Legato Merger Corp. III's Cash Dips Amid Continued SPAC Search

TL;DR

**LEGT-WT is burning cash while still hunting for a deal, making it a risky bet as the SPAC clock ticks down.**

AI Summary

Legato Merger Corp. III (LEGT-WT) reported a net income of $1,999,385 for the three months ended August 31, 2025, a decrease from $2,573,492 in the same period of 2024. For the nine months ended August 31, 2025, net income increased to $6,052,032 from $5,785,828 in the prior year. The company's general and administrative costs were $269,064 for the three months and $744,740 for the nine months ended August 31, 2025. Investments held in the Trust Account grew to $216,806,288 as of August 31, 2025, up from $210,061,362 on November 30, 2024. Cash outside the Trust Account decreased to $1,078,756 from $1,625,752 over the same period. The company continues to search for a target business in the infrastructure, engineering and construction, industrial, and renewables industries, having not yet commenced operations as of August 31, 2025. A significant risk remains the failure to consummate a Business Combination within the prescribed Combination Period, which would lead to liquidation.

Why It Matters

Legato Merger Corp. III's continued search for a business combination, with no operations commenced as of August 31, 2025, highlights the inherent risks of SPACs for investors. While the Trust Account's value has grown, the declining cash outside the trust and the looming deadline for a merger put pressure on the company. This situation impacts investors who are betting on a successful merger, employees of potential target companies, and the broader market's perception of SPAC viability in a challenging M&A environment. The competitive landscape for attractive targets remains fierce, making a timely and value-accretive deal crucial.

Risk Assessment

Risk Level: high — The company is a shell company with no operations as of August 31, 2025, and its primary asset is the Trust Account. Cash outside the Trust Account decreased by 33.6% from $1,625,752 on November 30, 2024, to $1,078,756 on August 31, 2025, indicating ongoing operational burn without a revenue-generating business. The significant risk of failing to consummate a Business Combination within the Combination Period, which would lead to liquidation and warrants expiring worthless, further elevates the risk.

Analyst Insight

Investors should closely monitor Legato Merger Corp. III's progress in identifying and executing a business combination, as the company's liquidity outside the trust is diminishing. Consider the potential for warrant expiration if a deal isn't secured within the Combination Period, and evaluate the risk-reward given the current cash burn and lack of operational business.

Financial Highlights

debt To Equity

N/A

revenue

N/A

operating Margin

N/A

total Assets

$217,966,099

total Debt

$7,043,750

net Income

$1,999,385

eps

$0.08

gross Margin

N/A

cash Position

$1,078,756

revenue Growth

N/A

Key Numbers

• $1,078,756 — Cash (Cash outside Trust Account as of August 31, 2025, down from $1,625,752 on November 30, 2024)
• $216,806,288 — Investments held in Trust Account (As of August 31, 2025, up from $210,061,362 on November 30, 2024)
• $1,999,385 — Net income (For the three months ended August 31, 2025, a decrease from $2,573,492 in 2024)
• $6,052,032 — Net income (For the nine months ended August 31, 2025, an increase from $5,785,828 in 2024)
• $7,043,750 — Deferred underwriting commissions (Outstanding liability as of August 31, 2025)
• 25,799,375 — Ordinary shares outstanding (As of October 7, 2025)
• $11.50 — Warrant exercise price (Per share for redeemable warrants)

Key Players & Entities

• Legato Merger Corp. III (company) — Registrant and SPAC
• NYSE American (regulator) — Exchange where securities are registered
• Eric Rosenfeld (person) — Chief SPAC Officer of Legato Merger Corp. III
• Crescendo Advisors, LLC (company) — Entity affiliated with Eric Rosenfeld, indemnifying the Trust Account
• Cayman Islands (regulator) — Jurisdiction of incorporation
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• Failure to Consummate Business Combination [high — financial]: Legato Merger Corp. III faces a significant risk of failing to complete a business combination within its prescribed Combination Period. If a business combination is not consummated, the company will be forced to liquidate. This risk is inherent to special purpose acquisition companies (SPACs) and directly impacts the potential return of capital to shareholders.
• Lack of Operations and Target Identification [high — operational]: As of August 31, 2025, Legato Merger Corp. III has not yet commenced operations and is still in the process of searching for a target business. The success of the company is entirely dependent on identifying and successfully merging with a suitable target in the infrastructure, engineering and construction, industrial, and renewables industries.
• Redemption of Public Shares [medium — financial]: A substantial portion of the company's capital is held in a Trust Account and is subject to redemption by public shareholders if a business combination is not completed. The value of ordinary shares subject to possible redemption was $216,711,289 as of August 31, 2025, representing a significant liability that could be realized upon liquidation.
• Declining Quarterly Net Income [medium — financial]: Net income for the three months ended August 31, 2025, decreased to $1,999,385 from $2,573,492 in the same period of 2024. While nine-month net income increased to $6,052,032 from $5,785,828, the downward trend in quarterly performance warrants attention.
• Decreasing Cash Reserves [medium — financial]: Cash outside the Trust Account has decreased from $1,625,752 as of November 30, 2024, to $1,078,756 as of August 31, 2025. This reduction in liquid assets outside the trust may impact the company's ability to fund ongoing operations and potential deal expenses.

Industry Context

Legato Merger Corp. III is a special purpose acquisition company (SPAC) targeting businesses in the infrastructure, engineering and construction, industrial, and renewables sectors. This space is characterized by significant capital requirements, long project cycles, and increasing demand driven by global trends in sustainability and modernization. The competitive landscape for SPACs is intense, with many seeking targets in similar growth-oriented industries.

Regulatory Implications

As a SPAC, Legato Merger Corp. III is subject to SEC regulations governing initial public offerings, disclosures, and business combinations. The potential for liquidation introduces specific regulatory considerations regarding the return of funds to investors and the winding down of the entity. Compliance with reporting requirements for its 10-Q filing is crucial.

What Investors Should Do

1. Monitor progress on business combination target identification and negotiation.
2. Evaluate the terms and valuation of any proposed business combination.
3. Assess the company's burn rate and remaining time in the Combination Period.
4. Consider the impact of potential redemptions on the combined entity's capitalization.

Key Dates

• 2025-08-31: Quarter and Nine Months Ended — Reporting period for financial results, showing a decrease in quarterly net income but an increase in year-to-date net income. Also marks the date for current asset and liability balances.
• 2024-08-31: Quarter and Nine Months Ended — Prior year comparable period for financial results, used to assess performance trends.
• 2024-11-30: Balance Sheet Date — Prior period balance sheet date, used to compare changes in assets, liabilities, and equity.

Glossary

Trust Account

A segregated account holding funds raised from the SPAC's initial public offering, which can only be used for business combinations, redemptions, or liquidation expenses. (The majority of Legato Merger Corp. III's assets are held in the Trust Account, and its growth and potential redemption are critical to shareholder value.)

Deferred underwriting commissions

Commissions payable to underwriters, typically paid upon the completion of a business combination. (This represents a contingent liability that will be settled upon a successful merger, impacting the net proceeds available to the combined entity.)

Ordinary shares subject to possible redemption

Shares issued in the SPAC's IPO that grant holders the right to redeem their shares for cash if a business combination is not completed within the specified timeframe. (This is a significant liability for the company, representing the potential outflow of capital from the Trust Account.)

Shareholders' deficit

Occurs when the total liabilities and redeemable shares exceed the total assets, resulting in a negative equity position. (Indicates that the company's net worth is negative, primarily due to the accounting treatment of redeemable shares and accumulated operating expenses.)

Combination Period

The timeframe within which a SPAC must complete a business combination, as stipulated in its governing documents. (Failure to complete a business combination within this period triggers liquidation, posing a significant risk to investors.)

Year-Over-Year Comparison

Compared to the filing as of November 30, 2024, Legato Merger Corp. III shows a decrease in cash outside the Trust Account from $1,625,752 to $1,078,756, indicating increased operational spending or other outflows. Conversely, investments held in the Trust Account have grown to $216,806,288 from $210,061,362, reflecting the initial capital raised. While quarterly net income has declined year-over-year, the nine-month net income has seen a modest increase, suggesting variability in income generation from investments.

Key Financial Figures

• $0.0001 — E American Ordinary shares, par value $0.0001 per share LEGT NYSE American Rede
• $11.50 — ordinary shares at an exercise price of $11.50 per share LEGT WS NYSE American C
• $10.00 — deposit in the Trust Account (initially $10.00 per share, plus any pro rata interest e

Filing Documents

• legatomerger3_10q.htm (10-Q) — 515KB
• legatomerger3_ex31-1.htm (EX-31.1) — 16KB
• legatomerger3_ex31-2.htm (EX-31.2) — 16KB
• legatomerger3_ex32-1.htm (EX-32.1) — 7KB
• legatomerger3_ex32-2.htm (EX-32.2) — 7KB
• 0001829126-25-007942.txt ( ) — 3224KB
• cik0002002038-20250831.xsd (EX-101.SCH) — 36KB
• cik0002002038-20250831_cal.xml (EX-101.CAL) — 27KB
• cik0002002038-20250831_def.xml (EX-101.DEF) — 119KB
• cik0002002038-20250831_lab.xml (EX-101.LAB) — 241KB
• cik0002002038-20250831_pre.xml (EX-101.PRE) — 205KB
• legatomerger3_10q_htm.xml (XML) — 453KB

Financial Information

Part I. Financial Information 1

Condensed Interim Financial Statements

Item 1. Condensed Interim Financial Statements 1 Condensed Balance Sheets as of August 31, 2025 (unaudited) and November 30, 2024 1 Condensed Statements of Operations for the three and nine months ended August 31, 2025 and 2024 (unaudited) 2 Condensed Statements of Changes in Shareholders' Deficit Equity for the three and nine months ended August 31, 2025 and 2024 (unaudited) 3 Condensed Statements of Cash Flows for the nine months ended August 31, 2025 and 2024 (unaudited) 4 Notes to Unaudited Condensed Financial Statements 5

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 26

Controls and Procedures

Item 4. Controls and Procedures 26

Other Information

Part II. Other Information 27

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27

Other Information

Item 5. Other Information 27

Exhibits

Item 6. Exhibits 27

Signatures

Part III. Signatures 28 i

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Condensed Interim Financial Statements

Item 1. Condensed Interim Financial Statements LEGATO MERGER CORP. III CONDENSED BALANCE SHEETS August 31, 2025 November 30, 2024 (unaudited) ASSETS Current assets: Cash $ 1,078,756 $ 1,625,752 Prepaid expenses 81,055 226,953 Total current assets 1,159,811 1,852,705 Investments held in Trust Account 216,806,288 210,061,362 Total assets $ 217,966,099 $ 211,914,067 LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS' DEFICIT Deferred underwriting commissions $ 7,043,750 $ 7,043,750 Total liabilities 7,043,750 7,043,750 Commitments and contingencies Ordinary shares subject to possible redemption, $ 0.0001 par value; 200,000,000 shares authorized; 20,125,000 shares at redemption value at $ 10.77 and $ 10.44 per share as of August 31, 2025 and November 30, 2024, respectively 216,711,289 209,966,362 Shareholders' deficit Preference shares, $ 0.0001 par value; 1,000,000 shares authorized; none issued or outstanding as of August 31, 2025 and November 30, 2024 - - Ordinary shares, $ 0.0001 par value; 200,000,000 shares authorized; 5,674,375 founders shares (excluding 20,125,000 shares subject to possible redemption) issued and outstanding as of August 31, 2025 and November 30, 2024 (1) 568 568 Additional paid-in capital - - Accumulated deficit ( 5,789,508 ) ( 5,096,613 ) Total shareholders' deficit ( 5,788,940 ) ( 5,096,045 ) Total Liabilities, Ordinary Shares Subject to Redemption, and Shareholders' Deficit $ 217,966,099 $ 211,914,067 (1) Total shares outstanding of ordinary shares include all Founder Shares, as well as Representative Founder Shares, inclusive of the full exercise of the over-allotment option. The accompanying notes are an integral part of these unaudited condensed financial statements. 1 LEGATO MERGER CORP. III CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months Ended August 31, 2025 For

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