Filing Overview
Registrant: Tortoise Acquisition Corp. (subsequently associated with Hyliion Holdings Corp.)
Form 8-K date: September 24, 2020. The filing reports an event under Item 8.01, “Other Events,” and does not present quarterly or annual financial results.
Business Context and Transaction
TortoiseCorp reported developments concerning its proposed business combination with Hyliion Inc. under the June 18, 2020 Business Combination Agreement. TortoiseCorp’s wholly owned subsidiary, SHLL Merger Sub Inc., was expected to merge with Hyliion, with Hyliion surviving as a wholly owned subsidiary of TortoiseCorp.
A special meeting of TortoiseCorp stockholders was scheduled for September 28, 2020 to vote on the proposed transaction and related matters.
Financial and Transaction Metrics
- The March 2020 non-binding letter of intent contemplated an initial Hyliion pre-money valuation of $1 billion on a debt-free, cash-free basis.
- The proposed conversion was based on Class A common stock valued at $10.00 per share.
- Closing of the contemplated transaction was conditioned, among other matters, on a private placement generating at least $235 million before fees and expenses.
- The filing does not provide revenue, profit, cash flow, operating margin, debt, cash balance, liquidity, or other periodic financial statement metrics.
Material Changes and Legal Proceedings
A purported TortoiseCorp stockholder filed a complaint in the U.S. District Court for the Southern District of New York alleging that the proxy statement omitted material information about the proposed transaction. Another purported stockholder submitted a substantially similar demand letter.
TortoiseCorp denied the allegations and voluntarily supplemented its definitive proxy statement. The supplemental disclosures addressed, among other matters:
- Due diligence and discussions concerning 13 alternative acquisition opportunities.
- The reasons the board selected Hyliion over other potential targets.
- The terms and negotiation history of the letter of intent.
- Barclays’ engagement as exclusive financial advisor and lead private placement agent, including its contingent transaction fee.
- Board discussions regarding valuation, due diligence, private placement marketing, governance, director nomination rights, registration rights, and lock-up arrangements.
- The scope of the board’s review of Hyliion’s operations, forecasts, customers, suppliers, comparable companies, contracts, intellectual property, and financial, tax, legal, insurance, and accounting matters.
Following the supplemental disclosures, the purported stockholders determined that their claims were moot and agreed to dismiss the complaint with prejudice. The filing states that this resolution was not an admission that the disclosures were legally required or material.
Outlook, Risks, and Unusual Items
The filing contains forward-looking statement disclosures but provides no updated operating guidance or financial forecast figures. Completion of the transaction remained subject to stockholder approval and other closing conditions.
- Potential failure to obtain stockholder approval or satisfy other closing conditions.
- Redemption requests by TortoiseCorp stockholders that could reduce funds available to the combined company.
- Termination rights under the Business Combination Agreement.
- Risks associated with delays, integration, transaction costs, and failure to realize anticipated benefits.
- Risks related to Hyliion’s business rollout, timing of milestones, competition, and general economic, financial, legal, political, and market conditions.
Investor Verification Items
- Verify the final stockholder vote and whether the business combination closed on the expected terms.
- Review the definitive proxy statement and supplemental disclosures in full, particularly valuation, dilution, redemption, governance, and lock-up provisions.
- Confirm the amount and terms of any private placement and the resulting cash available to the combined company.
- Review subsequent filings for actual Hyliion financial results, liquidity, debt, operating performance, and progress against business milestones.
- Confirm the final status and dismissal documentation for the Martinez litigation and Wolf demand letter.