Business context and reporting period
This is Soaring Eagle Acquisition Corp.’s unaudited Form 10-Q for the quarter ended June 30, 2021—not an operating-company 10-Q for Ginkgo Bioworks Holdings, Inc. Soaring Eagle was a blank-check company formed to complete a business combination and had not begun operating activities or generated operating revenue.
On May 11, 2021, Soaring Eagle agreed to merge with Ginkgo Bioworks, Inc. The proposed transaction contemplated approximately $15 billion of base equity consideration and about 180 million potential earn-out shares. Closing was subject to shareholder approvals and other conditions; it had not occurred by June 30, 2021.
Financial results and position
- Revenue: None. The company said it would not generate operating revenue until, at the earliest, after a business combination.
- Quarter ended June 30, 2021: General and administrative expense was $5.31 million; net loss was $106.76 million. The loss was driven chiefly by a $101.55 million non-cash increase in warrant-liability fair value.
- Six months ended June 30, 2021: General and administrative expense was $5.61 million; net loss was $100.99 million. The filing reports $92.01 million of warrant-liability fair-value loss, $3.52 million of warrant-related offering costs, and $145,399 of trust investment income.
- Margins: Not meaningful because there was no operating revenue.
- Cash flow, six months: Operating cash used was $2.77 million; investing cash used was $1.72 billion, mainly the trust deposit; financing cash provided was $1.73 billion. Ending cash outside the trust was $37,629.
- Liquidity at June 30: Trust assets were approximately $1.725 billion, while unrestricted cash was $37,629 and working capital deficit was $3.72 million. Management said it expected sufficient working capital and borrowing capacity through the earlier of a business combination or one year from filing.
- Liabilities and debt: Total liabilities were $254.95 million, including $189.89 million of warrant liabilities and $60.38 million of deferred underwriting compensation. The filing reported no long-term debt. Public shares subject to possible redemption were classified as temporary equity at $1.466 billion.
Material changes and unusual items
- The February 2021 IPO raised $1.725 billion gross from 172.5 million units, and the sponsor separately bought $28.88 million of private-placement warrants. Nearly all IPO proceeds were placed in the trust account.
- The SEC’s April 2021 warrant-accounting guidance led the company to classify public and private warrants as derivative liabilities rather than equity. Recurring fair-value changes can materially affect reported earnings without corresponding cash flows. The filing identifies this accounting change as a key cause of the quarterly loss.
- Compared with December 31, 2020, the company’s balance sheet reflects the IPO and trust funding; the filing does not provide prior-year comparable quarterly operating results.
Outlook, risks, and controls
- Soaring Eagle had until February 26, 2023 to complete a business combination, with a possible extension to August 26, 2023 if it had executed a definitive agreement within 24 months of the IPO closing. Failure to complete a transaction would generally require redemption of public shares and liquidation.
- The company expected ongoing transaction, public-company, legal, accounting, and due-diligence costs. Sponsor working-capital loans were possible but not committed.
- Management said COVID-19 could adversely affect the company’s financial position or search for a target, but the specific impact was not determinable.
- Disclosure controls were deemed ineffective as of June 30 due to a material weakness in warrant accounting. Management described remediation steps, including improved review of complex securities accounting and consideration of additional expertise.
- The company cautioned that future warrant fair-value changes could be material and volatile, and disclosed potential litigation or disputes relating to the control weakness, while stating it knew of none as of the report date.
Important facts for investors to verify
- Whether and when the Ginkgo merger closed, and the final transaction terms, approvals, and consideration.
- The company’s actual unrestricted liquidity and any sponsor advances or other funding needs; cash outside the trust was only $37,629 at quarter-end.
- Warrant-liability valuation and subsequent non-cash earnings volatility.
- Progress in remediating the material weakness and restoring effective disclosure controls.
- Redemption levels, trust assets, and the business-combination deadline or any extension.