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The San Antonio cloud computing companys CEO said the move from the OTC market would enable it to speed up its strategy of growth through mergers and acquisitions.

It provides us with the currency of a primary stock exchange; we really havent had the benefit of that historically, being on the OTC market, Digerati CEO Arthur L. Smith said Tuesday. We could have taken an alternative avenue to uplist, but this was a better economic path for the company and its shareholders.

The all-stock transaction will give the combined company an estimated initial equity value of $228 million, the companies said. Its expected to close in the fourth quarter.

On ExpressNews.com: San Antonios Digerati Technologies swings from loss to a profit on record revenue

Other details:

Digerati management will remain in place.

Its current board will remain, with two new directors: one additional director to be appointed and Shawn Rochester, CEO of Minority Equality Opportunities Acquisition, joining when the transaction closes.

Smith said Digerati would become a subsidiary of Minority Equality Opportunities Acquisition. Existing Digerati shareholders will receive 100 percent of their equity in the new company.

In its simplest form, this transaction can be viewed as Digerati acquiring a Nasdaq vehicle for purposes of listing on Nasdaq, Smith said.

Smith said he was introduced to Minority Equality Opportunities Acquisition Inc. by Maxim Group, a New York-based investment banking firm.

The Waxahachie company was founded last year and went public in August 2021. It calls itself the first minority-led special purpose acquisition company, or SPAC, to list on Nasdaq with the mission of executing a business combination with a minority owned, led or founded business.

A SPAC raises money through an initial public offering to find an existing company that can benefit from more capital and merging with it. Theyre also known as blank-check companies.

It was unclear whether the combined companies will trade under the Digerati name.

Digerati was born in 1994 as ATSI Communications Inc., an international telecommunications operator that served markets in Latin America. Two years later, it launched GlobalSCAPE Inc., an internet software company that was acquired in 2020 by HelpSystems, a Minnesota-based software firm.

Long an earnings laggard, Digerati attributed recent record-breaking revenue growth to its acquisitions of SkyNet Telecom in December and NextLevel Internet in February. In the three months ended April 30, the company swung to a profit as revenue jumped 118 percent to $8.2 million.

On ExpressNews.com: San Antonio-based Digerati Technologies acquires SkyNet Telecom

Those acquisitions were only the latest. In June 2021, it entered a partnership with Sandler Partners, a fast-growing business communications firm headquartered in Redondo Beach, Calif. In November 2020, it acquired two Florida business communication firms, Nexogy and ActivePBX.

Digerati said its business grew through the pandemic as demand from small businesses for its cloud computing and communication services increased. Its customer count was 3,963 as of April 30, up from 2,612 a year earlier.

In a statement, Minority Equality Opportunities Acquisition said it had been searching for historically undercapitalized minority business enterprises for mergers and acquisitions.

Smith, who identifies as Latino, was born in McAllen and has lived in San Antonio since 1988. About half of the employees at Digerati are members of a minority growth, with 45 percent being Latino.

We did this because of the economic benefits and to fulfill a key corporate goal of listing on Nasdaq, Smith said. And of course, it gives us access to capital. It did fulfill the mission for MEOA. It was a good fit.

The merger news gave Digerati shares a lift. They gained nearly 16 percent Tuesday to close at nearly 13 cents. That put its market capitalization at $17.84 million.

Shares in Minority Equality Opportunities Acquisition fell slightly to close at $10.12. Its market cap slipped to $161.62 million.

eric.killelea@express-news.net

Excerpt from:
Digerati moving to Nasdaq from OTC in merger deal with blank-check acquisition firm - San Antonio Express-News