Business context and reporting period
This is Sustainable Opportunities Acquisition Corp. (SOAC)’s unaudited Form 10-Q for the quarter ended June 30, 2020, filed August 12, 2020. The request identifies TMC The Metals Co Inc., but the supplied filing is for SOAC, a Cayman Islands blank-check company; it does not report TMC’s operating results. SOAC completed its IPO in May 2020 and was seeking a business combination, with an intended focus on businesses with strong environmental, social and governance profiles.
Financial results and position
| Metric | Three months ended June 30, 2020 | Six months ended June 30, 2020 / June 30 balance |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| General and administrative expenses | $327,417 | $386,416 |
| Interest income | $41,787 | $41,787 |
| Net loss | $285,630 | $344,629 |
| Basic and diluted loss per share | $0.04 | $0.04 |
| Operating cash flow | Not presented quarterly | $(472,886) |
| Cash | — | $2.16 million |
| Trust Account investments | — | $300.04 million |
| Total assets / liabilities | — | $302.54 million / $10.75 million |
| Working capital | — | Approximately $2.2 million |
SOAC reported no operating margin or operating revenue. The $10.5 million deferred underwriting commission is payable from the Trust Account only if a business combination closes. The approximately $163,000 Sponsor note was repaid in May; no Working Capital Loans were outstanding at quarter-end.
Material changes versus the prior comparable period
The filing does not provide a corresponding 2019 quarterly income statement for comparison. The six-month period includes SOAC’s formation and May 2020 IPO. The IPO raised $300 million gross from 30 million units; the Sponsor’s private placement of warrants raised another $9.5 million. The Trust Account held approximately $300 million at quarter-end. IPO and related costs were approximately $17.4 million, including the deferred underwriting commission. Cash-flow activity primarily reflects funding and depositing IPO proceeds into the Trust Account.
Outlook, risks and other disclosures
- Management expected cash and potential Sponsor or affiliate borrowing capacity to fund operations through a business combination or one year from the filing, but such loans were not committed.
- SOAC must complete a business combination by November 8, 2021, or generally redeem public shares from the Trust Account and liquidate. No assurance of completing a transaction was given.
- Public shareholders generally may redeem shares for their pro rata Trust Account value. A new risk disclosure notes that negative interest rates could reduce redemption proceeds below $10 per share.
- Trust assets were invested in short-term U.S. government securities or qualifying money-market funds. Management reported no material market or interest-rate exposure.
- Management reported effective disclosure controls, no material change in internal control, no off-balance-sheet arrangements, and no legal proceedings.
- The filing provides no financial guidance. Results reflect a pre-combination SPAC, not an operating metals business.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Sustainable Opportunities Acquisition Corp., not TMC The Metals Co Inc.
- Verify the status and terms of any subsequent business combination, including the deadline and shareholder redemption rights.
- Review Trust Account balances, redemption mechanics, and the deferred underwriting commission payable upon a completed transaction.
- Assess available operating cash apart from Trust funds and the fact that potential Sponsor loans are discretionary, not committed.
- Consider dilution from Founder Shares and warrants, including the $11.50 warrant exercise price and potential adjustments described in the filing.