Business context and reporting period
Hippo Holdings Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2021. At that date, the registrant was a special-purpose acquisition company (formerly Reinvent Technology Partners Z), not the operating insurance business Hippo. Its activity consisted of formation, its 2020 IPO, and pursuing the proposed Hippo business combination.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | None | None |
| General and administrative expense | $561,581 | $2,017,703 |
| Change in warrant-liability fair value | $(2,076,920) | $(3,135,550) |
| Net loss | $(2,632,093) | $(5,093,928) |
| Trust investment gain | $6,408 | $59,325 |
There was no operating revenue or operating margin to report. Net losses reflected SPAC expenses and noncash warrant-liability remeasurement; the filing does not provide comparable 2020 quarterly income results.
For the six months, operating cash outflow was $595,850 and cash declined by $521,940 to $101,045. At June 30, current assets were $901,355, including $800,310 of prepaid expenses; current liabilities were $1,298,718, yielding a working capital deficit of approximately $397,000. The $230.0 million in the Trust Account was principally restricted for a business combination or shareholder redemptions. Total liabilities were $26.2 million, including $16.6 million of derivative warrant liabilities, $8.05 million of deferred underwriting commissions, and $200,000 of deferred legal fees. The company reported no long-term debt and no working-capital loans outstanding.
Changes, transaction, and outlook
- From December 31, 2020 to June 30, 2021, operating cash fell from $622,985 to $101,045; current liabilities increased from $151,244 to $1,298,718; and warrant liabilities rose from $13,467,630 to $16,603,180. Trust assets remained about $230 million.
- The company had agreed to combine with Hippo Enterprises at a stated $5.0 billion enterprise value, with a planned $550 million PIPE investment. After the reporting date, 19,261,380 shares were redeemed for $192,613,300; the business combination closed August 2, 2021, and the shares and warrants began trading as HIPO and HIPO.WS on August 3. The filing does not provide operating-company guidance or a forward financial outlook.
- Management expected higher public-company and transaction-related costs. It cited uncertainty around COVID-19 impacts and the ability to complete a business combination; the transaction subsequently closed. No legal proceedings were reported.
- Disclosure controls were deemed ineffective because of a material weakness involving accounting for warrants as liabilities. Remediation efforts had begun but were not fully evidenced; management believed remediation could occur during 2021. Management performed additional analysis and stated the financial statements were fairly presented.
Important facts for investors to verify
- Distinguish these pre-combination SPAC results from Hippo’s insurance operations; this filing contains no Hippo operating-company revenue, claims, or underwriting metrics.
- Review the completed merger’s final capitalization, redemption effects, PIPE proceeds, and subsequent financial statements.
- Assess the material weakness, the status and effectiveness of remediation, and the valuation sensitivity of warrant liabilities.
- Confirm post-combination liquidity and cash available for operations; the June 30 trust balance was not ordinary operating cash.