Cartesian Growth Corporation — Q3 2021 Form 10-Q
Entity note: The supplied filing is for Cartesian Growth Corporation, a Cayman Islands SPAC, not Alti Global, Inc. The proposed transaction would combine Cartesian with Tiedemann, TIG and Alvarium businesses under Alvarium Tiedemann Capital, LLC.
Business context and reporting period
This unaudited quarterly report covers the three and nine months ended September 30, 2021. Cartesian had no operating business or revenue; its activities consisted of formation, its February 2021 IPO and identifying a business-combination target. On September 19, 2021, it signed a business combination agreement with the target companies. Completion remained subject to conditions, including shareholder approval. Cartesian had until February 26, 2023 to complete a business combination, subject to permitted extensions.
Financial highlights
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 |
|---|---|---|
| Revenue | None | None |
| Operating costs / loss from operations | $239,380 | $537,871 |
| Net loss | $5,863,746 | $1,519,632 |
| Net loss per ordinary share, Class A and Class B | $0.14 | $0.04 |
| Trust account assets | $345,024,019 at September 30, 2021 | |
| Cash outside trust | $715,774 at September 30, 2021 | |
| Total liabilities | $36,138,405 at September 30, 2021, including $12,075,000 deferred underwriting fees and $24,063,287 warrant liabilities | |
| Cash flows | Nine-month operating cash use was $744,166; investing cash use was $345,000,000; financing cash inflow was $346,459,940 |
The quarterly loss primarily reflected a $5,628,806 loss from the change in warrant fair value. The nine-month result included a $2,941,413 gain from warrant revaluation, $849,993 of offering costs allocated to warrants and a $3,097,200 expense for the fair value of private warrants exceeding their purchase price. These fair-value items are non-cash and may cause reported earnings to fluctuate. The filing provides no meaningful operating margins because the company had no revenue-producing operations. It reported no long-term debt and no outstanding sponsor loans at quarter-end.
Material changes, transaction and outlook
- The company restated previously issued 2021 financial statements after determining that all 34.5 million public Class A shares should be classified as temporary equity, rather than partly as permanent equity. The filing says the non-cash restatement did not change previously reported cash or total assets.
- Concurrent with the business-combination agreement, investors agreed to subscribe for approximately $165 million of PIPE shares at $9.80 per share, subject to customary closing conditions.
- At the IPO, Cartesian raised $345 million from public units and $8.9 million from private warrants. The trust balance is generally unavailable for operating needs before a business combination. Deferred underwriting fees of $12.075 million are payable only if a transaction closes.
- No financial guidance or quantified operating outlook is provided. Management expected to use cash outside the trust, about $0.7 million at quarter-end, for target-search and transaction expenses and said it did not then expect to need additional funding for operations. It cautioned that costs could exceed estimates and that further financing might be needed to close a transaction or address redemptions.
Risks, controls and contingencies
- Management concluded disclosure controls were ineffective at September 30, 2021 because of a material weakness in accounting for complex financial instruments, including the prior share-classification error. Management said it was performing additional analysis and planned remediation, but gave no assurance the weakness would be resolved.
- Warrants are derivative liabilities measured at fair value. Changes can materially affect reported results; private warrant valuation uses significant unobservable inputs.
- The company warned that COVID-19 could adversely affect its financial position, operations or target search, but the effect was not determinable. The filing also notes that the sponsor’s ability to meet certain trust-account indemnity obligations has not been verified.
- No legal proceedings were reported. The filing identifies potential litigation relating to the control weakness but said the company had no knowledge of any such litigation as of the report date.
Investor verification points
- Confirm the correct issuer: this filing is for Cartesian Growth Corporation, not Alti Global, Inc.
- Review the business-combination agreement, PIPE conditions, shareholder-approval requirements and subsequent transaction status.
- Assess the restatement and material weakness, including the status and effectiveness of remediation.
- Check the trust balance, redemption levels, transaction funding needs and the deferred underwriting fee payable upon closing.
- Evaluate warrant-liability valuation assumptions and the resulting potential volatility in reported earnings.