Executive Summary / Key Takeaways

• Downside Protection at Trust Value: McKinley Acquisition trades at $9.97, essentially at its $10.00 trust value, offering pre-deal investors limited capital loss risk with optionality on the sponsor's business combination execution.
• 18-Month Clock is Ticking: With no operating revenue and a going concern qualification, MKLY must complete an initial business combination within 18 months of its August 2025 IPO or face liquidation, making time decay the primary risk rather than fundamental deterioration.
• Sponsor Platform vs. Scale Trade-off: Belay Global's platform approach and global targeting strategy differentiate MKLY from larger, more established SPACs, but the $150 million trust size limits firepower for premium targets compared to $200 million peers.
• Geopolitical Headwinds Threaten Target Universe: Escalating tariffs (up to 145% on China) and global conflicts directly constrain MKLY's search for innovative targets, particularly in emerging markets where growth opportunities may be most attractive.
• Key Variable is Execution Velocity: The investment thesis hinges entirely on whether Belay Global can identify and close a value-creating deal before market conditions or sponsor fatigue erode investor confidence and redemption pressures mount.

Setting the Scene: The SPAC as a Blank Canvas

McKinley Acquisition Corporation is a blank check company formed in March 2025 under Cayman Islands law for the sole purpose of effecting a merger, share exchange, asset acquisition, or similar business combination with one or more businesses. The company has no operations, no revenue, and no historical performance to evaluate. Its entire value proposition rests on the Belay Global sponsor's ability to identify an attractive target, negotiate favorable terms, and complete a transaction within the 18-month completion window mandated by its charter.

The SPAC market in 2025 is experiencing a cautious revival after a brutal 2023-2024 downturn that saw deal flow evaporate and redemption rates soar. Approximately 50 new SPACs have launched this year, competing for a limited pool of quality targets willing to go public via merger rather than traditional IPO. In this environment, sponsor credibility, target sourcing networks, and capital efficiency matter more than raw trust size. MKLY's $150 million initial raise places it in the middle tier of this cohort—large enough to pursue meaningful acquisitions but small enough to maintain flexibility and avoid the complexity that plagued larger, multi-billion dollar SPACs.

MKLY's stated strategy focuses on partnering with innovative founders to transform and expand their companies into industry leaders. The target criteria require a fair market value equal to at least 80% of the net trust balance, which translates to businesses valued between $500 million and $2 billion—precisely the "middle market" where sponsor value-add can be most impactful. This positioning differentiates MKLY from both micro-cap SPACs chasing sub-scale targets and mega-SPACs hunting elephants.

Business Model: The Economics of Optionality

MKLY's business model is pure optionality. The company generates no operating revenue and incurs minimal expenses—$349,252 in the three months ended September 30, 2025—primarily for legal, accounting, and insurance costs required to maintain public company status. Its only income source is interest earned on the $173.45 million held in its Trust Account, which yielded $951,679 in Q3. This interest income is sufficient to cover taxes but little else, leaving the company dependent on external capital to fund its search for a target.
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The capital structure is straightforward: 15.0 million public units sold at $10.00 each, plus 2.25 million over-allotment units, with each unit comprising one Class A share and one right to receive one-tenth of a share upon deal completion. Concurrently, the sponsor purchased 465,000 private placement units at $10.00, though $500,000 remains unpaid as a subscription receivable. The sponsor holds 6.54 million Class B founder shares acquired for $25,000, representing a 20% promote that automatically converts to Class A shares upon a business combination.

This structure creates a clear alignment and misalignment dynamic. The sponsor's promote is worth approximately $30 million at trust value, providing strong incentive to complete any deal—but not necessarily a value-creating one. Public shareholders, meanwhile, have redemption rights that allow them to recover their pro-rata share of the trust if they disapprove of a proposed transaction, creating a check on sponsor opportunism. The rights, which convert to one-tenth of a share upon deal completion, provide additional upside optionality but will expire worthless if no deal is consummated.

Financial Performance: A Study in Pre-Revenue Dynamics

MKLY's financial statements tell a story of a company in suspended animation. For the period from inception through September 30, 2025, the company reported net income of $539,006, but this figure is entirely attributable to $951,679 in interest income from the Trust Account. Operations burned $412,673, resulting in a net loss from operations of $349,252 in Q3 alone. The company holds $1.88 million in cash outside the trust and $1.84 million in working capital, but management explicitly states this is insufficient to meet obligations over the next year.
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The balance sheet reveals the stark reality: $175.51 million in total assets, of which $173.45 million is restricted cash in the Trust Account. The company has no debt, but this is misleading—its entire enterprise is effectively a call option on a future business combination. The going concern qualification is not a technicality; it reflects genuine uncertainty about whether the sponsor can identify and execute a transaction before administrative costs deplete the limited cash available outside the trust.

What does this mean for investors? The financials demonstrate that MKLY is not a traditional operating company and cannot be valued on earnings or cash flow metrics. Value is derived from two sources: the trust value floor ($10.00 per share plus accrued interest) and the probability-weighted value of a successful business combination. The current trading price of $9.97 suggests the market assigns minimal probability to a successful deal or believes the sponsor's promote will dilute any upside.

Liquidity and Capital Resources: The Thin Line Between Search and Liquidation

MKLY's liquidity position is precarious. The $1.88 million in unrestricted cash must cover approximately $2.4 million in estimated annual expenses: $1.0 million for legal and due diligence, $465,000 for SEC reporting, $180,000 for infrastructure, $175,000 for D&O insurance, and $580,000 for working capital reserves. This shortfall explains the going concern qualification and highlights the critical importance of completing a deal within the 18-month window.

The sponsor has provided minimal support: a $25,000 initial payment for founder shares and up to $185,000 in loans, which have already been drawn. More significantly, the sponsor can provide up to $1.5 million in non-interest bearing working capital loans, convertible into private placement-equivalent units at $10.00 per unit if a deal closes. As of September 30, 2025, no such loans have been drawn, but this represents the only available liquidity cushion if search costs exceed estimates.

The Trust Account structure adds another layer of complexity. While the $173.45 million is invested in cash, U.S. treasuries with maturities under 185 days, or specific money market funds, the proceeds could be subject to creditor claims that take priority over public shareholders. The sponsor has agreed to indemnify the company if claims reduce the trust below $10.00 per share, but the company has not verified the sponsor's financial capacity to meet these obligations. This creates a latent risk: if a major liability emerges, shareholders might not receive the full trust value upon liquidation.

Competitive Landscape: Fresh Sponsor vs. Established Players

MKLY competes directly with three categories of SPACs: larger, well-capitalized vehicles like Highview Merger Corp (HVMC) and Churchill Capital Corp X (CCCX), and similarly-sized peers like Copley Acquisition Corp (COPL). Each presents different competitive dynamics that affect MKLY's ability to source and close attractive deals.

HVMC's $200 million trust provides 33% more firepower for acquisitions, enabling it to pursue larger targets or offer more attractive consideration. However, HVMC's North America/Western Europe focus creates a geographic blind spot that MKLY's global mandate can exploit. MKLY's smaller size may actually be an advantage in the middle market, where $500 million to $2 billion targets often prefer partners who won't overwhelm their culture or impose overly complex integration demands.

CCCX benefits from Churchill Capital's established brand and track record of multiple prior SPACs, giving it credibility with targets and investors. However, this history includes high-profile delays and redemption issues that may make some targets wary of legacy baggage. MKLY's fresh sponsor, Belay Global, offers a clean slate and a "disciplined platform model" that emphasizes post-merger operational support rather than just capital injection. This could appeal to founder-led businesses seeking strategic guidance, not just a public currency.

COPL matches MKLY's $150 million trust size but focuses narrowly on technology and lifestyle sectors in Asia Pacific and North America. This specialization may enable faster target identification in those verticals but limits optionality. MKLY's broader "innovative founders" mandate provides flexibility to pursue opportunities across sectors and geographies, particularly in emerging markets where COPL's Asia-Pacific focus might be hindered by geopolitical risks.

The key differentiator is Belay Global's platform approach. Unlike traditional SPAC sponsors who function primarily as financial engineers, Belay positions itself as a value-added partner providing strategic guidance and operational expertise. This matters because post-merger performance ultimately determines whether a de-SPAC transaction creates or destroys value. If Belay can deliver on this promise, MKLY may command better deal terms or attract higher-quality targets than scale-driven competitors.

Risks: The Thesis Can Break in Three Ways

The investment thesis faces three material risks that directly threaten the core optionality value.

First, liquidation risk if no deal is consummated within 18 months. The company must complete a business combination by February 2027 or liquidate the Trust Account, returning approximately $10.00 per share to public shareholders. While this creates a floor, it also caps upside if the sponsor fails to identify a suitable target. The going concern qualification indicates management itself doubts the company's ability to continue as a standalone entity, making this risk existential rather than theoretical.

Second, geopolitical instability and trade policy could shrink the target universe. The company's search for innovative businesses is directly threatened by "volatility and disruption following the Russia-Ukraine conflict and the Israel-Hamas conflict," which could limit opportunities in Europe and the Middle East. More significantly, the Trump administration's tariff policies—including 25% tariffs on Canada and Mexico (subsequently suspended), 10-145% tariffs on China, and baseline 10% tariffs on all imports—create uncertainty for any target with international supply chains or revenue exposure. These factors "could adversely affect the Company's search for an initial business combination," particularly for MKLY's globally-focused strategy.

Third, sponsor indemnification may prove illusory. While the sponsor has agreed to be liable if third-party claims reduce the Trust Account below $10.00 per share, the company has not verified the sponsor's financial capacity to meet these obligations. Management notes that the sponsor's "only assets are securities of the company," creating a circular dependency. If a major creditor claim emerges, shareholders may find the indemnification uncollectible, impairing the trust value floor that underpins the entire investment case.

Additional risks include equity dilution from the 20% founder share promote and potential issuance of additional shares to target owners or PIPE investors, which could significantly dilute public shareholders' post-combination ownership. The company also acknowledges that rights will expire worthless if no deal is completed, and that debt incurred to finance a transaction could create default risks if the combined entity's operating revenues prove insufficient.

Valuation Context: Pricing the Option

At $9.97 per share, MKLY trades essentially at its $10.00 trust value, implying the market assigns minimal value to the sponsor's deal-making optionality. With 23.7 million shares outstanding (including founder shares and private placement units), the market capitalization of approximately $237 million represents a 37% premium to the $173.45 million in unrestricted trust value. This premium reflects the value of the sponsor's promote, rights, and the time value of the 18-month search option.
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Unlike traditional companies, MKLY cannot be valued on earnings or cash flow metrics—it has no operations. The relevant metrics are:

• Trust value per share: Approximately $10.00, providing a hard floor
• Market cap vs. trust value: The $63 million premium reflects option value
• Time to liquidation: 18 months from August 2025, creating time decay
• Sponsor promote: 20% of post-deal equity aligns incentives but creates dilution risk

Comparing to peers, HVMC trades at a similar modest premium to trust value, while CCCX commands a larger premium due to its established sponsor track record. COPL trades near trust value like MKLY, reflecting similar execution risk. The valuation context is clear: investors are paying for the right to participate in a future deal with limited downside if the sponsor fails, but meaningful dilution risk if they succeed.

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Outlook and Execution Risk

Management's outlook is simultaneously optimistic and fragile. The company expects to generate sufficient interest income to cover taxes and does not anticipate needing additional capital before a business combination. However, this assumes search costs remain within the $2.4 million annual estimate—a figure that could prove conservative if due diligence requires extensive travel, advisors, or if competitive bidding for targets emerges.

The 18-month completion window is both a catalyst and a constraint. It creates urgency for the sponsor to act, but also limits the time available to find and vet an optimal target. In a reviving SPAC market, competition for quality assets is intensifying. If MKLY cannot differentiate its value proposition beyond capital, it may be forced to accept less attractive terms or face higher redemption rates, which would reduce the cash available to the combined entity.

Management's commentary suggests confidence in Belay Global's sourcing network and platform model, but provides no specific guidance on target sectors, geographies, or timeline milestones. This opacity is typical for SPACs but leaves investors with little visibility into the probability of success. The key variable to monitor is whether the sponsor can announce a definitive agreement within the next 9-12 months, providing sufficient time for shareholder approval and closing before the February 2027 deadline.

Conclusion: A Tight Risk/Reward with Sponsor Execution as the Decisive Factor

McKinley Acquisition represents a pure-play option on Belay Global's ability to execute a value-creating business combination in a reviving but competitive SPAC market. The $9.97 trading price offers essentially no premium to the $10.00 trust value, creating a tight risk/reward profile where the primary downside is opportunity cost and time decay rather than capital loss. This structure appeals to investors seeking exposure to pre-deal SPAC optionality without the valuation risk that plagued the 2021 SPAC bubble.

The central thesis hinges on two variables: the sponsor's execution velocity and the impact of geopolitical instability on the target universe. If Belay Global can leverage its platform model to identify and close a high-quality deal within the next 12 months, the modest premium to trust value could generate substantial returns post-combination. Conversely, if tariffs, conflicts, or competitive pressures constrain the search process, the 18-month clock may expire with shareholders receiving only their $10.00 per share plus minimal interest.

For investors, the decision reduces to confidence in Belay Global's sourcing network and operational expertise relative to established sponsors like Churchill Capital or larger vehicles like HVMC. The fresh sponsor approach offers strategic flexibility and a clean slate, but lacks the track record that might attract premium targets. With redemption rights providing a floor and rights offering additional upside, MKLY presents a defined-risk speculation on the sponsor's deal-making acumen in an increasingly complex global environment.