SEC Form 8-K Summary
Filing date: September 18, 2020, reporting events occurring September 17, 2020. The filing entity is Pivotal Investment Corporation II, although the request metadata identifies Spruce Power Holding Corp. The filing concerns a proposed combination with XL Hybrids, Inc., commercially known as XL Fleet.
Business Context and Transaction
Pivotal entered into an Agreement and Plan of Reorganization with XL Hybrids and a wholly owned merger subsidiary. The merger would make XL Fleet a wholly owned subsidiary of Pivotal, with XL securityholders receiving Pivotal common stock.
- Pivotal will issue or reserve approximately 100,000,000 shares for XL securityholders.
- XL provides hybrid, plug-in hybrid, electrification and cloud-based telematics solutions for Class 2–6 commercial vehicles in North America.
- Closing was expected in the fourth quarter of 2020 or the first quarter of 2021, subject to required approvals and other conditions.
- The merger agreement had an outside termination date of January 16, 2021, subject to specified exceptions.
Financial Metrics, Capitalization and Liquidity
This 8-K does not provide clear historical revenue, profit, cash flow, margin, debt, liquidity or working-capital figures for Pivotal or XL. The filing states that certain XL financial information in the exhibits was non-GAAP and did not conform to Regulation S-X; the information would be adjusted in subsequent SEC filings.
- Pivotal must have at least $5,000,001 of net tangible assets immediately before and after the merger, after any public-share redemptions.
- Pivotal entered into subscription agreements for a PIPE offering of 15,000,000 shares at $10 per share, generating aggregate gross proceeds of $150 million.
- The PIPE closing is conditioned on shareholder approval and completion of the merger at or near the same time.
- XL was required either to obtain lender consent or repay its outstanding Paycheck Protection Program loan, including accrued interest.
Material Changes and Transaction Terms
- XL preferred stock will automatically convert into XL common stock immediately before the merger.
- XL common stock will be exchanged for Pivotal common stock based on an exchange ratio calculated using the 100 million share consideration and XL’s fully diluted capitalization.
- Outstanding XL options and warrants will be assumed and converted into instruments exercisable for Pivotal common stock.
- Certain XL officers, directors and holders of at least 5% of XL stock, representing approximately 47% of XL common stock on an as-converted basis, agreed to support the merger.
- Certain XL stockholders and Pivotal initial stockholders agreed to 12-month lock-up restrictions, subject to specified early-release conditions.
- Specified XL and Pivotal stockholders received registration rights for resale of Pivotal common stock.
Outlook, Conditions and Risks
The transaction remained subject to Pivotal and XL shareholder approvals, effectiveness of an S-4 registration statement, antitrust waiting periods, NYSE listing approval, completion of the PIPE offering, delivery of audited XL financial statements and other customary closing conditions.
Key risks identified include failure or delay in closing, inability to obtain required approvals or consents, failure to realize expected merger benefits, management distraction, post-merger business disruption, intense competition, product liability and litigation, component shortages or cost increases, privacy and data-security issues, COVID-19 impacts, macroeconomic conditions, and uncertainty in XL’s projections and future profitability.
The filing cautions that financial projections and non-GAAP information are subject to significant uncertainty, particularly for periods beyond 12 months, and that actual results may differ materially.
Important Facts for Investors to Verify
- Whether the merger closed and the resulting company’s final name, ticker and capitalization.
- Shareholder redemption levels and whether the $5,000,001 net tangible asset condition was satisfied.
- Whether the $150 million PIPE offering closed and the final number of shares issued.
- XL’s audited GAAP financial statements, revenue growth, profitability, cash flow, debt and PPP loan status in subsequent filings.
- The final exchange ratio and dilution from XL securities, Pivotal securities, warrants, options and the PIPE.
- Whether the S-4 registration statement became effective and whether all required regulatory and stockholder approvals were obtained.