Stark Power-Sh: How the SunSpear deal dilutes public holders and resets the shell

The main article argued that the market is already pricing SunSpear before there is a closed deal. This follow-up isolates the mechanics of the transaction itself, because that is where current shareholders can easily lose the plot: even if the deal closes, they do not remain with the same listed shell plus a new asset. They remain with a much smaller slice of a company that goes through a legal, equity, and governance reset.

This is not just a financing round. The deal is built in three layers: first, an interim period in which the buyers effectively get consent rights over unusual actions; second, a completion point at which the board, management, articles, company name, and auditor are replaced; and only then a full option-exercise path that can move 89.9% of the equity and voting rights to the new buyers. Anyone who reads only the 89.9% line sees the end state, but not the way control starts moving earlier.

Dilution is not a side effect, it is the deal

At the report date the company has 4,952,226 issued and paid-up ordinary shares. The investment deal adds 11,130,123 short options and 33,390,375 long options for the buyers. Together that is 44,520,498 potential securities, almost nine times the current share count.

The decisive number in the report is, of course, 89.9%. Assuming full exercise of all the proposed options, that is the portion that moves to the new buyers. The simple arithmetic implication is that all holders who were in the company before the deal, together, are left with roughly 10.1%. It is important to be precise: that 10.1% is not the public alone, but all legacy holders together, including the current control group. For a public shareholder, though, the practical point is the same: this is not ownership in the same economics. It is a much smaller residual stake in a rebuilt structure.

There is also an important sequence issue. The buyers do not receive ordinary shares immediately. They receive options, and the long options can be exercised only after all the short options are exercised. So 89.9% is the end point of the full path, not the opening condition. But anyone who assumes old control stays in place until the very end misses the second layer of the transaction: governance control and management control move earlier.

Another sharp detail in the report reinforces this. At the meeting date, the current control bloc must still hold at least 45% of the issued and paid-up capital and voting rights, and it undertakes not to do anything that would take it below that threshold by completion. At the same time, the report says that the existing acting-in-concert arrangement among the current control holders will terminate automatically once the proposed short options are exercised by the buyers. In other words, the old control group is needed to carry the deal through, but not to remain at the center of power afterward.

This is a control package, not just a securities issuance

The report is explicit that the matters brought to the general meeting are brought as one package. This is not a structure in which shareholders can approve a new activity injection but reject the shell replacement. Approving the transaction means approving a full bundle:

That matters because it breaks the comfortable reading of the deal as "a NIS 1 million raise." The NIS 1 million is only the entry ticket to the path. The real economics of the deal are about who controls the company, who runs it, under which articles it operates, and how the future equity pie is divided.

Control also starts moving before formal completion. During the interim period, from signing until the long-stop date, the company undertakes not to take a long list of actions without the buyers' prior written consent: no new investments, no material debt changes, no liens, no related-party transactions, and no change in the capital structure. So even before full option exercise delivers the 89.9%, the buyers already have a strong contractual grip on how the shell is run.

Section 350 resets the shell, but it does not erase everything

The truly unusual mechanism in the deal is not only the dilution. It is the arrangement under Section 350 of the Companies Law. Under the wording summarized in the report, the purpose of the arrangement is that after approval, if approved, the company will owe no debt to any person or entity, so that upon completion it remains with no assets and liabilities other than the company's cash box.

That is the core of the reset. Not merely to inject a new business into the shell, but first to clean the old shell so that mainly the cash remains. This is not a legal footnote. It is the definition of what the buyers are trying to acquire.

But the reset is not absolute. The report lists three important carve-outs:

1. The company will not seek relief from tax liabilities as part of the arrangement, and its obligations to the tax authorities will remain subject to law.
2. The company will not seek any waiver or release regarding the personal liability of officers, directors, or shareholders.
3. If the insolvency commissioner or the court requires a safety cushion for unknown debts, the company will leave a cash cushion of up to NIS 100 thousand.

So Section 350 is meant to clean the corporate shell, but not to make it perfectly empty in every respect. Taxes stay outside the reset, personal liability stays outside the reset, and some cash may still remain tied up for unknown claims. That matters because it shows the reset is a deal tool, not magic that erases every legacy risk.

The report also gives the buyers explicit protection rights around this process. They may instruct the company to cancel the Section 350 application at any stage after filing. Separately, the company may ask to cancel the application if court approval is not received within 90 days from the date the meeting summons is approved, unless the period is extended. That means the arrangement is integral to the transaction structure, but it is also a condition the incoming side can walk away from if it does not progress on time or on acceptable terms.

Even the cash floor is designed first for the buyers

One of the most important clauses in the agreement is the cash requirement at completion. The company must then hold at least NIS 4 million of unrestricted and unconditional net cash. At the end of 2025, the company's cash and cash equivalents were almost exactly at that threshold, so the cushion is not wide.

The more interesting point is what happens if the threshold is not met. In that case, the exercise price of each long option is reduced by the shortfall divided by the total number of long options. So if the shell arrives weaker to the finish line, the buyers' economics actually improve.

From the perspective of legacy holders, that is critical. The cash requirement is not a protective cushion for them. It is mainly a mechanism that protects the buyers against receiving a shell with less cash than expected. If the company burns down further during the interim period, existing holders do not just remain with a smaller stake. They may do so under even better terms for the incoming side.

What legacy holders actually keep after the reset

Once the story is stripped down to its mechanics, the conclusion is simple. Existing shareholders do not own a deal that leaves them with the same shell plus a new asset on top. They own a path in which:

1. The shell is cleaned legally through Section 350, subject to the carve-outs described above.
2. Governance and management power shift to the incoming side.
3. The future equity economics move so that the buyers can reach 89.9%.

There is one final detail that sharpens the picture even more. The report says the shares trade on the preservation list because this is a shell company, and that completing the transaction will not automatically move the shares back to the main list. If the company later seeks such a transfer, it will have to meet the conditions applicable to a new company. So even after the reset, shareholders do not get an immediate normalization of the stock itself. They get a rebuilt shell whose listing status still requires a fresh proof test.

That is exactly why "dilution" alone is too small a word here. This is an identity change. The old company is required to hold together long enough to approve the transaction, then it resigns, is replaced, is cleaned, and makes room for a new structure in which the legacy holders' economic share shrinks to roughly a tenth.

Conclusion

The right way to read the deal is not "the company raised NIS 1 million to inject SunSpear." That is far too narrow an accounting description. The more accurate reading is that the company is executing a shell reset through a package transaction: legacy cleanup via Section 350, transfer of control and management centers, and only then the equity path that can take the buyers to 89.9%.

If SunSpear later succeeds in building a real business, 10.1% of a good company may still be worth more than 100% of an empty shell. But that is a debate about future operating success. At the level of the deal mechanics themselves, what existing shareholders are being left with is not a near-equal partnership in a new business. It is a residual slice in a structure rebuilt almost entirely around the incoming group.