{ "docId": "019dd923-622c-750b-8b98-f1acfdee233e", "docSlug": "a458f84d7f69", "documentTitle": "Forescout Technologies (FSCT)", "authorId": "54_Spruce_Point_Capital", "authorName": "Ben Axler", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2020-05-13 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 11, "pageCount": 55, "prevPage": 10, "nextPage": 12, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "dense", "nDataPoints": 2, "notes": "Uses direct quotes from company filings and legal contract text to highlight a potential breach of contract.", "elementsJson": [ "headline_text", "paragraph", "callout_box", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-f1acfdee233e/11", "deckHref": "/decks/019dd923-622c-750b-8b98-f1acfdee233e", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-f1acfdee233e.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-f1acfdee233e#slide-11", "components": [ { "bbox": { "h": 0.15, "w": 0.96, "x": 0.02, "y": 0.42 }, "kind": "callout", "text": "\"Further, during the three months ended March 31, 2020, we elected to drawdown on the revolving credit facility available to us in light of the macro-economic conditions and its potential impact on credit market availability in the future.\" \"In addition, during the first quarter of fiscal 2020, we borrowed $16.0 million under our revolving credit facility as a precautionary measure to provide additional liquidity in light of global economic uncertainty and financial market conditions caused by COVID-19. The amount borrowed has been gradually paid down and will be fully paid upon consummation of the Merger.\"", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0b868614-d181-4062-ac7e-1e92632827b7", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "Specifically the debt would have to be \"in the ordinary course of business consistent with past practices\". However, Forescout has never had to draw on its credit facility before as a public company, so the practice does not appear to be consistent with past practices.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-2041-7259-a85d-5753dfb57f67", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.92, "x": 0.04, "y": 0.18 }, "kind": "paragraph", "text": "Why would Forescout draw down on its credit facility, and incur financing costs, if it had $98m of cash and equivalents as of Dec 31, 2019, and it had a reasonable expectation of closing the transaction with Advent in Q2 2020. The merger agreement lists debt incurrence in the Forbearance Covenants. Specifically the debt would have to be \"in the ordinary course of business consistent with past practices\". However, Forescout has never had to draw on its credit facility before as a public company, so the practice does not appear to be consistent with past practices. There is no mention that approval was obtained from Advent.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d311ffc2-6ed6-47f9-a029-c6017d1f1eae", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.32, "w": 0.96, "x": 0.02, "y": 0.62 }, "kind": "paragraph", "text": "5.2 Forbearance Covenants. Except (A) as set forth in Section 5.2 of the Company Disclosure Letter; (B) as approved by Parent (which approval will not be unreasonably withheld, conditioned or delayed); or (C) as expressly contemplated by the terms of this Agreement, during the Pre-Closing Period, the Company will not, and will not permit any of its Subsidiaries, to: (h) (i) incur, assume, suffer or modify the terms of any Indebtedness or issue any debt securities, except (A) short-term debt incurred to fund operations of the business in the ordinary course of business consistent with past practice; (B) for loans or advances between Subsidiaries of the Company or between the Company and Subsidiaries; and (C) revolving Indebtedness incurred pursuant to the Credit Agreement to fund operations of the business in the ordinary course of business consistent with past practice; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except with respect to obligations of wholly owned Subsidiaries of the Company; (iii) make any loans, advances or capital contributions to, or investments in, any other Person, except for", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fb0cbf8f-5b97-4fc8-b7dd-df8727e4a920", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "Further, during the three months ended March 31, 2020, we elected to drawdown on the revolving credit facility available to us in light of the macro-economic conditions and its potential impact on credit market availability in the future. — Forescout Technologies", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-2041-7259-a85d-5a30b03f8628", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.68, "x": 0.28, "y": 0.04 }, "kind": "title", "text": "Did Forescout Violate Another Deal Covenant?", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "07c991e9-b216-4d27-806d-a592158a8314", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "c84e6686-4f27-4308-80a0-b92dd559adb1", "evidence": "The slide explicitly contrasts company actions with contractual obligations to suggest a violation.", "confidence": 0.9 } ], "arcBeats": [ { "to": 12, "from": 4, "beatId": "552f664e-6037-4ed7-b893-26bd2a0dbb24", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Monster", "beatSlug": "overcoming-monster-the-monster", "evidence": "Spruce Point exposes contradictions in Forescout management's statements and actions.", "position": 0, "confidence": 0.8, "parentBeatName": "Hook", "parentBeatSlug": "hook" } ], "loops": [ { "to": 12, "from": 4, "name": "The Reveal", "slug": "05-the-reveal", "bestFor": "Product launches, strategic pivots, unexpected findings", "matchId": "5923425e-f040-421a-8531-f579da37241c", "evidence": "The deck presents a series of revelations about Forescout management's actions and statements.", "position": 0, "objective": "Reveal management's alleged inconsistencies and flaws", "structure": "Setup the Question -> Build Suspense -> The Big Reveal", "confidence": 0.8, "description": "Build mystery and anticipation, then deliver a surprising or powerful conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }