Business Context and Reporting Period
Ginkgo Bioworks Holdings, Inc. filed this Form 8-K on September 20, 2021, reporting events beginning September 15, 2021. The filing documents the domestication of Soaring Eagle Acquisition Corp. (“SRNG”) as a Delaware corporation, the closing of its business combination with Ginkgo Bioworks, Inc. on September 16, 2021, and the resulting name change to Ginkgo Bioworks Holdings, Inc. The company ceased to be a shell company and became the successor issuer to SRNG.
Ginkgo’s Class A common stock and warrants began trading on the NYSE on September 17, 2021 under the symbols DNA and DNA.WS.
Key Financial and Capitalization Metrics
| Metric | Reported amount or description |
|---|---|
| Aggregate merger consideration | Approximately $15.8 billion in New Ginkgo common stock, valued at $10 per share. |
| PIPE investment | 76.0 million Class A shares at $10 per share, generating $760.0 million of gross proceeds. |
| Shares outstanding at closing | 1,330,072,374 Class A shares and 627,316,622 Class B shares, including rollover equity instruments. |
| Warrants outstanding | 51,824,925 warrants, generally exercisable for Class A shares at $11.50 per share. |
| Shares outstanding excluding specified earn-outs and warrant shares | 1,751,979,587 shares, consisting of 100,628,453 shares held by SRNG holders, 1,575,351,134 shares issued to legacy Ginkgo holders and 76,000,000 PIPE shares. |
| Potential additional shares | 188,672,226 legacy Ginkgo earn-out shares, 16,737,183 sponsor earn-out shares and 51,824,925 warrant shares were excluded from the basic closing share total. |
| Debt, cash flow, liquidity and profitability | The filing does not provide a clear consolidated post-transaction value for revenue, net income, operating cash flow, margins, debt or cash balances. It incorporates Ginkgo’s historical financial statements, June 30, 2021 financial statements, MD&A and pro forma information by reference. |
Material Changes Versus the Prior Comparable Period
- SRNG completed its conversion from a Cayman Islands entity to a Delaware corporation and acquired Ginkgo Bioworks, Inc.
- SRNG changed its name to Ginkgo Bioworks Holdings, Inc., succeeded to SRNG’s SEC reporting history and changed its listing from Nasdaq to the NYSE.
- The transaction substantially increased the company’s capitalization through the issuance of merger shares, earn-out shares, rollover equity and $760.0 million of PIPE shares.
- Legacy Ginkgo holders received approximately 89.9% of the shares outstanding at closing, while SRNG public and sponsor holders collectively held approximately 5.8% and PIPE investors held approximately 4.3%.
- The sponsor forfeited 11,534,052 shares and subjected an additional 16,737,183 shares to earn-out conditions.
- Ernst & Young LLP replaced WithumSmith+Brown, PC as the independent registered public accounting firm. The filing reports no accounting disagreements or reportable events with the predecessor auditor.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide new numerical revenue, earnings or cash-flow guidance. Management’s forward-looking statements concern the ability to realize the benefits of the business combination, maintain the NYSE listing, obtain future financing, manage growth and retain key personnel.
- Earn-out consideration of 188,672,226 shares vests in four equal tranches if the Class A stock price reaches $12.50, $15.00, $17.50 and $20.00, respectively, for 20 trading days in a 30-day period during the five-year earn-out period. Unvested shares are forfeited at the end of that period, subject to specified change-of-control acceleration provisions.
- Class B common stock carries 10 votes per share, compared with one vote per Class A share. Directors and executive officers and affiliated entities held approximately 32.6% of total voting power immediately after the transaction.
- The 2021 Incentive Award Plan initially authorizes 200 million shares, plus certain rollover and remaining earn-out shares and annual increases of up to 4% of outstanding shares for ten years.
- The 2021 Employee Stock Purchase Plan initially reserves 20 million shares and provides for annual increases of up to 1% of outstanding shares, subject to stated limits.
- Material risks include dependence on customers to commercialize engineered cells and biomanufacturing processes, rapid technological change, intense competition, regulatory compliance, intellectual property litigation, financing and debt-covenant risks, equity-market volatility and the potential dilution associated with earn-outs, warrants and equity plans.
Important Facts an Investor Should Verify
- Review Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 for the historical and pro forma revenue, loss, cash-flow, balance-sheet, liquidity and operating metrics that are not reproduced clearly in this filing.
- Reconcile the basic shares outstanding with the 188.7 million legacy earn-out shares, 16.7 million sponsor earn-out shares, 51.8 million warrants and rollover equity instruments to assess fully diluted ownership.
- Assess the effect of the dual-class structure and the approximately 32.6% insider-affiliated voting power on shareholder control.
- Review the merger agreement, sponsor support agreement and registration rights agreement for vesting, forfeiture, resale and potential dilution provisions.
- Confirm the terms and availability of the $760.0 million PIPE proceeds, including transaction expenses and any restrictions on their use.
- Evaluate the historical and pro forma results incorporated by reference rather than relying on the transaction valuation or share count as measures of operating performance.