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United States securities and exchange commission logo
December 10, 2021
Ophir Sternberg
President and Chief Executive Officer
Lionheart Acquisition Corp. II
4218 NE 2nd Avenue
Miami, FL 33137
Re: Lionheart
Acquisition Corp. II
Registration
Statement on Form S-4
Filed November 10,
2021
File No. 333-260969
Dear Mr. Sternberg:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4 Filed November 10, 2021
"What Equity Stake Will Current Stockholders...", page viii
1. Please separately
disclose the equity stake that the each of the current stockholders, the
initial stockholders,
and the members will hold in the post-business combination
company.
Ownership of the Post-Combination Company, page 2
2. It appears that
underwriting fees remain constant and are not adjusted based on
redemptions. Please
revise to disclose the effective underwriting fee on a percentage basis
for shares at each
redemption level presented in your sensitivity analysis related to
dilution.
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 2 10, 2021 Page 2
FirstName LastName
Tax Receivable Agreement, page 15
3. Please revise to quantify the potential size of any payments under the
Tax Receivable
Agreement.
Risk Factors, page 25
4. Disclose the material risks to unaffiliated investors presented by
taking the company
public through a merger rather than an underwritten offering. These
risks could include
the absence of due diligence conducted by an underwriter that would be
subject to liability
for any material misstatements or omissions in a registration
statement.
"Changes in legislation, both federal and state, or in laws relating to
healthcare...", page 34
5. Please disclose the percentage of MSP recoveries that are brought in
under the Medicare
Secondary Payer Act. Please also revise to disclose the potential
effect on your business
if the Medicare Secondary Payer Act is substantially changed or
repealed.
"We may not be able to obtain additional capital to continue...", page 43
6. Please enhance this risk factor to describe and quantify your sources
of liquidity to fund
working capital.
"The Sponsor, certain members of the LCAP Board and our officers...", page 51
7. Please elaborate on the personal and financial interests of the
Sponsor and your officers
and directors that may have influenced their motivation in identifying
and selecting MSP.
"Our public stockholders will experience substantial dilution...", page 52
8. Please revise to disclose all possible sources and extent of dilution
that shareholders who
elect not to redeem their shares may experience in connection with the
business
combination. Provide disclosure of the impact of each significant
source of dilution,
including the amount of equity held by founders, convertible
securities, including warrants
retained by redeeming shareholders, at each of the redemption levels
detailed in your
sensitivity analysis, including any needed assumptions.
9. Quantify the value of warrants, based on recent trading prices, that
may be retained by
redeeming stockholders assuming maximum redemptions and identify any
material
resulting risks.
"We will qualify as a 'controlled company' within the meaning of the Nasdaq
listing
standards...", page 53
10. Please explain the controlling shareholders ability to control
matters requiring
shareholder approval, including the election of directors, amendment
of organizational
documents, and approval of major corporate transactions, such as a
change in control,
merger, consolidation, or sale of assets.
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 3 10, 2021 Page 3
FirstName LastName
"Risks Related to Ownership of Our Common Stock...", page 60
11. Please highlight the material risks to public warrant holders,
including those arising from
differences between private and public warrants. Clarify whether
recent common stock
trading prices exceed the threshold that would allow the company to
redeem public
warrants. Clearly explain the steps, if any, the company will take to
notify all
shareholders, including beneficial owners, regarding when the warrants
become eligible
for redemption.
Unaudited Pro Forma Condensed Combined Financial Information
Notes to Unaudited Pro Forma Condensed Combined Financial Information
1. Basis of Presentation, page 77
12. You state that the New Warrants will be classified as equity upon
issuance at the closing
date. Please provide us with your analysis under ASC 815-40 to support
your accounting
treatment for the warrants. As part of your analysis, please address
whether there are any
terms or provisions in the warrant agreement that provide for
potential changes to the
settlement amounts that are dependent upon the characteristics of the
holder of the
warrant, and if so, how you analyzed those provisions in accordance
with the guidance in
ASC 815-40.
4. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information,
page 81
13. Please revise footnotes l and ee to clarify why the 98.7% and 99.2%
interests attributable
to MSP Members as a result of the Up-C structure under the no
redemption and maximum
redemption scenarios, respectively, represent non-controlling interest
and how you
allocated the net income or loss to the non-controlling interest in
all periods presented.
Redemption Rights, page 88
14. We note that LCAP's Sponsor, directors, officers, and Nomura have
agreed to waive their
redemption rights. Please describe any consideration provided in
exchange for this
agreement.
Conflicts of Interest, page 126
15. We note your statement that "[w]e are not prohibited from pursuing an
initial business
combination with a company that is affiliated with the Sponsor or our
officers or
directors. However, in the event we seek to complete our initial
business combination
with such a company, we, or a committee of independent directors,
would obtain an
opinion from an independent investment banking firm that is a member
of FINRA or from
an independent accounting firm, that such an initial business
combination is fair to our
company from a financial point of view." Please elaborate on what
"affiliated" means in
this context. In this light, we note that John H. Ruiz, CEO of MSP and
Ophir Sternberg,
CEO of LCAP and their affiliates have entered into multiple agreements
together (4701
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 4 10, 2021 Page 4
FirstName LastName
North Meridian Lakehouse, LLC, RC Lakehouse, LLC, and Cigarette
Holdings, LLC, as
described in further detail on page 230). In light of these
transactions, please tell us what
consideration you gave to obtaining a fairness opinion, why you chose
not to obtain a
fairness opinion, and whether you should obtain a fairness opinion for
this business
combination. In addition, please clarify how the board considered
those conflicts in
negotiating and recommending the business combination. Also, please
update the table on
page 128 to reflect the fiduciary duties or contractual obligations
owed by Ophir Sternberg
in any of the agreements described on page 230.
16. Please expand your disclosure regarding the sponsor s ownership
interest in the target
company. Disclose the approximate dollar value of the interest based
on the transaction
value and recent trading prices as compared to the price paid.
17. Your charter waived the corporate opportunities doctrine. Please
address this potential
conflict of interest and whether it impacted your search for an
acquisition target.
Security Ownership of Certain Beneficial Owners and Management of MSP, The
Company and
The Post-Combination Company, page 133
18. Please disclose the sponsor and its affiliates' total potential
ownership interest in the
combined company, assuming exercise and conversion of all securities,
including the New
Warrants.
Information About MSP, page 136
19. We note your statement that "[a]s of June 30, 2021, we are entitled to
a portion (typically
fifty percent (50%)) of any recovery rights associated with
approximately $248 billion in
Billed Amounts (and approximately $60 billion in Paid Amounts), which
contains an
estimated $15 billion of potentially recoverable claims." Please
revise to explain how you
calculate your $15 billion estimation of potentially recoverable
claims and clarify whether
that is the total recoverable amount or whether you would typically be
entitled to 50% of
that amount. Additionally, please disclose how much of the $60 billion
in Paid Amounts
is "capitated payments" and whether to date, you have been successful
in recovering any
capitated payments. Finally, please revise to include the time frame
for which you
anticipate receiving payment on the potentially recoverable claims.
20. Please include any material contracts as an exhibit to this
registration statement, for
example MSP's Amazon Web Services agreement, any other systems
agreement, the
Virage Investment Capacity Agreement, and any of your fee sharing
arrangements or tell
us why you are not required to do so. Refer to Item 21 of Form S-4 and
Item 601(b)(10)
of Regulation S-K.
Our Claims Portfolio, page 146
21. We note that as of June 30, 2021 you have been assigned certain
recovery rights for more
than 150 Assignors. Please clarify whether you received these rights
under the Recovery
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 5 10, 2021 Page 5
FirstName LastName
Model, the Chase to Pay model, and/or the Claims Recovery Services
model as explained
on pages 154-155. In that light, we note your statements on page 155
that you have yet to
generate substantial revenue from the Recovery Model and no revenue
from the Chase to
Pay model and that you have entered into two claims recovery service
contracts under the
Claims Recovery Services model. Please clarify how you anticipate
generating revenue
from the 150 Assignors under the relevant model.
Human Capital, page 150
22. Please provide the information required by Item 101(c)(2)(ii) of
Regulation S-K.
MSP Recovery's Management's Discussion And Analysis, page 154
23. We note your statement that "[i]t would take any competitor a long
time to amass the
portfolio of claims rights currently owned by us." Please provide
support for this
statement or characterize it as management's belief.
24. We note that you have entered into two claims recovery service
contracts. Please
disclose the date that you entered into these claims recovery service
contracts, the Billed
Amounts and potential recovery amounts, and any other material
information.
25. We note that your Assignors have grown from 32 in 2015 to 155 as of as
of June 30,
2021. Please revise to state the number of Assignors that you have had
per year for each
of the last three years.
26. We note your statement that "[p]er the Medicare Secondary Payer Act,
we are entitled to
reasonable and customary rates. If litigation is required, we are also
entitled to double
damages and additional penalties." Please clarify how double damages
and additional
penalties are treated under each of your business models. To the
extent such amounts are
paid directly to the Law Firm, please revise to state as much.
27. Please disclose MSP's management's key performance indicators and
metrics in evaluating
its business. Refer to Item 303(a) of Regulation S-K and SEC Release
33-10751.
Impact of the COVID-19 Pandemic, page 157
28. Please discuss the key economic factors and impact of COVID-19, and
known trends and
uncertainties, on your Total Claims Recovery, Cost of Recoveries,
number of Assignors or
Clients, changes in Billed Amounts, timing of recovery of payments,
timing of any
litigation, etc. for the year ended December 31, 2020 and period ended
June 30, 2021, if
any. Refer to Item 303(b)(2)(i) and (ii) of Regulation S-K and
CF Disclosure Guidance Topics 9 and 9A.
Background of the Business Combination, page 176
29. We note your disclosure regarding your search process for a target
business, including that
your search started with 45 potential targets. Please provide
additional detail on how you
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 6 10, 2021 Page 6
FirstName LastName
narrowed the targets down from the 45 original potential targets. To
the extent applicable,
please describe the role of the Sponsor in these activities. Also,
please highlight the
potential targets where the members of the LCAP Board were involved,
and how they
were involved.
30. We note that on January 19, 2021, Messrs. Sternberg and Ruiz discussed
MSP's then
current and projected financial position and Mr. Ruiz's vision to grow
MSP, and certain
benefits for MSP if it were to operate as a public company. Please
revise to disclose the
material discussions related to each of these topics.
31. Please describe, in further detail, the underlying basis for the
possible preliminary
valuation range of MSP between $20.0 billion and $50.0 billion.
32. Please disclose whether any materials were prepared and/or circulated
in connection with
the February 18, 2021 and March 19, 2021 meetings, and if applicable,
which parties
prepared and circulated such materials. Provide greater detail about
the MSP Model, and
Brattle's assessment of it.
33. Please provide the basis for MSP's pre-money equity valuation at $26.8
billion and
quantify and describe the MSP Members' post-closing transaction
consideration
adjustment. Also, please elaborate on the material terms of the MSP
valuation discussions
that occurred throughout March 2021 and the valuation metrics
discussed in April 2021,
including the material details surrounding the certain governmental
claims rights held by
MSP WB, LLC.
34. Please discuss the material considerations and negotiations underlying
the PIPE
transaction and the ultimate decision to not include the PIPE.
35. Please disclose any material terms or negotiation points regarding the
proposed
transaction structure, possible capital alternatives, valuation,
business assumptions and
outlook as discussed on April 26, 2021.
36. We note that on or about May 15, 2021 MSP and LCAP agreed to include
the MSP
Government Claims in the Business Combination, increasing the overall
purchase price to
$32.5 billion. Please clarify the then current valuation of the
business without the
Government Claims business and any material adjustments to the prior
valuation at $26.8
billion.
37. Please disclose the material terms added to the July 11, 2021 draft of
the MIPA under
which the LCAP Board would recommend the transaction to its
stockholders in order to
comply with the directors' fiduciary duties under Delaware law.
38. We note that Nomura was engaged as LCAP's financial advisor and Stifel
and KBW
were engaged as MSP's financial advisor in connection with the
business combination.
Please revise to elaborate on the role that each financial advisor
played in advising on the
business combination. To the extent that Nomura and/or Stifel prepared
any report, for
example in presenting MSP's financial model or in preparing the
investor
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 7 10, 2021 Page 7
FirstName LastName
presentation, please file such report in accordance with Item 1015(b)
of Regulation M-A.
39. Revise to state how, in substance, Amendment no. 1 to the MIPA impacts
the overall
terms of the transaction that was approved by the Board and clarify
whether the Board of
LCAP continued to recommend the transaction to shareholders.
Recommendation of the LCAP Board and Reasons for the Business Combination, page
183
40. We note that the LCAP Board determined that the consideration to be
paid to the
Members and New Warrants to the Class A Common Stockholders was
"reasonable."
Please elaborate on what "reasonable" means in this context.
41. We note that at the date that the LCAP Board approved the Business
Combination, MSP
did not have any combined or consolidated historical financial
statements that the LCAP
Board could consider. Tell us how the Board was able to evaluate the
unaudited
prospective financial information of MSP without the necessary context
of historical
financial information. Please tell us whether the LCAP Board
considered the MSP
historical financial statements once they were provided, and if so,
whether the LCAP
Board continues to recommend the Business Combination to shareholders.
If the LCAP
Board did not consider the MSP historical financial statements once
they were provided,
please revise to state as much and explain why and how the LCAP Board
made that
decision and continued to recommend the transaction.
42. Please disclose whether the Board considered Nomura's conflict of
interest as an
underwriter to receive deferred compensation in connection with the
business
combination, while also serving as a financial advisor to the LCAP in
evaluating and
advising on the business combination. Please also update your risk
factors to address this
conflict of interest.
Certain Unaudited Projected Financial Information of MSP, page 187
43. Explain how MSP prepared its projections in light of the fact that MSP
did not have any
combined or consolidated historical financial statements at the time
the projections were
provided to LCAP. Please also explain the assumptions underlying the
projections in light
of MSP's historical financials and relatively untested business models
(i.e. Claim
Recovery Model and Chose to Pay).
44. Please disclose how and why the timeframe leading out to 2026
projected financial results
was selected. Disclose whether or not the projections are in line with
historic operating
trends and, if not, explain why the change in trends is appropriate.
45. Please disclose the specific assumptions that underlie each line item
of the MSP
projections. For example, please include the assumptions that underlie
MSP
management s good faith estimate of the timing of reaching recovery
settlements or other
resolutions and the assumptions that underlie Implied Annual
Recoveries. Please explain
the reasoning behind the substantial increases between the estimates
in 2021 as compared
to 2026. In this light we note that Total Claims Recovery as of
December 31, 2020 was
Ophir Sternberg
FirstName LastNameOphir
Lionheart Acquisition Corp.Sternberg
II
Comapany10,
December NameLionheart
2021 Acquisition Corp. II
December
Page 8 10, 2021 Page 8
FirstName LastName
$13.9 million.
Interests of the Company's Directors and Executive Officers in the Business
Combination, page
189
46. Here and in your risk factor on page 51, please quantify the aggregate
dollar amount and
describe the nature of what the sponsor and its affiliates have at
risk that depends on
completion of a business combination. Include the current value of
securities held, loans
extended, fees due, and out-of-pocket expenses for which the sponsor
and its affiliates are
awaiting reimbursement. Provide similar disclosure for the company s
officers and
directors, if material.
47. Here and in your risk factor on page 51, please highlight the risk
that the sponsor will
benefit from the completion of a business combination and may be
incentivized to
complete an acquisition of a less favorable target company or on terms
less favorable to
shareholders rather than liquidate.
48. Here and in your risk factor on page 51, please clarify if the sponsor
and its affiliates can
earn a positive rate of return on their investment, even if other SPAC
shareholders
experience a negative rate of return in the post-business combination
company.
Interests of MSP's Directors and Executive Officers in the Business Combination
Legal Fees, page 191
49. Please discuss why MSP did not make payments in the years ended 2020
and 2019 to the
law firms owned and controlled by John H. Ruiz and Frank C. Quesada.
Also, fill in the
payments made to the law firms as of June 30, 2021 and disclose
whether this amount
includes amounts owed for any prior period(s).
Sources and Uses for the Business Combination, page 191
50. Revise this table to reflect all sources of consideration, including
equity consideration, for
the total value of the transaction and quantify the amount by which
this depiction could be
impacted by a full redemption scenario.
Material U.S. Federal Income Tax Considerations, page 211
51. In addition to the disclosure you have provided in this section
regarding the exercise of
redemption rights, please include a discussion of the federal income
tax consequences of
the business combination. Please also include a tax opinion from
counsel as appropriate.
Refer to Item 4(a)(6) of Form S-4 and Section III.A. of Staff Legal
Bulletin 19.
Certain Relationships and Related Party Transactions, page 228
52. Please disclose who will receive the payment from 4701 Meridian
Lakehouse, LLC on or
before May 31, 2026. Please also disclose all information that is
required by Item 404(a)
of Regulation S-K with respect to the Cigarette Holdings, LLC
transaction.
Ophir Sternberg
Lionheart Acquisition Corp. II
December 10, 2021
Page 9
General
53. We note that Nomura performed additional services after the IPO and part
of the IPO
underwriting fee was deferred and conditioned on completion of a business
combination.
Please quantify the aggregate fees payable to Nomura that are contingent
on completion of
the business combination.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Suying Li at (202) 551-3335 or Lyn Shenk at (202)
551-3380 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Cara Wirth at (202) 551-7127 or Mara Ransom at (202) 551-3264 with any
other
questions.
Sincerely,
FirstName LastNameOphir Sternberg
Division of
Corporation Finance
Comapany NameLionheart Acquisition Corp. II
Office of Trade &
Services
December 10, 2021 Page 9
cc: Steven D. Pidgeon
FirstName LastName