ESS Tech, Inc. current report, 01 October 2021

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ESS Tech, Inc. / ACON S2 Acquisition Corp. Form 8-K Summary

Business Context and Reporting Period

ACON S2 Acquisition Corp. (STWO), a special purpose acquisition company, filed this Form 8-K on October 1, 2021, reporting developments related to its proposed business combination with ESS Tech, Inc. The filing does not report quarterly or annual operating results for ESS or STWO.

Key Financial and Capitalization Information

  • The filing provides no current revenue, profit, cash flow, margin, debt, liquidity, or balance-sheet metrics.
  • ESS provided STWO with unaudited fiscal-year 2020 financial results on January 9, 2021; the filing does not provide the figures.
  • ESS provided internal projections for 2021 through 2027 covering revenue, gross profit, EBITDA, debt, and capital expenditures; the filing does not provide the projected amounts.
  • After the proposed transaction, assuming no redemptions, disclosed ownership included BASF Venture Capital GmbH with 7,721,878 New ESS shares, or 5.1%; Breakthrough Energy Ventures, LLC with 15,527,317 shares, or 10.2%; and SB Energy Global Holdings One Ltd. with 31,127,200 shares, or 20.4%.
  • Assuming maximum redemptions, the corresponding ownership percentages were 6.1%, 12.2%, and 24.4%, respectively. The filing does not define the exact maximum-redemption share count in the provided text.
  • STWO warrants were exercisable for one Class A ordinary share at an exercise price of $11.50 per warrant.

Material Changes Versus the Prior Comparable Period

  • No period-over-period financial comparison is presented.
  • STWO supplemented its proxy statement/prospectus after receiving four shareholder demand letters alleging disclosure deficiencies concerning the proposed business combination. STWO denied the allegations and stated that the supplemental disclosures were intended to avoid litigation-related delay and expense.
  • The supplemental disclosures added or amended information regarding potential acquisition targets, receipt of ESS’s 2020 unaudited results, comparable public-company analysis, ESS projections, financial-advisor interests, and ownership following the transaction.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

  • STWO’s extraordinary general meeting remained scheduled for October 5, 2021, and the board continued to recommend that shareholders vote in favor of each proposal.
  • ESS and SB Energy filed a CFIUS notice in August 2021 concerning SB Energy’s proposed acquisition of voting shares and certain information and governance rights in New ESS. CFIUS approval was not a condition to closing, and its timing and outcome were uncertain.
  • Under an irrevocable proxy agreement dated September 30, 2021, SB Energy’s shares above 9.9% of New ESS’s outstanding shares would generally be voted proportionally with other common shareholders until CFIUS approval. After approval, the threshold would increase to shares above 19.9%.
  • Failure to obtain CFIUS approval, or the imposition or violation of mitigation measures, could materially affect New ESS’s business, prospects, financial condition, reputation, and relationship with SB Energy.
  • Financial-advisor fees, deferred underwriting compensation, expense reimbursement, and indemnification were contingent in part on closing the business combination. The filing does not quantify these amounts.
  • Key transaction risks include failure or delay in closing, failure to satisfy closing conditions, termination rights, disruption to ESS’s business, competitive and regulatory changes, execution risk, and the inability to achieve projected results.

Most Important Facts for Investors to Verify

  1. Whether STWO shareholders approved the proposed business combination and whether the transaction ultimately closed.
  2. The final redemption level and resulting ownership and voting percentages, particularly SB Energy’s effective voting rights.
  3. Whether CFIUS approval was obtained and whether any mitigation measures were imposed.
  4. ESS’s actual historical financial statements and the detailed 2021–2027 projections, including revenue, gross margin, EBITDA, debt, capital expenditures, and cash requirements.
  5. The amount of transaction-related advisory, underwriting, placement-agent, and other contingent fees.
  6. Whether the supplemental disclosures or shareholder demand letters led to additional litigation, regulatory action, or transaction delays.