Filing summary
Important entity distinction: This is Soaring Eagle Acquisition Corp.’s Form 10-Q for the quarter ended March 31, 2021—not an operating-company quarterly report from Ginkgo Bioworks Holdings, Inc. Ginkgo Bioworks appears as the proposed merger target in a subsequent-event disclosure.
Business context and reporting period
Soaring Eagle was a blank-check company formed to pursue a business combination. It had not begun operations and had no operating revenue during the quarter. It completed its IPO on February 26, 2021, raising $1.725 billion from 172.5 million units at $10 each, and sold $28.875 million of private-placement warrants.
Financial performance and position
- Revenue: None; the company reported no significant business operations.
- Net income: $5.762 million for the three months ended March 31, 2021. General and administrative expenses were $295,117; trust-account investment gain was $44,564; and reported warrant-liability fair-value change was a $9.533 million gain, partly offset by $3.520 million of warrant-related offering costs.
- Cash flow: $470,438 used in operating activities; $1.725 billion used in investing activities, principally the trust-account deposit; and $1.727 billion provided by financing activities. Ending cash outside the trust was $1.917 million.
- Liquidity and assets: Total assets were $1.728 billion, including $1.725 billion held in trust and $1.917 million of cash outside the trust. Trust funds were principally invested in short-term U.S. government securities or qualifying money-market funds and were generally reserved for a business combination or shareholder redemptions.
- Liabilities and equity: Total liabilities were $150.139 million, including $88.343 million of warrant liabilities and $60.375 million of deferred underwriting compensation. The filing reports no long-term debt or lease obligations. Class A shares subject to possible redemption were presented as $1.573 billion of temporary equity.
- Margins: Not meaningful because the company had no operating revenue.
Material changes and unusual items
- The company revised its previously issued February 26, 2021 balance sheet after reassessing the accounting for its public and private warrants. It reclassified the warrants from equity to derivative liabilities, with recurring fair-value changes recognized in earnings.
- Management reported a material weakness in internal control over financial reporting related to the warrant classification and concluded disclosure controls were not effective as of March 31. It described expanded review procedures and other planned remediation.
- The reported net income is substantially affected by non-cash warrant accounting and should not be viewed as operating earnings. The filing’s MD&A and notes contain descriptions of warrant-related gains and charges that do not clearly reconcile with the statement of operations; the filing text does not provide a clear reconciliation.
Outlook, risks, and subsequent events
- Management expected to incur additional public-company and transaction-search costs. The company had no assurance it would complete a business combination or successfully raise additional capital.
- The company had until February 26, 2023 to complete a business combination, extendable to August 26, 2023 if it had signed a definitive agreement within the initial 24-month period. Otherwise, it generally would have to redeem public shares and liquidate.
- Management said COVID-19 could adversely affect its financial position, operations, or target search, but the impact was not then determinable. It reported no material market or interest-rate risk from its short-term investments.
- On May 11, 2021, after quarter-end, Soaring Eagle entered into a merger agreement with Ginkgo Bioworks, Inc. The proposed transaction contemplated approximately $15 billion of base equity consideration at $10 per share plus approximately 180 million potential earn-out shares, subject to vesting conditions. Completion required shareholder approval and satisfaction of closing conditions; it was not completed as of the reporting date.
Important facts for investors to verify
- Confirm the filing entity and period: this 10-Q reports Soaring Eagle’s SPAC activity, not Ginkgo’s standalone operating results.
- Review the warrant-liability remeasurement, its effect on reported earnings, and the filing’s inconsistent warrant-related descriptions.
- Track remediation of the material weakness and whether subsequent filings report effective controls.
- Check the merger’s final terms, approvals, closing conditions, redemption levels, and any changes to consideration or earn-out provisions.
- Assess the limited unrestricted cash available outside the trust and the deadlines and consequences if a business combination is not completed.