Business Context and Reporting Period
This Form 10-Q covers the three months ended March 31, 2020 and was filed June 4, 2020. The filing entity is Social Capital Hedosophia Holdings Corp. III, a Cayman Islands blank-check company, not Clover Health Investments, Corp. The company had not commenced operations and was seeking a technology-focused business combination.
The financial statements are unaudited and prepared under U.S. GAAP. The company had no operating revenue and would not generate operating revenue until, at the earliest, completion of an initial business combination.
Key Financial Metrics
| Metric | March 31, 2020 | December 31, 2019 |
|---|---|---|
| Cash | $63,370 | $0 |
| Total assets | $650,885 | $100,346 |
| Total current liabilities | $643,516 | $117,977 |
| Shareholders’ equity/(deficit) | $7,369 | $(17,631) |
| Promissory note payable to related party | $300,000 | $0 |
- Three-month net loss: $0; formation and operating costs reported: $0.
- Basic and diluted net loss per share: $0.00; weighted-average shares: 14,043,956.
- Net cash provided by financing activities: $63,370, consisting primarily of $300,000 borrowed from the Sponsor, $25,000 from founder-share issuance, repayment of $17,631 of related-party advances, and $243,999 of offering-cost payments.
- Deferred offering costs were $587,515 at March 31, 2020, including $248,170 recorded in accrued offering costs.
- The company reported no long-term debt, capital leases, operating leases, or off-balance-sheet financing arrangements as of March 31, 2020.
Material Changes and Subsequent Events
- Cash increased from $0 to $63,370, while shareholders’ deficit improved from $(17,631) to equity of $7,369, primarily due to the Sponsor’s $25,000 founder-share investment.
- On April 24, 2020, after quarter-end, the company completed an initial public offering of 82.8 million units at $10.00 per unit, generating gross proceeds of $828.0 million. The underwriters fully exercised their 10.8 million-unit over-allotment option.
- Each unit consisted of one Class A ordinary share and one-third of a redeemable warrant. Each whole warrant had an initial exercise price of $11.50 per share.
- The Sponsor simultaneously purchased 10.933 million private-placement warrants for $16.4 million.
- $828.0 million was placed in a trust account, and $1.663 million remained outside the trust account for working capital after offering costs.
- Total offering transaction costs were $44.156 million, including $14.400 million of underwriting fees, $28.980 million of deferred underwriting fees, and $776,346 of other costs.
- The $300,000 related-party promissory note outstanding at March 31, 2020 was repaid upon completion of the IPO.
Guidance, Outlook, Risks, and Unusual Items
- Management expected continued costs related to identifying, evaluating, performing diligence on, and completing a business combination, but provided no earnings or revenue guidance.
- The company had until April 24, 2022 to complete a business combination. If unsuccessful, it must cease operations, redeem the public shares using the trust-account proceeds, and liquidate.
- Public shareholders generally have redemption rights in connection with a business combination. Founder shares and private-placement warrants would not receive liquidation distributions and could expire worthless if no transaction is completed.
- A deferred underwriting fee of $28.980 million becomes payable from the trust account only if a business combination is completed.
- Beginning in April 2020, the company agreed to pay an affiliate of the Sponsor up to $10,000 per month for office, administrative, and support services until completion of a business combination or liquidation.
- The Sponsor agreed, subject to stated exceptions, to protect the trust account against certain third-party claims that would reduce its value below $10.00 per public share.
- Management identified risks relating to failure to complete a transaction, potential dilution from additional equity or equity-linked securities, possible debt financing, redemption obligations, and limited working capital. The filing states there were no material changes to the risk factors in the IPO prospectus.
- As of March 31, 2020, the company reported no material market or interest-rate risk; post-IPO trust assets were invested in short-term U.S. government securities or qualifying money-market funds.
Investor Verification Priorities
- Verify the issuer identity: this filing is for Social Capital Hedosophia Holdings Corp. III, not Clover Health Investments, Corp.
- Confirm completion and terms of the April 24, 2020 IPO, including trust-account funding, offering costs, and cash available outside the trust account.
- Review the business-combination deadline, redemption mechanics, and liquidation protections.
- Assess dilution from founder shares, public warrants, private-placement warrants, potential working-capital loans, and any transaction-related financing.
- Confirm repayment of the $300,000 Sponsor promissory note and monitor related-party administrative fees and any additional Sponsor loans.
- Review the IPO prospectus for the detailed risk factors and warrant terms referenced but not fully reproduced in this summary.