Business context and reporting period
This is Star Peak Energy Transition Corp.’s (STPK) Form 10-K for the fiscal year ended December 31, 2020—not an operating-company 10-K for Stem, Inc. STPK was a special purpose acquisition company (SPAC) with no operating business or revenue. It signed a merger agreement with Stem on December 3, 2020; the proposed combination had not closed as of year-end. Accordingly, the financial results below are STPK’s and do not describe Stem’s operating performance.
Financial results and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | None | None |
| Net loss | $3.36 million | $10,406 |
| Operating expenses | $3.50 million | $10,406 |
| Net gain on trust investments | $136,707 | None |
| Operating cash flow | $(1.84) million | $(17,473) |
- Cash outside the trust was $936,773 at year-end; prepaid expenses were $627,564. Management reported a working capital deficit of approximately $1.2 million.
- Trust investments totaled $383.72 million, invested in U.S. Treasury securities. Total liabilities were $16.44 million, including $13.43 million of deferred underwriting commissions. The filing reports no outstanding working-capital loans; the sponsor note was repaid in August 2020.
- Class A shares subject to possible redemption were presented as temporary equity at $363.85 million. Reported stockholders’ equity was $5.00 million.
- Cash-flow movements included $383.59 million deposited in the trust and $386.36 million of net financing cash inflow, primarily related to the IPO and private placement. Profit margins are not meaningful for a company with no operating revenue.
Material changes and proposed transaction
- STPK completed its IPO in August 2020, raising $383.59 million gross from public units, and raised approximately $10.77 million from sponsor private-placement warrants. The trust held $383.72 million at year-end.
- The net loss increased from $10,406 in 2019 to $3.36 million in 2020, reflecting the SPAC’s formation, public-company and transaction-search costs after the 2020 IPO.
- Under the proposed merger, approximately 65 million New Stem shares were expected to be issued or reserved as merger consideration. Former Stem holders were projected to own approximately 48% of the combined company assuming no STPK redemptions, or 66.9% assuming maximum redemptions. These were transaction estimates, not completed results.
Outlook, risks and unusual items
- STPK reported substantial doubt about its ability to continue as a going concern because of limited operating liquidity. Sponsor or insider working-capital loans were possible but not committed. The filing gives no Stem operating guidance or combined-company forecast in the provided text.
- If no business combination were completed by August 20, 2022, STPK generally would have to redeem public shares and liquidate; warrants could expire worthless. Redemptions, creditor claims and financing availability could affect transaction completion and proceeds to shareholders.
- Management said the impact of COVID-19 on the company and its search for a target was not readily determinable. Other significant SPAC risks include conflicts of interest and competing opportunities involving Magnetar and affiliates, dilution from founder shares and warrants, and the possibility of claims against trust assets.
- The auditor issued an unqualified opinion on the financial statements but included a going-concern paragraph. Management said disclosure controls were effective; the filing did not include management’s internal-control assessment or an auditor attestation, citing the transition period for newly public companies.
Most important facts for investors to verify
- Use Stem’s separate filings and the merger proxy/prospectus to verify Stem’s revenue, growth, margins, cash flows, debt, customer concentration and forecasts; these STPK statements do not provide those operating metrics.
- Confirm whether and on what terms the merger closed, actual redemptions and financing, final share issuance, and resulting ownership and dilution.
- Reconcile year-end trust assets, redeemable-share classification, deferred underwriting fees and cash available outside the trust.
- Assess the going-concern disclosure and whether committed liquidity was available to fund transaction expenses and operations through the business-combination deadline.