This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" has been amended and restated to give effect to the restatement of
our financial statements, as more fully described in Note 2 to our financial
statements entitled "Restatement of Previously Issued Financial Statements". For
further detail regarding the restatement, see "Explanatory Note" and "Item 9A.
Controls and Procedures."
References to "we", "us", "our" or the "Company" are to Bluescape Opportunities
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 statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (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.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on July 9, 2020 for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar Business Combination with
one or more businesses that we have not yet identified. Although we are not
limited to a particular industry or geographic region for purposes of
consummating a Business Combination, we intend to focus on businesses that have
sound fundamentals but that have the opportunity for substantial performance
enhancement through a combination of sharpening of strategic focus, more
disciplined capital allocation, capital structure improvements, rationalization
of cost structure, and enhanced management skillset. Our sponsor is Bluescape
Sponsor LLC, a Delaware limited liability company.
We consummated our Initial Public Offering on October 30, 2020 and our
underwriters partially executed their Over-Allotment Option on November 12,
2020. We also entered into Forward Purchase Agreements simultaneously with the
closing of the Initial Public Offering with our Sponsor and with the Zimmer
Entity which provide for the purchase of additional forward purchase units in
private placements to occur concurrently with the closing of our initial
Business Combination. If we are unable to complete an initial Business
Combination by October 27, 2022, we will: (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but no more
than ten business days thereafter subject to lawfully available funds therefor,
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 the Company's franchise and income 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 shareholders'
rights as shareholders (including the right to receive further liquidating
distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the
Company's remaining shareholders and the Company's board of directors, dissolve
and liquidate, subject in each case to the Company's obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law.
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Results of Operations
Our entire activity from July 9, 2020 (inception) through December 31, 2020
related to our formation and execution of our Initial Public Offering, which was
consummated on October 27, 2020. Since such offering, our activity has been
limited to the search for a prospective initial Business Combination. We will
not generate any operating revenues until the closing and completion of our
Initial Business Combination. However, 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. Additionally,
we recognize non-cash gains and losses within other income (expense) related to
changes in recurring fair value measurement of our warrant liabilities at each
reporting period.
For the period from July 9, 2020 (inception) through December 31, 2020, we had a
net loss of $40,585,602, which consisted of $102,519 in investment income from
the Trust Account, offset by $171,497 in combined formation and general and
administrative costs, $2,006,624 of offering costs, $2,921,000 of stock
compensation expense related to the private placement warrants, and a non-cash
loss from the change in fair value of warrant liabilities of $35,589,000.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $2.7 million in our operating bank
account for working capital.
Our liquidity needs up to September 30, 2020 have been satisfied through a
$25,000 contribution from our Sponsor in exchange for the issuance of the
Founder Shares to our Sponsor and the advancement of funds by our Sponsor of
$298,067 under a promissory note (the "Note") to us to cover for offering costs
in connection with the Initial Public Offering. We fully repaid the Note on
October 30, 2020. Subsequent to the consummation of the Initial Public Offering
and the Private Placement Warrants, our liquidity has been satisfied through the
proceeds from the consummation of the Private Placement not held in the Trust
Account of approximately $2.0 million as well as an expense reimbursement of
approximately $1.2 million. In addition, in order to finance transaction costs
in connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor, or certain of our officers and directors may, but are not obligated to,
provide the Company Working Capital Loans. As of December 31, 2020, there were
no amounts outstanding under any Working Capital Loans.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable and deferred underwriting commissions), to complete our initial
Business Combination. We may withdraw income earned on investments (if any) to
pay our income taxes, if any. To the extent that our equity or debt is used, in
whole or in part, as consideration to complete our 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.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or certain of our officers and directors to meet our 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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Related Party Transactions
Founder Shares
On July 13, 2020, our sponsor paid $25,000, to cover certain expenses on our
behalf in consideration of 20,125,000 Class B ordinary shares, par value $0.0001
(the "Founder Shares"). On October 23, 2020, our sponsor surrendered 3,593,750
shares, resulting in an aggregate of 16,531,250 Class B ordinary shares
outstanding. As a result of the underwriters' election to partially exercise
their over-allotment option, 1,343,750 additional Founder Shares were forfeited,
resulting 15,187,500 Founder Shares outstanding as of December 31, 2020. Prior
to the initial investment in the company of $25,000 by the sponsor, the company
had no assets, tangible or intangible. The per share price of the founder shares
was determined by dividing the amount contributed to the company by the number
of founder shares issued. The Founder Shares are identical to the Class A
ordinary shares included in the Units sold in the Initial Public Offering except
that the Founder Shares automatically convert into shares of Class A ordinary
shares at the time of our Initial Business Combination on a one-for-one basis,
subject to adjustments and certain transfer restrictions, as described in more
detail below. On October 27, 2020, the Sponsor transferred 15,000 Founder Shares
to each of our independent director nominees, at the original per share purchase
price. The Founder Shares will be worthless if we do not complete an initial
Business Combination.
Our Sponsor has agreed, subject to limited exceptions, not to transfer, assign
or sell any of its Founder Shares until the earlier to occur of: (A) one year
after the completion of a Business Combination or (B) the date on which the
Company completes a liquidation, merger, stock exchange, reorganization or
similar transaction after a Business Combination that results in all of the
Company's shareholders having the right to exchange their ordinary shares for
cash, securities or other property. Notwithstanding the foregoing, if the
closing price of the Class A ordinary shares equals or exceeds $12.00 per share
(as adjusted for share sub-division, share dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-day
trading period commencing at least 150 days after a Business Combination, the
Founder Shares will be released from the lockup.
Private Placement Warrants
Simultaneous with the closing of our Initial Public Offering, we consummated the
Private Placement of 13,500,000 warrants at a price of $1.00 per Private
Placement Warrant in a private placement to our Sponsor and an investment fund
managed by Zimmer Partners LP. Subsequently, on November 12, 2020, the Company
received notice of the underwriters' election to partially exercise the
Over-Allotment option and we consummated the private placement of an additional
650,000 warrants, at a purchase price of $1.00 per private placement warrant, to
our Sponsor and the Zimmer Entity for an aggregate of 14,150,000 warrants. Each
whole Private Placement Warrant is exercisable for one whole share of our
Class A ordinary shares at a price of $11.50 per share. A portion of the
purchase price of the Private Placement Warrants was added to the proceeds from
the Initial Public Offering held in the Trust Account. If the Initial Business
Combination is not completed by October 27, 2022, the proceeds from the sale of
the Private Placement Warrants held in the Trust Account will be used to fund
the redemption of the Public Shares (subject to the requirements of applicable
law) and the Private Placement Warrants will expire worthless. The Private
Placement Warrants will be non-redeemable and exercisable on a cashless basis so
long as they are held by the Sponsor or its permitted transferees.
Our Sponsor and our officers and directors agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants until 30 days after the completion of the initial Business Combination.
Forward Purchase Agreements
We also entered into a forward purchase agreement simultaneously with the
closing of our Initial Public Offering with the Sponsor providing for the
purchase of up to 3,000,000 forward purchase units, and with the Zimmer Entity
providing for the purchase of up to 27,000,000 forward purchase units, at a
purchase price of $10.00 per unit, in private placements to occur concurrently
with the closing of our initial Business Combination. Participation by the
Forward Purchase Agreement providers is discretionary. However, if requested by
the Company, and approved by Zimmer Partners' investment committee, the proceeds
from the sale of forward purchase securities may be used as part of the
consideration to the sellers in the initial Business Combination, expenses in
connection with the initial Business Combination or for working capital in the
post-transaction company. If we do not consummate an initial Business
Combination within 24 months from the closing of our Initial Public Offering,
the private placement warrants will expire worthless.
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Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any, will be entitled to
registration rights (in the case of the Founder Shares, only after conversion of
such shares to Class A ordinary shares) pursuant to a registration and
shareholder rights agreement. These holders will be entitled to certain demand
and "piggyback" registration rights. 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 the
termination of the applicable lock-up period for the securities to be
registered. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Pursuant to the forward purchase agreements, we have agreed to use reasonable
best efforts (i) to file within 30 days after the closing of a Business
Combination a registration statement with the SEC for a secondary offering of
the forward purchase shares and the forward purchase warrants (and underlying
Class A ordinary shares), (ii) to cause such registration statement to be
declared effective promptly thereafter but in no event later than sixty (60)
days after the initial filing, (iii) to maintain the effectiveness of such
registration statement until the earliest of (A) the date on which the Sponsor,
the Zimmer Entity or their respective assignees cease to hold the securities
covered thereby and (B) the date all of the securities covered thereby can be
sold publicly without restriction or limitation under Rule 144 under the
Securities Act and (iv) after such registration statement is declared effective,
cause us to conduct firm commitment underwritten offerings, subject to certain
limitations. In addition, the forward purchase agreements provide that these
holders will have certain "piggy-back" registration rights to include their
securities in other registration statements filed by the Company.
Related Party Loans and Advances
Our Sponsor had agreed to loan us an aggregate of $300,000 to cover expenses
related to the Initial Public Offering pursuant to the terms of a related party
promissory note (the "Note"). This loan was non-interest bearing
and payable upon the completion of the Initial Public Offering. We fully repaid
the Note on October 30, 2020.
Commitments and Contingencies
Underwriting Agreement
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$11.5 million in the aggregate paid upon the closing of the Initial Public
Offering and an incremental $0.7 million paid upon the Over-Allotment Option
exercise (for an aggregate of approximately $12.2 million). In addition, $0.35
per unit, or $21.3 million in the aggregate will be payable to the underwriter
for deferred underwriting commissions (inclusive of approximately $1.1 million
of incremental deferred commissions related to the Over-Allotment Exercise). The
deferred underwriting commissions will become payable to the underwriter 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.
Administrative Support Agreement
We entered into an agreement, commencing on October 30, 2020 through the earlier
of our consummation of a Business Combination and our liquidation, to reimburse
our Sponsor a total of $10,000 per month for office space, secretarial and
administrative services.
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Risks and Uncertainties
On January 30, 2020, the World Health Organization announced a global health
emergency because of a new strain of coronavirus (the "COVID-19 outbreak"). In
March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the
rapid increase in exposure globally. The full impact of the COVID-19 outbreak
continues to evolve. The impact of the COVID-19 outbreak on the Company's
results of operations, financial position and cash flows will depend on future
developments, including the duration and spread of the outbreak and related
advisories and restrictions. These developments and the impact of the COVID-19
outbreak on the financial markets and the overall economy are highly uncertain
and cannot be predicted. If the financial markets and/or the overall economy are
impacted for an extended period, the Company's results of operations, financial
position and cash flows may be materially adversely affected. Additionally, the
Company's ability to complete an Initial Business Combination may be materially
adversely affected due to significant governmental measures being implemented to
contain the COVID-19 outbreak or treat its impact, including travel
restrictions, the shutdown of businesses and quarantines, among others, which
may limit the Company's ability to have meetings with potential investors or
affect the ability of a potential target company's personnel, vendors and
service providers to negotiate and consummate an Initial Business Combination in
a timely manner. The Company's ability to consummate an Initial Business
Combination may also be dependent on the ability to raise additional equity and
debt financing, which may be impacted by the COVID-19 outbreak and the resulting
market downturn.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States 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 financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. The
Company has identified the following as its critical accounting policies:
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Net Income (Loss) per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." Net income (loss) per share is computed by
dividing net income (loss) by the weighted-average number of ordinary shares
outstanding during the period. The Company applies the two-class method in
calculating earnings per share. Remeasurement adjustments associated with the
redeemable shares of Class ordinary shares are excluded from earnings per share
as the redemption value approximates fair value. The Company has not considered
the effect of the warrants sold in the initial Public Offering and Private
Placement in the calculation of diluted income (loss) per share, since the
inclusion of such warrants would be anti-dilutive.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from
Equity. Under this guidance, shares of Class A ordinary shares subject to
mandatory redemption (if any) are classified as liability instruments and are
measured at fair value. Shares of 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. Our Class A ordinary shares features certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, as of
December 31, 2020, 60,750,000 Class A ordinary shares subject to possible
redemption is presented, at redemption value, as temporary equity, outside of
the shareholders' equity section of our condensed balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of redeemable common stock to equal the redemption value at
the end of each reporting period. Such changes are reflected in additional
paid-in capital, or in the absence of additional paid-in capital, in accumulated
deficit.
Warrant Liabilities
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to the
Company's own common stock, among other conditions for equity classification.
This assessment is conducted at the time of warrant issuance and as of each
subsequent quarterly period end date while the warrants are outstanding.
In accordance with Accounting Standards Codification ("ASC") 815-40, Derivatives
and Hedging-Contracts in Entity's Own Equity ("ASC 815"), the warrants do not
meet the criteria for equity classification and must be recorded as liabilities.
The Public Warrants and Private Placement Warrants are not indexed to the
Company's own stock and therefore are accounted for as liabilities and, as the
warrants meet the definition of a derivative as contemplated in ASC 815, the
Warrants are measured at fair value at inception and at each reporting date in
accordance with ASC 820, Fair Value Measurement, with changes in fair value
recognized in the Statement of Operations in the period of change.
Our warrant agreements, dated as of October 27, 2020, between the Company and
Continental Stock Transfer & Trust Company, a New York corporation, as warrant
agent (the "Warrant Agreement"), include settlement terms and provision related
to certain tender offers following a business combination. In consideration of
the guidance in Accounting Standards Codification ("ASC") 815-40, Derivatives
and Hedging - Contracts in Entity's Own Equity, we have concluded that such
provisions in the Warrant Agreement that relate to certain tender or exchange
offers precludes the Warrants from being accounted for as components of equity.
As the Warrants meet the definition of a derivative as contemplated in ASC 815,
the Warrants are recorded as derivative liabilities on the balance sheet and
measured at fair value at each reporting date in accordance with ASC 820, Fair
Value Measurement, with changes in fair value recognized in the statement of
operations in the period of change. The Public Warrants and Private Placement
Warrants are not indexed to the Company's own stock and therefore are accounted
for as liabilities and, as the warrants meet the definition of a derivative as
contemplated in ASC 815 Fair Value Measurement, with changes in fair value
recognized in the Statement of Operations in the period of change.
Offering Costs
Offering costs consisted of legal, accounting, and other costs incurred that
were directly related to the Initial Public Offering. Offering costs are
allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with warrant liabilities are expensed as
incurred, presented as non-operating expenses in the statement of operations.
Offering costs associated with issuance of the Class A ordinary shares were
charged against the carrying value of the Class A ordinary shares subject to
possible redemption upon the completion of the Initial Public Offering. The
Company classifies deferred underwriting commissions as non-current liabilities
as their liquidation is not reasonably expected to require the use of current
assets or require the creation of current liabilities. As of December 31, 2020,
the Company had recognized aggregate offering costs of $33,103,735, consisting
of $12,150,000 of underwriting fees, $21,262,500 of deferred underwriting fees,
$906,235 of other offering costs, and an expense reimbursement of $1,215,000, of
which $2,006,624 was immediately expensed, and remaining was allocated to Class
A ordinary shares, reducing the carrying amount of such shares.
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Off-Balance Sheet Arrangements
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
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.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements.
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