Equity and Warrants

12 Months Ended

Dec. 31, 2021

Equity and Warrants

Equity and Warrants

8. Equity and Warrants

Shares Authorized

As of December 31, 2021, the Company had authorized a total of 410,000,000 shares for issuance with 400,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock.

Common Shares Outstanding and Common Stock Equivalents

The following table summarizes our fully diluted capital structure:

	December 31,
	2021	2020
Issued and outstanding common shares	95,911,597	75,519,151
Earnout common shares (Note 1 and Note 9)	2,050,000	6,150,000
Total common shares issued and outstanding	97,961,597	81,669,151
Common shares reserved for future issuance:
Public warrants	—	8,625,000
Private warrants	1,795,700	5,700,000
Common stock options outstanding	4,822,992	6,414,611
Restricted stock units and awards (Note 9)	2,717,154	2,581,902
2020 Equity Plan pool reserved for future issuance (Note 9)	8,126,263	11,137,824
Convertible senior notes, due 2026(1)	16,998,130	—
Total shares of common stock outstanding and reserved for future issuance	132,421,836	116,128,488

(1) In connection with the September 16, 2021 issuance of the 2026 Notes, the Company used a portion of the proceeds to pay for the capped call transactions, which are expected to generally reduce the potential dilution to the Company’s common stock. The capped call transactions impact the number of shares that may be issued by effectively increasing the conversion price for the Company from $25 per share to approximately $37.74 per share, which would result in 11,261,261 potentially dilutive shares instead of the shares reported in this table.

The table above excludes common stock contingently issuable in connection with acquisitions described in Note 12. Such common stock is issuable to the extent specified operational milestones are achieved or market conditions are met in the future. See Notes 4 and 12 for more information.

Warrants

PTAC Warrants

Upon completion of the Merger with PTAC on December 23, 2020, the Company assumed 8,625,000 public warrants and 5,700,000 private warrants to purchase an aggregate 14,325,000 shares of common stock, which were outstanding as of December 31, 2020. Each warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment, commencing 30 days after the completion of the Merger, and expiring on December 23, 2025, which is five years after the Merger.

The Company may call the public warrants for redemption (excluding the private warrants), in whole, at a price of $0.01 per warrant:

●at any time while the public warrants are exercisable,

●upon not less than 30 days’ prior written notice of redemption to each public warrant holder,

● if, and only if, the last sale price common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders and,

● if and only if, there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

The private warrants are identical to the public warrants, except that the private warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees, as defined in the warrant agreements. If the placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants. 1,795,700 and 5,700,000 private warrants were held by the initial purchases or their permitted transferees as of December 31, 2021 and 2020, respectively.

The public and private warrants are classified separately on our consolidated balance sheets due to differences in each instrument’s contractual terms. The public warrants are classified in equity classified financial instruments and are not remeasured periodically. The private warrants are liability classified financial instruments measured at fair value, with periodic changes in fair value recognized through earnings. See Note 4.

On March 23, 2021, the Company announced that it would redeem all outstanding public warrants on April 16, 2021 pursuant to a provision of the warrant agreement under which the public warrants were issued. In connection with the redemption, the public warrants stopped trading on the Nasdaq Capital Market and were delisted, with the trading halt announced after close of market on April 16, 2021.

Detail related to public and private warrant activity for the year ended December 31, 2021 is as follows:

		Number of
	Number of	Common
	Warrants	Shares Issued	Cash Received
Balances as of January 1, 2021	14,325,000	—	$	—
Cash exercises	(11,023,376)	11,023,376		126,741
Cashless exercises	(1,329,454)	498,036		—
Canceled	(176,470)	—		—
Balances as of December 31, 2021	1,795,700	11,521,412	$	126,741

Legacy Porch Warrants

Redeemable convertible preferred stock warrants and common stock warrants that were issued prior to the Merger (“Legacy Porch Warrants”) were cancelled upon completion of the Merger on December 23, 2020, in exchange for 702,791 and 1,705,266 shares of common stock through net share settlement, respectively.

Detail related to Legacy Porch Warrant activity for the year ended December 31, 2020, is as follows:

	Redeemable Convertible
	Preferred Stock
		Weighted-
		Average
	Number of	Exercise
	Warrants	Price
Balances as of January 1, 2020	965,157	$	4.39
Warrants granted	209,384		5.62
Warrants exercised	—		—
Warrants cancelled	(1,174,541)		4.60
Balances as of December 31, 2020	—	$	—