Business context and reporting period
Filing identity differs from the request metadata: the supplied filing is Trebia Acquisition Corp.’s Form 10-Q for the quarter ended June 30, 2020, not a System1, Inc. filing. Trebia was a newly formed blank-check company (SPAC), incorporated February 11, 2020, seeking a business combination. It had not begun operating activities or identified a completed combination in this filing. Its stated areas of interest included financial services, technology, software, data, analytics and services.
The company completed its IPO on June 19, 2020, selling 51.75 million units at $10 each, including full exercise of the underwriters’ over-allotment option. Each unit included one Class A share and one-third of a warrant. The reporting period began at inception, so there is no prior-year comparable period presented.
Financial results and position
| Metric | Three months ended June 30, 2020 | Inception through June 30, 2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Formation and operating costs | $31,882 | $36,886 as displayed in the statement of operations |
| Net loss | $31,882 | $36,866 |
| Basic and diluted loss per share | $0.00 loss, rounded | $0.00 loss, rounded |
The filing’s inception-period operating-cost figure ($36,886) differs from its reported net loss ($36,866) and from the $36,866 loss in the cash flow statement and MD&A; the filing text does not reconcile the difference. There is no operating margin or meaningful revenue trend to assess.
At June 30, 2020, total assets were $519.3 million, including $517.5 million in the Trust Account and $1.74 million of cash outside it. The notes state that Trust Account assets were held in cash. Current liabilities were $551,485; total liabilities were $18.66 million, including an $18.11 million deferred underwriting fee payable if a business combination closes. Shareholders’ equity was $5.00 million. Separately, $495.60 million attributable to redeemable Class A shares was presented as temporary equity. The company reported no long-term debt.
Cash used in operating activities from inception was $44,716. Financing activities provided $519.28 million, while $517.5 million was placed in the Trust Account. Cash outside the Trust Account at period-end was $1.74 million. No cash flow comparison with a prior-year period is provided.
Changes, outlook, risks and contingencies
- The IPO and private placement raised $517.5 million and $12.35 million, respectively. Total transaction costs were $29.24 million, including $10.35 million of underwriting fees, $18.11 million deferred underwriting fees and $778,589 of other offering costs.
- The company had until June 19, 2022 to complete a business combination. If it failed, it was required to redeem public shares from the Trust Account, subject to the filing’s terms; warrants could expire worthless.
- A forward purchase agreement provides for Cannae Holdings to buy 7.5 million shares and 2.5 million warrants for $75 million alongside a business combination. The obligation does not depend on public-share redemptions. Founder-share conversion and potential additional financing may dilute public shareholders.
- Management expected continued costs to identify and evaluate a target, conduct diligence and complete a transaction, and stated that it could not assure a successful combination. It did not provide earnings or revenue guidance.
- Management said COVID-19 could adversely affect target identification, but the impact could not be determined. The filing also identifies possible negative interest rates on Trust Account investments as a risk to redemption value.
- The company reported no legal proceedings, off-balance-sheet arrangements or material subsequent events. Management concluded disclosure controls were effective as of June 30, 2020.
Important facts for investors to verify
- Confirm the issuer: this filing is for Trebia Acquisition Corp., not System1, Inc.
- Review the inception-period operating-cost/net-loss discrepancy in the financial statements.
- Assess the $1.74 million of unrestricted cash against expected transaction-search and public-company costs, and review any subsequent funding.
- Evaluate redemption rights, the June 2022 combination deadline, deferred underwriting fees and the potential effects of the $75 million forward purchase and founder-share conversion on dilution.
- Review the COVID-19 and negative-interest-rate disclosures and any later developments affecting the Trust Account or ability to complete a business combination.