Company: COHN
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001437749-25-007158
Chunk: 2021

Company: Cohen & Co Inc.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 3
Chunk 2021
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 private placement and founder shares (together, sponsor shares) of a SPAC.  The SPAC will also raise funds in a public offering and seek to complete a business combination within an agreed upon time frame.  The SPAC will use the proceeds raised from the sponsor shares to pay transaction and operating expenses during the period it is seeking a business combination.  The proceeds of the public offering are placed in an interest bearing trust and can only be used to complete the business combination and pay taxes on the interest earned.  Generally, the public investors must approve any business combination prior to its effectiveness.  If a business combination is not completed within the agreed upon time frame, the SPAC will liquidate and return the public investors' investment to them.  If there are funds remaining after liquidation, the sponsor entities may receive some portion of their investment back, but it is likely they will suffer a total loss of their investment.  If the business combination is completed, the sponsor entities' private placement in the SPAC will entitle them to a combination of unrestricted common, restricted common, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company).  The following summarizes our accounting policies related to our investments in these entities:

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     The sponsor entities are LLCs that give all important decision making rights to their respective managing member.  Furthermore, the other members of the LLC cannot replace the managing member.  Accordingly, we concluded that the sponsor entities are VIEs and the managing member has the power to direct its most important economic activities.  In all cases where we are the managing member of a sponsor entity, we also have had a significant economic interest in such sponsor entity and therefore consolidate such sponsor entity.  

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     In all cases where we consolidated a sponsor entity, we determined that the sponsor entity's private placement investment in the SPAC that it sponsors should be treated as an equity method investment during the SPAC's pre-business combination period.  Furthermore, due to the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, we have chosen to not elect the fair value option.

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     If a SPAC completes its business combination, the sponsor entity's investment in the SPAC will be converted to a combination of unrestricted and restricted shares in the post-business combination SPAC.  At this point (assuming we consolidate the sponsor entity), we will account for the shares received at fair value.