SEC filing summary: TPG Pace Tech Opportunities Corp. (proposed Nerdy combination)
Important scope: This is the SPAC’s Form 10-K, not an operating-company 10-K for Nerdy Inc. It covers the fiscal year ended December 31, 2020; the SPAC had no operating business or revenue. Nerdy’s operating financial results are not provided in this filing. Filed February 16, 2021.
Business context and reporting period
TPG Pace Tech Opportunities Corp. was a blank-check company formed to complete a business combination. It completed its IPO on October 9, 2020, selling 45 million units at $10 each and placing $450 million in trust. On January 28, 2021, after year-end, it signed an agreement to combine with Live Learning Technologies LLC, doing business as Nerdy. The proposed transaction remained subject to approvals and other closing conditions; completion was not assured.
Financial results and position
| Metric | FY 2020 / December 31, 2020 | Prior comparable period |
|---|---|---|
| Revenue | $0 | $0 for inception through December 31, 2019 |
| Net loss | $637,366 | $8,494 loss from inception through December 31, 2019 |
| Interest income | $5,937 | $93 |
| Operating cash flow | $(480,871) | $93 |
| Cash outside trust | $534,095 | $25,093 |
| Trust investments | $450,005,937 | None |
| Total assets | $450,817,922 | $25,093 |
| Total liabilities | $16,283,908, including $15,750,000 deferred underwriting compensation | $8,587 |
Basic and diluted loss per share was $0.02. The trust balance was principally invested in permitted U.S. Treasury money-market investments. Trust funds were restricted for a business combination, shareholder redemptions, or liquidation; they should not be viewed as ordinary operating liquidity. Current liabilities were $533,908, so cash outside trust was only slightly above that amount. The company reported no long-term debt or off-balance-sheet arrangements. It had no meaningful operating margin to assess. No dividend was paid or expected before a business combination.
Working capital was reported as $434.5 million, largely reflecting the trust-related balance-sheet presentation; for near-term operating capacity, the filing separately identifies just $534,095 of cash outside trust. Net loss increased from the short 2019 inception period, but the periods are not directly comparable because the IPO and trust funding occurred in 2020.
Material developments, transaction terms, and outlook
- The proposed Nerdy transaction used an enterprise value of $1.25 billion, subject to certain debt-related adjustments. Consideration was to include cash and equity; estimated cash contributed to Nerdy at closing was approximately $265 million.
- A $150 million PIPE was agreed with institutional and accredited investors for 15 million shares at the transaction’s stated $10-per-share valuation. Existing Nerdy holders could also receive up to 4 million earnout shares or units, subject to stock-price thresholds over five years.
- The post-combination structure was expected to be an Up-C, with the public company expected to own approximately 60% of OpCo units and control Nerdy. The filing does not provide Nerdy’s historical revenue, profit, cash flow, debt, or liquidity figures.
- The SPAC had a 24-month period from the October 9, 2020 IPO close to complete a business combination. Its trust held approximately $450.0 million at year-end, before potential redemptions and transaction costs. A $15.75 million deferred underwriting fee was payable only if a combination closed.
- The SPAC described a TPG forward purchase commitment of at least $50 million, while additional forward purchases of up to $100 million were not obligatory. Funding availability, redemptions, and closing conditions could affect transaction cash and completion.
- Management provided no operating guidance for Nerdy in this 10-K. The SPAC stated that it expected to pursue the proposed combination, but emphasized that closing could not be assured. In February 2021, the Sponsor also committed to provide loans if needed for specified obligations through April 1, 2022.
Risks, contingencies, and unusual items
- Completion depended on shareholder and Nerdy-member approvals and other conditions; the agreement could be terminated, including if the transaction was not completed within 180 days after signing.
- Shareholder redemptions could reduce cash available or prevent the transaction from meeting minimum-cash conditions. If the SPAC failed to complete a combination within 24 months, public shares were generally subject to redemption from trust, while warrants would expire worthless.
- The Sponsor’s trust-account indemnity may not be fully collectible: the company had not verified the Sponsor’s ability to pay and said its assets were believed to consist primarily of company securities.
- Potential conflicts include TPG’s and insiders’ other investment activities, competing acquisition opportunities, founder-share voting influence, and related-party administrative payments of $50,000 per month.
- COVID-19, market volatility, financing availability, diligence limitations, transaction dilution, and the risks of combining with a single operating business were identified as material uncertainties.
- KPMG issued an unqualified opinion on the SPAC’s financial statements. Management concluded disclosure controls were effective; the filing did not include management’s internal-control effectiveness assessment or an auditor attestation, citing applicable transition relief.
Investor facts to verify
- Review Nerdy’s audited historical financial statements and the transaction’s pro forma financial information in the later proxy statement/prospectus; they are not included here.
- Confirm final redemption levels, closing cash, debt adjustments, transaction expenses, and whether the $50 million forward purchase and optional additional financing were funded.
- Check final share and warrant dilution, including PIPE shares, founder-share forfeitures, earnouts, warrants, and the Up-C ownership and tax-receivable arrangements.
- Verify the status of required approvals, closing conditions, and any amendments or termination of the business combination agreement.
- Reconcile the filing’s reported working capital with the much smaller cash balance available outside the trust, and assess the sufficiency of operating funds before closing.