ESS Tech, Inc. current report, 08 October 2021

Vollständiges Dokument

ESS Tech, Inc. Form 8-K Summary

Reporting date: October 8, 2021; filed October 15, 2021. The filing reports completion of ESS Tech, Inc.’s merger with ACON S2 Acquisition Corp. (“STWO”), formerly a shell company. The combined company adopted the name ESS Tech, Inc. and began trading on the NYSE under GWH and GWH.W on October 11, 2021.

Business Context and Transaction

  • STWO completed its domestication from the Cayman Islands to Delaware and merged its wholly owned subsidiary with ESS Tech, Inc., with ESS surviving as a wholly owned subsidiary of the renamed ESS Tech, Inc.
  • Each outstanding ESS common share converted into 1.47110014425 shares of New ESS common stock, subject to the merger terms.
  • ESS preferred stock converted into ESS common stock immediately before the merger. Existing ESS options and restricted stock units were converted into corresponding New ESS awards.
  • The transaction included a private investment in public equity (“PIPE”) financing of 25,000,000 shares at $10.00 per share, generating aggregate gross proceeds of $250.0 million.
  • Approximately 20,754,719 STWO public shares were redeemed for approximately $207.5 million, at approximately $10.00 per share.

Capitalization, Liquidity and Other Key Metrics

  • Immediately after the merger and PIPE financing, New ESS had 135,058,074 shares of common stock outstanding.
  • New ESS had 12,416,621 warrants outstanding, each generally exercisable for one share at $11.50 per share. The warrants expire five years after the closing, subject to earlier redemption or liquidation.
  • Up to 16,500,000 earnout shares could be issued over a 54-month earnout period, reduced by 824,998 incentive RSUs. Because no earnout milestones had been achieved, the filing states that the contingent earnout instruments were liability-classified in the unaudited pro forma financial information.
  • The maximum remaining earnout issuance of 15,675,002 shares represented approximately 11.6% of common stock outstanding as of October 8, 2021, based on the stated capital structure.
  • The filing does not provide current-period revenue, net income or loss, operating cash flow, free cash flow, margins, debt balances, cash balances or liquidity ratios in the supplied text. Historical financial statements and pro forma information are incorporated by reference from the proxy statement and Exhibit 99.1.
  • New ESS had not paid cash dividends and did not anticipate paying dividends in the foreseeable future.

Material Changes Versus the Prior Comparable Period

  • The principal change was the transformation of STWO from a shell company into the operating public company ESS Tech, Inc. through the completed merger.
  • The company raised $250.0 million through the PIPE financing and paid approximately $207.5 million to redeem STWO public shares.
  • STWO units ceased trading on Nasdaq, while New ESS common stock and warrants began trading on the NYSE under GWH and GWH.W.
  • The company adopted an amended and restated certificate of incorporation and bylaws, including changes to authorized capital, shareholder rights, board matters and director provisions.
  • The 2021 Equity Incentive Plan and 2021 Employee Stock Purchase Plan became effective at closing.
  • On October 12, 2021, the board expanded from eight to nine directors, appointed Alexi Wellman as an independent director and appointed her as Audit Committee chair.

Guidance, Outlook, Risks and Unusual Items

  • No quantitative revenue, earnings or cash-flow guidance is provided in the filing text.
  • Management’s forward-looking statements address future financial performance, strategy, operations, revenue, losses, costs, capital requirements and business prospects, but are subject to substantial uncertainty.
  • Key risks include realizing expected merger benefits, technology adoption and market acceptance, scaling cost-effectively, competition, intellectual property protection, COVID-19 impacts, future funding needs, deployment of merger proceeds, litigation and regulatory proceedings.
  • Potential dilution is material from earnout shares, warrants, incentive RSUs, equity awards and other securities.
  • Lock-up restrictions generally applied for up to 180 days after closing, subject to an early release condition if the stock price met specified thresholds.
  • Registration rights were granted to the Sponsor and certain securityholders, which could facilitate future resales of shares.

Investor Verification Checklist

  • Verify the cash and investments remaining after the PIPE financing, share redemptions and transaction expenses.
  • Review the historical ESS financial statements and unaudited pro forma financial information incorporated by reference and included in Exhibit 99.1.
  • Confirm the fully diluted share count, including earnout shares, warrants, options, RSUs and equity-plan reserves.
  • Review the earnout milestone conditions and assess the potential dilution from the remaining 15,675,002 earnout shares.
  • Review the proxy statement’s risk factors, business description and management’s discussion and analysis for operating assumptions and projections.
  • Confirm the terms of the PIPE shares, registration rights, lock-up provisions and warrant redemption provisions.