01—Abstract
Summary
Summary of the 10-K filed March 13, 2019. Cited figures are marked; the original filing is the authoritative source.
This filing is not a conventional 10-K for an operating company.
It is the Annual Report of GS Acquisition Holdings Corp (a blank check / SPAC sponsored by GS DC Sponsor I LLC, an affiliate of Goldman Sachs and David M. Cote), not Vertiv Holdings Co (VRT). The company is a shell with no operations or revenue.
It completed a $690 milliona IPO of 69,000,000 units on June 12, 2018 (each unit: one Class A share and one-third of a warrant exercisable at $11.50), plus a $15.8 million private placement of 10,533,333 warrants. The proceeds, net of $24.15 million in deferred underwriting fees, are held in a trust account (about $696.2 million including $1.28 million of accrued dividends at year-end 2018), to be used for an initial business combination, targeted at the diversified industrial sector, within 24 months of closing (around June 2020). For 2018 the company reported net income of $5.03 million, driven by $7.41 million of dividend income on trust assets, offset by $1.04 million of G&A expenses and $1.34 million of income tax.
Only $835,544b of cash sat outside the trust, and the company held a $2.0 million sponsor liquidity commitment (dated March 11, 2019) to cover ordinary-course expenses through June 12, 2020. Management concluded disclosure controls were effective. Investors should understand that the equity value here is essentially the trust balance, and the core risks are the outcome of the deal search, conflicts of interest with Goldman Sachs and Mr. Cote (who is restricted by a Honeywell non-compete through 2023), potential dilution, and the warrants expiring worthless if no deal closes.
The filing also flags a conflict in the filing record itself: the Vertiv reference in the request does not match the document, which is a GS Acquisition Holdings 10-K. The analysis above reflects the document provided.
02—Key points
Key Highlights
- Blank check (SPAC) with no operations or revenue; shell company status confirmed; formed April 25, 2016 to pursue an initial business combination, targeting the diversified industrial sector
- IPO of 69,000,000 units at $10.00 (gross $690M) closed June 12, 2018; Class A shares began separate NYSE trading July 30, 2018 under GSAH
- Trust account held $696.2M at December 31, 2018 (about $10.09 per public share); redemption value of $10.00 per share is subject to creditor claims
- 2018 net income of $5.03M, all from trust dividend income ($7.41M), less $1.04M G&A and $1.34M income tax; EPS $0.06
- Liquidity is thin: $835,544 cash outside trust at year-end, plus a $2.0M sponsor commitment through June 12, 2020
- Substantial conflicts of interest: sponsor is a Goldman Sachs affiliate, director Raanan Agus is a GS employee, and CEO David Cote is subject to a Honeywell non-compete through 2023
- Sponsor and insiders hold 17,250,000 Class B founder shares (20% of outstanding), and 10,533,333 private warrants; founders control director elections until a deal closes
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed March 13, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.29B$0 | — |
| Cost of Revenue | $2.87B— | — |
| Gross Profit | $1.42B— | — |
| R&D Expenses | $198.30M— | — |
| SG&A Expenses | $1.22B— | — |
| Interest Expense | $288.80M— | — |
| Net Income | $5.03M-$1K | +394359.2% |
| EPS (Basic) | $-2.65— | — |
| EPS (Diluted) | $-2.65— | — |
| Shares Outstanding (Basic) | 118.26M— | — |
| Shares Outstanding (Diluted) | 118.26M— | — |
05—Questions
Frequently Asked Questions
Is this filing from Vertiv Holdings (VRT)?
No. The document is the 2018 Form 10-K of GS Acquisition Holdings Corp, a blank check company sponsored by a Goldman Sachs affiliate and led by David M. Cote. Vertiv was formed later through a combination with GS Acquisition Holdings in 2020, but this filing contains no Vertiv operating or financial information.
How much money is at stake for public investors?
The trust account held about $696.2M at December 31, 2018, including $1.28M of accrued dividends, or roughly $10.09 per public share. Public holders can redeem for their pro rata share of the trust, but that amount could be reduced by third-party creditor claims. Redemption rights are generally available only at business combination or liquidation within 24 months of the June 2018 closing.
What happens if the company does not complete a deal?
Under the charter, if no business combination is completed within 24 months of closing (by about June 12, 2020), the company will redeem all public shares at trust value (less up to $100,000 for dissolution costs) and dissolve. Warrants expire worthless, and the founder shares receive no liquidating distribution.
Why did the company report net income when it has no operations?
Income came entirely from dividends on the trust account invested in a Goldman Sachs Treasury money market fund, which generated $7.41M of dividend income in 2018. After G&A expenses of $1.04M and income tax of $1.34M, net income was $5.03M.
What are the main risks for investors?
Key risks include failing to find a suitable target within the deadline, dilution from founder and warrant shares, the warrants (exercise price $11.50) expiring worthless, Goldman Sachs and Cote conflicts that may steer opportunities elsewhere, limited ability to evaluate a target before a vote, and possible sponsor inability to cover creditor claims against the trust.
06—Continue