TIDMJTWO TIDMJTOW
RNS Number : 2195H
J2 Acquisition Limited
13 November 2018
13 November 2018
J2 ACQUISITION LIMITED (THE "COMPANY")
Audited Financial Information
for the Period from Incorporation on 18 September 2017 to 31
August 2018
J2 Acquisition Limited (the "Company") has today published its
report and audited financial statements from incorporation on 18
September 2017 to 31 August 2018 ("Audited Financials").
The Audited Financials will shortly be available at
www.j2acquisitionlimited.com.
J2 Acquisition Limited
Report and financial statements
from Incorporation on 18 September 2017 to 31 August 2018
Contents
Director's Statement
Report of the Directors
Principal Risks and Uncertainties
Report of independent auditor
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to financial statements
Corporate information
Director's Statement
It is with pleasure that I present to you the shareholders the
report and audited financial statements of J2 Acquisition Limited
(the "Company") for the period from 18 September 2017 to 31 August
2018.
The Company
On 10 October 2017, the Company completed its initial public
offering. The offering raised gross proceeds of US$1.25 billion,
consisting of US$1.21 billion through the placement of ordinary
shares ("Ordinary Shares") with matching warrants ("Warrants") at a
placing price of US$10.00 per Ordinary Share and a further US$40
million through the subscription of 4,000,000 preferred shares
("Founder Preferred Shares") (with Warrants being issued to the
subscriber of Founder Preferred Shares on the basis of one Warrant
per Founder Preferred Share) also at US$10 per Founder Preferred
Share. The Company was admitted to trading with a standard listing
on the main market of the London Stock Exchange on 10 October 2017
("Admission"). As at 31 August 2018, the Company had 121,032,500
Ordinary Shares in issue. The net proceeds from the IPO are easily
accessible when required.
As set out in the Company's prospectus dated 5 October 2017 (the
"Prospectus"), the Company was formed to undertake an acquisition
of a target company or business. There is no specific expected
target value for the acquisition and the Company expects that any
funds not used for the acquisition will be used for future
acquisitions, internal or external growth and expansion, purchase
of outstanding debt and working capital in relation to the acquired
company or business. Following completion of the acquisition, the
objective of the Company is expected to be to operate the acquired
business and implement an operating strategy with a view to
generating value for shareholders through operational improvements
as well as potentially through additional complementary
acquisitions following the acquisition.
The Board of Directors continues to review a number of
acquisition targets and will remain disciplined in only proceeding
with an acquisition that it believes can produce attractive returns
to the Company's shareholders.
Financial Results
During the period commenced 18 September 2017 and ended 31
August 2018, the Company has incurred operating costs of US$166.3
million, including US$163.0 million of non-cash charges related to
Founder Preferred Share dividend rights and US$1.2 million of
non-cash charges related to warrant redemption liability as
outlined in the Company's Prospectus. These expenses were partially
offset by net investment income totalling approximately US$16.2
million. Costs of Admission of US$22.8 million were recorded as an
offset to the gross proceeds from the IPO in the Company's
Statement of Financial Position.
Principal Risks and Uncertainties
The Company set out in the Prospectus the principal risks and
uncertainties that could impact its performance; these principal
risks and uncertainties remain unchanged since that document was
published and apply in the period to 31 August 2018. Your attention
is drawn to the Prospectus for the detailed assessment. A copy of
the Prospectus is available on the Company's website
(www.j2acquisitionlimited.com) and was submitted to the National
Storage Mechanism and is available for inspection at
www.morningstar.co.uk/uk/nsm.
Related Parties
Related party disclosures are given in note 12 to these
financial statements.
Martin E. Franklin
Director
8 November 2018
Report of the Directors
The financial statements on pages 17 to 32 were approved by the
Board of Directors on 8 November 2018 and signed on its behalf by
Martin E. Franklin, Director.
The Directors have pleasure in submitting their report and the
audited financial statements for the period from 18 September 2017
through 31 August 2018.
Status and activities
The Company was incorporated with limited liability under the
laws of the British Virgin Islands under the BVI Business Companies
Act 2004 (as amended) (the "BVI Companies Act") on 18 September
2017. The address of the Company's registered office is Ritter
House, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin
Islands. The Ordinary Shares and Warrants were admitted for trading
on the Main Market of the London Stock Exchange on 10 October 2017,
after raising gross proceeds of US$1.25 billion for a potential
acquisition (an "Acquisition").
The Company was formed to undertake an acquisition of a target
company or business. There is no specific expected target value for
the Acquisition and the Company expects that any funds not used for
the Acquisition will be used for future acquisitions, internal or
external growth and expansion, purchase of outstanding debt and
working capital in relation to the acquired company or business.
Following completion of the Acquisition, the objective of the
Company is expected to be to operate the acquired business and
implement an operating strategy with a view to generating value for
its shareholders through operational improvements as well as
potentially through additional complementary acquisitions following
the Acquisition. Following the Acquisition, the Company intends to
seek re-admission of the enlarged group to listing on the Official
List and to trading on the London Stock Exchange or admission to an
alternative stock exchange. The Company expects to acquire a
controlling interest in a target company or business. The Company
(or its successor) may consider acquiring a controlling interest
constituting less than the whole voting control or less than the
entire equity interest in a target company or business if such
opportunity is attractive; provided, the Company (or its successor)
would acquire a sufficient portion of the target entity such that
it could consolidate the operations of such entity for applicable
financial reporting purposes. In connection with an Acquisition,
the Company may issue additional Ordinary Shares which could result
in the Company's then existing Shareholders owning a minority
interest in the Company following the Acquisition.
The Company's efforts in identifying a prospective target
company or business will not be limited to a particular industry or
geographic region. The Company may subsequently seek to raise
further capital for the purposes of the Acquisition.
Unless required by applicable law or other regulatory process,
no Shareholder approval will be sought by the Company in relation
to the Acquisition. The Acquisition will be subject to Board
approval, including by a majority of the Company's Non-Founder
Directors (as defined in the Prospectus).
The determination of the Company's post-Acquisition strategy and
whether any of the Directors will remain with the combined company
and on what terms will be made at or prior to the time of the
Acquisition.
If the Acquisition has not been announced by the second
anniversary of Admission, the Board will recommend to shareholders
either that the Company be wound up (in order to return capital to
shareholders and holders of the Founder Preferred Shares, to the
extent assets are available) or that the Company continue to pursue
the Acquisition for a further 12 months from the second anniversary
of Admission. The Board's recommendation will then be put to a
shareholder vote (from which the Directors and Mariposa Acquisition
IV, LLC (the "Founder Entity") will abstain).
The Company has identified the following criteria and guidelines
that it believes are important in evaluating potential acquisition
opportunities. It will generally use these criteria and guidelines
in evaluating acquisition opportunities. However, it may also
decide to enter into the Acquisition of a target company or
business that does not meet these criteria and guidelines:
-- financial condition and results of operations;
-- growth potential;
-- brand recognition and potential;
-- experience and skill of management and availability of
additional personnel;
-- capital requirements;
-- stage of development of the business and its products or
services;
-- existing distribution or other sales arrangements and the
potential for expansion;
-- degree of current or potential market acceptance of the
products or services;
-- proprietary aspects of products and the extent of
intellectual property or other
protection for products or formulas;
-- impact of regulation and potential future regulation on the
business;
-- regulatory environment of the industry;
-- seasonal sales fluctuations and the ability to offset these
fluctuations through
other acquisitions, introduction of new products, or product
line extensions; and
-- the amount of working capital available.
Results and dividends
For the period from 18 September 2017 to 31 August 2018, the
Company's loss was US$150.0 million.
It is the Board's policy that prior to making the first
Acquisition, no dividends will be paid. Following the first
Acquisition, subject to availability of distributable reserves,
dividends will be paid to shareholders if and when the Directors
believe it is appropriate and prudent to do so.
Share capital
General:
As at 31 August 2018, the Company had in issue 121,032,500
Ordinary Shares and 4,000,000 Founder Preferred Shares.
4,000,000 Founder Preferred Shares were in issue on 10 October
2017. There are no Founder Preferred Shares held in Treasury. Each
Founder Preferred Share was issued at US$10.00 per share with a
Warrant as described in note 10.
121,032,500 Ordinary Shares were issued on 10 October 2017
(121,000,000 were issued in the IPO at US$10.00 per share and
32,500 were issued to the Non-Founder Directors in conjunction with
the IPO). There are no Ordinary Shares held in Treasury. Each
Ordinary Share was issued with a Warrant as described in note
10.
Founder Preferred Shares:
Details of the Founder Preferred Shares can be found in note 10
to the financial statements, and are incorporated into this Report
by reference.
Securities carrying special rights:
Save as disclosed above in relation to the Founder Preferred
Shares, no person holds securities in the Company carrying special
rights with regard to control of the Company.
Voting rights:
Holders of Ordinary Shares and Founder Preferred Shares have the
right to receive notice of and to attend and vote at any meetings
of members except, in the case of the holders of Ordinary Shares,
in relation to any Resolution of Members that the Directors, in
their absolute discretion (acting in good faith) determine is
necessary or desirable: (i) in connection with a merger or
consolidation in relation to, in connection with or resulting from
the Acquisition (including at any time after the Acquisition has
been made); or (ii) to approve matters in relation to, in
connection with or resulting from the Acquisition (whether before
or after the Acquisition has been made). Each holder of shares
being present in person or by proxy at a meeting will, upon a show
of hands, have one vote and upon a poll each such holder of shares
present in person or by proxy will have one vote for each share
held by him.
In the case of joint holders of a share, if two or more persons
hold shares jointly each of them may be present in person or by
proxy at a meeting of members and may speak as a member, and if one
or more joint holders are present at a meeting of persons, in
person or by proxy, they must vote as one.
Restrictions on voting:
No member shall, if the Directors so determine, be entitled in
respect of any share held by him to attend or vote (either
personally or by proxy) at any meeting of members or separate class
meeting of the Company or to exercise any other right conferred by
membership in relation to any such meeting if he or any other
person appearing to be interested in such shares has failed to
comply with a notice requiring the disclosure of shareholder
interests and given in accordance with the Company's articles of
association (the "Articles") within 14 calendar days, in a case
where the shares in question represent at least 0.25% of their
class, or within seven days, in any other case, from the date of
such notice. These restrictions will continue until the information
required by the notice is supplied to the Company or until the
shares in question are transferred or sold in circumstances
specified for this purpose in the Articles.
Transfer of shares:
Subject to the BVI Business Companies Act and the terms of the
Articles, any member may transfer all or any of his certificated
shares by an instrument of transfer in any usual form or in any
other form which the Directors may approve. The Directors may
accept such evidence of title of the transfer of shares (or
interests in shares) held in uncertificated form (including in the
form of depositary interests or similar interests, instruments or
securities) as they shall in their discretion determine. The
Directors may permit such shares or interests in shares held in
uncertificated form to be transferred by means of a relevant system
of holding and transferring shares (or interests in shares) in
uncertificated form.
No transfer of shares will be registered if, in the reasonable
determination of the Directors, the transferee is or may be a
Prohibited Person (as defined in the Articles), or is or may be
holding such shares on behalf of a beneficial owner who is or may
be a Prohibited Person. The Directors shall have power to implement
and/or approve any arrangements they may, in their absolute
discretion, think fit in relation to the evidencing of title to and
transfer of interests in shares in the Company in uncertificated
form (including in the form of depositary interests or similar
interests, instruments or securities).
Rights to appoint and remove Directors
Subject to the BVI Companies Act and the Articles, the Directors
shall have power at any time, and from time to time, without
sanction of the members, to appoint any person to be a Director,
either to fill a casual vacancy or as an additional Director.
Subject to the BVI Companies Act and the Articles, the members may
by a Resolution of Members appoint any person as a Director and
remove any person from office as a Director.
For so long as an initial holder of Founder Preferred Shares
(being a Founding Entity together with its affiliates) holds 20% or
more of the Founder Preferred Shares in issue, such holder shall be
entitled to nominate up to three persons as Directors of the
Company and the Directors shall appoint such persons. In the event
such holder notifies the Company to remove any Director nominated
by him the other Directors shall remove such Director, and in the
event of such a removal the relevant holder shall have the right to
nominate a Director to fill such vacancy.
No Director has a service contract with the Company, nor are any
such contracts proposed. There are no pension, retirement or other
similar arrangements in place with the Directors nor are any such
arrangements proposed.
Powers of the Directors
Subject to the provisions of the BVI Companies Act and the
Articles, the business and affairs of the Company shall be managed
by, or under the direction or supervision of, the Directors. The
Directors have all the powers necessary for managing, and for
directing and supervising, the business and affairs of the Company.
The Directors may exercise all the powers of the Company to borrow
or raise money (including the power to borrow for the purpose of
redeeming shares) and secure any debt or obligation of or binding
on the Company in any manner including by the issue of debentures
(perpetual or otherwise) and to secure the repayment of any money
borrowed, raised, or owing by mortgage, charge, pledge, or lien
upon the whole or any part of the Company's undertaking property or
assets (whether present or future) and also by a similar mortgage,
charge, pledge, or lien to secure and guarantee the performance of
any obligation or liability undertaken by the Company or any third
party.
Directors and their interests
The Directors of the Company who served during the period and
subsequent to the date of this Report are:
Name Position Date of appointment
James E. Lillie Founder and Non-Executive 19 September
Director 2017
-------------------------- --------------------
Martin E. Franklin Founder and Non-Executive 19 September
Director 2017
-------------------------- --------------------
Rory Cullinan Independent Non-Executive 19 September
Director 2017
-------------------------- --------------------
Jean-Marc Huët Independent Non-Executive 19 September
Director 2017
-------------------------- --------------------
Brian Kaufmann Non-Executive Director 19 September
2017
-------------------------- --------------------
Thomas V. Milroy Independent Non-Executive 19 September
Director 2017
-------------------------- --------------------
Lord Myners of Truro Chairman 19 September
CBE 2017
-------------------------- --------------------
As of 8 November 2018, all of the Directors listed above
continue to serve as Directors of the Company. As at 8 November
2018, the Directors have the following interests in the Company's
securities:
Percentage of
No. of Ordinary issued Ordinary No. of Founder
Director Shares Shares Preferred Shares
James E. Lillie[1] -------- -------- -------------
---------------- ----------------- ------------------
Martin E. Franklin 6,000,000[2] 4.96 4,000,000
---------------- ----------------- ------------------
Rory Cullinan 7,500 0.001 -------------
---------------- ----------------- ------------------
Jean-Marc Huët 7,500 0.001 -------------
---------------- ----------------- ------------------
Brian Kaufmann[3] -------- -------- -------------
---------------- ----------------- ------------------
Thomas V. Milroy 7,500 0.001 -------------
---------------- ----------------- ------------------
Lord Myners of
Truro CBE 10,000 0.001 --------------
---------------- ----------------- ------------------
[1]Mr. Lillie holds an indirect pecuniary interest of
approximately 20 per cent. in the Founder Entity.
[2]Represents the interests held by the Founder Entity. Mr.
Franklin is a beneficial owner and the manager of the Founder
Entity and, as such, may be considered to have beneficial ownership
of all the Founder Entity's interests in the Company
[3]Mr. Kaufmann, who was invited by the Founders to join the
Board, is a Portfolio Manager at Viking Global Investor LP. Viking
Global Opportunities Liquid Portfolio Sub-Master LP, an affiliate
of Viking Global Investor LP, has an interest in 25,000,000
Ordinary Shares and 25,000,000 Warrants (being 20.66 per cent of
the Ordinary Shares and Warrants in issue).
Directors' remuneration
Each of the Directors entered into a Director's letter of
appointment with the Company dated 5 October 2017. Under the
letters of appointment, Rory Cullinan, Thomas V. Milroy and
Jean-Marc Huët are entitled to a fee of $75,000 per annum and Lord
Myners, as Chairman, is entitled to receive a fee of $100,000 per
annum. Fees are payable quarterly in arrears. During the period
from 18 September 2017 to 31 August 2018, the Company issued 32,500
Ordinary Shares and Warrants in aggregate to independent
Non-Founder Directors in lieu of their first year's annual cash
remuneration. The shares were valued at US$10.00 per share and are
being expensed over the one-year service period. Martin E.
Franklin, James E. Lillie and Brian Kaufmann do not receive a fee
in connection with their appointment as Non-Executive Directors of
the Company. In addition, all of the Directors are entitled to be
reimbursed by the Company for travel, hotel and other expenses
incurred by them in the course of their directors' duties relating
to the Company.
Substantial shareholdings
As at 8 November 2018 (the latest practicable date prior to the
publication of this Report), the following had disclosed an
interest in the issued Ordinary Share capital of the Company (being
5% or more of the voting rights in the Company) in accordance with
the requirements of the Disclosure and Transparency Rules (the
"DTRs"):
Notified
percentage
Number of Date of disclosure of voting
Shareholder Ordinary Shares to Company rights[4]
Viking Global Opportunities
Liquid Portfolio Sub-Master 12 October
LP 25,000,000 2017 20.66%
----------------- ------------------- ------------
Senator Investment Group 12 October
LP 10,000,000 2017 8%
----------------- ------------------- ------------
[4]Since the date of disclosures to the Company, the interest of
any person listed above in Ordinary Shares may have increased or
decreased without any obligation on the relevant person to make
further notification to the Company pursuant to the DTRs.
Change of control
The Company is not party to any significant contracts that are
subject to change of control provisions in the event of a takeover
bid. There are no agreements between the Company and its Directors
or employees providing compensation for loss of office or
employment that occurs because of a takeover bid.
The Directors have reason to believe that PricewaterhouseCoopers
LLP conducted an effective audit. The Directors have provided the
auditors with full access to all of the books and records of the
Company.
Corporate Governance Statement
The Company is a British Virgin Islands registered company with
a standard listing on the London Stock Exchange. For as long as the
Company has a standard listing it is not required to comply or
explain non-compliance with the UK Corporate Governance Code (the
"Code") issued by the Financial Reporting Council ("FRC") in April
2016. However, the Company is firmly committed to high standards of
corporate governance and maintaining a sound framework through
which the strategy and objectives of the Company are set and the
means of attaining these objectives and monitoring performance are
determined. At Admission, the Company therefore stated its
intention to voluntarily comply with the Code. The Code is
available on the FRC's website, www.frc.co.uk. The Company also
complies with the corporate governance regime applicable to the
Company pursuant to the laws of the British Virgin Islands.
As at the date of this Report, the Company is in compliance with
the Code with the exception of the following:
-- Given the wholly non-executive composition of the Board,
certain provisions of the Code (in particular the provisions
relating to the division of responsibilities between the Chairman
and chief executive and executive compensation) are considered by
the Board to be inapplicable to the Company. In addition, the
Company does not comply with the requirements of the Code in
relation to the requirement to have a senior independent
director.
-- The Code also recommends the submission of all directors for
re-election at annual intervals. No Director will be required to
submit for re-election until the first annual general meeting of
the Company following the Company's first acquisition.
-- Until completion of the Company's first acquisition, the
Company will not have nomination, remuneration, audit or risk
committees. The Board as a whole instead reviews its size,
structure and composition, the scale and structure of the
Directors' fees (taking into account the interests of Shareholders
and the performance of the Company), takes responsibility for the
appointment of independent auditors and payment of their audit fee,
monitors and reviews the integrity of the Company's financial
statements, including the Company's internal control and risk
management arrangements in relation to its financial reporting
process, and takes responsibility for any formal announcements on
the Company's financial performance. Following the Company's first
acquisition, the Board intends to put in place nomination,
remuneration, audit and risk committees.
Share dealing
As at the date of this Report, the Board has voluntarily adopted
a share dealing code which is consistent with the rules of the
Market Abuse Regulation 596/2014 (the "Market Abuse Regulation").
The Board is responsible for taking all proper and reasonable steps
to ensure compliance with the Market Abuse Regulation by the
Directors.
Relations with Shareholders
The Directors are available for communication with shareholders
and all shareholders will have the opportunity, and are encouraged,
to attend and vote at any future Annual General Meeting of the
Company, the first of which will take place within 18 months
following completion of the Acquisition, during which the Board
will be available to discuss issues affecting the Company.
Statement of going concern
The Directors have considered the financial position of the
Company and have concluded that it is appropriate to prepare the
financial statements on a going concern basis.
Internal control
The Board is responsible for determining the nature and extent
of the significant risks it is willing to take in achieving its
strategic objectives. The Board maintains sound risk management and
internal control systems. The Board has reviewed the Company's risk
management and control systems and believes that the controls are
satisfactory given the nature and size of the Company. Controls
will be reviewed following completion of its first acquisition.
Financial Risk Profile
The Company's financial instruments comprise mainly of cash and
cash equivalents, and various items such as payables and
receivables that arise directly from the Company's operations.
Details of the risks relevant to the Company are included in the
notes to the financial statements and on page 12 of this
report.
Branches
At the date of this Report, the Company does not have any
branches.
Management Report
For the purposes of compliance with DTR 4.1.5R(2), DTR 4.1.8R
and DTR4.1.11R, the required content of the "Management Report" can
be found in this Report of Directors and the Principal Risks and
Uncertainties section on page 12 of this report.
Directors' Responsibilities
The Directors are responsible for preparing the Report and the
financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Company financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the International Accounting Standards Board. Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period. In preparing these financial statements, the directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs as adopted by the
International Accounting Standards Board have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and, as regards the Company financial
statements, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Company's website. A copy of the financial statements is
placed on our website www.j2acquisitionlimited.com. The Directors
consider that the annual report and accounts, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for shareholders to assess a Company's performance,
business model and strategy.
Each of the Directors, who are in office and whose names and
functions are listed under "Corporate Information", confirms that,
to the best of his knowledge:
-- the Company financial statements, which have been prepared in
accordance with IFRSs as adopted by the International Accounting
Standards Board, give a true and fair view of the assets,
liabilities, financial position and loss of the Company; and
-- the management report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
Disclosure of information to Auditors
Each of the persons who is a Director at the date of approval of
this Report confirms that:
-- so far as the director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- each director has taken all the steps that he ought to have
taken as a director in order to make himself aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
Directors' indemnities
As at the date of this Report, indemnities granted by the
Company to the Directors are in force to the extent permitted under
BVI law. The Company also maintains Directors' and Officers'
liability insurance, the level of which is reviewed annually.
By order of the Board
___________________________
Martin E. Franklin
Director
8 November 2018
Principal Risks and Uncertainties
The Board has identified the following principal risks and
uncertainties facing the Company which remain unchanged from the
principal risks and uncertainties set out in the Company's
prospectus dated 5 October 2017. The risks referred to below do not
purport to be exhaustive and are not set out in any particular
order of priority. Additional risks and uncertainties not currently
known to the Board or which the Board currently deems immaterial
may also have an adverse effect on the Company's business. In
particular, the Company's performance may be affected by changes in
the market and/or economic conditions and in legal, regulatory and
tax requirements.
Key information on the key risks that are specific to the issuer
or its industry
Business Strategy
-- The Company is a newly formed entity with no operating
history and has not yet identified any potential target company or
business for the Acquisition.
-- The Company may acquire either less than whole voting control
of, or less than a controlling equity interest in, a target, which
may limit its operational strategies.
-- The Company may be unable to complete the Acquisition in a
timely manner or at all or to fund the operations of the target
business if it does not obtain additional funding.
The Company's relationship with the Directors, the Founders and
the Founder Entity and conflicts of interest
-- The Company is dependent on James. E Lillie, Martin E.
Franklin and Ian G.H. Ashken (collectively, the "Founders") to
identify potential acquisition opportunities and to execute the
Acquisition and the loss of the services of any of them could
materially adversely affect it.
-- The Founders and Directors are currently affiliated and may
in the future become affiliated with entities engaged in business
activities similar to those intended to be conducted by the Company
and may have conflicts of interest in allocating their time and
business opportunities.
-- The Directors will allocate a portion of their time to other
businesses leading to the potential for conflicts of interest in
their determination as to how much time to devote to the Company's
affairs.
-- The Company may be required to issue additional Ordinary
Shares pursuant to the terms of the Founder Preferred Shares, which
would dilute existing Ordinary Shareholders.
Taxation
-- The Company may be a "passive foreign investment company" for
U.S. federal income tax purposes and adverse tax consequences could
apply to U.S. investors.
Key information on the key risks that are specific to the
securities
The Ordinary Shares and Warrants
-- The Standard Listing of the Ordinary Shares and Warrants will
not afford Shareholders the opportunity to vote to approve the
Acquisition.
-- The Warrants can only be exercised during the Subscription
Period and to the extent a Warrantholder has not exercised its
Warrants before the end of the Subscription Period, those Warrants
will lapse, resulting in the loss of a holder's entire investment
in those Warrants.
-- The Warrants are subject to mandatory redemption and
therefore the Company may redeem a Warrantholder's unexpired
Warrants prior to their exercise at a time that is disadvantageous
to a Warrantholder, thereby making those Warrants worthless.
-- The issuance of Ordinary Shares pursuant to the exercise of
the Warrants will dilute the value of a Shareholder's Ordinary
Shares.
Independent auditors' report to the directors of J2 Acquisition
Limited
Report on the audit of the financial statements
Opinion
In our opinion, J2 Acquisition Limited's financial
statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 August 2018 and of its loss and cash flows for the
11 1/2 month period (the "period") then ended; and
-- have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB).
We have audited the financial statements, included within the
Annual Report, which comprise: the statement of financial position
as at 31 August 2018, the statement of comprehensive income, the
statement of cash flows, the statement of changes in equity for the
11 1/2 month period then ended, the accounting policies, and the
notes to the financial statements.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC's Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
Our audit approach
Overview
Overall materiality: $12.4 million, based on 1% of net
assets.
Single audit location to cover the Company's complete
operations, transactions and balances.
Fair value measurement of Founder Preferred Shares and
associated share-based payment charge.
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
We did not identify any key audit matters relating to any
irregularities, including fraud. As in all of our audits we also
addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the
directors that represented a risk of material misstatement due to
fraud.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. This is not a complete list of all risks identified
by our audit.
Key audit matter How our audit addressed the key audit matter
=========================================================== =========================================================
Fair value measurement of Founder Preferred Shares and We assessed compliance of the accounting policy adopted
associated share-based payment charge with IFRS 2 'Share-based payment'.
Refer to Note 2.8 (accounting policies), Note 6 and Note 10 In order to test management's valuation model, we
to the financial statements. utilised a valuations expert to assess the
The Company has issued 4,000,000 Founder Preferred Shares bespoke valuation methodology applied and the related
in connection with its IPO to its assumptions.
Founder Entity as set out in Note 10 to the financial We performed an assessment of the valuation using a Monte
statements. Carlo valuation method to independently
The Founder Preferred Shares provide a right to receive an test the valuation model and its outcome as determined by
Annual Dividend Amount which is management's expert.
payable based on the future growth in share price and in Our work has consisted of considering the reasonableness
line with a calculation specified of the following assumptions made
by the terms of the Founder Preferred Shares set forth in by the independent expert on behalf of management:
the Company's Articles of Association. o Volatility post-acquisition;
Management appointed a third party expert to perform the o Probability of IPO;
valuation of the share-based payments o Probability of acquisition; and
award at the date of each issue of Founder Preferred o Risk free interest rate.
Shares. In each of the above areas, we have considered the impact
We focused on the fair value of the Founder Preferred of management's assumption, in the
Shares IFRS 2 share-based payment charge form of a sensitivity. We have also considered the
component due to the following reasons: reasonableness of the above assumptions
* The Founder Preferred Share equity charge for the against publicly available market data and the IFRS 2
period ended 31 August 2018 of $161.7 million is requirements for fair market value.
material to the financial statements; Based on our testing, we found that the Founder Preferred
Share equity charge of $161.7 million
was determined using an acceptable valuation methodology.
* A number of key assumptions as set out in Note 6 to
the financial statements used in the valuation are
judgemental and not solely based on market observable
data; and
* The fair valuation model is bespoke and complex.
=========================================================== =========================================================
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which it operates.
The audit was an initial audit and required obtaining an
understanding of the entity, its environment and life-cycle stage
of the business including the progression to initial public
offering.
The Company operates as a single business and within one
geography, and we therefore performed an audit of the complete
financial information of the single business. In establishing our
overall approach we assessed the risks of material misstatement,
taking into account the nature, likelihood and potential magnitude
of any misstatement. Following this assessment, we applied
professional judgement to determine the extent of testing required
over each balance in the financial statements.
The risk of material misstatement that had the greatest effect
on our audit, including the allocation of our resources and effort,
relate to the fair value measurement of Founder Preferred Shares
and associated share-based payment charge. This has been identified
as a "key audit matter" in the table above.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality $12.4 million.
=============================== =====================================================================================
How we determined it 1% of net assets.
=============================== =====================================================================================
Rationale for benchmark applied We applied this benchmark given the stage of development of the Company activities
since incorporation
and funds raised as a special purpose acquisition company, which meant that an asset
benchmark
was more appropriate than an income statement benchmark such as profit before tax or
revenue.
=============================== =====================================================================================
We agreed with the Board of Directors that we would report to
them misstatements identified during our audit above $620,000 as
well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you when:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Company's
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors'
report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Report of the Directors set out
on page 10, the directors are responsible for the preparation of
the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors' report.
Use of this report
This report, including the opinion, has been prepared for and
only for the Company's directors as a body for fulfilling their
obligation under the Listing Rules 14.3.23R and 4.1.7R of the FCA's
Disclosure Guidance and Transparency Rules sourcebook ("DTR") in
accordance with our engagement letter dated 27 November 2017 and
for no other purpose. We do not, in giving this opinion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come,
including without limitation under any contractual obligations of
the Company, save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
8 November 2018
Statement of Comprehensive Income for the period ended 31 August
2018
For the period
from
18 September
2017
to 31 August
2018
Note US $
---- ----------------------------
Investment income 7 16,155,277
Other income 135,675
Expenses 3 (2,001,199)
Non-cash charge related to Founder Preferred
Shares and warrants 6 (163,043,551)
Non-cash charge related to warrant redemption
liability 10 (1,210,325)
----------------------------
Operating loss (149,964,123)
----------------------------
Loss and Total Comprehensive Expense
for the Period (149,964,123)
============================
Basic and diluted loss per ordinary
share 8 (1.28)
----------------------------
The notes form an integral part of these financial
statements.
Statement of Financial Position as at 31 August 2018
31 August 2018
Note US$
----- -----------------------
Assets
Current assets
Cash and cash equivalents 11,672,995
Short-term investments 7 1,230,357,747
Prepayments and other assets 9 117,595
Total Assets 1,242,148,337
-----------------------
Liabilities
Current liabilities
Accruals 139,377
-----------------------
Total current liabilities 139,377
Non-current liabilities
Warrant redemption liability 10 1,210,325
-----------------------
Total non-current liabilities 1,210,325
-----------------------
Total liabilities 1,349,702
-----------------------
Net assets 1,240,798,635
-----------------------
Equity
Founder Preferred Share Capital 10 40,000,000
Ordinary Share Capital - nominal -
value
Ordinary Share Capital share
premium 10 1,187,547,637
Retained earnings 13,250,998
Total equity 1,240,798,635
=======================
Net asset value per share 8 9.92
=======================
The notes form an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the board of directors on 8 November 2018 and signed on its
behalf by:
Martin E. Franklin
Director
8 November 2018
Statement of Changes in Equity for the period ended 31 August
2018
Ordinary Ordinary
Founder Share Share
Preferred Capital Capital
Share Nominal Share Retained Total
Capital Value Premium Earnings Equity
Note US$ US$ US$ US$ US$
---- ---------------- ---------- --------------------- -------------------- ---------------------
Balance at
inception, 18
September 2017 - - - - -
Issue of
shares 10 40,000,000 - 1,210,325,000 163,043,551 1,413,368,551
Issue costs 10 - - (22,777,363) - (22,777,363)
Share-based
compensation
- directors 11 - - - 171,570 171,570
Loss and total
comprehensive
expense for
the period - - - (149,964,123) (149,964,123)
Balance as of
31 August
2018 40,000,000 - 1,187,547,637 13,250,998 1,240,798,635
================ ========== ===================== ==================== =====================
The notes form an integral part of these financial
statements.
Statement of Cash Flows for the period ended 31 August 2018
For the period
from
18 September 2017
to 31 August 2018
Note US$
----- ---------------------------------
OPERATING ACTIVITIES:
Net loss (149,964,123)
Elimination of non-cash items:
Charge related to Founder Preferred
Shares 6 163,043,551
Charge related to warrant redemption
liability 10 1,210,325
Unrealized gain on short-term investments 7 (4,575,742)
Charge related to directors' remuneration
settled in shares 11 284,372
Charge related to director options 11 171,570
Movements in working capital:
Increase in prepaids and other assets (76,967)
Increase in accruals 139,377
Net cash provided by operating activities 10,232,363
---------------------------------
INVESTING ACTIVITIES:
Purchase of short-term investments (3,057,472,771)
Sale of short-term investments 1,831,690,766
---------------------------------
Net cash used in investing activities (1,225,782,005)
---------------------------------
FINANCING ACTIVITIES:
Issuance of Founder Preferred Shares
and Associated Warrants 10 40,000,000
Issuance of Ordinary Shares and Associated
Warrants 10 1,210,000,000
Share issue expenses 10 (22,777,363)
---------------------------------
Net cash provided by financing activities 1,227,222,637
---------------------------------
Net increase in cash and cash equivalents 11,672,995
Cash and cash equivalents at beginning -
of period
---------------------------------
Cash and cash equivalents at end of
period 11,672,995
=================================
NON-CASH FINANCING ACTIVITY:
Issuance of Ordinary Shares for directors'
remuneration 11 325,000
=================================
The notes form an integral part of these financial
statements.
1. General information
The Company was incorporated with limited liability under the
laws of the British Virgin Islands under the BVI Business Companies
Act 2004 (as amended) (the "BVI Companies Act") on 18 September
2017. The address of the Company's registered office is Ritter
House, Wickhams Cay II, Tortola, VG 1110, British Virgin Islands.
The Ordinary Shares and Warrants were admitted for trading on the
Main Market of the London Stock Exchange on 10 October 2017, after
raising gross proceeds of US$1.21 billion for a potential
acquisition (the "Acquisition").
2. Principal accounting policies
The principal accounting policies applied in these financial
statements are set out below.
2.1 Basis of preparation
These financial statements are prepared under the historical
cost convention and are in accordance with International Financial
Reporting Standards and its interpretations as issued by the
International Accounting Standards Board ("IASB") and those parts
of the BVI Companies Act applicable under IFRS. As the Company was
incorporated on 18 September 2017, there is no comparative
information.
The financial statements and notes thereto are presented in U.S.
Dollars, which is the Company's presentational and functional
currency and are rounded to the nearest dollar, except when
otherwise indicated.
The financial statements are prepared on the historical cost
basis with the exception of financial instruments and share-based
payments, and Founder Preferred Shares which are stated at fair
value.
Accounting policies have been consistently applied.
There are no new accounting standards adopted which have a
material impact on these financial statements. Refer to 2.10 for
more information on new IFRSs not yet adopted.
2.2 Going concern
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future given the cash funds available and the current forecast cash
outflows. Thus, the Company continues to adopt the going concern
basis of accounting in preparing the financial statements.
2.3 Foreign currency translation
Functional and presentation currency
The Company is listed on the main market of the London Stock
Exchange. The capital raised in the IPO is denominated in US
dollars. The performance of the Company is measured and reported to
the Shareholders in US dollars, which is the Company's functional
currency. The Directors consider the US dollar as the currency of
the primary economic environment in which the Company operates and
the one that most faithfully represents the economic effects of the
underlying transactions, events and conditions.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign currency assets and liabilities are
translated into the functional currency using the exchange rate
prevailing at the balance sheet date.
2.4 Short-term investments
Classification
The Company classifies its investment in U.S. Treasury Bills as
short-term investments. This financial asset is designated by the
Directors at fair value through profit or loss at inception.
Short-term investments at inception are financial instruments
that are not classified as held for trading but are managed, and
their performance is evaluated on a fair value basis in accordance
with the Company's documented investment strategy.
The Company's policy requires the Directors to evaluate the
information about these short-term investments together with other
related financial information. Assets in this category are
classified as current assets if they are expected to be realised
within 12 months of the balance sheet date. Those not expected to
be realised within 12 months of the balance sheet date will be
classified as non-current.
Recognition, derecognition and measurement
Regular purchases and sales of investments are recognised on the
trade date - the date on which the Company commits to purchase or
sell the investment. Short-term investments are initially
recognised at fair value. Transaction costs are expensed as
incurred in the statement of comprehensive income. Financial assets
are derecognised when the rights to receive cash flows from the
investments have expired or the Company has transferred
substantially all risks and rewards of ownership.
Subsequent to initial recognition, all short-term investments
are measured at fair value. Gains and losses arising from changes
in the fair value of the short-term investments category is
presented in the statement of comprehensive income as investment
income in the period in which they arise.
Dividend income or distributions of a revenue nature from
financial assets at fair value through profit or loss are
recognised in the statement of comprehensive income within dividend
income when the Company's right to receive payments is
established.
2.5 Offsetting financial instruments
Financial instruments are offset and the net amount reported in
the balance sheet only when there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle
on a net basis, or realise the asset and settle the liability
simultaneously.
2.6 Cash
Cash represents cash at banks. There were no cash equivalents at
31 August 2018.
2.7 Payables and accrued expenses
Payables and accrued expenses are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method.
2.8 Share-based payments
The Founder Preferred Shares (and attached warrants),
Non-Founder Director shares (and attached warrants) and
non-executive director options represent equity-settled share-based
arrangements under which the Company receives services as a
consideration for the additional rights attached to these equity
shares, over and above their nominal price. The fair value of the
grant of Founder Preferred Shares (and attached warrants) in excess
of any purchase price received is recognised as an expense. In
addition, the Company has granted options to the non-executive
directors. The Company also issued shares (and attached warrants)
to Non-Founder Directors, which are recognised as expense over the
one year service period. The fair value of the Founder Preferred
Shares and the options is determined using a valuation model.
The total amount to be expensed as a respective share-based
payment charge is determined by reference to the fair value of the
awards granted:
-- including any market performance condition;
-- excluding the impact of any service and non-market performance vesting conditions; and
-- including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in
assumptions about the number of awards that are expected to
vest.
The total expense is recognised in the income statement with a
corresponding credit to equity over the vesting period, which is
the period over which all of the specified vesting conditions are
to be satisfied. The Company does not begin to recognise expense
associated with share-based awards with performance conditions
until it is probable that the performance condition will be
achieved.
2.9 Fair Value of Warrants
Warrants not subject to IFRS2 are valued at the redemption value
of $0.01 as financial instruments. The Warrants are compound
financial instruments with a liability recognised and the remainder
in equity.
2.10 New accounting standards
This is the first set of annual audited financial statements
prepared by the Company. The Company applied all applicable
standards and applicable interpretations published by the IASB for
the period ended 31 August 2018. The Company did not adopt any
standard or interpretation published by the IASB for which the
mandatory application date is on or after 1 September 2018.
IFRS 9 Financial Instruments is effective from 1 January 2018
and has been early adopted.
Based on the Company's existing activity, there are no other new
interpretations, amendments or full standards that have been issued
but not effective or adopted for the period ended 31 August 2018
that will have a material impact on the Company.
2.11 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors as it is
the body that makes strategic decisions. The Board is of the
opinion that there is only a single operational segment being the
investment in US Treasury Bills as disclosed in note 7. As a result
no segment information has been provided as the Company only
accumulates its funds raised for investment in US Treasury
Bills.
2.12 Share capital
Founder Preferred Shares, Ordinary Shares, and Warrants are
classified as equity. Incremental costs directly attributable to
the issue of new ordinary shares are shown in equity as a
deduction, net of tax, from the proceeds.
2.13 Auditor remuneration
During the period ended 31 August 2018, the Company obtained the
following services from the independent auditors:
Fees payable to the Company's auditor US$125,000
for Capital Markets Services in relations
to the Company's IPO. US$36,000
Fees payable to the Company's auditor
for the audit of the Company's financial
statements for the period from inception
through 31 August 2018
2.14 Critical accounting judgements and key sources of estimation uncertainty
There were no critical estimates or judgements in the
period.
3. Expenses
2018
US$
Directors' remuneration (including share-based compensation charge) 455,942
Legal and professional fees 436,688
Listing fees 346,102
Management fees 267,762
General and administrative expenses 494,705
2,001,199
=================
4. Taxation
The Company is not subject to income tax or corporation tax in
the British Virgin Islands.
5. Fair value
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. In determining fair
value, the Company may use various methods including market, income
and cost approaches.
Based on these approaches, the Company often utilises certain
assumptions that market participants would use in pricing the asset
or liability, including assumptions about risk and the risks
inherent in the inputs to the valuation technique. These inputs can
be readily observable, market corroborated, or generally
unobservable inputs. The Company utilises valuation techniques that
maximize the use of observable inputs and minimize the use of
unobservable inputs. Based on the observability of the inputs used
in the valuation techniques the Company is required to provide the
following information according to the fair value hierarchy. The
fair value hierarchy ranks the quality and reliability of the
information used to determine fair values.
Financial assets and liabilities carried at fair value will be
classified and disclosed in one of the following three
categories:
Level 1 - Quoted prices for identical assets and liabilities
traded in active exchange markets, such as the New York Stock
Exchange.
Level 2 - Observable inputs other than Level 1 including quoted
prices for similar assets or liabilities, quoted prices in less
active markets, or other observable inputs that can be corroborated
by observable market data. Level 2 also includes derivative
contracts whose value is determined using a pricing model with
observable market inputs or can be derived principally from or
corroborated by observable market data.
Level 3 - Unobservable inputs supported by little or no market
activity for financial instruments whose value is determined using
pricing models, discounted cash flow methodologies, or similar
techniques, as well as instruments for which the determination of
fair value requires significant management judgment or estimation;
also includes observable inputs for non-binding single dealer
quotes not corroborated by observable market data.
The Company has various processes and controls in place to
ensure that fair value is reasonably estimated. A model validation
policy governs the use and control of valuation models used to
estimate fair value. The Company performs due diligence procedures
over third-party pricing service providers in order to support
their use in the valuation process. Where market information is not
available to support internal valuations, independent reviews of
the valuations are performed and any material exposures are
escalated through a management review process.
While the Company believes its valuation methods are appropriate
and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different estimate of fair
value at the reporting date.
As of 31 August 2018, short-term investments of US$1,230,357,747
were categorized as Level 2 securities. There were no transfers
between Levels during the period.
6. Charge Related to Founder Preferred Shares and Warrants
The total charge related to Founder Preferred Shares and
warrants for the period ended 31 August 2018 was
US$163,043,551.
Founder Preferred Shares
The Company has outstanding Founder Preferred Shares issued to
its Founder Entity which have been accounted for in accordance with
IFRS 2 "Share-based payment" as equity-settled share-based payment
awards. The fair value of the Founder Preferred Shares over and
above their purchase price was determined as US$161,678,265 at the
grant date. The preferred share awards do not have any vesting or
service conditions and vested immediately on the date of the grant.
Accordingly, the aggregate non-cash charge relating to the Founder
Preferred Shares for the period ended 31 August 2018 was
US$161,678,265. The fair value of the awards was determined using a
Monte Carlo valuation model and was based on the following
assumptions:
Number of securities issued 4,000,000
Vesting period Immediate
Assumed price upon acquisition US$10.00
Probability of winding-up 34.5%
Probability of acquisition 65.5%
Time to acquisition 1.5 years
Volatility (post-acquisition) 35.1%
Risk free interest rate 2.33%
Expected volatility was estimated with reference to a
representative set of listed companies taking into account the
circumstances of the Company.
The probability and timing of an Acquisition has been estimated
only for the purposes of valuing the Founder Preferred Shares
issued as of October 2017 and no assurance can be given that the
Acquisition will occur at all or in any particular timeframe.
Warrants
Additionally, the Company has outstanding warrants issued to its
Founder Entity. The warrants do not have any vesting or service
conditions and vested immediately on the date of the grant.
Accordingly, the aggregate non-cash charge relating to the warrants
for the period ended 31 August 2018 was US$1,365,286. The fair
value of the awards was determined using a Monte Carlo valuation
model and was based on the following assumptions:
Share Price US$10.00
Exercise Price US$11.50
Risk-Free Rate 1.62%
Dividend Yield -
Probability of Acquisition 65.50%
Post-Acquisition Volatility 33.42%
Expected volatility was estimated with reference to a
representative set of listed companies taking into account the
circumstances of the Company.
The probability and timing of an Acquisition has been estimated
only for the purposes of valuing the Founder Preferred Shares
issued as in October 2017 and no assurance can be given that the
Acquisition will occur at all or in any particular timeframe.
7. Short-term investments
The Company holds zero coupon U.S. Treasury Bills which at 31
August 2018 had a cost of US$1,225,782,005, and a market value of
US$1,230,357,747. The increase in value of US$4,575,742 was
recorded as investment income during the period ended 31 August
2018. The original maturities of the zero coupon U.S. Treasury
Bills were greater than three months, but as of 31 August 2018
their remaining maturities were all within five months of the
period end. The Company also realized $11,579,535 of investment
income during the period ended 31 August 2018.
8. Loss per share and net asset value per share
The loss per share calculation for the period from 18 September
2017 through 31 August 2018 is based on loss for the period of
US$(149,964,123) and the weighted average number of Ordinary Shares
and Founder Preferred Shares of 116,768,858.
Net asset value per share is based on net assets of
US$1,240,798,635 divided by the 121,032,500 Ordinary Shares and
4,000,000 Founder Preferred Shares in issue at 31 August 2018.
The 121,032,500 Warrants and 162,500 Options are considered
non-dilutive at 31 August 2018.
9. Prepayments and other assets
2018
US$
Prepaid insurance and administrative
fees 68,256
Prepaid directors' remuneration 40,628
Accrued interest receivable 8,711
117,595
===================
10. Share capital
The authorised shares of the Company are as follows:
2018
US$
Authorised
Unlimited number of -
Ordinary Shares of
no par value
=====================
Founder Preferred Shares Number US$
Balance at beginning - -
of period
Issued during the period 4,000,000 40,000,000
Balance at end of period 4,000,000 40,000,000
===================== ======================
Ordinary Shares Number US$
Balance at beginning - -
of period
Issued during the period 121,032,500 1,187,547,637
Balance at end of period 121,032,500 1,187,547,637
===================== ======================
4,000,000 Founder Preferred Shares were issued on 10 October
2017 at US$10.00 per share. There are no Founder Preferred Shares
held in Treasury. Each ordinary share and Founder Preferred Share
was issued with a Warrant as described below.
121,032,500 Ordinary Shares were issued on 10 October 2017
(121,000,000 were issued in the IPO at US$10.00 per share and
32,500 were issued to the Non-Founder Directors in conjunction with
the IPO in lieu of cash directors' remuneration for one year).
There are no Ordinary Shares held in Treasury. Each Ordinary Share
was issued with a Warrant as described below.
Issue costs of US$22,777,363 were deducted from the proceeds of
issue.
Ordinary Shares
Ordinary Shares confer upon the holders (in accordance with the
Articles):
(a) Subject to the BVI Companies Act, on a winding-up of the
Company the assets of the Company available for distribution shall
be distributed, provided there are sufficient assets available, to
the holders of Ordinary Shares and Founder Preferred Shares pro
rata to the number of such fully paid up shares held by each holder
relative to the total number of issued and fully paid up Ordinary
Shares as if such fully paid up Founder Preferred Shares had been
converted into Ordinary Shares immediately prior to the
winding-up;
(b) The right, together with the holders of the Founder
Preferred Shares, to receive all amounts available for distribution
and from time to time to be distributed by way of dividend or
otherwise at such time as the Directors shall determine, pro rata
to the number of fully paid up shares held by the holder, as if the
Ordinary Shares and Founder Preferred Shares constituted one class
of share and as if for such purpose the Founder Preferred Shares
had been converted into Ordinary Shares immediately prior to such
distribution; and
(c) The right to receive notice of, attend and vote as a member
at any meeting of members except in relation to any Resolution of
Members that the Directors, in their absolute discretion (acting in
good faith) determine is: (i) necessary or desirable in connection
with a merger or consolidation in relation to, in connection with
or resulting from the Acquisition (including at any time after the
Acquisition has been made); or (ii) to approve matters in relation
to, in connection with or resulting from the Acquisition (whether
before or after the Acquisition has been made).
Founder Preferred Shares
The Founder Entity has also committed US$40,000,000 of capital
for 4,000,000 Founder Preferred Shares (with Warrants being issued
on the basis of one Warrant per Founder Preferred Share). The
Founder Preferred Shares are intended to have the effect of
incentivising the Founders to achieve the Company's objectives.
Commencing from consummation of the Acquisition, and only once
the Average Price (as defined in the Prospectus) per Ordinary Share
for any ten consecutive Trading Days (as defined in the Prospectus)
following Admission is at least US$11.50, a holder of Founder
Preferred Shares will be entitled to receive an "Annual Dividend
Amount", payable in Ordinary Shares or cash, at the sole option of
the Company.
In the first Dividend Year (as defined in the Prospectus) in
which such dividend becomes payable, such dividend will be equal in
value to (a) 20 per cent. of the increase in the market value of
one Ordinary Share, being the difference between $10.00 and the
Dividend Price (as defined in the Prospectus), multiplied by (b)
such number of Ordinary Shares equal to the Preferred Share
Dividend Equivalent (as defined in the Prospectus).
Thereafter, the Annual Dividend Amount will only become payable
if the Dividend Price during any subsequent Dividend Year is
greater than the highest Dividend Price in any preceding Dividend
Year in which a dividend was paid in respect of the Founder
Preferred Shares. Such Annual Dividend Amount will be equal in
value to 20 per cent. of the increase in the Dividend Price over
the highest Dividend Price in any preceding Dividend Year
multiplied by the Preferred Share Dividend Equivalent.
For the purposes of determining the Annual Dividend Amount, the
Dividend Price is the Average Price per Ordinary Share for the last
ten consecutive Trading Days in the relevant Dividend Year (the
"Dividend Determination Period").
The amounts used for the purposes of calculating an Annual
Dividend Amount and the relevant numbers of Ordinary Shares are
subject to such adjustments as the Directors in their absolute
discretion determine to be fair and reasonable in the event of a
consolidation or sub-division of the Ordinary Shares in issue after
the date of Admission or otherwise as determined in accordance with
the Articles.
If there is more than one holder of Founder Preferred Shares,
each Annual Dividend Amount shall be divided between the holders of
Founder Preferred Shares pro rata to the number of Founder
Preferred Shares held by them on the relevant Dividend Date. The
Annual Dividend Amount will be paid on the relevant Payment Date by
the issue to each holder of Founder Preferred Shares of such number
of Ordinary Shares as is equal to the pro rata amount of the Annual
Dividend Amount to which they are entitled divided by the Dividend
Price.
The Founder Preferred Shares will participate in any dividends
on the Ordinary Shares on an as converted basis. In addition,
commencing on and after consummation of the Acquisition, where the
Company pays a dividend on its Ordinary Shares the Founder
Preferred Shares will also receive an amount equal to 20 per cent
of the dividend which would be distributable on such number of
Ordinary Shares equal to the Preferred Share Dividend Equivalent.
All such dividends on the Founder Preferred Shares will be paid
contemporaneously with the dividends on the Ordinary Shares. For so
long as an initial holder of Founder Preferred Shares (being the
Founder Entity together with its affiliates and permitted
transferees) holds 20 per cent. or more of the Founder Preferred
Shares in issue, such holder shall be entitled to nominate up to
three persons as directors of the Company and the Directors shall
appoint such persons. On Admission, the Directors so nominated and
appointed were James E. Lillie and Martin E. Franklin.
The Founder Preferred Shares will automatically convert into
Ordinary Shares on a one for one basis (subject to such adjustments
as the Directors in their absolute discretion determine to be fair
and reasonable in the event of a consolidation or sub-division of
the Ordinary Shares in issue after the date of Admission or
otherwise as determined in accordance with the Articles) on the
last day of the seventh full financial year of the Company
following completion of the Acquisition (or if any such date is not
a Trading Day, the first Trading Day immediately following such
date).
A holder of Founder Preferred Shares may require some or all of
his Founder Preferred Shares to be converted into an equal number
of Ordinary Shares (subject to such adjustments as the Directors in
their absolute discretion determine to be fair and reasonable in
the event of a consolidation or subdivision of the Ordinary Shares
in issue after the date of Admission or otherwise as determined in
accordance with the Articles) by notice in writing to the Company,
and in such circumstances those Founder Preferred Shares the
subject of such conversion request shall be converted into Ordinary
Shares five Trading Days after receipt by the Company of the
written notice. In the event of a conversion at the request of the
holder, no Annual Dividend Amount shall be payable in respect of
the converted Founder Preferred Shares for the Dividend Year in
which the date of conversion occurs.
If there is more than one holder of Founder Preferred Shares, a
holder of Founder Preferred Shares may exercise its rights
independently of any other holder of Founder Preferred Shares.
On the liquidation of the Company, an Annual Dividend Amount
shall be payable in respect of a shortened Dividend Year which
shall end on the Trading Day immediately prior to the date of
commencement of liquidation, following which the holders of Founder
Preferred Shares shall have the right to a pro rata share (together
with Shareholders) in the distribution of the surplus assets of the
Company.
The Founder Preferred Shares carry the same voting rights as are
attached to the Ordinary Shares being one vote per Founder
Preferred Share. Additionally, the Founder Preferred Shares alone
carry the right to vote on any Resolution of Members required,
pursuant to BVI law, to approve any matter in connection with an
Acquisition, or a merger or consolidation in connection with an
Acquisition.
Warrants
The Company has issued 125,032,500 Warrants to the purchasers of
both Ordinary Shares and Founder Preferred Shares (including the
32,500 Warrants that were issued to Non-Founder Directors in
connection with their appointment). Each Warrant has a term of 3
years following an Acquisition and entitles a Warrant holder to
subscribe for one-third of an Ordinary Share upon exercise.
Warrants will be exercisable in multiples of three for one Ordinary
Share at a price of US$11.50 per whole Ordinary Share.
The Warrants are also subject to mandatory redemption at US$0.01
per Warrant if at any time the Average Price per Ordinary Share
equals or exceeds US$18.00 for a period of ten consecutive trading
days (subject to any prior adjustment in accordance with the terms
of the Warrant Instrument).
As a contingent obligation to redeem for cash, a separate
liability of US$1,210,325 (US$0.01 per non-founder Warrant), which
represents the fair value, was recognized in the period ended 31
August 2018.
11. Share-based compensation
On 10 October 2017, the Company issued 162,500 options on its
Ordinary Shares to its non-executive directors that vest upon an
Acquisition; continued service until that time is required for
vesting. The options expire on the 5th anniversary following an
Acquisition and have an exercise price of $11.50 per share (subject
to such adjustment as the Directors consider appropriate in
accordance with the terms of the Option Deeds).
The Company estimated the grant date fair value of each option
at US$1.81 using a Black-Scholes model with the following
assumptions:
Share Price US$10.00
Exercise Price US$11.50
Risk-Free Rate 2.15%
Dividend Yield -
Probability of Acquisition 65.50%
Post-Acquisition Volatility 32.99%
Share-based compensation expense of US$171,570 has been
recognised for these options in the accompanying financial
statements for the period ended 31 August 2018. Unamortized
share-based compensation expense of US$122,553 will be recognised
over the remaining estimated vesting period of approximately 0.6
years.
Also, during the period from 18 September 2017 to 31 August
2018, the Company issued 32,500 Ordinary Shares and Warrants in
aggregate to independent Non-Founder Directors for their first
year's annual remuneration. The shares were valued at US$10.00 per
share and are being expensed over the one year service period.
12. Related party and material transactions
On 10 October 2017, the Company completed its initial public
offering. The offering raised gross proceeds of US$1.25 billion,
consisting of US$1.21 billion through the placement of Ordinary
Shares (with matching Warrants) at a placing price of US$10.00 per
Ordinary Share and a further US$40 million through the subscription
of 4,000,000 Founder Preferred Shares (with Warrants being issued
to the subscriber of Founder Preferred Shares on the basis on one
Warrant per Founder Preferred Share) by the Founder and Mariposa
Acquisition IV, LLC.
See discussion of Founder Preferred Shares in Note 10.
During the period, the Company issued the following shares,
warrants and options to the directors of the Company:
Director No. of No. of Founder No. of No. of
Ordinary Preferred Warrants Stock Options
Shares Shares
James E. Lillie(1) -------- ------------- -------- ---------
---------- --------------- ----------- ---------------
Martin E. Franklin(2) 6,000,000 4,000,000 10,000,000 ---------
---------- --------------- ----------- ---------------
Rory Cullinan 7,500 ------------- 7,500 37,500
---------- --------------- ----------- ---------------
Jean-Marc Huët 7,500 ------------- 7,500 37,500
---------- --------------- ----------- ---------------
Brian Kaufmann -------- ------------- -------- ---------
---------- --------------- ----------- ---------------
Thomas V. Milroy 7,500 ------------- 7,500 37,500
---------- --------------- ----------- ---------------
Lord Myners of Truro
CBE 10,000 ------------- 10,000 50,000
---------- --------------- ----------- ---------------
_____________________________________
[1] Mr. Lillie holds an indirect pecuniary interest of
approximately 20 per cent in the Founder Entity.
[2] Represents the interests held by the Founder Entity. Mr.
Franklin is a beneficial owner and the manager of the Founder
Entity and, as such, may be considered to have beneficial ownership
of all the Founder Entity's interests in the Company.
In addition, each director holds Warrants equal to the total of
Ordinary Shares and Founder Preferred Shares held. Refer to Note 6
and Note 11 for further details on the value of the Founder
Preferred Shares and Options.
Additionally Mariposa Capital, LLC received $267,742 in
management fees during the period from 18 September 2017 through 31
August 2018.
32,500 Ordinary Shares and Warrants in aggregate were issued to
independent Non-Founder Directors. Messrs Lillie, Franklin and
Kaufmann have elected not to receive director remuneration. The
other directors opted to have their first year's annual
remuneration settled by the issue of shares at US$10.00 per share,
which are being expensed over the one-year service period. The
associated expense recorded for each director during the period
from 18 September 2017 through 31 August 2018 was as follows:
Amount Amount
recorded
received as
up front expense
US$ US$
Rory Cullinan 75,000 65,625
Jean-Marc Huët 75,000 65,625
Thomas V. Milroy 75,000 65,625
Lord Myners of Truro CBE
(Chairman) 100,000 87,497
325,000 284,372
================== =====================
The Company incurred total issuance costs of US$22.8 million.
The details of these costs are as follows:
US$
Placement fees 20,500,000
Legal fees 1,872,865
Other expenses 325,819
Syndicate expenses 78,679
Total 22,777,363
=================
13. Financial risk management
The Company's policies with regard to financial risk management
are clearly defined and consistently applied. They are a
fundamental part of the Company's long-term strategy covering areas
such as foreign exchange risk, interest rate risk, credit risk,
liquidity risk and capital management.
Financial risk management is under the direct supervision of the
Board of Directors which follows policies covering specific areas,
such as foreign exchange risk, interest rate risk, credit risk, use
of derivative and non-derivative financial instruments and
investment of excess liquidity.
The Company does not intend to acquire or issue derivative
financial instruments for trading or speculative purposes and has
yet to enter into a derivative transaction.
Currency risk
The majority of the Company's financial cash flows are
denominated in Pounds Sterling and United States Dollars. Currently
the Company does not carry out any significant operations in
currencies outside the above. Foreign exchange risk arises from
recognised monetary assets and liabilities. The Company does not
hedge systematically its foreign exchange risk.
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Company is exposed to credit risk
from its financing activities, including deposits with banks and
financial institutions. Credit risk from balances with banks and
financial institutions is managed by the Board. Surplus funds are
invested in high credit quality financial institutions and in U.S
treasury bills. The Company has nominal credit risk related to U.S
treasury bills as they are backed by the United States
government.
Liquidity risk
The Company monitors liquidity requirements to ensure it has
sufficient cash to meet operational needs while maintaining
sufficient headroom. Such forecasting takes into consideration the
Company's debt financing plans (when applicable), compliance with
internal balance sheet ratio targets and external regulatory or
legal requirements if appropriate. The Company's accruals of
$139,377 are administrative in nature and due within three months
and the timing of the warrant redemption liability is uncertain
according to its terms as described in Note 10.
Cash flow interest rate risk
The Company has no long-term borrowings and as such is not
currently exposed to interest rate risk. To mitigate against the
risk of default by one or more of its counterparties, the Company
currently holds its assets in instruments available from the U.S
denominated money markets and/or at commercial banks that are at
least AA rated or better at the time of deposit. As of 31 August
2018, US$1.2 billion was held in U.S. treasury bills meeting the
terms of the U.S denominated money markets as described in the
Prospectus. The Board regularly monitors interest rates offered by,
and the credit ratings of, current and potential counterparties, to
ensure that the Company remains in compliance with its stated
investment policy for its cash balances. The Company does not
currently use financial instruments to hedge its interest rate
exposure.
Capital risk management
The Company's objectives when managing capital (currently
consisting of share capital and share premium) are to safeguard the
Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Company may adjust the amount of dividends paid to
shareholders, return capital to shareholders or issue new
shares.
Directors Legal advisers to the Company
James E. Lillie (English and US Law)
Martin E. Franklin Greenberg Traurig, LLP
Rory Cullinan 8th Floor
Jean-Marc Huët The Shard
Brian Kaufmann 32 London Bridge Street
Thomas V. Milroy London
Lord Myners of Truro CBE (Chairman) SE1 9SG
Legal advisers to the Company
Registered office (BVI Law)
Ritter House Carey Olsen
Wickhams Cay II Carey House
Road Town, Tortola Les Banques
VG1 110 St Peter Port
British Virgin Islands Guernsey GY1 4BZ
Administrator and secretary Depositary
International Administration Computershare Investor Services
Group (Guernsey) Limited PLC
Regency Court The Pavilions
Glategny Esplanade Bridgewater Road
St Peter Port Bristol
Guernsey BS 13 8AE
GY1 1WW
Principal bankers
Registrar Citigroup Global Markets Limited
Computershare Investor Services 33 Canada Square
(BVI) Limited London E14 5GL
Woodbourne Hall
PO Box 3162 UBS Limited
Road Town 5 Broadgate
Tortola London EC2M 2QS
British Virgin Islands
Independent auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKNDBNBDDNDD
(END) Dow Jones Newswires
November 13, 2018 08:50 ET (13:50 GMT)
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