eToro SPAC partner FinTech Acq V reports “material weakness” in internal controls

The publicly traded special purpose acquisition company (SPAC) that is slated to bring eToro public, FinTech Acquisition Corp. V, has made a filing with US regulators indicating that it has identified an error in certain of its previously issued financial statements.

As such, the company said that certain of its previously issued financial reports should no longer be relied upon.

While FinTech Acquisition V said that it intends to reflect the error in an amendment to its 2020 Annual Report on Form 10-K as well as subsequent quarterly reports, the company’s management has concluded that a material weakness exists in its internal control over financial reporting, and that the company’s disclosure controls and procedures were not effective.

eToro and the SPAC agreed back in March on a transaction that would bring eToro public, valuing eToro at about $10 billion. That transaction, originally scheduled to close in Q3, was delayed and is now slated to close in Q4-2021, according to the latest filings made last week by eToro.

The text of the filing made by FinTech Acquisition Corp. V follows.

FINTECH ACQUISITION CORP. V

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

(a) In connection with the preparation of FinTech Acquisition Corp. V’s (the “Company”) financial statements as of September 30, 2021, the Company’s management, in consultation with its advisors, identified an error made in certain of its previously issued financial statements, arising from the manner in which, as of the closing of the Company’s initial public offering, the Company valued its Class A common stock subject to possible redemption. The Company previously determined the value of such Class A common stock  to be equal to the redemption value of such shares of Class A common stock, after taking into consideration the terms of the Company’s Amended and Restated Certificate of Incorporation, under which a redemption cannot result in net tangible assets being less than $5,000,001. Management has now determined, after consultation with its advisors, that the shares of Class A common stock underlying the units issued during the initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered to be outside the Company’s control. Therefore, management has concluded that the redemption value of its shares of Class A common stock subject to possible redemption should reflect the possible redemption of all shares of Class A common stock. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This has resulted in a restatement of the initial carrying value of the shares of Class A common stock subject to possible redemption, with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and shares of Class A common stock. In addition, in connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has determined it should restate its earnings per share calculation to allocate income and losses shared pro rata between the two classes of its shares. This presentation contemplates a business combination as the most likely outcome, in which case, both classes of shares share pro rata in the income and losses of the Company.

On November 22, 2021, the audit committee of the board of directors of the Company (the “Audit Committee”), based on the recommendation of and after consultation with management, concluded that the Company’s (i) audited balance sheet as of December 8, 2020 (the “Audited Balance Sheet”) filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on December 14, 2020, as amended as set forth in the Restated Form 10-K (as defined below), (ii) audited financial statements for the year ended December 31, 2020 (together with the Audited Balance Sheet, the “Audited Affected Financials”), as reported in the Company’s Annual Report on Form 10-K/A filed with the SEC on May 14, 2021 (the “Restated Form 10-K”), (iii) unaudited financial statements as of March 31, 2021 (the “Q-1 Unaudited Financials”) contained in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 28, 2021, (iv) unaudited financial statements as of June 30, 2021 (together with the Q-1 Unaudited Financials, the “Unaudited Affected Financials”) contained in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2021 and (v) Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 filed with the SEC on November 10, 2021, should no longer be relied upon due to the error described above. The Company intends to reflect the error in an amendment to (1) its Annual Report on Form 10-K for the year ended December 31, 2020 (to include restatements with respect to the Audited Affected Financials) (the “Amended Form 10-K”) and (2) its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 (to include restatements with respect to the Unaudited Affected Financials) (the “Amended Form 10-Q”). Similarly, the related press releases, stockholder communications, investor presentations or other communications describing relevant portions of the Company’s financial statements for these periods, should no longer be relied upon.

The Company does not expect the changes described above to have any impact on its cash position or the balance held in the trust account.

The Company’s management has concluded that in light of the error described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness will be described in more detail in the Amended Form 10-K and the Amended Form 10-Q.

The Audit Committee and management have discussed the matters disclosed pursuant to this Item 4.02(a) with the Company’s independent accountant.