Double Eagle Acquisition Corp. — Form 10-Q, quarter ended June 30, 2016
Entity note: The supplied filing is for Double Eagle Acquisition Corp., not WillScot Holdings Corp. It describes a blank-check company seeking a business combination, not an operating modular-space business.
Business context and reporting period
Double Eagle was formed to acquire or combine with one or more businesses. It had not completed a transaction by June 30, 2016; its activities were offering-related and identifying and evaluating potential targets. Its initial target focus was media and entertainment, though it could pursue other sectors. The filing provides no named or selected target.
Key financial metrics
| Metric | Three months ended June 30, 2016 | Six months ended June 30, 2016 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expenses | $127,551 | $405,025 |
| Operating loss | $(127,551) | $(405,025) |
| Trust-account interest income | $268,755 | $499,485 |
| Net income | $141,204 | $94,460 |
| Basic and diluted earnings per share | $0.01 | $0.01 |
At June 30, 2016, total assets were $501.1 million, including $500.6 million in the trust account and $495,015 of cash outside it. Total liabilities were $19.5 million, largely the $19.5 million deferred underwriting fee payable only if a business combination closes. Current accounts payable and accrued offering costs were $25,639. Redeemable Class A shares of $476.6 million were classified outside permanent equity; shareholders’ equity was $5.0 million.
For the six months, operating cash use was $13,361; $499,485 of trust interest was reinvested, and cash declined by $512,846 to $495,015. Debt and margin figures are not applicable or not reported for this acquisition-stage company.
Changes versus prior comparable period
The filing’s 2015 comparison is only the period from inception on June 26 through June 30, 2015, when it reported a $5,000 net loss and no revenue. This is not a meaningful full-quarter or six-month year-over-year comparison. From December 31, 2015 to June 30, 2016, trust assets rose about $0.5 million, outside cash fell about $0.5 million, and redeemable Class A shares increased by 9,446 shares. Shareholders’ equity remained $5.0 million.
Net income in 2016 reflected trust interest exceeding operating expenses, not operating revenue. The MD&A says “income (loss) from operations” was $141,204 for the quarter and $94,460 for six months; those amounts match net income, while the financial statements report operating losses of $127,551 and $405,025, respectively.
Outlook, risks, and unusual items
- The company had 24 months from the September 16, 2015 offering closing to complete a business combination. If it fails, it must redeem public shares from the trust and liquidate; public warrants would expire worthless.
- A target generally must have fair market value of at least 80% of trust assets, excluding deferred underwriting compensation and taxes, and the company must acquire control unless an exception applies.
- Management expected continued target-search expenses and said additional financing might be needed to complete a transaction or meet working-capital needs. Sponsor and insiders were not obligated to lend; inability to secure funds could impair continued operations.
- Share issuance could dilute public investors; debt could constrain flexibility and create repayment, covenant, and default risks. A transaction may also involve substantial public-share redemptions.
- Trust funds were invested in short-term U.S. Treasury securities and cash. Management considered interest-rate exposure immaterial given short maturities; no hedging activities had occurred.
- The filing reported no material change to previously disclosed risk factors, no legal proceedings, and no off-balance-sheet arrangements. Disclosure controls were assessed as effective, with no material control changes reported.
- Management provided no operating or transaction guidance. Actual completion of a business combination was uncertain.
Most important facts for investors to verify
- Confirm the issuer identity: this filing is Double Eagle Acquisition Corp., not WillScot Holdings Corp.
- Check subsequent filings for any announced or completed business combination, target terms, financing, and redemption levels.
- Verify the trust balance, cash available outside the trust, and the status of the $19.5 million deferred underwriting fee.
- Assess the 24-month transaction deadline and liquidation consequences, including the treatment of public shares and warrants.
- Reconcile the MD&A operating-income wording with the financial statements’ operating-loss and net-income figures.