Business context and reporting period
This is PropTech Acquisition Corporation’s unaudited Form 10-Q for the quarter ended June 30, 2020—not Porch Group’s standalone financial statements. PropTech was a SPAC formed to pursue a business combination and had not begun operating or generating operating revenue. It reported results for the three and six months ended June 30, 2020; the filing does not provide comparable 2019 quarterly results.
Financial highlights
| Metric | Three months ended June 30, 2020 | Six months ended June 30, 2020 / June 30, 2020 balance |
|---|---|---|
| Operating revenue | None | None |
| Net income (loss) | $(180,059) | $365,675 |
| Trust investment income | $54,322 | $1,000,282 |
| Operating expenses | $233,473 | $445,547 |
| Cash and cash equivalents | $1,066,867 | |
| Investments held in Trust Account | $173,210,276 | |
| Working capital | Approximately $1.4 million | |
| Total liabilities | $6,108,592, including $6,037,500 deferred underwriting commissions | |
| Long-term debt | None reported | |
| Cash flow | $874,745 used in operating activities; $528,711 provided by investing activities; cash decreased $346,034 |
The trust assets were held in a money market fund invested solely in U.S. Treasury securities. The six-month income included investment gains, dividends and interest; it does not represent operating profit. Class A shares subject to possible redemption were presented as temporary equity, with a carrying value of $163,526,520.
Material changes and transaction update
On July 30, 2020, after quarter-end, PropTech entered into a merger agreement with Porch.com, Inc. The stated aggregate merger consideration is $471.5 million, subject to adjustment, apportioned between cash and PropTech Class A shares; the agreement also provides for 5 million restricted shares. Separately, investors agreed to buy 15 million shares for $150 million in a PIPE, subject to closing conditions. These are proposed transaction terms, not completed-quarter financial results.
Outlook, risks and unusual items
- No operating guidance was provided. The company expected continued costs pursuing a business combination and as a public company.
- The SPAC had until May 26, 2021 to complete a business combination. If unsuccessful, it would wind up and redeem public shares from the trust, subject to applicable claims and terms; warrants could expire worthless.
- Management stated that the required liquidation if no business combination is completed raises substantial doubt about the company’s ability to continue as a going concern. No liquidation-related adjustments were recorded.
- COVID-19 could hinder negotiations, travel, financing and timely completion of a business combination; the filing said its effects were uncertain.
- The proposed merger and PIPE were subject to closing conditions. The filing also described potential dilution from issuing shares and risks from taking on debt to fund a transaction.
- Management concluded disclosure controls and procedures were effective as of June 30, 2020. No material changes in internal control over financial reporting were reported during the quarter.
Important facts for investors to verify
- Confirm the merger consideration, PIPE funding, closing conditions, redemption levels and final capitalization in subsequent filings; the July 2020 agreements were not completed transactions as of this report.
- Review Porch’s own financial statements and operating metrics separately; this 10-Q reports PropTech’s pre-combination SPAC finances.
- Assess the SPAC’s May 26, 2021 deadline, trust-account protections, redemption rights and the risk that warrants may expire worthless.
- Verify liquidity available outside the trust and the impact of transaction expenses, redemptions and any financing on funds available at closing.