Filing summary
Entity mismatch: The supplied filing is for TPG Pace Holdings Corp., a blank-check company, not Accel Entertainment, Inc. It does not report Accel’s operating or financial results.
Business context and reporting period
This unaudited Form 10-Q covers the quarter ended June 30, 2017, and results from inception on February 14, 2017 through June 30, 2017. TPG Pace was formed to pursue a business combination. It had not identified a target or begun substantive discussions, and its activities consisted primarily of formation and its June 30 initial public offering.
Financial position and results
- Revenue: $0 for the quarter and inception-to-date. The company expected no operating revenue before a business combination.
- Net loss: $44,983 for the quarter and $124,515 from inception through June 30. Inception-to-date formation and other expenses were $124,538; interest income was $23.
- Cash flow: Operating cash use was $19,977 from inception. Financing activities provided $451.96 million, primarily from the IPO and private warrant placement. The $450 million placed in trust was reported as investing cash outflow. Ending cash outside the trust was $1.94 million.
- Assets and liquidity: Total assets were $452.06 million, including $450 million in the trust account. Current liabilities were $1.46 million. The trust funds were restricted for a business combination or shareholder redemptions; outside-trust cash was available for working capital.
- Debt and obligations: The $300,000 non-interest-bearing sponsor loan was repaid at the IPO closing. No long-term debt was reported. A $15.75 million deferred underwriting fee is payable only if a business combination closes. The company also agreed to pay an affiliate $20,000 monthly for administrative services until a business combination or liquidation.
- Equity and dilution: Of 45 million public Class A shares, 42,985,126 were classified outside permanent equity as redeemable at $10 per share. The IPO units included warrants, and the sponsor separately purchased 7,333,333 private placement warrants; warrants generally have an $11.50 exercise price.
Operating margins are not meaningful because the company had no revenue. The filing provides no prior-year comparable operating period; the company was newly formed in 2017.
Outlook, risks, and unusual items
- The company had 24 months from the June 30 closing date to complete a business combination, extendable to 27 months if it had entered into a qualifying preliminary or definitive agreement within the first 24 months. If it fails, it must redeem public shares and liquidate, subject to the stated terms.
- Management said acquisition-related expenses would continue and could be significant. It might need additional working-capital or transaction financing, with no assurance that financing would be available.
- A target generally must have fair market value of at least 80% of the trust balance, net of specified amounts. Redemptions may reduce available transaction funds, and the company may not redeem shares if doing so would leave net tangible assets below $5,000,001.
- The sponsor’s trust-account indemnity may provide limited protection: the company had not independently verified the sponsor’s ability to pay and believed its assets consisted only of company securities.
- The filing reported no legal proceedings, no material change to prospectus risk factors, no off-balance-sheet arrangements, and no subsequent events requiring disclosure. Management concluded disclosure controls were effective.
Most 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 whether and when a business combination was announced or completed, and the resulting transaction terms and financing.
- Review actual public-share redemptions, remaining trust funds, and payment of the deferred underwriting fee.
- Assess the warrants’ terms and potential dilution, as well as any additional financing required for a transaction.
- Evaluate the sponsor’s capacity to meet its indemnity obligations and the company’s available cash for costs before a transaction or liquidation.