Business Context and Reporting Period
Soaring Eagle Acquisition Corp. filed this Form 8-K on May 11, 2021, reporting its proposed business combination with Ginkgo Bioworks, Inc. The transaction would result in Soaring Eagle domesticating as a Delaware corporation and being renamed Ginkgo Bioworks Holdings, Inc., with Ginkgo surviving as a wholly owned subsidiary.
Transaction and Key Financial Terms
- Base equity consideration is approximately $15 billion, based on a $10.00 per-share value, payable in New Ginkgo common stock.
- Ginkgo equityholders may receive up to approximately 180 million earn-out shares over five years, in four equal tranches tied to New Ginkgo Class A trading-price targets of $12.50, $15.00, $17.50, and $20.00.
- The company entered into PIPE subscription agreements for 77.5 million Class A shares at $10.00 per share, representing gross proceeds of approximately $775 million.
- The PIPE includes 7.5 million shares for an affiliate of the Sponsor.
- Ginkgo’s closing condition requires at least $1.25 billion of cash at closing, calculated using specified trust-account proceeds, PIPE proceeds, and certain other equity investments, after applicable redemptions and subject to transaction expenses and other limitations.
- The filing does not provide operating revenue, net income, cash flow, margin, debt, or liquidity metrics for Ginkgo or Soaring Eagle for a comparable reporting period.
Material Changes Versus Prior Comparable Period
The filing is a transaction announcement rather than periodic financial reporting. It does not present historical financial statements or quantify changes in revenue, profitability, cash flow, margins, debt, or liquidity versus a prior period.
- The proposed transaction establishes a new ownership and capital structure, including Class A shares with one vote per share and Class B shares with ten votes per share.
- Approximately 90% of Ginkgo’s outstanding voting power, on an as-converted basis, is subject to stockholder support agreements requiring approval of the transaction, subject to the agreements’ terms.
- The Sponsor agreed to vote its shares in favor of the transaction, not redeem them, and potentially forfeit or receive certain shares depending on redemption levels and earn-out conditions.
Outlook, Conditions, Risks, and Unusual Items
- Closing requires approval by Soaring Eagle and Ginkgo stockholders, expiration or termination of the applicable Hart-Scott-Rodino waiting period, and approval for listing of the New Ginkgo Class A shares.
- The transaction may be terminated if it has not closed by November 11, 2021, subject to specified extensions and other termination rights.
- The transaction remains subject to shareholder redemptions, including the requirement to satisfy the $1.25 billion minimum cash condition.
- The PIPE securities will be issued in private placements relying on Section 4(a)(2) and/or Regulation D exemptions and will not initially be registered under the Securities Act.
- New Ginkgo is expected to provide registration rights for securities held by the Sponsor and Ginkgo holders, with New Ginkgo bearing related registration expenses.
- Key risks include failure to complete the transaction, failure to obtain approvals, insufficient cash after redemptions, regulatory or legal proceedings, Nasdaq listing risks, disruption to Ginkgo’s operations or employee retention, market volatility, execution of business plans, and weaker demand for synthetic-biology products.
- The filing states that no third-party valuation was obtained in determining whether to pursue the transaction.
Important Facts for Investors to Verify
- Whether the Form S-4 registration statement is filed and declared effective, and the terms presented in the definitive proxy statement/prospectus.
- Actual shareholder redemption amounts and whether the $1.25 billion minimum cash condition is satisfied.
- Completion of the $775 million PIPE investment and the final post-closing capitalization.
- Final treatment of earn-out shares, Sponsor shares, warrants, options, and other equity awards.
- Ginkgo’s historical and projected revenue, profitability, cash flow, debt, liquidity, customer concentration, and operating assumptions, which are not provided clearly in this filing.
- Required shareholder, antitrust, listing, and other regulatory approvals and the final closing date.