PLAYSTUDIOS, Inc. current report, 21 June 2021

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PLAYSTUDIOS, Inc. Form 8-K Summary

Reporting period: Filed June 25, 2021, with the earliest reported event dated June 21, 2021. The filing reports the completion of the business combination between Acies Acquisition Corp. and Old PLAYSTUDIOS, the domestication of Acies as a Delaware corporation, and the resulting name change to PLAYSTUDIOS, Inc. Some reported actions occurred on June 22, June 24, and June 25, 2021.

Business Context and Transaction

  • PLAYSTUDIOS continued Old PLAYSTUDIOS’ existing business as a publicly traded company following the merger.
  • Acies shareholders approved the transaction at a June 17, 2021 extraordinary general meeting.
  • Acies shareholders domesticated the company from the Cayman Islands to Delaware and changed its name to PLAYSTUDIOS, Inc.
  • Class A common stock and warrants began trading on Nasdaq under the symbols MYPS and MYPSW, respectively, on June 22, 2021.

Financial Metrics, Funding, Liquidity, and Capital Structure

  • The filing does not provide a clear post-closing revenue, net income, operating cash flow, or margin figure. Historical and pro forma financial statements are incorporated by reference.
  • The transaction included a $250.0 million PIPE financing at $10.00 per share. Placement-agent fees totaled approximately $6.0 million.
  • Before redemptions, Acies’ trust account held approximately $215.3 million. Public shareholders redeemed 11,333,489 shares for approximately $113.4 million, or approximately $10.00 per share.
  • After redemptions and the PIPE financing, approximately $351.9 million was available for transaction-related disbursements. Approximately $149.7 million funded transaction expenses and cash elections, $20.0 million terminated the profit-share provision with MGM Resorts International, and approximately $182.2 million became available to New PLAYSTUDIOS.
  • At closing, 109,623,364 Class A shares, 16,130,300 Class B shares, and 10,996,634 warrants were outstanding.
  • The Class B shares have the same economic rights as Class A shares but carry 20 votes per share, compared with one vote per Class A share. Founder-related Class B shares are subject to transfer restrictions and sunset provisions.
  • Old PLAYSTUDIOS stockholders initially owned approximately 69.0% of outstanding common stock and approximately 91.1% of total voting power. Former Acies public shareholders, excluding PIPE investors, owned approximately 8.1% of outstanding common stock and approximately 2.4% of total voting power.
  • New PLAYSTUDIOS entered into a five-year $75.0 million revolving credit facility. Initial margins were 2.50% for Eurodollar loans and 1.50% for Alternate Base Rate loans, subject to leverage-based adjustments.
  • The credit facility requires a total net leverage ratio of no more than 3.50:1.00, subject to an increase to 4.00:1.00 following certain material acquisitions, and a fixed-charge coverage ratio of at least 1.25:1.00, beginning with the quarter ending September 30, 2021.
  • Substantially all assets of the Company and its subsidiary secure the credit facility.
  • The Company has not paid cash dividends and does not expect to pay dividends for the foreseeable future.

Material Changes Versus the Prior Comparable Period

  • The filing reflects a fundamental change from a special purpose acquisition company to an operating public company.
  • Acies’ ordinary shares, units, and warrants were converted into PLAYSTUDIOS securities, and Acies ceased to be a shell company.
  • Old PLAYSTUDIOS’ existing revolving credit facility with Silicon Valley Bank was terminated and replaced with the $75.0 million JPMorgan-led facility.
  • Deloitte & Touche LLP was appointed as the independent registered public accounting firm, replacing Marcum LLP. The filing reports no disagreements or reportable events involving Marcum.
  • The Company adopted a 2021 Equity Incentive Plan reserving up to 16,839,129 Class A shares and a 2021 Employee Stock Purchase Plan reserving up to 3,367,826 Class A shares. Both plans include annual share increases beginning in 2022.
  • Eligible former Old PLAYSTUDIOS securityholders may receive up to 15,000,000 additional earnout shares if specified stock-price milestones are achieved.

Guidance, Outlook, Risks, and Unusual Items

  • No new quantitative revenue, earnings, or cash-flow guidance is provided in the filing. Management’s discussion and analysis and projections are incorporated from the proxy statement/prospectus.
  • Forward-looking statements depend on projected growth, market opportunity, execution of business plans, realization of transaction benefits, and the accuracy of estimated pro forma results.
  • Key disclosed risks include competition and regulatory changes, COVID-19 impacts, Nasdaq listing compliance, the ability to raise future financing, retention of key personnel, and failure to realize anticipated transaction benefits.
  • The filing states that New PLAYSTUDIOS identified a material weakness in internal control over financial reporting, which could impair accurate and timely reporting.
  • Warrants are accounted for as liabilities; changes in their fair value could materially affect reported financial results.
  • The new credit facility imposes financial and operational covenants and is secured by substantially all assets, increasing lender rights in a default scenario.
  • The filing identifies substantial doubt about Acies’ ability to continue as a going concern in Marcum’s pre-combination audit report, although this relates to Acies as a SPAC before the transaction.

Important Facts for Investors to Verify

  1. Review the incorporated historical and pro forma financial statements for revenue, profitability, cash flow, debt, and liquidity details not presented in this 8-K.
  2. Confirm the Company’s remediation plans and subsequent status of the material weakness in internal control over financial reporting.
  3. Monitor compliance with the credit facility’s leverage and fixed-charge coverage covenants beginning September 30, 2021.
  4. Assess dilution from the 10,996,634 outstanding warrants, the 16,839,129-share equity incentive plan, the 3,367,826-share ESPP, and up to 15,000,000 earnout shares.
  5. Evaluate the founder’s 20-votes-per-share Class B structure and its effect on shareholder control, including the applicable sunset provisions.
  6. Verify post-closing cash balances and the final allocation of transaction proceeds, including expenses, cash elections, and the MGM Resorts agreement termination payment.
  7. Review the registration rights agreement and related resale-registration obligations for potential future selling pressure.