SEC Form 10-K/A filed by Pershing Square Tontine Holdings Ltd. (Amendment)

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).    Yes ☒    No ☐

10-K/A

 

 

 

 

 

 

 

 

 

 

 

 

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Item 1A. Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

Unless otherwise stated in this Report, or the context otherwise requires, references to:

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

3

We are a blank check company incorporated in Delaware on May 4, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Initial Business Combination”). We completed our initial public offering on July 24, 2020.

Our Sponsor is advised by Pershing Square Capital Management, L.P. (“Pershing Square” or “PSCM”), a registered investment adviser under the Investment Act of 1940, as amended, and the members of our Sponsor are the Pershing Square Funds.

Our management team is led by William A. Ackman, our Chairman and Chief Executive Officer, who works closely with the PSCM investment team and the other employees of, and resources available to, PSCM to fulfill our corporate mission. Mr. Ackman has spent 30 years in the investment management industry, the last 19 years as CEO of PSCM. PSCM’s investment strategy involves investments in high-quality, large capitalization, growth companies during periods when they have underperformed their potential. By working with management teams and boards of directors, PSCM has assisted its portfolio companies in creating substantial long-term value.

as-needed

We believe that we have substantial competitive advantages when compared with other blank check companies and other sources of equity capital, such as private equity, growth equity and hedge funds, among others. We have these competitive advantages because of the amount of committed capital we have, our willingness to acquire a minority stake, our ability to give a private company access to the public equity markets and the lower cost of capital of our structure compared to other blank check companies.

We have the largest amount of committed capital of any blank check company currently pursuing a business combination. As a result of our initial public offering and the Committed Forward Purchase Units, we have a minimum of $5,000,000,000 in equity capital for use in our Initial Business Combination (assuming that the Additional Forward Purchase is not consummated and assuming none of our Class A Common Stock is redeemed in connection with an initial business combination), and as much as $7,000,000,000 (assuming the Additional Forward Purchase is consummated in full and assuming none of the Class A Common Stock is redeemed), in each case, before expenses and not including the $6,000,000 of Forward Purchase Units certain of our directors have agreed to purchase.

We intend to merge with one company through a transaction in which our stockholders (just prior to the Initial Business Combination) will own a minority interest in the company that survives as a result of the Initial Business Combination. We believe that a substantial majority of other investors in private companies are not prepared to (or are not able to) deploy $5,000,000,000 or more of cash in acquiring a minority interest in a company. While comparably sized or larger investment funds generally seek to acquire controlling or 100% interests in one company, we are willing to execute a transaction in which our stockholders will own collectively a minority stake in a large-capitalization private company as part of its transition from a private company to a public company. As a result, we believe we are one of the largest sources of cash equity capital for a private, single-company, minority investment in the world.

As the largest blank check company currently pursuing a business combination, we can offer a larger-capitalization private company (with market capitalization of $10,000,000,000 or more) the opportunity to gain access to the public equity markets, without the company having to conduct its own initial public offering (“IPO”). Through a merger, we will be, in effect, facilitating the IPO of a large private company, enabling a private business to avoid the inherent costs and risks associated with the traditional IPO process.

We intend to pursue merger opportunities with private, large capitalization, high-quality, growth companies. We have continued to use PSCM’s substantial experience in identifying, analyzing, and determining business quality and the sustainable competitive advantages of a target company, as well as PSCM’s due diligence and negotiation expertise in executing a transaction.

The past experiences and performances of the members of our management team is not a guarantee (i) that we will be able to identify a suitable candidate for our Initial Business Combination or (ii) that we will provide an attractive return to our stockholders from any business combination we may consummate. You should not rely on the historical record of PSCM, the Pershing Square Funds and our management’s performance as indicative of our future performance.

 

4

Below is a description of the proposed Initial Business Combination, which was ultimately not consummated.

On June 20, 2021, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Vivendi SE to purchase a number of ordinary shares, par value €10 per share (the “UMG Shares”), representing approximately 10% of the share capital and voting rights, on a fully diluted basis, of Universal Music Group (“UMG”) for approximately $4 billion (the “Share Purchase”), with the expectation that the Company would distribute the UMG Shares to its Public Stockholders (the “Distribution” and together with the Share Purchase, the “Proposed IBC”). The Company expected that the Share Purchase would be consummated in the third quarter of 2021 and the Shares held in trust under the Distribution which would occur in November or December 2021.

In connection with the Proposed IBC, the Company and Vivendi also entered into an indemnification agreement pursuant to which the Company agreed to indemnify Vivendi and certain of its related parties for certain potential liabilities in connection with the Company’s redemption tender offer, the warrant exchange offer and the Distribution (each as further described below).

Also on June 20, 2021, the Company, the Sponsor, the Pershing Square Funds and the Company’s independent directors entered into the Pershing Entities Letter Agreement, pursuant to which:

 

 

 

The Company further announced that it expected to undertake a 1:4 reverse stock split following the issuance of the Distributable Tontine Redeemable Warrants, all warrants in respect of the Forward Purchase Agreement and Director Forward Purchase Agreements and the Distribution to target a net asset value (“NAV”) of approximately $22 per share.

Pursuant to the Proposed IBC, following the Distribution, the Company would have continued to exist and it would not have disappeared into UMG nor would it have been liquidated. The Company that would have continued to exist is referred to herein as “RemainCo”. RemainCo would have been the same corporate entity and it would have continued to be named Pershing Square Tontine Holdings, Ltd. The Public Stockholders would have continued to own shares in RemainCo, and it was intended that RemainCo would pursue a traditional business combination with an operating business (RemainCo’s “Future Business Combination”).

On July 8, 2021, the Company launched (i) a redemption tender offer which was intended to provide Public Stockholders with the opportunity to exercise their right to redeem their shares of Class A Common Stock in connection with the Proposed IBC and (ii) a warrant exchange offer which provided holders of the Company’s currently outstanding Distributable Redeemable Warrants the opportunity to exchange those warrants for shares of Class A Common Stock at a ratio of 0.2650 shares per warrant.

On July 19, 2021, the Company announced that its board of directors had unanimously determined not to proceed with the Proposed IBC and the Company had agreed to assign its rights and obligations under the Share Purchase Agreement with Vivendi to Pershing Square Holdings, Ltd. and certain of its affiliates (the “Assignees”). The Assignees agreed to purchase or cause to be purchased

 

5

On July 21, 2021, the Company terminated its redemption tender offer and warrant exchange offer, and no shares were redeemed from the Company. As a result of the termination of these offers and the cancellation of the Proposed IBC, the Pershing Entities Letter Agreement did not come into effect and there have been no changes to the instruments discussed as exhibits to such letter agreement. The FPA, Sponsor Warrants and Director Warrants remain as initially issued as of June 21, 2020 and July 21, 2020, respectively.

The Company continues to seek an initial business combination.

On August 10, 2021, the Assignees completed an initial closing under the Share Purchase Agreement, as a result of which the Company was released from its obligations under the Share Purchase Agreement and the indemnification agreement described above (which indemnity was allocated without the participation of the Company, among the Pershing Square Funds). Also on August 10, 2021, the Company entered into an assignment of the registration rights agreement to the Assignees, at which time the registration rights agreement was amended to provide, among other things, the Assignees certain rights to register UMG shares for a public offering no earlier than 2023 rather than providing for the Distribution that the Company originally envisioned.

Our business strategy is to identify and complete a business combination that creates substantial long-term value for our stockholders. We are seeking target companies that demonstrate the characteristics set out under “Our Acquisition Criteria” below. We believe our investment team’s operational, financial and transaction experience across economic cycles and our broad network of relationships, along with our deep understanding of the equity and debt capital markets, allow us to effectively and efficiently identify and evaluate potential opportunities for our Initial Business Combination.

We are considering companies in a wide range of industries, but generally seek to acquire a simple, high-quality, high-return on capital business that generates predictable growing cash flows that can be estimated within a reasonable range over the long term. We prefer targets that have low sensitivity to macroeconomic factors, with minimal commodity exposure and/or cyclical risk. We are willing to accept a high degree of situational, legal, and/or capital structure complexity in a business combination if we believe that the potential for reward justifies this additional complexity, particularly if these issues can be resolved in connection with and as a result of a combination with us.

To achieve a successful Initial Business Combination, our investment team will leverage its experience to identify a company with a strong competitive position that can benefit from being a public company in the execution of its growth and value-creation strategy. We believe our scale and structure, coupled with our investment team’s background and experience, make us an attractive partner for high-quality management teams and owners.

Consistent with our core investment principles and business strategy, we are seeking to enter into an Initial Business Company with a company which has characteristics that we have outlined below. We use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to complete our Initial Business Combination with a target business that does not meet all of these criteria. We are seeking to acquire a company that has the following characteristics:

 

 

 

6

 

 

 

 

 

These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular Initial Business Combination may be based, to the extent relevant, on these general guidelines, as well as other considerations, factors and criteria that our management and our investment team may deem relevant. In the event that we decide to enter into our Initial Business Combination with a target business that does not substantially meet the above criteria and guidelines, we will disclose that the target business does not substantially meet the above criteria in our stockholder communications related to our Initial Business Combination, in the form of tender offer documents or proxy materials that we would file with the Securities and Exchange Commission (“SEC”).

In evaluating a prospective target business, we expect to conduct a detailed due diligence review of the issues that we deem important in order to determine a company’s business quality and estimate its intrinsic value. That due diligence review will include, among other things, financial statement analysis, detailed document reviews, meetings with incumbent management and employees, consultations with relevant industry experts, competitors, customers and suppliers, as well as a review of additional financial, legal and other information that we will seek to obtain as part of our analysis of a target company.

We are not prohibited from pursuing an Initial Business Combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our Initial Business Combination with a company that is affiliated with our Sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm which is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or an independent accounting firm that our Initial Business Combination is fair to our company from a financial point of view.

Each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors is included by a target business as a condition to any agreement with respect to our Initial Business Combination.

Members of our management team are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our Initial Business Combination. In addition, we have an investment team comprised of eight members, who are employed by PSCM. We believe our investment team members are able to allocate their duties to us and to PSCM amongst themselves in a manner that allows them to provide us with the resources and support we require while fulfilling their responsibilities to PSCM. The amount of time that any such person devotes in any time period will vary based on whether a target business has been selected for our Initial Business Combination and the current stage of the business combination process.

Although PSCM is the investment adviser to the Pershing Square Funds, we do not believe that PSCM’s activities present significant conflicts of interest with respect to our pursuit of an acquisition target, because we intend that our acquisition target will be a privately owned company, and the Pershing Square Funds are not permitted by their constituent documents to make investments in the equities of companies whose securities are not publicly traded (except that they may make investments in public companies that issue private securities).

 

7

Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Neither the affiliates of our Sponsor nor members of our management team who are employed by our Sponsor or its affiliates have any obligation to present us with any opportunity for a potential business combination of which they become aware. However, absent a significant conflict of interest with respect to our pursuit of an acquisition target, we expect opportunities with respect to potential targets that are private companies would as a matter of course typically be made available to us.

Each of our directors and officers currently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities (including current or future investment vehicles of our Sponsor) pursuant to which such director or officer is or will be required to present business combination opportunities to such entity. Therefore, our directors and officers may be required to present potential business combinations to the related entities described above before they present such opportunities to us. Accordingly, in the future, if any of our directors or officers becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such opportunity to such entity first, and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us. Any presentation of such opportunities to entities other than us, or affiliates of our Sponsor, may present additional conflicts.

24-month

So long as we maintain a listing for our securities on the NYSE, our Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the amount of any deferred underwriting discount held in trust) at the time of our signing a definitive agreement in connection with our Initial Business Combination. If our securities are no longer listed on the NYSE, we will not be obligated to satisfy such 80% test. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or the value of comparable businesses. If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm which is a member of FINRA or a valuation or appraisal firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board will not be able to make an independent determination of the fair market value of a target business or businesses, it may be unable to do so if the board is less familiar or experienced with the target company’s business, there is a significant amount of uncertainty as to the value of the company’s assets or prospects, including if such company is at an early stage of development, operations or growth, or if the anticipated transaction involves a complex financial analysis or other specialized skills and the board determines that outside expertise would be helpful or necessary in conducting such analysis. Since any opinion, if obtained, would merely state that the fair market value of the target business meets the 80% of assets threshold, unless such opinion includes material information regarding the valuation of a target business or the consideration to be provided, it is not anticipated that copies of such opinion would be distributed to our stockholders. However, if required under applicable law, any proxy statement that we deliver to stockholders and file with the SEC in connection with a proposed transaction will include such opinion.

We anticipate structuring our Initial Business Combination so that our stockholders (including our Sponsor, the Forward Purchasers, directors, officers and our Public Stockholders) will own a minority stake in the post-combination business, which post-combination business we anticipate will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our Initial Business Combination such that the post-combination business owns or acquires less than 100% of such interests or assets of the target business for the post-combination business to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-combination business owns or

 

8

acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target or assets sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-combination business, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the Initial Business Combination for the purposes of a tender offer or for seeking stockholder approval, as applicable.

pre-combination

Though the number of shares issuable to the holders of the Sponsor Warrants and Director Warrants (for the purposes of this discussion, the “Private Holders”) is calculated as approximately 6.21% of the fully-diluted common shares outstanding immediately following the Initial Business Combination, the actual ownership stake of the Private Holders in the post-combination business upon the exercise of all warrants will differ significantly. At or below the $24.00 exercise price of the Sponsor Warrants and Director Warrants, the Private Holders will not have any ownership stake. Accordingly, there will be no dilutive effect on the Public Stockholders and the holders of the Redeemable Warrants (for the purposes of this discussion, the “Public Holders”). At higher Market Prices, the ownership stake (and overall dilutive effect) of the Private Holders increases towards its limit of approximately 6.21%.

The following table presents the dilutive effect of the Sponsor Warrants and Director Warrants as (i) the change in the Public Holders’ ownership stake with and without taking into account the Sponsor Warrants and Directors Warrants, as a percentage of (ii) the Public Holders’ ownership stake if the Sponsor Warrants and Director Warrants did not exist. The dilutive effect is shown across a range of transaction sizes and Market Prices at the time of the Initial Business Combination. The scenarios below assume no redemptions of Class A Common Stock and that the Forward Purchasers purchase the $1,000,000,000 of Committed Forward Purchase Units (50,000,000 Forward Purchase Units).

If the post-combination business’ equity is valued at $10 billion and the Market Price is $20.00, the $4 billion of value represented by the shares of Class A Common Stock gives the Public Owners an ownership stake of 40.0% in the post-combination business, whether or not the Sponsor Warrants exist (as none of the warrants are exercisable at this Market Price). At a Market Price of $36.00, the Public Owners have an ownership stake of 42.3% (reflecting exercise of their Redeemable Warrants), without taking into account the Sponsor Warrants and Director Warrants. By including the Sponsor Warrants and Director Warrants, their ownership stake decreases to 41.3%. The dilutive effect, calculated as the 1.0% decline in ownership stake, divided by 42.3%, is 2.4%.

If the post-combination business’ equity is valued at $25 billion and the Market Price is $20.00, the $4 billion of value represented by the shares of Class A Common Stock gives the Public Owners an ownership stake of 16.0% in the post-combination business, whether or not the Sponsor Warrants exist (as none of the warrants are exercisable at this Market Price). At a Market Price of $36.00, the Public Owners have an ownership stake of 17.5% (reflecting exercise of their Redeemable Warrants), absent the Private Holders. Including the Private Holders, their ownership stake decreases to 17.1%. The dilutive effect, calculated as the 0.4% decline in ownership stake, divided by 17.5%, is 2.2%.

pre-combination

 

9

All warrants are assumed to be exercised by surrendering such warrants for that number of common shares of the post-combination business equal to the quotient obtained by dividing (x) the product of the number of common shares underlying such warrants, multiplied by the excess of the Market Price over the exercise price of warrants, by (y) the Market Price.

With proceeds from the initial public offering and the Committed Forward Purchase Units, we will have a minimum of approximately $5,000,000,000 in equity capital (subject to redemptions in the case of the Class A Common Stock offered hereby) for use in our Initial Business Combination (assuming that the additional forward purchase is not consummated and assuming no redemptions of the Class A Common Stock), and as much as $7,000,000,000 (assuming the additional forward purchase is consummated in full and assuming no redemptions of the Class A Common Stock), in each case before the payment of fees and expenses associated with our Initial Business Combination. We believe that we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations and strengthening its balance sheet by reducing its debt. Because we are able to complete our business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to tailor the consideration to be paid to the target business to fit owner’s and management’s needs and requirements. We have not, however, taken any steps to secure third-party financing, and there can be no assurance it will be available to us.

We are not presently engaged in, and we will not engage in, any operations other than pursuing and reviewing potential opportunities for the Initial Business Combination. We intend to effectuate our Initial Business Combination using cash we hold in trust from the proceeds of the initial public offering and any remaining proceeds from the private placement of the Sponsor Warrants, Director Warrants and the Forward Purchase Units, by issuing shares of our capital stock, incurring debt or a combination of these as the consideration to be paid in our Initial Business Combination. We may seek to complete our Initial Business Combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.

If our Initial Business Combination is paid for using equity or debt instruments, or not all of the funds released from the trust account are used for payment of the consideration in connection with our business combination or used for redemptions of our shares of Class A Common Stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-combination business, the payment of principal or interest due on indebtedness incurred in completing our Initial Business Combination, to fund the purchase of other companies or make other investments, or for working capital.

In addition to the Forward Purchase Units, we may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our Initial Business Combination, and we may effectuate our Initial Business Combination using the proceeds of such offering rather than using the amounts held in the trust account. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our business combination. In the case of our Initial Business Combination funded with assets other than the trust account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, or through loans in connection with our Initial Business Combination. At this time, other than the Forward Purchase Agreement, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.

We do not intend to purchase multiple businesses in unrelated industries in conjunction with our Initial Business Combination. Our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, subject to the 80% NYSE asset test. However, we will not be permitted to effectuate our Initial Business Combination with another blank check company or a similar company with nominal operations.

 

10

In any case, we will only complete an Initial Business Combination in which we or the resulting company own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire an interest in the target sufficient for the post-combination business not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-combination business is what will be valued for purposes of the 80% of net assets test. There is no basis for our investors to evaluate the possible merits or risks of any target business with which we may ultimately complete our business combination.

To the extent we effect our business combination with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

The time required to select and evaluate a target business and to structure and complete our Initial Business Combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. See “Risk Factors – Any current work on a potential Initial Business Combination does not guarantee an immediate or timely deal announcement.” Any costs incurred with respect to the identification and evaluation of a prospective target business with which our business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete a business combination.

For an indefinite period of time after the completion of our Initial Business Combination, the prospects for our success may depend entirely on the future performance of a single business. By completing our Initial Business Combination with only a single entity, our lack of diversification may:

 

 

Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our Initial Business Combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company effectively. Furthermore, the future role of members of our management team, if any, in the target business is uncertain. While it is possible that one or more of our directors will remain associated in some capacity with the company resulting from our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our Initial Business Combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.

We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our Initial Business Combination.

Following our Initial Business Combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, and we may also decide to seek stockholder approval of our initial business combination for a number of business or other legal reasons. Presented in the table below is a graphic explanation of the types of Initial Business Combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.

 

 

11

Under the NYSE’s listing rules, stockholder approval would be required for our Initial Business Combination if, for example:

 

 

 

non-public

In the event that our Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.

The purpose of such purchases would be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our business combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our Class A Common Stock or Redeemable Warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

pro-rata

10b-18

10b-18,

10b-5

10b-18

10b-5

 

12

per-share

per-share

pro-rata

Each such remaining Public Share will receive as a dividend that number of Distributable Tontine Redeemable Warrants calculated as the aggregate number of Distributable Tontine Redeemable Warrants (44,444,444 such warrants) divided by the aggregate number of then-outstanding Public Shares (after we have redeemed Public Shares pursuant to the elections of the holders thereof). Accordingly, Public Stockholders who elect to redeem their Public Shares will not receive any Distributable Tontine Redeemable Warrants in respect of such redeemed Public Shares. The contingent right to receive the Distributable Tontine Redeemable Warrants will remain attached to our Public Share, will not be separately transferable, assignable or salable, and will not be evidenced by any form of certificate or instrument.

Our Distributable Tontine Redeemable Warrants are otherwise identical to our Distributable Redeemable Warrants, including with respect to exercise price, exercisability and exercise period. No fractional Distributable Tontine Redeemable Warrants will be issued, no cash will be paid in lieu of fractional Distributable Tontine Redeemable Warrants and only whole Distributable Tontine Redeemable Warrants will trade. The Distributable Tontine Redeemable Warrants will be fungible with our Distributable Redeemable Warrants and we expect that they will become tradable on the first trading day following their distribution, under the same stock symbol as the Distributable Redeemable Warrants.

No Distributable Tontine Redeemable Warrants will be distributed in respect of the Forward Purchase Shares.

We will provide our Public Stockholders with the opportunity to have all or a portion of their Public Shares redeemed upon the completion of our Initial Business Combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Under NYSE rules, asset acquisitions and stock purchases would not typically require stockholder approval, while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. If we structure a business combination transaction with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed business combination. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we maintain a listing for our securities on the NYSE, we will be required to comply with such rules.

If a stockholder vote is not required and we decide not to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:

 

 

 

13

14e-1(a)

If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:

 

 

In the event that we seek stockholder approval of our Initial Business Combination, we will distribute proxy materials and, in connection therewith, provide our Public Stockholders with the redemption rights described above upon completion of our Initial Business Combination.

non-votes

Our amended and restated certificate of incorporation provides that in no event will we redeem the Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our Initial Business Combination (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our Initial Business Combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners; (ii) cash to be transferred to the target for working capital or other general corporate purposes; or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all Public Shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all Public Shares submitted for redemption will be returned to the holders thereof.

Notwithstanding the foregoing, if we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the Public Shares, which we refer to as the “Excess Shares,” unless our board of directors determines, in its sole discretion, to waive or amend such limit with respect to a particular stockholder or “group.” We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a Public Stockholder holding more than an aggregate of 15% of the Public Shares could threaten to exercise its redemption

 

14

rights if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the Public Shares (except as otherwise permitted by our board of directors), we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our Initial Business Combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, our amended and restated certificate of incorporation does not restrict our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination.

We may require our Public Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to our Public Stockholders in connection with our Initial Business Combination will indicate whether we are requiring Public Stockholders to satisfy such delivery requirements. Accordingly, a Public Stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for Public Stockholders to use electronic delivery of their Public Shares.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.

After our Initial Business Combination is approved, we would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. In this scenario, the stockholder would then have an “option window” after the completion of the business combination during which he or she could monitor the price of our stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to us for cancellation. As a result, the redemption rights, which to be exercised require stockholders to commit before the stockholder meeting, would become “option” rights surviving past the completion of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is approved.

Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a Public Share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of the Public Shares who elect to redeem their shares will be distributed promptly after the completion of our Initial Business Combination.

pro-rata

If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until the end of the Combination Period.

24-month

per-share

 

15

Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our Redeemable Warrants, and our Distributable Redeemable Warrants will expire worthless and no Distributable Tontine Redeemable Warrants will have been issued if we fail to complete our business combination within the Combination Period.

If we fail to complete our Initial Business Combination within the Combination Period, our Class B Common Stock will not be able to convert into Class A Common Stock, and therefore will have no rights to liquidating distributions from the trust account in respect of their Class B shares, although they will be entitled to liquidating distributions from the trust account with respect to any Public Shares that they hold (however acquired).

pre-Initial

per-share

We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any accrued interest in the trust account not required to pay our taxes as described herein, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.

per-share

per-share

Although we seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business, execute agreements with us waiving any right, title, interest and claim of any kind in or to any monies held in the trust account for the benefit of our Public Stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account, including but not limited, to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $20.00 per Public Share or (ii) such lesser amount per share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of the initial public

 

16

offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company. We have not asked our Sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the trust account, the funds available for our Initial Business Combination and redemptions could be reduced to less than $20.00 per Public Share. In such event, we may not be able to complete our Initial Business Combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of our officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

per-share

We seek to reduce the possibility that our Sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our Sponsor will also not be liable as to any claims under our indemnity of the underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act. As of December 31, 2021, we have access to up to approximately $21 million from funds held outside the trust account to pay any such potential claims. In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors.

pro-rata

60-day

90-day

150-day

pro-rata

pro-rata

per-share

th

 

17

potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time, that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our Sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $20.00 per Public Share or (ii) such lesser amount per share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims.

If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $20.00 per share to our Public Stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying Public Stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

pre-Initial

pro-rata

In identifying, evaluating and selecting a target business for our business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity fund sponsors and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Furthermore, our obligation to pay cash in connection with our Public Stockholders who exercise their redemption rights may reduce the resources available to us for our Initial Business Combination and our then-outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating our Initial Business Combination.

S-1

 

18

to provide our shareholders, including the Pershing Square Funds, the opportunity to invest in SPARC. SPARC remains subject to SEC and stock exchange review and will take place if and only once the registration statement has been declared effective by the SEC under the Securities Act of 1933. No assurance can be given that SPARC will be ultimately effectuated.

We currently have four executive officers. Members of our management team are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our Initial Business Combination. In addition, we have an investment team comprised of eight members, who are employed by PSCM. We believe our investment team is able to allocate their duties to us and to PSCM amongst themselves in a manner that allows them to provide us with the resources and support we require while fulfilling their responsibilities to PSCM. The amount of time that any such person devotes in any time period will vary based on whether a target business has been selected for our Initial Business Combination and the current stage of the business combination process.

Our Class A Common Stock and Warrants are registered under the Exchange Act and we have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports contain financial statements audited and reported on by our independent registered public accounting firm.

We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with GAAP or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the PCAOB. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with such requirements or that the potential target business will be able to prepare its financial statements in accordance with such requirements. To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.

non-binding

As a large accelerated filer for the fiscal year ending December 31, 2021, the Sarbanes-Oxley Act requires that management conduct an evaluation and provide an assessment of our internal control over financial reporting (“ICFR”), and that our ICFR be audited by an independent registered public accounting firm. Compliance with these requirements of the Sarbanes-Oxley Act may be particularly burdensome in connection with our identification of a target company for our initial business combination because a target business with which we seek to complete our initial business combination may find it difficult to comply with the provisions of the Sarbanes-Oxley Act regarding the assessment of and attestation as to their ICFR. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination or may make it more difficult to reach agreement with such a target.

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

We are a newly formed company with operations limited to pursuing and reviewing potential opportunities for the Initial Business Combination. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our Initial Business Combination with one or more target businesses. If we fail to complete our Initial Business Combination, we will never generate any operating revenues.

co-investment

There is no guarantee that we will complete a transaction or that such a transaction will generate attractive long-term returns for our shareholders. Whether or not we complete a transaction, there is no guarantee that SPARC will be approved or that we will launch SPARC or a second SPAC.

While we have from time to time announced updates related to our search for a potential Initial Business Combination including our announcement regarding Universal Music Group, we may be unable to enter into and complete a transaction in the remaining period before we are obligated to return the funds we hold in trust to our shareholders We disclaim any obligation to make additional announcements about our transaction progress unless and until we enter into a definitive agreement for a transaction.

We may choose not to hold a stockholder vote to approve our Initial Business Combination unless our Initial Business Combination would require stockholder approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other legal reasons. For instance, the NYSE rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares of common stock to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares of common stock, we would seek stockholder approval of such business combination. Except as required by law, the decision as to whether we will seek stockholder approval of a proposed Initial Business Combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may complete our Initial Business Combination even if holders of a majority of the Public Shares do not approve of the Initial Business Combination we complete. Please see “Item 1. Business” for additional information.

Pursuant to the Letter Agreement, our Sponsor, directors, officers and Forward Purchasers have agreed to vote their Class B Common Stock, as well as any Public Shares that they hold (whether purchased during or after the initial public offering, and including

 

21

in open market and privately negotiated transactions), in favor of our Initial Business Combination. As a result, in addition to the Class B Common Stock held by our Sponsor, we would need only 75,000,001, or 37.5%, of the Public Shares to be voted in favor of a transaction in order to have our Initial Business Combination approved, assuming (i) no Forward Purchase Shares have been issued, (ii) the parties to the Letter Agreement have not acquired any Public Shares and (iii) all outstanding shares are voted. Our Class B Common Stock has, in the aggregate, 20.0% of the voting power of our issued and outstanding shares of common stock. Accordingly, if we seek stockholder approval of our Initial Business Combination, the agreement by such parties to vote in favor of our Initial Business Combination will increase the likelihood that we will receive the requisite stockholder approval for such Initial Business Combination.

one-third

The funds from the sale of the Sponsor Warrants, Director Warrants and Forward Purchase Units are expected to be used as part of the consideration to the sellers in our Initial Business Combination, and to pay expenses in connection with our Initial Business Combination and may be used for working capital in the post-combination business. These purchases are intended to provide us with appropriate funding for our Initial Business Combination. If the Forward Purchasers do not agree to fund more than the amount necessary to complete our Initial Business Combination, the post-combination business may not have enough cash available for working capital. If the sale of the Committed Forward Purchase Units does not close by reason of the failure of the Forward Purchasers to fund the purchase price (and/ or the Director Forward Purchasers do not purchase Forward Purchase Units), for example, or for any other reason, we may lack sufficient funds to consummate our Initial Business Combination. In addition, the Forward Purchasers’ and Director Forward Purchasers’ obligation to purchase the Committed Forward Purchase Units is subject to termination prior to the closing of the sale of such units by mutual written consent of us and such parties, or automatically: (i) if our Initial Business Combination is not consummated by July 24, 2022, unless extended in accordance with our amended and restated certificate of incorporation. In addition, such obligations to purchase the Forward Purchase Units are subject to fulfillment of customary closing conditions, including that our Initial Business Combination must be consummated substantially concurrently with the purchase of the Forward Purchase Units (if the Forward Purchasers and/or Director Forward Purchasers have not elected to make such purchase at an earlier date). In the event of any such failure to fund by the Forward Purchasers or Director Forward Purchasers, any obligation is so terminated or any such condition is not satisfied and not waived by such party, we may not be able to obtain additional funds to account for such shortfall on terms favorable to us or at all. Any such shortfall would also reduce the amount of funds that we have available for the completion of our Initial Business Combination or working capital of the post-combination business.

Because our board of directors may approve our Initial Business Combination without the need to seek or obtain stockholder approval, Public Stockholders may not have the right or opportunity to vote on our Initial Business Combination, unless we seek such stockholder vote. Accordingly, if we do not seek stockholder approval, your only opportunity to make an investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our Public Stockholders in which we describe our Initial Business Combination.

pro-rata

 

22

in respect of such shares. The contingent right to receive the Distributable Tontine Redeemable Warrants will remain attached to our Public Shares, will not be separately transferable, assignable or salable, and will not be evidenced by any certificate or instrument.

We may seek to enter into our Initial Business Combination agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash at the completion of our initial business combination and after giving effect to redemptions of our Class A common stock. If too many Public Stockholders exercise their redemption rights, and we do not obtain sufficient funds from the sale of our Forward Purchase Units or from third-party financing, we may not be able to satisfy such a closing condition and, as a result, would not be able to proceed with our Initial Business Combination. Furthermore, in no event will we redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our Initial Business Combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our Initial Business Combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon consummation of our Initial Business Combination and after payment of underwriters’ fees and commissions or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate Initial Business Combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into an Initial Business Combination with us.

per-share

per-share

non-redeeming

pro-rata

pro-rata

The Forward Purchasers have the right, but not the obligation, to purchase up to $2,000,000,000 of Additional Forward Purchase Units prior to or simultaneously with our Initial Business Combination at a price of $20.00 per unit. In addition, we and the Forward Purchasers may mutually agree to increase the amount of Additional Forward Purchase Units that the Forward Purchasers may choose to purchase. If our board of directors determines that additional capital is needed in order to consummate our Initial Business

 

23

Combination or for other reasons, and the Forward Purchasers or the Affiliate Transferees do not exercise this right in part or in full, we may not have the capital to satisfy certain conditions to our Initial Business Combination. If the Forward Purchasers do elect to purchase the entire additional amount, they would receive an additional 100,000,000 shares of Class A Common Stock and Forward Purchase Warrants exercisable for an additional 33,333,333 shares of Class A Common Stock (or a greater number of Forward Purchase Shares and Forward Purchase Warrants if we and the Forward Purchasers have mutually agreed to increase the additional forward purchase amount). Depending on the terms of our Initial Business Combination and the value of our securities at such time, this may significantly reduce and/or dilute the economic interest of our Public Stockholders in the post-combination business.

If the Forward Purchasers elect to purchase any Forward Purchase Units prior to our Initial Business Combination, they will have the ability to vote their Forward Purchase Shares on any matter submitted to our stockholders for approval. If the Forward Purchasers were to vote as recommended by us on a matter submitted to our stockholders for their approval (although they are under no obligation to do so), this would substantially increase the likelihood that any such matter would receive the requisite stockholder approval. For example, if the Forward Purchasers acquired all 50,000,000 of the Committed Forward Purchase Units prior to the record date for a stockholder vote on our Initial Business Combination and were to vote their Forward Purchase Shares in favor of such transaction, in addition to the voting power of such Forward Purchase Shares and the Class B Common Stock held by our Sponsor, we would need only 50,000,001, or 25.0%, of the Public Shares to be voted in favor of a transaction for it to be approved. If, prior to such record date, the Forward Purchasers acquired the total 150,000,000 Forward Purchase Units represented by the committed forward purchase and the additional forward purchase, our Sponsor and the Forward Purchasers would together effectively control the outcome of such vote. With respect to certain amendments to our amended and restated certificate of incorporation that require the approval of 65% of the outstanding shares of our common stock, assuming the Forward Purchasers and our Sponsor vote in favor of such an amendment, the approval of such amendment would require (i) the vote of 95,000,001, or 47.5%, of the Public Shares, if only the Committed Forward Purchase Units have been issued, and (ii) the vote of 60,000,001, or 30%, of the Public Shares, if the Committed Forward Purchase Units and Additional Forward Purchase Units have been issued. Each of the foregoing examples assumes that our Sponsor, officers and directors do not acquire any other Public Shares and that all outstanding shares are voted. The amount of the additional forward purchase may be increased by mutual agreement between the Forward Purchasers and us, which could further diminish the influence and/or control of our Public Stockholders. In addition, the Director Forward Purchasers may acquire up to 300,000 Forward Purchase Shares prior to the record date for a stockholder vote on our Initial Business Combination, in which case they would be required to vote such shares in favor of a transaction, which Forward Purchase Shares would have approximately 0.1% of the voting power of the outstanding common stock in the above scenarios.

Any potential target business with which we enter into negotiations concerning our Initial Business Combination will be aware that we must complete our Initial Business Combination within the Combination Period. Consequently, such target business may obtain leverage over us in negotiating an Initial Business Combination, knowing that if we do not complete our Initial Business Combination with that particular target business, we may be unable to complete our Initial Business Combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our Initial Business Combination on terms that we would have rejected upon a more comprehensive investigation.

Our amended and restated certificate of incorporation provides that we must complete our Initial Business Combination within the Combination Period. We may not be able to find a suitable target business and complete our Initial Business Combination within such time period. Our ability to complete our Initial Business Combination may be negatively affected by general market conditions, volatility in the capital and debt markets and the other risks described herein.

per-share

 

24

per-share

If we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions in connection with our Initial Business Combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or their affiliates may purchase shares or Distributable Redeemable Warrants, or a combination thereof, in privately negotiated transactions or in the open market either prior to or following the completion of our Initial Business Combination, although they are under no obligation to do so. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. In addition, the Forward Purchasers and Director Forward Purchasers may purchase Forward Purchase Units prior to our Initial Business Combination. None of the funds in the trust account will be used to purchase shares, Redeemable Warrants or Forward Purchase Securities in such transactions.

Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof, and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of our Initial Business Combination and thereby increase the likelihood of obtaining stockholder approval of our Initial Business Combination, or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our Initial Business Combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of the Distributable Redeemable Warrants could be to reduce the number of such warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our Initial Business Combination. Any such purchases of our securities may result in the completion of our Initial Business Combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent that such purchasers are subject to such reporting requirements.

In addition, if such purchases are made (other than with respect to the Forward Purchase Units), the public “float” of our shares of Class A Common Stock or Redeemable Warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.

We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our Initial Business Combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to have its shares redeemed. In addition, the proxy materials or tender offer documents, as applicable, that we will furnish to our Public Stockholders in connection with our Initial Business Combination will describe the various procedures that must be complied with in order to validly tender or redeem such shares. For example, we may require our Public Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve our Initial Business Combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, its shares may not be redeemed.

 

25

pre-Initial

Our Class A Common Stock and warrants units are listed on the NYSE. Although we expect to continue meeting the minimum initial listing standards set forth in the NYSE listing standards, we cannot assure you that our securities will be, or will continue to be, listed on the NYSE in the future or prior to our Initial Business Combination. In order to continue listing our securities on the NYSE prior to our Initial Business Combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with our Initial Business Combination, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, our stock price would generally be required to be at least $4.00 per share, our net tangible assets would generally be required to be at least $5,000,000 and we would be required to have a minimum of 300 round lot holders of our securities (or 400 round lot holders following our Initial Business Combination). We cannot assure you that we will be able to meet those initial listing requirements at that time.

 

 

 

 

 

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Class A Common Stock and Redeemable Warrants are listed on the NYSE, our Class A Common Stock and Redeemable Warrants will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the NYSE, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities, including in connection with our Initial Business Combination.

 

26

Since the net proceeds of our initial public offering and the private placement sale of the Sponsor Warrants and Director Warrants are intended to be used to complete our Initial Business Combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, because we have net tangible assets in excess of $5,000,000, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, we will have a longer period of time to complete our Initial Business Combination than do companies subject to Rule 419. Moreover, if our initial public offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with the completion of our Initial Business Combination.

If we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions in connection with our Initial Business Combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights without our prior consent with respect to more than an aggregate of 15% of the Public Shares, which we refer to as the “Excess Shares,” unless our board of directors determines, in its sole discretion, to waive or amend such limit with respect to such stockholder or “group.” However, we would not be restricting our Public Stockholders’ ability to vote all of their shares (including Excess Shares) for or against our Initial Business Combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our Initial Business Combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our Initial Business Combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.

We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries.

per-share

The funds available to us outside of the trust account may not be sufficient to allow us to operate until the end of the Combination Period, assuming that our Initial Business Combination is not completed during that time. We believe the funds available to us outside of the trust account will be sufficient to allow us to operate during the Combination Period; however, we cannot assure you that our

 

27

“no-shop”

per-share

per-share

non-cash

pre-existing

 

28

Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our Public Stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

per-share

Pursuant to the Letter Agreement, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduces the amount of funds in the trust account to be below the lesser of (i) $20.00 per Public Share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account (if less than $20.00 per share) due to reductions in the value of the trust assets, net of the amount of interest which may be withdrawn to pay taxes, provided that such liability will not apply to any claims by a third party or prospective business target who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. None of our directors or officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

pro-rata

In the event that the proceeds in the trust account are reduced below the lesser of (i) $20.00 per Public Share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account (if less than $20.00 per share) due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our

 

29

Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.

While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our Public Stockholders may be reduced below $20.00 per share.

We have agreed to indemnify our directors and officers to the fullest extent permitted by law and we have purchased directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our directors and officers. However, any such insurance may not be available or sufficient. Further, our directors and officers have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided by us will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account, or (ii) we consummate our Initial Business Combination. Our obligations to indemnify our directors and officers may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against our directors and officers even though, such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent that we may incur the costs of settlement and damage awards against our directors and officers pursuant to these indemnification provisions.

If, after we distribute the proceeds in the trust account to our Public Stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying Public Stockholders from the trust account prior to addressing the claims of creditors.

per-share

We face litigation claiming that we were required to register as an investment company under the Investment Company Act which may, even if meritless make it difficult for us to enter into a business combination with a target in a timely fashion within the Combination Period. If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:

 

 

 

30

Each of which may make it difficult for us to complete our business combination. In addition, we may have imposed upon us burdensome requirements, including:

 

 

 

In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business is to identify and complete our Initial Business Combination and thereafter to operate the post-combination business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.

2a-7

pre-Initial

COVID-19

COVID-19

COVID-19

COVID-19

COVID-19

COVID-19

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be

 

31

difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our Initial Business Combination, and results of operations.

pro-rata

60-day

90-day

150-day

pro-rata

pro-rata

pro-rata

In accordance with the NYSE corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on the NYSE. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our Initial Business Combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our Initial Business Combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.

The holders of our Class B Common Stock have the exclusive right to elect all of our directors prior to our Initial Business Combination. Accordingly, we do not expect to hold an annual meeting of stockholders to elect new directors prior to the consummation of our Initial Business Combination. The holders of our Class B Common Stock will also have the exclusive right to vote on the removal of directors prior to our Initial Business Combination.

 

32

arm’s-length

We have not registered the shares of Class A Common Stock issuable upon exercise of the Redeemable Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our Initial Business Combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of Class A Common Stock issuable upon exercise of the Redeemable Warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our Initial Business Combination, and to maintain a current prospectus relating to the Class A Common Stock issuable upon exercise of the Redeemable Warrants, until the expiration of the Redeemable Warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their Redeemable Warrants on a cashless basis. However, no Redeemable Warrant will be exercisable on a cash or cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Redeemable Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.

Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a Redeemable Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Redeemable Warrants who exercise their Redeemable Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, though we will be required to use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any redeemable warrant, or issue securities or other compensation in exchange for the Redeemable Warrants in the event that we are unable to register or qualify the shares underlying the Redeemable Warrants under applicable state securities laws and there is no applicable exemption available. If the issuance of the shares upon exercise of the Redeemable Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their Redeemable Warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A Common Stock included in the units. If and when the Redeemable Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.

There are circumstances in which the exercise of the Redeemable Warrants may be required or permitted to be made on a cashless basis. First, if a registration statement covering the shares of Class A Common Stock issuable upon exercise of the Redeemable Warrants is not effective by the 60 business day after the closing of our Initial Business Combination, warrant holders may, until such time as there is an effective registration statement, exercise Redeemable Warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Second, if our Class A Common Stock is at any time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Redeemable Warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and will be required to use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. Third, if we call our Redeemable Warrants for redemption when the price per share of Class A Common Stock equals or exceeds $36.00, we may require any holders wishing to exercise their warrants prior to the date of redemption to do so on a cashless basis. In any of the circumstances described above, each holder would pay the exercise price by surrendering the warrants for that number of Class A Common Stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of Class A Common Stock underlying the warrants, multiplied by the excess of the “fair market value” (as defined with respect to the applicable cashless exercise or redemption provision) less the exercise price of the warrants by (y) the fair market

 

33

value and (B) 0.3611 per redeemable warrant. Fourth, if we call our Redeemable Warrants for redemption when the price per share of our Class A Common Stock equals or exceeds $20.00, holders who exercise their warrants will receive that number of shares set forth in the table as described under “Description of Securities–Redeemable Warrants” in the prospectus. As a result, you would receive fewer shares of Class A Common Stock from such exercise than if you were to exercise such warrants for cash.

Pursuant to the registration rights agreement with our Sponsor, the Forward Purchasers and our independent directors, which we have entered into concurrently with the initial public offering, we are required to use commercially reasonable efforts to file a registration statement within 120 days of our Initial Business Combination, and use our best efforts to cause such registration statement to be declared effective as soon as practicable (but in no event later than 60 days) thereafter, providing for the resale, under Rule 415 of the Securities Act, of (i) the Sponsor Warrants, (ii) the Director Warrants, (iii) the shares issuable upon the exercise of the Sponsor Warrants or Director Warrants, (iv) the Forward Purchase Securities, (v) the shares of Class A Common Stock issuable upon conversion of our Class B Common Stock and (vi) any other shares or warrants of the company that the parties to the registration rights agreement have purchased on the open market, subject to certain conditions as provided in the such agreement. The parties to the registration rights agreement, and their permitted transferees, will be entitled to make up to 10 demands that we register the foregoing securities, and will have certain “piggyback rights” with respect to other registration statements filed by the company. The post-combination business will bear the cost of registering these securities. In addition, the Redeemable Warrants have certain registration rights, as described herein. The registration and availability of such a significant number of securities for trading in the public market (to the extent any such securities are not subject to transfer restrictions) may have an adverse effect on the market price of our Class A Common Stock. In addition, the existence of the registration rights may make our Initial Business Combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A Common Stock that is expected when such securities are registered.

We may seek to complete a business combination with an operating company in any industry or sector. However, we are not, under our amended and restated certificate of incorporation, permitted to effectuate our Initial Business Combination with another blank check company or similar company with nominal operations. To the extent we complete our business combination, we may be affected by numerous risks inherent in the business operations with which we combine. Although our directors and officers endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. Accordingly, any security holders who choose to remain security holders following our Initial Business Combination could suffer a reduction in the value of their securities.

per-share

 

34

Unless we complete our Initial Business Combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our Initial Business Combination.

Our amended and restated certificate of incorporation authorizes the issuance of up to 3,020,000,000 shares of common stock, consisting of 3,000,000,000 shares of Class A Common Stock, par value $0.0001 per share, and 20,000,000 shares of Class B Common Stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2021, there were 2,800,000,000 and 19,999,900 authorized but unissued shares of Class A Common Stock and Class B Common Stock, respectively. The amount of Class A Common Stock available for issuance does not take into account the Forward Purchase Shares, shares of Class A Common Stock reserved for issuance upon exercise of any then-outstanding warrants (including the Redeemable Warrants, Forward Purchase Warrants, Sponsor Warrants and Director Warrants) or the shares of Class A Common Stock issuable upon conversion of Class B Common Stock. As of December 31, 2021, there were no shares of preferred stock issued and outstanding. The 100 shares of Class B Common Stock will automatically convert into 100 shares of our Class A Common Stock at the time of our Initial Business Combination.

pre-Initial

pre-Initial

per-share

The issuance of additional shares of common or preferred stock:

 

 

 

 

 

35

per-share

Our ability to successfully effect our Initial Business Combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our Initial Business Combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we employ after our Initial Business Combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.

In addition, the directors and officers of an Initial Business Combination candidate may resign upon completion of our Initial Business Combination. The departure of our Initial Business Combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of our Initial Business Combination candidate’s key personnel upon the completion of our Initial Business Combination cannot be ascertained at this time. Although we contemplate that certain members of our Initial Business Combination candidate’s management team will remain associated with our Initial Business Combination candidate following our Initial Business Combination, it is possible that members of the management of our Initial Business Combination candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.

key-man

Our key personnel may be able to remain with us after the completion of our Initial Business Combination only if they are able to negotiate employment or consulting agreements in connection with our Initial Business Combination. Such negotiations would take place simultaneously with the negotiation of our Initial Business Combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of our Initial Business Combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our Initial Business Combination will not be the determining factor in our decision as to whether or not we will proceed with any potential Initial Business Combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our Initial Business Combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our Initial Business Combination.

 

36

When evaluating the desirability of effecting our Initial Business Combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any security holders who choose to remain security holders following the initial business could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value.

The members of our management team and investment team are not required to, and do not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for our Initial Business Combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our Initial Business Combination. The members of our management team and investment team may be engaged in other business endeavors for which he or she may be entitled to substantial compensation, and our officers are not obligated to contribute any specific number of hours per week to our affairs. The seven members of our investment team allocate their time between fulfilling their duties to us and to PSCM. Our directors may (and in some cases do) also serve as officers or board members for other entities. If such persons’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our Initial Business Combination.

Until we consummate our Initial Business Combination, we intend to engage in the business of identifying and combining with one or more businesses. Our Sponsor, directors and officers are, and may in the future become, affiliated with entities that are engaged in a similar business, although each of our directors and officers has agreed not to become a director or officer of any other special purpose acquisition company with a class of securities registered under the Exchange Act until we have entered into a definitive agreement regarding our Initial Business Combination or we have failed to complete our Initial Business Combination within the Combination Period.

Though we do not believe that PSCM and its affiliates’ activities present significant conflicts of interest with respect to our pursuit of an acquisition target, because we intend that our acquisition target will be a privately owned company, and the Pershing Square Funds are not permitted by their constituent documents to make investments in the equities of companies whose securities are not publicly traded (except they may make investments in public companies that issue private securities), certain conflicts described herein may still arise.

pre-existing

Our directors and officers also may become aware of business opportunities which may be necessary or appropriate for presentation to other entities to which they owe certain fiduciary or contractual duties. Any presentation of such opportunities to such other entities may present additional conflicts.

Accordingly, our directors and officers may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to

 

37

another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.

None of the members of our management team or investment team are required to commit his or her full time to our affairs. The members of our investment team are employed by PSCM. While the members of our management team intend to devote as much of their time as they deem necessary to our affairs, and while we believe the seven members of our investment team are able to allocate their duties to us and to PSCM in a manner that allows them to provide us with the resources and support we require while also fulfilling their responsibilities to PSCM, such persons may have conflicts of interest in allocating his or her time among various business activities.

Please see “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest” for a discussion of our officers’ and directors’ business affiliations and potential conflict of interest.

We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. It is possible that we enter into our Initial Business Combination with a target business that is affiliated with our Sponsor and/or its affiliates, our directors or officers. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.

Despite our agreement pursuant to our amended and restated certificate of incorporation to obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our company from a financial point of view of an Initial Business Combination with one or more businesses affiliated with our Sponsor, directors or officers, potential conflicts of interest still may exist and, as a result, the terms of our Initial Business Combination may not be as advantageous to our Public Stockholders as they would be absent any conflicts of interest.

In light of the involvement of our Sponsor, directors, and officers with other entities, we may decide to acquire one or more businesses affiliated with our Sponsor, directors or officers. Our directors and officers may (and in some cases do) also serve as officers and board members for other entities, including, without limitation, those described under “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest” Such entities may compete with us for business combination opportunities. Our Sponsor, directors and officers are not currently aware of any specific opportunities for us to complete our Initial Business Combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning an Initial Business Combination with any such entity or entities. Although we are not specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for our Initial Business Combination as set forth in “Item 1. Business—Selection of a Target Business and Structuring of our Initial Business Combination” and such transaction was approved by a majority of our disinterested directors. Despite our agreement pursuant to our amended and restated certificate of incorporation to obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our company from a financial point of view of an Initial Business Combination with one or more businesses affiliated with our Sponsor, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of our Initial Business Combination may not be as advantageous to our Public Stockholders as they would be absent any conflicts of interest.

We have entered into a Forward Purchase Agreement with the Forward Purchasers pursuant to which they have agreed to purchase at least $1,000,000,000, and up to an additional $2,000,000,000, of Forward Purchase Units, for an aggregate investment of up to $3,000,000,000 (or such greater amount as mutually agreed upon with respect to the Additional Forward Purchase Units and such aggregate amount). In addition, certain of our independent directors have committed to purchase an aggregate of $6,000,000 of Forward

 

38

one-third

Our Sponsor purchased Sponsor Warrants for an aggregate purchase price of $65,000,000. The Sponsor Warrants are generally not salable, transferable or exercisable until three years after the date of our Initial Business Combination, and will only then be exercisable for that number of shares constituting 5.95% of the common shares of the post-combination business on a fully diluted basis as of the time immediately following the Initial Business Combination, at an exercise price equal to $24.00 per common share of the post-combination business. The Sponsor Warrants will have a term of 10 years from the consummation of our Initial Business Combination. The Sponsor Warrants will not be redeemable by us and will be exercisable, in whole or in part, on a cashless basis (in addition to being exercisable for cash).

In addition, our directors purchased Director Warrants for an aggregate purchase price of $2,837,500. The Director Warrants will be exercisable for that number of shares constituting 0.26% of the common shares of the post-combination business, on the same terms as the Sponsor Warrants. If we do not complete an Initial Business Combination, or we enter into an Initial Business Combination that is unlikely to result in a price per common share above $24.00, our Sponsor will lose the investment opportunity presented by the Sponsor Warrants, and our directors will lose the investment opportunity presented by the Director Warrants.

Our Sponsor, directors, officers and Forward Purchasers have agreed (A) to vote any Public Shares owned by them in favor of any proposed business combination and (B) not to redeem any Public Shares held by them (whether acquired during or after the initial public offering) in connection with a stockholder vote to approve a proposed Initial Business Combination. In addition, we may obtain loans from our Sponsor, affiliates of our Sponsor or an officer or director. The personal and financial interests of our directors and officers may influence their motivation in identifying and selecting a target initial business, completing our Initial Business Combination and influencing the operation of the business following our Initial Business Combination.

per-share

 

 

 

 

 

 

 

 

 

 

39

The net proceeds from the initial public offering and the sale of the Sponsor Warrants and Director Warrants provided us with $4,026,337,800, plus an additional $1,006,000,000 to $3,006,000,000 from the sale of the Forward Purchase Units, will be available to complete our business combination and pay related fees and expenses (which includes $56,250,000 for the payment of deferred underwriting commissions). The amount available to us may be less in the event of redemptions.

We may effectuate our Initial Business Combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our Initial Business Combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry.

If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our Initial Business Combination. We do not, however, intend to purchase multiple businesses in unrelated industries in conjunction with our Initial Business Combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.

In pursuing our Initial Business Combination strategy, we are likely to seek to effectuate our Initial Business Combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential Initial Business Combination on the basis of limited information, which may result in our Initial Business Combination with a company that is not as profitable as we suspected, if at all.

We anticipate structuring our Initial Business Combination so that our stockholders (including our Sponsor, the Forward Purchasers, and our Public Stockholders) will own a minority stake in the post-combination business, which post-combination business we anticipate will own or acquire 100% of the equity interests or assets of the target business or businesses. However, we may structure our Initial Business Combination so that the post-combination business in which our Public Stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-combination business owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the target company’s stock than we initially acquired. Given that we intend to acquire a minority stake, and based on the foregoing factors, our management may have limited ability to influence or control the target business. We cannot provide assurance that we will have sufficient influence to ensure that management of the target business will possess the skills, qualifications or abilities necessary to profitably operate such business.

 

40

Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, other than the requirement we may not redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our Initial Business Combination and after payment of underwriters’ fees and commissions (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our Initial Business Combination. As a result, we may be able to complete our Initial Business Combination even though a substantial majority of our Public Stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our Initial Business Combination and do not conduct redemptions in connection with our Initial Business Combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our Sponsor, officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed Initial Business Combination exceed the aggregate amount of cash available to us, we will not complete our Initial Business Combination or redeem any shares, all shares of Class A Common Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

pre-business

pre-Initial

pre-Initial

per-share

 

41

pre-Initial

pre-Initial

per-share

While our Sponsor may not propose any of the amendments described in the prior paragraph, our Sponsor may vote to approve such amendments, as may the Forward Purchasers if any Forward Purchase Units have been issued as of the record date for such a vote. If no Forward Purchase Units have been issued as of such time, and our Sponsor votes its Class B Common Stock in favor of such matter requiring the approval of 65% of our outstanding common stock, we would need approximately 56.3% of the Public Shares to be voted in favor of such amendment for it to be approved. If the Forward Purchasers were to vote as recommended by us on a matter submitted to our stockholders for their approval, it would substantially increase the likelihood that any such matter would receive the requisite stockholder approval. For example, if the Forward Purchasers acquired all 50,000,000 of the Committed Forward Purchase Units prior to the record date for a stockholder vote on such an amendment and were to vote their Forward Purchase Shares in favor of such transaction, in addition to the voting power of such Forward Purchase Shares and the Class B Common Stock held by our Sponsor, we would need approximately 47.5% of the Public Shares to be voted in favor of such amendment for it to be approved. If, prior to such record date, the Forward Purchasers acquired the total 150,000,000 Forward Purchase Units represented by the committed forward purchase and the additional forward purchase, in addition to the voting power of such Forward Purchase Shares and the Class B Common Stock held by our Sponsor, we would need approximately 30% of the Public Shares to be voted in favor of such amendment for it to be approved. Each of the foregoing examples assumes that our Sponsor, officers and directors do not acquire any other Public Shares and that all outstanding shares are voted. The amount of the additional forward purchase may be increased by mutual agreement of us and the Forward Purchasers, which could further diminish the influence and/or control of our Public Stockholders. In addition, the Director Forward Purchasers may acquire and be able to vote up to 300,000 Forward Purchase Shares prior to the Initial Business Combination, representing approximately 0.1% of the voting power of the outstanding common stock in the above scenarios.

lock-up

 

42

lock-up

pro-rata

Our Sponsor, as the holder of our Class B Common Stock, holds 20.0% of the voting power of our issued and outstanding common stock. Accordingly, our Sponsor may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our Sponsor or its affiliates purchase additional Public Shares on the NYSE or in privately negotiated transactions, this would increase the influence of such parties. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A Common Stock. In addition, prior to our Initial Business Combination, our directors may be elected and removed only by the vote of the holders of our Class B Common Stock. Accordingly, our Sponsor will continue to exert control at least until the completion of our Initial Business Combination. In addition, if the Forward Purchasers elect to purchase Forward Purchase Units prior to our Initial Business Combination, and vote their Forward Purchase Shares in favor of any matter submitted to our stockholder for approval, although they have no obligation to vote with our Sponsor or as recommended by us, their ability to do so could also exert a substantial influence on actions requiring a stockholder vote.

For example, if the Forward Purchasers acquired all 50,000,000 of the Committed Forward Purchase Units prior to the record date for a stockholder vote on our Initial Business Combination and were to vote their Forward Purchase Shares in favor of such transaction, in addition to the voting power of such Forward Purchase Shares and the Class B Common Stock held by our Sponsor, we would need approximately 25.0% of the Public Shares to be voted in favor of a transaction for it to be approved. If, prior to such record date, the Forward Purchasers acquired the total 150,000,000 Forward Purchase Units represented by the committed forward purchase and the additional forward purchase, our Sponsor and the Forward Purchasers would together effectively control the outcome of such vote. With respect to certain amendments to our amended and restated certificate of incorporation that require the approval of 65% of the outstanding common stock, assuming the Forward Purchasers and our Sponsor vote in favor of such an amendment, the approval of such amendment would require (i) the vote of approximately 47.5%, if only the Committed Forward Purchase Units have been issued, and (ii) the vote of approximately 30%, if the Committed Forward Purchase Units and all Additional Forward Purchase Units have been issued. Each of the foregoing examples assumes that our Sponsor, officers and directors do not acquire any other shares of Class A Common Stock and that all outstanding shares are voted. The amount of the additional forward purchase may be increased by mutual agreement of us and the Forward Purchasers, which could further diminish the influence and/or control of our Public Stockholders. In

 

43

addition, the Director Forward Purchasers may acquire and be able to vote up to 300,000 Forward Purchase Shares prior to the Initial Business Combination, representing approximately 0.1% of the voting power of the outstanding common stock in the above scenarios.

Our Redeemable Warrants and Forward Purchase Warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of such warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires approval by the holders of at least 65% of the outstanding Redeemable Warrants. Pursuant to the warrant agreement, prior to our Initial Business Combination, the Forward Purchase Warrants will not have the right to vote on any amendments to the warrant agreement, except with respect to certain provisions relating solely to the transfer of Forward Purchase Securities. Accordingly, we may amend the terms of such warrants in a manner adverse to a holder if holders of at least 65% of the outstanding Redeemable Warrants and, as applicable, Forward Purchase Warrants, approve of such amendment. Our ability to amend the terms of such warrants includes, but is not limited to, amendments to increase the exercise price, convert such warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A Common Stock purchasable upon exercise of such a warrant. Prior to our Initial Business Combination, there will be 22,222,222 Distributable Redeemable Warrants outstanding, and only such warrants will be able to vote on amendments to the warrant agreement. Following our Initial Business Combination, there will be 66,666,666 Redeemable Warrants outstanding (including the 44,444,444 Distributable Tontine Redeemable Warrants issued in connection with our Initial Business Combination), and (i) if only the Committed Forward Purchase Units have been issued, 16,666,666 Forward Purchase Warrants outstanding and (ii) if the entire amount of the Additional Forward Purchase Units have been issued, 50,000,000 Forward Purchase Warrants outstanding, all of which will have the right to vote on amendments to the warrant agreement. Accordingly, following our Initial Business Combination, the Forward Purchasers will hold between 20.0% and 42.9% of the outstanding amount of redeemable and Forward Purchase Warrants, potentially giving the Forward Purchasers substantial influence over any vote to amend the warrant agreement. If we and the Forward Purchasers determine, by mutual agreement, to increase the number of Additional Forward Purchase Units, the voting power of the Forward Purchasers with respect to the warrant agreement will be correspondingly greater. In addition, the Director Forward Purchasers will have the ability to vote 100,000 Forward Purchase Warrants on amendments to the warrant agreement following our Initial Business Combination. The above descriptions of voting power in each case assume that no Redeemable Warrants or Forward Purchase Warrants have been exercised.

30-day

In addition, we have the ability to redeem the outstanding Redeemable Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the reference value equals or exceeds $20.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like). In such a case, the holders will be able to exercise their Redeemable Warrants prior to redemption for a number of shares of Class A Common Stock determined based on the redemption date and the fair market value of our shares of Class A Common Stock. This provision could result in the warrant holders receiving less value than they may have been able to obtain if we had not called the warrants for redemption. For example, if we choose to redeem the warrants when the trading price of our shares of Class A Common Stock is less than the exercise price of the warrants, the value warrant holders receive upon exercise may be less than the value they could have received if they were able to wait to exercise

 

44

until a later time when the trading price of our shares of Class A Common Stock could be higher. In other circumstances, including when our shares of Class A Common Stock has a higher trading price, the amount received by exercising warrant holders pursuant to this provision may not compensate the holders for the value of the warrants, including because the number of shares received is capped at 0.3611 shares of Class A Common Stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.

one-third

We issued Distributable Redeemable Warrants to purchase 22,222,222 shares of our Class A Common Stock as part of the units sold in the initial public offering, and will be distributing Distributable Tontine Redeemable Warrants to purchase 44,444,444 shares of our Class A Common Stock in connection with the closing of our Initial Business Combination, each exercisable for one share of Class A Common Stock at an exercise price of $23.00 per share. In addition, no later than simultaneously with the consummation of our Initial Business Combination, Forward Purchase Warrants to purchase at least 16,666,666 shares of Class A Common Stock will be issued pursuant to the Forward Purchase Agreement (as part of the Committed Forward Purchase Units) and as many as 50,000,000 shares of Class A Common Stock (or such greater amount as mutually agreed upon by us) if the Forward Purchasers elect to purchase the full amount of Additional Forward Purchase Units. In a private placement simultaneously with the closing of the initial public offering, our Sponsor purchased Sponsor Warrants constituting 5.95% of the common shares of the post-combination business on a fully diluted basis, with an exercise price equal to $24.00 per share of the post-combination business, and our directors purchased an aggregate amount of $2,837,500 of Director Warrants, exercisable for approximately 0.26% of the common share capital of the post-combination business on a fully diluted basis, with an exercise price equal to $24.00 per share of the post-combination business.

The potential for the issuance of a substantial number of additional shares of Class A Common Stock upon the issuance or exercise of these securities could make us a less attractive business combination vehicle to a target business. Any issuance of Forward Purchase Units or exercise of Forward Purchase Warrants or Redeemable Warrants will increase the number of issued and outstanding shares of our Class A Common Stock, and may reduce the value of the shares of Class A Common Stock issued, if any, to complete our Initial Business Combination. In addition, if stockholders of a target company are to remain stockholders in the post-combination business, the exercise of any of our warrants would reduce the ownership interest maintained in the post-combination business by such stockholders of the target company. Therefore, our warrants may make it more difficult to effectuate our Initial Business Combination or increase the cost of acquiring the target business.

 

45

Prior to our initial public offering there had been no public market for any of our securities. The public offering price of the units and the terms of the warrants were negotiated between us and the underwriters. In determining the size of the initial public offering, management held customary organizational meetings with the representatives of the underwriters, both prior to our inception and thereafter, with respect to the state of capital markets, generally, and the amount the underwriters believed they reasonably could raise on our behalf. Factors considered in determining the size of the initial public offering, prices and terms of the units, including the Class A Common Stock and warrants underlying the units, include:

 

 

 

 

 

 

 

 

Although these factors were considered, the determination of our offering price is more arbitrary than the pricing of securities of an operating company in a particular industry since we have no historical operations or financial results.

COVID-19

The federal proxy rules require that a proxy statement with respect to a vote on our Initial Business Combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America (GAAP), or international financial reporting standards (IFRS) as issued by the International Accounting Standards Board. Depending on the circumstances, the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete our Initial Business Combination within the Combination Period.

10-K

 

46

Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

Section 203 of the DGCL affects the ability of an “interested stockholder” to engage in certain business combinations, for a period of three years following the time that the stockholder becomes an “interested stockholder.” We will take all necessary corporate action to ensure that our Sponsor, its affiliates, and their transferees will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and will therefore not be subject to such restrictions.

Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. This exclusive provision forum will not apply to suits arising under the Exchange Act or any other claim for which federal courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation provides that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.

If we effect our Initial Business Combination with a company with operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:

 

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition.

re-evaluated

non-cash

non-cash

Following the issuance of the SEC Staff Statement, and after consultation with our independent registered public accounting firm, our management and our audit committee concluded that, in light of the SEC Statement, it was appropriate to restate our previously issued audited financial statements as of December 31, 2020, and for the period from May 4, 2020 (inception) through December 31, 2020. As part of such process, we identified a material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting.

 

48

With respect to non-routine transactions, all significant and unusual transactions entered into by the Company are reviewed by the CFO for appropriate treatment in accordance with US GAAP. Where necessary, third-party professionals are consulted regarding the treatment of complex accounting matters to assist management in validating that the correct accounting treatment is used.

If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures, and could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.

None

We currently maintain our principal executive offices at 787 Eleventh Avenue, 9 Floor, New York, NY 10019. The space is provided to us at no cost by Pershing Square Capital Management, L.P., an entity affiliated with our Sponsor and the members of our management team. We consider our current office space adequate for our current operations.

The Company has also received requests for books and records from certain purported stockholders pursuant to Section 220 of the Delaware General Corporation Law and has provided or agreed to provide certain information in response to those requests.

Not Applicable.

 

49

Our Class A Common Stock and warrants are traded separately on the NYSE under the symbols “PSTH” and “PSTH.WS”, respectively.

As of March 4, 2022, there were three holders of record of our Class A Common stock, one holder of record our Class B Common Stock, one holder of record of our public warrants, one holder of record of our Sponsor Warrants, and five holders of record of our Director Warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Class A Common Stock and warrants are held of record by banks, brokers and other financial institutions.

We have not paid any cash dividends on shares of our common stock to date and do not intend to pay cash dividends prior to the completion of our Initial Business Combination. The payment of cash dividends in the future will depend on our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our Initial Business Combination. The payment of any cash dividends subsequent to our Initial Business Combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any share dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our Initial Business Combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

None

The graph below compares the cumulative total return for our Class A Common Stock from September 11, 2020 (the first day on which our Class A Common Stock detached from our units and started trading separately on the NYSE) through December 31, 2021 with the comparable cumulative return of two indices: the S&P 500 Index and the Russell 2000 Index. The graph assumes $100 invested on September 11, 2020 in each of our Class A Common Stock and the two indices presented.

 

 

50

None.

None.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our Initial Business Combination using cash from the proceeds of the initial public offering and the private placements of the Sponsor Warrants, Director Warrants and Forward Purchase Units, our capital stock, debt or a combination of cash, stock and debt. Our Initial Business Combination will be a negotiated transaction, not a hostile takeover.

The issuance of additional shares of our stock in a business combination, including the Forward Purchase Securities and any private investment on public equity, or PIPE, securities may:

 

 

 

 

 

Similarly, if we issue debt instruments or otherwise incur significant indebtedness, it could result in:

 

 

 

 

 

 

 

 

51

 

We expect to continue to incur costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our Initial Business Combination will be successful.

Below is a description of the proposed Initial Business Combination, which was ultimately not consummated.

On June 20, 2021, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Vivendi SE to purchase a number of ordinary shares, par value €10 per share (the “UMG Shares”), representing approximately 10% of the share capital and voting rights, on a fully diluted basis, of Universal Music Group (“UMG”) for approximately $4 billion (the “Share Purchase”), with the expectation that the Company would distribute the UMG Shares to its Public Stockholders (the “Distribution” and together with the Share Purchase, the “Proposed IBC”). The Company expected that the Share Purchase would be consummated in the third quarter of 2021 and the Shares held in trust under the Distribution which would occur in November or December 2021.

In connection with the Proposed IBC, the Company and Vivendi also entered into an indemnification agreement pursuant to which the Company agreed to indemnify Vivendi and certain of its related parties for certain potential liabilities in connection with the Company’s redemption tender offer, the warrant exchange offer and the Distribution (each as further described below).

Also on June 20, 2021, the Company, the Sponsor, the Pershing Square Funds and the Company’s independent directors entered into the Pershing Entities Letter Agreement, pursuant to which:

 

 

 

The Company further announced that it expected to undertake a 1:4 reverse stock split following the issuance of the Distributable Tontine Redeemable Warrants, all warrants in respect of the Forward Purchase Agreement and Director Forward Purchase Agreements and the Distribution to target a net asset value (“NAV”) of approximately $22 per share.

Pursuant to the Proposed IBC, following the Distribution, the Company would have continued to exist and it would not have disappeared into UMG nor would it have been liquidated. The Company that would have continued to exist is referred to herein as “RemainCo”. RemainCo would have been the same corporate entity and it would have continued to be named Pershing Square Tontine Holdings, Ltd. The Public Stockholders would have continued to own shares in RemainCo, and it was intended that RemainCo would pursue a traditional business combination with an operating business (RemainCo’s “Future Business Combination”).

 

52

On July 8, 2021, the Company launched (i) a redemption tender offer which was intended to provide Public Stockholders with the opportunity to exercise their right to redeem their shares of Class A Common Stock in connection with the Proposed IBC and (ii) a warrant exchange offer which provided holders of the Company’s currently outstanding Distributable Redeemable Warrants the opportunity to exchange those warrants for shares of Class A Common Stock at a ratio of 0.2650 shares per warrant.

On July 21, 2021, the Company terminated its redemption tender offer and warrant exchange offer, and no shares were redeemed from the Company. As a result of the termination of these offers and the cancellation of the Proposed IBC, the Pershing Entities Letter Agreement did not come into effect and there have been no changes to the instruments discussed as exhibits to such letter agreement. The FPA, Sponsor Warrants and Director Warrants remain as initially issued as of June 21, 2020 and July 21, 2020, respectively.

The Company continues to seek an initial business combination.

On August 10, 2021, the Assignees completed an initial closing under the Share Purchase Agreement, as a result of which the Company was released from its obligations under the Share Purchase Agreement and the indemnification agreement described above (which indemnity was allocated without the participation of the Company, among the Pershing Square Funds). Also on August 10, 2021, the Company entered into an assignment of the registration rights agreement to the Assignees, at which time the registration rights agreement was amended to provide, among other things, the Assignees certain rights to register UMG shares for a public offering no earlier than 2023 rather than providing for the Distribution that the Company originally envisioned.

non-cash

non-cash

non-cash

non-cash

 

53

Non-cash

non-operating

(i) non-cash

non-cash

(i) non-cash

non-cash

Financial Measures

non-GAAP

non-GAAP

non-GAAP

non-GAAP

non-GAAP

non-cash

 

54

Our liquidity needs had been satisfied prior to the consummation of the initial public offering through a capital contribution of $25,000 by our Sponsor in exchange for 100 shares of Class B Common Stock, and interest-bearing loans of $1,121,120 from our Sponsor under an unsecured promissory note covering expenses related to the initial public offering. The loan was repaid in full on July 24, 2020, inclusive of interest. As of December 31, 2021 and December 31, 2020, $378,880 was left under the promissory note to be drawn down, and there were no borrowings outstanding, respectively.

On July 24, 2020, we consummated the initial public offering of 200,000,000 Units, at $20.00 per unit, generating gross proceeds of $4,000,000,000. Simultaneously with the closing of the initial public offering, we consummated a $67,837,500 sale of Sponsor Warrants and Director Warrants in private placements.

Following the initial public offering and the private placements of Sponsor Warrants and Director Warrants, a total of $4,000,000,000 was placed into the trust account. We incurred $94,623,187 in offering costs, including $35,000,000 of underwriting fees, $56,250,000 of deferred underwriting fees and $3,373,187 of other offering costs. The per share amount to be distributed to Public Stockholders who properly redeem their Public Shares will not be reduced by the deferred underwriting fees (further discussed below).

As of December 31, 2021, we had an unrestricted cash balance of $23,156,677 in the operating account, held outside the trust account to fund our ongoing expenses, as well as cash and marketable securities held in the trust account of $4,002,943,971. Interest and dividend income earned on the balance in the trust account will be used by us to pay taxes on such income. From our inception through December 31, 2021, we withdrew $596,509 of interest and dividends earned on the trust account to pay our income taxes, of which all were withdrawn during the year ended December 31, 2021.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest and dividends earned on the trust account (less taxes payable and deferred underwriting fees), and the proceeds from the sale of the Forward Purchase Units to complete an Initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the Initial Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions, and pursue our growth strategies.

In order to fund working capital deficiencies or finance transaction costs in connection with an Initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be needed. If we complete the Initial Business Combination, we would repay such loaned amounts. In the event that the Initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment.

in-depth

 

55

We do not have any long-term debt, capital lease obligations or operating lease obligations as of December 31, 2021.

pro-rata

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

We account for our Class A Common Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” The Company’s conditionally redeemable Class A Common Stock features certain redemption rights that are considered to be outside of its control and subject to the occurrence of uncertain future events. Accordingly, at December 31, 2021 and December 31, 2020, 200,000,000 shares of Class A Common Stock subject to possible redemption were presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets. The Company adjusts the carrying value of redeemable common stock to equal the redemption value of the cash held in the Trust Account net of income taxes payable at the end of each reporting period.

815-40,

two-class

non-redeemable

non-redeemable

Sheet Arrangements.

off-balance

S-K.

 

56

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on the Company’s financial statements.

2a-7

This information appears following Item 15 of this Report and is incorporated herein by reference.

None

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

13a-15(b)

Management has completed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making the assessment, management used the “Internal Control — Integrated Framework” (“COSO 2013”) promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the assessment performed, management concluded that as of December 31, 2021, the Company’s internal control over financial reporting was effective as outlined by the COSO 2013 framework. Additionally, based on management’s assessment, the Company determined that there were no material weaknesses in its internal control over financial reporting as of December 31, 2021. The effectiveness of the Firm’s internal control over financial reporting as of December 31, 2021, has been audited by Marcum LLP, an independent registered public accounting firm, as stated in their report which appears herein.

13a-15(f)

15d-15(f)

 

57

To the Shareholders and Board of Directors of

Pershing Square Tontine Holdings, Ltd.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheets as of as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity and cash flows the year ended December 31, 2021 and the period from May 4, 2020 (inception) through December 31, 2020 of the Company, and our report dated March 3, 2022 expressed an unqualified opinion on those financial statements.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

Marcum LLP

New York, NY

March 3, 2022

 

58

None

Our current directors and executive officers are as follows:

 

co-founded

co-founded

e-commerce

pop-up

co-founded,

 

59

co-founded

20-year

start-up

Our board of directors consist of five members. We may not hold an annual meeting of stockholders until after we consummate our Initial Business Combination.

Our officers are appointed by the board of directors and serve at their discretion, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Treasurer and such other offices as may be determined by the board of directors.

phase-in

10A-3

 

60

Jacqueline Reses, Lisa Gersh and Michael Ovitz serve as members of our audit committee, with Jacqueline Reses serving as Chair of the audit committee. Under the NYSE listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent.

Each member of the audit committee is independent and financially literate, and our board of directors has determined that Jacqueline Reses, the Chair of our audit committee, qualifies as an “audit committee financial expert” as defined in applicable SEC rules.

We have adopted an audit committee charter, which details the principal functions of the audit committee, including:

 

 

 

 

 

 

 

 

Lisa Gersh, Jacqueline Reses and Joseph Steinberg serve as members of our compensation committee, with Lisa Gersh serving as Chair of the compensation committee. Under the NYSE listing standards and applicable SEC rules, we are required to have at least two members on the compensation committee, all of whom must be independent. Each member of our compensation committee is independent. As we are not paying compensation to any employees, and have already determined director compensation, we do not expect the compensation committee will meet for substantive compensation purposes prior to our Initial Business Combination, (other than meeting at least annually for administrative purpose).

We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:

 

 

 

 

 

 

 

61

 

Notwithstanding the foregoing, other than reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our Sponsor, directors and officers, or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of a business combination. Accordingly, it is likely that prior to the consummation of our Initial Business Combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such Initial Business Combination.

The charter provides that the compensation committee may, in its sole discretion, obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the NYSE and the SEC.

Lisa Gersh, Michael Ovitz and Joseph Steinberg serve as members of our nominating and governance committee, with Joseph Steinberg serving as chair of the nominating and governance committee.

The primary purposes of our nominating and corporate governance committee is to assist the board in:

 

 

 

 

The nominating and governance committee is governed by a charter that complies with the rules of the NYSE.

Our nominating and governance committee will recommend to the board of directors, candidates for nomination for election at the annual meeting of the stockholders. We have not formally established any specific minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders. However, we do not expect to hold an annual meeting of stockholders until after we consummate our Initial Business Combination.

None of our officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more officers serving on our board of directors.

Section 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of such forms, we believe that during the period from May 4, 2020 (inception) through December 31, 2021, there were no delinquent filers.

We have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed copies of our code of ethics and our audit, compensation and nominating and governance committee charters as exhibits to the registration statement in connection with our initial public offering. You will be able to review these documents by accessing our public filings at the SEC’s web site at

 

62

8-K.

Although PSCM is the investment adviser to the Pershing Square Funds, we do not believe that PSCM and its affiliates’ activities present significant conflicts of interest with respect to our pursuit of an acquisition target because we intend that our acquisition target will be a privately owned company, and the Pershing Square Funds are not permitted by their constituent documents to make investments in the equities of companies whose securities are not publicly traded (except that they may make investments in public companies that issue private securities).

Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Neither the affiliates of our Sponsor nor members of our management team who are employed by our Sponsor or its affiliates have any obligation to present us with any opportunity for a potential business combination of which they become aware. However, absent a significant conflict of interest with respect to our pursuit of an acquisition target, we would expect such opportunity to be provided to us, as such potential target company would be a private company.

Each of our directors and officers currently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities (including current or future investment vehicles of our Sponsor) pursuant to which such director or officer is or will be required to present business combination opportunities to such entity. Therefore, our directors and officers may be required to present potential business combinations to the related entities described above before they present such opportunities to us. Accordingly, in the future, if any of our directors or officers becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such opportunity to such entity first, and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us. Any presentation of such opportunities to entities other than us, or affiliates of our Sponsor, may present additional conflicts.

Although the current and future fiduciary duties or contractual obligations of our directors or officers could materially undermine our ability to complete our business combination, we believe this risk is partly mitigated for the following reasons. As stated above, our Sponsor and its affiliates currently do not make, or are not permitted to make, investments in private companies. Further, each of our directors and officers has agreed not to become a director or officer of any other special purpose acquisition company with a class of securities registered under the Exchange Act, until we have entered into a definitive agreement regarding our Initial Business Combination or we have failed to complete our Initial Business Combination within the Combination Period. With respect to a potential business combination as to which a director may be “interested” or have a potential conflict of interest, we may take steps including, but not limited to, requiring the review of our audit committee pursuant to our related party policy, the recusal of such director with respect to such transaction, the appointment of a committee of independent and disinterested directors, or, as described above, the use of an independent accounting firm to ensure that a potential business combination is fair to our stockholders.

Potential investors should also be aware of the following other potential conflicts of interest:

 

 

 

 

63

 

 

The conflicts described above are not intended to be exhaustive, and may not be resolved in our favor.

In general, directors and officers of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:

 

 

 

Accordingly, as a result of multiple business affiliations, our directors and officers may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation provides that the doctrine of corporate opportunity will not apply with respect to any of our directors or officers in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have.

We are not prohibited from pursuing our Initial Business Combination with a company that is affiliated with our Sponsor, our directors or our officers. In the event we seek to complete our Initial Business Combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that such an Initial Business Combination is fair to our company from a financial point of view.

In the event that we submit our Initial Business Combination to our Public Stockholders for a vote, our Sponsor, directors, officers and Forward Purchasers have agreed to vote any shares of common stock held by them in favor of our Initial Business Combination.

Our amended and restated certificate of incorporation provides that our directors and officers will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.

We have entered into agreements with our directors and officers providing contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our directors and officers.

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though

 

64

such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.

After the completion of our Initial Business Combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined by a compensation committee constituted solely of independent directors.

We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our Initial Business Combination, although it is possible that some or all of our directors and officers may negotiate employment or consulting arrangements to remain with us after our Initial Business Combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our Initial Business Combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our directors and officers that provide for benefits upon termination of employment.

The following tables set forth information regarding the beneficial ownership of our common stock as of the date of this Report, by:

 

 

 

To our knowledge, all persons named in the following table have sole voting and investment power with respect to all shares of common stock beneficially owned by them, except with respect to our Sponsor, the Pershing Square Funds and Mr. Ackman, who have shared investment and voting power with respect to the securities they may be deemed to beneficially own. The following table does not reflect record or beneficial ownership of the Sponsor Warrants, Director Warrants, and, except with respect to our Sponsor, the Pershing Square Funds and Mr. Ackman, does not reflect the Forward Purchase Warrants or Redeemable Warrants, as these warrants are not exercisable within 60 days of the date of this Report.

 

65

 

 

66

Our Sponsor has 20.0% of the voting power of the outstanding shares of our common stock through ownership of the Class B shares. Because the voting power held by each share of Class B Common Stock will not be adjusted upon the issuance of any Forward Purchase Units, our Sponsor will have less than 20.0% of the voting power of the outstanding shares of our common stock. Our Sponsor has the right to elect all of our directors prior to our Initial Business Combination. Accordingly, our Sponsor and Forward Purchasers (if they exercise their right to purchase Forward Purchase Units prior to a vote) may be able to effectively influence the outcome of all matters requiring approval by our stockholders, including amendments to our amended and restated certificate of incorporation and approval of significant corporate transactions, including approval of our Initial Business Combination.

Our Sponsor, directors, officers and Forward Purchasers have agreed (i) to vote any shares of common stock owned by them in favor of any proposed business combination and (ii) not to redeem any shares of common stock owned by them in connection with a stockholder vote to approve a proposed Initial Business Combination.

Our Sponsor and our directors and officers are deemed to be our “promoters” as such term is defined under the federal securities laws.

None.

On May 7, 2020, our Sponsor acquired 100 shares of Class B Common Stock in exchange for a capital contribution of $25,000, or $250 per share. Upon completion of the initial public offering, the Sponsor holds 20.0% of the voting power of our outstanding common stock. Because the voting power held by each share of Class B Common Stock will not be adjusted upon the issuance of any Forward Purchase Units, our Sponsor will have less than 20.0% of the voting power of the outstanding shares of our common stock. Our Class B Common Stock (including the Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.

Our Sponsor may, in its discretion, transfer, directly or indirectly, its Class B Common Stock (including the Class A Common Stock issued upon conversion thereof) to any Affiliate Transferee, subject to compliance with applicable securities laws.

Concurrently with our initial public offering, our Sponsor purchased Sponsor Warrants in a private placement for a purchase price of $65,000,000. The purchase price was determined by the company, in consultation with a third-party, nationally recognized valuation firm, to be the fair market value of the Sponsor Warrants.

arm’s-length

arm’s-length

 

67

procedure. The Sponsor Warrants has been issued pursuant to a Sponsor Warrant agreement between us and Continental Stock Transfer & Trust Company, as warrant agent.

lock-up

lock-up

Until three years after our Initial Business Combination, (i) our Sponsor will be permitted to transfer the Sponsor Warrants only to Affiliate Transferees and (ii) any director owning a Director Warrant will be permitted to transfer such warrant only to our Sponsor, other directors or Affiliate Transferees, with limited exceptions in each case, with any such transferee being subject to the same agreements with respect to such securities as the transferor. Otherwise, the Sponsor Warrants and Director Warrants will generally not be salable, transferable or exercisable until three years after the completion of our business combination. The Sponsor Warrants and Director Warrants will not be redeemable by us and will be exercisable, in whole or in part, on a cash or cashless basis.

Of the proceeds from the sale of the Sponsor Warrants and Director Warrants, $35,000,000 was deposited in the trust account, and the remainder is held outside of the trust account and used to pay expenses in connection with the initial public offering and a potential Initial Business Combination.

one-third

one-third

Pursuant to the Director Forward Purchase Agreement with certain of our independent directors, the Director Forward Purchasers have agreed to purchase, in one or more private placements in such amounts and at such time or times as each Director Forward Purchasers determines, but no later than simultaneously with the closing of our Initial Business Combination, an aggregate of $6,000,000 of Forward Purchase Units. The Director Forward Purchasers have agreed to purchase the following amounts of Forward Purchase Units: Mr. Ovitz, $5,000,000, and Ms. Reses, $1,000,000. The Director Forward Purchasers may not transfer their obligation to purchase such Forward Purchase Units, other than to our Sponsor, other directors and Affiliate Transferees. Such Forward Purchase Securities will be subject to certain transfer restrictions and have certain registration rights, as described herein.

 

68

The proceeds of purchases of Forward Purchase Units will not be deposited in the trust account. The Forward Purchase Shares will have no right to receive our Distributable Tontine Redeemable Warrants, no redemption rights in connection with our Initial Business Combination or in connection with certain amendments to our amended and restated certificate of incorporation and will have no rights to liquidating distributions from our trust account in the event that we fail to complete our Initial Business Combination within the prescribed timeframe. Pursuant to the warrant agreement, the Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our Initial Business Combination, except with respect to certain provisions relating solely to the transfer of Forward Purchase Securities. The Forward Purchase Securities, as long as they are held by the Forward Purchasers or their permitted transferees, will have certain transfer restrictions and registration rights. In all other respects, the terms of the Forward Purchase Shares and Forward Purchase Warrants, respectively, will be identical to the terms of the Class A Common Stock and the Redeemable Warrants.

The purchases of the Sponsor Warrants, Director Warrants and Forward Purchase Units are intended to provide us with appropriate equity funding for our Initial Business Combination.

We entered into a Registration Rights Agreement with our Sponsor, the Forward Purchasers and our independent directors, pursuant to which we will be required to use commercially reasonable efforts to file a registration statement within 120 days of our Initial Business Combination, and use our best efforts to cause such registration statement to be declared effective as soon as practicable (but in no event later than 60 days) thereafter, providing for the resale, under Rule 415 of the Securities Act, of (i) the Sponsor Warrants, (ii) the Director Warrants, (iii) the shares issuable upon the exercise of the Sponsor Warrants or Director Warrants, (iv) the Forward Purchase Securities, (v) the shares of Class A Common Stock issuable upon conversion of our Class B Common Stock and (vi) any other shares or warrants of the company that the parties to the Registration Rights Agreement have purchased on the open market, subject to certain conditions as provided in the Registration Rights Agreement. The parties to the Registration Rights Agreement, and their permitted transferees, will be entitled to make up to 10 demands that we register the foregoing securities, and will have certain “piggyback rights” with respect to other registration statements filed by the company. The post-combination business will bear the cost of registering these securities.

As more fully discussed in the section of this Report entitled “Conflicts of Interest,” if any of our directors or officers becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, including our Sponsor, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. Our directors and officers currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.

PSCM provided us office space and general administrative services at no cost to us.

Our Sponsor loaned us an aggregate of $1,121,120 to cover expenses related to the initial public offering and for general corporate purposes prior to our Initial Business Combination, and potential transaction costs in connection with our intended Initial Business Combination. This loan was unsecured, bore interest on a monthly basis at the Applicable Federal Rate, and was payable no later than the end of the Combination Period. We repaid the promissory note upon the completion of our initial public offering.

In order to finance transaction costs in connection with an intended Initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be needed. If we complete our Initial Business Combination, we would repay such loaned amounts. In the event that our Initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. The terms of such loans by our directors and officers, if any, have not been determined, and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

After our Initial Business Combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held

 

69

to consider our Initial Business Combination, as applicable, as it will be up to the directors of the post-combination business to determine executive officer and director compensation.

We have adopted a formal policy for the review, approval or ratification of related-party transactions. The Company’s directors and executive officers are required to bring any potential related-party transaction to the Company’s attention by informing the Company’s corporate secretary. Any potential related-party transactions that are brought to the Company’s attention are analyzed by the Company’s corporate secretary, in consultation with the audit committee and counsel, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related-party transaction. In determining whether to approve a related-party transaction, the audit committee considers, among other factors, and to the extent relevant, the following:

 

 

 

 

An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present is required in order to approve a related-party transaction. A majority of the members of the entire audit committee constitutes a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee is required to approve a related-party transaction. We also require each of our directors and officers to complete a directors’ and officers’ questionnaire that elicits information about related-party transactions.

These procedures are intended to determine whether any such related-party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.

Since the completion of the initial public offering, we have adopted a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company.

We do not believe that PSCM and its affiliates’ activities present significant conflicts of interest with respect to our pursuit of an acquisition target because we intend that our acquisition target will be a privately owned company, and the Pershing Square Funds are not permitted by their constituent documents to make investments in the equities of companies whose securities are not publicly traded (except that they may make investments in public companies that issue private securities).

To further minimize conflicts of interest, we have agreed not to consummate our Initial Business Combination with an entity that is affiliated with any of our Sponsor, directors or officers unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our Initial Business Combination is fair to our company from a financial point of view. Furthermore, no finder’s fees, reimbursements or cash payments will be made to our Sponsor, directors or officers, or their affiliates, for services rendered to us prior to or in connection with the completion of our Initial Business Combination. However, the following payments will be, or have been, made to our Sponsor, directors or officers, or their affiliates, and, if made prior to our Initial Business Combination, will be made from (i) funds held outside the trust account or (ii) permitted withdrawals:

 

 

 

70

Our audit committee reviews on a quarterly basis all payments that were made to our Sponsor, directors or officers, or their affiliates.

The NYSE listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of our board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Mses. Gersh and Reses and Messrs. Ovitz and Steinberg are “independent directors” as defined in the NYSE listing standards and applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.

The following table summarizes the aggregate fees billed for professional services provided to us by Marcum LLP (“Marcum”) for the year ended December 31, 2021 and for the period from May 4, 2020 (inception) through December 31, 2020:

 

 

 

 

Policy

pre-approve

pre-approve

non-audit

non-audit

 

71

2-01(c)(1)(i)(A)

S-X

On March 23, 2021, Marcum learned that a tax partner, who we refer to below as the “covered person” in Marcum’s New York office had acquired 150 shares of our common stock on November 18, 2020 for an aggregate purchase price of $3,590.50, and sold the shares on January 7, 2021 for an aggregate sales price of $4,109.41, a transaction that was not permissible under Marcum’s internal policies or the SEC’s independence rules.

Marcum has advised our audit committee that it believes that Marcum remains objective and impartial despite this violation of the SEC’s independence rules, and therefore believes that it can continue to serve as our independent auditor. Marcum also advised the audit committee that it believes that in light of its analysis, a reasonable investor possessing all of the facts regarding the matter would conclude that Marcum was and is independent and capable of exercising objective and impartial judgment with respect to our financial statements. Marcum has advised the audit committee that their views and conclusions are based in part on the following considerations:

 

 

 

 

 

 

Our audit committee, with the assistance of management and outside counsel, evaluated the facts and circumstances relating to Marcum’s independence described above under applicable SEC and PCAOB independence rules. After considering all of the facts and circumstances, including those noted above, the audit committee concluded that Marcum violated the SEC’s independence rules, but nevertheless has been and continues to be capable of exercising objective and impartial judgment on all issues encompassed within the audit engagement, particularly in light of the lack of involvement of the “covered person” in the audit or otherwise with respect to us and that the amount involved in the covered person’s trade was not material in amount.

The following documents are filed as part of Report:

 

 

 

 

 

72