United States securities and exchange commission logo
October 15, 2021
Paul Danola
President
Trebia Acquisition Corp.
41 Madison Avenue, Suite 2020
New York, NY 10010
Re: Trebia Acquisition
Corp.
Preliminary Proxy
Statement on Schedule 14A
Filed September 16,
2021
File No. 001-39331
Dear Mr. Danola:
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 Proxy Statement on Schedule 14A
General
1. We note that
Shareholder Proposal No. 1 appears to bundle distinct material matters,
namely the business
combination transactions pursuant to which System1, LLC and
Protected.net Group
would become subsidiaries of Trebia. Please provide your analysis
as to why you are not
required to unbundle this proposal and provide shareholders
with separate votes on
these business combination transactions. In your analysis,
please address Rule
14a-4(a)(3) of Regulation 14A and Question 101.02 to Exchange Act
Rule 14a-4(a)(3)
Questions and Answers of General Applicability (Unbundling under
Rule 14a-4(a)(3)
Generally), available on our website.
Cover page
2. Please revise your
cover page to briefly discuss the practical effects and implications of
the Up-C structure. For
example, disclose your voting and economic rights in S1 Holdco
Paul Danola
FirstName LastNamePaul
Trebia Acquisition Corp. Danola
Comapany
October 15,NameTrebia
2021 Acquisition Corp.
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and Protected.
Cautionary Note Regarding Forward-Looking Statements, page 18
3. We note your reliance upon the safe harbor for forward-looking
statement contained in the
Private Securities Litigation Reform Act of 1995. Because the
application of the safe
harbor to your merger is unsettled (due in part to no definitive case
law regarding its
application), please condition your reliance with qualifying language
that the protections
of the safe harbor of the Private Securities Litigation Reform Act of
1995 may not be
available.
Questions and Answers, page 20
4. Please include a question and answer regarding the interests of the
officers, directors, and
affiliates in the business combination.
5. Please include a question and answer regarding the Up-C structure of
the post-
combination entity and the tax receivable agreement.
Summary of the Business Combination Proposal, page 43
6. Please disclose whether the merger between Protected UK and System1 is
a condition
precedent to the completion of the business combination. Furthermore,
please disclose
whether the 80% test would be satisfied absent the acquisition of
Protected UK by
System1.
Tax Receivable Agreement, page 46
7. Please briefly provide the purpose of organizing the post-combination
entity as an Up-C
and the tax advantages it provides to investors.
Summary of Interests of Certain Persons in Connection with Transactions, page
52
8. Please disclose here and add a risk factor that the sponsor may have
been incentivized to
complete an acquisition of a less favorable target company or on terms
less favorable to
shareholders rather than liquidate. Also, 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.
Risk Factors
Risks Related to Trebia and the Business Combination, page 97
9. Please 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.
10. Please add a risk factor that describes any risks or other impacts on
investors related to the
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FirstName LastNamePaul
Trebia Acquisition Corp. Danola
Comapany
October 15,NameTrebia
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exclusive forum provision in the System1 charter documents.
The New S1 Holdco Operating Agreement, page 132
11. Please disclose the economic and voting rights of the holders of both
S1 Holdco Class A
Common Units and S1 Holdco Class B Common Units.
Shareholder Proposal No. 5 - The Non-Binding Governance Proposals
Proposal 5D - the exclusive forum proposal , page 166
12. Please balance your disclosure by describing the potential negative
impacts of the
exclusive forum provision on investors. Also, disclose that there is
uncertainty
surrounding the enforceability of exclusive forum provisions and that
a court may not find
this provision enforceable.
Unaudited Pro Forma Condensed Combined Financial Information, page 178
13. Please provide a detailed analysis supporting your conclusion that the
acquisition method
should be employed in this business combination under ASC 805. In this
regard, we
noted that the Selling Equity Holders will own more than 50% under
either the No
Redemption or Maximum Redemption scenarios. In the case of Maximum
Redemption,
the Trebia Shareholders have a zero ownership in the combined company.
Tell us your
consideration for accounting for this transactions as a reverse
recapitalization. Please
advise.
14. Please confirm that the noncontrolling interest does not contain a
cash redemption
feature. Disclose the terms of this interest in pro forma adjustment
3(j). Tell us the
settlement alternative for the common units. Tell us how you
considered that the Selling
Equity Holders have control over the post-merger company in evaluating
whether this
interest should be classified as temporary equity. We refer you to ASC
480-10-S99-3A .
15. Please supplement your disclosure to show the potential impact of
redemptions on the per
share value of the shares owned by non-redeeming shareholders by
including interim
redemption levels in your sensitivity analysis.
Operating Metrics and Non-GAAP Financial Measures, page 199
16. We note your Non-GAAP measure, Adjusted Revenue, includes the
reconciling item,
Acquisition related adjustments, that represents revenue of your
acquisitions for the
periods prior to the acquisition being completed. In addition, we note
that you include a
revenue adjustment for terminated product lines. Tell us how you
considered that these
adjustments result in a tailored revenue recognition and measurement
methods. We refer
you to Question 100.04 of the Compliance and Disclosure
Interpretations on Non-GAAP
Financial Measures. Similar concerns apply to the Acquisition related
adjustments
included in Adjusted O&O Revenue and Adjusted EBITDA.
17. We note you include the line item, Non-recurring costs, in your
reconciling items for
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FirstName LastNamePaul
Trebia Acquisition Corp. Danola
Comapany
October 15,NameTrebia
2021 Acquisition Corp.
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Adjusted EBITDA on page 202. Further, these costs appear in each
period presented.
Refer to Question 102.03 of the Compliance and Disclosure
Interpretations on Non-
GAAP Financial Measures. Tell us the nature of the items classified as
Non-recurring and
provide support for the adjustment to your measure. Please revise the
caption of this line
item to describe its nature or present the adjustments in a separate
table that agrees to this
line item.
18. Please revise to address any known underlying material trends related
to the metrics
disclosed in this section.
Information about the Companies' Business
Our Business, page 236
19. Please disclose the basis for your statement that System1 operates a
leading omnichannel
customer acquisition platform. Clarify the criteria on which you based
this statement, such
as revenue or number of customers or market share.
System1 Management's Discussion and Analysis of Financial Condition and Results
of
Operations
Results of Operations, page 249
20. Expand your discussion of results of operations to include a
discussion by segment of
revenue and profitability. Refer to Financial Reporting Codification
501.06.a.
Comparison of the Years Ended December 31, 2020, 2019, and 2018
Revenue, page 250
21. Your disclosure indicates that the increase in revenue in 2020 was
a result of increased
consumer traffic driven by increased marketing spend. Please
quantify the increase in
consumer traffic period over period. Similar concerns apply to your
revenue disclosures
for 2019 and interim disclosure on page 253. Refer to Section III.B of
SEC Release No.
33-8350.
22. We note that you "own and operate over 40 websites, including leading
search engines
like info.com and Startpage.com, and publishing digital media sites
and utilities such as
HowStuffWorks, Mapquest and ActiveBeat". Tell us your consideration
for disclosing
the websites that contribute a significant majority of your revenue.
This disclosure should
further discuss changes in volume and pricing. We refer you to Item
303(b)(2)(iii) of
Regulation S-K.
Cost of Revenue, page 251
23. We note you disclose that the increase in user acquisition costs in
2020 was $48,225. We
further note your revenue in 2020 increased $37,636 as a result of
increased consumer
traffic. As such, it appears that your user acquisition costs exceeded
revenue growth. If
true, disclose why your user acquisition costs were greater than the
received revenue.
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FirstName LastNamePaul
Trebia Acquisition Corp. Danola
Comapany
October 15,NameTrebia
2021 Acquisition Corp.
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Liquidity and Capital Resources
Cash Flows
Operating Activities, page 256
24. We note that your discussion of cash flows from operating activities
is limited in nature.
This does not appear to contribute substantively to an understanding
of your cash flows.
Rather, it repeats items that are readily determinable from the
financial statements. When
preparing the discussion and analysis of operating cash flows, you
should address material
changes in the underlying drivers that affect these cash flows. These
disclosures should
also include a discussion of the underlying reasons for changes in
working capital items
that affect operating cash flows. Refer to Section IV.B.1 of SEC
Release 33-8350.
Cost of Revenues, page 266
25. We note cost of revenues is greater than revenues in the years
presented. Expand your
disclosure to explain why cost of revenue is greater than revenue and
if you expect this
trend to continue. Refer to Section III.B of SEC Release No. 33-8350.
Protected Management s Discussion and Analysis of Financial Condition and
Results of
Operations
Results of Operations
Comparison of the Years Ended December 31, 2020 and 2019
Revenue, page 266
26. We note your revenue increased 71% in 2020 over 2019. Please expand
your disclosure to
quantify the amount of this increase that is related to new customers
compared to that
related to subscription renewals. Further, provide disclosure to
discuss the increase in your
antivirus software revenue compared to the increase in your add-on
service revenue. Refer
to Section III.B of SEC Release No. 33-8350.
Liquidity and Capital Resources
Cash Flows
Operating Activities, page 268
27. We note that your discussion of cash flows from operating activities
is limited in nature.
This does not appear to contribute substantively to an understanding
of your cash flows.
Rather, it repeats items that are readily determinable from the
financial statements. When
preparing the discussion and analysis of operating cash flows, you
should address material
changes in the underlying drivers that affect these cash flows. These
disclosures should
also include a discussion of the underlying reasons for changes in
working capital items
that affect operating cash flows. Refer to Section IV.B.1 of SEC
Release 33-8350.
Description of System1 Securities
Anti-Dilution Adjustments, page 295
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FirstName LastNamePaul
Trebia Acquisition Corp. Danola
Comapany
October 15,NameTrebia
2021 Acquisition Corp.
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28. We understand the sponsor will receive additional securities pursuant
to an anti-dilution
adjustment based on the company s additional financing activities.
Please quantify the
number and value of securities the sponsor will receive. In addition,
disclose the
ownership percentages in the company before and after the additional
financing to
highlight dilution to public stockholders.
Index to Consolidated Financial Statements, page F-2
29. As a reminder, please provide historical 2021 interim financial
statements for
Protected.Net in your next filing. We refer you Item 8 of Form 20-F.
Note 1. Organization and Description of Business, page F-80
30. Your disclosure identifies countries other than the United States that
you have operations.
Disclose the amount of revenue as well as long-lived assets that are
attributed to the
United States as well as those countries that represent greater than
10%. Refer to ASC
280-10-50-41.
S1 Holdco, LLC and Subsidiaries
Notes to Consolidated Financial Statements, page F-80
31. We note you include a reconciling item for your terminated Social
Publishing product line
in your Non-GAAP measure, Adjusted Revenue. It appears that this
product line
represented 19% and 10% of your total revenue in the years 2018 and
2019, respectively.
Please provide footnote disclosure to address how you terminated this
product line.
Please tell us how you determined that these terminated product lines
do not qualify for
discontinued operations presentation. We refer you to ASC 205-20. In
addition, given the
significant impact in the years 2018 and 2019, please explain why this
termination of the
product line is not identified as a factor in the change in your
revenue on page 250.
32. Your disclosure on page 276 indicates that you maintain a 401(k)
retirement savings plan
for your employees. Disclose this and the amounts contributed by the
Company to this
plan by the Company for each period presented. Refer to ASC
715-70-50-1.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F-88
33. Your revenue recognition policy included in the notes to your interim
financial statements
on page F-61 consists only of a general statement related to contracts
with multiple
performance obligations. However, your revenue recognition policy here
does not address
multiple performance obligations. Please revise to provide a
consistent revenue
recognition policy between your financial statements.
34. Your policy currently states that you recognize revenue upon
delivering traffic to your
advertising partners. Please expand your disclosure to clarify your
basis of delivering
traffic, i.e., cost-per-click basis and/or cost-per-thousand
impression basis.
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FirstName LastNamePaul
Trebia Acquisition Corp. Danola
Comapany
October 15,NameTrebia
2021 Acquisition Corp.
October
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35. Expand your disclosure to identify any additional factors that you
considered in order to
recognize revenue on a gross basis in the respective transaction.
Please identify the
Advertising Partners and explain how the gross amount is determined.
Indicate if this
amount is net of the Advertising Partners share or fee. Explain how
you are subject to risk
of loss.
36. We note your revenue recognition policy identifies two separate
revenue streams;
Advertising and Other Revenue and SS Protect Revenue. Please provide a
disaggregation
of revenue for these two separate revenue streams as well as for
revenue recognized over
time and at a point in time. Refer to ASC 606-10-55-91.
37. Please ensure your disclosures are consistent with the application and
terms of ASC 606.
For example, you reference whether your revenue share fees are fixed
or determinable
which is a reference to ASC 605. In addition, please provide your
principal vs agent
analysis for your revenue-sharing arrangements with the Company s
Marketing Partners.
We refer you to ASC 606-10-55-36 through 55-40.
Cost of Revenues, page F-89
38. Expand your disclosure to explain the nature of your traffic
acquisition costs and what
these costs include. As part of this, clarify if revenue-sharing
arrangements, as identified
in your revenue recognition policy, is your only compensation model.
Clarify if you pay
any up-front payments, incentive payments, or bonuses and how these
payments are
recognized and amortized.
Note 10. Share-Based Compensation, page F-99
39. Please provide us with a breakdown of all equity awards granted from
January 1st and
leading up to your filing, including the fair value of the underlying
common stock used to
value such awards as determined by your board of directors. To the
extent there were any
significant fluctuations in the fair values from period-to-period,
please describe for us the
factors that contributed to these fluctuations, including any
intervening events within the
Company or changes in your valuation assumptions or methodology.
Compare the most
recent valuations for options granted to the fair value of the shares
of commons stock as
determined by the exchange ratio in the merger agreement.
Protected.Net Group Limited
Notes to the Consolidated Financial Statements
Note 10. Revenue with Customers, page F-129
40. Disclose the amount of revenue generated in the United Kingdom as well
as any country
that represents greater than 10% of revenue. In addition, disclose the
amount of long-lived
assets that are attributed to the United Kingdom as well as those
countries that represent
greater than 10%. Refer to ASC 280-10-50-41.
We remind you that the company and its management are responsible for
the accuracy
Paul Danola
Trebia Acquisition Corp.
October 15, 2021
Page 8
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Ryan Rohn, Senior Staff Accountant, at (202) 551-3739
or Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact Austin
Pattan, Law
Clerk, at (202) 215-1319 or Jeff Kauten, Staff Attorney, at (202) 551-3477 with
any other
questions.
Sincerely,
FirstName LastNamePaul Danola
Division of
Corporation Finance
Comapany NameTrebia Acquisition Corp.
Office of Technology
October 15, 2021 Page 8
cc: Michael J. Aiello
FirstName LastName