| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to TCV Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to TCV Acquisition Holdings, L.P., as the holder of the founder shares, and TCV Acquisition Holdings 2, L.P., as the holder of the Private Placement shares, as applicable. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special 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 that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering (the “Initial Public Offering”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on January 27, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”). We intend to effectuate our initial business combination using cash from the proceeds of our Initial Public Offering and the sale of the private placement shares, our shares, debt or a combination of cash, equity and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activity relates to the Company’s formation, its initial public offering (the “Initial Public Offering”) and looking for a business combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We expect that we will 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 in connection with searching for and completing a Business Combination.
For the three months ended September 30, 2021, we had net losses of $255,918, which consisted primarily of insurance expense and professional fees offset by dividend and interest income. For the period from January 27, 2021 (inception) through September 30, 2021, we had net losses of $496,736, which consisted of formation and operating costs offset by dividend and interest income.
Liquidity and Capital Resources
As of September 30, 2021, we had cash of approximately $748.7 thousand. Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class B ordinary shares by the Sponsor and loans from our Sponsor.
On April 16, 2021, we consummated our Initial Public Offering of 40,000,000 shares, which included the full exercise by the underwriters of the over-allotment option to purchase an additional 5,000,000 shares, at $10.00 per share, generating gross proceeds of $400.0 million. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of an aggregate of 1,100,000 private placement shares to our Sponsor at a price of $10.00 per private placement share, generating gross proceeds of $11.0 million.
As of September 30, 2021, a total of $400.0 million was placed in the Trust Account, and we had approximately $748.7 thousand of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred approximately $23.1 million in transaction costs, including $8.0 million of underwriting fees, $14.0 million of deferred underwriting fees and approximately $1.1 million of other offering costs.
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 (if applicable) and deferred underwriting commissions) to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the post-Business Combination entity, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily for paying existing accounts payable, ongoing professional fees, 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..
In order to fund working capital deficiencies or 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, loan us funds as may be required (the “Working Capital Loans”). If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a 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. Up to $2.0 million of such loans may be convertible into shares of the post-Business Combination entity at a price of $10.00 per share at the option of the lender.
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 estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating and consummating a 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 Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our 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 Business Combination. If we are unable to complete our 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 Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
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 balance sheet. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The underwriters are entitled to a deferred fee of $0.35 per share, or $14.0 million in the aggregate. The deferred fee will become payable to the underwriters 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.
Pursuant to a registration and shareholder rights agreement, the holders of the Class B ordinary shares, Private Placement shares and any shares that may be issued upon conversion of Working Capital Loans will be entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. There were no critical accounting policies that contain significant judgment or estimates. Refer to Note 2 for the Company’s accounting policies.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officers and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officers and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
None.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus from our Initial Public Offering filed with the SEC on April 13, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
On April 16, 2021, we consummated our Initial Public Offering of 40,000,000 shares, which included the full exercise by the underwriters of the over-allotment option to purchase an additional 5,000,000 shares, at $10.00 per share, generating gross proceeds of $400 million. Citigroup Global Markets Inc., Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC acted as book-running managers. The securities sold in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333- 254505). The SEC declared the registration statement effective on April 13, 2021.
Simultaneously with the consummation of the Initial Public Offering we consummated a private placement of 1,100,000 private placement shares to our sponsor at a price of $10.00 per share, generating total proceeds of $11.0 million. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The private placement shares, which were purchased by TCV Acquisition Holdings 2, L.P., are substantially similar to the Shares, except that if held by TCV Acquisition Holdings 2, L.P. or its permitted transferees they will be subject to transfer restrictions until 30 days following the consummation of the Company’s initial business combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering including the full exercise of the option to purchase additional shares and the private placement shares, $400.0 million was placed in the Trust Account.
We paid a total of $8.0 million in underwriting discounts and commissions and approximately $1.1 million for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $14.0 million in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
| ITEM 5. | OTHER INFORMATION. |
None.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| No. | Description of Exhibit |
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| 3.1 | |
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| 4.1 | |
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| 10.1 | |
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| 10.2 | |
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| 10.3 | |
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| 10.6 | |
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| 10.7 | |
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| 31.1* | |
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| 31.2* | |
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| 31.3* | |
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| 32.1* | |
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| 32.2* | |
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| 32.3* | |
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| 101.INS* | XBRL Instance Document |
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| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.SCH* | XBRL Taxonomy Extension Schema Document |
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| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document |
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| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on April 19, 2021 (File No. 001-40327) and incorporated by reference herein. |
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | TCV ACQUISITION CORP. |
| | |
| Date: November 15, 2021 | | /s/ Jon Reynolds, Jr. |
| | Name: | Jon Reynolds, Jr. |
| | Title: | Co-Chief Executive Office |
| | | (Principal Executive Officer) |
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| Date: November 15, 2021 | | /s/ Christopher Marshall |
| | Name: | Christopher Marshall |
| | Title: | Co-Chief Executive Office |
| | | (Principal Executive Officer) |
| | | |
| Date: November 15, 2021 | | /s/ Erez Elisha |
| | Name: | Erez Elisha |
| | Title: | Chief Financial Officer |
| | | (Principal Financial and Principal Accounting Officer) |
