after the SPAC was announced, Circle started granting employees restricted stock units. Those RSUs vested only on satisfaction of both a service condition and a liquidity condition, and no compensation expense could be recognized until both were met.⁸

Double-trigger vesting is standard and defensible. It stops employees from owing tax on shares they cannot sell, and it stops the company from recognizing expense for awards that may never settle. The design assumes the liquidity event is a matter of timing rather than a matter of luck.

For everyone granted RSUs in that first cohort, the liquidity condition was the SPAC. When the S-4 stalled and the deal timed out, the awards did not lapse, get repriced, or become anyone's crisis. They simply kept waiting, quietly, until June 2025, with the two conditions stuck one short.

The scale is in the IPO prospectus. As of March 31, 2025, unrecognized stock-based compensation cost on outstanding unvested RSUs expected to vest was $664.0 million, against 25.3 million RSUs outstanding at a weighted-average grant-date fair value of $30.93. Approximately 9,624,397 of those units had all vesting conditions satisfied by the commencement of trading on the NYSE, producing about $125.3 million of tax withholding and remittance obligations and the net issuance of 5,438,969 Class A and 144,638 Class B shares.⁸

Circle's later performance made that a happy ending, and it is worth being clear that it did not have to be one. The same structure with a slower company, a worse market, or an employee who left in 2023 produces a very different table. A liquidity condition is a bet that a corporate event will occur before an individual's circumstances change, and the employee holding it does not get a vote on the outside date, the extension payment, or whether the registration statement goes effective. If you grant awards on that condition, the honest internal message during a failed deal is not that nothing has changed. It is that nothing has vested, and here is what would have to happen next.

Circle filed a Form S-1 on April 1, 2025. The SEC declared it effective on June 4. The final prospectus was filed on June 5.¹⁰

Compare that with the S-4: filed August 6, 2021, seven amendments, sixteen months, never effective.¹⁰ The S-1 took sixty-four days at the same company, before the same regulator.

The offering itself sold 34,000,000 Class A shares at $31.00, split between 14,800,000 primary shares and 19,200,000 from selling stockholders. Gross proceeds were $1.054 billion, of which $433.6 million went to Circle before expenses. Circle's founders took Class B stock carrying five votes per share, capped in the aggregate at 30% of total voting power, and the company disclosed that it would not be a controlled company under NYSE standards.⁸

That last structure is the quiet dividend of the failed deal, and it can be measured. Circle's 2026 proxy reports Jeremy Allaire at 23.9% of total voting power as of the March 16, 2026 record date, on 56,408 Class A and 17,708,642 Class B shares against 228,495,769 Class A and 18,714,651 Class B outstanding. Add the 1,513,189 shares he can acquire within sixty days to that denominator, as Rule 13d-3 does when computing his own percentage, and his economic ownership is about 7.1%. Subtract the second figure from the first and his Control Wedge is +16.8pp.¹²

Now run the counterfactual, because the de-SPAC documents answer it directly. The Topco constitution described in the final S-4 amendment entitled each Topco ordinary shareholder to one vote for each ordinary share. Topco's authorized capital was ordinary shares, preference shares, and euro deferred shares, with no second class of voting common stock anywhere in the structure.¹¹ Had the scheme closed, Circle's founders would have emerged holding stock that voted exactly as much as it owned.

So the wedge is not compensation for the delay. It is a record of who was holding the pen. A de-SPAC hands you a constitution drafted to a shell company's calendar, and an IPO you control lets you file your own certificate of incorporation, which in Circle's case arrived with dual-class stock at five votes per Class B share and an aggregate Class B voting cap of 30%.⁸

Set the two valuations beside each other and notice what kind of object each one is. The $9 billion was a defined term in a transaction agreement, adjustable by formula, payable in shares of a holding company that did not yet exist.² The $31.00 was what buyers actually paid.⁸ Both were called a valuation. Only one of them cleared.

Before signing any SPAC transaction, build the failure case with the same care you would give the deck. Specifically:

1. Separate the three deadlines. The SPAC's charter deadline, the merger agreement's outside date, and the date your registration statement must go effective are different obligations with different owners. Circle's charter deadline and its S-4 effectiveness were both required, and the extension mechanism depended on the one nobody controlled.⁵
2. Read the PIPE's termination elections. The 2021 subscription agreements let each subscriber walk if closing had not occurred within 270 days of signing, or 30 days later if the outside date was extended.¹ Committed capital with a unilateral exit date is a schedule risk wearing a financing costume.
3. Price the extension. Ask who funds deposits into the trust, whether the payment is a loan or a contribution, and what happens to it if the deal dies. Circle's $2.76 million became a forgiven note inside a termination charge.⁷⁸
4. Check the break-up fee for symmetry. Circle's original agreement obliged it to pay Concord $112,500,000 if the deal was validly terminated because Circle's own shareholders failed to approve the scheme, or for a related breach, with no equivalent obligation disclosed running the other way.¹
5. Cap and track expenses. Circle agreed to pay or procure Concord's transaction expenses up to $10 million.⁷ Know which of your own advisory fees are contingent, which are capitalized, and what they do to your income statement on termination.
6. Model minimum cash after redemptions, not the trust balance. Concord's $276 million IPO never became purchase consideration. Trust size is a starting number, and redemption is the shareholders' unilateral answer to it.
7. Write the employee memo before you need it. Know exactly which awards depend on a liquidity condition, how many people are affected, and what the next realistic trigger is.
8. Keep the alternative financing plan live. Circle was already profitable in the quarter before termination, reporting $274 million of total revenue and reserve interest income, $43 million of net income, and close to $400 million of unrestricted cash.⁵ That is why a missed deadline stayed an inconvenience. A target whose runway assumes the de-SPAC cash arrives has converted a market risk into an existential one.

None of that stops a deal from failing. It changes what failing costs, and it changes whether the founder finds out about the sponsor's economics in diligence or in an 8-K.

It can, and Circle did. Circle recorded $44.194 million of merger termination expenses in 2022, consisting of 396,514 of its own shares, expense reimbursements, forgiveness of a promissory note, and previously capitalized transaction costs.⁸ The specific obligations come from the transaction agreement's expense and termination sections, which is why those clauses deserve as much attention as the valuation.

PIPE subscription agreements are separate contracts that generally terminate when the business combination agreement terminates, and they often give the subscriber its own election to walk after a stated period. Concord's July 2021 subscriptions for $415 million terminated in accordance with their terms in February 2022, and included a subscriber right to terminate if closing had not occurred within 270 days of the original signing.¹²

Yes. Circle withdrew its S-4 in December 2022, filed a Form S-1 on April 1, 2025, was declared effective on June 4, and priced its IPO at $31.00 per share.⁸¹⁰ A terminated de-SPAC is not a bar to listing, though the intervening years belong to the market rather than to the plan.

The useful record here is not that Circle's SPAC failed. It is the order in which the pieces came apart, and how little of that order the target set.

Circle chose its counterparty and its valuation. It did not choose when the SEC would declare a registration statement effective, whether PIPE investors would hold their commitments past 270 days, what a SPAC charter would do on December 10, or which pocket a $20 million break-up issuance would land in once public stockholders were redeemed out of existence.

So before you sign, write the memo you would send on the day the deal times out. Name what your company loses, what the sponsor keeps, what your employees are still waiting for, and where the next round of capital comes from. If that memo runs short because nobody has modelled it, you have not been offered financing. You have been offered a countdown with a valuation printed on the front.