PureCycle Technologies, Inc. Form 8-K Summary
Business context and reporting period
Filed March 19, 2021, reporting the March 17, 2021 closing of the business combination between Roth CH Acquisition I Co. and PureCycle Technologies LLC. The registrant changed its name from Roth CH Acquisition I Co. Parent Corp. to PureCycle Technologies, Inc. and continued PureCycle’s operations as a public company. PureCycle’s business involves producing ultra-pure recycled polypropylene.
Key financial and capitalization metrics
- PureCycle unitholders received 83.5 million shares of common stock at closing, with rights to receive up to an additional 4.0 million shares in two 2.0 million-share tranches tied to stock-price and Phase II facility milestones.
- Immediately after closing, 118,322,900 common shares, up to 9,828,000 units and 5,936,625 warrants were issued and outstanding.
- Approximately 5,100 public shares were redeemed for approximately $51,024, at approximately $10.00 per share.
- ROCH’s trust account held approximately $76.5 million immediately before closing.
- The concurrent PIPE financing issued 25.0 million shares at $10.00 per share for gross proceeds of $250.0 million. Placement-agent fees were approximately $4.8 million for Roth Capital and approximately $3.4 million each for Craig-Hallum Capital Group and Oppenheimer.
- Following redemptions and the PIPE financing, approximately $310.6 million was available for transaction-related disbursement. Approximately $1.6 million was used for certain transaction expenses, and approximately $308.3 million became available to PureCycle.
- PureCycle unitholders owned approximately 70.6% of the outstanding common stock after closing; former ROCH stockholders, excluding PIPE investors and initial stockholders, owned approximately 6.5%.
- PCT assumed PureCycle’s obligations under the 5.875% Convertible Senior Secured Notes and related indenture obligations, and ROCH and PCT guaranteed those obligations. The filing does not provide the aggregate principal amount of the notes.
- The filing does not provide current-period revenue, net income, operating cash flow, margins, or comparable-period results. Historical and pro forma financial information is incorporated by reference from the Form S-1.
Material changes versus the prior comparable period
- The transaction converted ROCH from a special purpose acquisition company into the public operating company PureCycle Technologies, Inc.; both ROCH and ParentCo ceased to be shell companies.
- ROCH common stock, units and warrants were exchanged or assumed by PCT and began trading on Nasdaq under PCT, PCTTU and PCTTW, respectively, on March 18, 2021.
- The company adopted an amended and restated certificate of incorporation and bylaws, including 250 million authorized common shares, 25 million authorized preferred shares, a classified board, limits on stockholder written consent and special meetings, and enhanced voting requirements for certain amendments.
- Grant Thornton LLP was appointed as the independent registered public accounting firm, replacing Marcum LLP, which had audited ROCH. Marcum’s prior reports contained a going-concern explanatory paragraph related to ROCH’s working-capital deficiency, losses and need for additional funding; the filing reports no disagreements or reportable events.
- All incumbent ROCH and ParentCo directors and officers resigned at closing. PureCycle’s directors and officers are described in the incorporated Form S-1 disclosure.
Outlook, risks, contingencies and unusual items
- Management’s detailed outlook, operating plans and risk disclosures are incorporated by reference from the Form S-1; this 8-K does not provide a new standalone financial forecast.
- Key execution risks include scaling and constructing Plant 1 on time and within budget, obtaining regulatory approval and maintaining compliance for food-grade applications of ultra-pure recycled polypropylene, achieving market acceptance, and realizing expected benefits from offtake arrangements.
- Other risks include future capital requirements and funding availability, liquidity and trading limitations, operational and competitive risks, legal proceedings, unexpected transaction costs, changes in laws or regulations, geopolitical conditions and COVID-19 impacts.
- The additional 2.0 million-share earnout tranche tied to the stock price requires a closing price of at least $18.00 over 20 trading days within a 30-trading-day period after the six-month anniversary and before the third anniversary of closing. The other 2.0 million-share tranche depends on Phase II becoming operational as certified by Leidos Engineering.
- PureCycle has not paid cash dividends and currently expects to retain future earnings for business development, operations and expansion.
- PureCycle entered into indemnification agreements with directors and executive officers, adopted a 2021 equity and incentive compensation plan, and issued restricted shares replacing 143,092 unvested Class C units.
Most important facts for investors to verify
- Review the Form S-1 financial statements and pro forma information for PureCycle’s historical revenue, losses, cash flows, debt, liquidity and capital requirements, because this 8-K does not restate those figures.
- Confirm the final cash available after transaction expenses, financing fees, redemptions and any other closing adjustments.
- Review the terms, principal amount, collateral and conversion provisions of the 5.875% Convertible Senior Secured Notes.
- Assess Plant 1 and Phase II construction milestones, certification requirements and the potential dilution from the additional 4.0 million earnout shares.
- Evaluate the regulatory status and commercial acceptance of ultra-pure recycled polypropylene for food-grade applications.
- Review the PIPE subscription agreements, investor rights and lock-up provisions, including restrictions that may affect future trading supply.
- Confirm the post-closing share, unit and warrant counts and the potential dilution from outstanding warrants, units, convertible notes and equity awards.