Business context and reporting period
This is Star Peak Energy Transition Corp.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2020—not a filing by STEM, Inc. Star Peak was a blank-check company seeking a business combination, with a stated focus on energy transition businesses. It had not begun operations and had no operating revenue. The company completed its IPO in August 2020.
Financial performance and position
- Revenue: No operating revenue for the three or nine months ended September 30, 2020.
- Net loss: $374,402 for the third quarter and $376,602 for the first nine months of 2020, compared with losses of $1,080 and $9,956, respectively, in 2019. The 2020 nine-month loss included $395,116 in operating expenses, partly offset by $18,514 of trust-account investment income.
- Margins: Not meaningful because the company had no operating revenue.
- Cash flow: Nine-month operating cash outflow was $934,736; investing cash outflow was $383.6 million, primarily the deposit into the trust account; financing cash inflow was $386.4 million. Ending operating cash was $1.84 million.
- Liquidity and assets: At September 30, cash was $1.84 million, working capital was approximately $1.8 million, and trust-account investments were $383.6 million. Total assets were $386.2 million.
- Debt and liabilities: No long-term debt was reported; the sponsor note was fully repaid in August. Total liabilities were $14.35 million, including $13.43 million of deferred underwriting commissions payable only if a business combination closes.
- Equity and redemption: 36.68 million Class A shares, recorded as temporary equity and subject to possible redemption, were valued at $366.8 million. Stockholders’ equity was $5.0 million.
Material changes versus the prior comparable period
The 2020 losses increased from 2019, reflecting the company’s IPO, public-company and related-party administrative costs, and franchise taxes. The August IPO and partial over-allotment generated gross proceeds of approximately $383.6 million; approximately $383.6 million was held in the trust account at quarter-end. The company’s operations shifted from formation and IPO preparation to searching for a business-combination target.
Outlook, risks and unusual items
- Management expected available working capital and potential sponsor or insider financing to meet needs through a business combination or one year from the filing. Working-capital loans were available at the lenders’ discretion, but none were outstanding at quarter-end.
- The company had 24 months from the August 20, 2020 IPO closing—through August 20, 2022—to complete a business combination, subject to the terms disclosed. If unsuccessful, it generally must cease operations and redeem public shares from the trust account.
- Management said COVID-19’s specific impact was not readily determinable; the financial statements included no related adjustments.
- Public shareholders could redeem shares in connection with a business combination. Warrants could expire worthless if no business combination is completed. The filing also describes redemption limits, deferred underwriting fees, and sponsor indemnification of certain trust-account claims.
- Management reported effective disclosure controls and procedures and no material change in internal control over financial reporting. No legal proceedings or material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Confirm the issuer: this filing is for Star Peak Energy Transition Corp. (ticker STPK), not STEM, Inc.; verify that it is the intended filing.
- Check the balance-sheet comparison date: the filing’s table heading says December 31, 2020, while the figures and accompanying statements indicate December 31, 2019.
- Reconcile the IPO, trust-account, offering-cost and deferred-commission figures with the prospectus and related filings.
- Review the business-combination deadline, redemption mechanics, warrant terms, and the possibility of sponsor or insider financing.