References to the "Company," "our," "us" or "we" refer to Fifth Wall Acquisition
Corp. III. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
financial statements and the notes thereto contained elsewhere in this report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Overview
Fifth Wall Acquisition Corp. III (the "Company") was incorporated as a Cayman
Islands exempted company on February 19, 2021. The Company was formed for the
purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). The company is an early stage and
emerging growth company and, as such, the Company is subject to all of the risk
associated with early stage and emerging growth companies.
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As of December 31, 2021, the Company had not commenced any operations. All
activity for the period from February 19, 2021 (inception) through December 31,
2021 relates to the Company's formation and the initial public offering (the
"Initial Public Offering") described below and seeking a Business Combination
following the Initial Public Offering. The Company will not generate any
operating revenues until after the completion of its initial Business
Combination, at the earliest. The Company will generate non- operating income in
the form of interest income from the proceeds derived from the Initial Public
Offering. The Company has selected December 31 as its fiscal year end.
The Company's sponsor is Fifth Wall Acquisition Sponsor III LLC, a Cayman
Islands exempted limited company (the "Sponsor"). The registration statement for
the Company's Initial Public Offering was declared effective on May 24, 2021. On
May 27, 2021, the Company consummated its Initial Public Offering of 27,500,000
Class A ordinary shares (the "Public Shares"), including 2,500,000 Public Shares
as a result of the underwriters' partial exercise of their over-allotment
option, at an offering price of $10.00 per Public Share, generating gross
proceeds of $275.0 million, and incurring offering costs of approximately $16.1
million, of which approximately $9.6 million was for deferred underwriting
commissions.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the private placement ("Private Placement") of 907,000 Class A
ordinary shares (the "Private Placement Shares"), at a price of $10.00 per
Private Placement Share to the Sponsor, generating gross proceeds of
approximately $9.1 million.
Upon the closing of the Initial Public Offering, management agreed that an
amount equal to at least $10.00 per Public Share sold in the Initial Public
Offering, including the proceeds from the sale of the Private Placement Shares,
are held in a trust account ("Trust Account"), located in the United States,
with Continental Stock Transfer & Trust Company acting as trustee, and is
invested only in United States "government securities" within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a- 7 promulgated under the
Investment Company Act which invest only in direct U.S. government treasury
obligations, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account as described below.
The Company's management has broad discretion with respect to the specific
application of the net proceeds of the Initial Public Offering and the sale of
Private Placement Shares, although substantially all of the net proceeds are
intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business
Combination successfully. The Company must complete one or more initial Business
Combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (excluding the amount of deferred underwriting
commissions and taxes payable on the interest earned on the Trust Account) at
the time of the signing of the agreement to enter into the initial Business
Combination. However, the Company will only complete a Business Combination if
the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in
the target sufficient for it not to be required to register as an investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act").
The Company will provide the holders of Public Shares (the "Public
Shareholders"), with the opportunity to redeem all or a portion of their Public
Shares upon the completion of a Business Combination either (i) in connection
with a shareholder meeting called to approve the Business Combination or (ii) by
means of a tender offer. The decision as to whether the Company will seek
shareholder approval of a Business Combination or conduct a tender offer will be
made by the Company, solely in its discretion. The Public Shareholders will be
entitled to redeem their Public Shares for a pro rata portion of the amount then
in the Trust Account (initially anticipated to be $10.00 per Public Share, plus
any pro rata interest earned on the funds held in the Trust Account and not
previously released to the Company to pay income taxes). The per-share amount to
be distributed to Public Shareholders who redeem their Public Shares will not be
reduced by the deferred underwriting commissions the Company will pay to the
underwriters.
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The Public Shares were classified as temporary equity in accordance with the
Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." The
Company will proceed with a Business Combination if the Company has net tangible
assets of at least $5,000,001 upon such consummation of a Business Combination
and, only if a majority of the ordinary shares, represented in person or by
proxy and entitled to vote thereon, voted at a shareholder meeting are voted in
favor of the Business Combination. If a shareholder vote is not required by law
and the Company does not decide to hold a shareholder vote for business or other
reasons, the Company will, pursuant to the amended and restated memorandum and
articles of association which the Company adopted upon the consummation of the
Initial Public Offering (the "Amended and Restated Memorandum and Articles of
Association"), conduct the redemptions pursuant to the tender offer rules of the
U.S. Securities and Exchange Commission ("SEC") and file tender offer documents
with the SEC prior to completing a Business Combination. If, however,
shareholder approval of the transactions is required by law, or the Company
decides to obtain shareholder approval for business or other reasons, the
Company will offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules.
Additionally, each Public Shareholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed transaction or
vote at all. If the Company seeks shareholder approval in connection with a
Business Combination, the initial shareholders (as defined below) agreed to vote
their Founder Shares and any Public Shares purchased during or after the Initial
Public Offering in favor of a Business Combination. In addition, the initial
shareholders agreed to waive their redemption rights with respect to their
Founder Shares, Private Placement Shares and Public Shares in connection with
the completion of a Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of its
Business Combination and does not conduct redemptions in connection with its
Business Combination pursuant to the tender offer rules, the Amended and
Restated Memorandum and Articles of Association provides that a Public
Shareholder, together with any affiliate of such shareholder or any other person
with whom such shareholder is acting in concert or as a "group" (as defined
under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), will be restricted from redeeming its shares with respect to
more than an aggregate of 15% of the Class A ordinary shares sold in the Initial
Public Offering, without the prior consent of the Company.
The Company's Sponsor, officers and directors (the "initial shareholders")
agreed not to propose an amendment to the Amended and Restated Memorandum and
Articles of Association that would modify the substance or timing of the
Company's obligation to provide holders of its Public Shares the right to have
their shares redeemed in connection with a Business Combination or to redeem
100% of the Company's Public Shares if the Company does not complete its
Business Combination within 24 months from the closing of the Initial Public
Offering, or May 27, 2023 (the "Combination Period"), or with respect to any
other provision relating to the rights of Public Shareholders, unless the
Company provides the Public Shareholders with the opportunity to redeem their
Class A ordinary shares in conjunction with any such amendment.
If the Company has not completed a Business Combination within the Combination
Period, the Company 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 the Company to pay its taxes that were paid by the
Company or are payable by the Company, if any (less up to $100,000 of interest
to pay dissolution expenses), divided by the number of the then-outstanding
Public Shares, which redemption will completely extinguish Public Shareholders'
rights as shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and the
board of directors, liquidate and dissolve, subject in the case of clauses (i)
and (iii) to the Company's obligations under Cayman Islands law to provide for
claims of creditors and the requirements of other applicable law.
The initial shareholders agreed to waive their liquidation rights with respect
to the Founder Shares and Private Placement Shares held by them if the Company
fails to complete a Business Combination within the Combination Period. However,
if the initial shareholders acquire Public Shares in or after the Initial Public
Offering, they will be entitled to liquidating distributions from the Trust
Account with respect to such Public Shares if the Company fails to complete a
Business Combination within the Combination Period. The underwriters agreed to
waive their rights to their deferred underwriting commission held in the Trust
Account in the event the Company does not complete a Business Combination within
the Combination Period and, in such event, such amounts will be included with
the other funds held in the Trust Account that will be available to fund the
redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the assets remaining available for
distribution (including Trust Account assets) will be only $10.00 per share
initially held in the Trust Account. In order to protect the amounts held in the
Trust Account, the Sponsor agreed to be liable to the Company if and to the
extent any claims by a third party for services rendered or products sold to the
Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust
Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual
amount per Public Share
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held in the Trust Account as of the date of the liquidation of the Trust Account
if less than $10.00 per Public Share due to reductions in the value of the trust
assets. This liability will not apply with respect to any claims by a third
party who executed a waiver of any right, title, interest or claim of any kind
in or to any monies held in the Trust Account or to any claims under the
Company's indemnity of the underwriters of the Initial Public Offering against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
Moreover, in the event that an executed waiver is deemed to be unenforceable
against a third party, the Sponsor will not be responsible to the extent of any
liability for such third-party claims. The Company will seek to reduce the
possibility that the Sponsor will have to indemnify the Trust Account due to
claims of creditors by endeavoring to have all vendors, service providers
(excluding the Company's independent registered public accounting firm),
prospective target businesses or other entities with which the Company does
business, execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to monies held in the Trust Account.
Results of Operations
Our entire activity from February 19, 2021 (inception) through December 31, 2021
was in preparation for our formation and the Initial Public Offering and,
thereafter, seeking an initial Business Combination. We will not be generating
any operating revenues until the closing and completion of our initial Business
Combination.
For the period from February 19, 2021 (inception) through December 31, 2021, we
had a net loss of approximately $1,101,000, which consisted of approximately
$1,039,000 of general and administrative expenses, and $74,000 in general and
administrative expenses - related party, partially offset by approximately
$12,000 in income from investments held in Trust Account.
Liquidity and Capital Resources
As of December 31, 2021, the Company had approximately $738,000 in its operating
bank account and working capital of approximately $1.6 million.
The Company's liquidity needs through December 31, 2021 have been satisfied
through a payment of $25,000 by the Sponsor to cover for certain expenses in
exchange for the issuance of the Founder Shares, the loan of approximately
$109,000 from the Sponsor pursuant to the Note, and the proceeds from the
consummation of the Private Placement not held in the Trust Account. The Company
fully repaid the Note on May 28, 2021. In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors
may, but are not obligated to, provide the Company Working Capital Loans. As of
December 31, 2021, there were no amounts outstanding under any Working Capital
Loan.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity from the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors to
meet its needs through the earlier of the consummation of a Business Combination
or one year from this filing. Over this time period, the Company 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.
Contractual Obligations
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Shares and Private Placement
Shares that may be issued upon conversion of Working Capital Loans, were
entitled to registration rights pursuant to a registration and shareholder
rights agreement signed upon consummation of the Initial Public Offering. The
holders of these securities were entitled to make up to three demands, excluding
short form demands, that the Company registered such securities. In addition,
the holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the Company's completion of its
Business Combination. However, the registration and shareholder rights agreement
provides that the Company will not permit any registration statement filed under
the Securities Act to become effective until termination of the applicable
lock-up period, which occurs (i) in the case of the Founder Shares, in
accordance with the letter agreement the Company's initial shareholders entered
into and (ii) in the case of the Private Placement Shares, 30 days after the
completion of the Company's Business Combination. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.
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Underwriting Agreement
The Company granted the underwriters a 45-day option from the final prospectus
relating to the Initial Public Offering to purchase up to 3,750,000 additional
Public Shares to cover over-allotments, if any, at the Initial Public Offering
price less the underwriting discounts and commissions. On May 27, 2021, the
underwriters partially exercised the over-allotment option to purchase an
additional 2,500,000 Class A ordinary shares.
The underwriters were entitled to an underwriting discount of $0.20 per Public
Share, or $5.5 million in the aggregate, paid upon the closing of the Initial
Public Offering. In addition, $0.35 per Public Share, or approximately $9.6
million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Investments Held in Trust Account
The Company's portfolio of investments 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 and generally have a readily
determinable fair value, or a combination thereof. When the Company's
investments held in the Trust Account are comprised of U.S. government
securities, the investments are classified as trading securities. When the
Company's investments held in the Trust Account are comprised of money market
funds, the investments are recognized at fair value. Trading securities and
investments in money market funds are presented on the balance sheets 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 income on investments
held in the 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.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible
redemption in accordance with the guidance in ASC Topic 480 "Distinguishing
Liabilities from Equity." Class A ordinary shares subject to mandatory
redemption (if any) are classified as liability instruments and are measured at
fair value. Conditionally redeemable Class A ordinary shares (including Class A
ordinary shares 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 the Company's control) are classified as temporary
equity. At all other times, Class A ordinary shares are classified as
shareholders' equity. The Company's Class A ordinary shares feature certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, 27,500,000
Class A ordinary shares subject to possible redemption are presented at
redemption value as temporary equity, outside of the shareholders' equity
section of the Company's balance sheet.
The Company recognizes changes in redemption value immediately as they occur and
adjust the carrying value of redeemable ordinary shares to equal the redemption
value at the end of each reporting period. This method would view the end of the
reporting period as if it were also the redemption date for the security.
Effective with the closing of the Initial Public Offering (including the
exercise of the over-allotment option), the Company recognized the accretion
from initial book value to redemption amount, which resulted in charges against
additional paid-in capital (to the extent available) and accumulated deficit.
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Net Loss per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of shares, which
are referred to as Class A ordinary shares and Class B ordinary shares. Income
and losses are shared pro rata between the two classes of shares. Net income
(loss) per ordinary share is calculated by dividing the net income (loss) by the
weighted average ordinary shares outstanding for the respective period.
Accretion associated with the redeemable Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value.
Recent accounting standards
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. The ASU also removes certain settlement conditions
that are required for equity-linked contracts to qualify for the derivative
scope exception, and it simplifies the diluted earnings per share calculation in
certain areas. The Company adopted ASU 2020-06 on February 19, 2021 (inception).
Adoption of the ASU did not impact the Company's financial position, results of
operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2021, 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
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be 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 such, our financial statements may not be
comparable to companies that comply with public company effective dates.
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 Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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