Filing summary
Registrant identity: The supplied filing is TPG Pace Holdings Corp.’s Form 10-Q, not an operating-company filing for Accel Entertainment, Inc. It describes a SPAC seeking a business combination; its financial results are not Accel Entertainment’s operating results.
Business context and reporting period
Quarter ended March 31, 2018. TPG Pace was a Cayman Islands blank-check company formed to acquire or combine with one or more businesses. Its activities were formation, fundraising, and identifying and evaluating potential targets; it had not completed a business combination or begun operating-business activities.
Financial position and results
| Metric | Q1 2018 / March 31, 2018 | Prior comparison |
|---|---|---|
| Revenue | $0 | $0 in Q1 2017 |
| Operating expenses | $288,600 | $79,538 in Q1 2017 |
| Interest income | $1,414,985 | $6 in Q1 2017 |
| Net income (loss) | $1,126,385 | $(79,532) in Q1 2017 |
| Basic and diluted earnings (loss) per share | $0.02 | $(0.01) in Q1 2017 |
| Net cash used in operating activities | $(206,282) | $6 provided in Q1 2017 |
| Cash outside the trust account | $146,162 | $372,073 at December 31, 2017 |
| Trust investments | $451,414,985 | $450,000,000 at December 31, 2017 |
| Current liabilities | $237,257 | $157,390 at December 31, 2017 |
The prior-period comparison is Q1 2017, when the company was newly formed, and is not a comparison of operating-company performance. Q1 2018 interest income reflects funds invested in permitted U.S. government-related money-market investments; the reported effective annualized rate was 1.3%. The company reported no long-term debt. A $15.75 million deferred underwriting fee is payable only if a business combination closes. Shareholders’ equity was $5.0 million; $430.7 million of Class A shares were classified outside permanent equity because they were redeemable.
Changes, outlook, and risks
- Net income turned positive as trust-account interest increased, while operating expenses also rose from the very small Q1 2017 base. The company generated no revenue in either period.
- Management said it was reviewing acquisition opportunities but could not determine whether any would result in a completed transaction. It gave no transaction-specific or operating earnings guidance and cautioned that completion was not assured.
- At quarter-end, cash outside the trust account was below current liabilities. Management expected further search and operating costs, potentially significant, and said additional financing might be needed; there was no assurance it could be raised.
- The company had 24 months from the June 30, 2017 offering close to complete a business combination, extendable to 27 months if specified transaction arrangements were made within the initial period. If it fails, public shares are generally to be redeemed from the trust and the company wound up.
- Public-share redemptions are subject to a $5,000,001 minimum net tangible asset/equity threshold. The Sponsor’s trust-account indemnity may not be collectible: the company had not verified the Sponsor’s financial capacity and believed its assets consisted of company securities.
- The filing reported no material changes to previously disclosed risk factors, no legal proceedings, effective disclosure controls, and no material subsequent events through May 8, 2018.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for TPG Pace Holdings Corp., not Accel Entertainment, Inc.
- Check subsequent filings for the target identified, any business-combination agreement, closing status, and redemption results.
- Review available cash, continuing search costs, and any financing or Sponsor loans after March 31, 2018.
- Verify the business-combination deadline and the terms and collectibility of the trust-account protections and deferred underwriting fee.