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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.  )
Filed by the Registrant ☒
Filed by a Party other than the Registrant 
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ 
Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12
CarLotz, Inc.
Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
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Fee paid previously with preliminary materials.
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.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
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MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT
Dear Shift Stockholders and CarLotz Stockholders:
On August 9, 2022, Shift Technologies, Inc. (“Shift”), Shift Remarketing Operations, Inc., a wholly owned subsidiary of Shift (“Merger Sub”), and CarLotz, Inc. (“CarLotz”) entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), which provides that Merger Sub will, upon the terms and subject to the conditions set forth in the Merger Agreement, merge with and into CarLotz with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift (the “Merger”) at the effective time of the Merger (the “Effective Time”).
Pursuant to the Merger Agreement, at the Effective Time, each issued and outstanding share of Class A common stock, par value $0.0001 per share, of CarLotz (“CarLotz Common Stock”) (subject to certain exceptions set forth in the Merger Agreement) will be converted into the right to receive 0.692158 (the “Exchange Ratio”) of a fully-paid and nonassessable share of Class A common stock, par value $0.0001 per share, of Shift (“Shift Common Stock”), subject to adjustment immediately prior to the Effective Time to equal a ratio calculated as (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding certain CarLotz securities, including earnout shares, earnout restricted stock units, warrants, options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio, and performance-based restricted stock units that are terminated as of the Effective Time). Shift Stockholders will continue to own their existing shares of Shift Common Stock following the Merger.
Shift Common Stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “SFT.” CarLotz Common Stock is traded on the Nasdaq Global Market under the symbol “LOTZ.” CarLotz Warrants are traded on the Nasdaq Global Market under the symbol “LOTZW.”
On June 7, 2022, CarLotz received a deficiency letter from the Staff of the Nasdaq Stock Market notifying CarLotz that, for the last 30 consecutive business days, the bid price for CarLotz Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market. On October 4, 2022, Shift received a deficiency letter from the Staff of the Nasdaq Stock Market notifying Shift that, for the last 30 consecutive business days, the bid price for Shift Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Capital Market. See the section entitled “Questions and Answers — What happens if the Merger is not completed?
Based on the Exchange Ratio, the number of outstanding shares of CarLotz Common Stock and the number of outstanding shares of Shift Common Stock as of August 8, 2022, it is estimated that Shift Stockholders will own approximately 52.89% and CarLotz Stockholders will own approximately 47.11%, respectively, of the outstanding shares of Shift Common Stock on a fully diluted basis immediately following the Effective Time. Shift and CarLotz will each hold a special meeting of their respective stockholders to vote on the proposals necessary to complete the Merger and the other transactions contemplated by the Merger Agreement (collectively, the “Proposed Transactions”). Such special meetings are referred to as the “Shift Special Meeting” and the “CarLotz Special Meeting,” respectively. We encourage you to obtain current quotes for both Shift Common Stock and CarLotz Common Stock before voting at the Shift Special Meeting or the CarLotz Special Meeting.
At the Shift Special Meeting, Shift Stockholders will be asked to consider and vote on (i) a proposal to approve the issuance of shares of Shift Common Stock to CarLotz Stockholders in connection with the Merger for purposes of applicable Nasdaq rules (the “Shift Share Issuance Proposal”), (ii) a proposal to approve and adopt an amendment to Shift’s second amended and restated certificate of incorporation (the “Shift Charter”) to effect a reverse stock split of the Shift Common Stock at a ratio within a range of 1-for-5 and 1-for-10, as determined by the Shift Board, in the form attached as Annex B to this joint proxy statement/prospectus (the “Shift Reverse Stock Split Proposal”), and (iii) a proposal to approve the adjournment of the Shift Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Shift Special Meeting to approve the Shift Share Issuance Proposal (the “Shift Adjournment Proposal”). The Shift Board unanimously recommends that Shift Stockholders vote “FOR” each of the proposals to be considered at the Shift Special Meeting.
At the CarLotz Special Meeting, CarLotz Stockholders will be asked to consider and vote on (i) a proposal to adopt the Merger Agreement (the “CarLotz Merger Proposal”) and (ii) a proposal to approve the adjournment of the CarLotz Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the CarLotz Special Meeting to approve the CarLotz Merger Proposal (the “CarLotz Adjournment Proposal”). The CarLotz Board unanimously recommends that CarLotz Stockholders vote “FOR” each of the proposals to be considered at the CarLotz Special Meeting.
We cannot complete the Merger unless the Shift Share Issuance Proposal is approved by Shift Stockholders and the CarLotz Merger Proposal is approved by CarLotz Stockholders. Your vote on these matters is very important, regardless of the number of shares you own. Whether or not you plan to virtually attend your company’s respective special meeting, please vote by proxy over the internet or telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, in order to authorize the individuals named on your proxy card to vote your shares at the applicable special meeting.
The accompanying joint proxy statement/prospectus provides you with important information about Shift, CarLotz, the Merger Agreement, the Proposed Transactions (including the Merger) and the special meetings. We encourage you to read the entire joint proxy statement/prospectus carefully (including the annexes thereto and documents incorporated by reference therein), in particular the information under “Risk Factors” beginning on page 34 for a discussion of material risks relevant to the Merger.
We look forward to the successful completion of the Merger.
Sincerely,


Jeff Clementz
Chief Executive Officer
Shift Technologies, Inc.
Lev Peker
Chief Executive Officer
CarLotz, Inc.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Shift Common Stock to be issued in connection with the Merger or passed upon the adequacy or accuracy of the accompanying joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.
The accompanying joint proxy statement/prospectus is dated November 8, 2022 and is first being mailed to Shift Stockholders and CarLotz Stockholders on or about November 8, 2022.

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Shift Technologies, Inc.
290 Division Street, Suite 400
San Francisco, California 94103-4234
(855) 575-6739
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 7, 2022
Notice is hereby given that Shift Technologies, Inc. (“Shift”) will hold a special meeting of its stockholders (the “Shift Special Meeting”) virtually via live webcast on December 7, 2022, beginning at 12:00 p.m., Eastern Time.
Shift Stockholders will be able to virtually attend and vote at the Shift Special Meeting by visiting www.virtualshareholdermeeting.com/SFT2022SM (the “Shift Special Meeting Website”).
The Shift Special Meeting will be held for the purpose of Shift Stockholders considering and voting on the following proposals:
1.
to approve the issuance of shares of Shift Common Stock to the stockholders of CarLotz, Inc. (“CarLotz”), in connection with the merger of Shift Remarketing Operations, Inc., a wholly owned subsidiary of Shift (“Merger Sub”), with and into CarLotz with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift (the “Merger”), as contemplated by the Agreement and Plan of Merger, dated August 9, 2022 (as it may be amended from time to time, the “Merger Agreement”), by and among Shift, Merger Sub and CarLotz (the “Shift Share Issuance Proposal”);
2.
to approve an amendment to the Second Amended and Restated Certificate of Incorporation of Shift to effect a reverse stock split of Shift Common Stock at a ratio within a range of 1-for-5 and 1-for-10, as determined by the board of directors of Shift (the “Shift Board”), in the form attached as Annex B to the accompanying joint proxy statement/prospectus (the “Shift Reverse Stock Split Proposal”); and
3.
to approve the adjournment of the Shift Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Shift Special Meeting to approve the Shift Share Issuance Proposal (the “Shift Adjournment Proposal”).
These proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.
Only Shift Stockholders of record at the close of business on November 2, 2022, the record date for the Shift Special Meeting (the “Shift Record Date”), are entitled to notice of and to vote at the Shift Special Meeting and any adjournments or postponements thereof.
The Shift Board has unanimously determined and resolved that the Merger Agreement, the transactions contemplated by the Merger Agreement (including the Merger and the Share Issuance (as defined in the accompanying joint proxy statement/prospectus), collectively, the “Proposed Transactions”) and the Reverse Stock Split Amendment (as defined in the accompanying joint proxy statement/prospectus), on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and fair to, and in the best interests of, Shift and Shift Stockholders, and has approved the Merger Agreement and the Proposed Transactions and the Reverse Stock Split Amendment. Accordingly, the Shift Board unanimously recommends that Shift Stockholders vote:
FOR” the Shift Share Issuance Proposal;
FOR” the Shift Reverse Stock Split Proposal; and
FOR” the Shift Adjournment Proposal.
Your vote is very important, regardless of the number of shares of Shift Common Stock you own. The parties cannot complete the Merger unless the Shift Share Issuance Proposal is approved by Shift Stockholders.
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Share Issuance Proposal requires the affirmative vote of the holders of a majority of the outstanding stock having voting power present in person or represented by proxy at the Shift Special Meeting. Approval of the Shift Reverse Stock Split Proposal requires the affirmative vote of the majority of the shares of Shift Common Stock outstanding at the close of

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business on the Shift Record Date. Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Adjournment Proposal requires the affirmative vote of the holders of a majority of the Shift Common Stock having voting power present in person or represented by proxy at the Shift Special Meeting. If the Shift Reverse Stock Split Proposal is approved, but the Merger is not completed for any reason, the Shift Board may choose, in its discretion, to implement the Shift Reverse Stock Split Proposal.
Whether or not you plan to virtually attend the Shift Special Meeting, please vote by proxy over the internet or telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, in order to authorize the individuals named on your proxy card to vote your shares of Shift Common Stock at the Shift Special Meeting. If you hold your shares through a broker, bank or other nominee in “street name” (instead of as a registered holder), please follow the instructions on the voting instruction form provided by your bank, broker or nominee to vote your shares. The list of Shift Stockholders entitled to vote at the Shift Special Meeting will be available at Shift’s headquarters during regular business hours for examination by any Shift Stockholder for any purpose germane to the Shift Special Meeting for a period of at least ten days prior to the Shift Special Meeting. The stockholder list will also be available for examination during the Shift Special Meeting via the Shift Special Meeting Website.
PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE SHIFT SPECIAL MEETING, VIA THE SHIFT SPECIAL MEETING WEBSITE. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, THE MERGER AGREEMENT, THE MERGER, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors,

Jeff Clementz
Chief Executive Officer
Shift Technologies, Inc.
San Francisco, California

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CarLotz, Inc.
3301 W. Moore St.
Richmond, Virginia 23230
(804) 510-0744
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 7, 2022
Notice is hereby given that CarLotz, Inc. (“CarLotz”) will hold a special meeting of its stockholders (the “CarLotz Special Meeting”) virtually via live webcast on December 7, 2022, beginning at 11:00 a.m., Eastern Time.
You will be able to virtually attend and vote at the CarLotz Special Meeting by visiting www.virtualshareholdermeeting.com/LOTZ2022SM (the “CarLotz Special Meeting Website”).
CarLotz has entered into an Agreement and Plan of Merger, dated August 9, 2022 (as it may be amended from time to time, the “Merger Agreement”), among Shift Technologies, Inc. (“Shift”), Shift Remarketing Operations, Inc. (“Merger Sub”) and CarLotz, pursuant to which, among other things and subject to the terms and conditions contained therein, Merger Sub will merge with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift (the “Merger”).
The CarLotz Special Meeting will be held for the purpose of CarLotz Stockholders considering and voting on the following proposals:
1.
to adopt the Merger Agreement (the “CarLotz Merger Proposal”); and
2.
to approve the adjournment of the CarLotz Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the CarLotz Special Meeting to approve the CarLotz Merger Proposal (the “CarLotz Adjournment Proposal”).
These proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.
Only CarLotz Stockholders of record at the close of business on October 27, 2022, the record date for the CarLotz Special Meeting (the “CarLotz Record Date”), are entitled to notice of and to vote at the CarLotz Special Meeting and any adjournments or postponements thereof.
The board of directors of CarLotz (the “CarLotz Board”) has unanimously determined and resolved that the Merger Agreement and the Merger are advisable and fair to, and in the best interests of, CarLotz and CarLotz Stockholders and approved the Merger Agreement and the transactions contemplated thereby, including the Merger. Accordingly, the CarLotz Board unanimously recommends that CarLotz Stockholders vote:
“FOR” the CarLotz Merger Proposal; and
“FOR” the CarLotz Adjournment Proposal.
Your vote is very important, regardless of the number of shares of CarLotz Common Stock you own. The parties cannot complete the transactions contemplated by the Merger Agreement, including the Merger, without approval of the CarLotz Merger Proposal. Approval of the CarLotz Merger Proposal requires the affirmative vote of the holders of a majority of the shares of CarLotz Common Stock outstanding at the close of business on the CarLotz Record Date.
Whether or not you plan to virtually attend the CarLotz Special Meeting, please vote by proxy over the internet or by telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, in order to authorize the individuals named on your proxy card to vote your shares of CarLotz Common Stock at the CarLotz Special Meeting. If you hold your shares through a broker, bank or other nominee in “street name” (instead of as a registered holder), please follow the instructions on the voting instruction form provided by your bank, broker or nominee to vote your

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shares. The list of CarLotz Stockholders entitled to vote at the CarLotz Special Meeting will be available at CarLotz’s headquarters during ordinary business hours for examination by any CarLotz Stockholder for any purpose germane to the CarLotz Special Meeting for a period of at least ten days prior to the CarLotz Special Meeting. The stockholder list will also be available for examination during the CarLotz Special Meeting via the CarLotz Special Meeting Website.
PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE CARLOTZ SPECIAL MEETING VIA THE CARLOTZ SPECIAL MEETING WEBSITE. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, THE MERGER AGREEMENT, THE MERGER, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors,


Luis Solorzano
Chairman of the Board
CarLotz, Inc.
Richmond, Virginia
Lev Peker
Chief Executive Officer and Director
CarLotz, Inc.

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REFERENCES TO ADDITIONAL INFORMATION
The accompanying joint proxy statement/prospectus incorporates important business and financial information about Shift Technologies, Inc. (“Shift”) from other documents that Shift has filed with the U.S. Securities and Exchange Commission (the “SEC”) and that are not contained in and are instead incorporated by reference in the accompanying joint proxy statement/prospectus and with respect to CarLotz, Inc. (“CarLotz”) from other documents that CarLotz has filed with the SEC that have been included herein and delivered herewith as annexes. For a more detailed description of where you can find information about Shift and CarLotz and a list of Shift documents incorporated by reference in the accompanying joint proxy statement/prospectus, see the section entitled “Where You Can Find More Information.” This information is available for you, without charge, to review through the SEC’s website at http://www.sec.gov.
This joint proxy statement/prospectus includes as annexes documents that CarLotz previously filed with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as set forth below. Any statement contained in (a) such a document shall be deemed to be modified or superseded for purposes of this joint proxy statement/prospectus, or (b) in an annex hereto, consisting of a document filed with the SEC subsequent to such document, modifies or replaces such statement. The information included in the annexes hereto is incorporated into this joint proxy statement/prospectus, except to the extent so modified or superseded and except as provided below.
Set forth below is a list of the documents previously filed with the SEC by CarLotz under the Exchange Act that are included as annexes to this joint proxy statement/prospectus.
CarLotz’s Current Report on Form 8-K filed with the SEC on March 15, 2022 (other than information furnished under Item 2.02);
CarLotz’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 15, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on March 31, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on April 11, 2022;
CarLotz’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2022;
CarLotz’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, filed with the SEC on May 9, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on June 6, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on June 10, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on June 21, 2022 (other than information furnished under Item 7.01);
CarLotz’s Current Report on Form 8-K filed with the SEC on July 5, 2022 (other than information furnished under Item 7.01);
CarLotz’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 9, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on August 9, 2022 (other than information furnished under Item 2.02);
CarLotz’s Current Report on Form 8-K filed with the SEC on August 12, 2022;
CarLotz’s Current Report on Form 8-K filed with the SEC on September 30, 2022; and
CarLotz’s Current Report on Form 8-K filed with the SEC on October 11, 2022.

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You may request a copy of the accompanying joint proxy statement/prospectus, any of the documents incorporated by reference in the accompanying joint proxy statement/prospectus or other information filed with the SEC by Shift or CarLotz, without charge, by written or telephonic request directed to the appropriate company at the following contacts:
For Shift Stockholders:
For CarLotz Stockholders:
Shift Technologies, Inc.
CarLotz, Inc.
Attention: Corporate Secretary
Attention: Corporate Secretary
290 Division Street, Suite 400
3301 W. Moore St.
San Francisco, California 94103
Richmond, Virginia 23230
(855) 575-6739
(804) 510-0744
In order for you to receive timely delivery of the documents in advance of the special meeting of Shift Stockholders to be held on December 7, 2022 (the “Shift Special Meeting”) or the special meeting of CarLotz Stockholders to be held on December 7, 2022 (the “CarLotz Special Meeting”), as applicable, you must request the information no later than November 30, 2022.
If you have any questions about the Shift Special Meeting or the CarLotz Special Meeting, or need to obtain proxy cards or other information, please contact the applicable company’s proxy solicitor at the following contacts:
For Shift Stockholders:
For CarLotz Stockholders:
MacKenzie Partners, Inc.
Morrow Sodali LLC
1407 Broadway, 27th Floor
333 Ludlow Street, 5th Floor, South Tower
New York, New York 10018
Stamford, Connecticut 06902
(800) 322-2885 (toll-free)
proxy@mackenziepartners.com
(800) 662-5200 (toll-free) or (203) 658-9400 (banks and brokers can call collect)
 
LOTZ@investor.morrowsodali.com
The contents of the websites of the SEC, Shift, CarLotz or any other entity are not incorporated in the accompanying joint proxy statement/prospectus. The information about how you can obtain certain documents that are incorporated by reference in the accompanying joint proxy statement/prospectus at these websites is being provided only for your convenience.

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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Shift (Registration No. 333-267601), constitutes a prospectus of Shift under Section 5 of the Securities Act with respect to the shares of Shift Common Stock to be issued to CarLotz Stockholders in the transactions contemplated by the Agreement and Plan of Merger, dated August 9, 2022, by and among Shift, Shift Remarketing Operations, Inc., a wholly owned subsidiary of Shift (“Merger Sub”), and CarLotz (as it may be amended from time to time, the “Merger Agreement”). This document also constitutes a proxy statement of each of Shift and CarLotz under Section 14(a) of the Exchange Act. This joint proxy statement/prospectus also constitutes a notice of meeting with respect to each of the Shift Special Meeting and the CarLotz Special Meeting.
Shift has supplied all information contained or incorporated by reference in this joint proxy statement/prospectus relating to Shift and Merger Sub, and CarLotz has supplied all information contained in this joint proxy statement/prospectus relating to CarLotz. Shift and CarLotz have both contributed to information relating to the Merger.
You should rely only on the information contained or incorporated by reference in this joint proxy statement/ prospectus. Shift and CarLotz have not authorized anyone to provide you with information that is different from that contained or incorporated by reference in this joint proxy statement/prospectus. This joint proxy statement/ prospectus is dated November 8, 2022, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein.
Further, you should not assume that the information incorporated by reference in this joint proxy statement/ prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint proxy statement/prospectus to Shift Stockholders or CarLotz Stockholders nor the issuance by Shift of shares of Shift Common Stock pursuant to the Merger Agreement will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
Unless otherwise indicated or the context otherwise requires, when used in this joint proxy statement/prospectus:
“business day” refers to any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close;
“CarLotz” refers to CarLotz, Inc., a Delaware corporation;
“CarLotz Adjournment Proposal” refers to the proposal for CarLotz Stockholders to approve the adjournment of the CarLotz Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the CarLotz Special Meeting to approve the CarLotz Merger Proposal;
“CarLotz Board” refers to the board of directors of CarLotz;
“CarLotz Board Recommendation” refers to the unanimous recommendation of the CarLotz Board for CarLotz Stockholders to approve the CarLotz Merger Proposal;
“CarLotz Bylaws” refers to the Amended and Restated Bylaws of CarLotz;
“CarLotz Charter” refers to the Second Amended and Restated Certificate of Incorporation of CarLotz;
“CarLotz Common Stock” refers to the Class A common stock, par value $0.0001 per share, of CarLotz;
“CarLotz Earnout Shares” refers to “Earnout Shares” as such term is defined in the SPAC Merger Agreement;
“CarLotz Earnout Acquiror RSUs” refers to “Earnout Acquiror RSUs” as such term is defined in the SPAC Merger Agreement;
“CarLotz Merger Proposal” refers to the proposal for CarLotz Stockholders to adopt the Merger Agreement;

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“CarLotz Private Warrants” refers to the warrants exercisable for CarLotz Common Stock and issued to Acamar Partners Sponsor I LLC in a private placement in connection with the initial public offering of CarLotz;
“CarLotz Public Warrants” refers to warrants exercisable for CarLotz Common Stock issued in connection with the initial public offering of CarLotz and which are listed on the Nasdaq Global Market under the symbol “LOTZW” (On June 7, 2022, CarLotz received a deficiency letter from the Staff of the Nasdaq Stock Market notifying CarLotz that, for the last 30 consecutive business days, the bid price for CarLotz Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market. See the section entitled “Questions and Answers — What happens if the Merger is not completed?”);
“CarLotz Record Date” refers to October 27, 2022;
“CarLotz Special Meeting” refers to the special meeting of CarLotz Stockholders to consider and vote upon the CarLotz Merger Proposal and the CarLotz Adjournment Proposal;
“CarLotz Special Meeting Website” refers to the website that CarLotz Stockholders can visit to attend and vote at the CarLotz Special Meeting, accessible at the following web address: www.virtualshareholdermeeting.com/LOTZ2022SM;
“CarLotz Stockholders” refers to holders of CarLotz Common Stock;
“CarLotz Warrants” refers to, collectively, the CarLotz Public Warrants and the CarLotz Private Warrants;
“Centerview” refers to Centerview Partners LLC, financial advisor to the Shift Board in connection with the Proposed Transactions;
“Code” refers to the Internal Revenue Code of 1986, as amended;
“Combined Company” refers to Shift following the completion of the Merger;
“DGCL” refers to the General Corporation Law of the State of Delaware;
“Effective Time” refers to the date and time when the Merger becomes effective under the DGCL, which will be the date and time at which the certificate of merger with respect to the Merger is filed with the Secretary of State of the State of Delaware, or such other time as may be mutually agreed to by Shift and CarLotz and specified in the certificate of merger;
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
“Exchange Agent” refers to the exchange agent to be engaged by Shift in connection with the Merger;
“Exchange Ratio” refers to 0.692158 of a fully-paid and nonassessable share of Shift Common Stock, subject to adjustment immediately prior to the Effective Time to equal a ratio calculated as (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (i) CarLotz Earnout Shares, (ii) CarLotz Earnout Acquiror RSUs, (iii) CarLotz Warrants, (iv) options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio and (v) performance-based restricted stock units that are terminated as of the Effective Time);
“GAAP” refers to U.S. generally accepted accounting principles;
“HSR Act” refers to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
“Merger” refers to the merger of Merger Sub with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift;
“Merger Agreement” refers to the Agreement and Plan of Merger, dated as of August 9, 2022, as it may be amended from time to time, by and among Shift, Merger Sub and CarLotz;

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“Merger Consideration” refers to the consideration that a CarLotz Stockholder is entitled to receive in exchange for such CarLotz Stockholder’s shares of CarLotz Common Stock in connection with the Merger;
“Merger Sub” refers to Shift Remarketing Operations, Inc., a Delaware corporation and wholly owned subsidiary of Shift, formed for the purpose of effecting the Merger;
“Nasdaq” refers to the Nasdaq Capital Market;
“Outside Date” refers to February 9, 2023, the date on which, subject to adjustment and certain limitations set forth in the Merger Agreement, the Merger Agreement may be terminated and the Merger abandoned by either Shift or CarLotz;
“Proposed Transactions” refers to the transactions contemplated by the Merger Agreement, including the Merger and the Share Issuance;
“Reverse Stock Split Amendment” refers to the amendment of the Shift Charter to effect a reverse stock split, as contemplated by the Shift Reverse Stock Split Proposal;
“SEC” refers to the U.S. Securities and Exchange Commission;
“Securities Act” refers to the Securities Act of 1933, as amended;
“Share Issuance” refers to the issuance of shares of Shift Common Stock to CarLotz Stockholders in connection with the Merger;
“Shift” refers to Shift Technologies, Inc., a Delaware corporation;
“Shift Adjournment Proposal” refers to the proposal for Shift Stockholders to approve the adjournment of the Shift Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Shift Special Meeting to approve the Shift Share Issuance Proposal;
“Shift Board” refers to the board of directors of Shift;
“Shift Board Recommendation” refers to the unanimous recommendation of the Shift Board for Shift Stockholders to approve the Shift Share Issuance Proposal;
“Shift Bylaws” refers to the Second Amended and Restated Bylaws of Shift;
“Shift Charter” refers to the Second Amended and Restated Certificate of Incorporation of Shift;
“Shift Common Stock” refers to the Class A common stock, par value $0.0001 per share, of Shift;
“Shift Record Date” refers to November 2, 2022;
“Shift Reverse Stock Split Proposal” refers to a proposal for Shift Stockholders to approve an amendment to the Shift Charter to effect a reverse stock split of Shift Common Stock at a ratio within a range of 1-for-5 and 1-for-10, as determined by the Shift Board, in the form attached as Annex B to this joint proxy statement/prospectus;
“Shift Share Issuance Proposal” refers to the proposal for Shift Stockholders to approve the Share Issuance;
“Shift Special Meeting” refers to the special meeting of Shift Stockholders to consider and vote upon the Shift Share Issuance Proposal, the Shift Reverse Stock Split Proposal and the Shift Adjournment Proposal;
“Shift Special Meeting Website” refers to the website that Shift Stockholders can visit to attend and vote at the Shift Special Meeting, accessible at the following web address: www.virtualshareholdermeeting.com/SFT2022SM;
“Shift Stockholders” refers to holders of Shift Common Stock;
“SPAC Merger Agreement” refers to that certain Agreement and Plan of Merger dated as of October 21, 2020, as amended by Amendment No. 1, dated as of December 16, 2020, by and among CarLotz, Acamar Partners Sub, Inc. and CarLotz Group, Inc (f/k/a CarLotz, Inc.); and
“William Blair” refers to William Blair & Company, L.L.C., financial advisor to CarLotz in connection with the Merger.

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QUESTIONS AND ANSWERS
The following questions and answers briefly address some questions that you, as a Shift Stockholder or CarLotz Stockholder, may have regarding the Merger and the other matters being considered at the Shift Special Meeting or the CarLotz Special Meeting, as applicable. You are urged to carefully read this joint proxy statement/prospectus and the other documents referred to in this joint proxy statement/prospectus in their entirety because this section may not provide all the information that is important to you regarding these matters. See the section entitled “Summary” for a summary of important information regarding the Merger Agreement and the Proposed Transactions (including the Merger). Additional important information is contained in the annexes to, and the documents incorporated by reference in, this joint proxy statement/prospectus. You may obtain the information incorporated by reference in this joint proxy statement/prospectus, without charge, by following the instructions in the section entitled “Where You Can Find More Information.”
Why am I receiving this joint proxy statement/prospectus?
You are receiving this joint proxy statement/prospectus because Shift and CarLotz have entered into the Merger Agreement, which provides for the combination of Shift and CarLotz. Upon the terms and subject to the conditions set forth in the Merger Agreement, Shift will acquire all of the outstanding shares of CarLotz Common Stock in exchange for the issuance of the Merger Consideration to CarLotz Stockholders through a merger of Merger Sub with and into CarLotz, with CarLotz continuing as the surviving corporation (the “Surviving Corporation”) and as a wholly owned subsidiary of Shift. The Merger Agreement, which governs the terms and conditions of the Merger, is attached as Annex A hereto.
Your vote is required in connection with the Merger. Shift and CarLotz are sending these materials to their respective stockholders to help them decide how to vote their shares with respect to the Share Issuance and the Reverse Stock Split Amendment, in the case of Shift, and the adoption of the Merger Agreement, in the case of CarLotz, and other important matters.
What matters am I being asked to vote on?
In order to complete the Merger, among other things:
Shift Stockholders must approve the Shift Share Issuance Proposal; and
CarLotz Stockholders must approve the CarLotz Merger Proposal.
Shift: Shift is holding the Shift Special Meeting to obtain approval of the Shift Share Issuance Proposal. At the Shift Special Meeting, Shift Stockholders will also be asked to consider and vote on the Shift Reverse Stock Split Proposal and the Shift Adjournment Proposal.
CarLotz: CarLotz is holding the CarLotz Special Meeting to obtain approval of the CarLotz Merger Proposal. At the CarLotz Special Meeting, CarLotz Stockholders will also be asked to consider and vote on the CarLotz Adjournment Proposal.
Does my vote matter?
Yes, your vote is very important, regardless of the number of shares that you own. The Merger cannot be completed unless the Shift Share Issuance Proposal is approved by Shift Stockholders and the CarLotz Merger Proposal is approved by CarLotz Stockholders.
The approval of the Shift Reverse Stock Split Proposal, the Shift Adjournment Proposal and the CarLotz Adjournment Proposal are not required to complete the Merger.
When and where will each of the special meetings take place?
Shift: The Shift Special Meeting will be held virtually via a live webcast on December 7, 2022, beginning at 12:00 p.m., Eastern Time. There will not be a physical meeting location. In light of continuing public health and travel concerns arising from the coronavirus (COVID-19) outbreak, Shift believes hosting a virtual meeting helps ensure the health and safety of its stockholders, the Shift Board and Shift management. Additionally, the virtual nature of the Shift Special Meeting is generally designed to enable participation of and access by more Shift Stockholders. Shift Stockholders will be able to virtually attend and vote at the Shift Special Meeting by visiting
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the Shift Special Meeting Website at www.virtualshareholdermeeting.com/SFT2022SM. In order to virtually attend and vote at the Shift Special Meeting, you will need the 16-digit control number located on your proxy card. If you hold your shares of Shift Common Stock in “street name,” you may virtually attend and vote at the Shift Special Meeting only if you obtain a specific control number from your brokerage firm, bank, dealer or other similar organization, trustee or nominee giving you the right to vote such shares.
CarLotz: The CarLotz Special Meeting will be held virtually via live webcast on December 7, 2022, beginning at 11:00 a.m., Eastern Time. There will not be a physical meeting location. In light of continuing public health and travel concerns arising from the coronavirus (COVID-19) outbreak, CarLotz believes hosting a virtual meeting helps ensure the health and safety of its stockholders, the CarLotz Board and CarLotz management. Additionally, the virtual nature of the CarLotz Special Meeting is generally designed to enable participation of and access by more CarLotz Stockholders while decreasing the cost of conducting the CarLotz Special Meeting. CarLotz Stockholders will be able to virtually attend and vote at the CarLotz Special Meeting by visiting the CarLotz Special Meeting Website at www.virtualshareholdermeeting.com/LOTZ2022SM. In order to virtually attend and vote at the CarLotz Special Meeting, you will need the 16-digit control number located on your proxy card. If you hold your shares of CarLotz Common Stock in “street name,” you may virtually attend and vote at the CarLotz Special Meeting only if you obtain a specific control number from your brokerage firm, bank, dealer or other similar organization, trustee or nominee giving you the right to vote such shares.
Even if you plan to virtually attend your respective company’s special meeting, Shift and CarLotz recommend that you vote by proxy in advance as described below so that your vote will be counted if you later decide not to or become unable to virtually attend the applicable special meeting.
What will CarLotz Stockholders receive for their shares of CarLotz Common Stock if the Merger is completed?
If the Merger is completed, each issued and outstanding share of CarLotz Common Stock (other than CarLotz Common Stock owned or held in treasury by CarLotz, which will be cancelled for no consideration) will be converted into the right to receive a number of shares of Shift Common Stock as determined by the Exchange Ratio, rounded up to the nearest whole share for any fractional share of Shift Common Stock that would be issued to any CarLotz Stockholder after aggregating all fractional shares of Shift Common Stock that would otherwise be received by such CarLotz Stockholder resulting from the calculation. The “Exchange Ratio” is equal to 0.692158; provided, however, that as of immediately prior to the Effective Time the Exchange Ratio will be adjusted to a ratio equal to (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (1) any CarLotz Earnout Shares, (2) any CarLotz Earnout Acquiror RSUs, (3) any CarLotz Warrants, (4) any options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio and (5) any performance-based restricted stock unit awards that are terminated as of the Effective Time). Shift Stockholders will continue to own their existing shares of Shift Common Stock following the Merger.
As noted above, the number of shares of Shift Common Stock that CarLotz Stockholders will receive as consideration in the Merger is not fixed and may change. Events that may impact the number of shares of Shift Common Stock issued in connection with the Merger include:
the issuance of new shares of Shift Common Stock prior to the Effective Time, including the settlement of derivative securities convertible into or exercisable for shares of Shift Common Stock;
the issuance of new shares of CarLotz Common Stock prior to the Effective Time, excluding the settlement of derivative securities convertible or exercisable for shares of CarLotz Common Stock; and
the issuance of derivative securities convertible into or exercisable for shares of CarLotz Common Stock prior to the Effective Time.
You should obtain current market quotations for Shift Common Stock and CarLotz Common Stock before deciding how to vote on the Shift Share Issuance Proposal, the Shift Reverse Stock Split Proposal and the CarLotz Merger Proposal, as applicable. Shift Common Stock is traded on Nasdaq under the symbol “SFT” and CarLotz Common Stock is traded on the Nasdaq Global Market under the symbol “LOTZ.” In addition, CarLotz
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Warrants are traded on the Nasdaq Global Market under the symbol “LOTZW.” Shares of Shift Common Stock will continue trading on Nasdaq under the symbol “SFT” after completion of the Merger. For more information regarding the Merger Consideration to be received by CarLotz Stockholders if the Merger is completed, see the sections entitled “The Merger Agreement—Merger Consideration” and “The Merger Agreement—Treatment of CarLotz Equity Awards; CarLotz Earnout Shares; CarLotz Warrants.”
On June 7, 2022, CarLotz received a deficiency letter from the Staff of the Nasdaq Stock Market notifying CarLotz that, for the last 30 consecutive business days, the bid price for CarLotz Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market. See the section entitled “—What happens if the Merger is not completed?
How does the Shift Board recommend that I vote at the Shift Special Meeting?
The Shift Board has unanimously determined and resolved that the Merger Agreement, the Proposed Transactions (including the Merger and the Share Issuance) and the Reverse Stock Split Amendment, on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and fair to, and in the best interests of, Shift and the Shift Stockholders, and has approved the Merger Agreement, the Proposed Transactions and the Reverse Stock Split Amendment. Accordingly, the Shift Board unanimously recommends that Shift Stockholders vote “FOR” the Shift Share Issuance Proposal, “FOR” the Shift Reverse Stock Split Proposal and “FOR” the Shift Adjournment Proposal.
Other than as set forth below and with respect to continued service for, employment by and the right to continued indemnification by the Combined Company, as of the date of this joint proxy statement/prospectus, Shift directors and executive officers do not have interests in the Merger that are different from, or in addition to, the interests of other Shift Stockholders generally. See the section entitled “The Merger—Interests of Shift Directors and Executive Officers in the Merger.”
Pursuant to the Merger Agreement, Shift and CarLotz have agreed that, prior to the Effective Time, all necessary action will be taken such that the Combined Company’s board of directors will be increased from nine to 10 members. Five of the members of the Combined Company’s board of directors will be members of the current Shift Board, and three of the members of the Combined Company’s board of directors will be members of the current CarLotz Board (Messrs. Solorzano and Skinner and Ms. Sheehy). The remaining two spots on the Combined Company’s board of directors will be held by the then-serving Chief Executive Officer of the Combined Company and one independent director to be mutually agreed upon between Shift and CarLotz.
How does the CarLotz Board recommend that I vote at the CarLotz Special Meeting?
The CarLotz Board has unanimously determined and resolved that the Merger Agreement and the Proposed Transactions (including the Merger) are advisable and fair to, and in the best interests of, CarLotz and the CarLotz Stockholders, and approved and adopted the Merger Agreement and the Proposed Transactions (including the Merger). Accordingly, the CarLotz Board unanimously recommends that CarLotz Stockholders vote “FOR” the CarLotz Merger Proposal and “FOR” the CarLotz Adjournment Proposal.
In considering the recommendations of the CarLotz Board, CarLotz Stockholders should be aware that CarLotz directors and executive officers have interests in the Merger that are different from, or in addition to, their interests as CarLotz Stockholders generally. These interests may include, among others, the payment of severance benefits and acceleration of outstanding CarLotz equity awards upon certain terminations of employment or service, Shift’s agreement to add three of CarLotz’s current directors to the Shift Board as designated by CarLotz and approved by Shift and the Combined Company’s agreement to indemnify CarLotz directors and executive officers against certain claims and liabilities. For a more complete description of these interests, see the section entitled “The Merger—Interests of CarLotz Directors and Executive Officers in the Merger.”
Who is entitled to vote at each special meeting?
Shift
All holders of record of shares of Shift Common Stock who held shares at the close of business on November 2, 2022, the Shift Record Date, are entitled to receive notice of, and to vote at, the Shift Special Meeting. Virtual attendance at the Shift Special Meeting via the Shift Special Meeting Website is not required to vote. See below and the section entitled “The Shift Special Meeting—Methods of Voting” for instructions on how to vote without virtually attending the Shift Special Meeting.
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CarLotz
All holders of record of shares of CarLotz Common Stock who held shares at the close of business on October 27, 2022, the CarLotz Record Date, are entitled to receive notice of, and to vote at, the CarLotz Special Meeting. Virtual attendance at the CarLotz Special Meeting via the CarLotz Special Meeting Website is not required to vote. See below and the section entitled “The CarLotz Special Meeting—Methods of Voting” for instructions on how to vote without virtually attending the CarLotz Special Meeting.
What is a proxy?
A proxy is a stockholder’s legal designation of another person to vote shares owned by such stockholder on their behalf. If you are a stockholder of record, you can vote by proxy over the internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. If you hold shares beneficially through a broker, bank or other nominee in “street name,” you should follow the voting instructions provided by your broker, bank or other nominee.
How many votes do I have at each special meeting?
Shift
Each Shift Stockholder is entitled to one vote on each proposal for each share of Shift Common Stock held of record at the close of business on the Shift Record Date. At the close of business on the Shift Record Date, there were 85,817,926 shares of Shift Common Stock outstanding.
CarLotz
Each CarLotz Stockholder is entitled to one vote on each proposal for each share of CarLotz Common Stock held of record at the close of business on the CarLotz Record Date. At the close of business on the CarLotz Record Date, there were 119,703,272 shares of CarLotz Common Stock outstanding.
What constitutes a quorum for each special meeting?
A quorum is the minimum number of shares required to be represented, either through virtual attendance or through representation by proxy, to hold a valid meeting.
Shift
The holders of shares of Shift Common Stock representing a majority of the voting power of the outstanding shares of Shift Common Stock entitled to vote at the Shift Special Meeting must be present in person or represented by proxy in order to constitute a quorum for the transaction of business at the Shift Special Meeting. Virtual attendance at the Shift Special Meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the Shift Special Meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the Shift Special Meeting. Shares held in “street name” through a broker, bank or other nominee will not be counted as present for the purpose of determining the existence of a quorum if such broker, bank or other nominee does not have instructions to vote on such proposals (or, with respect to the Shift Reverse Stock Split Proposal, your bank, broker or other nominee does not exercise its discretionary authority to vote on the Shift Reverse Stock Split Proposal).
CarLotz
The holders of a majority of the voting power of the shares of CarLotz Common Stock entitled to vote at the CarLotz Special Meeting must be present in person, or by remote communication, or represented by proxy in order to constitute a quorum for the transaction of business at the CarLotz Special Meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the CarLotz Special Meeting. Since all of the proposals currently expected to be voted on at the CarLotz Special Meeting are considered non-routine matters, shares held in “street name” through a broker, bank or other nominee will not be counted as present for the purpose of determining the existence of a quorum if such broker, bank or other nominee does not have instructions to vote on any such proposals.
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What happens if the Merger is not completed?
If the Shift Share Issuance Proposal is not approved by Shift Stockholders, if the CarLotz Merger Proposal is not approved by CarLotz Stockholders or if the Merger is not completed for any other reason, CarLotz Stockholders will not receive the Merger Consideration or any other consideration in connection with the Merger, and their shares of CarLotz Common Stock will remain outstanding.
If the Merger is not completed, Shift will not complete the Share Issuance contemplated by the Merger Agreement, regardless of whether the Shift Share Issuance Proposal has been approved by Shift Stockholders, and, subject to the discussion in the remainder of this paragraph and the following paragraph, CarLotz will remain an independent public company and the CarLotz Common Stock and CarLotz Warrants will continue to be listed and traded on the Nasdaq Global Market under the symbols “LOTZ” and “LOTZW,” respectively. On June 7, 2022, CarLotz received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market notifying CarLotz that, for the prior 30 consecutive business days, the bid price for CarLotz Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1). Under Nasdaq Listing Rule 5810(c)(3)(A), CarLotz has a 180 calendar day grace period, or until December 5, 2022 (the “Compliance Date”), to regain compliance by meeting the continued listing standard. To regain compliance, the closing bid price of CarLotz Common Stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days during this grace period (the “Bid Price Requirement”).
If CarLotz does not regain compliance with the Bid Price Requirement by the Compliance Date, it may be eligible for an additional 180 calendar day compliance period. To qualify, CarLotz would need to transfer the listing of CarLotz Common Stock to the Nasdaq Capital Market, provided that it meets the continued listing requirement for the market value of publicly held shares and all other initial listing standards, with the exception of the Bid Price Requirement. To effect such a transfer, CarLotz would also need to pay an application fee and provide written notice to the Staff of its intention to cure the deficiency during the additional compliance period by effecting a reverse stock split, if necessary. As part of its review process, the Staff will make a determination of whether it believes CarLotz will be able to cure this deficiency. Should the Staff conclude that CarLotz will not be able to cure the deficiency, or should CarLotz determine not to submit an application for transfer to the Nasdaq Capital Market or notify the Staff of its intention to cure the deficiency, the Staff will provide written notification to CarLotz that the CarLotz Common Stock will be subject to delisting. At that time, CarLotz may appeal the Staff’s delisting determination to a Nasdaq Listing Qualifications Panel. If CarLotz is delisted from Nasdaq and it is not able to list the CarLotz Common Stock on another exchange, CarLotz’s securities could be quoted on the OTCQB, the OTC Bulletin Board or the pink sheets.
On October 4, 2022, Shift received a deficiency letter from the Staff of the Nasdaq Stock Market notifying Shift that, for the last 30 consecutive business days, the bid price for Shift Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). Under Nasdaq Listing Rule 5810(c)(3)(A), Shift has a 180 calendar day grace period, or until April 3, 2023, to regain compliance by meeting the continued listing standard. To regain compliance, the closing bid price of Shift Common Stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days during this grace period. Shift intends to monitor the closing bid price of Shift Common Stock and may, if appropriate, consider available options to regain compliance with Nasdaq Listing Rule 5550(a)(2), including effecting a reverse stock split of Shift Common Stock pursuant to the Reverse Stock Split Amendment if the Shift Reverse Stock Split Proposal is approved by Shift Stockholders. However, there can be no assurance that Shift will be able to regain compliance with Nasdaq Listing Rule 5550(a)(2).
If the Merger Agreement is terminated under specified circumstances, Shift or CarLotz may be required to pay the other party a termination fee of $4,250,000 and reimburse the other party’s reasonable and documented out-of-pocket expenses in an amount not to exceed $1,210,000 (provided that any such reimbursed expenses would be credited against any termination fee that may be payable). See the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement.”
How can I vote my shares at my respective special meeting?
Shift
Shares held directly in your name as a Shift Stockholder of record may be voted at the Shift Special Meeting via the Shift Special Meeting Website at www.virtualshareholdermeeting.com/SFT2022SM. You will need the 16-digit control
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number included on your proxy card in order to access and vote via the Shift Special Meeting Website as described in the section entitled “The Shift Special Meeting—Virtually Attending the Shift Special Meeting.
If you hold your shares through a stockbroker, nominee, fiduciary or other custodian, you may also be able to vote through a program provided through Broadridge Financial Solutions (“Broadridge”) that offers Internet voting options. If your shares are held in an account at a brokerage firm or bank participating in the Broadridge program, you are offered the opportunity to elect to vote via the Internet. Votes submitted via the Internet through the Broadridge program must be received by 11:59 p.m., Eastern Time on December 6, 2022. See the section entitled “The Shift Special Meeting—Virtually Attending the Shift Special Meeting.”
CarLotz
Shares held directly in your name as the CarLotz Stockholder of record may be voted online during the CarLotz Special Meeting via the CarLotz Special Meeting Website at www.virtualshareholdermeeting.com/LOTZ2022SM. You will need the 16-digit control number included on your proxy card in order to access and vote via the CarLotz Special Meeting Website as described in the section entitled “The CarLotz Special Meeting—Virtually Attending the CarLotz Special Meeting.”
If you hold your shares through a stockbroker, nominee, fiduciary or other custodian, you may also be able to vote through a program provided through Broadridge that offers Internet voting options. If your shares are held in an account at a brokerage firm or bank participating in the Broadridge program, you are offered the opportunity to elect to vote via the Internet. Votes submitted via the Internet through the Broadridge program must be received by 11:59 p.m., Eastern Time on December 6, 2022. See the section entitled “The CarLotz Special Meeting—Virtually Attending the CarLotz Special Meeting.”
How can I vote my shares without virtually attending my company’s special meeting?
Whether you hold your shares directly as a stockholder of record of Shift or CarLotz or beneficially in “street name,” you may direct your vote by proxy without virtually attending the Shift Special Meeting or the CarLotz Special Meeting, as applicable.
Shift
If you are a stockholder of record, you can vote by proxy:
by Internet 24 hours a day, seven days a week, until 11:59 p.m., Eastern Time on December 6, 2022 (have your proxy card in hand when you visit the website);
by telephone in accordance with the instructions on your proxy card, until 11:59 p.m., Eastern Time on December 6, 2022 (have your proxy card in hand when you call); or
by completing and mailing your proxy card in accordance with the instructions provided on the proxy card.
If you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee. If you hold your shares through a stockbroker, nominee, fiduciary or other custodian you may also be able to vote through a program provided through Broadridge that offers Internet voting options. If your shares are held in an account at a brokerage firm or bank participating in the Broadridge program, you are offered the opportunity to elect to vote via the Internet. Votes submitted via the Internet through the Broadridge program must be received by 11:59 p.m. (Eastern Time) on December 6, 2022.
For additional information on voting procedures, see the section entitled “The Shift Special Meeting.”
CarLotz
Whether you hold your shares directly as the CarLotz Stockholder of record or beneficially in street name, you may vote without attending the CarLotz Special Meeting in one of the following manners:
By Internet. Go to https://www.proxyvote.com and follow the instructions. You will need the control number included on your proxy card or voting instruction form;
By Telephone. Dial 1-800-690-6903. You will need the control number included on your proxy card or voting instruction form; or
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By Mail. Complete, date and sign your proxy card or voting instruction form and mail it using the enclosed, pre-paid envelope.
If you vote on the Internet or by telephone, you do not need to return your proxy card or voting instruction form. Internet and telephone voting for CarLotz Stockholders will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on December 6, 2022.
What is a “broker non-vote”?
Under Nasdaq rules, banks, brokers and other nominees may use their discretion to vote “uninstructed” shares (i.e., shares of record held by banks, brokers or other nominees but with respect to which the beneficial owner of such shares has not provided instructions on how to vote on a particular proposal) with respect to matters that are considered to be “routine” but not with respect to “non-routine” matters. All of the proposals currently expected to be voted on at the CarLotz Special Meeting are “non-routine” matters. The Shift Share Issuance Proposal and the Shift Adjournment Proposal are “non-routine” matters, while the Shift Reverse Stock Split Proposal is considered to be a “routine” matter.
A “broker non-vote” occurs on a proposal when (i) a broker, bank or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and (ii) the beneficial owner fails to provide the broker, bank or other nominee with such instructions. Because all of the proposals currently expected to be voted on at the CarLotz Special Meeting are non-routine matters for which brokers do not have discretionary authority to vote, CarLotz does not expect there to be any broker non-votes at the CarLotz Special Meeting. Because the Shift Share Issuance Proposal and the Shift Adjournment Proposal are non-routine matters for which brokers do not have discretionary authority to vote, and the Shift Reverse Stock Split Proposal is a routine matter for which brokers have discretionary authority to vote, there may be broker non-votes at the Shift Special Meeting.
What stockholder vote is required for the approval of each proposal at the Shift Special Meeting? What will happen if I fail to vote or abstain from voting on each proposal at the Shift Special Meeting?
Shift Proposal 1: Shift Share Issuance Proposal
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Share Issuance Proposal requires the affirmative vote of the holders of a majority of the outstanding stock having voting power present in person or represented by proxy at the Shift Special Meeting. Any shares not present or represented by proxy (including due to the failure of a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Shift Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the Shift Share Issuance Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Shift Share Issuance Proposal will have the same effect as a vote “AGAINST” the Shift Share Issuance Proposal for purposes of the requirement that the Shift Share Issuance Proposal receive the affirmative vote of the holders of a majority of the outstanding Shift Common Stock having voting power present in person or represented by proxy at the Shift Special Meeting. In addition, if a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Shift Share Issuance Proposal, it will have the same effect as a vote “AGAINST” the Shift Share Issuance Proposal.
Shift Proposal 2: Shift Reverse Stock Split Proposal
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Reverse Stock Split Proposal requires the affirmative vote of the holders of Shift Common Stock representing at least a majority of the outstanding shares of Shift Common Stock entitled to vote thereon. If you are a Shift Stockholder and fail to vote, fail to instruct your bank, broker or other nominee to vote with respect to the Shift Reverse Stock Split Proposal (except in the event your bank, broker or other nominee exercises its discretionary authority to vote “FOR” the Shift Reverse Stock Split Proposal), or abstain from voting, it will have the same effect as a vote “AGAINST” the Shift Reverse Stock Split Proposal.
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Shift Proposal 3: Shift Adjournment Proposal
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Adjournment Proposal requires the affirmative vote of the holders of a majority of the Shift Common Stock having voting power present in person or represented by proxy at the Shift Special Meeting. Any shares not present or represented by proxy (including due to the failure of a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Shift Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the Shift Adjournment Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Shift Share Issuance Proposal will have the same effect as a vote “AGAINST” the Shift Adjournment Proposal. In addition, if a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Shift Adjournment Proposal, it will have the same effect as a vote “AGAINST” the Shift Adjournment Proposal.
What stockholder vote is required for the approval of each CarLotz proposal at the CarLotz Special Meeting? What will happen if I fail to vote or abstain from voting on each CarLotz proposal at the CarLotz Special Meeting?
CarLotz Proposal 1: CarLotz Merger Proposal
Approval requires the affirmative vote of the holders of a majority of the outstanding shares of CarLotz Common Stock entitled to vote at the close of business on the CarLotz Record Date. The failure to vote, the failure to instruct your brokerage firm, bank, dealer or other similar organization, trustee or nominee to vote shares held in “street name” on the CarLotz Merger Proposal or an abstention from voting will have the same effect as a vote “AGAINST” the CarLotz Merger Proposal.
CarLotz Proposal 2: CarLotz Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the voting power of the shares of CarLotz Common Stock present, including by remote communication, or represented by proxy at the CarLotz Special Meeting. Any shares not present or represented by proxy (including due to failure of a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the CarLotz Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the CarLotz Adjournment Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the CarLotz Adjournment Proposal will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal. In addition, if a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for the CarLotz Merger Proposal, but not for the CarLotz Adjournment Proposal, it will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal.
What if I hold shares of both Shift Common Stock and CarLotz Common Stock?
If you are both a Shift Stockholder and a CarLotz Stockholder, you will receive two separate packages of proxy materials. A vote cast as a Shift Stockholder will not count as a vote cast as a CarLotz Stockholder, and a vote cast as a CarLotz Stockholder will not count as a vote cast as a Shift Stockholder. Therefore, please follow the instructions received with each set of materials you receive in order to submit separate proxies for your shares of Shift Common Stock and your shares of CarLotz Common Stock.
What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in “street name”?
If your shares of Shift Common Stock or CarLotz Common Stock are registered directly in your name with the transfer agent of Shift or CarLotz, respectively, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote directly at the applicable special meeting. You may also grant a proxy directly to Shift or CarLotz, as applicable, or to a third party to vote your shares at the applicable special meeting.
If your shares of Shift Common Stock or CarLotz Common Stock are held by a brokerage firm, bank, dealer or other similar organization, trustee or nominee, you are considered the beneficial owner of shares held in “street name.” Your
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brokerage firm, bank, dealer or other similar organization, trustee or nominee will send you, as the beneficial owner, a package describing the procedures for voting your shares. You should follow the instructions provided by your brokerage firm, bank, dealer or other similar organization, trustee or nominee to vote your shares.
In order to virtually attend and vote at the Shift Special Meeting via the Shift Special Meeting Website or the CarLotz Special Meeting via the CarLotz Special Meeting Website, you should follow the voting instructions provided by your bank, broker or other nominee. If you hold your shares of Shift Common Stock or CarLotz Common Stock through a stockbroker, nominee, fiduciary or other custodian, you may also be able to vote at the applicable special meeting through a program provided through Broadridge that offers Internet voting options. If your shares of Shift Common Stock or CarLotz Common Stock are held in an account at a brokerage firm or bank participating in the Broadridge program, you are offered the opportunity to elect to vote via the Internet. Votes submitted via the Internet through the Broadridge program must be received by 11:59 p.m. Eastern Time on December 6, 2022.
If my shares of Shift Common Stock or CarLotz Common Stock are held in “street name” by my brokerage firm, bank, dealer or other similar organization, trustee or nominee, will my brokerage firm, bank, dealer or other similar organization, trustee or nominee automatically vote those shares for me?
Your bank, broker or other nominee will only be permitted to vote your shares of Shift Common Stock or CarLotz Common Stock, as applicable, at the applicable special meeting if you instruct your bank, broker or other nominee or your bank, broker or other nominee has voting discretion with respect to “routine” proposals. You should follow the procedures provided by your bank, broker or other nominee regarding the voting of your shares. Banks, brokers and other nominees who hold shares of Shift Common Stock or CarLotz Common Stock in “street name” for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are prohibited from exercising their voting discretion with respect to non-routine matters, which include the Shift Share Issuance Proposal and the Shift Adjournment Proposal and all of the proposals currently expected to be voted on at the CarLotz Special Meeting. As a result, absent specific instructions from the beneficial owner of such shares, banks, brokers and other nominees are not empowered to vote such shares on the Shift Share Issuance Proposal, the Shift Adjournment Proposal and the proposals currently expected to be voted on at the CarLotz Special Meeting. The Shift Reverse Stock Split Proposal is considered a “routine” matter, and banks, brokers and other nominees have voting discretion with respect to such proposal.
What should I do if I receive more than one set of voting materials for the same special meeting?
If you hold shares of Shift Common Stock or CarLotz Common Stock in “street name” and also directly in your name as a stockholder of record or otherwise, or if you hold shares of Shift Common Stock or CarLotz Common Stock in more than one brokerage account, you may receive more than one set of voting materials relating to the same special meeting.
Record Holders. For shares held directly, please vote by proxy over the internet or by telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, in order to ensure that all of your shares of Shift Common Stock or CarLotz Common Stock are voted.
Shares Held in Street Name. For shares held in “street name” through a bank, broker or other nominee, you should follow the procedures provided by such bank, broker or other nominee to submit a proxy or vote your shares.
If a stockholder gives a proxy, how are the shares of Shift Common Stock or CarLotz Common Stock voted?
Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your shares of Shift Common Stock or CarLotz Common Stock, as applicable, in the way that you indicate. For each item before the Shift Special Meeting or the CarLotz Special Meeting, as applicable, you may specify whether your shares of Shift Common Stock or CarLotz Common Stock, as applicable, should be voted “for” or “against,” or abstain from voting.
For more information regarding how your shares will be voted if you properly sign, date and return a proxy card but do not indicate how your Shift Common Stock or CarLotz Common Stock, as applicable, should be voted, see the section entitled “Questions and AnswersHow will my shares be voted if I return a blank proxy?
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How will my shares be voted if I return a blank proxy?
Shift
If you sign, date and return your proxy and do not indicate how you want your shares of Shift Common Stock to be voted, then your shares of Shift Common Stock will be voted in accordance with the recommendation of the Shift Board: “FOR” the Shift Share Issuance Proposal; “FOR” the Shift Reverse Stock Split Proposal; and “FOR” the Shift Adjournment Proposal.
CarLotz
If you sign, date and return your proxy and do not indicate how you want your shares of CarLotz Common Stock to be voted, then your shares of CarLotz Common Stock will be voted in accordance with the recommendation of the CarLotz Board: “FOR” the CarLotz Merger Proposal; and “FOR” the CarLotz Adjournment Proposal.
Can I change my vote after I have submitted my proxy?
Any Shift Stockholder or CarLotz Stockholder giving a proxy has the right to revoke the proxy and change their vote before the proxy is voted at the applicable special meeting by doing any of the following:
subsequently submitting a new proxy for the applicable special meeting that is received by the deadline specified on the accompanying proxy card;
giving written notice of your revocation to Shift’s Corporate Secretary or CarLotz’s Corporate Secretary, as applicable; or
virtually attending and voting at the applicable special meeting via the applicable special meeting website. Note that a proxy will not be revoked if you attend, but do not vote at, the applicable special meeting.
Execution or revocation of a proxy will not in any way affect your right to virtually attend and vote at the applicable special meeting via the applicable special meeting website. See the sections entitled “The Shift Special Meeting—Revocability of Proxies” and “The CarLotz Special Meeting—Revocability of Proxies.”
If I hold my shares in “street name,” can I change my voting instructions after I have submitted voting instructions to my bank, broker or other nominee?
If your shares are held in the name of a bank, broker or other nominee and you previously provided voting instructions to your bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee to revoke or change your voting instructions.
Where can I find the voting results of the special meetings?
The preliminary voting results for each special meeting are expected to be announced at that special meeting. In addition, within four business days following certification of the final voting results, each of Shift and CarLotz will file the final voting results of its respective special meeting (or, if the final voting results have not yet been certified, the preliminary results) with the SEC on a Current Report on Form 8-K.
Do Shift Stockholders or CarLotz Stockholders have dissenters’ or appraisal rights?
No dissenters’ or appraisal rights will be available to Shift Stockholders or CarLotz Stockholders with respect to the Merger or the other Proposed Transactions under Delaware law.
Are there any risks that I should consider in deciding whether to vote for the approval of the Shift Share Issuance Proposal, the Shift Reverse Stock Split Proposal or the CarLotz Merger Proposal?
Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors.” You also should read and carefully consider the risk factors relating to Shift and CarLotz that are contained in the documents that are incorporated by reference in and included as annexes to this joint proxy statement/prospectus.
What happens if I sell my shares of Shift Common Stock or CarLotz Common Stock after the respective record date but before the respective special meeting?
The Shift Record Date is earlier than the date of the Shift Special Meeting, and the CarLotz Record Date is earlier than the date of the CarLotz Special Meeting. If you sell or otherwise transfer your shares of Shift Common Stock or
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CarLotz Common Stock after the applicable record date but before the applicable special meeting, you will, unless special arrangements are made, retain your right to vote at the applicable special meeting.
Who will solicit and pay the cost of soliciting proxies?
Shift has engaged MacKenzie Partners, Inc. (“MacKenzie Partners”) to assist in the solicitation of proxies for the Shift Special Meeting. Shift estimates that it will pay MacKenzie Partners a fee of approximately $15,000, plus reimbursement for certain out-of-pocket fees and expenses. Shift has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).
CarLotz has engaged Morrow Sodali LLC (“Morrow Sodali”) to assist in the solicitation of proxies for the CarLotz Special Meeting. CarLotz will pay Morrow Sodali a fee of $25,000, plus a per stockholder fee to solicit record and beneficial owners of CarLotz Common Stock and reimbursement of any additional disbursements incurred by Morrow Sodali on CarLotz’s behalf.
Shift and CarLotz also may reimburse banks, brokers and other custodians, nominees and fiduciaries or their respective agents for their expenses in forwarding proxy materials to beneficial owners of Shift Common Stock and CarLotz Common Stock, respectively. Shift and CarLotz directors, officers and employees also may solicit proxies by telephone, by electronic means or in person. They will not be paid any additional amounts for soliciting proxies.
When is the Merger expected to be completed?
Subject to the satisfaction or waiver of the closing conditions described in the section entitled “The Merger Agreement—Conditions to Complete the Merger,” including approval of the Shift Share Issuance Proposal by Shift Stockholders and approval of the CarLotz Merger Proposal by CarLotz Stockholders, the Merger is currently expected to be completed in the fourth quarter of 2022. However, neither Shift nor CarLotz can predict the actual date on which the Merger will be completed, or if the Merger will be completed at all, because completion of the Merger is subject to conditions and factors beyond the control of both companies. Shift and CarLotz hope to complete the Merger as soon as reasonably practicable.
What respective equity stakes will Shift Stockholders and CarLotz Stockholders hold in the Combined Company immediately following the Merger?
Upon completion of the Merger, based on the Exchange Ratio, the number of outstanding shares of CarLotz Common Stock and the number of outstanding shares of Shift Common Stock as of October 21, 2022, (i) former CarLotz Stockholders are expected to own approximately 49.99% of the issued and outstanding shares of Shift Common Stock and approximately 48.12% of the outstanding shares of Shift Common Stock on a fully diluted and as-converted to Shift Common Stock basis and (ii) current Shift Stockholders are expected to own approximately 50.01% of the issued and outstanding shares of Shift Common Stock and approximately 51.88% of the outstanding shares of Shift Common Stock on a fully diluted and as-converted to Shift Common Stock basis.
If I am a CarLotz stockholder, how will I receive the Merger Consideration to which I am entitled?
If, at the Effective Time, you hold your shares of CarLotz Common Stock in book-entry form, whether through The Depository Trust Company (“DTC”) or otherwise, you will not be required to take any specific actions to exchange your shares of CarLotz Common Stock for shares of Shift Common Stock. Such shares will, following the Effective Time, be automatically exchanged for shares of Shift Common Stock (in book-entry form) to which you are entitled. If, at the Effective Time, you instead hold your shares of CarLotz Common Stock in certificated form, then, after receiving the proper documentation from you following the Effective Time, the Exchange Agent will deliver to you the shares of Shift Common Stock (in book-entry form) to which you are entitled. See the section entitled “The Merger—Exchange of CarLotz Certificates.
What are the material U.S. federal income tax consequences of the Merger to U.S. holders of shares of CarLotz Common Stock?
The Merger has been structured to qualify as, and the parties intend the Merger to be treated as, a reorganization for U.S. federal income tax purposes. Shift has received an opinion of counsel, filed as Exhibit 8.1, to the effect that, under the U.S. federal income tax laws in effect as of the date of such opinion, the Merger will qualify as a
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“reorganization” within the meaning of Section 368(a) of the Code. In the opinion of Jenner & Block LLP, tax counsel to Shift, CarLotz Stockholders generally will not recognize any gain or loss for federal income tax purposes on the exchange of their CarLotz Common Stock for Shift Common Stock in the Merger. You should be aware that the tax consequences to you of the Merger may depend upon your own situation. In addition, you may be subject to U.S. federal non-income, state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisors for a full understanding of the tax consequences to you of the Merger. For a more complete discussion of the material U.S. federal income tax consequences of the Merger, see the section entitled “U.S. Federal Income Tax Consequences of the Merger.
What are the material U.S. Federal income tax consequences to Shift and Shift Stockholders as a result of the Merger?
Shift does not expect Shift or any Shift Stockholder to recognize federal income tax or gain as a result of the Merger. However, as a result of the Merger, Shift’s ability to use its accumulated net operating losses and certain other tax attributes generated prior to the Merger may be subject to limitation.
What are the U.S. federal income tax consequences of the Reverse Stock Split Amendment to U.S. Holders of Shift Common Stock?
The Reverse Stock Split Amendment is expected to qualify as a “recapitalization” for U.S. federal income tax purposes. Shift has received an opinion of counsel, filed as Exhibit 8.1, to the effect that, under the U.S. federal income tax laws in effect as of the date of such opinion, a Shift reverse stock split pursuant to the Reverse Stock Split Amendment will qualify as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code. In the opinion of Jenner & Block LLP, tax counsel to Shift, Shift Stockholders generally will not recognize gain or loss for U.S. federal income tax purposes upon the reverse stock split (except with respect to cash, if any, received in lieu of a fractional share of Shift Common Stock). You should be aware that the tax consequences to you of the Reverse Stock Split Amendment may depend upon your own situation. In addition, you may be subject to U.S. federal non-income, state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisors for a full understanding of the tax consequences to you of the Reverse Stock Split Amendment. For a more complete discussion of the material U.S. federal income tax consequences of the Reverse Stock Split Amendment, see the section entitled “U.S. Federal Income Tax Consequences of the Reverse Stock Split Amendment.
What should I do now?
You should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes hereto and documents incorporated by reference herein. Then, you may vote by proxy over the internet or by telephone, using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, so that your shares will be voted in accordance with your instructions.
How can I find more information about Shift and CarLotz?
You can find more information about Shift and CarLotz from various sources described in the section entitled “Where You Can Find More Information” and in the annexes to this joint proxy statement/prospectus.
Whom do I call if I have questions about the special meetings or the Merger?
If you have questions about the special meetings or the Merger, or desire additional copies of this joint proxy statement/prospectus or additional proxies, you may contact your company’s proxy solicitor:
If you are a Shift Stockholder:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, New York 10018
(800) 322-2885 (toll-free)
proxy@mackenziepartners.com
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If you are a CarLotz Stockholder:
Morrow Sodali LLC
333 Ludlow Street, 5th Floor, South Tower
Stamford, Connecticut 06902
(800) 662-5200 (toll-free) or (203) 658-9400 (banks and brokers can call collect)
LOTZ@investor.morrowsodali.com
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SUMMARY
For your convenience, provided below is a brief summary of certain information contained in this joint proxy statement/prospectus. This summary highlights selected information from this joint proxy statement/prospectus and does not contain all of the information that may be important to you as a Shift Stockholder or CarLotz Stockholder. To understand the Merger fully and for a more complete description of the terms of the Merger, you should read carefully this entire joint proxy statement/prospectus, its annexes and the other documents to which you are referred. Items in this summary include a page reference directing you to a more complete description of those items. You may obtain the information incorporated by reference in this joint proxy statement/prospectus, without charge, by following the instructions under “Where You Can Find More Information.”
The Parties to the Merger (Page 45)
Shift Technologies, Inc.
Headquartered in San Francisco, Shift is a leading end-to-end ecommerce platform transforming the used car industry with a technology-driven, hassle-free customer experience. Shift’s mission is to make car purchase and ownership simple–to make buying or selling a used car fun, fair and accessible to everyone. Shift provides comprehensive, technology-driven solutions throughout the car ownership lifecycle: finding the right car, a seamless digitally-driven purchase transaction including financing and vehicle protection products, an efficient, fully-digital trade-in/sale transaction and a vision to provide high-value support services during car ownership. Each of these steps is powered by Shift’s software solutions, mobile transactions platform and scalable logistics, combined with our centralized inspection, reconditioning & storage centers, called hubs.
Shift Common Stock is publicly traded on Nasdaq under the symbol “SFT.” Shift’s principal executive offices are located at 290 Division Street, Suite 400, San Francisco, California 94103, and its telephone number is (855) 575-6739. On October 4, 2022, Shift received a deficiency letter from the Staff of the Nasdaq Stock Market notifying Shift that, for the last 30 consecutive business days, the bid price for Shift Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Capital Market. See the section entitled “Questions and Answers — What happens if the Merger is not completed?”
CarLotz, Inc.
CarLotz operates a consignment-to-retail used vehicle marketplace that provides its corporate vehicle sourcing partners and retail sellers of used vehicles with the ability to easily access the retail sales channel. CarLotz’s mission is to create the world’s greatest vehicle buying and selling experience. CarLotz operates a technology-enabled buying, sourcing and selling model that offers an omni-channel experience and diverse selection of vehicles. CarLotz’s proprietary technology provides its corporate vehicle sourcing partners with real-time performance metrics and data analytics along with custom business intelligence reporting that enables vehicle triage optimization between the wholesale and retail channels.
CarLotz Common Stock is traded on the Nasdaq Global Market under the symbol “LOTZ.” CarLotz Warrants are traded on the Nasdaq Global Market under the symbol “LOTZW.” CarLotz’s principal executive offices are located at 3301 W. Moore Street, Richmond, Virginia 23230, and its telephone number is (804) 510-0744. On June 7, 2022, CarLotz received a deficiency letter from the Staff of the Nasdaq Stock Market notifying CarLotz that, for the last 30 consecutive business days, the bid price for CarLotz Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market. See the section entitled “Questions and Answers — What happens if the Merger is not completed?
Shift Remarketing Operations, Inc.
Shift Remarketing Operations, Inc. was formed by Shift for the sole purpose of effecting the Merger. Shift Remarketing Operations, Inc. has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the Merger Agreement. At the Effective Time, Merger Sub will merge with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift, and the separate existence of Merger Sub will cease. Merger Sub’s principal executive offices are located at 290 Division Street, Suite 400, San Francisco, California 94103, and its telephone number is (855) 575-6739.
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The Merger and the Merger Agreement (Pages 64 and 107)
The terms and conditions of the Merger are contained in the Merger Agreement, a copy of which is attached as Annex A hereto. Shift and CarLotz encourage you to read the Merger Agreement carefully and in its entirety, as it is the legal document that governs the Merger.
The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift.
Merger Consideration (Page 64)
If the Merger is completed, each issued and outstanding share of CarLotz Common Stock (other than CarLotz Common Stock owned or held in treasury by CarLotz, which will be cancelled for no consideration) will be converted into the right to receive a number of shares of Shift Common Stock as determined by the Exchange Ratio, rounded up to the nearest whole share for any fractional share of Shift Common Stock that would be issued to any CarLotz Stockholder after aggregating all fractional shares of Shift Common Stock that would otherwise be received by such CarLotz Stockholder resulting from the calculation. The “Exchange Ratio” is equal to 0.692158; provided, however, that as of immediately prior to the Effective Time, the Exchange Ratio will be adjusted to a ratio equal to (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (1) any CarLotz Earnout Shares, (2) any CarLotz Earnout Acquiror RSUs, (3) any CarLotz Warrants, (4) any options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio and (5) any performance-based restricted stock unit awards that will be terminated as of the Effective Time). Shift Stockholders will continue to own their existing shares of Shift Common Stock following the Merger.
As noted above, the number of shares of Shift Common Stock that CarLotz Stockholders will receive as Merger Consideration is not fixed and may change. Events that may impact the number of shares of Shift Common Stock issued in connection with the Merger include:
the issuance of new shares of Shift Common Stock prior to the Effective Time, including the settlement of derivative securities convertible into or exercisable for shares of Shift Common Stock;
the issuance of new shares of CarLotz Common Stock prior to the Effective Time, excluding the settlement of derivative securities convertible or exercisable for shares of CarLotz Common Stock; and
the issuance of derivative securities convertible into or exercisable for shares of CarLotz Common Stock prior to the Effective Time.
Treatment of CarLotz Equity Awards; CarLotz Earnout Shares; CarLotz Warrants (Page 108)
With respect to CarLotz’s equity awards, the CarLotz Earnout Shares and CarLotz Warrants, the Merger Agreement provides that, at the Effective Time:
each award of time-based vesting restricted stock units (excluding CarLotz Earnout Acquiror RSUs, each, a “CarLotz RSU Award”) that is outstanding immediately prior to the Effective Time and to the extent vested at the Effective Time pursuant to its terms, will be cancelled and converted into the right to receive a number of shares of Shift Common Stock equal to the product of (i) the number of vested whole shares of CarLotz Common Stock subject to such award immediately prior to the Effective Time and (ii) the Exchange Ratio, less applicable tax withholding. If or to the extent a CarLotz RSU Award is not covered by the preceding sentence, such award will be assumed by Shift and converted into an award of time-based vesting restricted stock units relating to Shift Common Stock, with such award subject to the same terms and conditions as applied to such CarLotz RSU Award immediately prior to the effective time, except the number of shares of Shift Common Stock subject to such award will equal the product of (i) the number of unvested whole shares of CarLotz Common Stock subject to such CarLotz RSU Award immediately prior to the Effective Time and (ii) the Exchange Ratio, and rounding such product down to the nearest whole share;
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each award of performance-based vesting restricted stock units (each, a “CarLotz PSU Award”) that is outstanding immediately prior to the Effective Time, if and to the extent vested at the Effective Time pursuant to its terms, will be cancelled and converted into the right to receive a number of shares of Shift Common Stock equal to the product of (i) the number of whole shares of CarLotz Common Stock subject to such award immediately prior to the Effective Time and (ii) the Exchange Ratio, less applicable tax withholding. If or to the extent a CarLotz PSU Award is not covered by the preceding sentence, such award will be assumed by Shift and converted into an award of performance-based vesting restricted stock units relating to Shift Common Stock, with such award subject to the same terms and conditions as applied to such CarLotz PSU Award immediately prior to the Effective Time, except (i) the number of shares of Shift Common Stock subject to such award will equal the product of (A) the number of unvested whole shares of CarLotz Common Stock subject to such CarLotz PSU Award immediately prior to the Effective Time and (B) the Exchange Ratio, and rounding such product down to the nearest whole share and (ii) the threshold closing share prices of CarLotz Common Stock applicable to such award shall be adjusted to threshold closing share prices of Shift Common Stock determined by dividing (A) the threshold closing share prices of CarLotz Common Stock applicable to such award immediately prior to the Effective Time by (y) the Exchange Ratio, and rounding such quotient up to the nearest whole cent;
each option to purchase shares of CarLotz Common Stock that is outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested (each, an “Assumed Stock Option”), will cease to represent a right to acquire shares of CarLotz Common Stock and will be assumed by Shift and converted into an option to purchase shares of Shift Common Stock from Shift (each, a “Shift Stock Option”) on the same terms and conditions as applied to such Assumed Stock Option immediately prior to the Effective Time, except that (i) the number of shares of Shift Common Stock subject to each Assumed Stock Option will be equal to the product of (A) the number of whole shares of CarLotz Common Stock subject to such Assumed Stock Option immediately prior to the Effective Time and (y) the Exchange Ratio, and rounding such product down to the nearest whole share, and (ii) the per share exercise price for the shares of Shift Common Stock issuable upon exercise of each Assumed Stock Option will be determined by dividing (x) the per share exercise price for the shares of CarLotz Common Stock otherwise purchasable pursuant to such Assumed Stock Option immediately prior to the Effective Time by (y) the Exchange Ratio, and rounding such quotient up to the nearest whole cent;
if the Proposed Transactions constitute an “Acceleration Event” (as such term is defined in the SPAC Merger Agreement), (i) Shift agrees that the terms and conditions set forth in Section 3.10(f) of the SPAC Merger Agreement will apply to the Proposed Transactions, (ii) the CarLotz Common Stock in respect of the CarLotz Earnout Shares will be issued in accordance with Section 3.10(f) of the SPAC Merger Agreement as of immediately prior to the Effective Time and (iii) as of the Effective Time, each such share of CarLotz Common Stock will be converted into the right to receive the Merger Consideration. If the Proposed Transactions do not constitute an “Acceleration Event” (as such term is defined in the SPAC Merger Agreement), each CarLotz Earnout Share that is subject to issuance as of immediately prior to the Effective Time (each, an “Assumed CarLotz Earnout Share”) will, as of the Effective Time, cease to represent a right to acquire shares of CarLotz Common Stock and will be assumed by Shift and converted into a right to receive shares of Shift Common Stock on the same terms and conditions as applied to such Assumed CarLotz Earnout Share immediately prior to the Effective Time, except that (i) the number of shares of Shift Common Stock subject to each Assumed CarLotz Earnout Share shall be equal to the product of (A) the number of whole shares of CarLotz Common Stock subject to such Assumed CarLotz Earnout Share immediately prior to the Effective Time and (B) the Exchange Ratio, and rounding such product down to the nearest whole share, and (ii) the threshold closing share prices of the CarLotz Common Stock applicable to such Assumed CarLotz Earnout Shares shall be adjusted to threshold closing share prices of Shift Common Stock determined by dividing (A) the threshold closing share prices of the CarLotz Common Stock applicable to such Assumed CarLotz Earnout Shares as of immediately prior to the Effective Time by (B) the Exchange Ratio, and rounding such quotient up to the nearest whole cent;
if the Proposed Transactions constitute an “Acceleration Event” (as such term is defined in the SPAC Merger Agreement), (i) Shift agrees that the terms and conditions set forth in Section 3.04(e) of the
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SPAC Merger Agreement will apply to the Proposed Transactions, and (ii) each CarLotz Earnout Acquiror RSU will immediately vest, be cancelled and be converted into the right to receive the a number of shares of Shift Common Stock equal to the product of (A) the number of vested shares of CarLotz Common Stock subject to such CarLotz Earnout Acquiror RSU immediately prior to the Effective Time and (B) the Exchange Ratio, less applicable tax withholding. If the Proposed Transactions do not constitute an “Acceleration Event” (as such term is defined in the SPAC Merger Agreement), each CarLotz Earnout Acquiror RSU that is issued and outstanding as of immediately prior to the Effective Time (each, an “Assumed CarLotz Earnout Acquiror RSU”) will cease to represent a right to acquire shares of CarLotz Common Stock and shall be assumed by Shift and converted into a right to receive Shift Common Stock on the same terms and conditions as applied to such Assumed CarLotz Earnout Acquiror RSU immediately prior to the Effective Time, except that (i) the number of shares of Shift Common Stock subject to each Assumed CarLotz Earnout Acquiror RSU shall be equal to the product of (A) the number of whole shares of CarLotz Common Stock subject to such Assumed CarLotz Earnout Acquiror RSU immediately prior to the Effective Time and (B) the Exchange Ratio, and rounding such product down to the nearest whole share; and (ii) the threshold closing share price of the CarLotz Common Stock applicable to such Assumed CarLotz Earnout Acquiror RSU shall be adjusted to threshold closing share price of Shift Common Stock determined by dividing (A) the threshold closing share price of the CarLotz Common Stock applicable to such Assumed CarLotz Earnout Acquiror RSU as of immediately prior to the Effective Time by (y) the Exchange Ratio, and rounding such quotient up to the nearest whole cent; and
each CarLotz Warrant that is outstanding and unexercised immediately prior to the Effective Time will cease to represent a CarLotz Warrant in respect of CarLotz Common Stock and will be assumed by Shift and converted into a warrant denominated in shares of Shift Common Stock (each, a “Shift Warrant”). The number of shares of Shift Common Stock subject to each Shift Warrant will be equal to the product of (i) the number of whole shares of CarLotz Common Stock subject to such CarLotz Warrant immediately prior to the Effective Time and (ii) the Exchange Ratio, and rounding such product to the nearest whole share; and the per share exercise price for the shares of Shift Common Stock issuable upon exercise of each Shift Warrant will be determined by dividing (i) the per share exercise price of such CarLotz Warrant immediately prior to the Effective Time by (y) the Exchange Ratio, and rounding such quotient up to the nearest whole cent. Except as set forth in the preceding sentence, following the Effective Time, each Shift Warrant will continue to be governed by the same terms and conditions as were applicable to the applicable CarLotz Warrant immediately prior to the Effective Time.
For more information, see the section entitled “The Merger Agreement—Treatment of CarLotz Equity Awards; CarLotz Earnout Shares; CarLotz Warrants.”
Shift’s Reasons for the Merger and Recommendation of the Shift Board (Page 78)
The Shift Board unanimously recommends that you vote “FOR” the Shift Share Issuance Proposal, “FOR” the Shift Reverse Stock Split Proposal and “FOR” the Shift Adjournment Proposal. For a description of factors considered by the Shift Board in reaching its decision to approve the Merger Agreement, the Proposed Transactions (including the Merger) and the Reverse Stock Split Amendment, and additional information on the recommendation of the Shift Board, see the section entitled “The Merger—Shift’s Reasons for the Merger and Recommendation of the Shift Board.”
CarLotz’s Reasons for the Merger and Recommendation of the CarLotz Board (Page 81)
The CarLotz Board unanimously recommends that you vote “FOR” the CarLotz Merger Proposal and “FOR” the CarLotz Adjournment Proposal. For a description of factors considered by the CarLotz Board in reaching its decision to approve the Merger Agreement and the Proposed Transactions (including the Merger) and additional information on the recommendation of the CarLotz Board, see the section entitled “The Merger—CarLotz’s Reasons for the Merger and Recommendation of the CarLotz Board.”
Opinion of Shift’s Financial Advisor (Page 85; Annex C)
Shift retained Centerview as financial advisor to the Shift Board in connection with the Proposed Transactions. In connection with this engagement, the Shift Board requested that Centerview evaluate the fairness, from a financial point of view, to Shift of the Exchange Ratio provided for pursuant to the Merger Agreement. On
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August 9, 2022, Centerview rendered to the Shift Board its oral opinion, which was subsequently confirmed by delivery of a written opinion dated August 9, 2022, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to Shift.
The full text of Centerview’s written opinion, dated August 9, 2022, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Shift Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Proposed Transactions, and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to Shift of the Exchange Ratio provided for pursuant to the Merger Agreement. Centerview’s opinion did not address any other term or aspect of the Merger Agreement or the Proposed Transactions and does not constitute a recommendation to any Shift Stockholder or any other person as to how such Shift Stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Proposed Transactions or any other matter.
The full text of Centerview’s written opinion, which is attached as Annex C to this joint proxy statement/prospectus, should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.
Opinion of CarLotz’s Financial Advisor
William Blair was retained to act as financial advisor to CarLotz in connection with a possible business combination. Pursuant to its engagement, the CarLotz Board requested that William Blair render an opinion to the CarLotz Board as to the fairness, from a financial point of view, of the Exchange Ratio to CarLotz Stockholders. On August 9, 2022, William Blair delivered its oral opinion to the CarLotz Board (subsequently confirmed in its written opinion dated August 9, 2022) that, as of the date of such opinion, and based upon and subject to the assumptions, qualifications and limitations stated in its written opinion, the Exchange Ratio was fair, from a financial point of view, to CarLotz Stockholders. The Exchange Ratio is subject to adjustment as set forth in the Merger Agreement, and William Blair expressed no opinion as to any such adjustment.
THE FULL TEXT OF WILLIAM BLAIR’S WRITTEN OPINION, DATED AUGUST 9, 2022, IS ATTACHED AS ANNEX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND INCORPORATED INTO THIS JOINT PROXY STATEMENT/PROSPECTUS BY REFERENCE. YOU ARE URGED TO READ THE ENTIRE FAIRNESS OPINION CAREFULLY AND IN ITS ENTIRETY TO LEARN ABOUT THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY WILLIAM BLAIR IN RENDERING ITS OPINION. THE ANALYSIS PERFORMED BY WILLIAM BLAIR SHOULD BE VIEWED IN ITS ENTIRETY; NONE OF THE METHODS OF ANALYSIS SHOULD BE VIEWED IN ISOLATION. WILLIAM BLAIR’S FAIRNESS OPINION WAS DIRECTED TO THE CARLOTZ BOARD FOR ITS USE AND BENEFIT IN EVALUATING THE FAIRNESS OF THE EXCHANGE RATIO SPECIFIED IN THE MERGER AGREEMENT AND RELATES ONLY TO THE FAIRNESS, AS OF THE DATE OF WILLIAM BLAIR’S FAIRNESS OPINION AND FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO SPECIFIED IN THE MERGER AGREEMENT. WILLIAM BLAIR’S FAIRNESS OPINION DOES NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CARLOTZ STOCKHOLDER AS TO HOW SUCH CARLOTZ STOCKHOLDER SHOULD VOTE ITS SHARES OF CARLOTZ COMMON STOCK WITH RESPECT TO THE MERGER. WILLIAM BLAIR DID NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY CARLOTZ TO ENGAGE IN THE MERGER. THE SUMMARY OF WILLIAM BLAIR’S FAIRNESS OPINION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS FAIRNESS OPINION ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS ANNEX D.
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The Shift Special Meeting (Page 46)
The Shift Special Meeting will be held in a virtual meeting format via live webcast on December 7, 2022, beginning at 12:00 p.m., Eastern Time. Shift Stockholders will be able to virtually attend and vote at the Shift Special Meeting by visiting the Shift Special Meeting Website at www.virtualshareholdermeeting.com/SFT2022SM.
The purposes of the Shift Special Meeting are to consider and vote upon the following matters:
the Shift Share Issuance Proposal;
the Shift Reverse Stock Split Proposal; and
the Shift Adjournment Proposal.
Approval of the Shift Share Issuance Proposal by Shift Stockholders is a condition to the Merger. Approval of the Shift Reverse Stock Split Proposal and the Shift Adjournment Proposal are not conditions to the obligation of either Shift or CarLotz to complete the Merger.
Only holders of record of shares of Shift Common Stock outstanding at the close of business on November 2, 2022, the Shift Record Date, are entitled to notice of, and to vote at, the Shift Special Meeting or any adjournment or postponement thereof. Each Shift Stockholder is entitled to one vote on each proposal for each share of Shift Common Stock held of record at the close of business on the Shift Record Date.
A quorum of Shift Stockholders is necessary to conduct business at the Shift Special Meeting. The presence in person or by proxy of the holders of Shift Common Stock representing a majority of the voting power of the outstanding shares of Shift Common Stock entitled to vote at the Shift Special Meeting will constitute a quorum. Virtual attendance at the Shift Special Meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the Shift Special Meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the Shift Special Meeting. Shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum unless the Shift Stockholder provides their bank, broker or other nominee with voting instructions for at least one of the proposals brought before the Shift Special Meeting (or your bank, broker or other nominee exercises its discretionary authority to vote on the Shift Reverse Stock Split Proposal as described below).
Shift Proposal 1: Shift Share Issuance Proposal
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Share Issuance Proposal requires the affirmative vote of the holders of a majority of the outstanding stock having voting power present in person or represented by proxy at the Shift Special Meeting. Any shares not present or represented by proxy (including due to the failure of a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Shift Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the Shift Share Issuance Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Shift Share Issuance Proposal will have the same effect as a vote “AGAINST” the Shift Share Issuance Proposal for purposes of the requirement that the Shift Share Issuance Proposal receive the affirmative vote of the holders of a majority of the outstanding Shift Common Stock having voting power present in person or represented by proxy at the Shift Special Meeting. In addition, if a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Shift Share Issuance Proposal, it will have the same effect as a vote “AGAINST” the Shift Share Issuance Proposal.
Shift Proposal 2: Shift Reverse Stock Split Proposal
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Reverse Stock Split Proposal requires the affirmative vote of the holders of Shift Common Stock representing at least a majority of the outstanding shares of Shift Common Stock entitled to vote thereon. If you are a Shift Stockholder and fail to vote, fail to instruct your bank, broker or other nominee to vote with respect to the Shift Reverse Stock Split Proposal (except in the event your bank, broker or other nominee exercises its discretionary authority to vote “FOR” the Shift Reverse Stock Split Proposal), or abstain from voting, it will have the same effect as a vote “AGAINST” the Shift Reverse Stock Split Proposal.
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Shift Proposal 3: Shift Adjournment Proposal
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Adjournment Proposal requires the affirmative vote of the holders of a majority of the Shift Common Stock having voting power present in person or represented by proxy at the Shift Special Meeting. Any shares not present or represented by proxy (including due to the failure of a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Shift Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the Shift Adjournment Proposal. An abstention or other failure of any shares present or represented by proxy to vote on the Shift Share Issuance Proposal will have the same effect as a vote “AGAINST” the Shift Adjournment Proposal, provided that a quorum is otherwise present at the Shift Special Meeting. In addition, if a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Shift Adjournment Proposal, it will have the same effect as a vote “AGAINST” the Shift Adjournment Proposal.
The CarLotz Special Meeting (Page 56)
The CarLotz Special Meeting is scheduled to be held virtually via live webcast on December 7, 2022, beginning at 11:00 a.m., Eastern Time. CarLotz Stockholders will be able to virtually attend and vote at the CarLotz Special Meeting by visiting www.virtualshareholdermeeting.com/LOTZ2022SM, the CarLotz Special Meeting Website.
The purpose of the CarLotz Special Meeting is to consider and vote on each of the following proposals, each of which is further described in this joint proxy statement/prospectus:
the CarLotz Merger Proposal; and
the CarLotz Adjournment Proposal.
Approval of the CarLotz Merger Proposal by CarLotz Stockholders is a condition to the Merger. Approval of the CarLotz Adjournment Proposal is not a condition to the obligation of either Shift or CarLotz to complete the Merger.
Only CarLotz Stockholders of record at the close of business on the CarLotz Record Date are entitled to receive notice of and to vote at the CarLotz Special Meeting and any and all adjournments or postponements thereof. Each CarLotz Stockholder is entitled to one vote on each proposal for each share of CarLotz Common Stock held of record at the close of business on the CarLotz Record Date.
A quorum of CarLotz Stockholders is necessary to conduct business at the CarLotz Special Meeting. The presence in person, or by remote communication, or represented by proxy of the holders of CarLotz Common Stock representing a majority of the voting power of the outstanding shares of CarLotz Common Stock entitled to vote at the CarLotz Special Meeting will constitute a quorum. Shares of CarLotz Common Stock present at the CarLotz Special Meeting by virtual attendance via the CarLotz Special Meeting Website or represented by proxy and entitled to vote, including shares for which a CarLotz Stockholder directs an “abstention” from voting, will be counted for purposes of determining a quorum. Shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum unless the CarLotz Stockholder provides their bank, broker or other nominee with voting instructions for at least one of the proposals at the CarLotz Special Meeting.
CarLotz Proposal 1: CarLotz Merger Proposal
Approval requires the affirmative vote of the holders of a majority of the outstanding shares of CarLotz Common Stock entitled to vote at the close of business on the CarLotz Record Date. The failure to vote, the failure to instruct your brokerage firm, bank, dealer or other similar organization, trustee or nominee to vote shares held in “street name” on the CarLotz Merger Proposal or an abstention from voting will have the same effect as a vote “AGAINST” the CarLotz Merger Proposal.
CarLotz Proposal 2: CarLotz Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the voting power of the shares of CarLotz Common Stock present, including by remote communication, or represented by proxy at the CarLotz Special Meeting. Any shares not present or represented by proxy (including due to failure of a CarLotz Stockholder who
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holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the CarLotz Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the CarLotz Adjournment Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the CarLotz Adjournment Proposal will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal. In addition, if a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for the CarLotz Merger Proposal, but not for the CarLotz Adjournment Proposal, it will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal.
Interests of Shift Directors and Executive Officers in the Merger (Page 145)
Other than with respect to continued service for, employment by and/or the right to continued indemnification by the Combined Company, as of the date of this joint proxy statement/prospectus, none of Shift’s named executive officers are party to or participate in any plan, program, arrangement or understanding that provides for any payment, benefit or other compensation that is based on or otherwise relates to the completion of the Merger. See the section entitled “Interests of Shift Directors and Executive Officers in the Merger.”
Interests of CarLotz Directors and Executive Officers in the Merger (Page 146)
In considering the recommendations of the CarLotz Board, CarLotz Stockholders should be aware that CarLotz’s directors and executive officers may have interests in the Merger, including financial interests, that may be different from, or in addition to, the interests of CarLotz Stockholders generally. The CarLotz Board was aware of and considered these interests, among other matters, in reaching its determination that the Merger is fair to and in the best interests of CarLotz and its stockholders, approving and declaring advisable the Merger Agreement and the Proposed Transactions, including the Merger, and recommending that CarLotz Stockholders approve the CarLotz Merger Proposal. These interests are discussed in more detail in the section entitled “Interests of CarLotz Directors and Executive Officers in the Merger.”
Certain Beneficial Owners of Shift Common Stock (Page 174)
At the close of business on October 27, 2022, the latest practicable date prior to the date of this joint proxy statement/ prospectus, Shift directors and executive officers and their affiliates, as a group, beneficially owned and were entitled to vote approximately 9.0% of the shares of Shift Common Stock. Certain directors, executive officers and affiliates of certain directors and executive officers executed supporting agreements in connection with the Merger Agreement, solely in their capacity as Shift Stockholders (the “Shift Support Agreements”). For more information regarding the Shift Support Agreements, see the section entitled “Support Agreements.”
Shift currently expects that all Shift directors and executive officers, including directors and executive officers not party to a Shift Support Agreement, will vote their shares “FOR” the Shift Share Issuance Proposal, “FOR” the Shift Reverse Stock Split Proposal and “FOR” the Shift Adjournment Proposal. For more information regarding the security ownership of Shift directors and executive officers, see the section entitled “Certain Beneficial Owners of Shift Common Stock.”
Certain Beneficial Owners of CarLotz Common Stock (Page 176)
At the close of business on October 27, 2022, the latest practicable date prior to the date of this joint proxy statement/ prospectus, CarLotz directors and executive officers and their affiliates, as a group, beneficially owned and were entitled to vote approximately 28.6% of the shares of CarLotz Common Stock. The CarLotz Chairman and affiliates of the CarLotz Chairman and certain directors executed supporting agreements in connection with the Merger Agreement, solely in their capacity as CarLotz Stockholders (the “CarLotz Support Agreements”). For more information regarding the CarLotz Support Agreements, see the section entitled “Support Agreements.”
CarLotz currently expects that all CarLotz directors and executive officers, including directors and executive officers not party to a CarLotz Support Agreement, will vote their shares “FOR” the CarLotz Merger Proposal and “FOR” the CarLotz Adjournment Proposal. For more information regarding the security ownership of CarLotz directors and executive officers, see the section entitled “Certain Beneficial Owners of CarLotz Common Stock.”
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Governance Matters After the Merger (Page 104)
Prior to the closing of the Merger, the Shift Board will take all necessary actions so that, immediately following the Effective Time, the Combined Company board of directors will consist of 10 members, composed of the following:
five current members of the Shift Board, designated by Shift;
three current members of the CarLotz Board, designated by CarLotz;
one director mutually agreed upon by Shift and CarLotz who will be “independent” in accordance with the applicable Nasdaq listing rules; and
one director who will be the then-serving Chief Executive Officer of the Combined Company.
For more information, see the section entitled “The Merger—Combined Company Governance.”
Regulatory Matters (Page 117)
The obligations of Shift and CarLotz to consummate the Merger are subject to, among other conditions, the expiration or earlier termination of any waiting period (and any extension thereof) under the HSR Act. For more information, see the section entitled “The Merger—Regulatory Matters.”
No Appraisal Rights (Page 171)
No dissenters’ or appraisal rights will be available to Shift Stockholders or CarLotz Stockholders with respect to the Merger or the other Proposed Transactions under Delaware law. See the section entitled “Appraisal Rights.”
Conditions to Complete the Merger (Page 122)
The obligations of each of Shift and CarLotz to complete the Merger are subject to the satisfaction or waiver by the other party (to the extent permitted by applicable legal requirements), at or prior to the completion of the Merger, of each of the following conditions:
the accuracy of the representations and warranties of the other party contained in the Merger Agreement as of the date on which the Merger Agreement was entered into and as of the Closing Date (other than any such representation and warranty made as of a specified date, which will have been accurate as of such specified date), subject to the materiality standards provided in the Merger Agreement (and the receipt by each party of an officer’s certificate from the other party to such effect);
the performance by the other party in all material respects of all covenants and obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date (and the receipt by each party of an officer’s certificate from the other party to such effect);
the absence of any material adverse effect with respect to the other party since the date of the Merger Agreement (and the receipt by each party of an officer’s certificate from the other party to such effect);
the approval of the Share Issuance by Shift Stockholders and adoption of the Merger Agreement by CarLotz Stockholders;
any waiting period (and any extension thereof) applicable to the Merger under the HSR Act will have been terminated or have expired, and any other waiting periods or suspension periods under any other antitrust laws will have expired or been terminated, and any necessary approvals or clearances under those laws will have been obtained;
no temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other governmental authority or other legal restraint or prohibition, and no litigation or other legal proceeding by any governmental authority, that has the effect of preventing the consummation of the Merger or that makes the consummation of the Merger illegal will have been enacted that remains in effect;
a registration statement on Form S-4 will have been declared effective under the Securities Act, and no stop order suspending the effectiveness of such registration statement will be in effect, and no proceedings for such purpose will be pending before the SEC;
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the shares of Shift Common Stock issuable to CarLotz Stockholders in accordance with the Merger Agreement will have been authorized for listing on Nasdaq, subject to official notice of issuance; and
the other party’s cash amount set forth on its closing statement must meet or exceed its minimum cash amount set forth in the Merger Agreement.
Neither Shift nor CarLotz can be certain when, or if, the conditions to the Merger will be satisfied or waived or that the Merger will be completed. For more information, see “The Merger Agreement—Conditions to Complete the Merger.”
Agreement Not to Solicit Other Offers (Page 120)
Commencing as of the date of the Merger Agreement and subject to certain exceptions, each of Shift and CarLotz has agreed (with respect to Shift, for the period prior to obtaining the approval of the Shift Share Issuance Proposal by Shift Stockholders) that it will not, directly or indirectly, and will ensure that its subsidiaries do not and will use reasonable best efforts to ensure each of their respective representatives do not directly or indirectly:
solicit, initiate, knowingly encourage, assist, induce or knowingly facilitate the making, submission or announcement of any acquisition proposal or acquisition inquiry (including by approving any transaction or approving any person (other than the other party and its affiliates) becoming an “interested stockholder” for purposes of Delaware corporate law) or take any action that reasonably would be expected to lead to an acquisition proposal or acquisition inquiry;
furnish or otherwise provide access to any non-public information regarding such party or any of its subsidiaries to any person in connection with or in response to an acquisition proposal or acquisition inquiry;
enter into, continue or otherwise engage in discussions or negotiations with, or cooperate with, any person with respect to any acquisition proposal or acquisition inquiry (other than to state that such party is subject to this non-solicitation provision);
approve, endorse or recommend any acquisition proposal; or
enter into any letter of intent, memorandum of understanding, agreement in principle or similar document or any contract constituting or relating directly or indirectly to, or that contemplates or is intended or reasonably would be expected to result directly or indirectly in, an acquisition transaction.
For purposes of the Merger Agreement, an “acquisition proposal” means, with respect to Shift and CarLotz, as applicable, any offer or proposal contemplating or otherwise relating to any acquisition transaction, other than an offer or proposal made or submitted by the other party or its subsidiaries with respect to such party and its subsidiaries. An “acquisition transaction” means, with respect to Shift and CarLotz, as applicable, any transaction or series of transactions, other than the Proposed Transactions, involving, directly or indirectly:
any merger, consolidation, amalgamation, plan or scheme of arrangement, share exchange, business combination, joint venture, issuance of securities, acquisition of securities, reorganization, recapitalization, tender offer, exchange offer or other similar transaction: (A) in which such party or its subsidiaries is a constituent or participating entity; (B) in which a person or “group” (as defined in Section 13(d) of the Exchange Act and the rules thereunder) of persons directly or indirectly acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) or record ownership of securities representing 20% or more of the outstanding securities of any class (or instruments convertible into or exercisable or exchangeable for 20% or more of any such class) of such party and its subsidiaries; or (C) in which (1) Shift and its subsidiaries or (2) CarLotz, as applicable, issues securities representing 20% or more of the outstanding securities of any class of such entity (or instruments convertible into or exercisable or exchangeable for 20% or more of any such class);
any sale, lease, exchange, transfer, license, sublicense, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated net revenues or consolidated assets of such party and its subsidiaries (measured based on the last day of the most recently completed calendar month); or
any liquidation or dissolution of such party.
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Further, under the Merger Agreement, each of Shift and CarLotz agreed that it will, and will ensure their respective subsidiaries and will use reasonable best efforts to cause its and their representatives to, immediately cease and cause to be terminated any existing solicitation, encouragement, inducement or facilitation of, or discussions or negotiations with, any person relating to any acquisition proposal or acquisition inquiry.
For more information, see the section entitled “The Merger Agreement—Agreement Not to Solicit Other Offers.”
Change in Board Recommendation (Page 119)
Under the Merger Agreement, except as described below, each of the Shift Board and the CarLotz Board may not:
withdraw or modify in a manner adverse to the other party the Shift Board Recommendation or the CarLotz Board Recommendation, as applicable (any such action, a “Board Recommendation Change”);
recommend the approval, acceptance or adoption of, or approve, endorse, accept or adopt, any alternative acquisition proposal;
cause or permit any subsidiary of such party to execute or enter into any alternative acquisition agreement; or
resolve, agree or publicly propose to, or permit any subsidiary of such party or any representative of any of such party’s subsidiaries to resolve, agree or publicly propose to, take any of the foregoing actions.
At any time prior to the approval of the Shift Share Issuance Proposal by Shift Stockholders in the case of the Shift Board or the approval of the CarLotz Merger Proposal by CarLotz Stockholders in the case of the CarLotz Board, the applicable board of directors may withdraw or modify its unanimous recommendation and, in the case of the first bullet below, may also cause the applicable party to terminate the Merger Agreement in order to accept a superior offer and, concurrently with or following such termination, cause such party to enter into an alternative acquisition agreement with respect to such superior offer (provided that, immediately prior to or concurrently with such termination, such party shall have paid to the other party the applicable termination fee):
if: (A) an unsolicited, bona fide, written acquisition proposal is made to such party after the date of the Merger Agreement and is not withdrawn; (B) such acquisition proposal did not result directly or indirectly from a breach of such party’s non-solicitation covenants; (C) such board of directors determines in good faith that such acquisition proposal constitutes a superior offer; (D) such board of directors determines in good faith, after having taken into account the advice of such party’s outside legal counsel, that, in light of such superior offer, the failure to withdraw or modify its unanimous recommendation, or the failure to terminate the Merger Agreement in order to accept such superior offer, would reasonably be expected to be inconsistent with its fiduciary obligations under applicable law; (E) no less than four business days prior to withdrawing or modifying its unanimous recommendation or terminating the Merger Agreement in order to accept such superior offer, such board of directors delivers to the opposite party a written notice, specifying, among other things, the material terms and conditions of such superior offer; (F) throughout such four business day period, such party engages (to the extent requested by the other party) in good faith negotiations to amend the Merger Agreement in such a manner that the failure to withdraw or modify such board of directors’ unanimous recommendation, or the failure to terminate the Merger Agreement in order to accept such superior offer, would not reasonably be expected to be inconsistent with such board of directors’ fiduciary obligations under applicable law; and (G) at the time of withdrawal or modification of such board of directors’ unanimous recommendation or the termination of the Merger Agreement in order to accept such superior offer, such board of directors determines in good faith, after taking into account the advice of an independent financial advisor and the advice of the applicable party’s outside legal counsel, that the failure to withdraw or modify such unanimous recommendation, or the failure to terminate the Merger Agreement in order to accept such superior offer, would reasonably be expected to be inconsistent with such board of directors’ fiduciary obligations under applicable law in light of such superior offer; provided, that when making such determination, such board of directors is obligated to consider any changes to the terms of the Merger Agreement proposed by the opposite party as a result of the negotiations required by clause (F) above or otherwise; or
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if: (A) there shall arise after the date of the Merger Agreement a material event, material development or change in circumstances that relates to and is material to (1) CarLotz and CarLotz’s subsidiaries or (2) Shift and Shift’s subsidiaries, in each case taken as a whole (but does not relate to any acquisition proposal) that was not known, and would not reasonably be expected to have been known or foreseen on the date of the Merger Agreement (or if known, the consequences of which were not known and would not reasonably be expected to have been known or foreseen as of the date of the Merger Agreement), which event, development or change in circumstance, or any material consequence thereof, becomes known to such party prior to the requisite vote of such party’s stockholders and did not result from or arise out of the announcement or pendency of, or any action required to be taken (or to be refrained from being taken) pursuant to, the Merger Agreement (any such material event, material development or material change in circumstances, a “Change in Circumstances”); (B) such board of directors determines in good faith, after having taken into account the advice of an independent financial advisor and the advice of such party’s outside legal counsel, that, in light of such Change in Circumstances, the failure to withdraw or modify such board of directors’ unanimous recommendation would reasonably be expected to be inconsistent with such board of directors’ fiduciary obligations under applicable law; (C) notice is delivered to the other party no less than four business days prior to withdrawing or modifying such board of directors’ unanimous recommendation, including a description of the Change in Circumstances; (D) throughout such four business day period, such party engages (to the extent requested by the other party) in good faith negotiations with the other party to amend the Merger Agreement in such a manner that the failure to withdraw or modify such board of directors’ unanimous recommendation would not reasonably be expected to be inconsistent with such board of directors’ fiduciary obligations under applicable law in light of such Change in Circumstances; and (E) at the time of withdrawing or modifying such board of directors’ unanimous recommendation, such board of directors determines in good faith, after taking into account the advice of an independent financial advisor and the advice of such party’s outside legal counsel, that the failure to withdraw or modify such board of directors’ unanimous recommendation would reasonably be expected to be inconsistent with such board of directors’ fiduciary obligations under applicable law; provided, however, that when making such determination, such board of directors must consider any changes to the terms of the Merger Agreement proposed by the opposite party as a result of the negotiations described in clause (D) or otherwise.
The Merger Agreement does not prohibit Shift or CarLotz from (i) taking and disclosing to their stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) making any disclosure to their stockholders if such party’s board of directors determines in good faith, after having taken into account the advice of such party’s outside legal counsel, that the failure to do so would reasonably be expected to be inconsistent with such party’s board of directors’ fiduciary obligations under applicable law; provided, however, that any such disclosure, other than a “stop, look and listen” communication or similar communication of the type contemplated by Section 14d-9(f) of the Exchange Act, will be deemed to be a withdrawal or modification of such party’s unanimous board recommendation in a manner adverse to the other party unless such party’s board of directors publicly and unanimously reaffirms its unanimous recommendation in such disclosure.
For more information, see the sections entitled “The Merger Agreement—Stockholder Meetings and Recommendation of Shift Board and CarLotz Board” and “The Merger Agreement—Termination Fees and Expense Reimbursement.”
Termination of the Merger Agreement (Page 124)
The Merger Agreement can be terminated at any time prior to the Effective Time, whether before or after the receipt of approval of the Share Issuance by Shift Stockholders or adoption of the Merger Agreement by CarLotz Stockholders, in the following circumstances:
by mutual written consent of Shift and CarLotz;
by either Shift or CarLotz if the Merger has not been consummated by the Outside Date; provided, that, if the failure to consummate the Merger by the Outside Date is primarily and proximately attributable to a failure on the part of such party to perform any covenant or obligation in the Merger Agreement required to be performed by such party at or prior to the Effective Time, then such party
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may not terminate the Merger Agreement in accordance with this clause; provided, further, that the Outside Date (including as it may have been previously extended) will be automatically extended without any action of any party to the extent necessary for purposes of determining the cash amount for each party and for the Closing to occur thereafter;
by either Shift or CarLotz if any legal restraint or legal proceeding having the effect of preventing the consummation of the Merger or that makes the consummation of the Merger illegal is in effect and has become final and nonappealable; provided, however, that a party may not terminate the Merger Agreement in accordance with this clause if the cause of such legal restraint or legal proceeding is primarily and proximately attributable to a failure on the part of such party to perform any covenant or obligation in the Merger Agreement required to be performed by such party at or prior to the Effective Time;
by either Shift or CarLotz if: (i) the Shift Special Meeting (including any adjournments and postponements thereof) has been held and completed, Shift Stockholders have taken a final vote on the Shift Share Issuance Proposal and such proposal was not approved; or (ii) the CarLotz Special Meeting (including any adjournments and postponements thereof) has been held and completed, CarLotz Stockholders have taken a final vote on the CarLotz Merger Proposal and such proposal was not approved; provided, however, that a party may not terminate the Merger Agreement in accordance with this clause if the failure to obtain such approval is primarily and proximately attributable to a failure on the part of such party to perform any covenant or obligation in the Merger Agreement required to be performed by such party at or prior to the Effective Time;
by Shift (at any time prior to the adoption of the Merger Agreement by CarLotz Stockholders) if a triggering event with respect to CarLotz has occurred; provided, however, that Shift is not permitted to terminate the Merger Agreement in accordance with this clause if Shift or Merger Sub is then in breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach would cause the applicable conditions to Closing not to be satisfied;
by CarLotz (at any time prior to the approval of the Share Issuance) if a triggering event with respect to Shift has occurred; provided, however, that CarLotz is not permitted to terminate the Merger Agreement in accordance with this clause if CarLotz is then in breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach would cause the applicable conditions to Closing not to be satisfied;
by Shift if: (i) any of CarLotz’s representations or warranties contained in the Merger Agreement were inaccurate as of the date of the Merger Agreement or become inaccurate as of a date subsequent to the date of the Merger Agreement (as if made on such subsequent date) such that the applicable condition to Closing would not be satisfied; or (ii) any of CarLotz’s covenants or obligations contained in the Merger Agreement are breached such that the applicable condition to Closing would not be satisfied, subject to certain cure provisions; provided, that the Merger Agreement may not be terminated in accordance with this clause if Shift or Merger Sub is then in breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach by Shift or Merger Sub would cause the applicable condition to Closing not to be satisfied;
by CarLotz if: (i) any of Shift’s representations or warranties contained in the Merger Agreement were inaccurate as of the date of the Merger Agreement or become inaccurate as of a date subsequent to the date of the Merger Agreement (as if made on such subsequent date) such that the applicable condition to Closing would not be satisfied; or (ii) if any of Shift’s covenants or obligations contained in the Merger Agreement are breached such that the applicable condition to Closing would not be satisfied, subject to certain cure provisions; provided, however, that the Merger Agreement may not be terminated in accordance with this clause if CarLotz is then in breach of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach by CarLotz would cause the applicable conditions to Closing not to be satisfied;
by CarLotz (at any time prior to the adoption of the Merger Agreement by CarLotz Stockholders) in order to accept a superior offer and enter into a binding, written, definitive agreement providing for the consummation of the transaction contemplated by such superior offer that has been executed on behalf of the person that made such superior offer, if concurrently with the termination of the Merger
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Agreement in accordance with this clause, CarLotz enters into such alternative acquisition agreement with respect to such superior offer; provided, that immediately prior to or concurrently with such termination, CarLotz pays to Shift or its designee a termination fee as described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement”; or
by Shift (at any time prior to the approval of the Share Issuance by Shift Stockholders) in order to accept a superior offer and enter into a binding, written, definitive agreement providing for the consummation of the transaction contemplated by such superior offer that has been executed on behalf of the person that made such superior offer, if concurrently with the termination of the Merger Agreement in accordance with this clause, Shift enters into the alternative acquisition agreement with respect to such superior offer; provided, that immediately prior to or concurrently with such termination, Shift pays to CarLotz or its designee a termination fee as described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement.”
For purposes of the Merger Agreement, a “triggering event” means, with respect to Shift or CarLotz, as applicable, if: (i) such party’s board of directors or any committee thereof (A) makes a Board Recommendation Change, (B) recommends the approval, acceptance or adoption of, or approves, endorses, accepts or adopts, any alternative acquisition proposal, (C) causes or permits the applicable party or any of its subsidiaries to execute or enter into any alternative acquisition agreement or (D) resolves, agrees or publicly proposes to, or permits the applicable party or any of its subsidiaries or any representative thereof to resolve, agree or publicly propose to, take any of the foregoing actions; (ii) such party fails to include its unanimous board recommendation in this joint proxy statement/prospectus; (iii) a tender or exchange offer relating to shares of such party’s common stock is commenced and such party does not send to its securityholders, within 10 business days after the commencement of such tender or exchange offer (or, if earlier, prior to such party’s special meeting), a statement disclosing that such party recommends rejection of such tender or exchange offer and reaffirming such party’s unanimous board recommendation; (iv) such party’s board of directors or any committee thereof recommends, adopts or approves or publicly proposes to recommend, adopt or approve any acquisition proposal; or (v) such party or any of its subsidiaries materially breaches the non-solicitation or board recommendation covenants in the Merger Agreement as further described in the sections entitled “The Merger Agreement—Stockholder Meetings and Recommendation of Shift Board and CarLotz Board” and “The Merger Agreement—Agreement Not to Solicit Other Offers.”
Termination Fees and Expense Reimbursement (Page 126)
Shift or CarLotz will pay the other party, as applicable, a termination fee of $4,250,000 in cash if the Merger Agreement is terminated in the following circumstances:
if: (A) the Merger Agreement is terminated by Shift or CarLotz in connection with the failure of CarLotz Stockholders to adopt the Merger Agreement; (B) at or prior to the time of such termination, an acquisition proposal with respect to CarLotz was publicly disclosed or made and such acquisition proposal was not publicly withdrawn at least two business days prior to the CarLotz Special Meeting; and (C) within 12 months after the date of any such termination, an acquisition transaction (whether or not relating to such acquisition proposal) with respect to CarLotz is consummated or a definitive agreement providing for an acquisition transaction (whether or not relating to such acquisition proposal) with respect to CarLotz is executed; provided, however, that, for purposes of clause (C), all references to “20%” in the definition of “acquisition transaction” will be deemed to be references to “50%”;
if: (A) the Merger Agreement is terminated by Shift or CarLotz in connection with the failure of Shift Stockholders to approve the Share Issuance; (B) at or prior to the time of such termination, an acquisition proposal with respect to Shift was publicly disclosed or made and such acquisition proposal was not publicly withdrawn at least two business days prior to the Shift Special Meeting; and (C) within 12 months after the date of any such termination, an acquisition transaction (whether or not relating to such acquisition proposal) with respect to Shift is consummated or a definitive agreement providing for an acquisition transaction (whether or not relating to such acquisition proposal) with respect to Shift is executed; provided, however, that, for purposes of clause (C), all references to “20%” in the definition of “acquisition transaction” will be deemed to be references to “50%”;
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if the Merger Agreement is terminated: (i) by Shift in connection with a triggering event with respect to CarLotz; (ii) by CarLotz at any time at which Shift has the right to terminate the Merger Agreement in connection with a triggering event with respect to CarLotz; or (iii) by CarLotz in order to accept a superior offer; and
if the Merger Agreement is terminated: (i) by CarLotz in connection with a triggering event with respect to Shift; (ii) by Shift at any time at which CarLotz has the right to terminate the Merger Agreement in connection with a triggering event with respect to Shift; or (iii) by Shift in order to accept a superior offer.
In addition, Shift or CarLotz will pay the other party, as applicable, all of the reasonable and documented out-of-pocket expenses of the other party incurred by the other party in connection with the Merger Agreement and the Proposed Transactions in an amount not to exceed $1,210,000 if the Merger Agreement is terminated in the following circumstances:
the Merger Agreement is terminated by Shift or CarLotz in connection with the failure of CarLotz Stockholders to adopt the Merger Agreement; or
the Merger Agreement is terminated by Shift or CarLotz in connection with the failure of Shift Stockholders to approve the Share Issuance.
Any expense reimbursement pursuant to the forgoing will be credited against the termination fee, if any, that is payable by such party.
Support Agreements (Page 128)
Concurrently with the execution of the Merger Agreement, on August 9, 2022, Shift and CarLotz entered into (i) the Shift Support Agreements with Shift director and then-Chief Executive Officer George Arison (and certain of his affiliates), Shift director Tobias Russell, Threshold Ventures I Partners Fund, LLC, Threshold Ventures I, L.P., DCM Affiliates Fund VIII, L.P., DCM Ventures China Fund (DCM VIII), L.P., DCM VIII, L.P., A-Fund, L.P., and G2VP, LLC and (ii) the CarLotz Support Agreements with CarLotz Chairman Luis Solorzano, Acamar Partners Sponsor I, LLC and TRP Capital Partners, LP, in each case in such person’s capacity as a Shift Stockholder or CarLotz Stockholder, as applicable. For more information on the Support Agreements, see the section entitled “Support Agreements.”
U.S. Federal Income Tax Consequences of the Merger (Page 154)
The Merger has been structured to qualify as, and the parties intend the Merger to be treated as, a reorganization for U.S. federal income tax purposes. In the opinion of Jenner & Block LLP, tax counsel to Shift, CarLotz Stockholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their CarLotz Common Stock for Shift Common Stock in the Merger.
You should be aware that the tax consequences to you of the Merger may depend upon your own situation. In addition, you may be subject to U.S. federal non-income, state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisors for a full understanding of the tax consequences to you of the Merger.
U.S. Federal Income Tax Consequences of the Reverse Stock Split Amendment (Page 157)
The Reverse Stock Split Amendment is expected to qualify as a “recapitalization” for U.S. federal income tax purposes. In the opinion of Jenner & Block LLP, tax counsel to Shift, Shift Stockholders generally will not recognize gain or loss for U.S. federal income tax purposes upon the reverse stock split (except with respect to cash, if any, received in lieu of a fractional share of Shift Common Stock).
You should be aware that the tax consequences to you of the Reverse Stock Split Amendment may depend upon your own situation. In addition, you may be subject to U.S. federal non-income, state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisors for a full understanding of the tax consequences to you of the Reverse Stock Split Amendment.
Comparison of Stockholders’ Rights (Page 160)
Upon completion of the Merger, CarLotz Stockholders receiving shares of Shift Common Stock will become Shift Stockholders. The rights of Shift Stockholders will be governed by the DGCL, the Shift Charter and the
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Shift Bylaws in effect at the Effective Time. As Shift and CarLotz are both Delaware corporations, the rights of Shift Stockholders and CarLotz Stockholders are not materially different. However, there are certain differences in the rights of Shift Stockholders under the Shift Charter and the Shift Bylaws and the rights of CarLotz Stockholders under the CarLotz Charter and the CarLotz Bylaws. See the section entitled “Comparison of Stockholders’ Rights.”
Listing of Shift Common Stock; Delisting and Deregistration of CarLotz Common Stock (Page 106)
It is a condition to the Merger that the shares of Shift Common Stock to be issued to CarLotz Stockholders in the Merger be authorized for listing on Nasdaq, subject to official notice of issuance. If the Merger is completed, CarLotz Common Stock will be delisted from Nasdaq and deregistered under the Exchange Act, following which CarLotz will no longer be required to file periodic reports with the SEC with respect to CarLotz Common Stock.
Risk Factors (Page 34)
In evaluating the Merger Agreement, the Proposed Transactions (including the Merger) and the Reverse Stock Split Amendment, you should carefully read this joint proxy statement/prospectus and give special consideration to the factors discussed in the section entitled “Risk Factors.”
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Market Prices
Shift Common Stock is listed on Nasdaq under the symbol “SFT” and CarLotz Common Stock is listed on the Nasdaq Global Market under the symbol “LOTZ.”
On June 7, 2022, CarLotz received a deficiency letter from the Staff of the Nasdaq Stock Market notifying CarLotz that, for the last 30 consecutive business days, the bid price for CarLotz Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market. On October 4, 2022, Shift received a deficiency letter from the Staff of the Nasdaq Stock Market notifying Shift that, for the last 30 consecutive business days, the bid price for Shift Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Capital Market. See the section entitled “Questions and Answers — What happens if the Merger is not completed?
The following table sets forth the closing sale price per share of Shift Common Stock reported on Nasdaq and CarLotz Common Stock reported on the Nasdaq Global Market, respectively, as of August 8, 2022, the trading day before the public announcement of the execution of the Merger Agreement, and October 27, 2022, the latest practicable trading date before the date of this joint proxy statement/prospectus. The table also shows the estimated implied value of the per share Merger Consideration for each share of CarLotz Common Stock as of the same two dates, calculated by multiplying the closing sale price of Shift Common Stock on those dates by 0.692158.
 
Shift
Common
Stock
CarLotz
Common
Stock
Implied Per
Share Value
of Merger
Consideration
August 8, 2022
$1.53
$0.623
$1.059
October 27, 2022
$0.5582
$0.2977
$0.3864
The market prices of Shift Common Stock and CarLotz Common Stock have fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the Shift Special Meeting, the CarLotz Special Meeting and the Closing Date and thereafter (in the case of Shift Common Stock). The number of shares of Shift Common Stock that CarLotz Stockholders will receive as the Merger Consideration is not fixed and may change. Events that may impact the number of shares of Shift Common Stock issued in connection with the Merger include:
the issuance of new shares of Shift Common Stock prior to the Effective Time, including the settlement of derivative securities convertible into or exercisable for shares of Shift Common Stock;
the issuance of new shares of CarLotz Common Stock prior to the Effective Time, excluding the settlement of derivative securities convertible or exercisable for shares of CarLotz Common Stock; and
the issuance of derivative securities convertible into or exercisable for shares of CarLotz Common Stock prior to the Effective Time.
In addition, the market value of the Merger Consideration will fluctuate with the market price of Shift Common Stock. The value of the Merger Consideration to be received in exchange for each share of CarLotz Common Stock when received by CarLotz Stockholders after the Merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, Shift Stockholders and CarLotz Stockholders are advised to obtain current market quotations for Shift Common Stock and CarLotz Common Stock in determining whether to vote in favor of the Shift Share Issuance Proposal and the Shift Reverse Stock Split Proposal, in the case of Shift Stockholders, or the CarLotz Merger Proposal, in the case of CarLotz Stockholders.
Dividends
Shift has not paid any cash dividends on Shift Common Stock to date. The payment of cash dividends in the future will depend upon Shift’s revenues and earnings, in each case, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of the Shift Board at such time. Shift’s flooring line of credit with Ally Bank contains certain restrictive covenants that may limit Shift’s ability to pay distributions.
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CarLotz has not paid any cash dividends on CarLotz Common Stock to date and does not intend to pay cash dividends for the foreseeable future. The payment of cash dividends in the future will be dependent upon CarLotz revenues and earnings, in each case, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of the CarLotz Board at such time. CarLotz’s ability to declare dividends will also be limited by restrictive covenants pursuant to any debt financing.
Under the terms of the Merger Agreement, each of Shift and CarLotz is not permitted to declare, accrue, set aside or pay any dividend or make any other distribution during the pre-Closing period without the prior written consent of the other party.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part, the documents that Shift and CarLotz refer you to in the registration statement and oral statements made or to be made by Shift and CarLotz include certain “forward-looking statements” within the meaning of, and subject to the safe harbor created by, Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, which are referred to as the “safe harbor provisions.” Statements contained or incorporated by reference in the registration statement of which this joint proxy statement/prospectus forms a part that are not historical facts are forward-looking statements, including statements regarding the anticipated benefits of the Merger, the anticipated impact of the Merger on the Combined Company’s business and future financial and operating results, the expected amount and timing of anticipated synergies from the Merger, the anticipated timing of the Closing and other aspects of Shift’s or CarLotz’s operations or operating results. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectations or intent regarding the Combined Company’s financial results, operations and other matters are intended to identify forward-looking statements that are intended to be covered by the safe harbor provisions. Investors are cautioned not to rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause future events to differ materially from the forward-looking statements in this report, including:
the occurrence of any change, event, series of events or circumstances that could give rise to the termination of the Merger Agreement, including a termination of the Merger Agreement under circumstances that could require Shift to pay a termination fee to CarLotz or require CarLotz to pay a termination fee to Shift;
the inability to complete the Merger due to the failure of Shift Stockholders to approve the Share Issuance or of CarLotz Stockholders to adopt the Merger Agreement, or the failure to satisfy any of the other conditions to the completion of the Merger, including regulatory approvals, in a timely manner or otherwise;
risks relating to fluctuations of the market value of Shift Common Stock and CarLotz Common Stock before the completion of the Merger, including as a result of uncertainty as to the long-term value of the common stock of the Combined Company or as a result of broader stock market movements;
risks related to fluctuations in the number of shares of Shift Common Stock that CarLotz Stockholders will receive as Merger Consideration pursuant to the terms of the Merger Agreement, and risks that the market value of the Merger Consideration payable to CarLotz Stockholders will fluctuate with the market price of Shift Common Stock;
delays in closing, or the failure to close, the Merger for any reason, could negatively impact Shift, CarLotz or the Combined Company;
the risk that disruptions from the pendency of the Merger will disrupt Shift’s or CarLotz’s business, including current plans and operations, which may adversely impact Shift’s or CarLotz’s respective businesses;
difficulties or delays in integrating the businesses of Shift and CarLotz following completion of the Merger or fully realizing the anticipated synergies or other benefits expected from the Merger;
certain restrictions during the pendency of the Merger that may impact the ability of Shift or CarLotz to pursue certain business opportunities or strategic transactions;
the risk of legal proceedings that have been or may be instituted against Shift, CarLotz, their directors and/or others relating to the Merger;
the diversion of the attention of the respective management teams of Shift and CarLotz from their respective ongoing business operations;
the risk that the Merger or any announcement relating to the Merger could have an adverse effect on the ability of Shift or CarLotz to retain and hire key personnel;
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the risk that uncertainty about the Merger may adversely affect relationships with Shift and CarLotz’s customers, partners, suppliers and employees, whether or not the Merger is completed;
the potentially significant amount of any costs, fees, expenses, impairments or charges related to the Merger;
the potential dilution of Shift Stockholders’ and CarLotz Stockholders’ ownership percentage of the Combined Company as compared to their ownership percentage of Shift or CarLotz, as applicable, prior to the Merger;
the business, economic, political and other conditions in the jurisdictions in which Shift or CarLotz operate;
the effect of uncertainties related to the COVID-19 pandemic on U.S. and global markets, Shift’s or CarLotz’s respective business, operations, revenue, cash flow, operating expenses, hiring, demand for their respective products and services, sales cycles and customer retention;
CarLotz directors and executive officers having interests in the Merger that are different from, or in addition to, the interests of CarLotz Stockholders generally; and
the possibility that the Combined Company’s results of operations, cash flows and financial position after the Merger may differ materially from the unaudited pro forma condensed combined financial information contained in this joint proxy statement/prospectus.
The forward-looking statements contained in this joint proxy statement/prospectus are also subject to additional risks, uncertainties and factors, including those described in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for Shift and CarLotz, respectively, and other documents filed by either of them from time to time with the SEC. See the section entitled “Where You Can Find More Information” and the annexes included with this joint proxy statement/prospectus.
The forward-looking statements included in this joint proxy statement/prospectus are made only as of the date hereof. Shift and CarLotz do not undertake to update, alter or revise any forward-looking statements made in this joint proxy statement/prospectus to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law.
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RISK FACTORS
In considering how to vote on the proposals to be considered and voted on at the Shift Special Meeting or the CarLotz Special Meeting, you are urged to carefully consider all of the information contained or incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.” You should also read and consider the risks associated with each of the businesses of Shift and CarLotz because those risks will affect the Combined Company. The risks associated with the business of Shift can be found in Shift’s Exchange Act reports, including Shift’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Shift’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, and June 30, 2022, which are incorporated by reference into this joint proxy statement/prospectus. The risks associated with the business of CarLotz can be found in CarLotz’s Exchange Act reports, including CarLotz’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and CarLotz’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022 and June 30, 2022 which are attached as Annexes F-1, F-2 and F-3, respectively. In addition, you are urged to carefully consider the following material risks relating to the Merger, the Reverse Stock Split Amendment and the business of the Combined Company.
Risks Relating to the Merger
The final Exchange Ratio will be determined in accordance with a formula and is not yet knowable. The number of shares of Shift Common Stock that CarLotz Stockholders will receive as Merger Consideration and the market value of the Merger Consideration payable to CarLotz Stockholders are uncertain.
At the Effective Time, each share of CarLotz Common Stock that is outstanding immediately prior to the Effective Time (other than shares held in CarLotz’s treasury) will be converted into the right to receive a number of shares of Shift Common Stock as determined by the Exchange Ratio (subject to adjustment for fractional shares and applicable tax withholding). The Exchange Ratio initially equals 0.692158 but is subject to adjustment, whereby at the Effective Time it will equal a ratio calculated as (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (1) any CarLotz Earnout Shares, (2) any CarLotz Earnout Acquiror RSUs, (3) any CarLotz Warrants, (4) any options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio, and (5) any CarLotz performance-based restricted stock unit awards that are terminated as of the Effective Time).
Because the final Exchange Ratio depends on a formula calculated at the Effective Time, CarLotz Stockholders will not know or be able to determine at the time of the CarLotz Special Meeting the number of shares of Shift Common Stock that CarLotz Stockholders will receive as Merger Consideration or the market value of the Merger Consideration payable to CarLotz Stockholders. Similarly, Shift Stockholders will not know or be able to determine at the time of the Shift Special Meeting the number of shares of Shift Common Stock that CarLotz Stockholders will receive as Merger Consideration or the market value of such shares compared to the market value of the shares of CarLotz Common Stock that are being exchanged in the Merger.
The market prices of Shift Common Stock and CarLotz Common Stock have fluctuated prior to and after the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the Shift Special Meeting and the CarLotz Special Meeting, and through the date the Merger is completed. It is impossible to accurately predict the market price of Shift Common Stock at the completion of the Merger and, therefore, impossible to accurately predict the value of the shares of Shift Common Stock that CarLotz Stockholders will receive in the Merger. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Shift’s or CarLotz’s respective business results of operations, financial condition and prospects, the effect of uncertainties related to the COVID-19 pandemic on U.S. and global markets, market assessments of the likelihood that the Merger will be completed, interest rates and other factors generally affecting the respective prices of Shift Common Stock and CarLotz Common Stock, and the timing of the Merger.
Many of these factors are beyond the control of Shift and CarLotz, and neither Shift nor CarLotz is permitted to terminate the Merger Agreement solely due to a decline in the market price of the common stock of the other
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party. You are urged to obtain current market quotations for Shift Common Stock and CarLotz Common Stock in determining whether to vote in favor of the Shift Share Issuance Proposal and the Shift Reverse Stock Split Proposal, in the case of Shift Stockholders, or the CarLotz Merger Proposal, in the case of CarLotz Stockholders.
The market price of Shift Common Stock will continue to fluctuate after the Merger.
Upon completion of the Merger, CarLotz Stockholders will become holders of Shift Common Stock. The market price of the Shift Common Stock will continue to fluctuate, potentially significantly, following completion of the Merger, including for the reasons described above. As a result, former CarLotz Stockholders could lose some or all of the value of their investment in Shift Common Stock. In addition, any significant price or volume fluctuations in the stock market generally could have a material adverse effect on the market for, or liquidity of, the Shift Common Stock received in the Merger, regardless of the Combined Company’s actual operating performance.
The Merger may not be completed, and the Merger Agreement may be terminated in accordance with its terms.
The Merger is subject to a number of conditions that must be satisfied, including the receipt of certain regulatory approvals and the approval by Shift Stockholders of the Shift Share Issuance Proposal and approval by CarLotz Stockholders of the CarLotz Merger Proposal, or waived (to the extent permitted), in each case prior to the completion of the Merger. These conditions are described in the section entitled “The Merger Agreement—Conditions to Complete the Merger.” These conditions to the completion of the Merger, some of which are beyond the control of Shift and CarLotz, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Merger may be delayed or not completed.
Additionally, either Shift or CarLotz may terminate the Merger Agreement under certain circumstances, subject to the payment of a termination fee in certain cases as described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement.” In such cases, Shift may be required to pay to CarLotz, or CarLotz may be required to pay to Shift, a termination fee of $4.25 million. In addition, if the Merger Agreement is terminated in certain cases, Shift or CarLotz will be required to pay the other party, as applicable, all of the reasonable and documented out-of-pocket expenses of the other party incurred by the other party in connection with the Merger Agreement and the Proposed Transactions in an amount not to exceed $1.21 million, as described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement.” If expenses are reimbursed pursuant to the immediately preceding sentence, such amount will be credited from any termination fee that may be payable by such party.
Failure to complete the Merger could negatively impact the future business and financial results of Shift and CarLotz and the market prices of Shift Common Stock or CarLotz Common Stock.
If the Merger is not completed for any reason, including because Shift Stockholders fail to approve the Shift Share Issuance Proposal or because CarLotz Stockholders fail to approve the CarLotz Merger Proposal, the ongoing businesses of Shift and CarLotz may be adversely affected and, without realizing any of the expected benefits of having completed the Merger, Shift and CarLotz would be subject to a number of risks, including the following:
each company may experience negative reactions from the financial markets, including negative impacts on its stock price;
each company may experience negative reactions from its customers, partners, suppliers and employees;
each company will be required to pay its respective costs relating to the Merger, such as financial advisory, legal, accounting costs and associated fees and expenses, whether or not the Merger is completed (subject to certain circumstances where one party is required to pay certain transaction expenses of the other party following the termination of the Merger Agreement, as described in the section entitled “The Merger Agreement—Termination of the Merger Agreement”);
there may be disruptions to each company’s respective business resulting from the announcement and pendency of the Merger, and any adverse changes in their relationships with their respective customers, partners, suppliers, other business partners and employees may continue or intensify; and
each company will have committed substantial time and resources to matters relating to the Merger (including integration planning), which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either company as an independent company.
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The market price for shares of Shift Common Stock may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market price of shares of CarLotz Common Stock.
Upon completion of the Merger, CarLotz Stockholders will receive shares of Shift Common Stock and will accordingly become Shift Stockholders. Shift’s business differs from that of CarLotz, and Shift’s results of operations and stock price may be adversely affected by factors different from those that historically have affected or currently affect CarLotz’s results of operations and stock price. Following the completion of the Merger, CarLotz will be part of a larger company, so decisions affecting CarLotz may be made in respect of the larger combined business as a whole rather than the CarLotz business individually. For a discussion of the businesses of each of Shift and CarLotz and some important factors to consider in connection with those businesses, see the section entitled “The Parties to the Merger” and the other information contained or incorporated in this joint proxy statement/prospectus, including the annexes included with this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”
The Share Issuance may cause the market price of Shift Common Stock to decline.
Based on 85,817,926 shares of Shift Common Stock issued and outstanding as of October 27, 2022, the latest practicable date prior to the date of this joint proxy statement/prospectus, and assuming CarLotz Stockholders will own 49.99% of the issued and outstanding shares of the Combined Company following the completion of the Merger, it is expected that Shift will issue approximately 85,783,606 shares of Shift Common Stock in the Merger. Former CarLotz Stockholders may decide not to hold the shares of Shift Common Stock that they will receive in the Merger, and Shift Stockholders may decide to reduce their investment in Shift as a result of the changes to Shift’s investment profile as a result of the Merger. Both the issuance of this amount of new shares in the Merger and any subsequent sales of these shares may cause the market price of Shift Common Stock to decline.
CarLotz Stockholders who receive shares of Shift Common Stock in the Merger will have rights as Shift Stockholders that differ from their current rights as CarLotz Stockholders.
Upon completion of the Merger, CarLotz Stockholders will no longer be stockholders of CarLotz and will instead become stockholders of Shift. As Shift and CarLotz are both Delaware corporations, the rights of Shift Stockholders and CarLotz Stockholders are not materially different. However, there are certain differences in the rights of Shift Stockholders under the Shift Charter and Shift Bylaws and the rights of CarLotz Stockholders under the CarLotz Charter and the CarLotz Bylaws. See the section entitled “Comparison of Stockholders’ Rights” for a discussion of these rights.
After the Merger, CarLotz Stockholders will have a significantly lower ownership and voting interest in Shift than they currently have in CarLotz and will exercise less influence over the management and policies of the Combined Company.
Pursuant to the terms of the Merger Agreement, upon completion of the Merger, former CarLotz Stockholders are expected to own approximately 49.99% of the issued and outstanding shares of Shift Common Stock and the current Shift Stockholders are expected to own approximately 50.01% of the issued and outstanding shares of Shift Common Stock. Consequently, former CarLotz Stockholders will have less influence over the management and policies of the Combined Company than they currently have over the management and policies of CarLotz. Pursuant to the Merger Agreement, however, at the Effective Time, Shift will appoint three members of the CarLotz Board to the Shift Board, as described in the section entitled “The Merger Agreement—Combined Company Governance.
Until the completion of the Merger or the termination of the Merger Agreement pursuant to its terms, Shift and CarLotz are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Shift, CarLotz and/or their respective stockholders.
From and after the date of the Merger Agreement and prior to the completion of the Merger or the termination of the Merger Agreement pursuant to its terms, the Merger Agreement restricts Shift and CarLotz from taking specified actions without the consent of the other party and generally requires that the businesses of Shift, CarLotz and their respective subsidiaries be conducted in the ordinary course. These restrictions may prevent Shift or CarLotz, as applicable, from taking actions during the pendency of the Merger that would have been beneficial. Adverse effects arising from these restrictions during the pendency of the Merger could be exacerbated by any delays in the completion of the Merger or termination of the Merger Agreement. See the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Businesses Prior to the Completion of the Merger.”
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Obtaining required approvals and satisfying closing conditions may prevent or delay completion of the Merger.
The Merger is subject to a number of conditions to closing as specified in the Merger Agreement. These closing conditions include, among others, the effectiveness of the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part registering the issuance of shares of Shift Common Stock to CarLotz Stockholders in connection with the Merger and the absence of any stop order or proceedings by the SEC with respect thereto; the expiration or earlier termination of any applicable waiting period (and any extension thereof) under the HSR Act; consent, waiver, authorization or approval of any applicable non-U.S. antitrust regulatory authority; authorization for listing on Nasdaq of the shares of Shift Common Stock to be issued in connection with the Merger; and the absence of governmental restraints or prohibitions preventing the consummation of the Merger. The obligation of each of Shift and CarLotz to complete the Merger is also conditioned on, among other things, the accuracy of the representations and warranties made by the other party as of the date of the Merger Agreement and as of the Closing Date or such other specified date (subject to certain materiality and material adverse effect qualifiers), the performance by the other party in all material respects of its covenants and obligations under the Merger Agreement and the satisfaction of certain minimum cash conditions as described in the section entitled “The Merger Agreement—Conditions to Complete the Merger.”
No assurance can be given that the required stockholder approvals and governmental and regulatory consents and approvals will be obtained or that the required conditions to Closing will be satisfied, and, if all required consents and approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Merger could cause the Combined Company not to realize, or to be delayed in realizing, some or all of the benefits that Shift and CarLotz expect to achieve if the Merger is successfully completed within its expected time frame. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Merger, see the section entitled “The Merger Agreement—Conditions to Complete the Merger.”
Failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the Merger.
The success of the Merger will depend in part on the Combined Company’s ability to retain the talents and dedication of the professionals currently employed by Shift and CarLotz. It is possible that these employees may decide not to remain with Shift or CarLotz, as applicable, while the Merger is pending or with the Combined Company. If key employees of either company terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the Combined Company’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating Shift and CarLotz to hiring suitable replacements, all of which may cause the Combined Company’s business to suffer. In addition, Shift and CarLotz may not be able to locate suitable replacements for any key employees that leave either company or offer employment to potential replacements on reasonable terms. Moreover, there could be disruptions to or distractions for the workforce and management, including disruptions associated with integrating employees into the Combined Company. No assurance can be given that the Combined Company will be able to attract or retain key employees of Shift and CarLotz to the same extent that those companies have been able to attract or retain their own employees in the past.
The Merger, and uncertainty regarding the Merger, may cause business partners or vendors to delay or defer decisions concerning Shift or CarLotz and adversely affect each company’s ability to effectively manage its respective business, which could adversely affect each company’s business, operating results and financial position and, following the completion of the Merger, the Combined Company’s.
The Merger will happen only if the stated conditions are met, including the approval of the Shift Share Issuance Proposal, the approval of the CarLotz Merger Proposal and the receipt of required regulatory approvals, among other conditions. Many of the conditions are beyond the control of Shift and CarLotz, and both parties also have certain rights to terminate the Merger Agreement. Accordingly, there may be uncertainty regarding the completion of the Merger. This uncertainty may cause existing or business partners, advertisers and vendors to:
delay or defer other decisions concerning Shift, CarLotz or the Combined Company, including entering into contracts with Shift or CarLotz or making other decisions concerning Shift or CarLotz or seek to change or cancel existing business relationships with Shift or CarLotz; or
otherwise seek to change the terms on which they do business with Shift, CarLotz or the Combined Company.
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Any such disruptions such as delays or deferrals of those decisions or changes in existing agreements could adversely affect the respective business, operating results and financial position of Shift and CarLotz, whether the Merger is ultimately completed and, following the completion of the Merger, the Combined Company, including an adverse effect on the Combined Company’s ability to realize the anticipated synergies and other benefits of the Merger. The risk, and adverse effect, of any such disruptions could be exacerbated by a delay in completion of the Merger or termination of the Merger Agreement.
Whether or not the Merger is completed, the announcement and pendency of the Merger could cause disruptions in the businesses of Shift and CarLotz, which could have an adverse effect on their respective businesses and financial results.
Whether or not the Merger is completed, the announcement and pendency of the Merger could cause disruptions in the businesses of Shift and CarLotz, including by diverting the attention of Shift and CarLotz’s respective management and employee teams, such as those involved in day-to-day operations and sales, toward the completion of the Merger. In addition, Shift and CarLotz have each diverted significant management resources in an effort to complete the Merger and are each subject to restrictions contained in the Merger Agreement on the conduct of their respective businesses. If the Merger is not completed, Shift and CarLotz will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.
CarLotz directors and executive officers have interests and arrangements that may be different from, or in addition to, those of CarLotz Stockholders generally.
When considering the recommendations of the CarLotz Board on how to vote on the proposals described in this joint proxy statement/prospectus, CarLotz Stockholders should be aware that CarLotz directors and executive officers may have interests in the Merger that are different from, or in addition to, those of CarLotz Stockholders generally. These interests include the treatment in the Merger of outstanding equity, equity-based and incentive awards, severance arrangements, other compensation and benefit arrangements, Shift’s agreement to add three of CarLotz’s current directors to the Shift Board as designated by CarLotz, and the right to continued indemnification of former CarLotz directors and officers by the Combined Company. The CarLotz Board was aware of and considered these interests when it determined that the Merger was fair to, and in the best interests of, CarLotz and its stockholders, approved and declared advisable the Merger Agreement and the consummation of the Proposed Transactions, including the Merger, and recommended that CarLotz Stockholders adopt the Merger Agreement. The interests of CarLotz directors and executive officers are described in more detail in the section entitled “Interests of CarLotz Directors and Executive Officers in the Merger.”
The Merger Agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with either Shift or CarLotz.
The Merger Agreement contains “no shop” provisions that restrict the ability of Shift and CarLotz to, among other things (each as described in the section entitled “The Merger Agreement—Agreement Not to Solicit Other Offers”), subject to limited exceptions set forth in the Merger Agreement:
solicit, initiate, knowingly encourage, assist, induce or knowingly facilitate the making, submission or announcement of any acquisition proposal or acquisition inquiry (including by approving any transaction or approving any person (other than the other party and its affiliates) becoming an “interested stockholder” for purposes of Delaware corporate law) or take any action that reasonably would be expected to lead to an acquisition proposal or acquisition inquiry;
furnish or otherwise provide access to any non-public information regarding such party or any of its subsidiaries to any person in connection with or in response to an acquisition proposal or acquisition inquiry;
enter into, continue or otherwise engage in discussions or negotiations with, or cooperate with, any person with respect to any acquisition proposal or acquisition inquiry (other than to state that such party is subject to this non-solicitation provision);
approve, endorse or recommend any acquisition proposal; or
enter into any letter of intent, memorandum of understanding, agreement in principle or similar document or any contract constituting or relating directly or indirectly to, or that contemplates or is intended or reasonably would be expected to result directly or indirectly in, an acquisition transaction.
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Furthermore, there are only limited exceptions to the requirement under the Merger Agreement that neither the Shift Board nor the CarLotz Board withdraw or modify the Shift Board Recommendation or the CarLotz Board Recommendation, as applicable. Although each of the Shift Board or CarLotz Board is permitted to effect a change to its unanimous board recommendation in response to certain superior offers or to certain intervening events, after complying with certain procedures set forth in the Merger Agreement, such a change in recommendation would entitle the other party to terminate the Merger Agreement and receive a termination fee and expense reimbursement from the party making a change in recommendation. See the sections entitled “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Termination Fees and Expense Reimbursement.”
These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that implied by the Merger Consideration, or might result in a potential competing acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement.
The Merger will involve substantial costs.
Shift and CarLotz have incurred and expect to incur non-recurring costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the Merger. Such costs include, among others, filing and registration fees with the SEC, printing and mailing costs associated with this joint proxy statement/prospectus and legal, accounting, investment banking, consulting, public relations and proxy solicitation fees. Some of these costs are payable by Shift or CarLotz regardless of whether the Merger is completed.
The Combined Company will also incur restructuring and integration costs in connection with the Merger. There are processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Merger and the integration of CarLotz’s business. Although Shift expects that the elimination of duplicative costs, strategic benefits and additional income, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction, combination-related and restructuring costs over time, any net benefit may not be achieved in the near term or at all. While Shift has assumed that certain expenses would be incurred in connection with the Proposed Transactions, including the Merger, there are many factors beyond Shift’s control that could affect the total amount or the timing of the integration and implementation expenses.
Shift Stockholders and CarLotz Stockholders will not be entitled to appraisal rights in the Merger.
Appraisal rights are statutory rights that, if applicable under law, enable stockholders of a corporation to dissent from certain extraordinary transactions, such as a merger in certain circumstances, and to demand that such corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to such stockholders in connection with the extraordinary transaction. Under the DGCL, stockholders generally do not have appraisal rights if the shares of stock they hold are either listed on a national securities exchange or held of record by more than 2,000 holders. Notwithstanding the foregoing, appraisal rights are available if stockholders are required by the terms of the Merger Agreement to accept for their shares anything other than (a) shares of stock of the Surviving Corporation, (b) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more than 2,000 holders, (c) cash in lieu of fractional shares or (d) any combination of the foregoing.
Because the Merger Agreement provides for shares of Shift Common Stock to be issued by Shift to CarLotz in the Merger, CarLotz Stockholders are not entitled to appraisal rights in connection with the Merger. In addition, because Shift Stockholders will continue to hold their shares of Shift Common Stock following the completion of the Merger, they are not entitled to appraisal rights in connection with the Merger. See the section entitled No Appraisal Rights.
Lawsuits may in the future be filed against Shift, CarLotz and members of their respective boards of directors challenging the Merger, and an adverse ruling in any such lawsuit may prevent the Merger from becoming effective or from becoming effective within the expected time frame.
Transactions such as the Merger are frequently subject to litigation or other legal proceedings, including actions alleging that the Shift Board or CarLotz Board breached their respective fiduciary duties to their stockholders by entering into the Merger Agreement, by failing to obtain a greater value in the transaction for their stockholders
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or otherwise. Neither Shift nor CarLotz can provide assurance that such litigation or other legal proceedings will not be brought. If litigation or other legal proceedings are in fact brought against Shift or CarLotz, or against the Shift Board or CarLotz Board, they will defend against it but might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the business, results of operation or financial position of Shift, CarLotz or the Combined Company, including through the possible diversion of either company’s resources or distraction of key personnel.
Furthermore, one of the conditions to the Closing is that no injunction by any governmental body of competent jurisdiction will be in effect that prevents the consummation of the Merger. As such, if any of the plaintiffs are successful in obtaining an injunction preventing the consummation of the Merger, that injunction may prevent the Merger from becoming effective or from becoming effective within the expected time frame.
Risks Relating to the Proposed Reverse Stock Split
The proposed reverse stock split may not increase Shift’s stock price over the long-term.
One of the Shift Stockholder proposals is the Shift Reverse Stock Split Proposal. The Merger is not conditioned on the adoption of this stockholder proposal. One of the purposes of the contemplated reverse stock split is to increase the per share market price of Shift Common Stock in order to improve the perception of Shift Common Stock as an investment security and ensure that Shift continues to comply with the continued listing requirements of Nasdaq. It cannot be assured, however, that the contemplated reverse stock split, if effected, will accomplish these objectives for any meaningful period of time and that Shift Common Stock will not be delisted from Nasdaq in the future due to a failure to satisfy Nasdaq’s minimum closing bid listing standard. While it is expected that the reduction in the number of outstanding shares of Shift Common Stock will proportionally increase the market price of Shift Common Stock, it cannot be assured that the contemplated reverse stock split, if effected, will result in any permanent or sustained increase in the market price of Shift Common Stock, which is dependent upon many factors, including the Combined Company’s business and financial performance, general market conditions and the Combined Company’s prospects for future success.
Failure to obtain approval of the Shift Reverse Stock Split Proposal may increase the probability that Shift Common Stock would be delisted from Nasdaq in the future due to a failure to satisfy Nasdaq’s minimum closing bid listing standard.
The proposed reverse stock split may decrease the liquidity of Shift Common Stock.
Although the Shift Board believes that the anticipated increase in the market price of Shift Common Stock could encourage interest in Shift Common Stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the contemplated reverse stock split, if effected. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Shift Common Stock.
The proposed reverse stock split may lead to a decrease in Shift’s overall market capitalization.
Should the market price of Shift Common Stock decline after the contemplated reverse stock split, if effected, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the contemplated reverse stock split. The contemplated reverse stock split may be viewed negatively by the market and, consequently, may lead to a decrease in Shift’s overall market capitalization. If the per share market price does not increase in proportion to the contemplated reverse stock split ratio, then the value of Shift, as measured by its stock market capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of Shift Common Stock will remain the same after the contemplated reverse stock split is effected, or that the contemplated reverse stock split will not have an adverse effect on the stock price of Shift Common Stock due to the reduced number of shares outstanding after the contemplated reverse stock split.
Risks Relating to the Combined Company
Combining the businesses of Shift and CarLotz may be more difficult, costly or time-consuming than expected and the Combined Company may fail to realize the anticipated benefits of the Merger, which may adversely affect the Combined Company’s business results and negatively affect the value of the Combined Company’s common stock.
The success of the Merger will depend on, among other things, Shift’s ability to realize the anticipated benefits and operational scale efficiencies from combining the businesses of Shift and CarLotz. This success will depend largely on
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Shift’s ability to successfully integrate the business of CarLotz. If Shift is not able to successfully integrate CarLotz’s business within the anticipated time frame, or at all, the anticipated operational scale efficiencies and other benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected.
An inability to realize the full extent of the anticipated benefits of the Merger and the other Proposed Transactions, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the Combined Company, which may adversely affect the value of the Combined Company’s common stock.
Shift and CarLotz have operated and, until the Closing, will continue to operate independently. There can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Shift or CarLotz employees, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-Merger integration process that takes longer than originally anticipated. The challenges involved in this integration, which will be complex and time-consuming, include the following:
combining the companies’ operations and corporate functions;
combining the businesses of Shift and CarLotz and meeting the capital requirements of the Combined Company in a manner that permits the Combined Company to achieve any revenue synergies or operational scale efficiencies anticipated to result from the Merger, the failure of which would result in the anticipated benefits of the Merger not being realized in the time frame currently anticipated or at all;
integrating and retaining personnel from the two companies;
integrating the companies’ technologies and technologies licensed from third parties;
identifying and eliminating redundant and underperforming functions and assets;
harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;
maintaining existing agreements with business partners, suppliers and vendors, avoiding delays in entering into new agreements with prospective business partners, suppliers and vendors and leveraging relationships with such third parties for the benefit of the Combined Company;
addressing possible differences in business backgrounds, corporate cultures and management philosophies;
consolidating the companies’ administrative and information technology infrastructure;
coordinating sales motions and go-to-market efforts;
coordinating geographically dispersed organizations; and
effecting actions that may be required in connection with obtaining regulatory or other governmental approvals, including approvals from state departments of motor vehicles.
In addition, at times, the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the Merger and the integration of the businesses of the two companies and diverted from day-to-day business operations or other opportunities that may have been beneficial to such company, which may disrupt each company’s ongoing business and the business of the Combined Company.
The Combined Company may be unable to realize the anticipated cost synergies and expects to incur substantial expenses related to the Merger, which could adversely affect the Combined Company’s business, financial condition and results of operations.
As described under “The MergerShift Unaudited Prospective Financial Information,” the Merger is expected to generate annual cost synergies. The Combined Company’s ability to achieve such estimated cost synergies in the timeframe expected, or at all, is subject to various assumptions, which may or may not prove to be accurate. As a consequence, the Combined Company may not be able to realize all of these cost synergies within the timeframe expected or at all. In addition, the Combined Company may incur additional or unexpected costs in order to realize these benefits. Failure to achieve the expected cost synergies could significantly reduce the expected benefits associated with the Merger.
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Certain contractual counterparties may seek to modify contractual relationships with the Combined Company, which could have an adverse effect on the Combined Company’s business and operations.
As a result of the Merger, the Combined Company may experience impacts on relationships with contractual counterparties (such as business partners, vendors or other third party service providers) that may harm the Combined Company’s business and results of operations. Certain counterparties may seek to terminate or modify contractual obligations following the Merger whether or not contractual rights are triggered as a result of the Merger. There can be no guarantee that Shift’s or CarLotz’s contractual counterparties will remain with or continue to have a relationship with the Combined Company or do so on the same or similar contractual terms following the Merger. If any contractual counterparties (such as business partners, vendors or other third party service providers) seek to terminate or modify contractual obligations or discontinue the relationship with the Combined Company, then the Combined Company’s business and results of operations may be harmed.
Completion of the Merger may trigger change in control, assignment or other provisions in certain agreements to which CarLotz is a party, which may have an adverse impact on the Combined Company’s business and results of operations.
The completion of the Merger may trigger change in control, assignment and other provisions in certain agreements to which CarLotz is a party. If CarLotz is unable to negotiate waivers of or consents under those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages or other remedies. Even if CarLotz is able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to the Combined Company. Any of the foregoing or similar developments may have an adverse impact on the business, financial condition and results of operations of the Combined Company, or the ability of Shift to successfully integrate CarLotz’s business.
The Combined Company may be exposed to increased litigation, which could have an adverse effect on the Combined Company’s business and operations.
The Combined Company may be exposed to increased litigation from stockholders, customers, partners, suppliers, consumers and other third parties due to the combination of Shift’s and CarLotz’s businesses following the Merger. Such litigation may have an adverse impact on the Combined Company’s business and results of operations or may cause disruptions to the Combined Company’s operations.
The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the Combined Company following completion of the Merger.
The unaudited pro forma condensed combined financial information included in this joint proxy statement/ prospectus are presented for illustrative purposes only, contain a variety of adjustments, assumptions and preliminary estimates and are not necessarily indicative of what the Combined Company’s actual financial position or results of operations would have been had the Merger been completed on the dates indicated. The Combined Company’s actual results and financial position after the Merger may differ materially and adversely from the unaudited pro forma condensed combined financial information included in this joint proxy statement/prospectus. The unaudited pro forma condensed combined financial information reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual consideration transferred and the fair value of the assets and liabilities of CarLotz as of the Closing Date. Accordingly, the final acquisition accounting may differ materially from the unaudited pro forma condensed combined financial information reflected in this joint proxy statement/prospectus. For more information, see the section entitled Unaudited Pro Forma Condensed Combined Financial Information.”
While presented with numeric specificity, the unaudited pro forma condensed combined financial information provided in this joint proxy statement/prospectus is based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition, general business, economic, market and financial conditions and additional matters specific to Shift’s or CarLotz’s business, as applicable) that are inherently subjective and uncertain and are beyond the control of the respective management teams of Shift and CarLotz. As a result, actual results may differ materially from the unaudited pro forma condensed combined financial information. Important factors that may affect actual results include, but are not limited to, risks and uncertainties relating to Shift’s or
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CarLotz’s business, as applicable (including each company’s ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
The Combined Company’s debt may limit its financial flexibility.
In connection with the Merger, Shift will assume certain indebtedness of CarLotz.
Shift’s or CarLotz’s substantial indebtedness could have adverse effects on such company’s and/or the Combined Company’s financial condition and results of operations, including:
increasing its vulnerability to changing economic, regulatory and industry conditions;
limiting its ability to compete and its flexibility in planning for, or reacting to, changes in its business and the industry;
limiting its ability to borrow additional funds; and
increasing its interest expense and requiring it to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for working capital, capital expenditures, acquisitions and share repurchases and other purposes.
The companies’ ability to arrange any additional financing will depend on, among other factors, the companies’ respective financial positions and performance, as well as prevailing market conditions and other factors beyond their control. There can be no assurance that the Combined Company will be able to obtain financing on acceptable terms or at all.
The COVID-19 pandemic may cause harm to the business, results of operations and financial condition of the Combined Company.
The outbreak of COVID-19, which the World Health Organization declared a pandemic in March 2020, has spread across the globe and disrupted the global economy. Governmental actions to reduce the spread of COVID-19 have negatively impacted the macroeconomic environment in many ways, while the pandemic itself has significantly increased economic uncertainty and abruptly reduced economic activity.
The extent to which the COVID-19 pandemic will impact the Combined Company is highly uncertain and is difficult to predict. The pandemic’s effects and their extent will depend on various factors, including, but not limited to, the duration, scope and impact of the pandemic, restrictions on business and social distancing guidelines that may be requested or mandated by governmental authorities and how quickly and to what extent normal economic and operating conditions can resume. Relevant adverse consequences of the pandemic could include reduced liquidity, increased volatility of the Combined Company’s stock price, operational disruption or failure due to spread of disease within the Combined Company or due to restrictions on business and social distancing guidelines imposed or requested by governmental authorities, disruption in the supply chain and increased cybersecurity and fraud risks due to increased online and remote activity, as well as the adverse consequences of a macroeconomic slowdown, recession or depression.
Even after the COVID-19 pandemic has subsided, the Combined Company may continue to experience adverse impacts to its business as a result of the global economic impact of the COVID-19 pandemic, including reduced availability of credit, adverse impacts on liquidity and the negative financial effects from any recession or depression that may occur.
Shift’s charter documents designate specific courts as the exclusive forum for certain litigation that may be initiated by Shift Stockholders, which could limit the ability of the Combined Company’s stockholders to obtain a favorable judicial forum for disputes with the Combined Company.
The Shift Charter and Shift Bylaws (which will remain the Combined Company’s certificate of incorporation and bylaws following the Closing) provide that, unless Shift consents in writing to the selection of an alternative forum, the sole and exclusive forum for: (A) any derivative action or proceeding brought on Shift’s behalf; (B) any action asserting a claim of breach of a fiduciary duty owed by any of Shift’s directors, officers or other employees to Shift or its stockholders; (C) any action asserting a claim arising pursuant to any provision of the DGCL or the Shift Charter or Shift Bylaws (including the interpretation, validity or enforceability thereof); or (D) any action asserting a claim
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governed by the internal affairs doctrine is the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware or, if the Superior Court of the State of Delaware does not have jurisdiction, the United States District Court for the District of Delaware, subject to the court’s having personal jurisdiction over the indispensable parties named therein (the “Delaware Forum Provision”). The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. The Shift Bylaws further provide that, unless Shift consents in writing to the selection of an alternative forum, the district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, the Shift Bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of Shift’s capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that Shift Stockholders cannot and will not be deemed to have waived Shift’s compliance with the U.S. federal securities laws and the rules and regulations thereunder.
The Delaware Forum Provision and the Federal Forum Provision in the Shift Bylaws may impose additional litigation costs on Shift Stockholders in pursuing any such claims. Additionally, these forum selection clauses may limit the Combined Company’s stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with the Combined Company or its directors, officers or employees, which may discourage the filing of lawsuits against the Combined Company and its directors, officers and employees, even though an action, if successful, might benefit the Combined Company’s stockholders. In addition, Section 22 of the Securities Act creates a concurrent jurisdiction for state and federal courts over all suits brought concerning a duty or liability created by the securities laws, rules and regulations thereunder. While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce the Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, the Combined Company may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the federal district courts of the United States may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to the Combined Company than its stockholders.
Risk Factors Related to Shift
Shift’s business is and will be subject to the risks described above. In addition, Shift is, and will continue to be, subject to the risks described in, as applicable, Shift’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as such risks may be updated or supplemented in Shift’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each of which are filed with the SEC and incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”
Risk Factors Related to CarLotz
See Part I, Item 1A – Risk Factors, in CarLotz’s Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated herein and attached as Annex F-1 and in Part I, Item 1A – Risk Factors, in CarLotz’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022 and June 30, 2022, which are incorporated herein and attached as Annex F-2 and Annex F-3, respectively.
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THE PARTIES TO THE MERGER
Shift Technologies, Inc.
Shift is a leading end-to-end ecommerce platform transforming the used car industry with a technology-driven, hassle-free customer experience. Shift’s mission is to make car purchase and ownership simple–to make buying or selling a used car fun, fair and accessible to everyone. Shift provides comprehensive, technology-driven solutions throughout the car ownership lifecycle: finding the right car, a seamless digitally-driven purchase transaction, including financing and vehicle protection products, an efficient, fully-digital trade-in/sale transaction and a vision to provide high-value support services during car ownership. Each of these steps is powered by Shift’s software solutions, mobile transactions platform and scalable logistics, combined with our centralized inspection, reconditioning & storage centers, called hubs. Shift’s principal executive offices are located at 290 Division Street, Suite 400, San Francisco, California 94103, and its telephone number is (855) 575-6739.
CarLotz, Inc.
CarLotz operates a consignment-to-retail used vehicle marketplace that provides its corporate vehicle sourcing partners and retail sellers of used vehicles with the ability to easily access the retail sales channel. CarLotz’s mission is to create the world’s greatest vehicle buying and selling experience. CarLotz operates a technology-enabled buying, sourcing and selling model that offers an omni-channel experience and diverse selection of vehicles. CarLotz’s proprietary technology provides its corporate vehicle sourcing partners with real-time performance metrics and data analytics along with custom business intelligence reporting that enables vehicle triage optimization between the wholesale and retail channels. CarLotz’s principal executive offices are located at 3301 W. Moore Street, Richmond, Virginia 23230, and its telephone number is (804) 510-0744.
Shift Remarketing Operations, Inc.
Merger Sub was formed by Shift solely in contemplation of the Merger, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the Merger Agreement. At the Effective Time, Merger Sub will merge with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift. Merger Sub’s principal executive offices are located at 290 Division Street, Suite 400, San Francisco, California 94103, and its telephone number is (855) 575-6739.
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THE SHIFT SPECIAL MEETING
This joint proxy statement/prospectus is being provided to Shift Stockholders in connection with the solicitation of proxies by the Shift Board for use at the Shift Special Meeting and at any adjournments or postponements thereof. Shift Stockholders are encouraged to read this entire document carefully, including its annexes and the documents incorporated by reference herein, for more detailed information regarding the Merger Agreement and the Proposed Transactions.
Date, Time and Place of the Shift Special Meeting
The Shift Special Meeting is scheduled to be held virtually via live webcast on December 7, 2022, beginning at 12:00 p.m., Eastern Time.
The Shift Special Meeting will be held by means of remote communication via live webcast. There will not be a physical location. In light of continuing public health and travel concerns arising from the coronavirus (COVID-19) outbreak, Shift believes hosting a virtual meeting helps ensure the health and safety of its stockholders, the Shift Board and Shift management. Shift Stockholders will be able to virtually attend and vote at the Shift Special Meeting by visiting www.virtualshareholdermeeting.com/SFT2022SM, the Shift Special Meeting Website. Shift Stockholders will need the 16-digit control number found on their proxy card in order to access the Shift Special Meeting Website.
Matters to Be Considered at the Shift Special Meeting
The purpose of the Shift Special Meeting is to consider and vote on each of the following proposals, each of which is further described in this joint proxy statement/prospectus:
Shift Proposal 1 - Shift Share Issuance Proposal: To approve the issuance of shares of Shift Common Stock to CarLotz Stockholders in connection with the Merger;
Shift Proposal 2 – Shift Reverse Stock Split Proposal: To approve an amendment to the Shift Charter to effect a reverse stock split of Shift Common Stock at a ratio within a range of 1-for-5 and 1-for-10, as determined by the Shift Board;
Shift Proposal 3 - Shift Adjournment Proposal: To approve the adjournment of the Shift Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Shift Special Meeting to approve the Shift Share Issuance Proposal.
Approval of the Shift Share Issuance Proposal by Shift Stockholders is a condition to the Merger. Approval of the Shift Reverse Stock Split Proposal and the Shift Adjournment Proposal are not conditions to the obligation of either Shift or CarLotz to complete the Merger.
Only business within the purposes described in the Shift Special Meeting notice may be conducted at the Shift Special Meeting.
Recommendation of the Shift Board
After careful consideration, the Shift Board unanimously: (i) determined and resolved that the Merger Agreement, the Proposed Transactions (including the Merger and the Share Issuance) and the Reverse Stock Split Amendment are advisable and fair to, and in the best interests of, Shift and its stockholders; and (ii) approved the Merger Agreement, the Proposed Transactions and the Reverse Stock Split Amendment. Accordingly, the Shift Board unanimously recommends that Shift Stockholders vote:
Shift Proposal 1: “FOR” the Shift Share Issuance Proposal;
Shift Proposal 2: “FOR” the Shift Reverse Stock Split Proposal; and
Shift Proposal 3: “FOR” the Shift Adjournment Proposal.
See the section entitled “The Merger—Shift’s Reasons for the Merger and Recommendation of the Shift Board.”
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Record Date for the Shift Special Meeting and Voting Rights
The record date to determine Shift Stockholders who are entitled to receive notice of and to vote at the Shift Special Meeting or any adjournments or postponements thereof is November 2, 2022. At the close of business on the Shift Record Date, there were 85,817,926 shares of Shift Common Stock issued and outstanding and entitled to vote at the Shift Special Meeting.
Each Shift Stockholder is entitled to one vote on each proposal for each share of Shift Common Stock held of record at the close of business on the Shift Record Date. Only Shift Stockholders of record at the close of business on the Shift Record Date are entitled to receive notice of and to vote at the Shift Special Meeting and any and all adjournments or postponements thereof.
A complete list of Shift Stockholders entitled to vote at the Shift Special Meeting will be available for inspection at Shift’s headquarters during regular business hours for a period of no less than 10 days before the Shift Special Meeting at 290 Division Street, Suite 400, San Francisco, California 94103. If Shift’s headquarters are closed for health and safety reasons related to the COVID-19 pandemic during such period, the list of Shift Stockholders will be made available for inspection upon request to Shift’s corporate secretary at 290 Division Street, Suite 400, San Francisco, California 94103, subject to the satisfactory verification of stockholder status. The list of Shift Stockholders entitled to vote at the Shift Special Meeting will also be made available for inspection during the Shift Special Meeting via the Shift Special Meeting Website.
Quorum; Abstentions and Broker Non-Votes
A quorum of Shift Stockholders is necessary to conduct business at the Shift Special Meeting. The presence in person or by proxy of the holders of Shift Common Stock representing a majority of the voting power of the outstanding shares of Shift Common Stock entitled to vote at the Shift Special Meeting will constitute a quorum. Shares of Shift Common Stock present at the Shift Special Meeting by virtual attendance via the Shift Special Meeting Website or represented by proxy and entitled to vote, including shares for which a Shift Stockholder directs an “abstention” from voting, will be counted for purposes of determining a quorum. Shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum unless the Shift Stockholder provides their bank, broker or other nominee with voting instructions for at least one of the proposals at the Shift Special Meeting (or your bank, broker or other nominee exercises its discretionary authority to vote on the Shift Reverse Stock Split Proposal as described below). If a quorum is not present, the Shift Special Meeting will be adjourned or postponed until the holders of the number of shares of Shift Common Stock required to constitute a quorum attend.
Under Nasdaq rules, banks, brokers or other nominees who hold shares in “street name” on behalf of the beneficial owner of such shares have the authority to vote such shares in their discretion on certain “routine” proposals when they have not received voting instructions from the beneficial owners. However, banks, brokers or other nominees are not allowed under Nasdaq rules to exercise their voting discretion with respect to matters that are “non-routine.” This can result in a “broker non-vote,” which occurs on a proposal when (i) a bank, broker or other nominee has discretionary authority to vote on one or more “routine” proposals to be voted on at a meeting of stockholders but is not permitted to vote on other “non-routine” proposals without instructions from the beneficial owner of the shares and (ii) the beneficial owner fails to provide the bank, broker or other nominee with voting instructions on a “non-routine” matter. The Shift Share Issuance Proposal and the Shift Adjournment Proposal are considered “non-routine” matters, and banks, brokers or other nominees will not have discretionary authority to vote on such matters before the Shift Special Meeting. The Shift Reverse Stock Split Proposal is considered a “routine” matter, and banks, brokers or other nominees that hold your shares have discretionary authority to vote your shares on such matters without receiving instructions from you. As a result, if you hold your shares of Shift Common Stock in “street name,” your shares will not be represented and will not be voted on matters before the Shift Special Meeting unless you affirmatively instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instructions provided by your bank, broker or other nominee or your bank, broker or other nominee exercises its discretionary authority to vote on the Shift Reverse Stock Split Proposal. Accordingly, if a beneficial owner of Shift Common Stock held in “street name” does not give voting instructions to its bank, broker or other nominee, there may be broker non-votes at the Shift Special Meeting. It is therefore critical that you cast your vote by instructing your bank, broker or other nominee on how to vote. With the exception of the Shift Reverse Stock Split Proposal, brokers will not be able to vote on the proposals before the Shift Special Meeting unless they have received voting instructions from the beneficial owners.
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Required Votes
The vote required to approve each of the proposals listed below assumes the presence of a quorum at the Shift Special Meeting. As described above, there may be broker non-votes at the Shift Special Meeting if a beneficial owner of shares of Shift Common Stock held in “street name” does not give voting instructions to its bank, broker or other nominee.
Proposal
Required Vote
Effects of Certain Actions
Shift Proposal 1: Shift Share Issuance Proposal
Approval requires the affirmative vote of the holders of a majority of the shares of Shift Common Stock present in person or represented by proxy at the Shift Special Meeting and entitled to vote upon the Shift Share Issuance Proposal.
The failure to vote any shares present or represented by proxy at the Shift Special Meeting (including if a stockholder who holds shares in “street name” provides voting instructions for one or more other proposals but not for the Shift Share Issuance Proposal) or an abstention from voting will be treated as a vote “AGAINST” the Shift Share Issuance Proposal for the purposes of the requirement that the Shift Share Issuance Proposal receive the affirmative vote of the holders of a majority of the Shift Common Stock having voting power present in person or represented by proxy at the Shift Special Meeting.
Shift Proposal 2: Shift Reverse Stock Split Proposal
Approval requires the affirmative vote of the holders of Shift Common Stock representing at least a majority of the outstanding shares of Shift Common Stock entitled to vote on the Shift Reverse Stock Split Proposal.
The failure to vote or the failure to instruct your bank, broker or other nominee to vote shares held in “street name” with respect to the Shift Reverse Stock Split Proposal (except in the event your bank, broker or other nominee exercises its discretionary authority to vote “FOR” the Shift Reverse Stock Split Proposal) or an abstention from voting will be treated as a vote “AGAINST” the Shift Reverse Stock Split Proposal, provided that a quorum is otherwise present at the Shift Special Meeting.
Shift Proposal 3: Shift Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the shares of Shift Common Stock present in person or represented by proxy at the Shift Special Meeting and entitled to vote upon the Shift Adjournment Proposal.
The failure to vote any shares present or represented by proxy at the Shift Special Meeting (including if a stockholder who holds shares in “street name” provides voting instructions for one or more other proposals but not for the Shift Adjournment Proposal) or an abstention from voting will be treated as a vote “AGAINST” the Shift Adjournment Proposal.
Vote of Shift Directors and Executive Officers
As of November 2, 2022, the Shift Record Date, Shift directors and executive officers and their affiliates, as a group, beneficially owned and were entitled to vote 7,736,925 shares of Shift Common Stock, which represented approximately 9.0% of the shares of Shift Common Stock issued and outstanding on the Shift Record Date. Certain directors, executive officers and affiliates of certain directors and executive officers executed supporting agreements in connection with the Merger Agreement, solely in their capacity as Shift Stockholders (the “Shift Support Agreements”). For more information regarding the Shift Support Agreements, see the section entitled “Support Agreements.”
Shift currently expects that all Shift directors and executive officers, including directors and executive officers not party to a Shift Support Agreement, will vote their shares “FOR” the Shift Share Issuance Proposal, “FOR” the Shift Reverse Stock Split Proposal and “FOR” the Shift Adjournment Proposal. For more information regarding the security ownership of Shift directors and executive officers, see the section entitled “Certain Beneficial Owners of Shift Common Stock.” In addition, see the section entitled “Interests of Shift Directors and
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Executive Officers in the Merger” in this joint proxy statement/prospectus and the arrangements described in Shift’s Definitive Proxy Statement on Schedule 14A for Shift’s 2022 annual meeting of stockholders, filed with the SEC on May 27, 2022, which is incorporated by reference in this joint proxy statement/prospectus.
Methods of Voting
Stockholders of Record
If you are a Shift Stockholder of record, you may vote at the Shift Special Meeting by proxy over the internet or telephone or by mail, or by virtually attending and voting at the Shift Special Meeting via the Shift Special Meeting Website, as described below.
By Internet: To vote via the Internet, go to https://www.virtualshareholdermeeting.com/SFT2022SM to complete an electronic proxy card. You will be asked to provide the 16-digit control number from the proxy card you receive. Your vote must be received by 11:59 p.m., Eastern Time on December 6, 2022 to be counted. If you vote via the Internet, you do not need to return a proxy card by mail.
By Telephone: To vote by telephone, dial 1-800-690-6903 (the call is toll-free in the United States and Canada; toll charges apply to calls from other countries) and follow the recorded instructions. You will be asked to provide the 16-digit control number from the proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on December 6, 2022 to be counted. If you vote by telephone, you do not need to return a proxy card by mail.
By Mail: To vote by mail using the proxy card (if you requested paper copies of the proxy materials to be mailed to you), you need to complete, date and sign the proxy card and return it promptly by mail in the envelope provided so that it is received no later than December 6, 2022. The persons named in the proxy card will vote the shares you own in accordance with your instructions on the proxy card you mail.
Virtually via the Shift Special Meeting Website: To vote at the Shift Special Meeting, visit www.virtualshareholdermeeting.com/SFT2022SM, where you can virtually attend and vote at the Shift Special Meeting. You will be asked to provide the 16-digit control number from the proxy card you receive in order to access the Shift Special Meeting Website.
Unless revoked, all duly executed proxies representing shares of Shift Common Stock entitled to vote at the Shift Special Meeting will be voted at the Shift Special Meeting and, where a choice has been specified on the proxy card, will be voted in accordance with such specification. If you submit an executed proxy without providing instructions for any proposal, your shares will be voted “FOR” the Shift Share Issuance Proposal, “FOR” the Shift Reverse Stock Split Proposal and “FOR” the Shift Adjournment Proposal.
Beneficial (Street Name) Stockholders
If you hold your shares of Shift Common Stock through a bank, broker or other nominee in “street name” instead of as a registered holder, you must follow the voting instructions provided by your bank, broker or other nominee in order to vote your shares. Your voting instructions must be received by your bank, broker or other nominee prior to the deadline set forth in the information from your bank, broker or other nominee on how to submit voting instructions. If you do not provide voting instructions to your bank, broker or other nominee for a proposal, your shares of Shift Common Stock will not be voted on that proposal (except in the event your bank, broker or other nominee exercises its discretionary authority to vote for the Shift Reverse Stock Split Proposal). See the section entitled “—Quorum; Abstentions and Broker Non-Votes” above.
If you hold your shares of Shift Common Stock through a bank, broker or other nominee in “street name” (instead of as a registered holder), you must obtain a specific control number from your bank, broker or other nominee in order to virtually attend and vote at the Shift Special Meeting via the Shift Special Meeting Website. See the section entitled “—Virtually Attending the Shift Special Meeting” below.
Virtually Attending the Shift Special Meeting
If you wish to virtually attend the Shift Special Meeting via the Shift Special Meeting Website, you must (i) be a Shift Stockholder of record at the close of business on November 2, 2022, the Shift Record Date, (ii) hold your shares of Shift Common Stock beneficially in the name of a broker, bank or other nominee as of the Shift Record Date or (iii) hold a valid proxy for the Shift Special Meeting.
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To enter the Shift Special Meeting Website and virtually attend the Shift Special Meeting, you will need the 16-digit control number located on your proxy card. If you hold your shares of Shift Common Stock in street name beneficially through a broker, bank or other nominee and you wish to virtually attend the Shift Special Meeting via the Shift Special Meeting Website, you will need to obtain your specific control number and further instructions from your bank, broker or other nominee. The 16-digit control number is also needed to access the list of Shift Stockholders entitled to vote at the Shift Special Meeting during the time of the meeting.
If you plan to virtually attend and vote at the Shift Special Meeting via the Shift Special Meeting Website, Shift still encourages you to vote in advance by the internet, telephone or (if you received a paper copy of the proxy materials) by mail so that your vote will be counted even if you later decide not to virtually attend the Shift Special Meeting via the Shift Special Meeting Website. Voting your proxy by the internet, telephone or mail will not limit your right to virtually attend and vote at the Shift Special Meeting via the Shift Special Meeting Website if you later decide to do so.
Revocability of Proxies
Any Shift Stockholder granting a proxy has the right to revoke it at any time before the proxy is voted at the Shift Special Meeting. If you are a Shift Stockholder of record, you may revoke your proxy by any one of the following actions:
by sending a signed written notice of revocation to Shift’s Corporate Secretary, provided such notice is received no later than the close of business on December 6, 2022;
by voting again over the internet or telephone as instructed on your proxy card before the closing of the voting facilities at 11:59 p.m., Eastern Time, on December 6, 2022;
by submitting a properly signed and dated proxy card with a later date that is received by Shift’s Corporate Secretary no later than the close of business on December 6, 2022; or
by virtually attending the Shift Special Meeting via the Shift Special Meeting Website and requesting that your proxy be revoked or virtually voting via the Shift Special Meeting Website as described above.
Only your last submitted proxy will be considered.
Execution or revocation of a proxy will not in any way affect a Shift Stockholder’s right to virtually attend and vote at the Shift Special Meeting via the Shift Special Meeting Website.
Written notices of revocation and other communications relating to the revocation of proxies should be addressed to:
Shift Technologies, Inc.
Attn: Corporate Secretary
290 Division Street, Suite 400
San Francisco, California 94103
If your shares of Shift Common Stock are held in “street name” and you previously provided voting instructions to your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee to revoke or change your voting instructions. You may also change your vote by obtaining your specific control number and instructions from your bank, broker or other nominee and voting your shares at the Shift Special Meeting via the Shift Special Meeting Website.
Proxy Solicitation Costs
Shift is soliciting proxies on behalf of the Shift Board. Shift will bear the entire cost of soliciting proxies from Shift Stockholders. Proxies may be solicited on behalf of Shift or by Shift directors, officers and other employees in person or by mail, telephone, facsimile, messenger, the internet or other means of communication, including electronic communication. Shift directors, officers and employees will not be paid any additional amounts for their services or solicitation in this regard.
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Shift will request that banks, brokers and other nominee record holders send proxies and proxy material to the beneficial owners of Shift Common Stock and secure their voting instructions, if necessary. Shift may be required to reimburse those banks, brokers and other nominees on request for their reasonable expenses in taking those actions.
Shift has also retained MacKenzie Partners to assist in soliciting proxies and in communicating with Shift Stockholders and estimates that it will pay MacKenzie Partners a fee of approximately $15,000, plus reimbursement for certain out-of-pocket fees and expenses. Shift also has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).
Householding
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or a single notice addressed to those stockholders. This process, which is commonly referred to as “householding,” provides cost savings for companies. As a result, Shift Stockholders with the same address and last name may receive only one copy of this joint proxy statement/prospectus. Registered Shift Stockholders (those who hold shares of Shift Common Stock directly in their name with Shift’s transfer agent) may opt out of householding and receive a separate joint proxy statement/prospectus or other proxy materials by sending a written request to Shift at the address below.
Some brokers household proxy materials, delivering a single proxy statement or notice to multiple Shift Stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker.
Shift will promptly deliver a copy of this joint proxy statement/prospectus to any Shift Stockholder who only received one copy of these materials due to householding upon request in writing to: Shift Technologies, Inc., Attn: Corporate Secretary, 290 Division Street, Suite 400, San Francisco, California 94103 or by calling (855) 575-6739.
Adjournments
If a quorum is present at the Shift Special Meeting but there are insufficient votes at the time of the Shift Special Meeting to approve the Shift Share Issuance Proposal, then Shift Stockholders may be asked to vote on the Shift Adjournment Proposal. If a quorum is not present, the chairman of the Shift Special Meeting may adjourn the Shift Special Meeting, from time to time, without notice other than announcement at the meeting of the date, time and place, if any, to which the meeting is adjourned and the means of remote communications, if any, by which Shift Stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting. The chairman of the Shift Special Meeting may also adjourn the meeting to reconvene at the same or some other place, even if a quorum is present.
At any subsequent reconvening of the Shift Special Meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting, and all proxies will be voted in the same manner as they would have been voted at the original convening of the Shift Special Meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
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Assistance
If you need assistance voting or completing your proxy card, or if you have questions regarding the Shift Special Meeting, please contact MacKenzie Partners, Shift’s proxy solicitor for the Shift Special Meeting, at:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, New York 10018
(800) 322-2885 (toll-free)
proxy@mackenziepartners.com
SHIFT STOCKHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/ PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE MERGER AGREEMENT AND THE PROPOSED TRANSACTIONS (INCLUDING THE MERGER AND THE SHARE ISSUANCE). IN PARTICULAR, SHIFT STOCKHOLDERS ARE DIRECTED TO THE MERGER AGREEMENT, WHICH IS ATTACHED AS ANNEX A HERETO.
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SHIFT PROPOSAL 1: APPROVAL OF THE SHARE ISSUANCE
This joint proxy statement/prospectus is being furnished to you as a Shift Stockholder in connection with the solicitation of proxies by the Shift Board for use at the Shift Special Meeting. At the Shift Special Meeting, Shift is asking Shift Stockholders to consider and vote upon a proposal to approve the issuance of shares of Shift Common Stock to CarLotz Stockholders in connection with the Merger for purposes of applicable Nasdaq rules. Based on the number of shares of Shift Common Stock outstanding as of October 27, 2022, the latest practicable date prior to the date of this joint proxy statement/prospectus, and assuming CarLotz Stockholders will own 49.99% of the issued and outstanding shares of the Combined Company’s common stock following the completion of the Merger, Shift expects to issue approximately 85,783,606 million shares of Shift Common Stock to CarLotz Stockholders in connection with the Merger. The actual number of shares of Shift Common Stock to be issued in connection with the Merger will be determined by the final Exchange Ratio, which will be calculated immediately prior to the Effective Time to equal a ratio calculated as (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (1) any CarLotz Earnout Shares, (2) any CarLotz Earnout Acquiror RSUs, (3) any CarLotz Warrants, (4) any options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio, and (5) any CarLotz performance-based restricted stock unit awards that are terminated as of the Effective Time). Upon completion of the Merger, based on the Exchange Ratio, the number of outstanding shares of CarLotz Common Stock and the number of outstanding shares of Shift Common Stock as of October 21, 2022, (i) former CarLotz Stockholders are expected to own approximately 49.99% of the issued and outstanding shares of Shift Common Stock and 48.12% of the outstanding shares of Shift Common Stock on a fully diluted and as-converted to Shift Common Stock basis and (ii) current Shift Stockholders are expected to own approximately 50.01% of the issued and outstanding shares of Shift Common Stock and 51.88% of the outstanding shares of Shift Common Stock on a fully diluted and as-converted to Shift Common Stock basis.
The Shift Board, after careful consideration, unanimously determined that the Proposed Transactions (including the Merger and the Share Issuance), on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and fair to, and in the best interests of, Shift and its stockholders and approved the Merger Agreement and the Proposed Transactions.
The Shift Board unanimously recommends that Shift Stockholders vote “FOR” the Shift Share Issuance Proposal.
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Share Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of Shift Common Stock present in person or represented by proxy at the Shift Special Meeting and entitled to vote upon the Shift Share Issuance Proposal. Any shares not present or represented by proxy (including due to the failure of a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Shift Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the Shift Share Issuance Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Shift Share Issuance Proposal will be counted as a vote “AGAINST” the Shift Share Issuance Proposal for the purposes of the requirement that the Shift Share Issuance Proposal receive the affirmative vote of the holders of a majority of the shares of Shift Common Stock present in person or represented by proxy at the Shift Special Meeting and entitled to vote upon the Shift Share Issuance Proposal. In addition, if a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Shift Share Issuance Proposal, it will have the same effect as a vote “AGAINST” the Shift Share Issuance Proposal.
THE SHIFT BOARD UNANIMOUSLY RECOMMENDS THAT SHIFT STOCKHOLDERS VOTE “FOR” THE SHIFT SHARE ISSUANCE PROPOSAL
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SHIFT PROPOSAL 2: AMENDMENT TO THE SHIFT CHARTER
EFFECTING THE REVERSE STOCK SPLIT
In accordance with the Merger Agreement, Shift is seeking to approve and adopt an amendment to the Shift Charter to allow Shift, at the Shift Board’s discretion, to effect a reverse stock split of Shift Common Stock at a ratio anywhere in the range between 1 new share for every 5 shares and 1 new share for every 10 shares outstanding. The Shift Board will determine the actual reverse stock split ratio within such range. Upon the effectiveness of the amendment to the Shift Charter, the Shift Board may, at its discretion upon the Closing, effect the reverse stock split, pursuant to which the issued shares of Shift Common Stock immediately prior to the Effective Time of the reverse stock split will be reclassified into a smaller number of shares within the specified range, such that a Shift Stockholder will own one new share of Shift Common Stock for the specified number of shares of issued common stock held by that stockholder immediately prior to the effective time of the reverse stock split. The form of the proposed amendment that will effect the reverse stock split is attached as Annex B to this joint proxy statement/prospectus.
Approval of the Shift Reverse Stock Split Proposal is not a condition to the consummation of the Merger, and if the conditions to the Merger are satisfied, the Merger will close whether or not the Shift Reverse Stock Split Proposal is approved.
In addition, approval of the Shift Reverse Stock Split Proposal is not conditioned upon approval of the Shift Share Issuance Proposal and is not conditioned on completion of the Merger. As a result, if the Shift Stockholders vote to approve the Shift Reverse Stock Split Proposal, Shift may elect to effect the reverse stock split, regardless of whether the Merger closes or the Shift Share Issuance Proposal is approved.
The Shift Board, after careful consideration, unanimously determined that the Shift Reverse Stock Split Proposal, on the terms and conditions set forth in the form of proposed amendment attached as Annex B to this joint proxy statement/prospectus, are advisable and fair to, and in the best interests of, Shift and its stockholders and approved that the Shift Reverse Stock Split Proposal be submitted to the Shift Stockholders for approval. The Shift Board approved the proposal to amend the Shift Charter to effect the reverse stock split for the following reasons:
the Shift Board believes a higher stock price that may result from the reverse stock split may help generate investor interest in Shift and help Shift attract and retain employees;
if the reverse stock split successfully increases the per share price of Shift Common Stock, the Shift Board believes this increase may increase trading volume in Shift Common Stock; and
the Shift Board believes that effecting the reverse stock split may be an effective means of avoiding any potential delisting of Shift Common Stock from Nasdaq.
The Shift Board unanimously recommends that Shift Stockholders vote “FOR” the Shift Reverse Stock Split Proposal.
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Reverse Stock Split Proposal requires the affirmative vote of the holders of Shift Common Stock representing at least a majority of the outstanding shares of Shift Common Stock entitled to vote on the Shift Reverse Stock Split Proposal. If a Shift Stockholder fails to vote or fails to instruct its bank, broker or other nominee to vote shares held in “street name” with respect to the Shift Reverse Stock Split Proposal (except in the event such stockholder’s bank, broker or other nominee exercises its discretionary authority to vote “FOR” the Shift Reverse Stock Split Proposal), or abstains from voting, it will have the same effect as a vote “AGAINST” the Shift Reverse Stock Split Proposal.
THE SHIFT BOARD UNANIMOUSLY RECOMMENDS THAT SHIFT STOCKHOLDERS VOTE “FOR” THE SHIFT REVERSE STOCK SPLIT PROPOSAL
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SHIFT PROPOSAL 3: ADJOURNMENT OF THE SHIFT SPECIAL MEETING
The Shift Special Meeting may be adjourned to another time and place if necessary or appropriate to permit the solicitation of additional proxies if there are insufficient votes at the time of the Shift Special Meeting to approve the Shift Share Issuance Proposal.
Shift is asking Shift Stockholders to authorize the holder of any proxy solicited by the Shift Board to vote in favor of any adjournment of the Shift Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Shift Share Issuance Proposal.
The Shift Board unanimously recommends that Shift Stockholders vote “FOR” the Shift Adjournment Proposal.
Assuming a quorum is present at the Shift Special Meeting, approval of the Shift Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of Shift Common Stock present in person or represented by proxy at the Shift Special Meeting and entitled to vote upon the Shift Adjournment Proposal. Any shares not present or represented by proxy (including due to the failure of a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Shift Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the Shift Adjournment Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Shift Share Issuance Proposal will have the same effect as a vote “AGAINST” the Shift Adjournment Proposal. In addition, if a Shift Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Shift Adjournment Proposal, it will have the same effect as a vote “AGAINST” the Shift Adjournment Proposal.
THE SHIFT BOARD UNANIMOUSLY RECOMMENDS THAT SHIFT STOCKHOLDERS VOTE “FOR” THE SHIFT ADJOURNMENT PROPOSAL
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THE CARLOTZ SPECIAL MEETING
This joint proxy statement/prospectus is being provided to CarLotz Stockholders in connection with the solicitation of proxies by the CarLotz Board for use at the CarLotz Special Meeting and at any adjournments or postponements thereof. CarLotz Stockholders are encouraged to read this entire document carefully, including its annexes and the documents incorporated by reference herein, for more detailed information regarding the Merger Agreement and the Proposed Transactions.
Date, Time and Place of the CarLotz Special Meeting
The CarLotz Special Meeting is scheduled to be held virtually via live webcast on December 7, 2022, beginning at 11:00 a.m., Eastern Time.
The CarLotz Special Meeting will be held by means of remote communication via live webcast. There will not be a physical location. In light of continuing public health and travel concerns arising from the coronavirus (COVID-19) outbreak, CarLotz believes hosting a virtual meeting helps ensure the health and safety of its stockholders, the CarLotz Board and CarLotz management. CarLotz Stockholders will be able to virtually attend and vote at the CarLotz Special Meeting by visiting www.virtualshareholdermeeting.com/LOTZ2022SM, the CarLotz Special Meeting Website. CarLotz Stockholders will need the 16-digit control number found on their proxy card in order to access the CarLotz Special Meeting Website.
Matters to Be Considered at the CarLotz Special Meeting
The purpose of the CarLotz Special Meeting is to consider and vote on each of the following proposals, each of which is further described in this joint proxy statement/prospectus:
CarLotz Proposal 1—Adoption of the Merger Agreement: To adopt the Merger Agreement; and
CarLotz Proposal 2—Adjournment of the CarLotz Special Meeting: To approve the adjournment of the CarLotz Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the CarLotz Special Meeting to approve the CarLotz Merger Proposal.
Approval of the CarLotz Merger Proposal by CarLotz Stockholders is a condition to the Merger. Approval of the CarLotz Adjournment Proposal is not a condition to the obligation of either Shift or CarLotz to complete the Merger.
Only business within the purposes described in the CarLotz Special Meeting notice may be conducted at the CarLotz Special Meeting.
Recommendation of the CarLotz Board
After careful consideration, the CarLotz Board unanimously: (i) determined and resolved that the Merger Agreement and the Proposed Transactions (including the Merger) are advisable and fair to, and in the best interests of, CarLotz and its stockholders; (ii) adopted and approved the Merger Agreement and the Proposed Transactions (including the Merger) and (iii) recommended that CarLotz Stockholders adopt the Merger Agreement.
Accordingly, the CarLotz Board unanimously recommends that CarLotz Stockholders vote:
CarLotz Proposal 1: “FOR” the CarLotz Merger Proposal; and
CarLotz Proposal 2: “FOR” the CarLotz Adjournment Proposal.
See the section entitled “The Merger—CarLotz’s Reasons for the Merger and Recommendation of the CarLotz Board.”
Record Date for the CarLotz Special Meeting and Voting Rights
The record date to determine CarLotz Stockholders who are entitled to receive notice of and to vote at the CarLotz Special Meeting or any adjournments or postponements thereof is October 27, 2022. At the close of business on the CarLotz Record Date, there were 119,703,273 shares of CarLotz Common Stock issued and outstanding and entitled to vote at the CarLotz Special Meeting.
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Each CarLotz Stockholder is entitled to one vote on each proposal for each share of CarLotz Common Stock held of record at the close of business on the CarLotz Record Date. Only CarLotz Stockholders of record at the close of business on the CarLotz Record Date are entitled to receive notice of and to vote at the CarLotz Special Meeting and any and all adjournments or postponements thereof.
A complete list of CarLotz Stockholders entitled to vote at the CarLotz Special Meeting will be available for inspection at CarLotz’s headquarters during regular business hours for a period of no less than 10 days before the CarLotz Special Meeting at 3301 W. Moore St., Richmond, Virginia 23230. If CarLotz’s headquarters are closed for health and safety reasons related to the COVID-19 pandemic during such period, the list of CarLotz Stockholders will be made available for inspection upon request to CarLotz’s corporate secretary at 3301 W. Moore St., Richmond, Virginia 23230, subject to the satisfactory verification of stockholder status. The list of CarLotz Stockholders entitled to vote at the CarLotz Special Meeting will also be made available for inspection during the CarLotz Special Meeting via the CarLotz Special Meeting Website.
Quorum; Abstentions and Broker Non-Votes
A quorum of CarLotz Stockholders is necessary to conduct business at the CarLotz Special Meeting. The presence in person, or by remote communication, or represented by proxy of the holders of CarLotz Common Stock representing a majority of the voting power of the outstanding shares of CarLotz Common Stock entitled to vote at the CarLotz Special Meeting will constitute a quorum. Shares of CarLotz Common Stock present at the CarLotz Special Meeting by virtual attendance via the CarLotz Special Meeting Website or represented by proxy and entitled to vote, including shares for which a CarLotz Stockholder directs an “abstention” from voting, will be counted for purposes of determining a quorum. Shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum unless the CarLotz Stockholder provides their bank, broker or other nominee with voting instructions for at least one of the proposals at the CarLotz Special Meeting. If a quorum is not present, the CarLotz Special Meeting will be adjourned or postponed until the holders of the number of shares of CarLotz Common Stock required to constitute a quorum attend.
Under Nasdaq rules, banks, brokers or other nominees who hold shares in “street name” on behalf of the beneficial owner of such shares have the authority to vote such shares in their discretion on certain “routine” proposals when they have not received voting instructions from the beneficial owners. However, banks, brokers or other nominees are not allowed under Nasdaq rules to exercise their voting discretion with respect to matters that are “non-routine.” This can result in a “broker non-vote,” which occurs on a proposal when (i) a bank, broker or other nominee has discretionary authority to vote on one or more “routine” proposals to be voted on at a meeting of stockholders, but is not permitted to vote on other “non-routine” proposals without instructions from the beneficial owner of the shares, and (ii) the beneficial owner fails to provide the bank, broker or other nominee with voting instructions on a “non-routine” matter. Each of the proposals for consideration at the CarLotz Special Meeting is considered a “non-routine” matter, and banks, brokers or other nominees will not have discretionary authority to vote on any matter before the CarLotz Special Meeting. As a result, CarLotz does not expect any broker non-votes at the CarLotz Special Meeting, and if you hold your shares of CarLotz Common Stock in “street name,” your shares will not be represented and will not be voted on any matters before the CarLotz Special Meeting unless you affirmatively instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instructions provided by your bank, broker or other nominee. It is therefore critical that you cast your vote by instructing your bank, broker or other nominee on how to vote. Brokers will not be able to vote on any of the proposals before the CarLotz Special Meeting unless they have received voting instructions from the beneficial owners.
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Required Votes
The vote required to approve each of the proposals listed below assumes the presence of a quorum at the CarLotz Special Meeting. As described above, CarLotz does not expect there to be any broker non-votes at the CarLotz Special Meeting.
Proposal
Required Vote
Effects of Certain Actions
CarLotz Proposal 1: CarLotz Merger Proposal
Approval requires the affirmative vote of the holders of a majority of the outstanding shares of CarLotz Common Stock entitled to vote at the close of business on the Record Date.
The failure to vote, the failure to instruct your brokerage firm, bank, dealer or other similar organization, trustee or nominee to vote shares held in “street name” on the CarLotz Merger Proposal or an abstention from voting will have the same effect as a vote “AGAINST” the CarLotz Merger Proposal.
CarLotz Proposal 2: CarLotz Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the voting power of the shares of CarLotz Common Stock present, including by remote communication, or represented by proxy at the CarLotz Special Meeting.
Any shares not present or represented by proxy (including due to failure of a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the CarLotz Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the CarLotz Adjournment Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the CarLotz Adjournment Proposal will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal. In addition, if a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for the CarLotz Merger Proposal, but not for the CarLotz Adjournment Proposal, it will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal.
Vote of CarLotz Directors and Executive Officers
As of October 27, 2022, the CarLotz Record Date, CarLotz directors and executive officers and their affiliates, as a group, beneficially owned and were entitled to vote 34,175,673 shares of CarLotz Common Stock, which represented approximately 28.6% of CarLotz Common Stock issued and outstanding on the CarLotz Record Date. Certain directors, executive officers and affiliates of certain directors and executive officers executed supporting agreements in connection with the Merger Agreement, solely in their capacity as CarLotz Stockholders. For more information regarding the CarLotz Support Agreements, see the section entitled “Support Agreements.”
CarLotz currently expects that all CarLotz directors and executive officers, including directors and executive officers not party to a CarLotz Support Agreement, will vote their shares “FOR” the CarLotz Merger Proposal and “FOR” the CarLotz Adjournment Proposal. For more information regarding the security ownership of CarLotz directors and executive officers, see the section entitled “Certain Beneficial Owners of CarLotz Common Stock.” In addition, see the section entitled “Interests of CarLotz Directors and Executive Officers in the Merger” in this joint proxy statement/prospectus and the arrangements described in CarLotz’s Definitive Proxy Statement on Schedule 14A for CarLotz’s 2022 annual meeting of stockholders, which is attached as Annex G to this joint proxy statement/prospectus.
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Methods of Voting
Stockholders of Record
If you are a CarLotz Stockholder of record, you may vote at the CarLotz Special Meeting by proxy over the internet, by mail or by virtually attending and voting at the CarLotz Special Meeting via the CarLotz Special Meeting Website, as described below.
By Internet: To vote via the Internet, go to https://www.virtualshareholdermeeting.com/LOTZ2022SM to complete an electronic proxy card. You will be asked to provide the 16-digit control number from the proxy card you receive. Your vote must be received by 11:59 p.m. Eastern Time on December 6, 2022 to be counted. If you vote via the Internet, you do not need to return a proxy card by mail.
By Mail: To vote by mail using the proxy card (if you requested paper copies of the proxy materials to be mailed to you), you need to complete, date and sign the proxy card and return it promptly by mail in the envelope provided so that it is received no later than December 6, 2022. The persons named in the proxy card will vote the shares you own in accordance with your instructions on the proxy card you mail.
Virtually via the CarLotz Special Meeting Website: To vote at the CarLotz Special Meeting, visit www.virtualshareholdermeeting.com/LOTZ2022SM, where you can virtually attend and vote at the CarLotz Special Meeting. You will be asked to provide the 16-digit control number from the proxy card you receive in order to access the CarLotz Special Meeting Website.
Unless revoked, all duly executed proxies representing shares of CarLotz Common Stock entitled to vote at the CarLotz Special Meeting will be voted at the CarLotz Special Meeting and, where a choice has been specified on the proxy card, will be voted in accordance with such specification. If you submit an executed proxy without providing instructions for any proposal, your shares will be voted “FOR” the CarLotz Merger Proposal and “FOR” the CarLotz Adjournment Proposal.
Beneficial (Street Name) Stockholders
If you hold your shares of CarLotz Common Stock through a bank, broker or other nominee in “street name” instead of as a registered holder, you must follow the voting instructions provided by your bank, broker or other nominee in order to vote your shares. Your voting instructions must be received by your bank, broker or other nominee prior to the deadline set forth in the information from your bank, broker or other nominee on how to submit voting instructions. If you do not provide voting instructions to your bank, broker or other nominee for a proposal, your shares of CarLotz Common Stock will not be voted on that proposal. See the section entitled “—Quorum; Abstentions and Broker Non-Votes” above.
If you hold your shares of CarLotz Common Stock through a bank, broker or other nominee in “street name” (instead of as a registered holder), you must obtain a specific control number from your bank, broker or other nominee in order to virtually attend and vote at the CarLotz Special Meeting via the CarLotz Special Meeting Website. See the section entitled “—Virtually Attending the CarLotz Special Meeting” below.
Virtually Attending the CarLotz Special Meeting
If you wish to virtually attend the CarLotz Special Meeting via the CarLotz Special Meeting Website, you must (i) be a CarLotz Stockholder of record at the close of business on October 27, 2022, the CarLotz Record Date, (ii) hold your shares of CarLotz Common Stock beneficially in the name of a broker, bank or other nominee as of the CarLotz Record Date or (iii) hold a valid proxy for the CarLotz Special Meeting.
To enter the CarLotz Special Meeting Website and virtually attend the CarLotz Special Meeting, you will need the 16-digit control number located on your proxy card. If you hold your shares of CarLotz Common Stock in street name beneficially through a broker, bank or other nominee and you wish to virtually attend the CarLotz Special Meeting via the CarLotz Special Meeting Website, you will need to obtain your specific control number and further instructions from your bank, broker or other nominee. The 16-digit control number is also needed to access the list of CarLotz Stockholders entitled to vote at the CarLotz Special Meeting during the time of the meeting. If you plan to virtually attend and vote at the CarLotz Special Meeting via the CarLotz Special Meeting Website, CarLotz still encourages you to vote in advance by the internet or (if you received a paper copy of the proxy materials) by mail so that your vote will be counted even if you later decide not to virtually attend the
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CarLotz Special Meeting via the CarLotz Special Meeting Website. Voting your proxy by the internet or mail will not limit your right to virtually attend and vote at the CarLotz Special Meeting via the CarLotz Special Meeting Website if you later decide to do so.
Revocability of Proxies
Any CarLotz Stockholder granting a proxy has the right to revoke it at any time before the proxy is voted at the CarLotz Special Meeting. If you are a CarLotz Stockholder of record, you may revoke your proxy by any one of the following actions:
by sending a signed written notice of revocation to CarLotz’s Corporate Secretary, provided such notice is received no later than the close of business on December 6, 2022;
by voting again over the internet as instructed on your proxy card before the closing of the voting facilities at 11:59 p.m., Eastern Time, on December 6, 2022;
by submitting a properly signed and dated proxy card with a later date that is received by CarLotz’s Corporate Secretary no later than the close of business on December 6, 2022; or
by virtually attending the CarLotz Special Meeting via the CarLotz Special Meeting Website and requesting that your proxy be revoked or virtually voting via the CarLotz Special Meeting Website as described above.
Only your last submitted proxy will be considered.
Execution or revocation of a proxy will not in any way affect a CarLotz Stockholder’s right to virtually attend and vote at the CarLotz Special Meeting via the CarLotz Special Meeting Website.
Written notices of revocation and other communications relating to the revocation of proxies should be addressed to:
CarLotz, Inc.
Attn: Corporate Secretary
3301 W. Moore St.
Richmond, Virginia 23230
If your shares of CarLotz Common Stock are held in “street name” and you previously provided voting instructions to your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee to revoke or change your voting instructions. You may also change your vote by obtaining your specific control number and instructions from your bank, broker or other nominee and voting your shares at the CarLotz Special Meeting via the CarLotz Special Meeting Website.
Proxy Solicitation Costs
CarLotz is soliciting proxies on behalf of the CarLotz Board. CarLotz will bear the entire cost of soliciting proxies from CarLotz Stockholders. Proxies may be solicited on behalf of CarLotz or by CarLotz directors, officers and other employees in person or by mail, telephone, facsimile, messenger, the internet or other means of communication, including electronic communication. CarLotz directors, officers and employees will not be paid any additional amounts for their services or solicitation in this regard.
CarLotz will request that banks, brokers and other nominee record holders send proxies and proxy material to the beneficial owners of CarLotz Common Stock and secure their voting instructions, if necessary. CarLotz may be required to reimburse those banks, brokers and other nominees on request for their reasonable expenses in taking those actions.
CarLotz has also retained Morrow Sodali LLC to assist in soliciting proxies and in communicating with CarLotz Stockholders and will pay Morrow Sodali a fee of approximately $25,000, plus a per stockholder fee to solicit record and beneficial owners of CarLotz Common Stock and reimbursement of any additional disbursements incurred by Morrow Sodali on CarLotz’s behalf.
Householding
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single
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proxy statement or a single notice addressed to those stockholders. This process, which is commonly referred to as “householding,” provides cost savings for companies. As a result, CarLotz Stockholders with the same address and last name may receive only one copy of this joint proxy statement/prospectus. Registered CarLotz Stockholders (those who hold shares of CarLotz Common Stock directly in their name with CarLotz’s transfer agent) may opt out of householding and receive a separate joint proxy statement/prospectus or other proxy materials by sending a written request to CarLotz at the address below.
Some brokers household proxy materials, delivering a single proxy statement or notice to multiple CarLotz Stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker.
CarLotz will promptly deliver a copy of this joint proxy statement/prospectus to any CarLotz Stockholder who only received one copy of these materials due to householding upon request in writing to: CarLotz, Inc., Investor Relations, 3301 W. Moore St., Richmond, Virginia 23230 or through the “Contact IR” on the CarLotz investor relations website at https://investors.carlotz.com/ir-resources/investor-contact.
Adjournments
If a quorum is present or represented at the CarLotz Special Meeting but there are insufficient votes at the time of the CarLotz Special Meeting to approve the CarLotz Merger Proposal, then CarLotz Stockholders may be asked to vote on the CarLotz Adjournment Proposal. If a quorum is not present or represented, then either the chairperson of the CarLotz Special Meeting or the holders of a majority of the voting power of the shares of CarLotz Common Stock entitled to vote at the CarLotz Special Meeting, present in person, or by remote communication, if applicable, or represented by proxy, may adjourn the Special Meeting to another place (if any), date or time, without notice, if the date, time, place, if any, and the means of remote communications, if any, by which stockholder and proxy holders may be deemed to be present in person, or by remote communication, if applicable, and vote at such adjourned meeting are announced at the Special Meeting, unless the adjournment is for more than 30 days or if a new record date is fixed for the adjourned meeting. The chairperson of the CarLotz Special Meeting may also adjourn the meeting, even if a quorum is present.
At any subsequent reconvening of the CarLotz Special Meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting, and all proxies will be voted in the same manner as they would have been voted at the original convening of the CarLotz Special Meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
Assistance
If you need assistance voting or completing your proxy card, or if you have questions regarding the CarLotz Special Meeting, please contact Morrow Sodali, CarLotz’s proxy solicitor for the CarLotz Special Meeting, at:
Morrow Sodali LLC
333 Ludlow Street, 5th Floor, South Tower
Stamford, CT 06902
Tel: (800) 662-5200 (toll-free) or
(203) 658-9400 (banks and brokers can call collect)
Email: LOTZ@investor.morrowsodali.com
CARLOTZ STOCKHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE MERGER AGREEMENT AND THE PROPOSED TRANSACTIONS (INCLUDING THE MERGER). IN PARTICULAR, CARLOTZ STOCKHOLDERS ARE DIRECTED TO THE MERGER AGREEMENT, WHICH IS ATTACHED AS ANNEX A HERETO.
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CARLOTZ PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
This joint proxy statement/prospectus is being furnished to you as a CarLotz Stockholder in connection with the solicitation of proxies by the CarLotz Board for use at the CarLotz Special Meeting. At the CarLotz Special Meeting, CarLotz is asking CarLotz Stockholders to consider and vote upon a proposal to adopt the Merger Agreement, pursuant to which Merger Sub will merge with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift. The Merger Agreement provides that, at the Effective Time, each issued and outstanding share of CarLotz Common Stock (other than CarLotz Common Stock owned or held in treasury by CarLotz, which will be cancelled for no consideration) will be converted into the right to receive a number of shares of Shift Common Stock as determined by the Exchange Ratio, rounded up to the nearest whole share for any fractional share of Shift Common Stock that would be issued to any person after aggregating all fractional shares that would otherwise be received by such person resulting from the calculation. The “exchange ratio” is equal to 0.692158; provided, however, that as of immediately prior to the Effective Time the Exchange Ratio will be adjusted to a ratio equal to (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (1) any CarLotz Earnout Shares, (2) any CarLotz Earnout Acquiror RSUs, (3) any CarLotz Warrants, (4) any options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio, and (5) any performance-based restricted stock unit award that will be terminated as of the Effective Time, in each case as described in more detail in the Merger Agreement), subject to the terms and conditions set forth in the Merger Agreement.
The CarLotz Board, after careful consideration, unanimously determined that the Merger is fair to and in the best interests of CarLotz and its stockholders, and approved and declared advisable the Merger Agreement and the Proposed Transactions, including the Merger.
The CarLotz Board accordingly unanimously recommends that CarLotz Stockholders vote “FOR” the CarLotz Merger Proposal.
The Merger and a summary of the terms of the Merger Agreement are described in more detail under “The Merger” and “The Merger Agreement,” and CarLotz Stockholders are encouraged to read the full text of the Merger Agreement, which is attached as Annex A hereto.
Assuming a quorum is present at the CarLotz Special Meeting, approval of the CarLotz Merger Proposal requires the affirmative vote of a majority of the outstanding shares of CarLotz Common Stock entitled to vote at the close of business on the CarLotz Record Date. If a CarLotz Stockholder fails to vote, fails to instruct its bank, broker or nominee to vote with respect to the CarLotz Merger Proposal or abstains from voting, it will have the same effect as a vote “AGAINST” the CarLotz Merger Proposal.
It is a condition to the completion of the Merger that CarLotz Stockholders approve the CarLotz Merger Proposal.
THE CARLOTZ BOARD UNANIMOUSLY RECOMMENDS THAT CARLOTZ STOCKHOLDERS VOTE “FOR” THE CARLOTZ MERGER PROPOSAL
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CARLOTZ PROPOSAL 2: ADJOURNMENT OF THE CARLOTZ SPECIAL MEETING
The CarLotz Special Meeting may be adjourned to another time and place if necessary or appropriate in order to permit the solicitation of additional proxies if there are insufficient votes to approve the CarLotz Merger Proposal.
CarLotz is asking CarLotz Stockholders to authorize the holder of any proxy solicited by the CarLotz Board to vote in favor of any adjournment of the CarLotz Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the CarLotz Merger Proposal.
Approval of the CarLotz Adjournment Proposal is not a condition to the obligation of either Shift or CarLotz to complete the Merger.
The CarLotz Board unanimously recommends that CarLotz Stockholders approve the proposal to adjourn the CarLotz Special Meeting, if necessary or appropriate.
Assuming a quorum is present at the CarLotz Special Meeting, approval of the CarLotz Adjournment Proposal requires the affirmative vote of a majority of the voting power of the CarLotz Common Stock present, including by remote communication, or represented by proxy at the meeting and entitled to vote thereat. Any shares not present or represented by proxy (including due to the failure of a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the CarLotz Special Meeting to such bank, broker or other nominee) will have no effect on the outcome of the CarLotz Adjournment Proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the CarLotz Adjournment Proposal will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal. In addition, if a CarLotz Stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the CarLotz Adjournment Proposal, it will have the same effect as a vote “AGAINST” the CarLotz Adjournment Proposal.
THE CARLOTZ BOARD UNANIMOUSLY RECOMMENDS THAT CARLOTZ STOCKHOLDERS VOTE “FOR” THE CARLOTZ ADJOURNMENT PROPOSAL
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THE MERGER
The following is a description of material aspects of the Merger. While Shift and CarLotz believe that the following description covers the material terms of the Merger, the description may not contain all of the information that is important to you. You are encouraged to read carefully this entire joint proxy statement/prospectus, including the text of the Merger Agreement attached as Annex A hereto, for a more complete understanding of the Merger. In addition, important business and financial information about each of Shift and CarLotz is contained or incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”
General
Shift, Merger Sub and CarLotz have entered into the Merger Agreement, which provides that Merger Sub will merge with and into CarLotz, with CarLotz continuing as the surviving corporation and as a wholly owned subsidiary of Shift (the “Merger”). As a result of the Merger, the separate existence of Merger Sub will cease and CarLotz will cease to be an independent, publicly traded company.
Merger Consideration
If the Merger is completed, each issued and outstanding share of CarLotz Common Stock (other than CarLotz Common Stock owned or held in treasury by CarLotz, which will be cancelled for no consideration) will be converted into the right to receive a number of shares of Shift Common Stock as determined by the Exchange Ratio, rounded up to the nearest whole share for any fractional share of Shift Common Stock that would be issued to any CarLotz Stockholder after aggregating all fractional shares of Shift Common Stock that would otherwise be received by such CarLotz Stockholder resulting from the calculation. The “Exchange Ratio” is equal to 0.692158; provided, however, that, as of immediately prior to the Effective Time, the Exchange Ratio will be adjusted to a ratio equal to (i) the product of (A) the number of issued and outstanding shares of Shift Common Stock immediately prior to the Effective Time and (B) 99.99%, divided by (ii) the number of shares of CarLotz Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted and as-converted to CarLotz Common Stock basis (but excluding (1) any CarLotz Earnout Shares, (2) any CarLotz Earnout Acquiror RSUs, (3) any CarLotz Warrants, (4) any options to purchase CarLotz Common Stock that have an exercise price equal to or higher than the implied price per share of CarLotz Common Stock, determined at the Effective Time based on the Exchange Ratio, and (5) any performance-based restricted stock unit awards that will be terminated as of the Effective Time). Shift Stockholders will continue to own their existing shares of Shift Common Stock following the Merger.
As noted above, the number of shares of Shift Common Stock that CarLotz Stockholders will receive as Merger Consideration is not fixed and may change. Events that may impact the number of shares of Shift Common Stock issued in connection with the Merger include:
the issuance of new shares of Shift Common Stock prior to the Effective Time, including the settlement of derivative securities convertible into or exercisable for shares of Shift Common Stock;
the issuance of new shares of CarLotz Common Stock prior to the Effective Time, excluding the settlement of derivative securities convertible or exercisable for shares of CarLotz Common Stock; and
the issuance of derivative securities convertible into or exercisable for shares of CarLotz Common Stock prior to the Effective Time.
You should obtain current market quotations for Shift Common Stock and CarLotz Common Stock before deciding how to vote on the Shift Share Issuance Proposal, the Shift Reverse Stock Split Proposal and the CarLotz Merger Proposal, as applicable. Shift Common Stock is traded on Nasdaq under the symbol “SFT” and CarLotz Common Stock is traded on the Nasdaq Global Market under the symbol “LOTZ.” In addition, CarLotz Warrants are traded on the Nasdaq Global Market under the symbol “LOTZW.” Shares of Shift Common Stock will continue trading on Nasdaq under the symbol “SFT” after Closing. For more information regarding the Merger Consideration to be received by CarLotz Stockholders if the Merger is completed, see the sections entitled “The Merger Agreement—Merger Consideration” and “The Merger Agreement—Treatment of CarLotz Equity Awards; CarLotz Earnout Shares; CarLotz Warrants.”
On June 7, 2022, CarLotz received a deficiency letter from the Staff of the Nasdaq Stock Market notifying CarLotz that, for the last 30 consecutive business days, the bid price for CarLotz Common Stock had closed
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below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market. On October 4, 2022, Shift received a deficiency letter from the Staff of the Nasdaq Stock Market notifying Shift that, for the last 30 consecutive business days, the bid price for Shift Common Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Capital Market. See the section entitled “Questions and Answers—What happens if the Merger is not completed?
Background of the Merger
As part of CarLotz’s ongoing strategic planning process, the CarLotz Board and the CarLotz management team regularly review and assess CarLotz’s businesses and operations, and regularly review and assess various potential strategic alternatives available to enhance value for CarLotz Stockholders.
As part of Shift’s ongoing strategic planning process, the Shift Board and the Shift management team regularly review and assess Shift’s businesses and operations, and regularly review and assess various potential strategic alternatives available to enhance value for Shift Stockholders.
CarLotz’s co-founder and then-Chief Executive Officer, Mr. Michael Bor, and Mr. George Arison, co-founder and then-Chief Executive Officer of Shift, had informal discussions over the years concerning a potential business combination of the two companies. During the latter half of 2021, certain preliminary and informal discussions were also held between Messrs. Bor and Arison with their respective management teams regarding a potential business combination. To facilitate such discussions and the exchange of confidential information, the parties entered into a mutual confidentiality agreement on September 20, 2021. In the confidentiality agreement, both parties agreed to customary standstill provisions with respect to the other party’s publicly listed securities. The discussions involved representatives of William Blair & Company, LLC (“William Blair”) as financial advisor to CarLotz and J.V.B. Financial Group, LLC, acting through its Cohen & Company Capital Markets division (“CCM”), as financial advisor to Shift. The discussions focused on the potential synergies of a business combination between CarLotz and Shift. Subsequently, the discussions between CarLotz and Shift concerning a potential business combination were abandoned in December 2021 due to differing views on strategic focus, business models and relative values of CarLotz and Shift at that time. At that time under the previous CarLotz management team, Carlotz had a focus on growth in physical locations. Additionally, Carlotz had not yet developed its restructuring plan that was implemented in early summer 2022, which included slowing its geographic expansion plans. As a result, there was a lack of alignment between the parties necessary to finalize a valuation or take the next steps towards a proposed transaction.
On February 17, 2022, the Shift Board held a meeting via videoconference. Representatives of the Shift management team and the board observer designated by Insurance Acquisition Sponsor, LLC and Dioptra Advisors, LLC, pursuant to a letter agreement between Shift and such parties, also attended the meeting. At the meeting, the Shift Board discussed potential capital raising initiatives and potential strategic alternatives for Shift, including a potential strategic business combination transaction between Shift and a third party. Three investment banks, including Centerview, separately presented to the Shift Board to discuss their respective qualifications to potentially serve as a financial advisor to the Shift Board in connection with the evaluation of potential strategic transactions, including but not limited to a potential strategic business combination transaction between Shift and a third party.
On March 8, 2022 the Shift Board held a meeting via videoconference. Representatives from the Shift management team and Jenner & Block LLP, legal advisor to Shift (“Jenner & Block”), also attended the meeting. At this meeting, the Shift Board discussed the proposed terms of the potential engagement of Centerview by the Shift Board as its financial advisor with respect to the evaluation of potential strategic transactions, including but not limited to a potential business combination with a third party, and the scope of Centerview’s anticipated financial advisory services. On March 16, 2022, Mr. Arison delivered a draft engagement letter with Centerview to the Shift Board for its review and comment.
On March 15, 2022, CarLotz announced the appointment of Mr. Lev Peker to the role of Chief Executive Officer and member of the CarLotz Board, effective as of April 18, 2022. On June 21, 2022, as part of a strategic review of its business, CarLotz announced the closure of 11 hubs (50% of its stores) and an estimated 25% to 30% reduction in its workforce. CarLotz continued to review its competitive position and evaluate various strategic alternatives, including acquisitions and strategic initiatives.
On March 22, 2022, based on, among other things, Centerview’s reputation and experience, the Shift Board resolved by unanimous written consent to engage Centerview as an independent financial advisor in connection
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with its evaluation of a potential strategic business combination transaction involving Shift. Also on March 22, 2022, Shift entered into an engagement letter with Centerview, pursuant to which Centerview agreed to, among other things, provide certain financial advisory services in connection with a potential strategic business combination transaction involving Shift and, if requested by Shift in connection with such transaction, provide an opinion addressed to the Shift Board or a committee thereof with respect to the fairness, from a financial point of view, of the consideration to be paid in such transaction.
Shift has had a long history of working with Dan Nash, a Senior Managing Director and Co-Founder at CCM. Mr. Nash has worked with the Shift Board and the Shift management team on several occasions during the course of Shift’s history. Given the history and Mr. Nash’s unique industry expertise, the Shift Board and the Shift management team desired to engage Mr. Nash and CCM in an advisory capacity for potential strategic transactions in 2022. CCM was engaged by Fair Technologies on the sale of Fair’s dealer listing marketplace assets, which announced a sale to Shift on March 15, 2022. After the announcement, and with the approval of Fair Technologies, Shift began discussions regarding an engagement with CCM. On March 21, 2022, Mr. Arison proposed by email to the Shift Board that Shift formally engage CCM.
On March 30, 2022, Mr. Arison notified the Shift Board that Shift management had aligned on terms of an engagement with CCM as a non-exclusive financial advisor with respect to Shift’s review of potential strategic transactions.
On April 7, 2022, Shift entered into an engagement letter with CCM, pursuant to which CCM agreed to, among other things, assist in evaluating proposals from potential investors and acquirers, and provide a view on both the structuring of a sell-side transaction and negotiating the financial terms of a sell-side transaction by the lead advisor.
From April 2022 to July 2022, Shift continued to evaluate potential capital raising initiatives and potential strategic transactions, which included ongoing monitoring and discussion of CarLotz’s operations and valuation. During this period, Shift conducted an auction process in which it solicited non-binding offers from third parties to acquire Shift. Shift entered into mutual nondisclosure agreements with nine counterparties, each of which contained customary confidentiality provisions and none of which contained standstill provisions with respect to either party’s securities. Shift management, along with Centerview and CCM as financial advisors to Shift, held numerous management meetings and diligence sessions with such third parties, and certain of such third parties delivered non-binding indications of interest to enter into a strategic transaction with Shift. Upon reviewing such indications of interest and after further discussions with the associated third parties, by the end of June 2022 the Shift Board and Shift management determined to cease pursuing the proposed transactions and to continue evaluating other strategic alternatives for Shift.
In late June and early July of 2022, Shift’s management team developed a business plan that intended to accelerate Shift’s path to profitability and was estimated to require a lower total capital expenditure to achieve positive cash flow, in each case as compared to prior business plans. This new business plan outlined a strategy where Shift would eliminate the high-cost test drive offering from the platform, focusing solely on the lower-cost online sales channel. Shift would also consolidate its geographic footprint to a few locations in its most mature markets on the west coast. Finally, the new business plan would result in a reduction in Shift’s workforce.
On June 16, 2022, representatives of a former financial advisor of CarLotz had a telephonic meeting with certain representatives of Shift’s financial advisors to, among other things, explore the idea of introducing the chief executive officers of both companies to each other for further discussions around a potential business combination between CarLotz and Shift.
On July 7, 2022, a representative of CCM, at the direction of Mr. Arison, contacted a representative of a former financial advisor to CarLotz to have further discussions about a potential business combination with CarLotz. On this date, Mr. Arison also discussed with representatives from Centerview by email and telephone the possibility of a potential business combination with CarLotz. Mr. Arison and Shift management considered recommencing negotiations as a result of continuing macroeconomic developments, developments in the used auto industry, the financial results and future prospects of Shift and CarLotz, and CarLotz’s publicly disclosed restructuring plan. In addition, Shift management considered the complementary geographic footprints of the two companies and the potential ability for Shift to scale its dealer marketplace on the east coast, CarLotz’s potential ability to leverage Shift’s inventory acquisition engine to source inventory, the cost synergies that could be realized, primarily due
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to reduced duplicative overhead, the potential to reduce volatility in operating results due to a larger revenue base, more diverse buyer and seller channels, and increased geographic footprint, the potential to have greater financial flexibility from combining each company’s cash balance, and the potential to create a strong destination for both online and in-person car purchasing.
On July 8, 2022, representatives of a former advisor to CarLotz contacted Mr. Peker, conveying the interest of Shift to restart negotiations regarding a potential business combination between CarLotz and Shift. On July 9, 2022, Mr. Peker had a telephone call with Mr. Arison. On that call, Messrs. Peker and Arison agreed that a combination of CarLotz and Shift could potentially be beneficial to their respective stockholders from an operational, strategic and synergistic perspective and agreed to explore the possibility further. As part of the conversation between Messrs. Peker and Arison, Mr. Arison emphasized that Shift was actively considering other strategic alternatives, which, for strategic and operational reasons, it sought to conclude before its next quarterly earnings release, and the importance to Shift of working expeditiously. Following the July 9, 2022 call, Mr. Peker updated the Chairman and other members of the CarLotz Board on his discussions with Mr. Arison.
On July 11, 2022, representatives of the CarLotz and Shift management teams discussed preliminary financial and operational due diligence in a joint working session. Information provided by the respective CarLotz and Shift management teams to the other party was preliminary and subject to change and solely for informational purposes. Later on July 11, 2022, representatives of the CarLotz and Shift management teams further discussed such preliminary financial information and the status of CarLotz’s negotiations around the leases for their recently closed locations, and Shift requested further detailed financial information on location-specific performance. On July 12, 2022, Mr. Peker and Mr. Ozan Kaya, President of CarLotz, contacted representatives of William Blair to discuss the assistance William Blair provided to CarLotz in connection with the prior talks between CarLotz and Shift during the latter half of 2021.
On July 13, 2022, the Shift Board held a meeting via videoconference. Representatives of Shift management, Centerview and CCM also attended the meeting. At the meeting, the Shift Board discussed changes to its potential new business model and updates to potential strategic transactions, including a potential merger transaction with CarLotz. Representatives of Shift management gave a summary of recent discussions with CarLotz, including recent due diligence discussions. The Shift Board discussed in detail a potential merger transaction with CarLotz, including the material terms thereof, and resolved to send to CarLotz an initial non-binding indication of interest with respect to a potential merger transaction with CarLotz and authorized Shift management to negotiate the terms of such potential merger transaction consistent with the non-binding indication of interest. Also on July 13, 2022, representatives of CarLotz management delivered to representatives of Shift certain additional preliminary financial information as well as summaries of CarLotz’s workforce and leases, noting that these materials were preliminary, subject to change and solely for information purposes.
On July 14, 2022, Messrs. Peker and Kaya held an update meeting with Mr. Arison and other members of the Shift management team to further discuss a potential business combination; the meeting was also attended by representatives of CarLotz’s former financial advisor.
On July 15, 2022, representatives of Shift management, Jenner & Block LLP, Centerview and CCM finalized a non-binding indication of interest with respect to a potential business combination with CarLotz.
On July 16, 2022, Shift submitted to CarLotz a non-binding indication of interest (the “IOI”) for a stock-for-stock merger between CarLotz and Shift, proposing a fixed exchange ratio of 0.5093 of a share of Shift Common Stock for each share of CarLotz Common Stock, which represented pro forma ownership for CarLotz Stockholders in the Combined Company of approximately 38% on a fully diluted basis. At the time, this proposal represented an implied premium for CarLotz Stockholders of approximately 30%. The terms of the IOI further included a proposal to incorporate one member from the CarLotz Board into the Combined Company’s board of directors. The IOI contained a number of conditions, including satisfactory completion of due diligence and that CarLotz would abandon plans for a proposed strategic acquisition it was negotiating at the time. The IOI further indicated that the potential merger would be subject to the approval of the CarLotz Board and CarLotz Stockholders, and indicated Shift’s desire and ability to proceed expeditiously.
On July 18, 2022, the CarLotz Board held a special meeting via video conference to discuss the offer by Shift to combine with CarLotz in a stock-for-stock merger. Also in attendance were certain members of CarLotz management and a representative of Freshfields Bruckhaus Deringer US LLP, outside counsel to CarLotz (“Freshfields”). Prior to the meeting, Mr. Peker had informed the CarLotz Board of Shift’s offer and had also
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shared with the CarLotz Board the IOI he had received from Shift. At the meeting, Mr. Peker discussed with the CarLotz Board the key terms of the proposed transaction under the terms of the IOI, including valuation and the post-combination board structure of the Combined Company. Mr. Peker also discussed with the CarLotz Board the discussions he had with Shift during the period before Shift submitted the IOI. Mr. Peker then provided an overview to the CarLotz Board of Shift’s current business conditions and what he understood to be Shift’s rationale for the proposed merger and shared with the CarLotz Board his preliminary view of the merits and risks of the proposed transaction for CarLotz and its stockholders. Upon request of the CarLotz Board, Mr. Peker also provided an update to the CarLotz Board on certain developments in CarLotz’s business, including discussions with CarLotz’s floorplan provider concerning the future availability of financing thereunder, the status of a proposed strategic acquisition CarLotz was negotiating at the time and CarLotz’s recent business performance. After further discussion, the CarLotz Board agreed that it was in the best interest of CarLotz and its stockholders for CarLotz to continue to engage with Shift to explore a potential merger but emphasized that, regardless of Shift’s timing preferences, all necessary financial analysis and due diligence would need to be completed before any agreement could be finalized.
Also at the July 18, 2022 CarLotz Board meeting, the CarLotz Board formed a CarLotz Transaction Committee (the “CarLotz Transaction Committee”) to which it delegated the authority to oversee, review and evaluate and negotiate any potential transaction with Shift. The CarLotz Board instructed the CarLotz Transaction Committee to regularly update the CarLotz Board on all relevant information concerning the proposed transaction. The CarLotz Transaction Committee was not authorized, without approval of the full CarLotz Board, to approve any definitive documentation or agreements relating to the proposed transaction with Shift. The CarLotz Board appointed the following directors to serve as members of the CarLotz Transaction Committee: Luis Solorzano; Steven G. Carrel; Nanxi Liu; and David R. Mitchell.
Later on July 18, 2022, Shift submitted to CarLotz a draft standalone financial forecast of Shift for informational purposes, as well as a due diligence request list. Mr. Arison informed Mr. Peker that the Shift management team had begun preparation of a joint financial model for the Combined Company, proposed that both parties retain financial advisors to assist the companies on the Combined Company model and requested feedback from CarLotz on the IOI. With respect to feedback on the IOI, Mr. Peker informed Mr. Arison that CarLotz was seeking representation on the Combined Company’s board of directors that would be commensurate with the CarLotz Stockholders’ ownership percentage in the Combined Company, which could only be determined after completion of its financial analysis, due diligence and CarLotz Board discussions.
On July 19, 2022, CarLotz and Shift and representatives of their advisors, Freshfields for CarLotz and Centerview, CCM and Jenner & Block for Shift, as well as CarLotz’s former financial advisor, who had not been formally retained by CarLotz in connection with the proposed transaction, held an initial meeting to discuss the proposed merger. On July 20, 2022, representatives of Freshfields and Jenner & Block held a preliminary outside counsel meeting to discuss the proposed transaction, some initial questions on the treatment of equity, reciprocal due diligence and related matters.
On July 21, 2022, the CarLotz Transaction Committee held a meeting via video conference to discuss the proposed transaction with Shift. Also in attendance were members of CarLotz management and representatives of Freshfields. Mr. Peker updated the CarLotz Transaction Committee on the proposed transaction and his preliminary views, based on the information received to date, on the pros and cons of the proposed transaction with Shift. The CarLotz Transaction Committee reviewed and asked questions concerning management’s preliminary standalone financial (including cash) forecasts, which remained ongoing and were subject to change, and instructed management to provide additional financial analysis and more detail on potential synergies to be achieved in the proposed transaction. Mr. Peker also discussed CarLotz’s anticipated future financing needs in 2023 and its potential delisting from Nasdaq. Mr. Peker further outlined Shift’s proposed timing for the proposed transaction. The CarLotz Transaction Committee discussed the need to ensure that all due diligence and financial analysis was complete before the CarLotz Board could reach a determination regarding the advisability of the proposed transaction. The CarLotz Transaction Committee also discussed the engagement of a financial advisor in connection with the proposed transaction. Freshfields discussed the CarLotz Transaction Committee’s fiduciary duties under Delaware law in the context of engaging financial advisors and provided legal advice to the CarLotz Transaction Committee concerning the same.
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Also on July 21, 2022, Mr. Arison sent to certain members of Shift management and representatives of Centerview and CCM an update about the status of negotiations of the proposed transaction, including with respect to valuation, management and corporate governance of the Combined Company, and a potential timeline for the proposed transaction.
In addition, on July 21, 2022, representatives of Centerview held a meeting with representatives of CarLotz’s former financial advisor to review preliminary standalone financial forecasts from Shift management and CarLotz management relating to Shift and CarLotz, respectively, and the respective assumptions underlying such preliminary standalone financial forecasts, which remained subject to change.
On July 21 and July 24, 2022, Mr. Arison sent to the Shift Board updates about the status of negotiations of the proposed transaction, including with respect to valuation, succession planning and management of the Combined Company.
On July 22, 2022, representatives of CarLotz, Shift, Freshfields, Jenner & Block, Centerview, CCM, Deloitte Tax LLP and Deloitte & Touche LLP, in its capacity as professional advisor to Shift, participated in a due diligence session to discuss the status of the due diligence data rooms, the due diligence materials to be provided by each side, a timeline for completion of due diligence and further process around the due diligence to be conducted by both parties. Also on July 22, 2022, the Shift Board held a meeting via videoconference. Representatives of Shift management also attended the meeting. At the meeting, the Shift Board discussed in detail the status of negotiations with CarLotz and progress of due diligence with respect to CarLotz.
On July 23, 2022, representatives of Centerview and William Blair held a meeting to discuss the state of the process, outstanding due diligence and information received as at that date.
On July 24, 2022, the CarLotz Transaction Committee held a meeting via video conference, which was also attended by certain members of the CarLotz management team and representatives of Freshfields. The CarLotz Transaction Committee continued to discuss the engagement of a financial advisor to assist CarLotz in its evaluation of the proposed transaction. The committee then discussed the merits of William Blair as potential financial advisor to CarLotz based on a variety of considerations, including William Blair’s expertise, qualifications, knowledge of the relevant sector, familiarity with Shift’s and CarLotz’s respective businesses, prior work for CarLotz, including with respect to the preliminary discussions with Shift held during the latter half of 2021, prior work for Shift of which they were aware, any potential conflicts of interest (or lack thereof) and proposed fees. Representatives of Freshfields discussed the CarLotz Transaction Committee’s and the CarLotz Board’s fiduciary duties under Delaware law in the context of considering the offer received from Shift and the appointment of financial advisors and provided legal advice concerning the same. Prior to the meeting, the CarLotz management team had shared with the William Blair team certain draft standalone financial forecasts, which it noted were preliminary, subject to change and solely for informational purposes. Following the discussion of the background and qualifications of William Blair to serve as financial advisor, representatives of William Blair joined the meeting via video conference and presented to the CarLotz Transaction Committee certain preliminary valuation considerations for a potential merger between CarLotz and Shift and also discussed with the CarLotz Transaction Committee various strategic alternatives to a merger with Shift for consideration, including continuing to operate as a standalone company, capital raising initiatives, strategic acquisitions and a sale of the company to a third party. After William Blair’s presentation to the CarLotz Transaction Committee, representatives of William Blair left the meeting, and after further discussion the CarLotz Transaction Committee authorized CarLotz management to engage William Blair as CarLotz’s financial advisor in connection with the proposed transaction, subject to the negotiation and execution of a satisfactory engagement letter. An engagement letter was entered into between William Blair and CarLotz on July 26, 2022.
The CarLotz Transaction Committee held an additional meeting via video conference on July 25, 2022, which was also attended by certain members of the CarLotz management team and representatives of William Blair and Freshfields. During the meeting, CarLotz management discussed with the CarLotz Transaction Committee management’s preliminary view of management’s draft standalone financial forecast, which Mr. Peker emphasized was preliminary in nature and subject to change. The preliminary standalone financial forecast included draft estimates of future expenses to be incurred by CarLotz as it implemented certain strategic initiatives, its current and estimated future cash position, certain strategic alternatives being considered by CarLotz and preliminary views on the expected cash position of the Combined Company, including certain assumptions underlying such estimates, which management noted were likewise preliminary in nature and subject
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to change. The CarLotz Transaction Committee asked management numerous questions regarding its draft standalone financial forecast and its underlying assumptions and, following further discussion, instructed management and William Blair to continue developing and refining their analysis of the draft CarLotz standalone financial forecast, synergies that could potentially be achieved as a result of the proposed transaction and the expected cash needs of the Combined Company. The CarLotz Transaction Committee also received an update on the status of due diligence from CarLotz’s advisors.
On July 26, 2022, representatives of Jenner & Block sent representatives of Freshfields a draft of the proposed merger agreement that reflected, among other things, (1) non-reciprocal representations and warranties and interim operating covenants, (2) reciprocal restrictions on each party’s solicitation of other proposals with significant procedural hurdles required for each party to determine that an offer from a third party constituted a superior proposal to the proposed merger, (3) a reciprocal termination fee of 4% of CarLotz’s equity value payable by either CarLotz or Shift in the event the proposed merger agreement was terminated in certain circumstances, (4) a condition for Shift’s obligation to consummate the proposed merger that CarLotz’s net assets at Closing be above a certain unspecified minimum level, (5) that certain unspecified significant CarLotz Stockholders would be subject to lock-up restrictions on selling their shares of Shift Common Stock to be received in the Merger for an unspecified period of time and (6) no offer for governance rights or CarLotz’s representation on the Combined Company’s board of directors.
Following July 26, 2022 until the date of the Merger Agreement, the CarLotz management team and the Shift management team engaged with each other on a frequent basis regarding due diligence conducted on each of Shift and CarLotz, as applicable, and various operational matters. These interactions included daily update calls. The CarLotz management team also shared with the Shift management team certain draft standalone financial forecasts, which it noted were preliminary, subject to change and solely for informational purposes.
On July 27, 2022, members of the CarLotz Transaction Committee and certain members of the CarLotz management team met via video conference with certain members of the Shift management team, with representatives of William Blair and Freshfields participating in the meeting. The purpose of the discussion was for members of the Shift management team to provide an overview of the management team, Shift’s business (including locations, inventory, technology and employees), Shift’s financial results and forecasts, their standalone strategy for Shift and their plans for the Combined Company, including illustrative synergies for CarLotz and Shift potentially to be achieved as a result of the proposed transaction. Shift noted that its presentation was for informational purposes only and the data and analysis it presented was preliminary in nature and subject to change. Following the presentation, Mr. Arison sent to the Shift Board an update on the presentation and the status of discussions with respect to the proposed transaction.
Later on July 27, 2022, the CarLotz Transaction Committee held a meeting via video conference, which was also attended by certain members of CarLotz management and representatives of William Blair and Freshfields. The purpose of the meeting was to discuss the presentation by members of the Shift management team and to continue their ongoing analysis of the proposed transaction. A representative of William Blair informed the CarLotz Transaction Committee that William Blair was continuing to work with CarLotz management on the preparation of the standalone model valuation of CarLotz and the Combined Company model valuation, which work was ongoing. Mr. Peker informed the CarLotz Transaction Committee that management continued to refine its preliminary standalone financial forecast for CarLotz, including management’s underlying assumptions. The CarLotz Transaction Committee then discussed the presentation by members of the Shift management team, including Shift’s business model, Shift’s technology, Shift’s financial results and preliminary forecasts and Shift’s plans for the Combined Company. The CarLotz Transaction Committee further discussed the Combined Company’s management team, as well as the timing of CarLotz’s feedback to Shift and the opening of the CarLotz data room. Mr. Peker then gave an update on his discussions with the Shift management team regarding a proposed in-person meeting of certain members of the CarLotz and Shift management teams. The CarLotz Transaction Committee also received an update on the status of due diligence from CarLotz’s advisors.
On July 28, 2022, the CarLotz Transaction Committee held a meeting via video conference, which was also attended by certain members of the CarLotz management team and representatives of William Blair and Freshfields. In the meeting, William Blair’s representatives presented updated draft valuation materials to the CarLotz Transaction Committee, which they emphasized remained preliminary in nature and subject to change. The CarLotz Transaction Committee posed numerous questions to CarLotz’s management team regarding the preliminary standalone financial forecast, which the management team answered. The CarLotz Transaction
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Committee reviewed certain considerations with respect to the proposed transaction, including (1) the execution risk of the standalone plan versus the Combined Company plan, (2) the ability to raise capital in 2023 and the potential dilution impact therefrom, (3) the potential of a merger creating a more diversified company with larger scale and better research analyst coverage and (4) the Combined Company potentially not having to access additional capital beyond its floorplan financing. The CarLotz Transaction Committee then discussed William Blair’s presentation. Based on these discussions, and while acknowledging that the information contained in William Blair’s presentation was preliminary in nature and remained subject to change, the CarLotz Transaction Committee instructed William Blair to communicate to Centerview, in its capacity as financial advisor to Shift, a revised transaction proposal with an exchange ratio of 0.9 of a share of Shift Common Stock for each share of CarLotz Common Stock. In addition, the CarLotz Transaction Committee received an update on the status of due diligence from CarLotz’s advisors. It was determined at this meeting that, moving forward, the full CarLotz Board would participate in all future deliberations relating to the proposed transaction in light of Shift’s proposed timing and the need to provide all CarLotz board members with sufficient time to obtain and review information, ask questions of CarLotz’s advisors and engage in discussions with the CarLotz Board as a whole.
On July 28, 2022 and July 29, 2022, Mr. Arison sent to certain members of Shift’s management and representatives of Centerview and CCM updates about the status of negotiations of the proposed transaction, including with respect to valuation, management and board composition of the Combined Company.
On July 29, 2022, Centerview and William Blair discussed open items relating to the proposed merger agreement, including the exchange ratio. Prior to this discussion, the Shift Board and Shift management team discussed with Centerview the importance of Shift Stockholders maintaining greater than 50% of the pro forma ownership of the Combined Company with respect to shares of the Combined Company’s common stock on an issued and outstanding basis.
On July 30, 2022, the CarLotz Board held a special meeting via video conference, which was also attended by certain members of the CarLotz management team, and representatives of William Blair and Freshfields. Prior to the meeting, each of the CarLotz Board members who were not members of the CarLotz Transaction Committee were updated by the Chairman of the CarLotz Board on the status of discussions with Shift and its advisors and the process to date. The purpose of the meeting was to discuss the status of the negotiations of CarLotz’s proposed merger with Shift. Representatives of William Blair informed the CarLotz Board that representatives of Centerview had contacted William Blair with an offer to increase the exchange ratio to 0.6 of a share of Shift Common Stock to be issued for every share of CarLotz Common Stock. William Blair also shared with the CarLotz Board its preliminary view of the financial analysis of the transaction at Shift’s proposed 0.6 of a share exchange ratio, being careful to note that its view was based on preliminary information and remained subject to change. Mr. Peker then updated the CarLotz Board on his discussions concerning other terms of the proposed transaction, including that Mr. Arison had proposed to him that CarLotz would appoint three directors to a nine member Combined Company’s board of directors. Following discussion and with the advice of its legal counsel and financial advisor, the CarLotz Board determined that the 0.6 exchange ratio undervalued CarLotz and instructed Mr. Peker, the other members of the CarLotz management team and William Blair to continue to discuss with the Shift management team and its advisors regarding the proposed exchange ratio and other proposed deal terms, including the composition of the Combined Company’s board of directors. The CarLotz Board also received an update on the status of due diligence from CarLotz’s advisors.
On July 31, 2022, the CarLotz Board held an additional meeting via video conference, which was also attended by certain members of the CarLotz management team, with representatives of William Blair, Freshfields, Deloitte Tax LLP and Deloitte & Touche LLP, in its role as professional advisor to CarLotz. The purpose of the meeting was to (1) discuss the retention of Deloitte Tax LLP and Deloitte & Touche LLP as professional advisors to CarLotz for the proposed transaction and its proposed scope of review, (2) review and potentially agree on, for purposes of the financial aspects of the proposed transaction, management’s standalone forecast for the CarLotz business and (3) further discuss CarLotz’s anticipated financing needs and its floorplan financing. Representatives of Deloitte Tax LLP and Deloitte & Touche LLP discussed with the CarLotz Board the scope of its proposed due diligence. Following further discussion, the Board instructed management to engage Deloitte Tax LLP and Deloitte & Touche LLP to prepare a complete due diligence review of Shift, reaffirming that all necessary financial analysis and due diligence would need to be completed before any agreement could be finalized. During the meeting, representatives of William Blair also presented to the CarLotz Board updated preliminary valuation materials. Mr. Peker discussed the details and merits of a potential acquisition CarLotz was independently
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pursuing at the time and its potential impact on the growth of CarLotz’s business. Mr. Peker further discussed with the CarLotz Board management’s estimated future SG&A expenses. The CarLotz Board discussed the financial and technology investment required to develop CarLotz’s consumer consignment market initiative, its floorplan financing availability and discussions with the floorplan financing provider regarding its willingness to provide financing to CarLotz in the future, anticipated future cash flows and ability to raise capital on a standalone basis. Mr. Peker also noted that, in 2023, CarLotz would require additional capital to fund its operations. The CarLotz Board further discussed the pros and cons of forgoing the contemplated separate acquisition in favor of pursuing the proposed merger transaction with Shift. Management further confirmed that the updated standalone financial forecast discussed during the meeting represented CarLotz management’s best available estimates and judgments at the time of preparation and represented, to the best of CarLotz’s management’s knowledge and belief, the expected future financial performance of CarLotz as an independent company. Mr. Peker then discussed with the CarLotz Board management’s financial analysis of the Shift business and the Combined Company. The Board discussed the potential synergies to be achieved as a result of the proposed transaction with Shift and the expected financial flexibility of the Combined Company as compared to CarLotz continuing to operate on a standalone basis. The CarLotz Board further discussed certain strategic alternatives to a merger with Shift, including continuing to operate as a standalone company, capital raising initiatives, strategic acquisitions and a sale of CarLotz to a third party. Following this discussion, the CarLotz Board instructed William Blair and CarLotz management to communicate a revised transaction proposal to Shift that included: (1) an exchange ratio of 0.75 of a share of Shift Common Stock for each share of CarLotz Common Stock; (2) four seats on the Combined Company’s board of directors for CarLotz and a right to appoint the chairperson of such board of directors; (3) no lock-up restrictions for any CarLotz Stockholders with respect to the shares of Shift Common Stock to be received in the Merger; and (4) no minimum asset closing condition to Shift’s obligation to consummate the Merger.
Later on July 31, 2022, representatives of William Blair and Centerview engaged in a number of calls to discuss the terms of CarLotz’s revised transaction proposal. During these calls, Centerview conveyed a proposed exchange ratio mechanism pursuant to which pro forma ownership for CarLotz Stockholders in the Combined Company would be finally determined at consummation of the merger based on the parties’ respective share counts (with details still left for further discussion), but always be less than 50%. Centerview further conveyed a proposed increase of the Combined Company’s board of directors from nine to 10 with three CarLotz-appointed board members plus one board member to be mutually appointed by the parties. The advisors also discussed the potential treatment of CarLotz performance-based restricted stock units in the event that the potential transaction was consummated, and agreed to discuss with their respective clients that there would be no lock-up restrictions for CarLotz Stockholders on the sale of any shares of Shift to be received as merger consideration and that the Merger would not be subject to a minimum asset condition.
Throughout the weekend of July 30-31, 2022, Mr. Arison sent to the Shift Board updates regarding the status of negotiations regarding the proposed transaction, including, among other things, with respect to valuation, key open items in the proposed merger agreement and the composition of the Combined Company’s board of directors.
During the week of August 1, 2022, various due diligence calls were held among the Shift and CarLotz management teams and their respective accounting, legal and financial advisors.
On August 1, 2022, Mr. Arison and Jeff Clementz, the then-President of Shift, travelled to Dallas to meet in person with certain members of the CarLotz Board and members of CarLotz management. The parties discussed the management and governance of the Combined Company, potential areas of synergies and key terms of the proposed merger.
Also on this date, representatives of Centerview and William Blair met to discuss the potential mechanics of the exchange ratio to apply to the proposed merger as well as the respective methodologies for the financial forecasts of each of Shift and CarLotz.
On August 2, 2022, representatives of Freshfields sent representatives of Jenner & Block a revised draft of the proposed merger agreement. Among other things, the revised draft of the proposed merger agreement (1) amended the representations and warranties as well as interim operating covenants and made them generally reciprocal for both parties, (2) eased the procedural steps required for each party to determine that an offer from a third party would constitute a superior proposal to the proposed merger, (3) proposed a reduced mutual termination fee of 2.5% of CarLotz’s equity value, (4) rejected the proposed minimum net assets condition to Shift’s obligation to consummate the merger, (5) rejected the request that certain unspecified significant CarLotz
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Stockholders would be subject to lock-up restrictions on selling their shares of Shift Common Stock to be received in the merger; (6) included language providing for CarLotz’s representation on the Combined Company’s board of directors; (7) provided that certain Shift Stockholders, including its largest independent stockholder, would sign support agreements and (8) provided for expense reimbursement provisions for either party if the merger agreement is terminated due to the other party’s stockholders’ failure to approve the proposed transactions in accordance with the terms of the proposed merger agreement and applicable law.
Also on August 2, 2022, representatives of Shift, Centerview and Jenner & Block met to discuss key issues in the proposed merger agreement. In addition, on August 2, 2022, Mr. Clementz and members of CarLotz management discussed in Dallas certain strategic and operational issues regarding the proposed transaction. As well, on August 2, 2022, the Shift Board held a meeting via videoconference. Representatives of Shift management also attended the meeting. At the meeting, the Shift Board discussed in detail the status of negotiations with CarLotz and progress of due diligence with respect to CarLotz.
Also on this date, representatives of Deloitte Tax LLP and Deloitte & Touche LLP met with the Chief Financial Officer and Senior Vice President of Finance for CarLotz for a finance and accounting diligence session, which session was also attended by representatives of Shift, William Blair and Centerview.
On August 3, 2022, representatives of Jenner & Block sent representatives of Freshfields a draft of the proposed form of support agreements to be signed by certain major stockholders in support of the proposed merger, as well as drafts of other ancillary agreements to the proposed merger agreement. Also on August 3, 2022, representatives of Shift and CarLotz management, Centerview and William Blair discussed by video conference certain preliminary financial forecasts for the Shift business. Further on this date, representatives of CarLotz, Shift, Centerview, William Blair, Jenner & Block, CCP and Freshfields met to discuss, and ultimately agreed upon, the treatment of certain outstanding CarLotz warrants and earn-out-related securities in the exchange ratio which would apply to the proposed merger.
Certain CarLotz Stockholders who were asked to sign support agreements in support of the proposed merger also asked that they receive registration rights with respect to the shares of Shift Common Stock to be received by them in the merger, similar to the registration rights they had with respect to their shares of CarLotz Common Stock. Shift rejected this request.
On August 4, 2022, representatives of the CarLotz and Shift management teams and representatives of Deloitte Tax LLP and Deloitte & Touche LLP, in their capacity as professional advisors to CarLotz, discussed by videoconference potential tax consequences of different transaction structures for a business combination between Shift and CarLotz. Following the call, CarLotz and Shift agreed to continue structuring the business combination as a reverse subsidiary merger.
Also on August 4, 2022, representatives of Freshfields and Jenner & Block had a telephone call to discuss the transaction status and certain issues relating to the proposed support agreements.
On August 5, 2022, representatives of Jenner & Block sent representatives of Freshfields a revised draft of the proposed merger agreement. The draft reflected general alignment around numerous matters. However, the revised draft of the proposed merger agreement also continued to reflect Shift’s position with respect to: (1) a $100 million minimum cash level for CarLotz at Closing as a condition for Shift’s obligation to consummate the merger (albeit in this draft, Shift proposed the condition to be mutual, with CarLotz’s condition to consummate the merger being conditioned on Shift having a minimum cash position in an amount to be determined); (2) a mutual termination fee of 4% of CarLotz’s equity value; and (3) the rejection of mutual expense reimbursement provisions in the event of termination of the proposed merger agreement due to failure to obtain the relevant stockholder votes. In addition, the revised draft proposed merger agreement provided for (a) an increase of the Combined Company’s board of directors to 10 members with three members to be designated by CarLotz and one independent member to be mutually agreed by Shift and CarLotz and (b) the exchange ratio between shares of CarLotz Common Stock and Shift Common Stock to be determined at Closing rather than determined at signing, based on the number of issued and outstanding shares of Shift Common Stock relative to the fully diluted number of shares of CarLotz Common Stock (subject to certain exceptions). Also on August 5, 2022, representatives of the CarLotz and Shift management teams, Jenner & Block and Freshfields discussed by videoconference outstanding legal due diligence requests from each party. In addition, on August 5, 2022, Mr. Arison sent to the Shift Board an update regarding the status of key open items with respect to the proposed transaction.
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On August 6, 2022, the CarLotz Board held a special meeting via video conference to discuss the status of the proposed transaction. Certain members of the CarLotz management team and representatives of William Blair and Freshfields also participated in the meeting. During the meeting, representatives of Freshfields reviewed the fiduciary duties of the CarLotz Board under Delaware law and provided legal advice concerning the same, discussed in detail the transaction documentation, drafts of which had been distributed to the CarLotz Board in advance of the meeting, and provided an update on the progress of negotiations with Shift. In particular, representatives of Freshfields summarized for the CarLotz Board the mechanics of the exchange ratio and the minimum cash closing condition in addition to certain executive compensation and employee benefit provisions contained in the draft merger agreement. Also discussed were the other closing conditions set forth in the proposed merger agreement. Representatives of Freshfields discussed the status of obtaining support agreements from key Shift Stockholders, including its largest independent stockholder. The CarLotz Board instructed William Blair and Freshfields to continue discussions on the remaining open points. The CarLotz Board then discussed certain employment matters related to employee severance arrangements and retention and received an update on the status of due diligence from CarLotz’s advisors.
Later on August 6, 2022, representatives of Freshfields and Jenner & Block met telephonically to discuss the current draft of the merger agreement and to relay the positions of the CarLotz Board regarding certain open items, including the mechanics of the exchange ratio, calculation of the currently proposed minimum cash condition, signing of support agreements by key Shift Stockholders, the amount of the mutual termination fee, treatment of equity awards in the Merger and certain employee and benefits topics. Also on August 6, 2022, representatives of Shift, Jenner & Block and Centerview met to discuss these same issues and other open points. Also on August 6, 2022, Freshfields delivered to Jenner & Block a revised draft of the support agreements and other ancillary agreements to the proposed merger agreement.
Over the course of August 6-9, 2022, Mr. Arison sent to the Shift Board frequent updates regarding the status of negotiations with CarLotz with respect to the proposed merger agreement and solicited feedback from the Shift Board on key open items.
On August 7, 2022, representatives of Freshfields sent a revised draft of the proposed merger agreement to representatives of Jenner & Block. The draft continued to reflect CarLotz’s position with respect to (1) its refusal of a minimum cash condition and (2) an exchange ratio for shares of CarLotz Common Stock to be determined at signing rather than at Closing. With respect to the mutual termination fee, the draft proposed a fee of 3.5% of CarLotz’s equity value. While the draft accepted Shift’s request for an increase of the Combined Company’s board of directors to 10 members and a representation of CarLotz on such board of three members in addition to an independent director to be mutually agreed by CarLotz and Shift, CarLotz also requested the ability to designate one additional non-voting observer to the Combined Company’s board of directors.
Later on August 7, 2022, the CarLotz Board met to discuss the status of the proposed transaction and its positions with respect to certain unresolved transaction terms. The meeting was also attended by certain members of the CarLotz management team and representatives of William Blair and Freshfields. The CarLotz Board discussed the request by Shift for a minimum cash closing condition for Shift’s obligation to consummate the proposed merger and considered accepting such a condition subject to review of the financial details. The CarLotz Board requested that the CarLotz management team present to them an updated projected quarterly cash flow estimate. Furthermore, the CarLotz Board discussed the mechanics for determining the final exchange ratio for shares of CarLotz Common Stock and what securities should be included and excluded from the CarLotz and Shift share count for such purposes. Representatives of Freshfields provided for the CarLotz Board an update on certain executive compensation and employee benefit provisions contained in the draft merger agreement.
Still later on August 7, 2022, representatives of Freshfields held a telephone conference with representatives of Jenner & Block to discuss the draft merger agreement. On this call, Freshfields relayed the CarLotz Board’s position that the proposed exchange ratio would (1) be subject to an adjustment at Closing for certain potential changes in the parties’ share count in the interim period between signing and Closing (with certain details around which securities would be included in the calculation remaining unresolved) and (2) result in CarLotz Stockholders owning less than 50% of the Combined Company. Freshfields also relayed the CarLotz Board’s willingness to further explore reciprocal minimum cash conditions subject to further review by the CarLotz Board. Freshfields also requested additional due diligence on Shift’s floorplan financing. Jenner & Block relayed
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its client’s willingness to agree to mutual expense reimbursement provisions in the event the proposed merger agreement was terminated due to a failure to obtain the relevant stockholder votes and an employee retention plan for CarLotz employees (subject to agreement on certain details).
Later in the day on August 7, 2022, representatives of Shift, CarLotz, William Blair, Centerview, CCM, Freshfields and Jenner & Block met via video conference to discuss the remaining open items in the proposed merger agreement, including the exchange ratio, the calculation of the proposed minimum cash condition, the signing of support agreements by major Shift Stockholders, including Shift’s largest independent stockholder, and certain employee benefits matters related to CarLotz’s continuing employees. Following the video conference, the key open topics in the proposed merger agreement included the securities included in the calculation of the exchange ratio, registration rights for CarLotz’s two major stockholders, calculation of the proposed minimum cash condition and certain severance arrangements for CarLotz employees.
Also on August 7, 2022, the Shift Board held a meeting via videoconference together with representatives from Shift management, Jenner & Block, Centerview and CCM. At this meeting, representatives from Jenner & Block gave an overview of the background of the discussions and negotiations between representatives of Shift management and Shift’s advisors, on the one hand, and CarLotz management and its advisors, on the other hand. Representatives from Jenner & Block also reviewed with the Shift Board certain legal considerations in connection with the potential merger and reviewed the Shift Board’s fiduciary duties under applicable law. Representatives from Jenner & Block also gave an overview of the terms of the proposed merger agreement, as well as the related agreements contemplated thereby, and answered certain questions regarding the same from members of the Shift Board. Representatives from Shift management gave a presentation on certain results of the due diligence investigation of Deloitte Tax LLP and Deloitte & Touche LLP, including as to severance liabilities and liabilities for the wind down of various leased facilities. Representatives from Jenner & Block also led a discussion regarding legal due diligence conducted to date, including as to CarLotz’s capitalization, indebtedness, litigation, employment arrangements and material customer and supplier contracts. A further discussion of the Shift Board’s fiduciary duties, the diligence discussion and the proposed merger agreement ensued. Also at this meeting, Centerview reviewed with the Shift Board Centerview’s financial analysis of the latest exchange ratio proposed with respect to the proposed merger. Members of the Shift Board asked various questions regarding the presentation and discussed possible strategic alternatives to the proposed merger. In addition, the Shift Board resolved to enter into a new engagement letter with Centerview and an amendment to the existing engagement letter with CCM, in each case to formalize the terms of engagement with respect to a buy-side transaction. Adam Nash, a director of Shift, recused himself from the discussion and the vote with respect to the amendment to the engagement letter with CCM.
On August 8, 2022, the CarLotz Board held a special meeting via video conference, which was also attended by certain members of the CarLotz management team and representatives of William Blair, Freshfields, Deloitte Tax LLP and Deloitte & Touche LLP, acting in their capacity as professional advisors to CarLotz. The meeting focused on discussing the open commercial points in the draft merger agreement and potential resolutions and due diligence performed by the CarLotz advisors, including (1) the level of cash required to comply with the minimum cash conditions and the potential impact of a delayed Closing and (2) which securities were to be included in the share numbers for the adjustment of the proposed exchange ratio at Closing, including the level of flexibility for each party to make additional equity retention grants to employees between signing and Closing. Representatives of Freshfields reviewed in detail the provisions of the proposed merger agreement and discussed the closing risks to the proposed transaction and certain employment related topics. Representatives of Deloitte Tax LLP and Deloitte & Touche LLP then presented their due diligence report to the CarLotz Board. Following this presentation, the CarLotz Board instructed Deloitte Tax LLP and Deloitte & Touche LLP to make additional inquiries on Shift’s cash balance forecast and its floorplan financing. Representatives of Freshfields then presented their legal due diligence report to the CarLotz Board, including as to Shift’s capitalization, organizational structure, material contracts, employee benefits, litigation, indebtedness, including its floorplan financing, related party transactions and intellectual property. Lastly, representatives of William Blair presented to and discussed with the CarLotz Board the valuation materials and financial analyses that would underlie their fairness opinion.
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Later on August 8, 2022, representatives of Jenner & Block sent representatives of Freshfields revised drafts of the proposed support agreements. Still later on August 8, 2022, representatives of Jenner & Block sent representatives of Freshfields a revised draft of the proposed merger agreement, which continued to reflect open issues, including aspects of the mutual minimum cash condition and relevant share numbers for the adjustment of the proposed exchange ratio at Closing.
Still later on August 8, 2022, the CarLotz Board held a second special meeting via video conference, which was also attended by certain members of the CarLotz management team and representatives of William Blair, Freshfields, Deloitte Tax LLP and Deloitte & Touche LLP, acting in their capacity as professional advisors to CarLotz. Representatives of Deloitte Tax LLP and Deloitte & Touche LLP summarized for the CarLotz Board an updated cash level forecast received from Shift, the underlying analysis of such forecast and the impact of such cash levels under Shift’s floorplan financing covenants. The CarLotz Board discussed the information provided by Deloitte Tax LLP and Deloitte & Touche LLP and the projected timeline of the Closing. The CarLotz Board further discussed an updated draft cash forecast for CarLotz, which had been provided to the CarLotz Board by the CarLotz management team prior to the meeting.
In addition, on August 8, 2022, the Shift Board held a meeting via videoconference together with representatives from Shift management, Jenner & Block, Centerview and CCM. At this meeting, representatives of Shift management and Jenner & Block provided an update on the status of negotiations and a summary of outstanding points of negotiation with respect to the proposed merger agreement.
In addition, on August 8, 2022, Shift and the relevant CarLotz Stockholders continued to discuss registration rights for such CarLotz Stockholders. The relevant CarLotz Stockholders continued to request full demand registration rights for the shares of Shift Common Stock to be received by them in the proposed merger. Shift, however, only offered piggyback registration rights, giving the relevant CarLotz Stockholders a right to have their shares of Shift Common Stock included in a future registration statement.
Later in the day on August 8, 2022, representatives of Shift, CarLotz, William Blair, Centerview, Freshfields and Jenner & Block met via video conference to discuss the open items in the proposed merger agreement and disclosure schedules, including the dilutive shares of CarLotz Common Stock to be taken into account for purposes of the exchange ratio, the calculation of the minimum cash condition, registration rights for certain CarLotz Stockholders, certain employee benefits matters related to CarLotz’s continuing employees and certain exceptions proposed to interim operating covenants by each of the parties.
On August 9, 2022, the CarLotz Board held a meeting via video conference, which was also attended by certain members of the CarLotz management team and representatives of William Blair, Freshfields and Deloitte Tax LLP and Deloitte & Touche LLP. Representatives of Freshfields updated the CarLotz Board on the discussions held with Shift and its advisors on August 8, 2022. During the meeting, the CarLotz Board then discussed (1) certain information received from Shift with respect to the Combined Company’s preliminary cash flow forecast, (2) synergies to be potentially achieved by the Combined Company, (3) registration rights requested by certain CarLotz Stockholders with respect to the shares of Shift Common Stock to be received by them in the proposed merger, (4) calculation of the minimum cash conditions, (5) the amount of severance payments to be made to certain CarLotz employees and (6) the exchange ratio to be reflected in the proposed merger agreement.
Also on August 9, 2022, representatives of Shift, CarLotz, William Blair, Centerview, CCM, Freshfields and Jenner & Block met via video conferences to discuss the open items in the proposed merger agreement and disclosure schedules, and reached agreement regarding the same, including that the exchange ratio would be finally determined at Closing based on the issued and outstanding shares of Shift Common Stock relative to the fully diluted shares of CarLotz Common Stock (subject to certain exceptions). On August 9, 2022, representatives from Jenner & Block and Freshfields exchanged a number of drafts of the proposed merger agreement reflecting these discussions.
Further on August 9, 2022, the relevant CarLotz Stockholders and Shift reached an agreement with respect to the registration rights to be granted to such CarLotz Stockholders for the shares of Shift Common Stock to be received by them in the proposed merger. Such agreement provided that the relevant CarLotz Stockholders would not be granted demand registration rights and provided further that, with respect to a certain CarLotz Stockholder
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and subject to such CarLotz Stockholder holding a certain minimum percentage of the issued and outstanding shares of the Combined Company’s common stock, the Combined Company would provide demand registration rights to such stockholder in the event that Shift granted demand registration rights to any other Combined Company stockholder.
Later on August 9, 2022, the CarLotz Board held a meeting via video conference, which was also attended by certain members of the CarLotz management team and representatives of William Blair, Freshfields and Deloitte Tax LLP and Deloitte & Touche LLP. During the meeting, the CarLotz Board discussed the final exchange ratio calculation for the proposed merger and received an update on the agreement between Shift and the relevant CarLotz Stockholders with respect to the registration rights to be provided to such stockholders.
Later on August 9, 2022, representatives of Freshfields circulated to the CarLotz Board and CarLotz management team the execution version of the proposed merger agreement.
Also on August 9, 2022, the Shift Board held a meeting via videoconference together with representatives from Shift management, Jenner & Block, Centerview and CCM. At this meeting, representatives from Jenner & Block gave a summary of the material developments in the negotiations and terms of the proposed merger agreement since the last meeting of the Shift Board. Also at this meeting, representatives of Centerview reviewed with the Shift Board Centerview’s financial analysis of the Exchange Ratio, and rendered to the Shift Board an oral opinion, which was subsequently confirmed by delivery of a written opinion dated August 9, 2022, that, based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Centerview in preparing its opinion, in the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to Shift. The members of the Shift Board also considered, among other matters, the matters described in the section of this joint proxy statement/prospectus entitled “—Shift’s Reasons for the Merger and Recommendation of the Shift Board.” Following this discussion, the Shift Board by unanimous vote (1) determined that the terms of the proposed merger agreement, the related agreements contemplated by the proposed merger agreement and the transactions contemplated thereby were fair to and in the best interests of Shift and its stockholders, (2) approved the execution, delivery and performance of the proposed merger agreement, the related agreements contemplated by the proposed merger agreement and the transactions contemplated thereby, (3) directed that the Share Issuance and related matters be submitted to Shift Stockholders for approval at a stockholders meeting and (4) resolved to recommend that Shift Stockholders approve the Share Issuance and related matters at such stockholders meeting.
In addition, on August 9, 2022, the CarLotz Board held a telephonic meeting, which was also attended by certain members of the CarLotz management team and representatives of William Blair and Freshfields. Representatives of Freshfields reviewed the fiduciary duties of the CarLotz Board under Delaware law and provided legal advice concerning the same. Thereafter, representatives of Freshfields provided an overview of the negotiation process and discussed changes made to the proposed merger agreement since the CarLotz Board meeting on August 8, 2022. A representative of William Blair then presented to the CarLotz Board William Blair’s financial analysis summarized below under “— Opinion of William Blair.” At the request of the CarLotz Board, William Blair rendered to the CarLotz Board an oral opinion, subsequently confirmed by delivery of a written opinion dated August 9, 2022 to the effect that, as of that date and based on and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the Exchange Ratio pursuant to the proposed merger agreement was fair, from a financial point of view, to the CarLotz Stockholders.
After further discussion and based on, among other reasons, the considerations set forth in more detail in the section titled “CarLotz’s Reasons for the Merger and Recommendation of the CarLotz Board,” including the attractiveness of the proposed exchange ratio to CarLotz Stockholders, the expectation of synergies to be potentially achieved by the Combined Company and the expectation of an enhanced cash position providing greater financial flexibility for the Combined Company, the CarLotz Board unanimously (i) determined that the proposed merger agreement and the Proposed Transactions, including the Merger, were fair to and in the best interests of CarLotz and its stockholders, (ii) declared it advisable for CarLotz to enter into the proposed merger agreement and consummate the Merger upon the terms and subject to the conditions set forth therein, (iii) approved the execution and delivery of the proposed merger agreement by CarLotz, the performance by CarLotz of its covenants and other obligations under the proposed merger agreement and the consummation of the Proposed Transactions, including the Merger, upon the terms and conditions set forth therein, (iv) agreed that the Merger, upon the terms, and subject to the conditions, contained in the proposed merger agreement was
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authorized and approved in accordance with the requirements of the DGCL and (v) resolved that the proposed merger agreement be submitted to CarLotz Stockholders and to recommend that CarLotz Stockholders adopt the proposed merger agreement in accordance with the relevant provisions of the DGCL.
Later on August 9, 2022, CarLotz and Shift executed and delivered the Merger Agreement and other related agreements.
Later that same day, CarLotz and Shift issued a joint press release announcing the execution of the Merger Agreement and summarizing the material terms of the Proposed Transactions.
Shift’s Reasons for the Merger and Recommendation of the Shift Board
At a meeting of the Shift Board held on August 9, 2022, the Shift Board unanimously: (a) determined and resolved that the Merger Agreement and the Proposed Transactions (including the Merger and the Share Issuance), on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and fair to, and in the best interests of, Shift and its stockholders; (b) authorized and approved the execution, delivery and performance of the Merger Agreement by Shift and approved the Proposed Transactions; and (c) recommended that Shift Stockholders vote in favor of the Shift Share Issuance Proposal. In addition, by unanimous written consent on September 26, 2022, the Shift Board unanimously: (a) determined and resolved that the Reverse Stock Split Amendment is advisable and fair to, and in the best interests of, Shift and its stockholders; (b) authorized and approved the execution, delivery and performance of the Reverse Stock Split Amendment by Shift; and (c) recommended that Shift Stockholders vote in favor of the Shift Reverse Stock Split Proposal. Accordingly, the Shift Board unanimously recommends that Shift Stockholders vote “FOR” the approval of the Shift Share Issuance Proposal, “FOR” the Shift Reverse Stock Split Proposal and “FOR” the approval of the Shift Adjournment Proposal.
In evaluating the Merger, the Shift Board consulted with members of Shift’s management team and with Shift’s outside legal counsel and financial advisors and, in reaching its determinations and recommendations, the Shift Board considered a number of factors.
Many of the factors considered favored the determinations and recommendations made by the Shift Board, including the following (not in any relative order of importance):
the expectation that the Combined Company will create a strong destination for online and in-person used car purchasing;
the expectation that the geographic footprints of the Shift business and the CarLotz business are complementary;
the expectation that the CarLotz business will be able to leverage Shift’s existing proprietary inventory acquisition engine and at-home delivery offering to obtain differentiated inventory and expand its geographic footprint;
the expectation that the Shift business will be able to leverage the CarLotz business’s geographic presence to scale its dealer marketplace on the East Coast;
the expectation of annual cost synergies within the first year after Closing, primarily driven by the rationalization of duplicative overhead, including corporate general and administrative expenses and public company costs, as well as the benefit of scale efficiencies across the enterprise;
the expectation that the Combined Company’s more diverse sources of consumer spending will help reduce volatility in revenue and operating results across reporting periods;
the expectation that the Combined Company’s strategic and financial flexibility will be greater than each company on a standalone basis, providing the Combined Company with the financial resources to continue to invest in development and innovation, while having the flexibility to pursue select inorganic growth opportunities;
the fact that, based on the number of shares of Shift Common Stock and the number of shares of CarLotz Common Stock expected to be outstanding immediately prior to the completion of the Merger, Shift Stockholders are expected to own approximately 50.01% of the issued and outstanding shares of
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the Combined Company’s common stock and approximately 52.89% (calculated as of August 8, 2022) of the outstanding shares of the Combined Company’s common stock on a fully diluted and as-converted to Combined Company common stock basis immediately after the completion of the Merger;
information and discussions with members of Shift’s management team and with Shift’s advisors regarding CarLotz’s business, assets, financial condition, results of operations, reputation, current business strategy and prospects, including the projected long-term financial results of CarLotz as a standalone company, the size and scale of the Combined Company and the expected pro forma effect of the Merger on each company;
the belief that the Shift management team will be able to successfully integrate the two companies;
the opinion of Centerview rendered to the Shift Board on August 9, 2022, which was subsequently confirmed by delivery of a written opinion dated August 9, 2022, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to Shift, as more fully described in the section entitled “Opinion of Shift’s Financial Advisor” and in the full text of the written opinion of Centerview, which is attached as Annex C to this joint proxy statement/prospectus; and
the review by the Shift Board with its advisors of the financial and other terms of the Merger Agreement, including the companies’ representations, warranties and covenants, the conditions to their respective obligations to complete the Merger and the termination provisions, as well as the likelihood of the completion of the Merger and the evaluation by the Shift Board of the likely time period necessary to complete the Merger. The Shift Board also considered the following specific aspects of the Merger Agreement:
the fact that the Exchange Ratio and other terms of the Merger Agreement provide certainty to Shift Stockholders as to the range of their pro forma percentage ownership of the Combined Company, on an issued and outstanding basis and on a fully diluted and as-converted basis, immediately after the completion of the Merger (as more fully described in the sections entitled “The Merger Agreement—Merger Consideration” and “The Merger Agreement—Covenants and Agreements—Conduct of Businesses Prior to the Completion of the Merger”);
the limited number and nature of the conditions to the obligation of CarLotz to complete the Merger as well as the probability that those conditions would be satisfied prior to the end date (as more fully described in the section entitled “The Merger Agreement—Conditions to Complete the Merger”);
the conditions to the obligations of Shift and Merger Sub to complete the Merger as well as the probability that those conditions would be satisfied prior to the end date (as more fully described in the section entitled “The Merger Agreement—Conditions to Complete the Merger”);
the extensive representations and warranties made by CarLotz (as more fully described in the section entitled “The Merger Agreement—Representations and Warranties”) as well as the covenants in the Merger Agreement relating to the conduct of CarLotz’s business during the period from the date of the Merger Agreement through the Effective Time (as more fully described in the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Businesses Prior to the Completion of the Merger”);
the fact that the Merger Agreement includes restrictions, subject to certain exceptions, on the ability of CarLotz to solicit, initiate, knowingly encourage, assist, induce or knowingly facilitate the making, submission or announcement of any acquisition proposal or acquisition inquiry, or take any action that reasonably would be expected to lead to an acquisition proposal or acquisition inquiry; and Shift’s right to further negotiate with CarLotz in the event CarLotz receives a superior offer (as defined below in, and as more fully described in, the sections entitled “The Merger Agreement—Stockholder Meetings and Recommendation of Shift Board and CarLotz Board” and “The Merger Agreement—Agreement Not to Solicit Other Offers”);
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the ability of Shift to terminate the Merger Agreement and receive an up to $4.25 million termination fee from CarLotz under specified circumstances (as more fully described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement”); and
the right of the Shift Board, prior to the approval of the Shift Share Issuance Proposal, to make a change in the Shift Board Recommendation in connection with a superior offer or material event, development or change in circumstances that relates to and is material to Shift and its subsidiaries, taken as a whole, as more fully described in the section titled “The Merger AgreementStockholder Meetings and Recommendation of Shift Board and CarLotz Board.”
In the course of its deliberations, the Shift Board also considered a variety of risks and other potentially negative factors, including the following (which are not in any relative order of importance):
the risk that CarLotz’s financial performance may not meet Shift’s expectations;
the possibility that the Merger may not be completed or that completion may be unduly delayed for reasons beyond the control of Shift;
the possible disruption to Shift’s and CarLotz’s respective operations that may result from the Merger, including the potential for diversion of management and employee attention from other strategic opportunities or operational matters and for increased employee attrition during the period prior to completion of the Merger, and the potential effect of the Merger on Shift’s and CarLotz’s respective businesses and relations with business partners, vendors and advertisers;
the adverse impact that business uncertainty pending completion of the Merger could have on Shift’s and CarLotz’s respective ability to attract, retain and motivate key personnel;
the difficulties and challenges inherent in completing the Merger and integrating the businesses, operations and workforce of CarLotz with those of Shift, and the possibility of encountering difficulties in achieving expected cost synergies and unit economics;
the risk that the anticipated strategic and other benefits to CarLotz and Shift following completion of the Merger, including the expected opportunities and synergies described above, will not be realized or will take longer to realize than expected;
the risk that Shift Stockholders may not approve the Shift Share Issuance Proposal or that CarLotz Stockholders may not approve the CarLotz Merger Proposal;
the risk that the structure of the Merger could potentially trigger termination rights of CarLotz’s counterparties under, or breach certain restrictive covenants or other terms of, CarLotz’s contracts with third parties;
certain terms and conditions of the Merger Agreement, including:
the fact that the Merger Agreement includes restrictions on the ability of Shift to solicit, initiate, knowingly encourage, assist, induce or knowingly facilitate the making, submission or announcement of any acquisition proposal or acquisition inquiry, or take any action that reasonably would be expected to lead to an acquisition proposal or acquisition inquiry, subject to certain exceptions (as more fully described in the section entitled “The Merger Agreement—Agreement Not to Solicit Other Offers”);
the right of the CarLotz Board, prior to the approval of the CarLotz Merger Proposal, to make a change in the CarLotz Board Recommendation in connection with a superior offer or material event, development or change in circumstances that relates to and is material to CarLotz and its subsidiaries, taken as a whole (as more fully described in the section entitled “The Merger Agreement—Stockholder Meetings and Recommendation of Shift Board and CarLotz Board”);
the restrictions on the right of the Shift Board to make a change to the Shift Board Recommendation, subject to certain conditions (as more fully described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement”), which could have the effect of discouraging Shift acquisition proposals from being made or pursued; and
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the requirement that Shift provide CarLotz with an opportunity to propose revisions to the Merger Agreement prior to Shift being able to make a change to the Shift Board Recommendation in connection with a superior offer or material event, development or change in circumstances that relates to and is material to Shift and its subsidiaries, taken as a whole (as more fully described in the section entitled “The Merger Agreement—Stockholder Meetings and Recommendation of Shift Board and CarLotz Board”);
the fact that Shift’s current stockholders will have reduced ownership and voting interests after the completion of the Merger (compared to their current ownership and voting interests in Shift) and will exercise less influence over the Shift Board and management and policies of Shift (compared to their current influence over the Shift Board and management and policies of Shift);
the substantial costs to be incurred in connection with the Merger, including those incurred regardless of whether the Merger is completed;
the risks and contingencies relating to the announcement and pendency of the Merger and the risks and costs to Shift if the Merger is not completed on a timely basis or at all, including the impact on Shift’s relationships with employees, with business partners and with third parties;
the fact that, if the Merger is not completed, Shift will have expended significant human and financial resources on a failed transaction and may also be required to pay a termination fee of $4.25 million under certain circumstances (as more fully described in the section entitled “The Merger Agreement—Termination Fees and Expense Reimbursement”); and
various other risks associated with the Merger and the business of Shift described in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” respectively.
The factors set forth above are not intended to be exhaustive but include many of the material factors considered by the Shift Board in approving the Merger Agreement and the Proposed Transactions (including the Merger and the Share Issuance) in authorizing the execution of the Merger Agreement and related transaction documents and in recommending that Shift Stockholders vote in favor of the Shift Share Issuance Proposal. In view of the wide variety of factors, both positive and negative, considered in connection with making its determinations and recommendations, and the complexity of these matters, the Shift Board did not find it practical to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights or values to any of the various factors considered in reaching its determination to approve the Merger Agreement and the Proposed Transactions (including the Merger and the Share Issuance) and to recommend that Shift Stockholders vote in favor of the Shift Share Issuance Proposal. The Shift Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the Shift Board. In addition, individual members of the Shift Board may have given different weights to different factors. The Shift Board carefully considered all of the factors described above as a whole.
CarLotz’s Reasons for the Merger and Recommendation of the CarLotz Board
The CarLotz Board unanimously: (1) determined that the Merger Agreement and the Proposed Transactions, including the Merger, were fair to and in the best interests of CarLotz and CarLotz Stockholders; (2) declared it advisable to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth therein; (3) approved the execution and delivery of the Merger Agreement by CarLotz, the performance by CarLotz of its covenants and other obligations under the Merger Agreement and the consummation of the Proposed Transactions, including the Merger, upon the terms and conditions set forth therein; (4) agreed that the Merger, upon the terms, and subject to the conditions, contained therein was authorized and approved in accordance with the requirements of the DGCL; and (5) resolved that the Merger Agreement be submitted to CarLotz Stockholders and to recommend that CarLotz Stockholders adopt the Merger Agreement in accordance with the DGCL. Accordingly, the CarLotz Board unanimously recommends that CarLotz Stockholders vote “FOR” the CarLotz Merger Proposal and “FOR” the CarLotz Adjournment Proposal.
As described in the section entitled “—Background of the Merger,” in evaluating the Merger Agreement and the Proposed Transactions, including the Merger, the CarLotz Board held a number of meetings and consulted CarLotz management and CarLotz’s outside legal and financial advisors. In reaching its decision to approve the Merger Agreement and to recommend that CarLotz Stockholders vote to adopt the Merger Agreement, the CarLotz Board considered a number of factors, including, but not limited to the following (which are not necessarily presented in
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order of their relative importance to the CarLotz Board), and concluded that entering into the Merger Agreement with Shift was advisable and in the best interests of CarLotz and CarLotz Stockholders.
Strategic Rationale of the Merger. The strategic and business rationale of the Merger and related opportunities for value creation for CarLotz Stockholders, employees and business partners. Among the potential factors identified by the CarLotz Board were:
the opportunity to create a leading online and in-person auto retailer, with complementary geographic footprints, with Shift’s strong presence on the West Coast and CarLotz’s retail stores in the mid-Atlantic region;
the ability for CarLotz to leverage Shift’s technology, which CarLotz otherwise would have had to develop as a standalone company;
the opportunity for CarLotz to broaden its sourcing channels;
the expectation that the Combined Company could generate aggregate annual cost synergies of approximately $40 million and that CarLotz Stockholders will be able to participate in the benefits of such potential synergies as stockholders of the Combined Company;
the expectation that, upon the Closing, the Combined Company will have a cash position of approximately $125 million (assuming Closing in 2022), better positioning the Combined Company to execute on its business plan with greater resources and financial flexibility for future growth than CarLotz as an independent company;
the belief that Shift management will be able to successfully integrate and combine the respective businesses of CarLotz and Shift;
discussions with CarLotz’s management and CarLotz’s advisors regarding the business, operations, strategy and future prospects of Shift and the Combined Company, including the results of CarLotz’s legal, accounting and financial due diligence review of Shift; and
other strategic benefits and opportunities that could be achieved through the sharing of CarLotz’s and Shift’s technology and employee talent.
Financial Condition, Results of Operations and Prospects of CarLotz; Risks of Execution. The current, historical and projected financial condition, results of operations and business of, and sources of liquidity for, CarLotz as well as CarLotz’s prospects and risks if it were to remain an independent company.
Value to CarLotz Stockholders. The belief of the CarLotz Board that the Merger Consideration represents the best value reasonably obtainable for the shares of CarLotz Common Stock, taking into account business, competitive, industry and market risks and the CarLotz Board’s familiarity with the business, operations, prospects, business strategy, financial condition and results of CarLotz on a historical and prospective basis. In addition, the CarLotz Board believed that, considering the strategic rationale of the Merger, the Merger Consideration reflects a fair and favorable price for the shares of CarLotz Common Stock. In this regard, the CarLotz Board considered, among other things:
various analyses as to the valuation of CarLotz as an independent company;
the implied value of the consideration to be received by CarLotz Stockholders in the Merger (using the closing price of Shift Common Stock on August 8, 2022, the last trading day before the announcement of the Merger, of $1.53 as the Shift Common Stock price for purposes of calculating the Exchange Ratio) represented a premium of approximately 70% to the closing price of CarLotz Common Stock on August 8, 2022;
the historic trading ranges of CarLotz Common Stock and Shift Common Stock;
the Merger Consideration being the result of extensive negotiation between the parties and the CarLotz Board’s belief that the Merger Consideration represented the best value that CarLotz could reasonably obtain from Shift in the Merger;
the fact that the Merger Consideration consists of Shift Common Stock, which provides CarLotz Stockholders with participation in the upside potential of a larger, more diversified company;
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the possibility that the value of the Merger Consideration payable to CarLotz Stockholders could increase if the price of Shift Common Stock increases prior to completion of the Merger; and
the expected treatment of the Merger as a tax-free reorganization under Section 368(a) of the Code for U.S. federal income tax purposes, as more fully described in the section entitled “U.S. Federal Income Tax Consequences of the Merger.”
Potential Strategic Alternatives. The assessment of the CarLotz Board that none of the possible alternatives to the Merger (including the possibility of continuing to operate CarLotz as an independent company or pursuing a different transaction, and the desirability and perceived risks of those alternatives, as well as the potential benefits and risks to CarLotz Stockholders of those alternatives and the timing and likelihood of effecting such alternatives) was reasonably likely to present superior opportunities for CarLotz to create greater value for CarLotz Stockholders, taking into account execution risks as well as business, industry, player, competitive and regulatory risks.
Opinion of William Blair. The opinion of William Blair rendered to the CarLotz Board on August 9, 2022 and subsequently confirmed by delivery of a written opinion on August 9, 2022 as to the fairness, from a financial point of view and as of such date, of the Merger Consideration to be paid to CarLotz Stockholders pursuant to the Merger Agreement), which opinion was based on and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken as set forth in such opinion attached as Annex D to this joint proxy statement/prospectus and more fully described in the section entitled “Opinion of CarLotz’s Financial Advisor.”
Terms of the Merger Agreement. The terms of the Merger Agreement, which was the product of arm’s-length negotiations overseen by the CarLotz Board and the belief of the CarLotz Board that the Merger Agreement contained terms and conditions that are, in the CarLotz Board’s view, favorable to CarLotz and CarLotz Stockholders. The factors considered included:
CarLotz’s ability, under certain circumstances, to furnish information to, and conduct negotiations with, third parties regarding acquisition proposals;
the CarLotz Board’s ability, under certain circumstances, to withdraw or modify its recommendation that CarLotz Stockholders vote in favor of the adoption of the Merger Agreement;
the CarLotz Board’s ability, under certain circumstances, to terminate the Merger Agreement to enter into an alternative acquisition agreement. In that regard, the CarLotz Board believed that the termination fee payable by CarLotz in such instance was reasonable, consistent with similar fees payable in comparable transactions and not preclusive of other offers;
Shift’s agreement to appoint to the Combined Company’s board of directors three of CarLotz’s current directors, designated by CarLotz in connection with the completion of the Merger;
the likelihood that Shift would consummate the Merger taking into account the limited conditions to Shift’s obligation to consummate the Merger;
CarLotz’s ability to specifically enforce Shift’s obligations under the Merger Agreement, including Shift’s obligations to complete the Merger;
the limited circumstances in which the Shift Board may change its recommendation that Shift Stockholders approve the Shift Share Issuance Proposal; and
the requirement that Shift pay CarLotz a $4.25 million termination fee and reimburse transaction expenses of up to $1.21 million in certain circumstances.
The CarLotz Board also considered uncertainties and risks and other potentially negative factors related to the Merger, including the following:
Potential Decrease in the Value of the Merger Consideration. The value of the Merger Consideration payable to CarLotz Stockholders could decrease if (i) the price of Shift Common Stock decreases prior to completion of the Merger or (ii) the Exchange Ratio is adjusted downward at the Effective Time;
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Merger and Integration Risks. The risk that the Combined Company will not realize all of the anticipated strategic and other benefits of the Merger, including the possibility that Shift’s financial performance may not meet CarLotz’s expectations and that the expected synergies may not be realized or will cost more to achieve than anticipated. In this regard, the CarLotz Board was aware of the challenges inherent in completing the Merger and integrating the businesses, operations and workforces of CarLotz and Shift and that this process could take longer than expected and might ultimately be unsuccessful;
Effects of the Announcement of the Merger. The effects of the public announcement of the Merger, including the: (1) effects on CarLotz’s employees, business partners and operating results; (2) potential effects on the share prices of Shift Common Stock and CarLotz Common Stock; (3) impact on CarLotz’s ability to attract and retain key employees; and (4) potential for litigation in connection with the Merger;
Need to Obtain Required Stockholder Approvals. The possibility that CarLotz Stockholders may not approve the adoption of the Merger Agreement at the CarLotz Special Meeting or that Shift Stockholders may not approve the Shift Share Issuance Proposal at the Shift Special Meeting;
Need to Obtain Required Regulatory Clearances. Completion of the Merger may require approval, or expiration or termination of the applicable waiting periods, under the HSR Act and other applicable non-U.S. antitrust laws. In this regard, the CarLotz Board considered the risk that regulatory agencies may not approve the Merger or may impose terms and conditions on their approvals that exceed the thresholds and limitations that Shift agreed to in the Merger Agreement, or that would otherwise adversely affect the business and financial results of the Combined Company, and the amount of time that might be required to obtain all required regulatory consents and approvals;
Shift’s Ability to Consider Alternative Transactions. The risk related to Shift’s right, subject to certain conditions, to respond to and negotiate with respect to certain acquisition proposals from third parties and the related possibility that the Shift Board might withdraw its recommendation in favor of the Shift Share Issuance Proposal;
Restrictions on CarLotz’s Ability to Solicit Alternative Transactions. The restrictions in the Merger Agreement on CarLotz’s ability to solicit alternative acquisition proposals (subject to certain exceptions to allow the CarLotz Board to exercise its fiduciary duties and to accept a superior proposal, and then only upon the payment of a termination fee);
Satisfaction of Minimum Cash Conditions. The risk that CarLotz fails to satisfy the minimum cash condition set forth in the Merger Agreement, that the Merger Agreement is terminated due to failure to satisfy such minimum cash condition and the negative impact such failure could have on CarLotz’s business and operations;
Termination Fee Payable by CarLotz. The requirement that CarLotz pay Shift a termination fee under certain circumstances following termination of the Merger Agreement, including if the CarLotz Board terminates the Merger Agreement to accept a superior proposal. The CarLotz Board considered the potentially discouraging impact that this termination fee could have on a third party’s interest in making a competing proposal to acquire CarLotz;
Expense Reimbursement by CarLotz. The requirement that CarLotz reimburse up to $1.21 million of Shift’s transaction expenses if the Merger Agreement is terminated by either party following the failure of CarLotz Stockholders to approve the adoption of the Merger Agreement at the CarLotz Special Meeting;
Risk Associated with Failure to Consummate the Merger. The possibility that the Merger might not be consummated, and if it is not consummated, that: (1) CarLotz’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work on behalf of CarLotz during the pendency of the Merger; (2) CarLotz will have incurred significant transaction and other costs; (3) CarLotz’s continuing business relationships with employees and business partners may be adversely affected; (4) the trading price of CarLotz Common Stock could be adversely affected; (5) the termination fee payable by Shift to CarLotz will not be available in all instances in which the Merger Agreement is terminated and such termination fee may not be sufficient to compensate CarLotz for the damage suffered by its business as a result of the pendency of the Merger or of the strategic initiatives forgone by CarLotz during this period; (6) the expense reimbursement payable by Shift to CarLotz will not be available in all instances in which the
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Merger Agreement is terminated; (7) the contractual and legal remedies available to CarLotz in the event of the termination of the Merger Agreement may be insufficient, costly to pursue or both; and (8) investors, employees and business partners may develop an adverse perception about CarLotz’s prospects as a result of the failure of the Merger to be consummated;
Impact of Interim Restrictions on CarLotz’s Business Pending the Completion of the Merger. The restrictions on the conduct of CarLotz’s business prior to the consummation of the Merger, which could delay or prevent CarLotz from undertaking business opportunities that may arise or taking other actions with respect to its operations that the CarLotz Board and management might believe were appropriate or desirable; and
Interests of CarLotz’s Directors and Executive Officers. The interests that CarLotz’s directors and executive officers may have in the Merger, which may be different from, or in addition to, those of CarLotz’s other stockholders.
This discussion is not meant to be exhaustive. Rather, it summarizes the material reasons and factors evaluated by the CarLotz Board in its consideration of the Merger Agreement and the Proposed Transactions. After considering these and other factors, the CarLotz Board concluded that the potential benefits of entering into the Merger Agreement outweighed the uncertainties and risks. In the light of the variety of factors considered by the CarLotz Board and the complexity of these factors, the CarLotz Board did not find it practicable to, and did not, quantify or otherwise assign relative weights, ranks or values to the factors that it considered in reaching its determination and recommendations. Moreover, each member of the CarLotz Board applied his or her own personal business judgment to the process and may have assigned different relative weights, ranks or values to the different factors. The CarLotz Board approved the Merger Agreement and the Proposed Transactions and recommended that CarLotz Stockholders adopt the Merger Agreement, based upon the totality of the information presented to, and considered by, the CarLotz Board.
The foregoing discussion of the information and factors considered by CarLotz in approving the Merger Agreement is forward looking in nature. This information should be read in the light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”
Opinion of Shift’s Financial Advisor
On August 9, 2022, Centerview rendered to the Shift Board its oral opinion, subsequently confirmed in a written opinion dated August 9, 2022, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to Shift.
The full text of Centerview’s written opinion, dated August 9, 2022, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety by the full text of Centerview’s written opinion attached as Annex C to this joint proxy statement/prospectus. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Shift Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Proposed Transactions, and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, to Shift of the Exchange Ratio provided for pursuant to the Merger Agreement. Centerview’s opinion did not address any other term or aspect of the Merger Agreement or the Proposed Transactions and does not constitute a recommendation to any Shift Stockholder or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Proposed Transactions or any other matter.
The full text of Centerview’s written opinion, which is attached as Annex C to this joint proxy statement/prospectus, should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.
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In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:
a draft of the Merger Agreement dated August 8, 2022, which is referred to in this summary of Centerview’s opinion as the “Draft Merger Agreement”;
Annual Reports on Form 10-K of Shift and CarLotz, in each case, for the years ended December, 31, 2021, December 31, 2020 and December 31, 2019;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Shift and CarLotz;
certain publicly available research analyst reports for Shift and CarLotz;
certain other communications from Shift and CarLotz to their respective stockholders;
certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of CarLotz, which are referred to in this summary of Centerview’s opinion as the “CarLotz Internal Data”;
certain financial forecasts, analyses and projections relating to CarLotz prepared by CarLotz management, with adjustments made by Shift management, and furnished to Centerview by Shift for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “CarLotz Forecasts”; and
certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of Shift, including certain financial forecasts, analyses and projections relating to Shift prepared by Shift management and furnished to Centerview by Shift for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Shift Forecasts” (and, collectively with all other foregoing internal information relating to Shift and furnished to Centerview, the “Shift Internal Data”).
Centerview also participated in discussions with members of the senior management and representatives of Shift and CarLotz regarding their assessment of the CarLotz Internal Data, the CarLotz Forecasts and the Shift Internal Data (including the Shift Forecasts), as appropriate, and the strategic rationale for the Proposed Transactions. In addition, Centerview reviewed publicly available financial and stock market data, including valuation multiples, for Shift and CarLotz and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate. Further, Shift informed Centerview of, and Centerview took into account in arriving at its opinion, Shift’s liquidity position and potential capital requirements. In arriving at its opinion, Centerview also considered the results of its efforts on behalf of Shift to solicit, at Shift’s direction, indications of interest from certain third parties selected by Shift with respect to possible financing and acquisition transactions involving Shift.
Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with or reviewed by Centerview for purposes of its opinion, and with Shift’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at Shift’s direction, that the CarLotz Internal Data was reasonably prepared on bases reflecting the best currently available estimates and judgments of CarLotz management as to the matters covered thereby and that the CarLotz Forecasts and the Shift Internal Data (including, without limitation, the Shift Forecasts) were reasonably prepared on bases reflecting the best currently available estimates and judgments of Shift management as to the matters covered thereby, and Centerview relied, at Shift’s direction, on the CarLotz Internal Data, the CarLotz Forecasts and the Shift Internal Data (including, without limitation, the Shift Forecasts) for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the CarLotz Internal Data, the CarLotz Forecasts or the Shift Internal Data (including, without limitation, the Shift Forecasts) or the assumptions on which any of them were based. In addition, at Shift’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of Shift or CarLotz, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of Shift or CarLotz. Centerview assumed that the final executed Merger Agreement would not differ in any respect material to Centerview’s analysis or opinion from the Draft
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Merger Agreement reviewed by Centerview and that there would be no adjustments to the Exchange Ratio pursuant to the Merger Agreement that would be material to Centerview’s analysis or opinion. Centerview also assumed that the Proposed Transactions will be consummated on the terms set forth in the Merger Agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Proposed Transactions, no delay, limitation, restriction, condition or other change, including any divestiture requirements or amendments or modifications, will be imposed, the effect of which would be material to Centerview’s analysis or opinion. Further, Centerview assumed, in accordance with the terms of the Draft Merger Agreement, that the Merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of Shift or CarLotz, or the ability of Shift or CarLotz to pay their respective obligations when they come due, or as to the impact of the Proposed Transactions on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.
Centerview’s opinion expressed no view as to, and did not address, Shift’s underlying business decision to proceed with or effect the Proposed Transactions or the relative merits of the Proposed Transactions as compared to any alternative business strategies or transactions that might be available to Shift or in which Shift might engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date thereof, to Shift, of the Exchange Ratio provided for pursuant to the Merger Agreement. For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the Proposed Transactions, including, without limitation, the structure or form of the Proposed Transactions, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Proposed Transactions, including, without limitation, the fairness of the Proposed Transactions or any other term or aspect of the Proposed Transactions to, or any consideration to be received in connection therewith by, or the impact of the Proposed Transactions on, the holders of any other class of securities, creditors or other constituencies of Shift or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of Shift or any party, or class of such persons in connection with the Proposed Transactions, whether relative to the Exchange Ratio provided for pursuant to the Merger Agreement or otherwise. Centerview’s opinion related to the relative values of Shift and CarLotz. Centerview’s opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’s written opinion. Centerview expressed no view or opinion as to what the value of shares of Shift Common Stock will be when issued pursuant to, and following the consummation of, the Proposed Transactions, or what the value of shares of CarLotz Common Stock will be immediately prior to the Effective Time, or the prices at which the shares of Shift Common Stock or shares of CarLotz Common Stock will trade or otherwise be transferable at any time, including following the announcement or consummation of the Proposed Transactions. Centerview’s opinion does not constitute a recommendation to any Shift Stockholder or CarLotz Stockholder or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Proposed Transactions or any other matter. Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the Shift Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Proposed Transactions. The issuance of Centerview’s written opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.
Summary of Centerview Financial Analysis
The following is a summary of the material financial analyses prepared and reviewed with the Shift Board in connection with Centerview’s opinion, dated August 9, 2022. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed
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various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s view of the actual value of Shift or CarLotz. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Centerview. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Shift, CarLotz or any other parties to the Proposed Transactions. None of Shift, CarLotz, Merger Sub, Centerview or any other person assumes responsibility if future results are materially different from those discussed below. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of Shift or CarLotz do not purport to be appraisals or reflect the prices at which Shift or CarLotz may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before August 8, 2022 (the last trading day before the public announcement of the Proposed Transactions) and is not necessarily indicative of current market conditions.
Standalone Shift Financial Analysis
Selected Comparable Public Companies Analysis
Centerview reviewed and compared certain financial information, ratios and multiples for Shift to corresponding financial information, ratios and multiples for publicly traded companies that Centerview deemed comparable, based on its experience and professional judgment, to Shift. Centerview refers to these selected publicly traded companies in this “–––Summary of Centerview Financial Analysis” section as the “selected comparable companies.” The selected comparable companies consisted of:
Asbury Automotive Group, Inc.
AutoNation, Inc.
Carmax, Inc.
Carvana Co.
Cazoo Group Ltd
Group 1 Automotive, Inc.
Lithia Motors, Inc.
Penske Automotive Group, Inc.
Sonic Automotive, Inc.
Vroom, Inc.
Although none of the selected comparable companies is directly comparable to Shift, these companies were selected because, among other things, they are publicly traded companies in the automotive retail (including online retail) industry with certain operational and financial characteristics, which, for purposes of its analyses, Centerview considered, based on its experience and professional judgment, to be similar to those of Shift.
Using publicly available information obtained from SEC filings, publicly available Wall Street research, other publicly available information and closing stock prices as of August 8, 2022, as well as the Shift Forecasts, Centerview calculated, for each selected comparable company, and for Shift, multiples including: (1) enterprise value (calculated as the market value of fully diluted common equity with outstanding options treated with the treasury stock method, plus the book value of debt and noncontrolling interests, less cash and cash equivalents
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including investments in marketable securities) as a multiple of 2023 calendar year estimated revenue (the “EV / revenue multiple”); and (2) enterprise value (calculated as the market value of fully diluted common equity with outstanding options treated with the treasury stock method, plus the book value of debt and noncontrolling interests, less cash and cash equivalents including investments in marketable securities) as a multiple of 2023 calendar year estimated gross profit (the “EV / gross profit multiple”). The multiples for the selected comparable companies are shown below:
Valuation Metric
25th percentile
Median
75th percentile
Enterprise Value / 2023E Revenue
0.35x
0.44x
0.50x
Enterprise Value / 2023E Gross Profit
2.3x
2.5x
4.5x
Based on its experience and professional judgment, for purposes of its analysis, Centerview selected an EV / revenue multiple reference range of 0.40x to 0.45x (the “EV / revenue multiple reference range”) and an EV / gross profit multiple reference range of 2.50x to 3.50x (the “EV / gross profit multiple reference range”). Because none of the selected comparable companies is exactly the same as Shift, Centerview believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable companies analysis. Accordingly, in selecting these reference ranges, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of Shift and the selected comparable companies that could affect the public trading values, in order to provide a context within which to consider the results of its quantitative analysis.
Centerview applied the EV / revenue multiple reference range to Shift’s calendar year 2023 estimated revenue, as set forth in the Shift Forecasts, to derive a range of implied enterprise values for Shift. Centerview also applied the EV / gross profit multiple reference range to Shift’s calendar year 2023 estimated gross profit, as set forth in the Shift Forecasts, to derive a range of implied enterprise values for Shift. Centerview subtracted from each of these ranges of implied enterprise values the face value of Shift’s net debt as of June 30, 2022, as set forth in the Shift Internal Data, to derive a range of implied equity values for Shift. Centerview then divided these implied equity values by the number of fully-diluted shares of Shift Common Stock as of June 30, 2022, as set forth in the Shift Internal Data, to derive a range of implied values per share of Shift Common Stock. The results of this analysis are summarized below:
Valuation Metric
Implied Shift Share Price
Enterprise Value / 2023E Revenue
$0.58 – $0.88
Enterprise Value / 2023E Gross Profit
$0.07 – $0.83
Centerview then compared these ranges to the closing price of shares of Shift Common Stock on August 8, 2022 of $1.53.
Discounted Cash Flow Analysis
Centerview performed a discounted cash flow analysis of Shift, which is a traditional valuation methodology used to derive a valuation of an asset by calculating the present value of estimated future cash flows of the asset. Present value refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
In performing this analysis, Centerview calculated the estimated present value of the unlevered free cash flows of Shift reflected in the Shift Forecasts for the years ending December 31, 2022 through December 31, 2031. The terminal value of Shift at the end of the forecast period was estimated by Centerview using an exit-based EV / gross profit multiple of 2.50x to 3.00x. The unlevered free cash flows (including the terminal value) of Shift during the forecast period were discounted to present value using discount rates ranging from 15.5% to 17.5%, with this range determined based on Centerview’s analysis of Shift’s weighted average cost of capital. Based on its discounted cash flow analysis, Centerview then calculated a range of implied enterprise values of Shift. When calculating this range, Centerview added the estimated present value of future tax benefits available to Shift from net operating losses carried forward and subtracted the face value of Shift’s net debt as of June 30, 2022, in each case, as set forth in the Shift Internal Data, to derive a range of implied equity values of Shift. Centerview then divided this range of implied equity values by the number of fully-diluted shares of Shift Common Stock as of June 30, 2022, as set forth in the Shift Internal Data, to derive a range of implied values
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per share of Shift Common Stock of $0.65 to $2.38. Centerview then compared the results of this analysis to the closing price of shares of Shift Common Stock on August 8, 2022 of $1.53.
Other Factors
Centerview noted for the Shift Board certain additional factors solely for informational purposes, including, among other things, an analysis of Shift’s historical stock price.
Centerview reviewed the stock price performance of shares of Shift Common Stock for the 52-week period prior to August 8, 2022 and noted that the range of low and high closing prices during this period was $0.61 to $9.33, as compared to the closing price of shares of Shift Common Stock on August 8, 2022 of $1.53. Centerview also noted that historical trading price analysis is not a valuation methodology and that such analysis was presented for reference purposes only and not as a component of Centerview’s fairness analyses.
Standalone CarLotz Financial Analysis
Selected Comparable Public Companies Analysis
Centerview also reviewed and compared certain financial information, ratios and multiples for CarLotz to corresponding financial information, ratios and multiples for the selected comparable companies listed above, which Centerview also deemed comparable, based on its experience and professional judgment, to CarLotz.
Although none of the selected comparable companies is directly comparable to CarLotz, these companies were selected because, among other things, they are publicly traded companies in the automotive retail (including online retail) industry with certain operational and financial characteristics, which, for purposes of its analyses, Centerview considered, based on its experience and professional judgment, to be similar to those of CarLotz.
Using publicly available information obtained from SEC filings, publicly available Wall Street research, other publicly available information and closing stock prices as of August 8, 2022, as well as the CarLotz Forecasts, Centerview calculated, for each selected comparable company, and for CarLotz, multiples including: (1) the EV / revenue multiple; and (2) the EV / gross profit multiple. The multiples for the selected comparable companies are shown below:
Valuation Metric
25th percentile
Median
75th percentile
Enterprise Value / 2023E Revenue
0.35x
0.44x
0.50x
Enterprise Value / 2023E Gross Profit
2.3x
2.5x
4.5x
Based on its experience and professional judgment, for purposes of its analysis, Centerview again selected the EV / revenue multiple reference range of 0.40x to 0.45x and the EV / gross profit multiple reference range of 2.50x to 3.50x. Because none of the selected comparable companies is exactly the same as CarLotz, Centerview believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable companies analysis. Accordingly, in selecting these reference ranges, Centerview again made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of CarLotz and the selected comparable companies that could affect the public trading values, in order to provide a context within which to consider the results of its quantitative analysis.
Centerview applied the EV / revenue multiple reference range to CarLotz’s calendar year 2023 estimated revenue, as set forth in the CarLotz Forecasts, to derive a range of implied enterprise values for CarLotz. Centerview also applied the EV / gross profit multiple reference range to CarLotz’s calendar year 2023 estimated gross profit, as set forth in the CarLotz Forecasts, to derive a range of implied enterprise values for CarLotz. Centerview added to each of these ranges of implied enterprise values the value of CarLotz’s net cash and cash equivalents as of June 30, 2022, as set forth in the CarLotz Internal Data, to derive a range of implied equity values for CarLotz. Centerview then divided these implied equity values by the number of fully-diluted shares of CarLotz Common Stock as of August 8, 2022, as set forth in the CarLotz Internal Data, to derive a range of implied values per share of CarLotz Common Stock. The results of this analysis are summarized below:
Valuation Metric
Implied CarLotz Share Price
Enterprise Value / 2023E Revenue
$1.42 – $1.48
Enterprise Value / 2023E Gross Profit
$1.23 – $1.36
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Centerview then compared these ranges to the closing price of shares of CarLotz Common Stock on August 8, 2022 of $0.62.
Discounted Cash Flow Analysis
Centerview also performed a discounted cash flow analysis of CarLotz. In performing this analysis, Centerview calculated the estimated present value of the unlevered free cash flows of CarLotz reflected in the CarLotz Forecasts for the years ending December 31, 2022 through December 31, 2031. The terminal value of CarLotz at the end of the forecast period was estimated by Centerview using an exit-based EV / gross profit multiple of 2.50x to 3.00x. The unlevered free cash flows (including the terminal value) of CarLotz during the forecast period were discounted to present value using discount rates ranging from 16.5% to 18.5%, with this range determined based on Centerview’s analysis of CarLotz’s weighted average cost of capital. Based on its discounted cash flow analysis, Centerview then calculated a range of implied enterprise values of CarLotz. When calculating this range, Centerview added the estimated present value of future tax benefits available to CarLotz from net operating losses carried forward, and also added the value of CarLotz’s net cash and cash equivalents as of June 30, 2022, in each case, as set forth in the CarLotz Internal Data, to derive a range of implied equity values of CarLotz. Centerview then divided this range of implied equity values by the number of fully-diluted shares of CarLotz Common Stock as of August 8, 2022, as set forth in the CarLotz Internal Data, to derive a range of implied values per share of CarLotz Common Stock of $0.77 to $0.92. Centerview then compared the results of this analysis to the closing price of shares of CarLotz Common Stock on August 8, 2022 of $0.62.
Other Factors
Centerview noted for the Shift Board certain additional factors solely for informational purposes, including, among other things, an analysis of CarLotz’s historical stock price.
Centerview reviewed the stock price performance of shares of CarLotz Common Stock for the 52-week period prior to August 8, 2022. Centerview noted that the range of low and high closing prices of shares of CarLotz Common Stock during the prior 52-week period was $0.38 to $4.70, as compared to the closing price of shares of CarLotz Common Stock on August 8, 2022 of $0.62. Centerview also noted that historical trading price analysis is not a valuation methodology and that such analysis was presented for reference purposes only and not as a component of Centerview’s fairness analyses.
Relative Value Analysis
Based upon a comparison of the range of implied equity values for each of Shift and CarLotz calculated pursuant to the selected comparable public companies analyses and the discounted cash flow analyses described above, Centerview calculated ranges of implied exchange ratios for the Merger, excluding, in each case, transaction expenses and the impact of any synergies that may be realized as a result of the Proposed Transactions. With respect to any given range of exchange ratios, the higher ratio assumes the highest implied value per share of CarLotz Common Stock divided by the lowest implied value per share of Shift Common Stock, and the lower ratio assumes the lowest implied value per share of CarLotz Common Stock divided by the highest implied value per share of Shift Common Stock.
Valuation Methodology
Implied Exchange Ratio
Selected Trading Comparables (Enterprise Value / 2023E Revenue)
1.61x – 2.55x
Selected Trading Comparables (Enterprise Value / 2023E Gross Profit)
1.48x – 18.91x
Discounted Cash Flow Analysis
0.33x – 1.40x
Centerview then compared the implied ranges of exchange ratios set forth above to the Exchange Ratio of 0.692158 shares of Shift Common Stock per share of CarLotz Common Stock.
General
The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances, and therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.
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Centerview’s financial analyses and opinion were only one of many factors taken into consideration by the Shift Board in its evaluation of the Proposed Transactions. Consequently, the analyses described above should not be viewed as determinative of the views of the Shift Board or Shift management with respect to the Exchange Ratio or as to whether the Shift Board would have been willing to determine that different consideration (including a different exchange ratio) was fair. The Exchange Ratio was determined through arm’s-length negotiations between Shift and CarLotz and was approved by the Shift Board. Centerview provided advice to Shift during these negotiations. Centerview did not, however, recommend any specific amount of consideration (including any specific exchange ratio) to Shift or the Shift Board or that any specific amount of consideration (including any specific exchange ratio) constituted the only appropriate consideration for the Proposed Transactions.
Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion, except for its current engagement by Shift, Centerview had not been engaged to provide financial advisory or other services to Shift or CarLotz and had not received any compensation from Shift or CarLotz during such period. Centerview may provide investment banking and other services to or with respect to Shift or CarLotz or their respective affiliates in the future, for which Centerview may receive compensation. Certain (i) of Centerview’s and its affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest may at any time acquire, hold, sell or trade in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, Shift, CarLotz or any of their respective affiliates or any other party that may be involved in the Proposed Transactions.
The Shift Board selected Centerview as its financial advisor in connection with the Proposed Transactions based on Centerview’s reputation and experience. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Proposed Transactions.
In connection with Centerview’s services as the financial advisor to the Shift Board, Shift has agreed to pay Centerview an aggregate fee of $5 million, $2 million of which was paid upon the rendering of Centerview’s opinion and $3 million of which is payable contingent upon consummation of the Proposed Transactions. In addition, Shift has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.
Opinion of CarLotz’s Financial Advisor
Opinion of William Blair & Company, L.L.C.
William Blair was retained to act as financial advisor to CarLotz in connection with a possible business combination. Pursuant to its engagement, the CarLotz Board requested that William Blair render an opinion to the CarLotz Board as to the fairness, from a financial point of view, of the Exchange Ratio to the holders of CarLotz Common Stock. On August 9, 2022, William Blair delivered its oral opinion to the CarLotz Board (subsequently confirmed in its written opinion dated August 9, 2022) that, as of the date of such opinion, and based upon and subject to the assumptions, qualifications and limitations stated in its written opinion, the Exchange Ratio was fair, from a financial point of view, to the CarLotz Stockholders. The Exchange Ratio is subject to adjustment as set forth in the Merger Agreement, and William Blair expressed no opinion as to any such adjustment.
THE FULL TEXT OF WILLIAM BLAIR’S WRITTEN OPINION, DATED AUGUST 9, 2022, IS ATTACHED AS ANNEX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND INCORPORATED INTO THIS JOINT PROXY STATEMENT/PROSPECTUS BY REFERENCE. YOU ARE URGED TO READ THE ENTIRE FAIRNESS OPINION CAREFULLY AND IN ITS ENTIRETY TO LEARN ABOUT THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY WILLIAM BLAIR IN RENDERING ITS OPINION. THE ANALYSIS PERFORMED BY WILLIAM BLAIR SHOULD BE VIEWED IN ITS ENTIRETY; NONE OF THE METHODS OF ANALYSIS SHOULD BE VIEWED IN ISOLATION. WILLIAM BLAIR’S FAIRNESS OPINION WAS DIRECTED TO THE CARLOTZ BOARD FOR ITS USE AND BENEFIT IN EVALUATING THE FAIRNESS OF THE EXCHANGE RATIO SPECIFIED IN THE MERGER AGREEMENT AND RELATES ONLY TO THE FAIRNESS, AS OF THE DATE OF WILLIAM BLAIR’S FAIRNESS OPINION AND FROM A
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FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO SPECIFIED IN THE MERGER AGREEMENT. WILLIAM BLAIR’S FAIRNESS OPINION DOES NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CARLOTZ STOCKHOLDER AS TO HOW SUCH CARLOTZ STOCKHOLDER SHOULD VOTE ITS SHARES OF CARLOTZ COMMON STOCK WITH RESPECT TO THE MERGER. WILLIAM BLAIR DID NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY CARLOTZ TO ENGAGE IN THE MERGER. THE FOLLOWING SUMMARY OF WILLIAM BLAIR’S FAIRNESS OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS FAIRNESS OPINION ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX D.
In connection with William Blair’s review of the Merger and the preparation of its opinion, William Blair examined: