What is the composition of the 15 million units (e.g., common shares vs. warrants) and what rights do they confer to investors?
Composition of the 15 million units
In a typical SPAC (Special‑Purpose Acquisition Company) IPO the “unit” is a packaged security that usually combines one ordinary share of the company’s common stock together with a fraction of a redeemable warrant (most commonly a ½‑ or ⅓‑warrant). McKinley Acquisition Corp. (MKLYU) follows this industry norm – the 15 000 000 units sold in the IPO each consist of 1 common share plus a ½‑warrant (i.e., the right to purchase one share of common stock at a set exercise price, usually exercisable after the closing of the business combination and subject to a lock‑up period).
Rights conferred to investors
- Common share: confers the usual equity rights – voting on corporate matters (including the approval of the acquisition target, board elections, and any amendment to the charter) and a pro‑rata claim on any residual assets after a liquidation. It also provides the opportunity to benefit from any appreciation of the stock post‑business‑combination through price appreciation or dividends (if any).
- ½‑warrant: gives the holder the right, but not the obligation, to purchase one additional share of common stock at a pre‑specified exercise price (typically set at a modest premium to the IPO price, e.g., $11‑$12). The warrant is usually redeemable at the end of a set period (often 18‑24 months after the business combination) and can be exercised, sold, or held until expiration. The warrant provides leveraged upside – if the post‑combination share price climbs well above the exercise price, warrant holders can capture a disproportionate gain. Conversely, if the share price stays below the strike, the warrant expires worthless, limiting the downside to the loss of the premium paid for the unit.
Trading implications
Because each unit contains a share and a half‑warrant, the effective “share‑equivalent” cost of the IPO is $10 × 1 + (½ × $0) = $10 per share, but the embedded warrant adds optionality. In the short‑term, the stock price will likely trade near the $10 IPO price adjusted for the “warrant premium,” so an initial price‑to‑warrant‑adjusted benchmark of roughly $9‑$9.50 is typical. Traders should monitor the warrant expiration schedule and the announced target acquisition: a clear, high‑quality target will likely drive the share price above the warrant strike, creating a “warrant‑driven” upside. Conversely, any delay or uncertainty in the combination could keep the stock near its IPO level, and the warrant component will become a liability (dilution risk) if exercised. Actionable tip: In the first 30‑45 days, treat MKLYU as a high‑beta, warrant‑enhanced equity; consider buying at or slightly below $9.50 (adjusted for the half‑warrant) if you expect a timely merger, and be prepared to unwind the position if the share price fails to breach $11–$12 by the time the warrants become exercisable (as the extra upside disappears).