Business Context and Reporting Period
This Form 8-K Current Report, dated February 9, 2021, covers the closing of a merger between INSU Acquisition Corp. II (INSU II) and MetroMile, Inc. Cohen & Company Inc. (the "Company") manages the Sponsor Entities (Insurance Acquisition Sponsor II, LLC and Dioptra Advisors II, LLC) that sponsored INSU II. Upon closing, INSU II changed its name to Metromile, Inc. ("MILE") and its NASDAQ trading symbol changed from "INAQ" to "MILE" on February 10, 2021.
Key Financial Metrics and Transaction Details
The filing does not provide standard financial metrics such as revenue, profit, cash flow, or debt levels for the Company or MILE. Instead, it details the equity structure resulting from the merger:
- Placement Securities: Sponsor Entities held 452,500 shares of MILE Class A Common Stock and 150,833 warrants.
- Founder Shares: Sponsor Entities held an additional 6,669,667 shares of MILE Class A Common Stock.
- Accounting Treatment: The Company reclassified its investment in INSU II from an equity method investment to "other investments" at fair value. This reclassification triggers the recognition of principal transaction revenue based on the fair value of retained Sponsor Shares.
- Expenses: The Company will record non-controlling interest expense or compensation expense related to Sponsor Shares distributable to non-controlling interest holders.
Material Changes Versus Prior Period
The primary material change is the completion of the business combination and the subsequent change in the Company's accounting treatment for its investment in the SPAC. Previously treated as an equity method investment, the holding is now accounted for at fair value. Additionally, the Company expects to distribute most Placement Securities and a significant portion of Founder Shares to non-controlling interest holders, retaining approximately 3,254,792 Founder Shares.
Guidance, Outlook, Risks, and Unusual Items
Share Restrictions:
- Placement Securities are restricted for 30 days post-closing.
- Founder Shares are subject to vesting based on MILE's stock price: 24% are freely transferable; 38% unlock if the price exceeds $15.00 for 20 of 30 consecutive trading days; an additional 38% unlock if the price exceeds $17.00 under similar conditions.
- Daniel G. Cohen (Chairman), Lester R. Brafman (CEO), and Joseph W. Pooler, Jr. (CFO) were allocated 170,000, 170,000, and 25,500 shares of MILE Class A Common Stock, respectively, subject to the same vesting restrictions.
- Forward-looking statements are subject to risks including economic declines, liquidity issues, litigation, and the possibility that intended distributions to minority interest holders may not occur.
- The Company notes that actual results may differ materially from projections due to market conditions and integration synergies.
Important Facts for Investor Verification
- Verify the final trading price of MILE stock to determine the fair value of the Company's retained investment and the resulting principal transaction revenue.
- Confirm the specific amount of compensation expense or non-controlling interest expense to be recorded upon distribution of shares to non-controlling interest holders.
- Monitor the vesting schedule of Founder Shares held by the Company and its executives, as liquidity depends on MILE's stock price reaching $15.00 and $17.00 thresholds.
- Review the Amended and Restated Registration Rights Agreement to understand the timeline for the resale shelf registration statement.