Business Context and Reporting Period
This Form 8-K, dated February 1, 2021, reports the entry into a Material Definitive Agreement between Tuscan Holdings Corp. ("Parent"), a special purpose acquisition company (SPAC), and Microvast, Inc. ("Company"). The filing details a reverse triangular merger agreement under which Microvast will become a wholly-owned subsidiary of Tuscan. The transaction is structured to take Microvast public via the SPAC vehicle.
Key Financial Metrics and Transaction Structure
- Transaction Consideration: The merger involves the issuance of 210,000,000 shares of Parent Common Stock to Company shareholders and MPS Investors, valued at $10.00 per share.
- PIPE Financing: Investors have committed to purchase 48,250,000 shares of Parent Common Stock at $10.00 per share, raising an aggregate of $482,500,000.
- Debt Conversion: Promissory notes totaling $57,500,000 (Tranche 1: $25,000,000; Tranche 2: $32,500,000) will convert into 6,736,111 shares of Parent Common Stock at conversion prices of $8.00 and $9.00 per share, respectively.
- Minimum Cash Requirement: A condition to closing is that Available Cash must be at least $250,000,000.
- Termination Fee: The Company has agreed to pay a termination fee of $63,000,000 under specific circumstances, such as entering into a superior proposal or failing to obtain stockholder approval.
Material Changes and Transaction Mechanics
The filing represents a material change in corporate structure and capitalization. Key mechanics include:
- Earn-Out Provision: Company holders may receive up to 20,000,000 additional shares if the Parent's volume-weighted average price (VWAP) exceeds $18.00 over any 20 trading days within a 30-day period during the three-year earn-out period.
- Convertible Loan Resolution: A Framework Agreement was executed to resolve obligations to Convertible Loan Investors (CL Investors) and Minority Investors in Microvast Power System (Huzhou) Co., Ltd. (MPS). CL Investors will waive rights to convert loans directly and instead subscribe for Parent shares via affiliates, while Minority Investors will receive Parent shares held in a special purpose vehicle.
- Stockholder Approval: Company stockholder approval was obtained via irrevocable written consent on February 1, 2021. Parent stockholder approval is required via a proxy statement.
Guidance, Outlook, and Risks
Management commentary is limited to the terms of the agreement and the path to closing. The filing includes standard forward-looking statements regarding the likelihood of consummating the transaction and future performance.
- Outlook: The combined entity intends to list on the Nasdaq Capital Market. The Sponsor has agreed to cover transaction expenses exceeding $46,000,000.
- Risks and Contingencies:
- Failure to meet closing conditions, including the $250,000,000 minimum cash requirement after redemptions.
- Regulatory approvals required for the CL Investors' transactions.
- Operational risks related to the COVID-19 pandemic and competition in the battery technology sector.
- Risks associated with operations in the People's Republic of China.
Investor Verification Checklist
- Verify the final amount of cash remaining in the Trust Account after Parent stockholder redemptions to ensure the $250,000,000 minimum closing condition is met.
- Confirm the status of regulatory approvals required for the CL Investors to subscribe for shares and discharge the Convertible Loans.
- Review the upcoming Proxy Statement for details on the Parent stockholder vote and redemption rights.
- Assess the dilution impact of the 210,000,000 merger shares, 48,250,000 PIPE shares, and 6,736,111 debt conversion shares on existing shareholders.
- Monitor the Sponsor's commitment to cover transaction expenses exceeding $46,000,000.