Business Context and Reporting Period
Holley Inc. filed a Current Report on Form 8-K dated July 16, 2021, reporting the completion of its business combination with Holley Intermediate Holdings, Inc. Empower Ltd., previously a shell company, domesticated from the Cayman Islands to Delaware, changed its name to Holley Inc., and became the holding company for Holley Intermediate.
The transaction closed on July 16, 2021, following shareholder approval on July 14, 2021. Historical financial statements and operating information are incorporated from the related Form S-4 and are not fully reproduced in the filing text.
Key Financial and Capitalization Information
| Item | Reported information |
|---|---|
| PIPE financing | $240.0 million from the issuance of 24.0 million shares at $10.00 per share. |
| Forward purchase financing | $50.0 million for 5.0 million units at $10.00 per unit; each unit separated into one common share and one-third of a warrant. |
| Cash consideration to Holley Stockholder | $264.7 million, together with 67.7 million common shares valued at a deemed $10.00 per share. |
| Common stock outstanding at closing | 117,993,139 shares, including 2,187,500 earn-out shares and shares issued in the merger, PIPE financing and forward purchase transaction. |
| Warrants outstanding | 14,666,667 warrants: 10.0 million public warrants and 4,666,667 private placement warrants. The exercise price is $11.50 per share. |
| Revenue, profit and margins | The filing text does not provide clear current-period revenue, net income, earnings per share or margin figures. Historical and pro forma information is incorporated by reference. |
| Cash flow, debt and liquidity | The filing text does not provide clear cash flow, debt-balance or liquidity amounts. It identifies future liquidity requirements, debt covenants and access to additional capital as risk areas. |
| Dividends | No cash dividends have been paid. Holley does not anticipate declaring dividends in the foreseeable future and may retain earnings for operations, expansion and debt repayment. |
Material Changes Versus the Prior Comparable Period
- Empower ceased to be a shell company and became Holley Inc., an operating-company holding structure.
- Holley completed the merger, domestication and related equity financings, creating substantial new common-stock and warrant capitalization.
- Holley listed its common stock and public warrants on the NYSE under the symbols HLLY and HLLY WS, respectively, effective July 19, 2021.
- A new seven-member classified board and new executive leadership team were appointed. Tom Tomlinson became Chief Executive Officer and Dominic Bardos became Chief Financial Officer.
- Holley adopted a new certificate of incorporation, bylaws, code of ethics and 2021 Omnibus Incentive Plan.
- Options covering an aggregate of 1,254,406 common shares were granted to seven executives, vesting in three equal annual installments, subject to continued employment.
- Holley entered into registration-rights, stockholders’, executive employment and indemnification agreements. The largest stockholder, Holley Parent Holdings, held 67,673,884 shares, or 57.35%, at closing; MidOcean held 10.47%.
Guidance, Outlook, Risks and Unusual Items
The filing provides no quantified revenue, earnings or cash-flow guidance. Management’s forward-looking statements address execution of the business strategy, integration of the combined businesses, growth and profitable management of growth, deployment of transaction proceeds, hiring and retention, technology systems, intellectual property and future capital access.
- Principal risks include COVID-19 impacts, consumer spending and preference changes, supply and operating conditions, employee availability, competition, product acceptance, litigation and product liability.
- Additional risks include privacy or data breaches, technology changes, regulatory and environmental compliance, foreign exchange and international-market conditions, higher interest rates, tax-law changes, and NYSE listing requirements.
- Holley must comply with restrictive covenants and meet future liquidity requirements related to long-term indebtedness; the filing does not quantify those obligations.
- Warrants become exercisable beginning October 9, 2021 and expire July 16, 2026, subject to redemption provisions. Public warrants may be redeemed at $0.01 if the stock price reaches $18.00, or at $0.10 under a separate cashless-exercise provision if the stock price reaches $10.00.
- The filing states that ordinary-course legal proceedings are not expected to have a material adverse effect, individually or in the aggregate, based on the information available at filing.
- Certain executive incentive units had an aggregate disclosed grant fair value of approximately $11.7 million and generally vest on the earlier of July 16, 2022 or liquidation of Holley Parent Holdings. Some units participate only after specified sponsor investment-return thresholds.
Important Facts for Investors to Verify
- Review the incorporated Holley historical financial statements, March 31, 2021 financial statements and Exhibit 99.2 pro forma information for revenue, profitability, cash flow, debt and liquidity.
- Confirm the final post-closing capitalization, including earn-out shares, warrants, executive equity awards and potential dilution from warrant exercises.
- Review the merger consideration adjustments and the terms of the Holley Stockholder, registration-rights and stockholders’ agreements.
- Assess debt balances, interest rates, maturity schedules, financial covenants and the use of PIPE and forward-purchase proceeds.
- Evaluate ownership concentration and related-party arrangements, including Sentinel Capital Partners’ control through Holley Parent Holdings and MidOcean’s ownership and governance rights.
- Monitor the effectiveness of registration statements for resale shares and warrant shares, as warrant exercise may depend on an effective registration statement or an available exemption.