Filing summary: Supernova Partners Acquisition Company II, Ltd. (proposed Rigetti combination)
Important identity and period note: The supplied filing is Supernova’s 2021 Form 10-K, not an operating-company 10-K filed by Rigetti Computing, Inc. It covers the fiscal year ended December 31, 2021; it does not provide standalone fourth-quarter results. Supernova was a blank-check company and had no operating revenue or business operations.
Business context and reporting period
Supernova completed its IPO on March 4, 2021, raising $345.0 million gross from 34.5 million units at $10 each, and raised a further $8.9 million from private placement warrants. It entered into a proposed merger agreement with Rigetti Holdings, Inc. on October 6, 2021, amended in December 2021 and January 2022. The combination had not closed as of the filing date, February 23, 2022.
The merger contemplated a $1.041 billion aggregate equity value for Rigetti holders, subject to agreement terms, plus PIPE financing commitments of $102.51 million at $10 per share and an additional $45.0 million at $10.25 per share. These investments were conditional on closing. Required conditions included shareholder approvals, Nasdaq listing approval, regulatory clearance, at least $5,000,001 of net tangible assets, and at least $165 million of available cash at closing for Rigetti’s obligation to close.
Financial results and position
- Revenue and margins: No operating revenue was generated. Operating margins are not meaningful for this pre-combination SPAC.
- Net loss: $23.17 million for 2021, versus $14,691 from inception on December 22 through December 31, 2020. The 2021 loss included $4.90 million of general and administrative expense, $17.78 million of noncash loss from increased warrant fair value, and $0.50 million of offering costs associated with derivative warrant liabilities, partly offset by $19,271 of trust investment income.
- Cash flow: Operating activities used $0.96 million; investing activities used $345.0 million, primarily the deposit into the trust account; financing activities provided $346.49 million. Cash at year-end was $532,436.
- Assets and liquidity: Year-end assets were $345.82 million, including $345.02 million held in the trust account. Working capital was in deficit by approximately $3.4 million. Trust funds were principally for a business combination or shareholder redemptions and should not be treated as unrestricted operating cash.
- Debt and obligations: The company reported no borrowings under working capital loans at year-end. Liabilities included $12.08 million of deferred underwriting commissions, payable only if a business combination closes, and $30.99 million of warrant liabilities. Approximately $0.5 million of consulting fees were contingent on closing and excluded from reported liabilities.
Changes, outlook, risks and unusual items
- The company’s 2021 loss was substantially greater than the short 2020 inception-period loss, primarily reflecting the IPO-period costs and warrant fair-value remeasurement; the periods are not directly comparable in length or activity.
- Management and the auditor stated that the $0.5 million operating cash balance and working-capital deficit raised substantial doubt about Supernova’s ability to continue as a going concern within one year after issuance of the financial statements. Management’s proposed path depended on completing the merger or obtaining additional funds; success was not assured.
- Supernova had to complete a business combination by March 4, 2023 or liquidate and redeem public shares under its governing documents. The merger agreement separately provided for termination if closing had not occurred by June 6, 2022, subject to its terms.
- Public shareholders could redeem shares in connection with the combination. Redemptions could reduce available cash and jeopardize the $165 million closing cash condition. Sponsor shares were also subject to specified forfeiture and performance-based vesting provisions.
- Supernova reported ineffective disclosure controls and internal control over financial reporting at December 31, 2021, due to a material weakness in accounting for complex financial instruments. The weakness led to restatement of the March 4, 2021 balance sheet and interim financial statements for the quarters ended March 31 and June 30, 2021. Management described ongoing remediation efforts; the auditor did not provide an internal-control effectiveness opinion.
- Warrant accounting produced a material noncash loss and relied in part on valuation models for private warrants. The filing also identifies risks from transaction completion, redemptions, creditor claims against trust assets, conflicts of interest, COVID-19 uncertainty and the possibility that warrants would expire worthless if no combination occurred.
Most important facts for investors to verify
- Confirm the actual merger status, closing conditions, shareholder approvals, listing approval, and available cash after redemptions; this 10-K describes a proposed transaction, not a completed combination.
- Review the merger agreement and amendments, PIPE subscription agreements, and the definitive proxy/prospectus for transaction valuation, dilution, redemption mechanics and financing terms.
- Check the subsequent company filings for liquidity, going-concern developments, actual closing proceeds and any changes to the agreed deadlines.
- Review the restated interim financial statements and disclosures on remediation of the material weakness in financial reporting controls.
- Assess warrant liability valuation, potential dilution from warrants and equity awards, deferred fees, contingent transaction costs, and the risk that trust assets could face creditor claims.