References to "we", "us", "our" or the "Company" are to BowX Acquisition Corp.,
except where the context requires otherwise. The following discussion should be
read in conjunction with our financial statements and related notes thereto
included elsewhere in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statementswithin the
meaning of Section 27A of the Securities Act, and Section 21E of the Exchange
Act. We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are
subject to known and unknown risks, uncertainties and assumptions about us that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other U.S. Securities
and Exchange Commission ("SEC") filings.
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In this Annual Report of BowX Acquisition Corp. on Form 10-K for the fiscal year
ended December 31, 2020, we are restating (i) our audited financial statements
as of, and for the period from May 19, 2020 (inception) through December 31,
2020, (ii) our unaudited interim financial statements as of, and for the periods
ended September 30, 2020.
The restatement results from our prior accounting for our Private Placement
Warrants issued in connection with the Private Placements in August 2020 which
had been classified as a component of equity on the premise that the instruments
were indexed to our own stock and were eligible to be accounted for as equity
instruments instead of classifying them as derivative liabilities.
On April 12, 2021, the SEC Staff issued a public statement entitled "Staff
Statement on Accounting and Reporting Considerations for Warrants issued by
Special Purpose Acquisition Companies. In the SEC Staff Statement, the SEC Staff
expressed its view that certain terms and conditions common to SPAC warrants may
require the warrants to be classified as liabilities on the SPAC's balance sheet
as opposed to equity. Since issuance on August 7, 2020, our warrants were
accounted for as equity within our balance sheets, and after discussion and
evaluation, including with our independent auditors, we have concluded that our
Private Placement Warrants should be presented as liabilities with subsequent
fair value remeasurement.
Therefore, we, in consultation with out Audit Committee, concluded that our
previously issued Financial Statements as of and for the period from May 19,
2020 (inception) through December 31, 2020, as of and for the three months ended
September 30, 2020 and the period from May 19, 2020 (inception) through
September 30, 2020 (collectively, the "Affected Periods") should be restated
because of a misapplication in the guidance around accounting for our Private
Placement Warrants and should no longer be relied upon.
Historically, the Private Placement Warrants were reflected as a component of
equity as opposed to liabilities on the balance sheets and the statements of
operations did not include the subsequent non-cash changes in estimated fair
value of the Warrants, based on our application of Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 815-40,
Derivatives and Hedging, Contracts in Entity's Own Equity ("ASC 815-40). The
views expressed in the SEC Staff Statement were not consistent with our
historical interpretation of the specific provisions within its warrant
agreement and the Company's application of ASC 815-40 to the warrant agreement.
We reassessed our accounting for Private Placement Warrants issued in August
2020, in light of the SEC Staff's published views. Based on this reassessment,
we determined that the Private Placement Warrants should be classified as
liabilities measured at fair value upon issuance, with subsequent changes in
fair value reported in our Statement of Operations each reporting period.
Our accounting for the Private Placement Warrants as components of equity
instead of as derivative liabilities did not have any effect on our previously
reported revenue, operating expenses, operating income, cash flows or cash.
In connection with the restatement, our management reassessed the effectiveness
of its disclosure controls and procedures for the periods affected by the
restatement. As a result of that reassessment, we determined that its disclosure
controls and procedures for such periods were not effective with respect to the
classification of our Private Placement Warrants as components of equity instead
of as derivative liabilities. For more information, see Item 9A included in this
Annual Report on Form 10-K/A.
We have not amended our previously filed Quarterly Reports on Form 10-Q for the
period affected by the restatement. The financial information that has been
previously filed or otherwise reported for these periods is superseded by the
information in this Annual Report on Form 10-K, and the financial statements and
related financial information contained in such previously filed reports should
no longer be relied upon.
The restatement is more fully described in Note 2 of the notes to the financial
statements included herein.
Overview
We are a blank check company incorporated as a Delaware corporation on May 19,
2020. We were formed for the purpose of for the purpose of effecting an initial
business combination with a target business. Although we are not limited to a
particular industry or sector for purposes of consummating a Business
Combination, we initially intend to focus our search on target businesses in the
technology, media and telecommunications industries. We are an emerging growth
company and, as such, we are subject to all of the risks associated with
emerging growth companies.
Our sponsor is BowX Sponsor, LLC, a Delaware limited liability company of which
Vivek Ranadivé, the Company's Chairman and Co-Chief Executive Officer, and
Murray Rode, our Co-Chief Executive Officer and Chief Financial Officer, are the
managing members (the "Sponsor"). The registration statement for the IPO was
declared effective on August 4, 2020. On August 7, 2020, we consummated our IPO
of 42,000,000 units (the "Units" and, with respect to the Class A common stock
included in the Units being offered, the "Public Shares") at $10.00 per Unit,
generating gross proceeds of $420.0 million, and incurring offering costs of
approximately $23.6 million, inclusive of $14.7 million in deferred underwriting
commissions. On August 10, 2020, the underwriter exercised the over-allotment
option to purchase an additional of 6,300,000 Units at the IPO price at $10.00
per Unit and we consummated the sale of such Units on August 13, 2020,
generating additional gross proceeds of $63.0 million, and incurring
additional offering costs of approximately $3.5 million, inclusive of
approximately $2.2 million in deferred underwriting commissions.
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Simultaneously with the closing of the IPO, we consummated the private placement
("Private Placement") of 6,933,333 warrants (each, a "Private Placement Warrant"
and collectively, the "Private Placement Warrants") at a price of $1.50 per
Private Placement Warrant in a private placement to certain of the initial
stockholders and certain funds and accounts managed by subsidiaries of
BlackRock, Inc (the "Private Placement Warrants Purchasers"), generating gross
proceeds of $10.4 million and incurring offering costs of approximately $8,000.
In connection with the consummation of the sale of additional Units pursuant to
the underwriter's over-allotment option on August 13, 2020, we sold an
additional 840,000 Private Placement Warrants to the Private Placement Warrants
Purchasers, generating additional gross proceeds of approximately $1.3 million,
and incurring offering costs of approximately $1,000.
Upon the closing of the IPO and the Private Placement (including the exercise of
the over-allotment) $483.0 million ($10.00 per Unit) of the net proceeds of the
sale of the Units in the IPO and the Private Placement were placed in a trust
account located in the United States with Continental Stock Transfer & Trust
Company acting as trustee, and held as cash or invested only in U.S. "government
securities," within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less, or in money market funds
meeting certain conditions under the Investment Company Act, which invest only
in direct U.S. government treasury obligations, as determined by us, until the
earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below.
We will only have 24 months from the closing of the IPO, or August 7, 2022, to
complete our initial Business Combination (the "Combination Period"). If we do
not complete a Business Combination within this period of time (and stockholders
do not approve an amendment to the amended and restated certificate of
incorporation to extend this date), we will (i) cease all operations except for
the purpose of winding up; (ii) as promptly as reasonably possible but not more
than ten business days thereafter, redeem the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account including interest earned on the funds held in the Trust
Account and not previously released to us to pay its taxes (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish Public
Stockholders' rights as stockholders (including the right to receive further
liquidating distributions, if any); and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders
and our board of directors, dissolve and liquidate, subject in the case of
clauses (ii) and (iii) to our obligations under Delaware law to provide for
claims of creditors and the requirements of other applicable law. Our Sponsor
and the other holders of the Founder Shares (as defined below), excluding funds
and accounts managed by subsidiaries of BlackRock, Inc (the "initial
stockholders"), have entered into agreements with us, pursuant to which they
have waived their rights to participate in any redemption with respect to their
Founder Shares in the event we do not complete a Business Combination within the
required time period; provided, however, if the initial stockholders or any of
our officers, directors or affiliates acquire Public Shares in or after the
Initial Public Offering, they will be entitled to a pro rata share of the Trust
Account upon our redemption or liquidation in the event we do not complete a
Business Combination within the required time period. In the event of such
distribution, it is possible that the per share value in the Trust Account will
be less than the price per Unit sold in the IPO.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $0.9 million in cash and working
capital of approximately $1.1 million.
Through December 31, 2020, our liquidity needs were satisfied through a payment
of $25,000 from our Chairman and Co-Chief Executive Officer to cover for certain
offering costs in exchange for the issuance of the Founder Shares (as defined
below), and the loan under the Note (as defined below) of approximately $150,000
to us to cover for offering costs in connection with the IPO. Subsequent to the
consummation of the IPO on August 7, 2020, the liquidity needs have been
satisfied through the remaining balance of the Note and advancement of funds of
approximately $45,000 from a related party, for total outstanding balance of
Note and advances of approximately $195,000, and the net proceeds from the
consummation of the Private Placement not held in the Trust Account. We fully
repaid the Note on August 7, 2020. In addition, in order to finance transaction
costs in connection with a Business Combination, our officers, directors and
initial stockholders may, but are not obligated to, provide us Working Capital
Loans (as defined below). To date, there were no amounts outstanding under any
Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination.
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Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Results of Operations
Since inception, our entire activity has been related to our formation, IPO,
which was consummated on August 7, 2020, and since the IPO, our activity has
been limited to the search for a prospective Initial Business Combination, and
we will not be generating any operating revenues until the closing and
completion of our Initial Business Combination. We expect to incur increased
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
For the period from May 19, 2020 (inception) through December 31, 2020, we had
net loss of approximately $4.8 million, which consisted of approximately
$220,000 in general and administrative expenses, approximately $122,000 in
franchise tax expense, $22,000 of income tax expense and $4.7 million change in
fair value of warrant liabilities, offset by approximately $227,000 of net gain
from investments held in Trust Account.
As a result of the restatement described in Note 2 of the notes to the financial
statements included herein, we classify the warrants issued in connection with
our Private Placement as liabilities at their fair value and adjust the warrant
instruments to fair value at each reporting period. These liabilities are
subject to re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statement of operations.
Related Party Transactions
Founder Shares
On May 26, 2020, we issued 10,062,500 shares of Class B common stock to our
sponsor in exchange for a payment of $25,000 for offering costs made by our
Sponsor on behalf of our company (the "Founder Shares"). In July 2020, the
sponsor transferred certain Founder Shares to our directors and officers as well
as to certain third parties. On August 4, 2020, we effected a stock dividend of
0.2 shares of Class B common stock for each share of Class B common stock
outstanding, resulting in an aggregate of 12,075,000 Founder Shares outstanding.
All shares and associated amounts have been retroactively restated to reflect
the share dividend. On August 13, 2020, the underwriters exercised their 15%
over-allotment option in full; thus, the Founder Shares were no longer subject
to forfeiture.
The initial stockholders have agreed, subject to limited exceptions, not to
transfer, assign or sell any of the Founder Shares until the earlier to occur
of: (A) one year after the completion of the initial Business Combination and
(B) subsequent to the initial Business Combination, (x) if the last reported
sale price of the Class A common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the initial Business Combination, or (y) the
date on which we complete a liquidation, merger, capital stock exchange,
reorganization or other similar transaction that results in all of our
stockholders having the right to exchange their shares of common stock for cash,
securities or other property.
Private Placement Warrants
Simultaneously with the closing of the IPO, the Private Placement Warrants
Purchasers purchased an aggregate of 6,933,333 Private Placement Warrants at a
price of $1.50 per Private Placement Warrants, generating gross proceeds of
$10.4 million in the Private Placement, and incurring offering costs of
approximately $8,000. In connection with the sale of Units pursuant to the
over-allotment option on August 13, 2020, we sold an additional 840,000 Private
Placement Warrants to the Private Placement Warrants Purchasers, generating
additional gross proceeds of approximately $1.3 million, and incurring offering
costs of approximately $1,000.
Each whole Private Placement Warrant is exercisable for one whole share of
Class A common stock at a price of $11.50 per share, subject to adjustment. A
portion of the proceeds from the sale of the Private Placement Warrants was
added to the proceeds from the IPO to be held in the Trust Account. If we do not
complete a Business Combination within the Combination Period, the Private
Placement Warrants will expire worthless. The Private Placement Warrants will be
non-redeemable for cash (subject to certain exceptions) and exercisable on a
cashless basis so long as they are held by the initial purchasers or their
permitted transferees.
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The Private Placement Warrants (and the Class A common stock issuable upon
exercise of the Private Placement Warrants) will not be transferable, assignable
or salable until 30 days after the completion of the initial Business
Combination (subject to certain exceptions).
Related Party Loans
On May 26, 2020, our Chairman and Co-Chief Executive Officer agreed to loan us
up to an aggregate of $150,000 pursuant to an unsecured promissory note (the
"Note") to cover expenses related to the IPO. This loan was payable without
interest upon the completion of the IPO. We borrowed up to the full amount of
the Note and received additional advances of approximately $45,000 advancement
of funds from such officer, for a total outstanding loan of approximately
$195,000. We fully repaid the Note and the advances to such officer on August 7,
2020.
Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial Business Combination, the initial
stockholders, officers and directors and their affiliates may, but are not
obligated to, loan us funds as may be required (the "Working Capital Loans"). Up
to $1.5 million of such Working Capital Loans may be convertible into warrants
of the post-Business Combination entity at a price of $1.50 per warrant at the
option of the lender. Such warrants would be identical to the Private Placement
Warrants. Except for the foregoing, the terms of such loans, if any, have not
been determined and no written agreements exist with respect to such loans to
date. We did not have any borrowings under the Working Capital Loans as of
December 31, 2020.
Contractual Obligations
Registration Rights
The initial stockholders and holders of the Private Placement Warrants are
entitled to registration rights pursuant to a registration rights agreement. The
initial stockholders and holders of the Private Placement Warrants will be
entitled to make up to three demands, excluding short form registration demands,
that we register such securities for sale under the Securities Act. In addition,
these holders will have "piggy-back" registration rights to include their
securities in other registration statements filed by us. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriter a 45-day option to purchase up to 6,300,000
additional Units to cover any over-allotments, at the IPO price less the
underwriting discounts and commissions. On August 10, 2020, the underwriter
fully exercised the over-allotment option.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$8.4 million in the aggregate, paid upon the closing of the IPO. In addition,
$0.35 per unit, or $14.7 million in the aggregate will be payable to the
underwriter for deferred underwriting commissions. The deferred fee will become
payable to the underwriter from the amounts held in the Trust Account solely in
the event that we complete a Business Combination, subject to the terms of the
underwriting agreement.
In connection with the consummation of the sale of Units pursuant to the
over-allotment option on August 13, 2020, the underwriter received an aggregate
of $1.26 million in underwriting fees and additional deferred underwriting
commissions of approximately $2.2 million.
Critical Accounting Policies and Estimates
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. The investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in net gain from investments held
in Trust Account in the accompanying statement of operations. The estimated fair
values of investments held in the Trust Account are determined using available
market information.
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Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within our control) are classified as temporary equity. At all other times,
shares of Class A common stock are classified as stockholders' equity. Our
Class A common stock features certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, at December 31, 2020, 44,911,184 shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of the balance sheet.
Net Loss Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net income per share is computed by dividing net income
(loss) applicable to common stockholders by the weighted average number of
shares of common stock outstanding for the period. We have not considered the
effect of the warrants sold in the IPO and Private Placement to purchase an
aggregate of 23,873,333 shares of Class A common stock in the calculation of
diluted earnings per share, since their inclusion would be anti-dilutive under
the treasury stock method. As a result, diluted earnings per share is the same
as basic earnings per share for the period.
Our statement of operations includes a presentation of income per share for
common stock subject to redemption in a manner similar
to the two-class method of income per share. Net income per share, basic and
diluted for Class A common stock is calculated by dividing the investment income
earned on the Trust Account of approximately $227,000, net of applicable income
and franchise taxes of approximately $144,000 for the period from May 19, 2020
(inception) through December 31, 2020 by the weighted average number of shares
of Class A common stock outstanding. Net loss per share, basic and diluted for
Class B common stock for the period from May 19, 2020 (inception) through
December 31, 2020 is calculated by dividing the net loss of approximately
$4.8 million, less net income attributable to Class A common stock of
approximately $83,000, resulting in a net loss of approximately $4.9 million, by
the weighted average number of Class B common stock outstanding.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
We issued 7,733,333 common stock warrants in connection with our Private
Placement which are recognized as derivative liabilities in accordance with ASC
815-40. Accordingly, we recognize the warrant instruments as liabilities at fair
value and adjust the instruments to fair value at each reporting period. The
liabilities are subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The fair value of warrants issued in connection with the Private
Placement has been estimated using Monte-Carlo simulations at August 7, 2020 and
September 30, 2020 and fair value of the Public Warrants at December 31, 2020.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our IPO or until we are no longer an "emerging
growth company," whichever is earlier.
Recent Accounting Pronouncements
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
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