Filing identity and reporting period
Important mismatch: The supplied filing is TPG Pace Holdings Corp.’s Form 10-K for the fiscal year ended December 31, 2018, not an Accel Entertainment, Inc. filing. It describes a blank-check company seeking a business combination, not an operating gaming business. The filing provides quarterly 2018 data, including the quarter ended December 31, but its annual financial statements cover the full fiscal year.
Business context and financial results
TPG Pace reported no operating revenue and had not completed a business combination by year-end. Its activities were target identification and evaluation. Reported 2018 net income was $6.87 million, compared with a $376,372 net loss from inception through December 31, 2017; these periods are not like-for-like. 2018 income consisted of $7.67 million of trust-account interest, offset by $804,050 of expenses. Fourth-quarter 2018 net income was $2.17 million, including $2.38 million of interest income.
- Assets and liquidity: Total assets were $457.47 million, including $456.92 million in the trust account. Cash available outside the trust was $512,827; current liabilities were $252,472. The trust funds were principally reserved for a business combination or shareholder redemptions and were not ordinary operating cash.
- Trust activity: The trust earned $7.67 million of interest during 2018; $750,000 was withdrawn for operating expenses.
- Debt and obligations: The company reported no long-term debt. Liabilities included $15.75 million of deferred underwriting compensation, payable only if a business combination is completed, and a $20,000 monthly administrative-services fee to a sponsor affiliate.
- Cash flow and margins: Operating cash flow was $140,754 for 2018. Operating margins are not meaningful because the company had no revenue.
Material changes versus the prior period
Compared with the period from inception through year-end 2017, 2018 net income improved substantially, primarily because the trust funds began earning interest after being invested in permitted U.S. Treasury money-market investments in January 2018. Cash outside the trust increased from $372,073 to $512,827. The number of Class A shares classified as subject to possible redemption rose to 43,646,490 from 42,959,940. The comparison period for 2017 was less than a full year.
Outlook, risks, and unusual items
- The company had no operating-business guidance or forecast; management continued to evaluate potential business combinations and gave no assurance one would be completed.
- The company had 24 months from the June 30, 2017 offering close to complete a combination, with a possible extension to 27 months if it had entered a qualifying agreement within the initial period. Failure to complete a transaction would trigger liquidation and redemption of public shares; warrants would expire worthless.
- The auditor issued an unqualified opinion but highlighted substantial doubt about the company’s ability to continue as a going concern because of the deadline and uncertainty of completing a transaction.
- At December 31, 2018, only $512,827 was available outside the trust for working capital. Management said it might need sponsor or other financing; none was assured.
- The NYSE notified the company in October 2018 that it had fewer than 300 public holders. It submitted a compliance plan and was subject to quarterly monitoring.
- Other key risks include shareholder redemptions reducing transaction funds, creditor claims potentially reducing trust distributions, conflicts of interest involving TPG and its affiliates, dilution from share or warrant issuance, and the possibility that the sponsor could be unable to meet its trust-account indemnity.
Key facts for investors to verify
- Confirm the issuer and filing: this document is for TPG Pace Holdings Corp., not Accel Entertainment, Inc.
- Check whether the company later completed a business combination, and whether the stated 24- or 27-month deadline was extended or otherwise affected.
- Verify trust-account balance, redemption terms, and the amount of cash actually available for operating expenses.
- Review the status of NYSE holder-distribution compliance and any subsequent listing notices.
- Assess potential dilution, sponsor-related conflicts, and the practical collectability of the sponsor’s indemnification commitment.