Shares of a frozen food company Tattooed chef (NASDAQ: TTCF) fell 13.9% in February, according to data provided by S&P Global Market Intelligence. During the month, the company repurchased all of its outstanding warrants and pre-announced financial results for the year 2020.
Tatoué Chef went public via an ad hoc acquisition company (After-sales service) in 2020. SPACs have a unique feature called public mandates. The holder has the right to redeem each warrant for one common share at a fixed price, generally $ 18 per share.
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Let’s say you decide to redeem your Tattooed Chef warrants. In this case, you just pay Tattooed Chef $ 18 per share. Considering the action is worth more than that right now, it’s a steal. However, PSPC companies like Tattooed Chef can set a final reimbursement date if predetermined criteria are met. In this case, either you close the transaction or you lose the right to buy back your mandate forever.
On January 14, Tattooed Chef announced that its redemption date would be February 16. More than 10.7 million warrants had been voluntarily redeemed before that date. More than 9.1 million were then repurchased by Tattooed Chef on February 16, bringing the total warrants exercised to nearly 19.9 million. It seems that over 3 million warrants have missed it. By the way, if you have any warrants in a PSPC share, it’s worth keeping track of the redemption dates.
Thanks in large part to the redeemed warrants, the tattooed chef’s cash balance now exceeds $ 200 million, which is great for investing in future growth. However, investors may not be very happy with the fact that there are currently 81.4 million shares. This is not really a dilution for the shareholders since warrants are a known factor when these PSPC companies go public. But not all investment services track the eventual number of diluted shares, which gives the wrong impression when warrants are ultimately redeemed.
Leaving these details aside, investors can now fully concentrate on the business of Tattooed Chef. The company has already provided preliminary financial results for the attention of shareholders. For 2020, he expects revenue growth of 76% year-over-year to $ 149 million. Fourth quarter revenue slowed somewhat, “only” up 47% from the fourth quarter of 2019. However, its preliminary fourth quarter revenue of $ 39.5 million is slightly higher than previous forecast of $ 39 million. of dollars.
With new public enterprises like Tattooed Chef, it is important for management to establish a balance sheet with investors. For me, the company is off to a good start, delivering results slightly ahead of expectations. Now, shareholders will be able to learn more about the company’s plans for 2021 when it releases its results on March 10.
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