Porch Group, Inc. / PropTech Acquisition Corporation Form 8-K Summary
Reporting date: December 14, 2020. The filing was made by PropTech Acquisition Corporation (PTAC) under Item 8.01, primarily to supplement disclosures in its proxy statement for the proposed merger with Porch.com, Inc. The merger would make Porch a wholly owned subsidiary of PTAC, subject to stockholder approval and other closing conditions.
Business Context and Transaction Status
- The merger agreement was signed July 31, 2020.
- The SEC declared PTAC’s Form S-4 effective on December 2, 2020, and PTAC began mailing the proxy materials on December 4, 2020.
- PTAC disclosed that a purported shareholder alleged material omissions in the proxy statement. PTAC denied the allegations but voluntarily provided supplemental disclosures to avoid potential delay, cost, and distraction.
- The supplemental disclosures were stated not to affect merger consideration or the timing of PTAC’s virtual special meeting, scheduled for December 21, 2020, at 11:00 a.m. Eastern Time. The board continued to recommend voting “FOR” the proposals.
Financial Metrics and Prospective Information
The filing does not provide historical revenue, cash flow, liquidity, debt balances, or operating margins. It adds the following unaudited prospective reconciliation for Porch, with amounts in millions:
| Metric | 2020E | 2021E |
|---|---|---|
| Net income (loss) | $(34) | $(11) |
| Interest expense | $12 | $4 |
| Depreciation and amortization | $4 | $7 |
| Non-cash stock-based compensation | $1 | $3 |
| Acquisition compensation and transaction expense | $7 | $2 |
| Adjusted EBITDA (loss) | $(10) | $7 |
| Pro forma Adjusted EBITDA (loss) | $(10) | $7 |
Other, net; income tax expense or benefit; non-cash long-lived asset impairment charges; and Adjusted EBITDA loss from divested businesses were each forecast at zero for both periods. Adjusted EBITDA is a non-GAAP measure that excludes or adds back interest, taxes, depreciation and amortization, certain impairment charges, stock-based compensation, and acquisition compensation and transaction expenses.
Material Changes and Additional Disclosures
- The forecast implies an expected improvement in pro forma Adjusted EBITDA from a $10 million loss in 2020 to $7 million of positive Adjusted EBITDA in 2021.
- Forecast net loss was expected to improve from $34 million in 2020 to $11 million in 2021, while forecast interest expense declined from $12 million to $4 million.
- PTAC disclosed that Northland Securities, Inc. received $172,500 at the IPO closing and was expected to receive an additional $301,875, less expenses, upon successful completion of a business combination.
- The disclosed nondisclosure agreements did not contain standstill or “don’t ask, don’t waive” provisions.
Outlook, Risks, and Unusual Items
Management’s forward-looking statements address the expected merger closing, execution of Porch’s business strategy, expansion into new business lines, monetization of services, access to capital, future liquidity requirements, compliance with debt covenants, and anticipated improvements in operating and financial results.
Key stated risks include failure to satisfy merger closing conditions, inability to realize anticipated merger benefits, COVID-19 effects, liquidity and financing needs, restrictive debt covenants, Nasdaq listing risks, data privacy and insurance regulation, litigation, intellectual property protection, employee retention, technology changes, market acceptance of new products and services, and uncertainties in future accounting, tax, and regulatory requirements.
The shareholder disclosure challenge and related supplemental proxy disclosures are unusual items in the filing. The filing states that PTAC believes the claims are without merit and that the additional disclosures do not constitute an admission that further disclosure was legally required.
Investor Verification Checklist
- Verify the final merger vote, satisfaction of closing conditions, and actual closing date.
- Compare the 2020E and 2021E forecasts with subsequent reported revenue, net loss, Adjusted EBITDA, cash flow, debt, and liquidity.
- Review the definitive proxy statement and Form S-4 for merger consideration, redemption provisions, dilution, financing, and transaction expenses.
- Confirm the final amounts paid to Northland Securities and other transaction advisers.
- Assess whether Porch achieved the forecast reduction in interest expense and transition from negative to positive Adjusted EBITDA.
- Review subsequent filings for COVID-19 effects, liquidity constraints, debt covenant compliance, litigation, regulatory matters, and Nasdaq listing status.