UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_____________________

SCHEDULE 14A
(Rule 14a-101)

_____________________

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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Check the appropriate box:

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

SHIFT TECHNOLOGIES, INC.

(Name of Registrant as Specified In Its Charter)

________________________________________________________________________________________________________

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

   

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OFFER TO EXCHANGE
WARRANTS TO ACQUIRE SHARES OF CLASS A COMMON STOCK
OF
SHIFT TECHNOLOGIES, INC.
AND
CONSENT SOLICITATION

THE OFFER PERIOD AND YOUR RIGHT TO WITHDRAW WARRANTS THAT YOU TENDER WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON DECEMBER 23, 2020, UNLESS THE OFFER PERIOD IS EXTENDED. THE COMPANY MAY EXTEND THE OFFER PERIOD AT ANY TIME.

THE OFFER IS BEING MADE SOLELY UNDER THIS OFFER LETTER AND THE RELATED LETTER OF TRANSMITTAL AND CONSENT TO ALL HOLDERS OF PUBLIC WARRANTS.

Shift Technologies, Inc., a Delaware corporation (the “Company,” “we,” “us,” or “our”), is making an offer to all holders of the warrants described below to exchange during the Offer Period 0.25 shares of our Class A common stock, par value $0.0001 per share, and $1.00 in cash, without interest (together, the “Exchange Consideration”), for each Public Warrant (as defined below) tendered. The “Offer Period” is the period commencing on November 25, 2020 and ending at 12:00 midnight, Eastern Time, on December 23, 2020, or such later date to which the Company may extend the Offer (the “Expiration Date”). The offer is made upon the terms and conditions in this Offer to Exchange Letter (“Offer Letter”) and the related Letter of Transmittal and Consent (together, as each may be amended or supplemented from time to time, the “Offer”).

Warrants eligible to be tendered pursuant to the Offer include 7,532,494 publicly traded warrants to purchase our Class A common stock, which were publicly issued as warrants to purchase the Class A common stock of the Company, formerly known as Insurance Acquisition Corp. (“IAC”), in connection with the initial public offering of IAC’s securities on March 22, 2019 (the “IAC IPO”), which entitle such warrant holders to purchase one share of Class A common stock at an exercise price of $11.50, subject to adjustments (the “Public Warrants”). The Offer does not relate to the 212,500 warrants to purchase Class A common stock, which were privately issued in connection with the IAC IPO based on an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), referred to as the “Placement Warrants.”

Concurrently with the Offer, we also are soliciting consents (the “Consent Solicitation”) from holders of the Public Warrants to amend (the “Warrant Amendment”) the Warrant Agreement, dated as of March 19, 2019, by and between the Company and Continental Stock Transfer & Trust Company (the “Warrant Agreement”), which governs all of the Public Warrants, to permit the Company to require that each outstanding Public Warrant be converted into a combination of 0.225 shares of our Class A common stock and $0.90 in cash, without interest (the “Conversion Consideration”), which Conversion Consideration is approximately 10% less than the Exchange Consideration applicable to the Offer, thus eliminating all of the Public Warrants, as described in this Offer Letter. We are not seeking consents, and will not accept letters of transmittal to participate in the Offer and consent to the Warrant Amendment, until we have filed a definitive proxy statement with respect to the Consent Solicitation. If the Warrant Amendment is approved, we will not enter into the Warrant Amendment until at least 20 business days after the definitive proxy statement is sent to holders of Public Warrants.

One of the conditions to consummation of the Offer (which condition may be waived by the Company, in its sole discretion) is that holders of at least 65% of the outstanding Public Warrants are tendered in the Offer and Consent Solicitation. The execution and delivery of the Letter of Transmittal and Consent with respect to Public Warrants will constitute your consent to the Warrant Amendment and will also authorize and direct the Depository (as defined below) to execute and deliver a written consent to the Warrant Amendment on your behalf with respect to all Public Warrants that you tender. If you hold Public Warrants, you must deliver your consent to the proposed Warrant Amendment in order to participate in the Offer and Consent Solicitation.

 

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Our Class A common stock and Public Warrants are listed on The Nasdaq Capital Market (“Nasdaq”) under the symbols “SFT” and “SFTTW,” respectively. On November 24, 2020, the last reported sale prices on Nasdaq for our Class A common stock and Public Warrants were $7.32 and $2.70, respectively. As of November 24, 2020, 7,532,494 Public Warrants were outstanding. Warrant holders should obtain current market quotations for the shares of Class A common stock and Public Warrants before deciding whether to tender their Public Warrants pursuant to the Offer.

The Offer is to permit holders of Public Warrants to tender any and all outstanding Public Warrants in exchange for the Exchange Consideration for each Public Warrant tendered. A holder may tender as few or as many Public Warrants as the holder elects. No fractional shares of Class A common stock will be issued. Public Warrants may only be exchanged for whole shares of Class A common stock. In lieu of issuing fractional shares of Class A common stock to which any holder of Public Warrants would otherwise have been entitled, the Company will round the number of shares to which such holder is entitled, after aggregating all fractions, up to the next whole number of shares. Holders are also entitled to exercise their Public Warrants during the Offer Period in accordance with the terms of the Public Warrant.

If you elect to tender Public Warrants in response to the Offer and Consent Solicitation, please follow the instructions in this Offer Letter and the related documents, including the Letter of Transmittal and Consent. If you wish to exercise your Public Warrants in accordance with their terms, please follow the instructions for exercise included in the Public Warrants.

If you tender Public Warrants, you may withdraw your tendered Public Warrants at any time before the Expiration Date and retain them on their current terms or amended terms if the Warrant Amendment is approved, by following the instructions in this Offer Letter. In addition, tendered Public Warrants that are not accepted by us for exchange by January 25, 2021, may thereafter be withdrawn by you until such time as the Public Warrants are accepted by us for exchange. If you withdraw the tender of your Public Warrants, your consent to the Warrant Amendment will be withdrawn as a result.

Investing in the Company’s Class A common stock involves a high degree of risk. See “The Offer and Consent Solicitation, Section 13. Forward-Looking Statements; Risk Factors” for a discussion of information that you should consider before tendering Public Warrants in the Offer.

The Offer and Consent Solicitation will commence on November 25, 2020 (the date the materials relating to the Offer and Consent Solicitation are first sent to the Public Warrant holders) and end on the Expiration Date.

A detailed discussion of the Offer and Consent Solicitation is contained in this Offer Letter. We may amend or terminate the Offer and Consent Solicitation at any time with requisite notice, as further described in this Offer Letter. Holders of Public Warrants are strongly encouraged to read this entire package of materials, and the publicly-filed information about the Company referenced herein, as well as any supplemental disclosure regarding the Offer before making a decision regarding the Offer and Consent Solicitation.

THE COMPANY’S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND CONSENT SOLICITATION. HOWEVER, NONE OF THE COMPANY, ITS DIRECTORS, OFFICERS OR EMPLOYEES, NOR CONTINENTAL STOCK TRANSFER & TRUST COMPANY, THE DEPOSITARY FOR THE OFFER (“CST” OR THE “DEPOSITARY”), MORROW SODALI, THE INFORMATION AGENT FOR THE OFFER (THE “INFORMATION AGENT”), OR WELLS FARGO SECURITIES, LLC, THE COMPANY’S DEALER MANAGER FOR THE OFFER (“WELLS FARGO” OR THE “DEALER MANAGER”), MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD TENDER PUBLIC WARRANTS OR CONSENT TO THE WARRANT AMENDMENT. EACH HOLDER OF A PUBLIC WARRANT MUST MAKE HIS, HER OR ITS OWN DECISION AS TO WHETHER TO TENDER SOME OR ALL OF HIS, HER OR ITS PUBLIC WARRANTS AND CONSENT TO THE WARRANT AMENDMENT.

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the Offer Letter or passed upon the merits or fairness of the Offer Letter or the accuracy or adequacy of the disclosure in this Offer Letter or the Letter of Transmittal and Consent. Any representation to the contrary is a criminal offense.

 

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IMPORTANT PROCEDURES

If you want to tender some or all of your Public Warrants, you must do one of the following before the Expiration Date:

•        if your Public Warrants are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, contact the nominee and have the nominee tender your Public Warrants for you, which typically can be done electronically;

•        if you hold Public Warrant certificates in your own name, complete and sign the Letter of Transmittal and Consent according to its instructions, and deliver the Letter of Transmittal and Consent, together with any required signature guarantee, the certificates for your Public Warrants and any other documents required by the Letter of Transmittal and Consent, to CST; or

•        if you are an institution participating in DTC, called the “book-entry transfer facility” in this Offer Letter, tender your Public Warrants according to the procedure for book-entry transfer described under “The Offer and Consent Solicitation, Section 2. Procedure for Tendering Public Warrants.”

If you want to tender your Public Warrants, but:

•        your certificates for the Public Warrants are not immediately available or cannot be delivered to the Depositary;

•        you cannot comply with the procedure for book-entry transfer; or

•        your other required documents cannot be delivered to the Depositary before the expiration of the Offer,

then you can still tender your Public Warrants if you comply with the guaranteed delivery procedure described under “The Offer and Consent Solicitation, Section 2. Procedure for Tendering Public Warrants.”

TO TENDER YOUR PUBLIC WARRANTS, YOU MUST CAREFULLY FOLLOW THE PROCEDURES DESCRIBED IN THIS OFFER LETTER, THE LETTER OF TRANSMITTAL AND CONSENT AND THE OTHER DOCUMENTS DISCUSSED HEREIN RELATED TO THE OFFER.

NO FRACTIONAL SHARES OF CLASS A COMMON STOCK WILL BE ISSUED. PUBLIC WARRANTS MAY ONLY BE EXCHANGED FOR WHOLE SHARES. IN LIEU OF ISSUING FRACTIONAL SHARES OF CLASS A COMMON STOCK TO WHICH ANY HOLDER OF PUBLIC WARRANTS WOULD OTHERWISE HAVE BEEN ENTITLED, THE COMPANY WILL ROUND THE NUMBER OF SHARES TO WHICH SUCH HOLDER IS ENTITLED, AFTER AGGREGATING ALL FRACTIONS, UP TO THE NEXT WHOLE NUMBER OF SHARES.

PUBLIC WARRANTS NOT EXCHANGED FOR SHARES WILL EXPIRE IN ACCORDANCE WITH THEIR TERMS ON OCTOBER 12, 2025, AT 5:00 P.M EASTERN TIME, AND OTHERWISE REMAIN SUBJECT TO THEIR ORIGINAL TERMS, UNLESS THE WARRANT AMENDMENT IS APPROVED AND THE COMPANY ELECTS TO REQUIRE THAT ALL OUTSTANDING PUBLIC WARRANTS BE EXCHANGED FOR THE CONVERSION CONSIDERATION.

THE OFFER RELATES TO THE PUBLIC WARRANTS THAT WERE PUBLICLY ISSUED IN CONNECTION WITH THE IAC IPO, WHICH TRADE ON NASDAQ UNDER THE SYMBOL “SFTTW.” ANY AND ALL OUTSTANDING PUBLIC WARRANTS ARE ELIGIBLE TO BE TENDERED PURSUANT TO THE OFFER. AS OF NOVEMBER 24, 2020, THERE WERE 7,532,494 PUBLIC WARRANTS OUTSTANDING.

THE COMPANY RESERVES THE RIGHT TO EXERCISE ITS ABILITY TO REDEEM THE PUBLIC WARRANTS IF AND WHEN IT IS PERMITTED TO DO SO PURSUANT TO THE TERMS OF THE PUBLIC WARRANTS.

 

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If you have any questions or need assistance, you should contact Morrow Sodali, the Information Agent for the Offer. You may request additional copies of this Offer Letter, the Letter of Transmittal and Consent or the Notice of Guaranteed Delivery from the Information Agent. The Information Agent may be reached at:

470 West Avenue, 3rd Floor
Stamford, CT 06902
Individuals, please call toll-free: (800) 662-5200
Banks and brokerage firms, please call: (203) 658-9400
Email: SFTTW.info@investor.morrowsodali.com

The address of the Depositary is:

Continental Stock Transfer & Trust Company
1 State Street — 30th Floor
New York, NY 10004
Attention: Corporate Actions Department

 

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TABLE OF CONTENTS

 

Page

SUMMARY

 

1

THE OFFER AND CONSENT SOLICITATION

 

5

1. GENERAL TERMS

 

5

2. PROCEDURE FOR TENDERING PUBLIC WARRANTS

 

6

3. WITHDRAWAL RIGHTS

 

10

4. ACCEPTANCE OF PUBLIC WARRANTS AND ISSUANCE OF EXCHANGE CONSIDERATION

 

11

5. BACKGROUND AND PURPOSE OF THE OFFER

 

11

6. PRICE RANGE OF SHARES AND PUBLIC WARRANTS

 

13

7. SOURCE AND AMOUNT OF FUNDS

 

14

8. TRANSACTIONS AND AGREEMENTS CONCERNING THE COMPANY’S SECURITIES

 

14

9. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

16

10. FINANCIAL INFORMATION REGARDING THE COMPANY

 

17

11. CONDITIONS; TERMINATION; WAIVERS; EXTENSIONS; AMENDMENTS

 

22

12. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

 

23

13. FORWARD-LOOKING STATEMENTS; RISK FACTORS

 

28

14. THE DEPOSITARY, INFORMATION AGENT AND DEALER MANAGER

 

30

15. ADDITIONAL INFORMATION; MISCELLANEOUS

 

31

We are not making the Offer to, and will not accept any tendered Public Warrants from, Public Warrant holders in any jurisdiction where it would be illegal to do so. However, we may, at our discretion, take any actions necessary for us to make the Offer to Public Warrant holders in any such jurisdiction.

You should rely only on the information contained in this Offer Letter and in the Letter of Transmittal and Consent or to which we have referred you. We have not authorized anyone to provide you with information or to make any representation in connection with the Offer other than those contained in this Offer Letter or in the Letter of Transmittal and Consent. If anyone makes any recommendation or gives any information or representation regarding the Offer, you should not rely upon that recommendation, information or representation as having been authorized by us, our board of directors, the Depositary or the Information Agent for the Offer or the Dealer Manager for the Offer. You should not assume that the information provided in the Offer is accurate as of any date other than the date as of which it is shown, or if no date is otherwise indicated, the date of this Offer Letter.

We are relying on Section 3(a)(9) of the Securities Act to exempt the Offer from the registration requirements of the Securities Act. We have no contract, arrangement or understanding relating to the payment of, and will not, directly or indirectly, pay, any commission or other remuneration to any broker, dealer, salesperson, agent or any other person, including the Dealer Manager, for soliciting tenders in the Offer. In addition, none of the Depositary, the Information Agent, the Dealer Manager or any broker, dealer, salesperson, agent or any other person is engaged or authorized to express any statement, opinion, recommendation or judgment with respect to the relative merits and risks of the Offer. Our officers, directors and regular employees may solicit tenders from holders of the Public Warrants and will answer inquiries concerning the terms of the Offer, but they will not receive additional compensation for soliciting tenders or answering any such inquiries.

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SUMMARY

Unless otherwise stated in this Offer Letter, references to “we,” “our,” “us,” or the “Company” refer to Shift Technologies, Inc. An investment in our Class A common stock involves risks. You should carefully consider the information provided under the heading “Forward-Looking Statements; Risk Factors” beginning on page 28.

The Company

 

Shift Technologies, Inc., a Delaware corporation. Our principal executive offices are located at 2525 16th Street, Suite 316, San Francisco, California 94103. Our telephone number is (855) 575-6739.

The Public Warrants

 

As of November 24, 2020, the Company had 7,532,494 Public Warrants outstanding. Each Public Warrant is exercisable for one share of our Class A common stock, par value $0.0001 per share, at an exercise price of $11.50. By their terms, the Public Warrants will expire on October 12, 2025, at 5:00 p.m. Eastern Time, unless sooner exercised or redeemed by the Company in accordance with the terms of the Public Warrants. The Offer relates to the Public Warrants that were publicly issued in connection with the IAC IPO, which trade on Nasdaq under the symbol “SFTTW.” Any and all outstanding Public Warrants are eligible to be tendered pursuant to the Offer.

The Class A Common Stock

 

As of November 24, 2020, the Company had 82,106,969 shares of Class A common stock outstanding. The shares issuable upon exchange of the Public Warrants pursuant to the Offer represent approximately 2.29% of our outstanding shares of Class A common stock as of November 24, 2020.

Market Information

 

Our shares of Class A common stock and Public Warrants are listed on Nasdaq under the symbols “SFT” and “SFTTW,” respectively. On November 24, 2020, the last reported sale prices on Nasdaq for our Class A common stock and Public Warrants were $7.32 and $2.70, respectively.

The Offer

 

The Offer is to permit holders of Public Warrants to tender any and all outstanding Public Warrants in exchange for 0.25 shares of Class A common stock and $1.00 in cash, without interest. A holder may tender as few or as many Public Warrants as the holder elects. Public Warrants may only be exchanged for whole shares of Class A common stock. In lieu of issuing fractional shares of Class A common stock to which any holder of Public Warrants would otherwise have been entitled, the Company will round the number of shares to which such holder is entitled, after aggregating all fractions, up to the next whole number of shares. Holders may also exercise their Public Warrants during the Offer Period in accordance with the terms of the Public Warrants. See “The Offer and Consent Solicitation, Section 1. General Terms.”

   

The shares of Class A common stock to be exchanged for the Public Warrants have not been registered with the SEC. As described elsewhere in this Offer Letter, the issuance of such shares upon exchange of the Public Warrants is exempt from the registration requirements of the Securities Act pursuant to Section 3(a)(9) thereof. The shares of Class A common stock that you receive in the Offer will be freely-tradable, except by persons who are considered to be our affiliates, as that term is defined in the Securities Act.

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The Consent Solicitation

 

In order to tender the Public Warrants in the Offer and Consent Solicitation, holders are required to consent (by executing the Letter of Transmittal and Consent or requesting that their broker or nominee consent on their behalf) to an amendment to the Warrant Agreement governing the Public Warrants as set forth in the Warrant Amendment attached as Annex A. If approved, the Warrant Amendment would permit the Company to require that each Public Warrant that is outstanding upon the closing of the Offer be converted into 0.225 shares of Class A common stock and $0.90 in cash, without interest, which is a ratio 10% less than the Exchange Consideration applicable to the Offer, thus eliminating all of the Public Warrants. We are not seeking consents, and will not accept letters of transmittal to participate in the Offer and consent to the Warrant Amendment, until we have filed a definitive proxy statement with respect to the Consent Solicitation. If the Warrant Amendment is approved, we will not enter into the Warrant Amendment until at least 20 business days after the definitive proxy statement is sent to holders of Public Warrants.

U.S. Federal Income Tax
Consequences of the Offer and Warrant Amendment

 



For holders of Public Warrants who participate in the Offer, we intend to treat your exchange of Public Warrants for our cash and Class A common stock as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to which you should recognize gain, but not loss, on the exchange of Public Warrants for cash and Class A common stock. The amount of gain recognized should equal the lesser of (i) the amount of cash received and (ii) the amount by which the cash and the value of the Class A common stock received in the exchange exceeds the adjusted tax basis in the Public Warrants exchanged therefor. Your holding period for the shares received in the exchange should include your holding period for the surrendered Public Warrants. However, because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the exchange of Public Warrants for our Class A common stock, there can be no assurance in this regard and alternative characterizations are possible by the IRS or a court, including ones that would require U.S. holders to recognize taxable income.

We intend to treat the adoption of the Warrant Amendment as a deemed exchange of existing “old” Public Warrants for “new” Public Warrants with the modified terms pursuant to the Warrant Amendment. Further, we intend to treat such deemed exchange as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code, pursuant to which (i) you should generally not recognize any gain or loss on the deemed exchange of Public Warrants for “new” Public Warrants, (ii) your aggregate tax basis in the “new” Public Warrants deemed to be received in the exchange should generally equal your aggregate tax basis in your existing Public Warrants, and (iii) your holding period for the “new” Public Warrants deemed to be received in the exchange should generally include your holding period for the surrendered Public Warrants.

Public Warrant holders are urged to review the section entitled “Material U.S. Federal Income Tax Consequences” for more information regarding the Offer as well as the adoption of the Warrant Amendment.

Reasons for the Offer

 

The Offer and Consent Solicitation are being made to all holders of Public Warrants. The purpose of the Offer and Consent Solicitation is to reduce the number of shares of Class A common stock that would become outstanding upon the exercise of Public Warrants. See “The Offer and Consent Solicitation, Section 5.C. Background and Purpose of the Offer — Purpose of the Offer.”

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Expiration Date of Offer

 

12:00 midnight, Eastern Time, on December 23, 2020, or such later date to which we may extend the Offer. All Public Warrants and related paperwork must be received by the Depositary by this time, as instructed herein. See “The Offer and Consent Solicitation, Section 11. Conditions; Termination; Waivers; Extensions; Amendments.”

Withdrawal Rights

 

If you tender your Public Warrants and change your mind, you may withdraw your tendered Public Warrants at any time until the Expiration Date, as described in greater detail under “The Offer and Consent Solicitation, Section 3. Withdrawal Rights.”

Participation by Executive Officers
and Directors

 


To our knowledge, none of our directors or executive officers beneficially own Public Warrants, and therefore, will not participate in the Offer.

   

For more information, see “The Offer and Consent Solicitation, Section 5.D. Background and Purpose of the Offer — Interests of Directors and Executive Officers.”

Conditions of the Offer

 

The conditions of the Offer are:

   

i.   there shall not have been instituted, threatened in writing or be pending any action or proceeding before or by any court or governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the Offer, that is, or is reasonably likely to be, in our reasonable judgment, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects, or which would or might, in our reasonable judgment, prohibit, prevent, restrict or delay consummation of the Offer or materially impair the contemplated benefits to us of the Offer;

   

ii.  no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in our reasonable judgment, would or would be reasonably likely to prohibit, prevent, restrict or delay consummation of the Offer or materially impair the contemplated benefits to us of the Offer, or that is, or is reasonably likely to be, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects;

   

iii. in our reasonable judgment, there shall not have occurred or be reasonably likely to occur, any material adverse change to our business, operations, properties, condition, assets, liabilities, prospects or financial affairs; and

   

iv. there shall not have occurred:

   

a.  any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets;

   

b.  any material adverse change in the price of the shares of our Class A common stock in U.S. securities or financial markets;

   

c.  a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States;

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d.  any limitation (whether or not mandatory) by any government or governmental, regulatory or administrative authority, agency or instrumentality, domestic or foreign, or other event that, in our reasonable judgment, would or would be reasonably likely to affect the extension of credit by banks or other lending institutions; or

   

e.  a commencement or significant worsening of a war or armed hostilities or other national or international calamity, including but not limited to, catastrophic terrorist attacks against the United States or its citizens.

   

v.  at least 65% of the Public Warrants (which is the minimum number required to amend the Warrant Agreement) are tendered in the Offer and Consent Solicitation.

   

The foregoing conditions are solely for our benefit, and we may assert one or more of the conditions regardless of the circumstances giving rise to any such conditions. We may also, in our sole and absolute discretion, waive these conditions in whole or in part, subject to the potential requirement to disseminate additional information and extend the Offer, as described under “The Offer and Consent Solicitation, Section 11. Conditions; Termination; Waivers; Extensions; Amendments.” The determination by us as to whether any condition has been satisfied shall be conclusive and binding on all parties. The failure by us at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed a continuing right which may be asserted at any time and from time to time prior to the Expiration Date.

   

We may terminate the Offer if any of the conditions of the Offer are not satisfied prior to the Expiration Date. See “The Offer and Consent Solicitation, Section 11. Conditions; Termination; Waivers; Extensions; Amendments.”

Fractional Shares

 

No fractional shares of Class A common stock will be issued. Public Warrants may only be exchanged for whole shares of Class A common stock. In lieu of issuing fractional shares of Class A common stock to which any holder of Public Warrants would otherwise have been entitled, the Company will round the number of shares to which such holder is entitled, after aggregating all fractions, up to the next whole number of shares. See “The Offer and Consent Solicitation, Section 1.B. General Terms — Partial Tender Permitted.”

Board of Directors’ Recommendation

 

Our board of directors has approved the Offer and Consent Solicitation. However, none of the Company, its directors, officers or employees, nor the Depositary, the Information Agent or the Dealer Manager makes any recommendation as to whether to tender Public Warrants. You must make your own decision as to whether to tender some or all of your Public Warrants. See “The Offer and Consent Solicitation, Section 1.C. General Terms — Board Approval of the Offer; No Recommendation; Holder’s Own Decision.”

How to Tender Public Warrants

 

To tender your Public Warrants, you must complete the actions described herein under “The Offer and Consent Solicitation, Section 2. Procedure for Tendering Public Warrants” before the Offer expires.

Questions or Assistance

 

Please direct questions or requests for assistance, or for additional copies of this Offer Letter, Letter of Transmittal and Consent or other materials to the Information Agent. The contact information for the Information Agent is located on the back cover of this Offer Letter.

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THE OFFER AND CONSENT SOLICITATION

Risks of Participating In the Offer

Participation in the Offer involves a number of risks, including, but not limited to, the risks identified in Section 13 below. Holders should carefully consider these risks and are urged to speak with their personal financial, investment and/or tax advisors as necessary before deciding whether to participate in the Offer. In addition, we strongly encourage you to read this Offer Letter in its entirety and review the documents referred to in Sections 8, 10, 13 and 15.

1. GENERAL TERMS

The Offer is to permit holders of Public Warrants that were publicly issued in connection with the IAC IPO to tender any and all outstanding Public Warrants in exchange for 0.25 shares of our Class A common stock and $1.00 in cash, without interest, for each Public Warrant tendered. A holder may tender as few or as many Public Warrants as the holder elects. No fractional shares of Class A common stock will be issued. Public Warrants may only be exchanged for whole shares of Class A common stock. In lieu of issuing fractional shares of Class A common stock to which any holder of Public Warrants would otherwise have been entitled, the Company will round the number of shares to which such holder is entitled, after aggregating all fractions, up to the next whole number of shares. Holders may also exercise their Public Warrants during the Offer Period in accordance with the terms of the Public Warrants.

You may tender some or all of your Public Warrants on these terms. The Offer relates to the Public Warrants that were publicly issued in connection with the IAC IPO, which trade on Nasdaq under the symbol “SFTTW.” The Offer does not relate to the Placement Warrants that were privately issued in connection with the IAC IPO based on an exemption from registration under the Securities Act. Any and all outstanding Public Warrants are eligible to be tendered pursuant to the Offer. As of November 24, 2020, there were 7,532,494 Public Warrants outstanding.

If you elect to tender Public Warrants in response to the Offer, please follow the instructions in this Offer Letter and the related documents, including the Letter of Transmittal and Consent.

If you tender Public Warrants, you may withdraw your tendered Public Warrants before the Expiration Date and retain them on their terms by following the instructions herein.

The shares of Class A common stock to be exchanged for the Public Warrants have not been registered with the SEC. As described elsewhere in this Offer Letter, the issuance of such shares upon exchange of the Public Warrants is exempt from the registration requirements of the Securities Act pursuant to Section 3(a)(9) thereof. Under current interpretations of the staff of the Division of Corporation Finance of the SEC, securities that are obtained in a Section 3(a)(9) exchange generally assume the same character (i.e., restricted or unrestricted) as the securities that have been surrendered. The shares of Class A common stock that you receive in the Offer will be freely-tradable, except by persons who are considered to be our affiliates, as that term is defined in the Securities Act.

As part of the Offer, we are also soliciting from the holders of the Public Warrants their consent to the amendment of the Warrant Agreement. If approved, the Warrant Amendment would permit the Company to require that each Public Warrant that is outstanding upon the closing of the Offer be converted into 0.225 shares of Class A common stock and $0.90 in cash, without interest, which is a ratio 10% less than the Exchange Consideration applicable to the Offer, thus eliminating all of the Public Warrants. A copy of the Warrant Amendment is attached hereto as Annex A. We urge that you carefully read the Warrant Amendment in its entirety. Pursuant to the terms of the Warrant Agreement, the consent of holders of at least 65% of the outstanding Public Warrants is required to approve the Warrant Amendment.

Holders who tender Public Warrants in the Offer will automatically be deemed, without any further action, to have given their consent to approval of the Warrant Amendment (effective upon our acceptance of the Public Warrants tendered). The consent to the Warrant Amendment is a part of the Letter of Transmittal and Consent relating to the Public Warrants.

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You cannot tender any Public Warrants in the Offer without giving your consent to the Warrant Amendment. Thus, before deciding whether to tender any Public Warrants, you should be aware that a tender of Public Warrants may result in the approval of the Warrant Amendment.

We are not seeking consents, and will not accept letters of transmittal to participate in the Offer and consent to the Warrant Amendment, until we have filed a definitive proxy statement with respect to the Consent Solicitation. If the Warrant Amendment is approved, we will not enter into the Warrant Amendment until at least 20 business days after the definitive proxy statement is sent to holders of Public Warrants.

A. Period of Offer

The Offer and Consent Solicitation will only be open for a period beginning on November 25, 2020 and ending on the Expiration Date. We expressly reserve the right, in our sole discretion, at any time or from time to time, prior to the Expiration Date, to extend the period of time during which the Offer and Consent Solicitation is open. There can be no assurance, however, that we will exercise our right to extend the Offer and Consent Solicitation.

B. Partial Tender Permitted

If you choose to participate in the Offer, you may tender less than all of your Public Warrants pursuant to the terms of the Offer.

HOLDERS MAY ALSO EXERCISE THEIR PUBLIC WARRANTS DURING THE OFFER PERIOD IN ACCORDANCE WITH THE TERMS OF THE PUBLIC WARRANTS.

C. Board Approval of the Offer; No Recommendation; Holder’s Own Decision

THE COMPANY’S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND THE CONSENT SOLICITATION. HOWEVER, NONE OF THE COMPANY, ITS DIRECTORS, OFFICERS OR EMPLOYEES, NOR THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER, MAKES ANY RECOMMENDATION AS TO WHETHER TO TENDER PUBLIC WARRANTS AND CONSENT TO THE WARRANT AMENDMENT. EACH HOLDER OF A PUBLIC WARRANT MUST MAKE HIS, HER OR ITS OWN DECISION AS TO WHETHER TO TENDER SOME OR ALL OF HIS, HER OR ITS PUBLIC WARRANTS AND CONSENT TO THE WARRANT AMENDMENT.

D. Extensions of the Offer

We expressly reserve the right, in our sole discretion, and at any time or from time to time, prior to the Expiration Date, to extend the period of time during which the Offer and Consent Solicitation is open. There can be no assurance, however, that we will exercise our right to extend the Offer and Consent Solicitation. If we extend the Offer and Consent Solicitation, we will give notice of such extension by press release or other public announcement no later than 9:00 a.m., Eastern Time, on the next business day after the previously scheduled Expiration Date of the Offer and Consent Solicitation.

2. PROCEDURE FOR TENDERING PUBLIC WARRANTS

A. Proper Tender of Public Warrants

To validly tender Public Warrants pursuant to the Offer, a properly completed and duly executed Letter of Transmittal and Consent or photocopy thereof, together with any required signature guarantees, must be received by the Depositary at its address set forth on the last page of this document prior to the Expiration Date. The method of delivery of all required documents is at the option and risk of the tendering Public Warrant holders. If delivery is by mail, the Company recommends registered mail with return receipt requested (properly insured). In all cases, sufficient time should be allowed to assure timely delivery.

In the Letter of Transmittal and Consent, the tendering Public Warrant holder must: (i) set forth his, her or its name and address; (ii) set forth the number of Public Warrants tendered; and (iii) set forth the number of the Public Warrant certificate(s) representing such Public Warrants.

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Where Public Warrants are tendered by a registered holder of the Public Warrants who has completed either the box entitled “Special Payment/Issuance Instructions” or the box entitled “Special Delivery Instructions” on the Letter of Transmittal and Consent, all signatures on the Letter of Transmittal and Consent must be guaranteed by an “Eligible Institution.”

An “Eligible Institution” is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity which is an “eligible guarantor institution,” as that term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

If the Public Warrants are registered in the name of a person other than the signer of the Letter of Transmittal and Consent, the Public Warrants must be endorsed or accompanied by appropriate instruments of assignment, in either case signed exactly as the name(s) of the registered owner(s) appear on the Public Warrants, with the signature(s) on the Public Warrants or instruments of assignment guaranteed.

A tender of Public Warrants pursuant to the procedures described below in this Section 2 will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions of the Offer.

ALL DELIVERIES IN CONNECTION WITH THE OFFER, INCLUDING A LETTER OF TRANSMITTAL AND CONSENT AND PUBLIC WARRANTS, MUST BE MADE TO THE DEPOSITARY OR THE BOOK-ENTRY TRANSFER FACILITY.

NO DELIVERIES SHOULD BE MADE TO THE COMPANY, AND ANY DOCUMENTS DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY OR THE BOOK-ENTRY TRANSFER FACILITY AND THEREFORE WILL NOT BE DEEMED TO BE PROPERLY TENDERED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.

BOOK-ENTRY DELIVERY.    The Depositary will establish an account for the Public Warrants at The Depository Trust Company (“DTC”) for purposes of the Offer, within two business days after the date of this Offer Letter. Any financial institution that is a participant in DTC’s system may make book-entry delivery of Public Warrants by causing DTC to transfer such Public Warrants into the Depositary’s account in accordance with DTC’s procedure for such transfer. Even though delivery of Public Warrants may be effected through book-entry transfer into the Depositary’s account at DTC, a properly completed and duly executed Letter of Transmittal and Consent (or copy thereof), with any required signature guarantee, or an Agent’s Message (as defined below), and any other required documentation, must in any case be transmitted to and received by the Depositary at its address set forth on the last page of this Offer Letter prior to the Expiration Date, or the guaranteed delivery procedures set forth herein must be followed. Delivery of the Letter of Transmittal and Consent (or other required documentation) to DTC does not constitute delivery to the Depositary. The term “Agent’s Message” means a message, transmitted by DTC to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the participant in DTC exchanging the Public Warrants that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and Consent and that the Company may enforce such agreement against the participant. The term “Book-Entry Confirmation” means a timely confirmation of a book-entry transfer of Public Warrants into the Depositary’s account at DTC.

PUBLIC WARRANTS HELD IN STREET NAME.     If Public Warrants are held through a direct or indirect DTC participant, such as a broker, dealer, commercial bank, trust company or other financial intermediary, you must instruct that holder to tender your Public Warrants on your behalf. A letter of instructions is included in these materials, and as an exhibit to the Schedule TO. The letter may be used by you to instruct a custodian to tender and deliver Public Warrants on your behalf.

Unless the Public Warrants being tendered are delivered to the Depositary by the Expiration Date accompanied by a properly completed and duly executed Letter of Transmittal and Consent or a properly transmitted Agent’s Message, the Company may, at its option, treat such tender as invalid. Issuance of the Exchange Consideration upon tender of Public Warrants will be made only against the valid tender of Public Warrants.

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GUARANTEED DELIVERY.     If you want to tender your Public Warrants pursuant to the Offer, but (i) your Public Warrants are not immediately available, (ii) the procedure for book-entry transfer cannot be completed on a timely basis, or (iii) time will not permit all required documents to reach the Depositary prior to the Expiration Date, you can still tender your Public Warrants, if all of the following conditions are met:

(a)     the tender is made by or through an Eligible Institution;

(b)     the Depositary receives by hand, mail, overnight courier or fax, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery in the form the Company has provided with this Offer Letter (with signatures guaranteed by an Eligible Institution); and

(c)     the Depositary receives, within two (2) Nasdaq trading days after the date of its receipt of the Notice of Guaranteed Delivery:

(1)     the certificates for all tendered Public Warrants, or confirmation of receipt of the Public Warrants pursuant to the procedure for book-entry transfer as described above; and

(2)     a properly completed and duly executed Letter of Transmittal and Consent (or copy thereof), or any Agent’s Message in the case of a book-entry transfer, and any other documents required by the Letter of Transmittal and Consent.

In any event, the issuance of Exchange Consideration for Public Warrants tendered pursuant to the Offer and accepted pursuant to the Offer will be made only after timely receipt by the Depositary of Public Warrants, properly completed and duly executed Letters of Transmittal and Consent and any other required documents.

Public Warrants tendered by Notice of Guaranteed Delivery will be excluded from the determination of whether at least 65% of the Public Warrants (which is the minimum number required to amend the Warrant Agreement) have been tendered in the Offer and Consent Solicitation, unless such Public Warrants and other required documents are received by the Depositary by the Expiration Date.

B. Conditions of the Offer

The conditions of the Offer are:

i.       there shall not have been instituted, threatened in writing or be pending any action or proceeding before or by any court or governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the Offer, that is, or is reasonably likely to be, in our reasonable judgment, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects, or which would or might, in our reasonable judgment, prohibit, prevent, restrict or delay consummation of the Offer or materially impair the contemplated benefits to us of the Offer;

ii.      no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in our reasonable judgment, would or would be reasonably likely to prohibit, prevent, restrict or delay consummation of the Offer or materially impair the contemplated benefits to us of the Offer, or that is, or is reasonably likely to be, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects;

iii.     in our reasonable judgment, there shall not have occurred or be reasonably likely to occur, any material adverse change to our business, operations, properties, condition, assets, liabilities, prospects or financial affairs; and

iv.      there shall not have occurred:

a.       any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets;

b.       any material adverse change in the price of the shares of our Class A common stock in U.S. securities or financial markets;

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c.       a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States;

d.      any limitation (whether or not mandatory) by any government or governmental, regulatory or administrative authority, agency or instrumentality, domestic or foreign, or other event that, in our reasonable judgment, would or would be reasonably likely to affect the extension of credit by banks or other lending institutions; or

e.      a commencement or significant worsening of a war or armed hostilities or other national or international calamity, including but not limited to, catastrophic terrorist attacks against the United States or its citizens.

v.       at least 65% of the Public Warrants (which is the minimum number required to amend the Warrant Agreement) are tendered in the Offer and Consent Solicitation.

The foregoing conditions are solely for our benefit, and we may assert one or more of the conditions regardless of the circumstances giving rise to any such conditions. We may also, in our sole and absolute discretion, waive these conditions in whole or in part, subject to the potential requirement to disseminate additional information and extend the Offer, as described under “The Offer and Consent Solicitation, Section 11. Conditions; Termination; Waivers; Extensions; Amendments.” The determination by us as to whether any condition has been satisfied shall be conclusive and binding on all parties. The failure by us at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed a continuing right which may be asserted at any time and from time to time prior to the Expiration Date.

We may terminate the Offer if any of the conditions of the Offer are not satisfied prior to the Expiration Date. See “The Offer and Consent Solicitation, Section 11. Conditions; Termination; Waivers; Extensions; Amendments.”

C. Determination of Validity

All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for exchange of any tenders of Public Warrants will be determined by the Company, in its sole discretion, and its determination will be final and binding, subject to the judgment of any court that might provide otherwise. The Company reserves the absolute right, subject to the judgment of any court that might provide otherwise, to reject any or all tenders of Public Warrants that it determines are not in proper form or reject tenders of Public Warrants that may, in the opinion of the Company’s counsel, be unlawful. The Company also reserves the absolute right, subject to the judgment of any court that might provide otherwise, to waive any defect or irregularity in any tender of Public Warrants. The Company’s determination as to any matter may be subject to challenge by any security holder in any court of competent jurisdiction. Any determination of such a court of competent jurisdiction will be final and binding on all parties. Neither the Company nor any other person will be under any duty to give notice of any defect or irregularity in tenders, nor will any of them incur any liability for failure to give any such notice.

D. Tender Constitutes an Agreement

A tender of Public Warrants made pursuant to any method of delivery set forth herein will also constitute an acknowledgement by the tendering Public Warrant holder that: (i) the Offer is discretionary and may be extended, modified, suspended or terminated by us as provided herein; (ii) such Public Warrant holder is voluntarily participating in the Offer; (iii) the future value of our Public Warrants is unknown and cannot be predicted with certainty; (iv) such Public Warrant holder has read this Offer Letter; (v) such Public Warrant holder has consulted his, her or its tax and financial advisors with regard to how the Offer will impact the tendering Public Warrant holder’s specific situation; (vi) any foreign exchange obligations triggered by such Public Warrant holder’s tender of Public Warrants or receipt of the Exchange Consideration are solely his, her or its responsibility; and (vii) regardless of any action that we take with respect to any or all income/capital gains tax, social security or insurance tax, transfer tax or other tax-related items (“Tax Items”) related to the Offer and the disposition of Public Warrants, such Public Warrant holder acknowledges that the ultimate liability for all Tax Items is and remains his, her or its sole responsibility. In that regard, a tender of Public Warrants authorizes us to withhold all applicable Tax Items potentially payable by a tendering Public Warrant holder. Our acceptance for payment of Public Warrants tendered pursuant to the Offer will constitute a binding agreement between the tendering Public Warrant holder and us upon the terms and subject to certain conditions of the Offer.

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E. Signature Guarantees

Except as otherwise provided below, all signatures on a Letter of Transmittal and Consent by a person residing in or tendering Public Warrants in the United States must be guaranteed by an Eligible Institution. Signatures on a Letter of Transmittal and Consent need not be guaranteed if (i) the Letter of Transmittal and Consent is signed by the registered holder of the Public Warrant(s) tendered therewith and such holder has not completed the box entitled “Special Delivery Instructions” or “Special Payment/Issuance Instructions” in the Letter of Transmittal and Consent; or (ii) such Public Warrant(s) are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal and Consent.

3. WITHDRAWAL RIGHTS

Tenders of Public Warrants made pursuant to the Offer may be rescinded at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable. If the Company extends the period of time during which the Offer is open for any reason, then, without prejudice to the Company’s rights under the Offer and in a manner compliant with Rule 14e-1(c) of the Exchange Act, the Company may retain all Public Warrants tendered and tenders of such Public Warrants may not be rescinded, except as otherwise provided in this Section 3. Notwithstanding the foregoing, tendered Public Warrants may also be withdrawn if the Company has not accepted the Public Warrants for exchange by January 25, 2021.

To be effective, a written notice of withdrawal must be timely received by the Depositary at its address identified in this Offer Letter. Any notice of withdrawal must specify the name of the holder who tendered the Public Warrants for which tenders are to be withdrawn and the number of Public Warrants to be withdrawn. If the Public Warrants to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal must be submitted to the Depositary prior to release of such Public Warrants. In addition, such notice must specify the name of the registered holder (if different from that of the tendering Public Warrant holder). Withdrawal may not be cancelled, and Public Warrants for which tenders are withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, Public Warrants for which tenders are withdrawn may be tendered again by following one of the procedures described in Section 2 at any time prior to the Expiration Date.

A holder of Public Warrants desiring to withdraw tendered Public Warrants previously delivered through DTC should contact the DTC participant through which such holder holds his, her or its Public Warrants. In order to withdraw previously tendered Public Warrants, a DTC participant may, prior to the Expiration Date, withdraw its instruction previously transmitted through DTC’s ATOP procedures by (i) withdrawing its acceptance, or (ii) delivering to the Depositary by mail, hand delivery or fax, a notice of withdrawal of such instruction. Holders of Public Warrants submitting a tender via DTC’s ATOP procedures are deemed to consent to the Warrant Amendment. The valid revocation of a consent will constitute the concurrent valid withdrawal of the tendered Public Warrants as to which consent was delivered. The notices of withdrawal must contain the name and number of the DTC participant. A withdrawal of an instruction must be executed by a DTC participant as such DTC participant’s name appears on its transmission to which such withdrawal relates. A DTC participant may withdraw a tendered Public Warrant only if such withdrawal complies with the provisions described in this paragraph.

A holder who tendered his, her or its Public Warrants other than through DTC should send written notice of withdrawal to the Depositary specifying the name of the Public Warrant holder who tendered the Public Warrants being withdrawn. All signatures on a notice of withdrawal must be guaranteed by a Medallion Signature Guarantor; provided, however, that signatures on the notice of withdrawal need not be guaranteed if the Public Warrants being withdrawn are held for the account of an Eligible Institution. Withdrawal of a prior Public Warrant tender will be effective upon receipt of the notice of withdrawal by the Depositary. Selection of the method of notification is at the risk of the Public Warrant holder, and notice of withdrawal must be timely received by the Depositary.

All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Company, in its sole discretion, which determination will be final and binding, subject to the judgment of any court that might provide otherwise. The Company’s determination as to any matter may be subject to challenge by any security holder in any court of competent jurisdiction. Any determination of such a court of competent jurisdiction will be final and binding on all parties. Neither the Company nor any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification, subject to the judgment of any court that might provide otherwise.

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4. ACCEPTANCE OF PUBLIC WARRANTS AND ISSUANCE OF EXCHANGE CONSIDERATION

Upon the terms and subject to the conditions of the Offer, we will accept for exchange Public Warrants validly tendered as of the Expiration Date. The Exchange Consideration to be issued will be delivered promptly following the Expiration Date. In all cases, Public Warrants will only be accepted for exchange pursuant to the Offer after timely receipt by the Depositary of a properly completed and duly executed Letter of Transmittal and Consent (or copy thereof), or any Agent’s Message in the case of a book-entry transfer, and any other documents required by the Letter of Transmittal and Consent.

For purposes of the Offer, the Company will be deemed to have accepted for exchange Public Warrants that are validly tendered and for which tenders are not withdrawn, unless the Company gives written notice to the Public Warrant holder of its non-acceptance prior to the Expiration Date.

If you tender Public Warrants pursuant to the Offer, and you are not an affiliate of the Company, you will receive unlegended shares of Class A common stock, which will be freely tradable.

5. BACKGROUND AND PURPOSE OF THE OFFER

A. Information Concerning Shift Technologies, Inc.

Shift Technologies, Inc. (f/k/a Insurance Acquisition Corp) was originally incorporated in March 2018 as a special purpose acquisition company, formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more target businesses. On March 22, 2019, IAC consummated its initial public offering, following which its shares began trading on Nasdaq. On October 13, 2020, in a transaction referred to as the “Merger,” IAC consummated a merger with Shift Platform, Inc. (f/k/a Shift Technologies, Inc. (“Shift”)), whereby IAC Merger Sub, Inc., a direct wholly owned subsidiary of IAC, merged with and into Shift with Shift continuing as the surviving entity. In connection with the closing of the Merger, IAC changed its name to “Shift Technologies, Inc.” and its symbols on Nasdaq from “INSU,” and “INSUW,” to “SFT” and “SFTTW” for its shares of Class A common stock and Public Warrants, respectively.

We are a leading end-to-end auto ecommerce platform (based on volume) transforming the used car industry with a technology-driven, hassle-free customer experience. Our mission is to make car purchase and ownership simple — to make buying or selling a used car fun, fair, and accessible to everyone. We provide comprehensive, digital solutions throughout the car ownership lifecycle: finding the right car, having a test drive brought to you before buying the car, a seamless digitally-driven purchase transaction including financing and vehicle protection products, an efficient, digital trade-in/sale transaction, and a vision to provide high-value support services during car ownership. Each of these steps is powered by our software solutions, mobile transactions platform, and scalable logistics, combined with our five centralized inspection, reconditioning & storage centers, called Hubs.

Our principal executive offices are located at 2525 16th Street, Suite 316, San Francisco, California 94103, and our telephone number is (855) 575-6739.

B. Establishment of Offer Terms; Approval of the Offer

Our board of directors approved this Offer and Consent Solicitation and the Exchange Consideration and other terms of this Offer and Consent Solicitation. The board of directors set the Exchange Consideration in order to provide the holders of the Public Warrants with an incentive to exchange the Public Warrants in exchange for cash and a number of shares of Class A common stock that would be less dilutive than exercising the Public Warrants in accordance with their terms. The board believes that the Exchange Consideration provides holders of the Public Warrants with an incentive to exchange the Public Warrants for the Exchange Consideration because, based on recent trading prices of our Class A common stock and Public Warrants, the market value of the Exchange Consideration is greater than that of the Public Warrants, and holders who exchange Public Warrants, which are currently out of the money, will receive cash and shares of our Class A common stock that are freely tradeable.

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C. Purpose of the Offer

The Offer and Consent Solicitation is being made to all holders of Public Warrants. The purpose of the Offer is to reduce the number of shares of Class A common stock that would become outstanding upon the exercise of Public Warrants. The Company’s board of directors believes that by allowing holders of Public Warrants to exchange one Public Warrant for the Exchange Consideration, the Company can potentially reduce, or eliminate, the substantial number of shares of Class A common stock that would be issuable upon exercise of the Public Warrants, thus providing investors and potential investors with greater certainty as to the Company’s capital structure. For example, if all of the outstanding Public Warrants were validly tendered in the Offer, the Company would issue approximately 1,883,123 shares of Class A common stock in exchange for such tendered Public Warrants. However, if all of the outstanding Public Warrants were exercised for shares of Class A common stock pursuant to the terms of the Public Warrants, the Company would issue 7,532,494 shares in such exercise. The Public Warrants acquired pursuant to the exchange will be retired and cancelled. The Offer is not made pursuant to a plan to periodically increase any securityholder’s proportionate interest in the assets or earnings and profits of the Company.

D. Interests of Directors and Executive Officers

The names of the executive officers and directors of the Company are set forth below. The business address for each such person is: c/o Shift Technologies, Inc., 2525 16th Street, Suite 316, San Francisco, California 94103 and the telephone number for each such person is (855) 575-6739.

Name

 

Position

George Arison

 

Co-Chief Executive Officer and Chairman

Toby Russell

 

Co-Chief Executive Officer and President

Cindy Hanford

 

Chief Financial Officer

Sean Foy

 

Chief Operating Officer

Karan Gupta

 

Senior Vice President of Engineering

Victoria McInnis

 

Director

Kellyn Smith Kenny

 

Director

Jason Krikorian

 

Director

Emily Melton

 

Director

Adam Nash

 

Director

Manish Patel

 

Director

As of November 24, 2020, the Company had 82,106,969 outstanding shares of Class A common stock and 7,532,494 outstanding Public Warrants. The shares of Class A common stock issuable upon exchange of the outstanding Public Warrants pursuant to the Offer represent approximately 2.29% of our outstanding shares of Class A common stock as of November 24, 2020.

To our knowledge, none of our directors or executive officers beneficially own Public Warrants. The Company does not beneficially own any Public Warrants.

Except as set forth below, we have not and, to the best of our knowledge, none of our current directors, executive officers or any person holding a controlling interest in us has, engaged in any transactions involving the Public Warrants during the 60-day period prior to the date of this Offer Letter.

NONE OF THE COMPANY OR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES, OR THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER MAKES ANY RECOMMENDATION TO ANY HOLDER OF PUBLIC WARRANTS AS TO WHETHER TO EXERCISE SOME OR ALL OF THEIR PUBLIC WARRANTS. EACH HOLDER OF PUBLIC WARRANTS MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO EXERCISE THEIR PUBLIC WARRANTS.

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E. Plans, Proposals or Negotiations

Except as set forth below in Section 8 hereunder, there are no present plans, proposals or negotiations by the Company that relate to or would result in:

•        any extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries;

•        a purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries;

•        any material change in the present dividend rate or policy, or indebtedness or capitalization of the Company;

•        any change in the present board of directors or management of the Company, including, but not limited to, any plans or proposals to change the number or the term of directors, to fill any existing vacancies on the board or to change any material term of the employment contract of any executive officer;

•        any other material change in the Company’s corporate structure or business;

•        any class of equity security of the Company being delisted from a national securities exchange;

•        any class of equity security of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act;

•        the suspension of the Company’s obligation to file reports pursuant to Section 15(d) of the Exchange Act;

•        the acquisition by any person of additional securities of the subject company, or the disposition of securities of the subject company; or

•        changes in the Company’s Certificate of Incorporation or Bylaws or other governing instruments or other actions that could impede the acquisition of control of the Company by any person.

THE COMPANY’S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND CONSENT SOLICITATION. HOWEVER, NONE OF THE COMPANY, ITS DIRECTORS, OFFICERS OR EMPLOYEES, NOR THE DEPOSITARY, OR THE INFORMATION AGENT OR THE DEALER MANAGER, MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD TENDER ANY PUBLIC WARRANTS AND CONSENT TO THE WARRANT AMENDMENT. EACH HOLDER OF A PUBLIC WARRANT MUST MAKE HIS, HER OR ITS OWN DECISION AS TO WHETHER TO TENDER SOME OR ALL OF HIS, HER OR ITS PUBLIC WARRANTS AND CONSENT TO THE WARRANT AMENDMENT.

6. PRICE RANGE OF SHARES AND PUBLIC WARRANTS

Our shares of Class A common stock and Public Warrants are listed on Nasdaq under the symbols “SFT” and “SFTTW,” respectively. Prior to October 15, 2020, our shares of Class A common stock and Public Warrants were listed on Nasdaq under the symbols “INSU” and “INSUW,” respectively. On November 24, the last reported sale prices for shares of Class A common stock and the Public Warrants were $7.32 and $2.70, respectively.

The Company recommends that holders consider current market quotations for the shares of Class A common stock and Public Warrants, among other factors, before deciding whether or not to tender their Public Warrants.

 

Shares

 

Public Warrants

   

High

 

Low

 

High

 

Low

   

$

 

$

 

$

 

$

Fiscal 2019

               

Third Quarter(1)

 

9.85

 

9.70

 

1.00

 

0.55

Fourth Quarter

 

9.96

 

9.84

 

0.93

 

0.75

Fiscal 2020

 

10.00

 

9.85

 

1.19

 

0.93

First Quarter

 

10.10

 

9.519

 

1.27

 

0.60

Second Quarter

 

14.91

 

10.01

 

10.00

 

0.50

Third Quarter

 

14.49

 

10.51

 

4.135

 

1.61

Fourth Quarter(2) (through November 24, 2020)

 

12.75

 

6.40

 

3.49

 

1.88

____________

(1)      Beginning on May 13, 2019.

(2)      The Merger closed on October 13, 2020. Beginning on October 15, 2020, our common stock and Public Warrants began trading under the symbols “SFT” and “SFTTW,” respectively.

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The table below indicates the implied Public Warrant value at various hypothetical stock prices based on the exchange ratio of 0.25 shares per Public Warrant. The implied Public Warrant value is calculated by multiplying the prices per share in the table below by the number of shares to be received as part of the Exchange Consideration and the cash to be received as part of the Exchange Consideration. The stock prices below are included for illustrative purposes only and there can be no assurance that the shares will trade at such prices prior to, at or after the expiration of the Offer.

Price per Share

 

Implied Public Warrant Value

$8.00

 

$3.00

$8.20

 

$3.05

$8.40

 

$3.10

$8.60

 

$3.15

$8.80

 

$3.20

$9.00

 

$3.25

$9.20

 

$3.30

$9.40

 

$3.35

$9.60

 

$3.40

$9.80

 

$3.45

$10.00

 

$3.50

$10.20

 

$3.55

$10.40

 

$3.60

$10.60

 

$3.65

$10.80

 

$3.70

$11.00

 

$3.75

$11.20

 

$3.80

$11.40

 

$3.85

$11.60

 

$3.90

$11.80

 

$3.95

$12.00

 

$4.00

7. SOURCE AND AMOUNT OF FUNDS

We will use existing funds, including proceeds from the PIPE Investment (defined below) and the release of cash previously invested in marketable securities held in a trust account prior to the closing of the Merger, to fund the cash portion of the Exchange Consideration and to pay expenses associated with the Offer and Consent Solicitation.

8. TRANSACTIONS AND AGREEMENTS CONCERNING THE COMPANY’S SECURITIES

Except as described herein, none of the Company or, to our knowledge, any of our affiliates, directors or executive officers, is a party to any contract, arrangement, understanding or agreement with any other person relating, directly or indirectly, to the Offer or with respect to any of our securities, including any contract, arrangement, understanding or agreement concerning the transfer or the voting of the securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations.

Warrant Agreement

In connection with our initial public offering and the appointment of a warrant agent for the Public Warrants, we entered into a warrant agreement (the “Warrant Agreement”) with CST on March 19, 2019. The Warrant Agreement provides for the various terms, restrictions and governing provisions that dictate all of the terms of the Public Warrants.

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PIPE Investment

In connection with the Merger, pursuant to subscription agreements dated June 29, 2020 by and between the Company and the investors party thereto (the “PIPE Investors”), with respect to a private placement of Class A common stock, the Company issued and sold to the PIPE Investors 18,900,000 shares of Class A common stock at a price per share of $10.00 (the “PIPE Investment”). The PIPE Investment was conditioned on the substantially concurrent closing of the Merger and other customary closing conditions. The proceeds from the PIPE Investment will be used, among other things, for general corporate purposes, which may include, but not be limited to, working capital for operations, repayment of indebtedness, capital expenditures and future acquisitions.

Amended and Restated Registration Rights Agreement

At the closing of the Merger, the Company entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with Insurance Acquisition Sponsor, LLC, Dioptra Advisors, LLC (together with Insurance Acquisition Sponsor, LLC, “IAC Sponsor”), Cantor Fitzgerald & Co., and certain other initial stockholders of IAC, requiring the Company to, among other things, file a resale shelf registration statement on behalf of the stockholders promptly after the closing of the Merger. The Amended and Restated Registration Rights Agreement also provides certain demand rights and piggyback rights to the stockholders, subject to underwriter cutbacks and issuer blackout periods.

Sponsor Letter Agreement

Upon the closing of the Merger, we entered into the Sponsor Letter Agreement with IAC Sponsor, pursuant to which IAC Sponsor will receive certain board observer rights. Pursuant to the Sponsor Letter Agreement, for so long as Sponsor, Cohen & Company, LLC, or any of their respective affiliates (as such term is defined in Rule 405 of the Securities Act) continues to hold shares representing at least two percent (2%) of the total voting power of shares entitled to vote in the election of directors of the Company issued and outstanding, IAC Sponsor will have the right to designate an individual to attend and observe the Company’s board meetings.

Stockholder Letter Agreement

Upon the closing of the Merger, we entered into the Stockholder Letter Agreement with certain Shift stockholders, providing for certain restrictions on transfer applicable to the shares issued in connection with the Merger. Generally, the Stockholder Letter Agreement prohibits, until November 15, 2021, the stockholders from (i) selling, offering to sell, contracting or agreeing to sell, hypothecating, pledging, granting any option to purchase or otherwise disposing of or agreeing to dispose of, directly or indirectly, or establishing or increasing a put equivalent position or liquidating or decreasing a call equivalent position within the meaning of Section 16 of the Exchange Act, and the rules and regulations of the SEC promulgated thereunder with respect to the closing date Merger consideration, (ii) entering into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any closing date Merger consideration, whether any such transaction is to be settled by delivery of closing date Merger consideration or other securities, in cash or otherwise, or (iii) publicly announcing any intention to effect any transaction specified in the immediately preceding subsections (i) or (ii); provided that after May 15, 2021, these restrictions may become subject to certain exceptions, depending on whether the closing share price of our common stock reaches certain threshold levels.

Other Agreements and Transactions

The Company has retained CST to act as the Depositary, Morrow Sodali to act as the Information Agent and Wells Fargo to act as the Dealer Manager. Directors, officers and employees of either us or our affiliates or the Information Agent may contact holders of Public Warrants by hand, mail or telephone regarding the Offer and may request brokers, dealers and other nominees to forward the Offer Letter and related materials to beneficial owners of the Public Warrants. Such directors, officers and employees will not be specifically compensated for providing such services. CST and Morrow Sodali will receive reasonable and customary compensation for their respective services in connection with the Offer, plus reimbursement for out-of-pocket expenses, and will be indemnified by the Company against certain liabilities and expenses in connection therewith.

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We have no contract, arrangement or understanding relating to the payment of, and will not, directly or indirectly, pay, any commission or other remuneration to any broker, dealer, salesperson, agent or any other person for soliciting tenders in the Offer.

9. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to the Company regarding beneficial ownership of shares of Class A common stock of the Company immediately following the closing of the Merger by:

•        each person who is the beneficial owner of more than 5% of the outstanding shares of the Company’s common stock;

•        each of the Company’s executive officers and directors; and

•        all executive officers and directors of the Company as a group.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.

Beneficial ownership of common stock of the Company is based on 82,106,969 shares of common stock of the Company issued and outstanding as of November 24, 2020.

Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned.

 

Class A Common Stock

Name and Address of Beneficial Owners

 

Number

 

% of class

Directors and Executive Officers:(1)

       

 

George Arison(2)

 

1,595,413

 

1.9

%

Toby Russell(3)

 

1,296,541

 

1.6

%

Cindy Hanford(4)

 

47,395

 

*

 

Sean Foy(5)

 

250,753

 

*

 

Victoria McInnis(6)

 

15,000

 

*

 

Kellyn Smith Kenny

 

 

 

Jason Krikorian(7)

 

2,394,785

 

2.9

%

Emily Melton(8)

 

2,206,309

 

2.7

%

Adam Nash(9)

 

24,484

 

*

 

Manish Patel(10)

 

2,208,617

 

2.7

%

All post-Merger directors and executive officers as a group (eleven individuals)

 

10,143,736

 

12.34

%

5% or Greater Beneficial Owners:

       

 

Cohen & Company, LLC(11)

 

6,760,206

 

8.2

%

Lithia Motors, Inc.(12)

 

13,813,238

 

16.8

%

____________

*        Less than 1 percent.

(1)      Unless otherwise noted, the business address of each of the following individuals is c/o Shift Technologies, Inc., 2525 16th Street, Suite 316, San Francisco, CA 94103.

(2)      Includes 177,545 shares of Class A common stock allocated to Mr. Arison and held in escrow, pursuant to the terms of the Merger Agreement. Includes 163,587 shares of Class A common stock, including their allocation of shares of Class A common stock held in escrow, held by Mr. Arison’s family members that Mr. Arison exercises voting control over pursuant to a permanent voting proxy, which shares Mr. Arison disclaims beneficial ownership of. Includes 336,042 shares underlying stock options which are exercisable within 60 days of October 30, 2020. If exercised in full as of the date of this table, 112,014 shares would be subject to a right of repurchase in our favor.

(3)      Includes 109,944 shares of Class A common stock allocated to Mr. Russell and held in escrow, pursuant to the terms of the Merger Agreement. Includes 525,964 shares underlying stock options which are exercisable within 60 days of October 30, 2020. If exercised in full as of the date of this table, 175,167 shares would be subject to a right of repurchase in our favor.

(4)      Includes 47,395 shares underlying stock options which are exercisable within 60 days of October 30, 2020. If exercised in full as of the date of this table, 30,610 shares would be subject to a right of repurchase in our favor.

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(5)      Includes 17,949 shares of Class A common stock allocated to Mr. Foy and held in escrow, pursuant to the terms of the Merger Agreement. Includes 124,952 shares underlying stock options which are exercisable within 60 days of October 30, 2020. If exercised in full as of the date of this table, 78,360 shares would be subject to a right of repurchase in our favor.

(6)      Shares are held directly by the Victoria McInnis Trust Dated March 8, 2002, Victoria McInnis Trustee.

(7)      Shares are held directly by DCM Affiliates Fund VIII, L.P., DCM Ventures China Fund (DCM VIII), L.P., DCM VIII, L.P., and A-Fund, L.P. As a General Partner of DCM Venture Capital, Mr. Krikorian may be deemed to share beneficial ownership of the shares of common stock owned by such entities. Mr. Krikorian disclaims beneficial ownership of such shares.

(8)      Shares are held directly by Threshold Partners and Threshold Ventures I. As a managing partner of Threshold Ventures, Ms. Melton may be deemed to share beneficial ownership of the shares of common stock owned by such entities. Ms. Melton disclaims beneficial ownership of such shares.

(9)      Includes 262 shares of Class A common stock allocated to Mr. Nash and held in escrow, pursuant to the terms of the Merger Agreement. Shares are held directly by the Adam and Carolyn Nash Family Trust. Includes 22,648 shares underlying stock options which are exercisable within 60 days of October 30, 2020. If exercised in full as of the date of this table, 22,648 shares would be subject to a right of repurchase in our favor.

(10)    Shares are held directly by Highland Capital Partners 9 Limited Partnership, Highland Capital Partners 9-B Limited Partnership and Highland Entrepreneurs’ Fund 9 Limited Partnership. As a general partner of Highland Capital Partners, Mr. Patel may be deemed to share beneficial ownership of the shares of common stock owned by such entities. Mr. Patel disclaims beneficial ownership of such shares.

(11)    Includes 2,431,750 shares held directly by Insurance Acquisition Sponsor, LLC and 187,500 shares underlying currently exercisable private placement warrants held directly thereby, and 3,540,956 shares held directly by Dioptra Advisors, LLC, each of which is managed by Cohen & Company, LLC. Also includes the 600,000 shares that INSU Pipe Sponsor, LLC, an entity managed by Cohen & Company, LLC, has purchased in the PIPE Investment.

(12)    Includes 1,970,824 shares of Class A common stock allocated to Lithia Motors, Inc. and held in escrow, pursuant to the terms of the Merger Agreement. The address of Lithia is 150 N. Bartlett Street, Medford, Oregon 97501.

10. FINANCIAL INFORMATION REGARDING THE COMPANY

The financial information included under Part II, Item 8 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, under Part I, Item 1 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and in the Company’s Form 8-K filed on October 14, 2020, as amended on November 16, 2020 (the “Super 8-K”), is incorporated herein by reference. The sections of the 2020 S-1 (defined below) entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Shift Technologies, Inc. Financial Statements — Condensed Consolidated Financial Statements as of and for the periods ended September 30, 2020 and 2019—” are also incorporated herein by reference. The full text of all such filings with the SEC, as well as other documents we have filed with the SEC prior to, or will file with the SEC subsequent to, the filing of the Tender Offer Statement on Schedule TO can be accessed electronically on the SEC’s website at www.sec.gov.

Selected Historical Consolidated Financial Information of IAC

The following table sets forth selected historical financial information derived from IAC’s unaudited financial statements as of and for the three and nine months ended September 30, 2020 and 2019 and IAC’s audited financial statements as of and for the year ended December 31, 2019 and for the period from March 13, 2018 (inception) through December 31, 2018. Such financial information should be read in conjunction with the unaudited and audited financial statements and related notes included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and the proxy statement/prospectus on Form 424B3, filed with the SEC on September 24, 2020 (the “Merger Prospectus”), respectively.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should carefully read the following summary financial information in conjunction with the section

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entitled “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and IAC’s financial statements and the related notes Merger Prospectus.

Selected Historical Consolidated Financial Information of IAC

(in thousands, except share and per-share data)

 

Three
Months
Ended
September 30, 2020

 

Three
Months
Ended
September 30, 2019

 

Nine
Months
Ended
September 30, 2020

 

Nine
Months
Ended
September 30, 2019

 

Year
Ended December 31, 2019

 

For the
Period from March 13,
2018
(inception) Through December 31, 2018

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

$

1,691

 

 

$

221

 

 

$

3,415

 

 

$

521

 

 

$

764

 

 

$

2

 

Loss from operations

 

 

(1,691

)

 

 

(221

)

 

 

(3,415

)

 

 

(521

)

 

 

(764

)

 

 

(2

)

Other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income on marketable
securities

 

 

4

 

 

 

939

 

 

 

709

 

 

 

1,897

 

 

 

2,593

 

 

 

 

Provision for income taxes

 

 

12

 

 

 

(188

)

 

 

(120

)

 

 

(370

)

 

 

(502

)

 

 

 

Net income (loss)

 

$

(1,675

)

 

$

530

 

 

$

(2,826

)

 

$

1,006

 

 

$

1,327

 

 

$

(2

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net (loss) income per share, Class A

 

$

0.00

 

 

$

0.05

 

 

$

0.03

 

 

$

0.09

 

 

$

0.13

 

 

$

 

Weighted average shares outstanding, of Class A redeemable common stock, basic and diluted

 

 

15,065,000

 

 

 

15,065,000

 

 

 

15,065,000

 

 

 

15,065,000

 

 

 

15,065,000

 

 

 

 

Basic and diluted net (loss) income per share, Class A and Class B

 

$

(0.30

)

 

$

(0.03

)

 

$

(0.59

)

 

$

(0.07

)

 

$

(0.10

)

 

$

(0.01

)

Weighted average shares outstanding, of Class A and Class B non-redeemable common stock, basic and diluted

 

 

5,588,333

 

 

 

5,588,833

 

 

 

5,588,333

 

 

 

5,462,872

 

 

 

5,462,872

 

 

 

4,508,333

 

 

As of September 30, 2020

 

As of September 30, 2019

 

As of
December 31,
2019

 

As of December 31, 2018 (for the Period from March 13, 2018 (inception) Through December 31, 2018)

Balance Sheet Data:

 

 

   

 

   

 

   

 

 

Cash

 

$

129

 

$

675

 

$

407

 

$

25

Cash and marketable securities held in Trust Account

 

$

152,966

 

$

151,608

 

$

153,238

 

$

Total assets

 

$

153,455

 

$

152,445

 

$

153,719

 

$

126

Common stock subject to possible redemption

 

$

138,762

 

$

140,737

 

$

141,588

 

$

Total stockholders’ equity

 

$

5,000

 

$

5,000

 

$

5,000

 

$

23

Selected Historical Consolidated Financial Information of Shift

The following table sets forth selected historical consolidated financial information of Shift. Shift’s income statement data for the year ended December 31, 2019, 2018 and 2017 and balance sheet data as of December 31, 2019 and 2018 are derived from Shift’s audited consolidated financial statements included in the Merger Prospectus.

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Table of Contents

The following information is only a summary and should be read in conjunction with Shift’s consolidated financial statements and related notes contained in the Merger Prospectus and information discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included as Exhibit 99.2 to Amendment No. 1 to Form 8-K, filed with the SEC on November 16, 2020. The historical results included below, in the Merger Prospectus, and in Super 8-K are not indicative of Shift’s future performance.

Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)

 

Year Ended December 31,

   

2019

 

2018

 

2017

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Ecommerce revenue – net

 

$

135,277

 

 

$

122,889

 

 

$

88,870

 

Other revenue

 

 

3,150

 

 

 

2,617

 

 

 

1,931

 

Wholesale vehicle revenue

 

 

27,808

 

 

 

6,306

 

 

 

3,737

 

Total revenue

 

 

166,235

 

 

 

131,812

 

 

 

94,538

 

Cost of sales

 

 

167,997

 

 

 

126,423

 

 

 

89,999

 

Gross profit (loss)

 

 

(1,762

)

 

 

5,389

 

 

 

4,539

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

71,860

 

 

 

44,697

 

 

 

28,570

 

Depreciation and amortization

 

 

3,221

 

 

 

2,530

 

 

 

1,567

 

Total operating expenses

 

 

75,081

 

 

 

47,227

 

 

 

30,137

 

Loss from operations

 

 

(76,843

)

 

 

(41,838

)

 

 

(25,598

)

Interest expense

 

 

(5,461

)

 

 

(3,171

)

 

 

(261

)

Interest and other income

 

 

1,821

 

 

 

143

 

 

 

213

 

Net loss and comprehensive loss attributable to common stockholders

 

$

(80,483

)

 

$

(44,866

)

 

$

(25,646

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(2.33

)

 

$

(1.71

)

 

$

(0.89

)

Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted

 

 

34,579,059

 

 

 

26,172,848

 

 

 

28,718,469

 

 

Three Months Ended,
September 30,

 

Nine Months Ended
September 30,

   

2020

 

2019

 

2020

 

2019

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ecommerce revenue – net

 

$

48,486

 

 

$

36,914

 

 

$

97,870

 

 

$

112,645

 

Other revenue

 

 

2,036

 

 

 

954

 

 

 

3,933

 

 

 

2,627

 

Wholesale vehicle revenue

 

 

9,392

 

 

 

7,989

 

 

 

20,504

 

 

 

23,612

 

Total revenue

 

 

59,914

 

 

 

45,857

 

 

 

122,307

 

 

 

138,884

 

Cost of sales