United States securities and exchange commission logo
July 16, 2021
Adam Kriger
Chief Executive Officer
ACON S2 Acquisition Corp.
1133 Connecticut Avenue NW, Ste. 700
Washington, DC 20036
Re: ACON S2 Acquisition
Corp.
Registration
statement on Form S-4
Filed June 21, 2021
File No. 333-257232
Dear Mr. Kriger:
We have reviewed your registration statement 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 this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Form S-4 filed June 21, 2021
General
1. Please highlight the
risk that the sponsor will benefit from the completion of a business
combination and may be
incentivized to complete an acquisition of a less favorable target
company or on terms
less favorable to shareholders rather than liquidate.
2. Please clarify if the
sponsor and its affiliates can earn a positive rate of return on their
investment, even if
other SPAC shareholders experience a negative rate of return in the
post-business
combination company.
3. Please disclose the
sponsor and its affiliates total potential ownership interest in the
combined company,
assuming exercise and conversion of all securities.
4. Clarify whether recent
common stock trading prices exceed the threshold that would allow
Adam Kriger
FirstName LastNameAdam
ACON S2 Acquisition Corp.Kriger
Comapany
July NameACON S2 Acquisition Corp.
16, 2021
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the company to redeem public warrants. Clearly explain the steps, if
any, the company
will take to notify all shareholders, including beneficial owners,
regarding when the
warrants become eligible for redemption.
5. Disclose the material risks to unaffiliated investors presented by
taking the company
public through a merger rather than an underwritten offering. These
risks could include
the absence of due diligence conducted by an underwriter that would be
subject to liability
for any material misstatements or omissions in a registration
statement.
6. Revise your disclosure to show the potential impact of redemptions on
the per share value
of the shares owned by non-redeeming shareholders by including a
sensitivity analysis
showing a range of redemption scenarios, including minimum, maximum
and interim
redemption levels.
7. Please revise to disclose all possible sources and extent of dilution
that shareholders who
elect not to redeem their shares may experience in connection with the
business
combination. Provide disclosure of the impact of each significant
source of dilution,
including the amount of equity held by founders, convertible
securities, including warrants
retained by redeeming shareholders, at each of the redemption levels
detailed in your
sensitivity analysis, including any needed assumptions.
8. Quantify the value of warrants, based on recent trading prices, that
may be retained by
redeeming stockholders assuming maximum redemptions and identify any
material
resulting risks.
9. It appears that underwriting fees remain constant and are not adjusted
based on
redemptions. Revise your disclosure to disclose the effective
underwriting fee on a
percentage basis for shares at each redemption level presented in your
sensitivity analysis
related to dilution.
10. Please highlight material differences in the terms and price of
securities issued at the time
of the IPO as compared to private placements contemplated at the time
of the business
combination. Disclose if the SPAC s sponsors, directors, officers or
their affiliates will
participate in the private placement.
11. So that shareholders may better understand the consideration to be
received following
consummation of the transactions, please include a table in an
appropriate location of the
prospectus that quantifies in separate columns a range of potential
values shareholders can
expect to receive based on the formula disclosed for the conversion of
each ESS Common
Stock and ESS Preferred Stock. For example, since New ESS Common Stock
will be
issued based on an adjusted equity value with the ESS Preferred Stock
receiving the
consideration calculated on an as-converted basis as set forth in the
allocation schedule,
plus earnout stock pursuant to the terms and conditions of the Merger
Agreement, we
would expect to see disclosure that identifies the dollar value of
such per share values
based on share prices as of the most recent practicable date.
Adam Kriger
FirstName LastNameAdam
ACON S2 Acquisition Corp.Kriger
Comapany
July NameACON S2 Acquisition Corp.
16, 2021
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Interests of STWO Directors and Executive Officers in the Business Combination,
page 4
12. Please revise to quantify the aggregate dollar amount of the
securities held by the sponsor
and its affiliates as of the most recent practicable date. Please
include the current value of
loans extended, fees due, and out-of-pocket expenses for which the
sponsor and its
affiliates are awaiting reimbursement. Provide similar disclosure for
the company s
officers and directors, if material.
Unaudited Pro Forma Condensed Combined Financial Information, page 20
13. We note the tabular disclosure of the pro forma New ESS common stock
issued and
outstanding immediately after the business combination on page 23.
Please clarify or
revise the share numbers disclosed in footnotes (3) and (4) so that
they reconcile to the
ESS Stockholders share number presented in the table.
14. Refer to adjustments (J) and (K) in Note 3 on page 29. Please address
the need to reflect
transaction costs in the pro forma statement of operations pursuant to
Rule 11-
02(a)(i)(6)(B) of Regulation S-X.
15. Refer to footnote 5 on page 32. Please disclose the specific terms and
conditions
associated with the Earnout shares that will result in the shares
being vested.
The Background of the Business Combination, page 101
16. Please elaborate on the business, attributes, due diligence and level
of negotiations with
the 3 companies that you exchanged term draft sheets with.
17. Please identify the consulting firms that provided a written report or
analysis to the STWO
Board and management team.
18. Please identify the second investment bank engaged as placement agents
for the PIPE.
19. Please revise your disclosure in this section to include negotiations
relating to material
terms of the transaction, including, but not limited to, structure,
consideration, proposals
and counter-proposals, and size of PIPE. In your revised disclosure,
please explain the
reasons for the terms, each party's position on the
issues, and how you reached agreement on the final terms.
20. We note your statement the projections were not intended to be used by
investors or
shareholders. Please describe the reasons the projections were
prepared and the purpose
for their inclusion in the registration statement.
Certain ESS Projected Financial Information, page 110
21. We note your disclosure on page 111 that the financial projections
reflect numerous
estimates and assumptions, including estimates and assumptions with
respect to general
business, economic, industry, market, regulatory and financial
conditions, trends and other
Adam Kriger
FirstName LastNameAdam
ACON S2 Acquisition Corp.Kriger
Comapany
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16, 2021
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future events, and various other factors, as well as factors specific
to ESS business.
Please revise to describe such estimates and assumptions with greater
specificity and
quantify where practicable.
22. We note that your projected revenue is $2 million for 2021 and $3.5
billion for
2027. Please explain the basis for the projections beyond year three
and justify the
projections of year-over-year sustained revenue growth rates. The
disclosure relating to
projected revenue of 3.5 billion in 2027 should be substantially
enhanced so that investors
can understand how you derived this value.
23. We note the following disclosure "[n]either ESS nor STWO s
management nor any of
their representatives has made or makes any representation to any
person regarding the
ultimate performance of ESS compared to the information contained in
the projections,
and none of them intends to or undertakes any obligation to update or
otherwise revise the
projections to reflect circumstances existing after the date when made
or to reflect the
occurrence of future events in the event that any or all of the
assumptions underlying the
projections are shown to be in error." Please revise your disclosure
to clarify that you will
update this information to the extent required by law.
24. Please explain why you believe the projections are in line with your
historic operating
trends. If they are not, please explain why the change in trends is
appropriate to make your
assumptions about growth reasonable under the circumstances.
25. Please elaborate on the process you undertook to formulate the
projections and
assumptions, including the parties who participated in the preparation
of the projections,
and how they were used.
U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE REDEMPTION AND THE
BUSINESS COMBINATION, page 129
26. We note your disclosure that it is intended that the Domestication
constitute a
reorganization within the meaning of Section 368(a)(l)(F) of the
U.S. Internal Revenue
Code of 1986, as amended. Please revise your disclosure in this
section to clearly identify
and articulate the opinion being rendered as to the tax consequences
of the Business
Combination and clearly state in both the disclosure and short-form
opinion that the
disclosure in this section is the opinion of counsel. If there is
uncertainty regarding the tax
treatment of the transactions, counsel may issue a "should" or "more
likely than not"
opinion to make clear that the opinion is subject to a degree of
uncertainty, and explain
why it cannot give a firm opinion. Please revise your risk factor
disclosure accordingly.
Please also remove language stating that this section is a
"discussion" or "summary."
Refer to Section III of Staff Legal Bulletin 19.
ESS Management's Discussion and Analysis of Financial Condition and Results of
Operations,
page 191
Adam Kriger
FirstName LastNameAdam
ACON S2 Acquisition Corp.Kriger
Comapany
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16, 2021
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27. Refer to the liquidity discussion on page 198. Please quantify and
more fully disclose and
discuss your long term liquidity requirements and priorities,
including potential changes in
those priorities based on the impact of changes in the amount of cash
available to the post-
combination company based on the amount of cash redemptions. In this
regard we note
your disclosure on page 199 which indicates that you expect your
expenses related to
personnel, manufacturing, research and development, sales and
marketing, and general
and administrative activities to increase. And, we note your
disclosure on page 40 which
indicates you are currently in discussions with a potential joint
venture partner that will
include building manufacturing facilities.
28. Please refer to the disclosure under Common Stock Valuation on page
201. Please
disclose and discuss changes in the estimated fair value of your
common stock during the
periods presented. Please address material differences between the
valuations used to
determine the fair value of your common stock relative to the fair
value implied by the
current merger transaction.
SBE Framework Agreement, page 207
29. Please revise to clarify, if true, that there is no assurance that you
will achieve any portion
of the $300 million in revenue opportunities.
Redemption Rights for Public Shareholders upon Completion of the Business
Combination, page
210
30. We note that certain shareholders agreed to waive their redemption
rights. Please describe
any consideration provided in exchange for this agreement.
Experts, page 243
31. We note ESS was formed in 2011 and the current auditor was engaged in
2020. Please
confirm that ESS did not change auditors during its two most recent
fiscal years or
subsequent interim period; alternatively, please provide the
disclosures required by Item
304 of Regulation S-K, including a letter from the former auditors,
filed as an exhibit to
the registration statement.
Index to Financial Statements, page F-1
32. Please revise the index to the financial statements to remove
redundant items.
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.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Adam Kriger
ACON S2 Acquisition Corp.
July 16, 2021
Page 6
You may contact Mindy Hooker at 202-551-3732 or Kevin Stertzel at
202-551-3723 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Asia Timmons-Pierce at 202-551-3754 or Jay Ingram at 202-551-3397 with
any other
questions.
FirstName LastNameAdam Kriger Sincerely,
Comapany NameACON S2 Acquisition Corp.
Division of
Corporation Finance
July 16, 2021 Page 6 Office of
Manufacturing
FirstName LastName