PERSHING SQUARE TONTINE HOLDINGS, LTD. References in this report (the "Quarterly Report") to "we", "us", "our" or the
"Company" refer to
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, and including but not
limited to statements regarding the Company or the Company's management team's
expectations, hopes, beliefs, intentions or strategies regarding the future,
included in this Quarterly Report that address activities, events or
developments that the Company expects or anticipates will or may occur in the
future are forward-looking statements. These forward-looking statements involve
a number of risks, uncertainties (some of which are beyond the Company's
control) or other assumptions that may cause actual results or performance to be
materially different from those expressed or implied by these forward-looking
statements. Information concerning these and other factors can be found in the
Company's filings with the
Overview
We are a blank check company incorporated as a
The issuance of additional shares of our stock in a business combination,
including the
• significantly dilute the equity interest of investors;
• subordinate the rights of holders of our common stock if preferred
stock is issued with rights senior to those afforded our common stock;
• cause a change in control if a substantial number of shares of our
common stock is issued, which may affect, among other things, our
ability to use net operating loss carry forwards, if any, and could
result in the resignation or removal of our present directors and
officers;
• have the effect of delaying or preventing a change of control of us by
diluting the stock ownership or voting rights of a person seeking to
obtain control of us; and
• adversely affect prevailing market prices for our shares of Class A
Common Stock and/or Redeemable Warrants.
Similarly, if we issue debt instruments or otherwise incur significant indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after
our Initial Business Combination are insufficient to repay our debt
obligations;
• acceleration of our obligations to repay the indebtedness even if we
make all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any,
if the debt security is payable on demand;
• our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
• our inability to pay dividends on our common stock;
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• using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available to pay
expenses, make capital expenditures and acquisitions, and fund other
general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes
in our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in government
regulation; limitations on our ability to borrow additional amounts
for expenses, capital expenditures, acquisitions, debt service
requirements, and execution of our strategy; and
• other purposes and other disadvantages compared to our competitors who
have less debt.
We expect to continue to incur costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our Initial Business Combination will be successful.
Recent Developments
On
On
Certain Observations
During the first quarter of 2022, we have continued to work on identifying a target for an Initial Business Combination. For the three months endedMarch 31, 2022 , we recorded net loss of$18,509,528 , which was primarily due to a non-cash GAAP loss of$18,552,829 related to the change in valuations of our Public Warrants, Sponsor Warrants, Director Warrants ("Private Placement Warrants", collectively with the Public Warrants, the "Outstanding Warrants") and the Forward Purchase Agreement and Director Forward Purchase Agreement (collectively, the "FPA"), each of which was previously accounted for as equity on our financial statements throughDecember 31, 2020 . The change in accounting was initiated following a statement by the Staff of theSecurities & Exchange Commission on accounting for SPAC warrants. Following theSEC's public statement, management along with the audit committee reconsidered accounting issues related to these instruments and restated our financial statements atDecember 31, 2020 to account for our Outstanding Warrants andFPA as derivative liabilities. For the three months endedMarch 31, 2022 , this accounting treatment has required us to record a non-cash loss which we believe will not have any effect on our ability to consummate an initial business combination. Changes in our stock price could lead to large fluctuations of fair value as a result of this accounting treatment. The carrying amounts of our Outstanding Warrant liabilities andFPA liabilities/assets will fluctuate based, in part on the changes in the trading price of our stock with the changes in such carrying amounts being reported as non-cash GAAP gains or losses in our statement of operations. Non-cash GAAP gains or losses due to changes in the fair value of such instruments have no impact on our cash balances - including the more than$4 billion we hold in a trust account at J.P. Morgan - and the minimum Committed FPA of$1 billion , nor do we expect the change in accounting to have any impact on our ability to consummate an Initial Business Combination.
Results of Operations
All activities throughMarch 31, 2022 were related to the Company's organizational activities, preparation for the Company's initial public offering, identifying a target company for a business combination, and activities in connection with the Proposed IBC and its subsequent cancellation. We will not generate any operating revenues until after completion of our Initial Business Combination. We generate non-operating income in the form of interest and dividends on cash and cash equivalents, and marketable securities held in the trust account. We incur ongoing expenses as a result of being a public company for legal, financial reporting, accounting and auditing compliance, as well as for due diligence and Initial Business Combination related transaction expenses. For the three months endedMarch 31, 2022 , we had net loss of$18,509,528 , which consisted of (i) non-cash loss related to change in the fair value of Forward Purchase Agreement liabilities/assets of$6,810,860 , (ii) non-cash loss related to change in the fair value of Outstanding Warrant liabilities of$11,741,969 , (iii) income earned on marketable securities held in the trust account of$1,266,754 , (iv) interest and dividends earned on marketable securities held in the operating account of$1,908 , and (v) income tax provision of$166,435 , offset by legal, insurance, research, franchise tax and other expenses totaling$1,058,926 . For the three months endedMarch 31, 2021 , we had net income of$336,996,381 , which consisted of (i) non-cash gain related to change in the fair value of Forward Purchase Agreement liabilities of$268,621,120 , (ii) non-cash gain related to change in the fair value of Outstanding Warrant liabilities of$72,992,581 , (iii) income earned on marketable securities held in the trust account of$898,278 , and (iv) interest and dividends earned on marketable securities held in the operating account of$638 , (v) cancelled IBC related fees of$4,705,878 and (vi) income tax provision of$188,639 , offset by legal, insurance, research, franchise tax and other expenses totaling$621,719 . 23
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Table of Contents Non-GAAP Financial Measures As noted above, the Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. As such, we believe the amount of committed capital available for an Initial Business Combination is critical to our success as a blank check company. See Liquidity and Capital Resources below for further information on our unrestricted cash balances and funds held in the trust account as ofMarch 31, 2022 . In addition, we report adjusted net income, which is a non-GAAP financial measure that is not required by, or presented in accordance with, GAAP. Management uses this non-GAAP measure to evaluate results as it reduces the volatility of operations due to the accounting for our warrants and forward purchase agreements, which are more fully described in Note 2 of the Notes to Unaudited Condensed Financial Statements included herein, and which do not have an impact on the funds held in the trust account or committed capital available for an Initial Business Combination. We believe this information is useful to investors for these reasons. This non-GAAP measure should not be considered a substitute for the most directly comparable GAAP measures, which are reconciled below. Further, this measure has limitations as an analytical tool, and when assessing our operating performance, you should not consider this measure in isolation or as a substitute for GAAP measures. We may calculate or present this non-GAAP financial measure differently than other companies who report measures with the same or similar names, and as a result, the non-GAAP measure we report may not be comparable.
Adjusted net income/(loss) represents our net income/(loss) excluding the change
in fair value of forward purchase agreement liabilities/assets and the change in
fair value of Outstanding Warrant liabilities, which are
non-cash
items. As of
For the Three For the Three
Months Ended Months Ended
March 31, 2022 March 31, 2021
Net income/(loss) $ (18,509,528 ) $ 336,996,381
Less:
Change in fair value of Forward Purchase
Agreement liabilities/assets (6,810,860 ) 268,621,120
Change in fair value of Outstanding Warrant
liabilities (11,741,969 ) 72,992,581
Adjusted net income/(loss) $ 43,301 $ (4,617,320 ) Liquidity and Capital Resources
Our liquidity needs had been satisfied prior to the consummation of the initial
public offering through a capital contribution of
On
Following the initial public offering and the private placements of Sponsor
Warrants and Director Warrants, a total of
As of
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We intend to use substantially all of the funds held in the trust account, including any amounts representing interest and dividends earned on the trust account (less taxes payable and deferred underwriting fees), and the proceeds from the sale of the Forward Purchase Units to complete an Initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the Initial Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions, and pursue our growth strategies.
In order to fund working capital deficiencies or finance transaction costs in connection with an Initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be needed. If we complete the Initial Business Combination, we would repay such loaned amounts. In the event that the Initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our Initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our Initial Business Combination or because we become obligated to redeem a significant number of the shares of our Public Shares upon completion of our Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Initial Business Combination. If we are unable to complete our Initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our Initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Contractual Obligations
We do not have any long-term debt, capital lease obligations or operating lease
obligations as of
The underwriters are entitled to a deferred fee of$0.28 per Unit, or$56,250,000 in the aggregate payable only upon the completion of our initial business combination. The aggregate deferred underwriting fees includes (i) the deferral of any underwriting fees, other than the retail selling concessions, in excess of$30,000,000 (a deferral of$12,500,000 ), plus (ii) a 2.0% rate applied to the gross offering proceeds, subject to a$56,250,000 cap on the amount of such aggregate deferred underwriting fees. If the amount of proceeds from the trust account paid in connection with the redemption rights of Public Stockholders, together with the amount of any capital raised in private placements in connection with the Initial Business Combination from investors other than Sponsor or its affiliates (the "Net Redemptions"), results in us having less than$2,000,000,000 of cash available upon consummation of the Initial Business Combination, only 25% of the aggregate deferred underwriting fees will be payable. If such amount of cash available is$2,000,000,000 or greater, 50% of the aggregate deferred underwriting fees will be payable, and the remaining 50% of the aggregate deferred underwriting fees will be subject to a pro-rata reduction based on the amount of Net Redemptions as a percentage of the total public proceeds of the initial public offering. The deferred underwriting fees will be waived by the underwriters solely in the event that we do not complete a business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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." The Company's conditionally redeemable Class A Common Stock features
certain redemption rights that are considered to be outside of its control and
subject to the occurrence of uncertain future events. Accordingly, at
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Outstanding Warrants and FPA Liabilities/Assets
We account for our Outstanding Warrants andFPA in accordance with the guidance contained in ASC 815-40, under which the Outstanding Warrants andFPA do not meet the criteria for equity treatment and must be recorded as derivative liabilities or derivative assets. Accordingly, we classify the Outstanding Warrants andFPA as liabilities or assets with changes in fair value reflected on the Company's condensed statements of operations at each reporting period. The fair value of the Public Warrants was initially measured using a modified Black-Scholes pricing model and subsequently measured at the closing quoted market price. The Private Placement Warrants andFPA are valued using a modified Black-Scholes pricing model. See Note 7 of the Notes to unaudited condensed financial statements included herein for further information on the significant inputs to the models utilized to determine the fair values of the Outstanding Warrants andFPA liabilities/assets.
Net Income/(Loss) per Common Share
We apply the two-class method of calculating earnings per share. Net income/(loss) per common share, basic and diluted, for Class A Common Stock subject to possible redemption is calculated by dividing the allocable income earned on the Trust Account, net of applicable income taxes, by the weighted-average number of Class A Common Stock subject to possible redemption outstanding for the period. Net income/(loss) per share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing the net income/(loss), adjusted for income/(loss) attributable to Class A Common Stock subject to possible redemption, by the weighted-average number of Class B non-redeemable common stock outstanding for the period.
Off-Balance
Sheet Arrangements
As ofMarch 31, 2022 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Recent Accounting Pronouncements
InAugust 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. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning afterDecember 15, 2023 , including interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2020-06 effective as ofJanuary 1, 2021 . The adoption of ASU 2020-06 did not have an impact on the Company's unaudited condensed financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on the Company's unaudited condensed financial statements.
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