United States securities and exchange commission logo
August 11, 2020
James Graf
Chief Executive Officer
Graf Industrial Corp.
118 Vintage Park Blvd.
Houston, TX 77070
Re: Graf Industrial
Corp.
Preliminary Merger
Proxy Statement on Schedule 14A
Filed July 15, 2020
File No. 001-38703
Dear Mr. Graf:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Merger Proxy Statement filed July 15, 2020
Unaudited Pro Forma Condensed Combined Financial Information
Description of the Business Combination, page 83
1. Disclose the exchange
ratio for the shares of Graf common stock to be issued for a
common share of
Velodyne.
2. Disclose how the
550,176 shares of Velodyne Series B-1 Preferred Stock will be treated in
the merger.
3. Disclose how the
Velodyne Series A, Series B, and Series B-1 convertible preferred stock
will be treated in the
recapitalization/merger.
4. Disclose how you will
account for the additional 2,000,000 shares of common stock that
may be issued and the
total fair value of such shares assuming the maximum number are
issued.
James Graf
FirstName LastNameJames Graf
Graf Industrial Corp.
Comapany
August 11, NameGraf
2020 Industrial Corp.
August
Page 2 11, 2020 Page 2
FirstName LastName
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2020, page
85
5. Present in a separate column following the Velodyne historical balance
sheet data pro
forma adjustments to give effect to:
the equity issuance described in Note 3;
the repurchase of up to $50 million in common stock from Velodyne
equity holders;
any contemplated conversions of preferred stock to common; and
the write-off of $3.0 million of previously capitalized
transaction costs.
This pro forma adjustment column should be followed by a subtotal
column to
present Velodyne on a pro forma basis.
6. Present in a separate column following the Graf historical balance
sheet data pro forma
adjustments to give effect to:
the redemption of 12,921,275 shares of Graf s common stock in
April 2020 for
approximately $132.1 million;
the reclassification of common stock subject to possible
redemption to permanent
equity;
the reclassification of cash and cash equivalents held in the Graf
Trust Account; and
the private placement of 15,000,000 shares of common stock at
$10.00 per share
pursuant to the PIPE Investment.
This pro forma adjustment column should be followed by a subtotal
column to present
Graf balance sheet information on a pro forma basis.
Notes to Unaudited Pro Forma Condensed Combined Financial Information
1. Basis of Presentation, page 89
7. We note for accounting purposes, the Business Combination will be
treated as the
equivalent of Velodyne issuing stock for the net assets of the
Company, accompanied by a
recapitalization. In light of this conclusion, it is unclear why you
refer to the merger as a
business combination or disclose why Velodyne has been determined to
be the accounting
acquirer. Please revise your disclosures on page 89 and elsewhere
throughout your filing
so that they are consistent with your accounting conclusion.
4. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information,
page 90
8. We note on page F-64 that upon a sale event, the Company will
recognize the cumulative
stock-based compensation expense for the outstanding RSAs and RSUs.
Please tell us if
the contemplated merger with Graf will result in the recognition of
the cumulative stock-
based compensation expense. If so, please fully disclose including the
anticipated impact
on your results of operations and on the contemplated merger with
Graf.
Comparative Share Information, page 93
9. Limit the presentation of book value per share data to the most recent
balance sheet date.
James Graf
FirstName LastNameJames Graf
Graf Industrial Corp.
Comapany
August 11, NameGraf
2020 Industrial Corp.
August
Page 3 11, 2020 Page 3
FirstName LastName
10. Disclose pro forma book value per share for Velodyne and Graf as of
the most recent
balance sheet date.
11. Disclose the equivalent pro forma per share amounts pursuant to Item
14(b)(10) of
Schedule 14A. For guidance refer to Instruction 2 to paragraphs
(b)(8), (b)(9) and (b)(10).
Redemption Rights, page 99
12. You disclose that any request for redemption may be withdrawn until
the deadline for
submitting redemption requests and thereafter, with your consent,
until the closing of the
business combination. Please explain why you are permitting the
withdrawal of
redemption rights after the shareholder vote, particularly in light of
the fact that the level
of redemptions will determine whether you meet the condition to the
business
combination that the funds in the Trust Account together with the PIPE
investment total at
least $200 million. In addition, explain how this is consistent with
your highlighted
statement that "The requirement for physical or electronic delivery
prior to the Special
Meeting ensures that a redeeming stockholder s election to redeem is
irrevocable once
the Business Combination is approved."
Certain Projected Financial Information, page 133
13. Please disclose the bases for the material assumptions underlying your
projections,
including the revenue growth rates, Adjusted EBITDA margins, and cash
flows.
Satisfaction of 80% Test, page 135
14. We note that, under your certificate of incorporation, if your
business combination is with
a company that is affiliated with your sponsor, officers or directors,
you, or a committee
of independent directors, will obtain an opinion from an independent
accounting firm or
an investment banking firm that your initial business combination is
fair to the company
from a financial point of view. We further note that your director,
Sabrina McKee,
recused herself from any discussion and voting on a transaction with
Velodyne due to the
fact that she is a director of global strategy at Ford Motor Company
which is a minority
shareholder and customer of Velodyne. Please discuss why you did not
obtain an opinion
from an independent investment banking firm due to Ms. McKee's
relationship with
Velodyne.
Velodyne's Business
Company Overview, page 180
15. Please disclose the basis for the statement that Velodyne is "the
global leader in lidar
technology."
James Graf
FirstName LastNameJames Graf
Graf Industrial Corp.
Comapany
August 11, NameGraf
2020 Industrial Corp.
August
Page 4 11, 2020 Page 4
FirstName LastName
Velodyne's Management's Discussion and Analysis
Results of Operations
Comparison of the Three Months Ended March 31, 2019 and 2020
Revenue, page 211
16. Please quantify in MD&A each material factor identified in your
discussion as having
a significant impact on your results of operations. For an example,
quantify how much of
your revenues declined because of reduced unit sales, how much they
declined due to
changing product mix and how much due to lower pricing. You should
replace vague
terms such as primarily in favor of specific quantifications.
17. We note that you experienced a material decline in sales in your North
American market
during the year ended December 31, 2019, a trend that appears to
pre-date the impact of
the COVID-19 pandemic on your operations. We also note that you made a
strategic
decision in 2018 to selectively reduce prices in order to boost
volume. Please discuss why
your sales volume has declined across reporting periods. Address in
MD&A all known
trends or uncertainties regarding your sales volumes and other factors
that you expect will
have a material favorable or unfavorable impact on net sales or
revenues or income from
continuing operations.
Cost of Revenues and Gross Margin, page 212
18. We note that you primarily attribute the material decline in your
margins along with
quarterly revenues to decreased average selling prices reflecting your
strategic decision,
made in 2018, to reduce prices on higher volume products so as to
drive additional
adoption of your technology in multiple end markets. Explain for us
how price reductions
implemented in 2018 effected your comparative revenues and margins in
the quarters
ended March 31, 2019 and 2020. If applicable, describe the extent to
which you continue
to reduce selling price as a market strategy and your assessment of
your strategy's
prospects in light of your declining sales volumes.
General
19. In your response letter, please provide your analysis of the exemption
from registration
you are relying upon for the issuance of Graf common stock in the
business combination
transaction.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
James Graf
Graf Industrial Corp.
August 11, 2020
Page 5
You may contact Joseph Kempf, Staff Accountant, at (202) 551-3352 or
Robert
Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Michael C.
Foland, Attorney-Advisor, at (202) 551-6711 or Kathleen Krebs, Special Counsel,
at (202) 551-
3350 with any other questions.
Sincerely,
FirstName LastNameJames Graf
Division of
Corporation Finance
Comapany NameGraf Industrial Corp.
Office of Technology
August 11, 2020 Page 5
cc: Joel L. Rubinstein
FirstName LastName