Core Scientific, Inc. current report, 20 July 2021

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SEC Form 8-K Summary

Registrant: Power & Digital Infrastructure Acquisition Corp. (XPDI), a special purpose acquisition company that proposed combining with Core Scientific Holding Co. Report date: July 20, 2021; the filing was signed July 21, 2021.

Business Context and Transaction

XPDI entered into an Agreement and Plan of Merger and Reorganization with Core Scientific and two wholly owned merger subsidiaries. The transaction contemplated a series of mergers under which Core Scientific would become a wholly owned subsidiary of XPDI and the surviving entity would remain a wholly owned XPDI subsidiary.

Each outstanding Core Scientific common share would be exchanged for XPDI Class A common stock based on an implied Core Scientific equity value of approximately $4.0 billion and a reference XPDI share price of $10.00, subject to the agreement’s terms and fully diluted share count.

Financial Metrics and Liquidity

  • This 8-K does not provide historical or current revenue, profit, cash flow, operating margin, debt, cash balance, liquidity, or other operating financial metrics.
  • The approximately $4.0 billion figure is the implied transaction equity value, not reported revenue, earnings, enterprise value, or cash proceeds.
  • The filing does not state the amount of transaction financing, expected cash available at closing, or pro forma capitalization.

Material Changes and Transaction Terms

  • The proposed combination required approval by XPDI and Core Scientific stockholders, effectiveness of an S-4 registration statement, expiration or termination of applicable antitrust waiting periods, and Nasdaq listing approval.
  • Closing obligations were also subject to customary representations, covenants, absence of a Core Scientific material adverse effect, and completion of Core Scientific’s merger with Blockcap, Inc.
  • XPDI Class A stockholders would receive redemption rights in connection with the transaction.
  • The agreement could generally be terminated by mutual consent, failure to obtain required approvals, certain uncured breaches, legal prohibition, or failure to close by March 21, 2022, among other specified circumstances.
  • XPDI’s sponsor and other Class B holders agreed to support the transaction, waive specified anti-dilution protections, and accept transfer restrictions. Twenty percent of their Class B shares would be subject to performance-based vesting tied to a $12.50 XPDI share-price threshold over a specified trading period within five years after closing.
  • Core Scientific stockholders representing more than a majority of its fully diluted, as-converted voting power agreed to support or consent to the transaction.

Outlook, Risks, and Unusual Items

The filing includes investor materials and forward-looking statements regarding the proposed combination, projected financial and performance metrics, market opportunity, and market share. These statements are not guarantees of future performance.

  • Key risks include bitcoin price volatility, changes in global network hash rate, mining equipment supply, infrastructure and electricity availability, regulatory approvals, stockholder approval, delayed or unsuccessful closing, and failure to realize anticipated transaction benefits.
  • The filing states that the transaction remains subject to significant conditions and may not be completed.
  • The press release and investor presentation were furnished under Regulation FD and were not deemed filed for purposes of Section 18 of the Exchange Act.
  • The representations and warranties in the merger agreement are contractual risk-allocation provisions and should not be treated as independent factual statements about either company.

Investor Verification Checklist

  • Verify the full merger agreement, including the precise exchange-ratio calculation, treatment of options and other equity awards, closing conditions, and termination provisions.
  • Review the S-4, proxy statement/prospectus, and subsequent filings for Core Scientific’s historical financial statements, forecasts, debt, liquidity, and pro forma capitalization.
  • Confirm the amount and terms of any financing, PIPE investment, transaction expenses, sponsor promote, redemptions, and resulting ownership dilution.
  • Assess whether the Blockcap merger and required regulatory, Nasdaq, and stockholder approvals were completed.
  • Review bitcoin price, network hash-rate, mining-equipment, power-supply, and regulatory risks before relying on management projections.