SCHEDULE 13G/A: Alphabet-Backed GV 2016 L.P. Discloses 15.4% Stake in Starco Brands, Reflecting Soylent Merger Adjustments

GV 2016, L.P., an entity linked to Alphabet Inc., has disclosed a 15.4% beneficial ownership stake in Starco Brands, Inc., primarily stemming from post-closing adjustments related to the 2023 Soylent Nutrition acquisition.

Summary

• GV 2016, L.P. and its affiliates, including Alphabet Inc., beneficially own 99,510,805 shares of Starco Brands, Inc.'s Class A Common Stock.
• This represents 15.4% of Starco Brands' outstanding Class A Common Stock, based on 647,431,696 shares outstanding as of November 14, 2024.
• The shares were acquired as part of the February 15, 2023 sale of Soylent Nutrition, Inc. to Starco Brands, Inc. (the "Soylent Merger").
• The reported share count includes shares issued due to a post-closing working capital adjustment and a first post-closing adjustment tied to Starco Brands' stock price performance (volume weighted average trading price below $0.35 for 30 trading days ending February 14, 2024).
• Shares related to a potential second post-closing adjustment, contingent on the stock price performance ending May 15, 2025, are not yet included in this reported ownership.
• The reporting persons state that the securities were not acquired for the purpose of changing or influencing control of Starco Brands.

Sentiment

Score: 5

Explanation: The document is a routine beneficial ownership update (Schedule 13G Amendment). It reflects previously agreed-upon terms of a merger and subsequent adjustments. While it mentions a potential future share issuance tied to stock price performance (which could be seen negatively), the filing itself is factual and neutral in tone, primarily serving disclosure purposes without indicating significant positive or negative operational or financial news for the issuer.

Positives

• A significant institutional investor group, including entities related to Alphabet Inc., maintains a substantial 15.4% stake in Starco Brands, indicating continued interest.
• The acquisition of shares was part of a strategic merger (Soylent Nutrition, Inc.), suggesting a long-term investment horizon for the reporting entity.

Negatives

• The terms of the post-closing adjustments indicate that additional shares were issued (and potentially will be issued) if Starco Brands' Class A Common Stock volume weighted average trading price (VWAP) falls below $0.35 per share, which could imply underperformance or dilution risk.
• The shares for the Working Capital Adjustment and First Post-Closing Adjustment were issued on a "delayed basis during 2024," which could point to administrative or contractual complexities.

Risks

• Dilution Risk: The potential for additional shares to be issued under the Second Post-Closing Adjustment if Starco Brands' Class A Common Stock VWAP remains below $0.35 per share for the 30-trading day period ending May 15, 2025, could lead to further dilution for existing shareholders.
• Stock Price Performance Risk: The trigger for additional share issuance (VWAP below $0.35) highlights a potential risk related to the Issuer's stock price performance.

Future Outlook

The document indicates a potential future issuance of additional shares to GV 2016, L.P. under a "Second Post-Closing Adjustment" if Starco Brands' Class A Common Stock volume weighted average trading price is less than $0.35 per share for the 30-trading day period ending on May 15, 2025. This suggests a contingent future event that could impact share count.

Industry Context

This filing reflects a significant investment by an Alphabet-affiliated entity in Starco Brands, a company that acquired Soylent Nutrition. This highlights continued strategic interest from large investment vehicles in consumer brands, particularly those with a focus on health and wellness (like Soylent). The contingent share issuance mechanism is a common feature in M&A deals to align interests or provide downside protection based on post-merger performance.

Related Party Transactions

• The beneficial ownership stems from the February 15, 2023 sale of Soylent Nutrition, Inc. to Starco Brands, Inc., where GV 2016, L.P. was a former Soylent stockholder.
• Additional shares were issued to GV 2016, L.P. as part of post-closing adjustments (Working Capital Adjustment and First Post-Closing Adjustment) under the Merger Agreement and a subsequent Stockholder Agreement.
• There is a potential for further share issuance to GV 2016, L.P. under a Second Post-Closing Adjustment.

Stakeholder Impact

• Shareholders: Existing shareholders could face potential dilution if the Second Post-Closing Adjustment triggers the issuance of additional shares to GV 2016, L.P., especially if the stock price remains below $0.35. The continued significant stake by an Alphabet-affiliated entity might be viewed positively by some as a sign of long-term commitment.

Next Steps

• Potential issuance of additional shares to GV 2016, L.P. under the "Second Post-Closing Adjustment" if the volume weighted average trading price of Starco Brands' Class A Common Stock is less than $0.35 per share for the 30-trading day period ending on May 15, 2025.

Key Dates

Recommendation

Keywords

Starco Brands, SEC filing, Schedule 13G, beneficial ownership, GV 2016, Alphabet Inc., Soylent Nutrition, stock ownership, Class A Common Stock, post-closing adjustment, dilution, corporate governance, investment